Month: May 2024

We looked briefly at return on capital and examined how high return on capital companies can produce high returns for the investor.  Now I want to delve into this a little deeper. It is well known that the true value of an asset is the net present value of all future cash flows the company…

We have now introduced our methodology for investing and explained why we want to go for high quality companies with sustainable high returns on capital.  Depending on your level of expertise and desired effort, you should select from index investing (lowest effort), dividend growth investing (moderate effort), and star list investing – investing from your…

In the last post, we looked at the importance of investing in high quality businesses with durable returns on capital.  In that post, we mentioned not needing to depend on valuation changes to make a bundle of money over your investment lifetime.  You do hope to buy companies at low valuations, but you do not…

Now that we have examined a hypothetical 4 stock portfolio formed using quality as an assessment, we see that quality stocks can perform well even when handicapped (I picked 4 stocks in 1985 that were due to have one or more significant issues over the years between 1985 and 2023).  This outperformance is despite the…

Now that we have established some of the methodology for Star List investing, I wanted to take you through a case study of how investing in quality companies, buying and holding for many years, might work.  So, I selected a portfolio of 4 quality companies from March of 1985.  The date was selected at random and…

Now that we have laid some groundwork for what we are looking for in good investments, I think it is time to go into the overall investment strategy that we will employ to earn excess returns.  To summarize from our previous posts on indexing, the Fama and French model, and past successful super-investors, we want…

In the previous 2 posts, we looked at clues from super-investors and index investing for how we will build our successful investing process. Next we turn to another market model for clues to our investing strategy.  The Fama and French model is a simple model to describe returns of assets in markets.  It is a…

In the last post, we explored what traits many super-investors had in common. In this post, we will now compare those traits to the advantages of index investing to see a pattern of what traits work for earning the best investing returns. Index investing should be the default position of anyone who wishes to invest,…