A New Compelling Long-Term Buy for the Portfolio?

Benefiting from a steadily growing installed base

Whenever we have identified a new compelling high-quality growth company, we won’t hesitate to add it to the portfolio assuming the price is right. Since we’re long-term quality growth investors, it takes quite some time to build high conviction on a potential new position. But we may have identified a compelling long-term buy we’ve been following for quite some time.

When screening for moats, businesses that benefit from a steadily growing installed base look very intriguing and appealing to us. What’s driving recurring cash flow potential? Does the company hold a market-leading position with top-notch ROIC, the willingness to invest for future growth at great returns (ROIIC, IRR) and a strong balance sheet? Companies providing services and/or products that haven’t changed materially over time oftentimes produce rather safe but still above-average returns. More return with steady but very cash-minting business models: that’s what we would call a “Compounding Tortoise”.

More on that in the new bi-weekly webinar recording (along with the slides) below.