Our 25 Most-Read Articles To Get Started
A lot of free resources to become a better quality growth investor
Last May, we were on the verge of breaching 250 posts since we started the Substack early January 2024. We’re now at 256 blogs, webinars, earnings recaps, and deep dives.
So, if you’ve just recently discovered our work, the following inevitable question pops up: Where should I start?
We thought it would be helpful to highlight the 25 most-read pieces that best capture our strategy and the analytical rigor behind it.
Whether you're a free reader or a paid subscriber, this curated list is a great starting point. These posts lay out the core principles of our approach and offer a clear view of how we think about markets, valuation, and long-term investing.
Thank You and What's Next
Before we highlight these, we’d like to highlight a couple of other milestones too, which caught us by surprise:
exceeding 500 paid subscribers, of which 90% annual members (+37% versus 3 months ago);
7,000 total subscribers, or 1,800 more than 3 months ago (+35%);
10,300 followers;
We're incredibly grateful to everyone who's been part of this journey. We'll continue to dedicate ourselves to delivering high-quality content within our expertise, sharing our insights on identifying and holding exceptional businesses.
One of the most rewarding aspects of our Substack experience has been talking face-to-face to remarkable individuals who offer authentic perspectives on entrepreneurship, investing, and life. Thank you so much!
So, what's coming up next? We're finalizing our deep dive on Lotus Bakeries, a leading consumer staples company renowned for its products and share price performance. It's a fantastic business that exemplifies how consistency and patience drive success for quality compounders.
Additionally, we're teaming up with
for a very interesting discussion on incentives.Finally, we'll launch a follow-up series on "Sustainable Quality Compounding," analyzing both successful and less successful compounders and the reasons behind their performance. Our initial series was very well-received, and we aim to maintain that high standard. We plan to cover companies like Heico and Dollarama, among others.
The List to Get Started
Without further ado, here are the 25 most-read articles, ranked on the number of views. Click on the title to get directed to the related article.
1️⃣ McKinsey's First Principles of Valuation
Debunking 10 key takeaways from the interview with Tim Koller on how to value companies, what managers should be doing to maximize shareholder value. A great start to weed out weak capital allocators.
2️⃣ How Chris Hohn's Delivered an 18% CAGR Since 2003
Let’s elaborate on Chris Hohn’s key investing pillars and reflect on those as it relates to our own portfolio. On some areas, there’s bit of overlap with Dev Kantesaria’s strategy of owning unique companies.
We’ve already published free blogs and presentations on the topic of what makes great business over time, and Hohn’s insights are yet another layer of valuable information.
3️⃣ Deep Dive - Constellation Software Inc.
In terms of page views, our December 2024 report on CSI far surpasses all other in-depth analyses we've published to date. The deep dive discussed the following topics:
Introduction to CSI - Decentralization & Track Record
Organic Growth vs. M&A
Incentives and Management Team
ROIC vs. ROIIC vs. IRR - Smaller vs. Larger M&A Deals
Spin-Outs: TOI and LMN - Impact on FCFA2S
Year-to-Date Performance
Looking Ahead
Base Case Valuation Model - Drivers and Risks
Conclusions
4️⃣ 🔎 Everything You Need to Know About Valuation vs. ROIIC and Durability
Past compounding isn’t indicative of future performance. Companies can grow too quickly with several hiccups and thus subsequently higher volatility in their share prices. High growth rates are like a honey jar: they attract competition, tend to lead to reduced returns for all parties looking to get a bigger piece of the pie.
Plus, there’s plenty of empirical evidence that fast growers (or at least, investors expect them to meaningfully accelerate top line growth, i.e. the expectations treadmill) are prone to severe overvaluation. It’s not just about timing a reversal in sky-high growth rates but also factoring in the potentially devastating impact from substantial multiple contraction. Research conducted by McKinsey demonstrates why boring wins the race.
This blog dives into the essential parts of how we look at businesses.
Given that there isn’t a lot of (high-quality) coverage available, we were very excited to share the deep dive on the world’s largest sauna and spa manufacturer.
Following its initial public offering in 2018, the company has accelerated its internationalization efforts and broadened its product offerings, all while markedly enhancing returns on invested and incremental invested capital and generating significant growth in NOPAT per share.
Interestingly, while the company has over 30,000 shareholders, the 100 largest shareholders (a diversified group including the management team with a long-term investment horizon) own >75% of all shares.
