To The Moon

Portfolio at the end of December 2024December performance: -5.6% 2024 return: 20.5% FCF ROC = 38% FCF per share CAGR (5yr) = 24% FCF Linearity (5yr) = 0.94 FCF Margin = 35% FCF Margin Expansion (5yr) = 6% FCF Yield = 2.71%ImageWe exited our position in $Novo-Nordisk A/S(NVO)$ . The top contributor to performance was ATOSS Software. The top detractors from performance were $Fair Isaac(FICO)$ and $Applied Materials(AMAT)$ .I’ve held Novo for quite some time, mostly for the insulin side of the business - as I thought it was highly predictable. I think there will be a lot of growth once Ozempic is sold in Mexico.Well I personally own property and have cash savings, bu

Which company in your portfolio are you most excited for in 2025? $ASML Holding NV(ASML)$ $Alphabet(GOOG)$ $Alphabet(GOOGL)$ - Where would the world be without them $AppFolio(APPF)$ - It has a lot of positive sentiment at the moment $ASML Holding NV(ASML)$ $Amazon.com(AMZN)$ - Sometimes CAPEX takes a while to return FCF, I see all the semiconductor equipment manufacturers ( $Applied Materials(AMAT)$ $KLA-Tencor(KLAC)$

Here's how the constituents of the $.SPX(.SPX)$ differ based on their growth rate and the linearity of that growth.I use RSq, so the closer to 1.00 the better the correlation and therefore the less the volatility. And yes, it's against years.ImageHere are some of the financial metrics I optimise my portfolio for:What would you add?ImageInterestingly I rarely see FCF yield as a predictor of future share price gains. But I absolutely keep my eye on it!The three most important qualities of a quality business:1. Predictable growth2. Capital efficiency3. Pricing powerWhat would you add?

I've recently updated my quality growth dashboards. Here's a selection featuring: $ASML Holding NV(ASML)$ $NVIDIA(NVDA)$ $Novo-Nordisk A/S(NVO)$ $Hermes International SA(HESAF)$ ImageImageImageImageA mental model for understanding why high returns on capital and growth rate are both required for compounding.High ROC + High Growth = CompoundingHigh ROC + Low Growth = Lack of reinvestment opportunities and a high dividendLow ROC + High Growth = An expanding and unproductive balance sheetImage

Here's a mental model for thinking about a company's growth:• Is the growth rate high?• Is the growth predictable?High + Predictable = InvestableAnything else = Perhaps best to avoidWhere do you invest?ImageHere's my mental model for understanding how value creation, pricing power, barriers to entry and switching costs all come together.VALUE CREATION: Profit growth requires selling more, raising prices and cutting costs.PRICING POWER: Raising prices requires pricing power. Customers only put up with price hikes if there is no alternative (unique product), if the alternative is lower quality (superior product), if the alternative is a higher price (cheaper product) or if using the alternative is inconvenient (switching cost).BARRIERS TO ENTRY: There is only no alternative if companies can'

Here's my mental model for understanding how value creation, pricing power, barriers to entry and switching costs all come together.VALUE CREATION: Profit growth requires selling more, raising prices and cutting costs.PRICING POWER: Raising prices requires pricing power. Customers only put up with price hikes if there is no alternative (unique product), if the alternative is lower quality (superior product), if the alternative is a higher price (cheaper product) or if using the alternative is inconvenient (switching cost).BARRIERS TO ENTRY: There is only no alternative if companies can't replicate their competitors. Competitors can't replicate if they don't know how (knowledge barrier), don't have the capability (capability barrier), don't have the resource (resource barrier) or aren't all

Here's how the holdings of Blue Whale Capital rank based on various metrics for quality and growth.Which do you hold?This is a list of 33 companies. I note their factsheet says they hold 28. So 5 of these companies are no longer held.It's a odd to see such significant exposure to gambling ( $Evolution(EPM)$ , $Flutter Entertainment PLC(FLUT)$ , $DraftKings Inc.(DKNG)$ ), tobacco ( $Philip Morris(PM)$ ) and oil/gas ( $Canadian Natural Resources(CNQ)$ ).Image

Over the last 15 years, quality investing has crushed value investing.• The MSCI's quality index has an average outperformance of 2.71%, compared to -2.32% for their value index.• Quality has outperformed in 11/15 years, while value only managed 5/1• Quality delivered the lowest volatility (SD=4.36%).Critics may argue that 15 years is a short time frame, but the consistency and lower volatility speaks for itself.Maybe, but most of the performance is free cash flow growth, which may continue into the future.ImageThe MSCI World Quality index has outperformed the MSCI World index 10 out of the last 14 years.Image

$Applied Materials(AMAT)$ supplies equipment to the semiconductor industry. Over the last 5 years AMAT has grown.But when we say a company has grown, what precisely does that mean?Companies have many parts to them. Each part can grow at different rates.Let's consider AMAT's growth over the last 5 years.Revenue has grown by 9.7% per annumGross profit has grown 10.5% per annumOperating profit has grown 11.3% per annumNet income has grown 17.7% per annumFree cash flow has grown 19.1% per annumFree cash flow per share has grown 23.9% per annumShare price has grown 29.0% per annumAs you work down the above list you will notice that the percentage growth numbers are going up.Companies with pricing power see their gross profit grow faster than their reve

UPDATED: Here's my updated list of compounders.NEW: $Cavco(CVCO)$ $Cboe Global Markets, Inc(CBOE)$ $CommVault(CVLT)$ $Medpace(MEDP)$ Imagine having access to 15+ quality growth metrics for each of company (including cash return on capital, growth and valuation)?If that sounds interesting to you, then check this outImageyou can gain access to this spreadsheet and research notes - link below:ImageFor each company you get their share price linearity:ImageYou get the stability and expansion of their FCF marginsImageYou get their current valuation and their historic valuation... and so much more.Image