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Hi Partner 👋
I hope you are doing well.
This week, we’ll take a skeptical look at our portfolio.
What is going well?
What is not going well?
Should we make adjustments?
The goal? Have a Portfolio you can be proud of.
We might need to make a few adjustments to achieve this.
This will be a very open and honest article.
It will help you to know what to expect from Compounding Quality going forward.
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Our Portfolio
Currently, we are invested in 21 companies.
We invest in three buckets:
Owner-Operators (65.7% of the Portfolio):
What? Companies still run by their founder or their family
Why? Founder-led companies outperform by 3.9% per year on average
Monopolies & Oligopolies (27.8%):
What? Only one or a few companies dominate the entire industry
Why? The best compounders in the world are monopolies & oligopolies
Cannibal stocks (6.5%):
What? Quality stocks which heavily buy back their own shares
Why? Cheap cannibal stocks can create a lot of shareholder value.
If you want to find out more, I would highly recommend you reading our Owner’s Manual.
The Owner’s Manual was already written in 2023 and is still highly relevant today.
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The goal is to outperform the S&P 500 by 3% per year in the long term.
I believe we can achieve this:
We are invested in better companies than the index
Our companies are cheaper than the index
Quality investing is a strategy that has proven to work in the past. And it will continue to do so in the future.
As Mark Twain said: History doesn’t repeat itself, but it often rhymes.
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Free Cash Flow
Our goal?
Let our portfolio generate more and more free cash flow for us over the years.
The goal? Generate $1 in Free Cash Flow for us per minute.
That would be true passive income!
Here’s what the evolution over the past few years looks like:
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