An in-depth report on the luxury car manufacturer, which we greatly enjoyed writing. The chapter on its reinvestments into R&D, and the implications on the steady-state valuation is especially worth reading.
Covering the attractiveness of Diploma’s largest acquisitions, what its valuation looks like today, and why serial acquirers are inherently unpredictable to some extent.
8️⃣ How We Define Sustainable Quality Compounding (Part 1)
In this three-part blog, we’ll tie all pieces of sustainable quality compounding together by discussing six companies: Harvia, Copart, TJX, Tractor Supply, Pool Corporation, and Atkore.
This first article was devoted to Harvia, as it is our largest position. Its fairly sizable capacity investments over the course of Q2 - Q4 2021, a few months before the post-COVID normalization kicked in, merit additional analysis. The timing couldn’t have been worse to execute on these late 2021 growth investments.
It’s impossible to have predicted the COVID-19 pandemic and the profound impact it had on businesses. Many high-quality companies have lost their compounding status, e.g. Nike and Estée Lauder, despite their solid track record and ROIC. That’s exactly why only looking at ratios such as rolling ROIC (a lagging indicator) will result in an opaque investment case.
The more relevant question is: what’s the impact of a downturn, i.e. not using that capacity for 4 years in a row? The results for Harvia may surprise you, and they’re exactly the reason why this company is our highest-conviction position: highly efficient and effective quality compounding.
9️⃣ Partner Q&A (#1) - on Net Financial Position, ROIIC and our Valuation Model
Investment jargon and calculations can be a little deceiving, hence we'd like to break them down in these series. Some members would say: why clarify a seemingly simple concept (for instance NFP/net financial position), while others would highly appreciate this additional color. We believe a Q&A series are particularly helpful as many members are likely to remain silent if they have a question.
One of the main objectives (and hopefully differentiators) of our newsletter is to not only share information, but to help you better understand the ins and outs of durable shareholder value creation (and its pitfalls). It's about debunking financial information rather than believing the raw data from screeners is sufficient to make informed decisions. We shouldn’t just take numbers for granted, but contextualize what they’re made up of.
1️⃣0️⃣ Partner Q&A (#2) - Nuances on Modeling Steady-State NOPAT
The second blog on our premium members’ questions relates to ROIIC, organic reinvestments, past years’ ROIIC, modeling assumptions, our definition of steady-state NOPAT, and calculating the projected CAGR.
“Steady-state" NOPAT refers to the net operating profit after tax a company would earn if it made no further growth-related capital expenditures. In this context, depreciation should reflect only maintenance capex, excluding depreciation from recent growth investments.
1️⃣1️⃣ The Art of (Not) Selling - Makings of a Multibagger
This blog covered what it takes to become a multi-bagger: time and management focus. Meanwhile, human beings are looking for instant gratification and thesis confirmation, i.e., if we buy a stock, it better go up quite quickly. Even more so because many feel the pressure of relative performance (i.e., comparing performance to an index).
Our article covered Fastenal, the leading supplier of OEM fasteners, cutting tools and related equipment, and other industrial items.
1️⃣2️⃣ Why Investors Are Obsessed w/ Their Cost Basis - The Fallacy of Averaging Down
A blog on how to look at performance (time-weighted versus money-weighted), sunk costs, outcome bias, mean reversion, and being hesitant to averaging up.
1️⃣3️⃣ Finding Excellent Capital Allocators
Discussing a recent follow-up interview during which Koller highlighted the facets of capital allocation and how mainstream some of wrong concepts have become (e.g., a strategy that’s focused on continuous margin expansion won’t necessarily produce the highest economic value).
How should we think about a company’ excess cash allocation strategy? What about the timing of investments? Why should we question a company’s total ROIC and look for disaggregation instead? We’ve addressed these questions with some practical examples (including serial acquirers).
1️⃣4️⃣ It's Buy-and-Monitor, Not Buy-and-Hold
This blog talked about the nuances of gross return models, such as DCFs which typically aren’t adjusted for withholding taxes, or the fact that excess free cash may not be returned to shareholders.
Companies that don’t need to hold much permanent cash tend to be true industry leaders, miles ahead of their competitions. They can do whatever they want, which could be harmful to future returns if you have a reshuffle at the top management team.
