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Compounding Quality Profile picture
@QCompounding
Oct 16, 2022 • 2 tweets • 1 min read • Read on X
🧵🏆 20 Undervalued Quality Stocks

Stocks in an oligopoly (where a few players dominate the entire market) outperform the S&P500 with a wide margin.

In this thread, we'll discuss the 20 best stocks ⬇️⬇️⬇️ Image
So far, this list has outperformed the S&P 500 by more than 11% in less than 4 months: Image

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More from @QCompounding

Compounding Quality Profile picture
Dec 21
Criteria to screen for quality stocks

- Revenue growth > 5%
- Earnings growth > 7%
- FCF / earnings > 80%
- ROIC > 15%
- Net debt / FCFF < 5
- Debt/equity < 80%

Here are 15 Quality Stocks you should know:
1. Apple ($AAPL)

Apple is the largest company in the world manufacturing smartphones, personal computers, and tablets. 18% of all new phones sold are iPhones.

- FCF Margin: 28.3%
- ROIC: 48.8%
- FCF Yield: 3.5%
- Exp. yearly FCF growth (3 yr): 5.7%
- CAGR since IPO: 19.5%
2. Microsoft ($MSFT)

Microsoft operates as a software company. Word, Excel, … are all applications of Microsoft. Microsoft is also active in cloud storage.

- FCF Margin: 32.3%
- ROIC: 28.1%
- FCF Yield: 2.6%
- Exp. yearly FCF Growth (3 yr): 12.3%
- CAGR since IPO: 22.7%
Read 17 tweets
Compounding Quality Profile picture
Dec 21
The best books I have ever read about management?

Outsiders by William Thorndike.

Here are 12 timeless lessons from the book for investors Image
1️⃣ Managers should think like investors

Great CEOs prioritize increasing per-share value over revenue growth.

It's not about being the biggest. It's about being the most valuable. Image
2️⃣ Capital Allocation = CEO’s #1 Job

Investing in operations, acquisitions, debt repayment, stock buybacks, or dividends?

CEOs should make these decisions based on ROI, not emotions. Image
Read 14 tweets
Compounding Quality Profile picture
Dec 19
Charlie Munger always used 4 criteria to buy stocks.

It allowed him to make good and rational investment decisions.

Let's dig into them: Image
Here are the 4 criteria of Charlie Munger:

1️⃣ The business must have a moat
2️⃣ You need to be able to understand the business model
3️⃣ Management must have talent and high integrity
4️⃣ There should be a margin of safety
1️⃣ The business must have a moat

A sustainable competitive advantage is crucial.

Seek for companies with a high and consistent gross margin as well as ROIC.
Read 7 tweets
Compounding Quality Profile picture
Dec 19
How does Warren Buffett calculate the intrinsic value of a stock?

He looks at the Owner’s Earnings.

Today, I'll teach you everything you should know 👇 Image
1. Formula
Owner’s Earnings = Earnings Per Share (EPS) + Dividend Per Share

It reflects the real cash flow available to investors after all expenses are covered. Image
2. Importance

In the long run, stock prices always follow a company’s Owner’s Earnings. 📈

By focusing on this metric, you can:
- Avoid market noise
- See a company’s true performance
Read 7 tweets
Compounding Quality Profile picture
Dec 18
Daniel Kahneman passed away recently

He changed the world of behavioral finance

Here are 10 things I learned from his book Thinking Fast and Slow as a way to say thank you: Image
1️⃣ Our brain uses two systems: System 1 and System 2

System 1 is fast, intuitive and automatic. It is prone to biases and errors such as overconfidence.

System 2 is slow, analytical, and deliberate. It is necessary for complex tasks requiring focused attention. Image
2️⃣ Irrationality

Humans are not rational. We all make many mistakes.

90% of Americans believe they drive better than most, and 70% think they're smarter than average. Image
Read 12 tweets
Compounding Quality Profile picture
Dec 18
Chuck Akre’s wisdom can simplify the most complex ideas in investing.

I’ve summarized 11 of his most impactful quotes.

These will teach you more than 11 books Image
1. Diversification

"We’d rather own a few extraordinary businesses than many mediocre ones." Image
2. ROIC

"We look for businesses that compound capital at high rates for long periods." Image
Read 13 tweets

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