Quality Compounders: Investing for the Long Run

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This chapter explores the characteristics of standout companies that consistently deliver compounding returns for shareholders. It emphasizes the importance of qualitative factors such as corporate culture, pricing power, and customer loyalty in identifying quality investments. The discussion highlights the significance of a long-term perspective in investing, contrasting exceptional companies with cyclical businesses and introducing the 'twin engines of growth' framework.

In today’s episode, Shawn O’Malley (@Shawn_OMalley_) breaks down different investors’ approaches to finding the best of the best companies to own. It’s a strategy known as Quality Investing, and it differs from value investing because quality investors are more focused on finding companies to own forever, as opposed to selling them if they rise above their current intrinsic value.

You’ll learn how definitions of quality vary, how quality investing is still rooted in value investing, what the patterns and building blocks of high-quality companies are, why pricing power is a great way to identify quality businesses, how Chuck Akre approaches quality investing, what Jim Collins’ research on enduringly great companies reveals, and how Chris Mayer finds stocks with 100-to-1 returns—plus so much more!

IN THIS EPISODE, YOU’LL LEARN

00:00 - Intro

02:15 - How Quality Investing traces back to Ben Graham

03:10 - What quality investing is generally, and how it differ from other strategies

03:32 - What are the patterns and building blocks of quality businesses

07:51 - Why pricing power is so important to quality stocks

12:37 - How Chuck Akre’s three-legged stool approach to quality investing works

22:12 - What Jim Collins’ intensive study of enduringly great companies reveals for investors

29:57 - How Chris Mayer finds stocks that generate 100-to-1 returns

32:46 - How to define and determine whether a company has a winning corporate culture

41:55 - Why quality investing is really an art form

And much, much more!

*Disclaimer: Slight timestamp discrepancies may occur due to podcast platform differences.

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Kyle and the other community members.
Compounding Quality’s Investing Philosophy.
Three-Legged Stool Masterclass.
Chris Mayer’s blog
Jim Collins' book, Built to Last.
Thomas Peters' book, In Search of Excellence.
Michael Porter's book, Competitive Advantage.
Lawrence Cunningham's book, Quality Investing.
Thomas Phelps' book, 100 to 1 in the Stock Market.
Jim Collins' book, Good to Great.
Chris Mayer's book, 100 Baggers.
Long Equity's book, The Intelligent Quality Investor.
Check out the books mentioned in the podcast here.
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