In short, we favor the buy-and-monitor approach: keep track of your companies’ performance and capital allocation. And if something doesn’t seem right, reconsider your thesis. Don’t become anchored to past theses and/or your favorite companies. That’s already in the past, and we’re buying the future returns. Companies evolve, and so will your investment thesis.
Don’t invest in companies whose management teams always talk about past triumphs rather than future strategic, competitive positioning and value creation for the next years/decade.
1️⃣5️⃣ When ROIC is a Flawed Metric - Part II
What we’ve seen over the past years is that many capital-light (low working capital and low maintenance CAPEX) and high-margin companies managed to dramatically improve their reported ROIC. That’s obviously a testament to their effective capital management and competitive advantages, but using that ROIC as a baseline for modeling returns on future growth investments is tricky.
We’re interested in three elements:
Returns on incremental invested capital (ROIIC) excluding extraordinary events such as supply chain constraints leading to year-over-year volatility (although a structurally higher inventory position should be accounted for, i.e. lower ROIIC).
Longevity of these returns: we don’t want these returns to vanish within 3 years. Post-COVID, many commodity-based companies enjoyed unprecedented margin expansion which didn’t last. Hence, their temporarily elevated returns proved to be unsustainable, leading to - at least initially -overly optimistic assumptions on ROIIC.
Quick contribution of investments to the top-line and NOPAT. If it takes 10 years to ramp up a project that will yield an ROIIC of 20%, the final un-levered IRR will fall short of expectations.
The investment crowd has gone all-in on the ROIC narrative, but there are many moving parts: inflation inflating profits while the initial cash outlay on long-term assets (e.g. plants) remains relatively stable.
When modeling future cash flows and growth, we’re looking at the returns on incremental invested capital. That is, investment needs based on today’s so-called new-build cost.
Digging deep in a company’s asset base, cadence in prior years’ inflation and other factors lead to a more nuanced/prudent view on ROIC vs. ROIIC.
1️⃣6️⃣ Why Seemingly Undervalued Investment Cases Don't Pan Out: Reality vs. Theory
In this article, we shed light on a company that used to be in our investable universe following the COVID-19 pandemic and appeared to be undervalued: Delta Plus. It’s a French family-controlled small cap business, engaged in developing, manufacturing, and distributing personal protective equipment. It provides head protection products, including eyewear, skull, hearing, and respiratory protection products; and hand protection.
1️⃣7️⃣ When Selling Decisions Teach Us Valuable Lessons
In this blog, we touched on the concept of “selling decisions” - when and why do we look to sell a stock? Two relatively straightforward instances:
Valuation has become excessive, and we see a clearly better multi-year risk/reward profile in another stock (preferably, a name we already own/cover), considering all tax consequences. Excessive means that the real return outlook is expected to become very volatile and below our target. Fortunately, for valuations to get really excessive, a lot of bullishness must be priced in, and generally speaking, we’ll hold onto fairly to slightly overvalued compounders for as long as possible.
Or we’ve simply lost conviction, and find it difficult to model the growth path forward.
Selling because the thesis’s changed is tough; it’s essentially telling ourselves that we were wrong…
1️⃣8️⃣ Sources of High-Quality Growth
Companies can grow too quickly with several hiccups and thus subsequently higher volatility in their share prices. High growth rates are like a honey jar: they attract competition, tend to lead to reduced returns for all parties looking to get a bigger piece of the pie.
Plus, there’s plenty of empirical evidence that fast growers (or at least, investors expect them to meaningfully accelerate top line growth, i.e. the expectations treadmill) are prone to severe overvaluation. It’s not just about timing a reversal in sky-high growth rates but also factoring in the potentially devastating impact from substantial multiple contraction. Research conducted by McKinsey demonstrates why boring wins the race.
This article discussed sources of high-quality growth, and how high ROIC companies can keep growth initiatives going for quite a long time.
1️⃣9️⃣ Valuing Quality Growth Companies
From time to time, we receive quite a bit of questions on how to value quality companies, and how to gauge the economic returns of capital allocation. While valuation is a subjective topic, we stick to our favorite metric, namely steady-state NOPAT. In fact, we tweeted about it earlier today.
Free cash flow is an after-investment metric, which would severely penalize good companies investing at returns exceeding their cost of capital. A low free cash flow yield would also make comparisons to the risk-free rate meaningless.
