I had to smile at your post about your trip to Greece and your thoughts on long-term compounding, as I actually invest according to a very similar philosophy.
For me, too, factors like quality, cash flow, return on capital, valuation, long-term competitive advantages, and above all, a company’s ability to increase its intrinsic value over many years, rank far above short-term market noise.
However, I pursue a somewhat broader "quality-value" approach, combining elements such as value, quality, growth, and dividend growth with my own metrics, like the "Super Magic Formula" I developed back in 2020, or the combination of ROC and PEG/PEGY ratios.
Or, on a cash flow basis: the "CROIC / P/FCF/G(Y) ratio."
My goal is also to buy outstanding companies at reasonable prices and then let the operational compounding effect work for me for as long as possible.
I’ve been active on Seeking Alpha as "BM Cashflow Detective" for many years, so I think you might find my analyses, and especially my somewhat contrarian views on valuation, cash flow, and long-term compounders, quite interesting.
Perhaps you’d like to follow me there and browse through my many posts and comments.
And one more little personal parallel!
While you’re writing about your trip to Greece and the benefits of taking a break from daily market activity, I’ll be flying to Crete myself in the next few days.
It seems we share similar tastes, not just in investing, but also in occasionally "zooming out" from the stock market noise.
I wish you continued success with compounding quality, and perhaps our paths will cross in the future not only on Substack but also on Seeking Alpha.
After all, it’s incredibly pleasant in the investing world to find people who prefer becoming owners of good companies to interrogating stock prices over their morning coffee.
Best regards and happy quality compounding investing,
I think that when you say "free cash flow" you are also saying "re-invested capital", since that is where the compounding would mostly come from? Just wanting to you clarify that little point, if you don't mind.
And I think you are talking about the free cash flow of the portfolio, itself, and not the free cash flow of all the businesses owned by the portfolio?
Your fears about the reaction of "partners" with respect to your first 2-week holiday (during which you worked 2 hours per day) are probably unfounded. Personally I think you're making a fuss about nothing and being a show-off. What I would be worried about, if I were you, is the very modest return your portfolio is generating (roughly 12% "compounded" over nearly 3 years) : it certainly is not the stuff that - to use your own words - creates billionaires. On the other hand : respect for the transparency on the portfolio trades and composition. My advise : take some more holidays.
12% compounded over 3 years? That's not correct. The CAGR (yearly return) is now almost 9%. I agree that this return should go up going forward. We are aiming to outperform the S&P 500 by 3% per year in the long term.
Always happy for feedback to make Compounding Quality even better!
Hi Pieter,
I had to smile at your post about your trip to Greece and your thoughts on long-term compounding, as I actually invest according to a very similar philosophy.
For me, too, factors like quality, cash flow, return on capital, valuation, long-term competitive advantages, and above all, a company’s ability to increase its intrinsic value over many years, rank far above short-term market noise.
However, I pursue a somewhat broader "quality-value" approach, combining elements such as value, quality, growth, and dividend growth with my own metrics, like the "Super Magic Formula" I developed back in 2020, or the combination of ROC and PEG/PEGY ratios.
Or, on a cash flow basis: the "CROIC / P/FCF/G(Y) ratio."
My goal is also to buy outstanding companies at reasonable prices and then let the operational compounding effect work for me for as long as possible.
I’ve been active on Seeking Alpha as "BM Cashflow Detective" for many years, so I think you might find my analyses, and especially my somewhat contrarian views on valuation, cash flow, and long-term compounders, quite interesting.
Perhaps you’d like to follow me there and browse through my many posts and comments.
And one more little personal parallel!
While you’re writing about your trip to Greece and the benefits of taking a break from daily market activity, I’ll be flying to Crete myself in the next few days.
It seems we share similar tastes, not just in investing, but also in occasionally "zooming out" from the stock market noise.
I wish you continued success with compounding quality, and perhaps our paths will cross in the future not only on Substack but also on Seeking Alpha.
After all, it’s incredibly pleasant in the investing world to find people who prefer becoming owners of good companies to interrogating stock prices over their morning coffee.
Best regards and happy quality compounding investing,
BM Cashflow Detective
Your reply made me smile. I hope you'll have an amazing time in Crete. Let the magic of compounding do its work for you!
I think that when you say "free cash flow" you are also saying "re-invested capital", since that is where the compounding would mostly come from? Just wanting to you clarify that little point, if you don't mind.
And I think you are talking about the free cash flow of the portfolio, itself, and not the free cash flow of all the businesses owned by the portfolio?
Hi Steven,
We are talking about the Free Cash Flow the Portfolio. An explanation for the calculation can be found here: https://www.compoundingquality.net/i/160922581/free-cash-flow
So you calculate how much FCF every position is generating for you and then you take the sum for your total portfolio.
Does this make sense?
Your fears about the reaction of "partners" with respect to your first 2-week holiday (during which you worked 2 hours per day) are probably unfounded. Personally I think you're making a fuss about nothing and being a show-off. What I would be worried about, if I were you, is the very modest return your portfolio is generating (roughly 12% "compounded" over nearly 3 years) : it certainly is not the stuff that - to use your own words - creates billionaires. On the other hand : respect for the transparency on the portfolio trades and composition. My advise : take some more holidays.
12% compounded over 3 years? That's not correct. The CAGR (yearly return) is now almost 9%. I agree that this return should go up going forward. We are aiming to outperform the S&P 500 by 3% per year in the long term.
Always happy for feedback to make Compounding Quality even better!