💁♂️ Guide to Compounding Quality
Hi Friend 👋
I put my whole heart and soul into Compounding Quality for you.
The concept is simple: I research stocks for more than 60 hours per week and I try to provide you with as much value as I possibly can.
This guide will help you to get the most out of Compounding Quality.
Guide to Compounding Quality
1. Who is Compounding Quality?
My first name is Pieter and I started writing Compounding Quality in July 2022 to help other investors along their journey.
I used to work as a Professional Investor before starting to work on Compounding Quality full-time.
Compounding Quality has a true passion for investing and helping other investors.
I aim to invest in the best companies in the world as it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
You can read more about Compounding Quality here.
2. How often do you publish?
As a subscriber, you’ll receive 3 articles per week.
Each Tuesday: A general article teaching you something about investing
Each Thursday: An investment case or update of the ETF Portfolio
Each Sunday: An article related to our Portfolio
3. What is the investment philosophy of Compounding Quality?
Quality investing is all about investing in the best companies in the world.
We use 3 steps to achieve this:
Buy wonderful companies
Led by excellent managers
Trading at fair valuation levels
In this free webinar, I outline the entire investment philosophy:
4. Is Compounding Quality something for me?
Compounding Quality is not for you if you want to:
❌ Get rich quick
❌ Blindly follow someone else’s advice
❌ Outperform the market every single year
You are in the right place if you want to:
✅ Learn and become a better investor
✅ Be assisted alongside your investment journey
✅ Outperform the market in the long term
5. What do you think about Portfolio Allocation?
✅ The portfolio will invest worldwide (developed countries only)
✅ We’ll own 15-20 stocks
✅ The portfolio is aiming to invest in the best companies in the world
✅ We won’t trade a lot. Activity and costs harm our results
✅ We won’t try to time the market (I’m way too dumb for that)
✅ The characteristics of companies in the portfolio:
Sustainable competitive advantage
Integer management with skin in the game
Healthy balance sheet
Low capital intensity
Good capital allocation
High profitability
Plenty of reinvestment opportunities
Trading at fair valuation levels
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” - Warren Buffett.
6. Do you cover international stocks or only domestic ones?
Compounding Quality invests worldwide.
We are bottom-up stock pickers and we buy companies in all developed countries in the world.
7. How do I know the companies you own are still worth buying?
Partners get a spreadsheet with a Fair Value and Advice for every company:
Strong Buy: The current stock price offers opportunities
Buy: We think the company is worth buying today
Hold: Don’t add to this position at this point
Sell: We are considering selling the stock
8. Why do you give every company a Quality Score and how does it work?
We always use the same 15-step method to analyze a company:
Each company we look into gets a score on these 15 metrics.
Finally, the company gets a Total Quality Score on 10.
The higher the company, the more likely we want to own the stock.
9. When to buy a company?
We want to buy wonderful companies at a fair price.
While in the short term changes in valuation drive stock prices, the evolution of the intrinsic value drives stock prices in the long term.
That’s why we always look at the quality of the business first and the valuation second.
"If you bought the S&P 500 at a P/E of 5.3x in 1917, and sold it in 1999 at a P/E of 34x, your annual return would have been 11.6%. Only 2.3% p.a. came from the massive increase in P/E. The rest of your return came from the companies’ earnings and reinvestments." - Terry Smith
In general, there are 5 reasons to buy a company:
The stock is undervalued
Fundamentals are improving
The moat is strengthening
The future looks bright
Insiders are heavily buying
You can read more about reasons to buy a company here.
10. When to sell a company?
The biggest investment mistake I ever made? Selling my winners too soon.
Do you know why? A stock can only lose 100% in value but it can increase by more than 10,000%.
Just imagine that you sold Monster Beverage for $0,01 in 1987 or Apple for $0,3 in 1991.
Since their IPO, both stocks are up 72,000% and 85,000% respectively.
That’s exactly why we want to keep our winners and sell our losers as soon as possible.
Here are the most important reasons to sell a stock:
You notice you’ve made a mistake
You found a better opportunity (life is a game of opportunity costs)
The company is losing its moat
Change in management
Growth is slowing down
You need cash
You can read more about the underlying reasons here.
11. What if the stock (market) declines heavily?
We always use the Rule of Three from François Rochon:
One year out of three, the stock market will go down at least 10%
One stock out of three that we buy will be a disappointment
One year out of three, we will underperform the index
The best thing that can happen to you when you are a net buyer of stocks over the next 10 years? Declining stock prices.
Always remember that stocks are like hamburgers:
12. Why are all paid subscribers called Partners?
That’s simple. Because we are in this together.
Having mutual respect and being honest with ourselves is very important.
Another interesting thing to know? All my investable assets are invested in the Portfolio. I eat my own cooking.
If you do well, I do well, and the other way around.
13. What do you get as a Partner?
Partners of Compounding Quality get the following:
📈 Access to my Portfolio with 100% transparency
📚 Access to my ETF Portfolio
🔎 Full investment cases about interesting companies
📊 Access to the Community
✍️ And much more!
14. What is the investable universe and where can I find it?
The investable universe is a list of roughly 150 companies we quantified as Quality.
Based on this universe we are building our Portfolio.
Partners get access to the investable universe here.
15. Where can I find the Portfolio?
Partners can follow our Portfolio 24/7 with 100% transparency.
Get access here:
16. Where can I find the ETF Portfolio?
The ETF Portfolio can be found here:
Furthermore, there’s a dedicated page where you can find all the updates we’ve written about our ETF Portfolio. You can find this page here.
17. What is the Best Buys List?
Each month, we give an overview of our 5 most attractive stocks.
You can find the Best Buys list here:
18. Where can I get access to all investment cases?
For every company we own, there is a dedicated page.
You’ll find the full investment case of 30-40 pages as well as all articles we’ve written about the company in the past.
Here’s how you get access:
Click on the company you want to look into
Read everything we’ve written about the company in the past
19. How do I contact you?
You can always reach out to me via pieter@compoundingquality.net.
20. Become a Partner
Do you want to walk our investment journeys together?
Consider becoming a Partner of Compounding Quality and get immediate access to everything.
Here’s what you’ll get:
📈 Access to my Portfolio with 100% transparency
📚 Access to my ETF Portfolio
🔎 Full investment cases about interesting companies
📊 Access to the Community
✍️ And much more!
Everything in life compounds
Pieter (Compounding Quality)
Book
Order your copy of The Art of Quality Investing here
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Finchat: Financial data