Which Quality Stocks to Buy Now?
Building a portfolio from scratch - our most attractive companies
Yesterday, we received the following question from one of our premium members.
Hi CT, Wanted to get your thoughts on if we start a portfolio now I should go all in or there are names which are right now attractive and then there are names for which it is better to wait for pull back?
It’s the classic, million-dollar question - and it’s highly personal and subjective. This debate often surfaces in our Discord community: what’s the right perspective on X versus Y? Should you trim stock X to add more of stock Y?
First off, allocations are naturally dynamic, and they depend on what your goals are. We aren’t fixated on keeping stock and/or sector allocations at specific levels. It all comes down to what our individual companies are doing in terms of shareholder value creation, cyclicality, and the competitive backdrop. Remember that we focus heavily on that ROIC and reinvestment rate gap).
We’ve already written about our theme buckets (e.g. VMS serial acquirers, high-end luxury, consumer defensive) in previous posts, and we always address them in our quarterly letters.
The main challenge for the quality investor is to remain invested in companies that can keep the compounding flywheel going. Here’s an excerpt of the Q3 letter.
The Compounding Tortoise
With these factors in mind, let’s clarify what we’d be buying first today and the reasoning behind it. Specifically, what potential drivers and headwinds could influence the expected return outlook now that we approach the end of 2024?