The Top Picks of Our Partners
The Wisdom of Crowds is an amazing thing.
Many Partners of Compounding Quality state that the Community provides even more value than the newsletter itself.
At the end of 2023, I asked every Partner about his 3 favorite stocks.
Almost 200 stocks made the list.
Let’s dive into them. Did our Partners do well?
Performance
Since the beginning of the year, the top 10 picks of our Partners returned 18.7% versus 17.6% for the S&P500.
This outperformance is remarkable given the fact that there was NO Big Tech name within the top 10.
Big Tech accounted for roughly 50% of the returns of the S&P 500 this year. Nvidia alone accounted for 25% of the returns.
If you ask me, the outperformance of Big Tech can’t continue.
The expectations implied in the current stock prices for Big Tech are very high and it rarely happened that the largest 10 positions within the S&P 500 accounted for such a large portion of the index.
Source: Guide to the markets - J.P. Morgan
10 Interesting picks
Now let’s dive into 10 interesting picks of Our Partners.
The Partners with the highest return at the end of the year will win some attractive prizes.
10. ASML (+30.9% YTD)
Company Profile
ASML is a Dutch company and one of the world's leading suppliers of semiconductor manufacturing equipment.
It specializes in photolithography systems used to produce computer chips, playing a critical role in the advancement of semiconductor technology.
Investment rationale
ASML has a (quasi-)monopoly in semiconductor manufacturing equipment
The Dutch company is still investing heavily in future growth
CAGR since IPO in 1995: 26.2%
9. Meta Platforms (+33.4% YTD)
Company Profile
Meta Platforms, Inc., formerly known as Facebook, is a multinational technology conglomerate.
It owns and operates various social media and communication platforms, including Facebook, Instagram, WhatsApp, and Oculus, focusing on building community and virtual connectivity
Investment rationale
Mark Zuckerberg is an excellent Owner-Operator
High profitability and great capital allocation skills
Trading at reasonable valuation levels (forward PE: 26.0x)
Source: Finchat
8. The Trade Desk (+34.9% YTD)
Company Profile
The Trade Desk is a global technology company that provides a self-service platform for digital advertising buyers.
It enables advertisers to create, manage, and optimize digital campaigns across various formats, such as display, video, and social media.
Investment rationale
Healthy net cash position
Bright future. Expected long-term EPS growth: 21.7% per year
The Trade Desk returned more than 3,000% to shareholders since 2016
Source: Finchat
7. Crowdstrike (+43.7% YTD)
Company Profile
CrowdStrike is a cybersecurity company specializing in endpoint protection, threat intelligence, and cyberattack response services.
Using its cloud-native Falcon platform, it helps organizations detect and prevent breaches in real time.
Investment rationale
The market for cybersecurity is growing at attractive rates
George Kurtz, the co-founder, is still the CEO today
Crowdstrike is on the verge of becoming profitable
6. Arista Networks (+45.4% YTD)
Company Profile
Arista Networks is a leading provider of networking solutions, particularly known for its high-performance cloud networking technology.
The company designs and sells multilayer network switches to deliver software-driven cloud networking solutions for large data centers and high-performance computing environments.
Investment rationale
Arista Networks will benefit from Artificial Intelligence
The company translates 35% of its revenue into free cash flow
Expected long-term EPS growth: 19.0% per year
Source: Finchat
5. Eli Lilly (+52.9% YTD)
Company Profile
Eli Lilly is a global pharmaceutical company headquartered in the United States, renowned for its innovation in developing medications for diabetes, oncology, immunology, and neuroscience.
With a legacy spanning over 140 years, it continues to focus on research and development to improve patient outcomes.
Investment rationale
The market for diabetes and obesity will keep growing
Eli Lilly is active in an oligopoly together with Novo Nordisk
The fundamentals of Eli Lilly look excellent
4. Synektik (+61.1% YTD)
Synektik specializes in medical technology and innovative solutions, primarily in diagnostic imaging and nuclear medicine.
The company provides comprehensive services, including the development, production, and sale of radiopharmaceuticals.
Company Profile
Diagnostic imaging and nuclear medicine is an attractive segment to be active in
The company still has plenty of growth potential
Cheap valuation level (forward PE: 12.8x)
Source: Finchat
Now let’s dive into the top 3.