Where to Begin as a New Subscriber This Month? (September 2025)
Starting a portfolio from scratch
This will be a new series of “Where to begin as a new subscriber this month”. Considering the recent strong growth in new premium members and having taken note of Evan’s suggestion on portfolio construction, we thought it’d be helpful to cover how we’d build a portfolio from scratch.
What Are We Looking for?
Essentially, when we’re defining our investable universe it’s about:
Steady growth of 12-14% growth in EBITA per share (or NOPAT, which is the after-tax metric), we don’t seek the hyper growth that typically won’t last long;
High returns on incremental invested capital (ideally >25%);
Proactive excess cash management;
Broad-based skin in the game with managers being incentivized to do the right thing from a long-term perspective and where excellent performance does make a meaningful difference for his/her financial and personal situation;
Insiders who don’t care about the short-term stock price;
And finally, we should be able to buy these companies at attractive forward returns and we don’t want them to become investable: the more we can buy at stable forward returns of 11-13% per annum, the better. Explosive moves to the upside attract short-term focused momentum investors who’re looking for a quick gain. We’re looking for many occasions to keep investing new capital at solid returns.
We’ll talk about these parameters in the upcoming Q3 Letter; whether it’d be buybacks and value creation or drawdowns.
So, let’s take a closer look at how we would build a portfolio from scratch and the allocations we’d assign to each position. Of course, it’s very relevant to know that one cannot borrow someone else’s conviction.
The tickers are added below.