To The Moon

What matters more - FCF growth rate or FCF yield?The correlation between the share price growth rate and the FCF/share growth rate is higher (left), than the correlation between the share price growth rate and the change in FCF yield (right).I used 10 year data for the $.SPX(.SPX)$ . $SPDR S&P 500 ETF Trust(SPY)$ $E-mini S&P 500 - main 2412(ESmain)$ ImageImageWhat I take from your chart is that over the course of 1 year the multiple impacts 46% of performance, which then drops rapidly to just 5% over 10 years. So yes, I think both charts are explaining the same thing. Over the short term, the multiple is just noise.

What are the highest quality companies in the Fundsmith/Smithson investable universe?I took the complete set of holdings from both funds and ran it through one of my custom quality filters.Here are the ones that rise to the top 👇🏼👇🏼Which do you own? $MSCI Inc(MSCI)$ $Microsoft(MSFT)$ $Novo-Nordisk A/S(NVO)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ $Apple(AAPL)$ $Fortinet(FTNT)$ $Visa(V)$ $Meta Platforms, Inc.(META)$ I

Investors often talk about compounding and when they do - donuts and snowballs are often used as illustrations.🍩 The ring of a donut resembles the compounding cycle of retaining profits from the previous year to reinvest for the following year.❄️ And if animations are to be trusted, a ball of snow rolling down a hill can start small, but gradually becomes larger and larger, just like the compounding's snowball effect.In this post, I’ll explore how different Returns on Capital (ROC) and growth rates can impact the compounding process and explain why even small adjustments can create a huge difference in your returns over time.1. High ROC + Low Growth Rate: Flatline SnowballsWhile investors in compounders often emphasise the importance of consistently high returns on capital, they often negl

Here's a quick look at ATOSS Software...What are your thoughts?⬇️⬇️⬇️📈 Share price up 415% since 1999.ImageCash return on capital consistently above 20%, but also growing (currently over 60%).Image Free cash flow and dividends have both grown substantially over the decadesImage Pricing power is strong... the below is from my research note on ATOSS.Image Since 2020, the company's valuation has de-rated slightly, so is now at a more attractive valuation.ImagePS：Two things you can do to become a better investor:1. Limit the number of companies you own2. Limit how frequently you tradeThis forces you to only own your best ideas and to accept that there will always be an opportunity that you miss out on.

Here's four quality growth dashboards, covering: $Atlas Copco AB(ATLRF)$ $HMS Networks AB(HMNKF)$ $.IXIC(.IXIC)$ $Invesco QQQ(QQQ)$ $NASDAQ 100(NDX)$ $E-mini Nasdaq 100 - main 2412(NQmain)$ $Veeva(VEEV)$ Which stand out to you?ImageYear 1 - you invest $20 and make $10Year 2 - you invest $10 and make $5Year 3 - you invest $5 and make $2.50Your ROC is 50%, but your annualised growth rate is -50%.That’s why ROC and growth both matter. Look for both.Year 1 - you invest $20 and make $10Year 2 -

Here are four essential ratios for analysing companies:1. Growth. Consider both revenue and free cash flow. Consider both the short term and long term. Look for consistency. Consider the impact of buybacks on per share growth metrics.2. Margins. Look for margins that are widening over time, allowing FCF growth to outpace revenue growth. Consider each expense separately (e.g. COGS, R&D, CAPEX).3. Return on capital. Look for a consistently high number and a low payout ratio. Consider the company’s debt level and interest expense.4. FCF yield. Consider whether the growth rate justifies the valuation. Be mindful of stock-based compensation.What would you add?

What's happening inside $Estee Lauder(EL)$ ?I don't invest in consumer stocks, but this is an interesting one.- All measures of profitability are down over the last 5 years.- Return on capital has plummeted since 2019.- Margins have weakened as COGS and SG&A have gone up.- Leverage and cost of debt also up.Companies selling to other companies enter into long-term contracts, which can mean highly predictable and recurring revenue,While a fair number are seemingly more expensive than the S&P 500, the potential of these companies to continue growing their FCF at above market rates remains.Image

Here's a histogram of the $.SPX(.SPX)$ 's YTD share price returns.* Only 33% of companies in the S&P 500 beat the S&P 500.* The outsized returns have come from $Vistra Energy Corp.(VST)$ $NVIDIA Corp(NVDA)$ $Palantir Technologies Inc.(PLTR)$ .Is it easy or hard to beat the market?!Image

Here's a quick look at the valuations of the companies in my portfolio.While a fair number are seemingly more expensive than the $.SPX(.SPX)$ , the potential of these companies to continue growing their FCF at above market rates remains. $Applied Materials(AMAT)$ $Visa(V)$ $Fortinet(FTNT)$ $MasterCard(MA)$ $KLA-Tencor(KLAC)$ $Novo-Nordisk A/S(NVO)$ $MSCI Inc(MSCI)$ $Microsoft(MSFT)$

Great quality investors need to understand competitive disadvantages... not just competitive advantages.Here are 5 to look out for:🚫 High Costs: Inefficiency drives prices up, making it tough to compete on price (think narrow margins).👤 Weak Brand Identity: It's hard to build loyalty if no one trusts you or even knows you.🐢 Slow Innovation: Falling behind in tech is a failure to adapt to change.🌍 Limited Market Reach: Without efficient product distribution, your growth is capped.🌐 Weak Network Effects: Without enough users, platforms struggle to add value and reach a critical mass.