Cash Flow Compounders


Buy the best stocks in the world: companies that can compound earnings

The Best Companies In The World

In today's market more than ever, quality matters. With uncertainty in the air and the economy under perhaps unprecedented stress, you need a game plan to preserve your capital and take advantage of what could be some very attractive opportunities.

Cash Flow Compounders is built around exactly this sort of game plan. Specifics? We're looking for:

  • High free cash flow
  • Solid balance sheets
  • Impressive ROE’s
  • Top management teams
  • The cheapest valuations possible

The best companies in the world, in other words, but at good prices. This is the alpha we are seeking here.

I have spent the past 25 years developing my style of investing, and the winners time and again are the ones that can compound earnings steadily and consistently, year in and year out.

Indeed, since becoming a contributor on Seeking Alpha in 2011, my stock ideas have generated 27% annual returns for those following my advice (as of Sept 2022). That puts me well in the top 1% of financial bloggers (TipRanks number 120 out of 14,210).  




Finding The Compounders

Cash Flow Compounders will select only the best companies, ones that didn’t lose a dime during the Great Recession, and ones trading at attractive valuations. In essence, I have put together what I deem to be a bulletproof portfolio, one that not only will out-deliver on an EPS growth basis vs the market, but also will outperform in recessions.

While I didn't see coronavirus coming (who did?), I had a feeling in 2019 that the markets were getting toppy. A 10-year bull market can be a lot of fun, but it makes people forget valuation, risk management, or downside.

So, to prepare for a time like this, I screened through virtually every stock in the S&P 500, the Nasdaq, as well as the Russell 3000 for names that fit into our criterion. Out of this list, only approximately 100 passed the test when I first ran it, to give you an idea of how selective it is. These names are best-in-class stocks, ones you can buy and own for years, offering superior after-tax returns.

High management fee companies, secular decliners, capital-intensive cyclicals, and over-levered balance sheet stocks simply don’t pass the muster. By the way, our 10 years of backtesting of this portfolio suggests 20.8% annual returns compared to the S&P 500 at 14.6%.

The key is getting the entry point right on these names. That’s why I have created this service. Stocks need to be roughly 1.5 standard deviations cheap to historical trading averages before recommending. Said simply, stocks need to be somewhat beaten up or depressed from their norms. Of those 100 stocks, only a handful currently meet the entry point guidelines. Talk about rigorous!



A Bear Market Game Plan

It's not enough to look backward at trailing earnings; we know those are going to go out of whack in the coming months. You need to understand what the new market environment means for stocks.

I've been here before. Bear markets are hard for everyone, but there are steps you can take. We start with the best companies in the world, and we stress-test their valuations.

I get on the phone with management teams to understand how they're holding up during these difficult times and what that means for the months ahead.

And I share updates in our chat room in real time, as well as regular posts on how to adjust our tactics and strategy as the market runs through the full cycle of a bear market.

We have a plan to get through the months ahead. If you join Cash Flow Compounders, you can benefit from this plan and avoid going it alone.


What Do You Get On This Service?

  • Access to my portfolio of compounders. See the companies that clear my hurdle, and that I'm holding in my personal accounts.
  • An average of 2-4 in-depth new ideas a month. I don't lower my quality bar, but as I find new companies for the portfolio I share them with members exclusively.
  • Regular updates and discussion around our core ideas. Follow-up articles when appropriate, trading alerts when market opportunities arise, portfolio sizing thoughts, and availability to answer questions and comments as needed.
  • A live chat room and direct access to me for questions. The market will go up and down, and sometimes that causes noise or questions around the stocks we own. The chat is a way to stay on top of new opportunities and sort out what really changed and what's just market churn.
  • Special situation value names that are still high quality but have a specific angle to play -- sum of the parts, hidden assets, event-driven stories -- and that can add hidden gems to our core compounder.



More About Me And Who This Is For

Anyone that has followed me on this site knows however that I am no quant. I am value-oriented and a Warren Buffett follower to the core. The work here will be very in-depth and based on my extensive experience as an institutional research analyst and portfolio manager at multiple hedge funds and mutual funds. I have looked at thousands of stocks and bonds in my career and spent several months developing this list of names.

Even though Cash Flow Compounders provides institutional-level analysis, the ideas will be available and actionable for any investor. Colorful fast charts and company slides don’t cut it for me. Here we dig through financials, talk to management teams and competitors, build models and scenarios and outline all the risks that we see. The information provided will be substantial and enable subscribers to decide for themselves whether to invest or not. The good news is, these aren’t stocks that need constant monitoring. Buy a great company at the right price, and the rest is easy.

Finally, I also aim to let subscribers in on Special Situation value names that fit into my quality criterion, but perhaps have a slightly different angle. Sum of the parts stories, where markets appear to ignore valuable assets, or event driven names that appear attractive (e.g. spin-offs or companies for sale) are nice ways to add hidden gems to our core compounder portfolio.



How Do I Sign Up?

I want readers to know that I intend to invest in every single idea posted, as I have in the past. I am putting my money where my mouth is!

You want to see our plan and how we're handling this market? You can do so for free for two weeks, with no longer commitment. See what we're doing, take our ideas for your investing, learn whatever you can. I've developed this service to help investors for a time like this, and I want it to be easy for you to see what it's like and give it a shot.

If this sounds like the right fit for you, sign up on the right to get started and join me in finding the best companies in the world, good for any market!


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