We view steady-state NOPAT as the pile of cash a company would have if it 1) stopped reinvesting for future growth, and 2) made only maintenance investments, both in physical assets (machinery, factories, leased assets (lease repayments) and intangibles (IT, capitalized R&D). Think of it like a fixed coupon you’re getting from fixed income investments.
2️⃣0️⃣ Pitching Harvia to a Family Office
Early June, we were delighted to pitch Harvia’s investment case to a Belgian family office, currently holding a multi-million stake in the Finnish sauna and spa company. They were first-hour premium subscribers with whom we’ve had very insightful discussions since (and I’m sure many new will follow).
The pitch didn’t contain any major reveals, but was meant to concisely elaborate on this prime example of “Sustainable Quality Compounding” and recent trends, in particular relative to other consumer discretionary companies (e.g., home improvement retailers, pool installers et cetera).
One of the recent news items is the optimized alignment of interest/incentivization, which wasn’t explicitly mentioned in our previous recaps. Highlighted by the CFO during the Q1 2025 call:
And from more or less like from HR perspective, just to remind that a lot of our people are actually Harvia shareholders and we have also quite wide long-term incentive programs for our key personnel, they have parallel interests with our shareholdersto increase the value of the company and they get their share of that value increase also after minimum three years.
2️⃣1️⃣ Serial Acquirer Report September 2024
Our first report on 10 serial acquirers covers more ground on what’s essential to a serial acquirer’s longevity and how investors can separate the wheat from the chaff. We’ve expressed our concerns around M&A quality for Indutrade, Teqnion’s cash flow volatility and how its defined EBITA is completely off.
2️⃣2️⃣ Why Excellent Working Capital Management is So Underrated
Working capital management is one of the most important responsibilities of finance managers. It’s quite easy to understand why running with too much working capital isn’t ideal: cash is simply being tied up.
It could highlight some financial distress (aging receivables), unfavorable supplier payment terms (not playing from a position of strength), carrying too much inventory in product categories where you don’t want to see it (i.e. retailers in more discretionary merchandise after the post-COVID tailwinds had started to fade).
If your business experiences sizable swings in working capital, it could lead to a permanent lock-up of cash which some would view as “excess” liquidity.
What Einstein said about compound interest (he who understands it, earns it… he who doesn’t, pays it) is applicable to very working capital efficient companies. And our portfolio holdings are very good at it (to say the least).
2️⃣3️⃣ Letter to Our Partners - H1 2025
Our 1H letter highlighted what we should avoid.
The common denominator for much weaker-than-expected outcomes is driven by four factors that are closely tied to each other:
the inability to measure free cash flow performance (e.g., too much working capital seasonality, opaque capital allocation);
poor capital allocation management, revealing that excess cash isn’t so freely available after all;
management team not understanding the ROIIC, growth, and value creation framework. For instance, focusing on improving an already high ROIC by not reinvesting at high incremental returns.
discrepancy between ROIC and ROIIC
2️⃣4️⃣ Q2/1H 2025 - Constellation Software & Its Spin-Outs - Full Analysis
Analyzing Constellation Software’s Q2 and 1H 2025 performance. Elaborating on how to assess the moving pieces in its financials.
2️⃣5️⃣ Our Favorite Tool to Buy Great Quality Companies During Market Corrections
We’ve received quite a lot of questions on when to buy the dip in the stock market. It’s a relevant topic as building wealth in the stock market is a process of buying high-quality growth companies, adding capital to those along the way and keeping your personal risk tolerance in check.
Remember, our goal is to own a portfolio that delivers strong risk-adjusted returns throughout the whole cycle. During periods of economic uncertainty and heightened, we’re here to prove the resilience of our portfolio strategy, that’s where the edge should come from: outperforming during corrections. It’s interesting to notice the increased interest in our Substack over the past month, at a time of more stock market volatility.
As we look at our current portfolio, there will always be opportunities to top up certain positions. Whilst we cannot predict the future (and we’re not even trying to), staying disciplined with periodic purchases can be done through a very simple tool: the VIX index, with the usual caveat that nobody knows what will happen.
Here you go: 25 blogs to become comfortable with our enhanced quality growth stock portfolio, aimed at generating high returns with low risk.
Feel free to share them with your network!
Strong list & some essential reads & important bookmarks. Thanks for the effort!
Thank you very much, brother.