I seek to invest directly in high quality companies that I intend to hold onto for decades.
Established compounders are companies that have reached a steady state of operations, demonstrating consistent growth and strong returns on invested capital. These are typically well known companies with a proven track record.
Some companies in this category include Visa, Moody’s, UnitedHealth, Google, and Facebook.
Emerging compounders are companies that have not yet reached maturity. Typically high growth companies, these companies are focused on scaling their business. While these companies may have relatively low earnings or even losses due to aggressive investments, they typically demonstrate strong revenue growth and oftentimes positive cashflow.
I look for category leaders that are disrupting and innovating.
Given my position as an engineering leader at a high growth start-up in San Francisco, I have a unique perspective on up-and-coming technology companies. I tend to focus on growth efforts in that light.
Some names that fall into this category include CrowdStrike, Cloudflare, Upstart, and Okta.
I look for high-quality companies; companies that have demonstrated strong performance and have a compelling narrative for the future.
Regardless of the investment strategy, I gauge the quality of a company through two primary lenses: fundamental and qualitative analysis.
Fundamental analysis covers the company’s metrics – primarily their operations and balance sheet. The primary data points I consider are:
Other considerations include:
Qualitative assessment provides a unique insight into the future prospects of the company. Key considerations include: