Buy the best stocks in the world: companies that can compound earnings
High free cash flow, solid balance sheets, impressive ROEs, top management teams, and at the cheapest valuations possible. The best companies in the world, at good prices. This is the alpha we are seeking here. I have spent the past 25 years developing my style of investing, and the winners time and again are the ones that cancompoundearnings steadily and consistently, year in and year out.
Indeed,since becoming a contributor on Seeking Alpha in 2011, my stock ideas have generated30% annual returnsfor those following my advice. That puts me well in the top 1% of bloggers (TipRanks number 44 out of 6,831).
Cash Flow Compounderswill select only the best companies, ones that didnt lose a dime during the Great Recession, and ones trading at attractive valuations. In essence, I have put together what I deem to be a bulletproof portfolio, one that not only will out-deliver on an EPS growth basis vs the market, but also will outperform in recessions.
Over the past several months, I have screened through virtually every stock in the S&P 500, the Nasdaq, as well as the Russell 3000 for names that fit into our criterion. Out of this list, only approximately 100 have passed the test. These names are best in class stocks, ones you can buy and own for years, offering superior after-tax returns.
High management fee companies, secular decliners, capital intensive cyclicals, and over-levered balance sheet stocks simply dont pass the muster. By the way, our 10 years of backtesting of this portfolio suggests 20.8% annual returns compared to the S&P 500 at 14.6%.
The key is getting the entry point right on these names. Thats why I have created this service. Stocks need to be roughly 1.5 standard deviations cheap to historical trading averages before recommending. Said simply, stocks need to be somewhat beaten up or depressed from their norms. Of the 100 that have passed the test so far, only handful currently meet the entry point guidelines. Talk about rigorous!
. See the companies that clear my hurdle, and that Im holding in my personal accounts.
a month. I dont lower my quality bar, but as I find new companies for the portfolio I share them with members exclusively.
around our core ideas. Follow up articles when appropriate, trading alerts when market opportunities arise, portfolio sizing thoughts, and availability to answer questions and comments as needed.
and direct access to me for questions. The market will go up and down, and sometimes that causes noise or questions around the stocks we own. The chat is a way to stay on top of new opportunities and sort out what really changed and whats just market churn.
that are still high quality but have a specific angle to play – sum of the parts, hidden assets, event-driven stories – and that can add hidden gems to our core compounder.
Anyone that has followed me on this site knows however that I am no quant. I am value-oriented and a Warren Buffett follower to the core. The work here will be very in-depth, and based on my extensive experience as an institutional research analyst and portfolio manager at multiple hedge funds and mutual funds. I have looked at thousands of stocks and bonds in my life, and literally spent several months developing this list of names.
Even though Cash Flow Compounders provides institutional level analysis, the ideas will be available and actionable for any investor. Colorful fast charts and company slides dont cut it for me. Here we dig through financials, talk to management teams and competitors, build models and scenarios and outline all the risks that we see. The information provided will be substantial and enable subscribers to decide for themselves whether to invest or not. The good news is, these arent stocks that need constant monitoring. Buy a great company at the right price, and the rest is easy.
Finally, I also aim to let subscribers in on Special Situation value names that fit into my quality criterion, but perhaps have a slightly different angle. Sum of the parts stories, where markets appear to ignore valuable assets, or event driven names that appear attractive (e.g. spin-offs or companies for sale) are nice ways to add hidden gems to our core compounder portfolio.
I want readers to know that I intend to invest in every single idea posted, as I have in the past. I am putting my money where my mouth is!
If this sounds like the right fit for you, sign up on the right to get started and join me in finding the best companies in the world, good for any market!
Thomas and Cash Flow Compounders is the best service that I have ever subscribed to on Seeking Alpha. Just wish I would have been able to follow him years back.
Appropriate name. Access to Mr. Lotts brain is the MOST undervalued business here. I have been following him for years and it has paid me well. I am so thankful that he is posting more! Credible advice plus the opportunity to learn the way he thinks. What a bargain!
Thoughtful, Analytical Insights to Apply to Achieve our Financial Objectives
I find Tom Lotts Cash Flow Compounders insightful, full of analytics and observations on both micro and macro conditions. The recommendations incorporates diverse set of investments including stock compounders, special situations and fixed income. I also like the ability to be able to pose questions and interact directly with Tom and get his timely and thoughtful perspectives. There is a lot to like about Toms Cash Flow Compounders, and I encourage all to spend some time reading and thinking through how his recommendations to help us achieve our respective financial objectives based on our individual risk-reward appetites.
Great service — Actionable ideas, Deep research, Great market sense
Tom Lotts Cash Flow Compounders is fantastic. Tom writes about ideas that are actionable and that make money. Tom combines detailed deep analysis, realistic price targets and downside scenarios, and great market sense — to generate great ideas. Other services write articles that have great headlines, but provide very little analysis. Toms research and analysis in each article gives me the confidence to buy his ideas and I have made real money in his ideas. Tom has been writing for Seeking Alpha for a long time and you can track his success by reading his old work. I highly recommend Cash Flow Compounders.
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