Portfolio Update May 2026
Another month, another Portfolio Update.
What’s going on with our companies?
And which companies are the most attractive right now?
Let’s dive in right away.
Stocks? Or Companies?
Warren Buffett is the best investor in the world.
In this interview, he said that he tried to pick stocks when he was 11 years old:
He paid attention to the price
Read books on technical analysis
He thought the most important thing was to be able to predict what the price would do
Then he read Ben Graham’s book ‘The Intelligent Investor’.
From that point on, he never bought another stock.
It sounds crazy.
Warren Buffett is the best investor in the world.
He is known for buying stocks like Apple, Coca-Cola, and American Express.
But since he read The Intelligent Investor…
He stopped buying stocks and started buying businesses.
Some of these companies, like Apple, Coca-Cola, and American Express, … just happened to be traded on the stock market.
This is an important mindset shift.
In the short term, there are a lot of random things that will drive the price of a stock.
Things like:
Changes in interest rates
Sentiment
Analyst ratings
Headlines
…
But in the long run, the underlying performance of the business will drive the stock price.
Just listen to Peter Lynch:
“There is 100% correlation between a company’s earnings and what happens to the stock.”
The important lesson?
Over short periods of time, a stock's price can jump up or drop down because of things that aren't really about the company at all.
But given enough time, a strong business will lead to a strong stock.
In the long term, stock prices always follow the evolution of the intrinsic value:
Let’s dive in and see how our businesses are performing.
Our Portfolio
Fundamentally, our businesses are doing great.
Our companies are healthier than the ones in the S&P 500.
And this while they are substantially cheaper than the index.
As you can see we own better companies that are 23% (!) cheaper than the S&P 500:
The intrinsic value of our companies has grown by nearly 20% (!) per year.
Almost every company we own remains undervalued right now.
Right now, the market seems to care mostly about stock prices and the short term.
Let’s dive into the numbers for a second.
Our Portfolio in 2025
Intrinsic value: +8.6%
Stock price: -6.6%
As a result, Our Portfolio became 15.2% cheaper.
Our Portfolio in 2026
Intrinsic value: +8.3% (expectations)
Stock price: -17.2%
As a result, Our Portfolio became 25.5% cheaper.
Our Portfolio since the beginning of 2026
If you combine 2025 and 2026, Our Portfolio became 40.7% cheaper (!)
Over the same period, the valuation of the S&P 500 increased by 5%.
This means that since 2025, Our Portfolio’s relative valuation declined by almost 50% compared to the index.
That’s just ridiculous.
While the market will remain irrational in the short term, it will be a weighing machine in the long term.
I truly think now is the time to swing heavily.
The odds are in our favor.
I wrote an extensive summary about this.
Partners of Compounding Quality can read it here:
Just let me make it clear: today is a great day to buy quality stocks.
I feel very confident that Our Companies will be fine.
Even while our performance is struggling right now.
Why?
Because we own companies with durable competitive advantages.
The expected return of Our Portfolio has never been higher than today.
Just think about it for a second…
Our companies are fundamentally way healthier than the index
Our companies are cheaper than the index
The current Forward P/E for Our Portfolio equals 17.1x.
This means the earnings yield is 5.8% (100/17.1x).
Terry Smith says there is an easy rule of thumb to calculate your expected return:
Your expected yearly return = Expected EPS growth + Earnings yield
Your expected yearly return = 12% + 5.8% = 17.8%
An expected yearly return of 17.8% would be amazing.
It’s the highest it has ever been for Our Portfolio.
This would mean you double your money every 4 years.
If you invest $10.000, the evolution would look as follows:
There are three companies in Our Portfolio that I specifically want to focus in on today.
The ones that could be an absolute steal today.
