Compounder Company Investing
Welcome to Compounder Company Investing. On this blog I will post deep dives on stocks that live up to my criteria for being a “compounder company”.
What is a compounder company?
Defining compounder companies is a tricky but vital part of actually finding them on the stock market. Below you find a good definition brought by a big institutional investment bank:
Morgan Stanley definition: We define compounders as companies with high quality, franchise businesses, ideally with recurring revenues, built on dominant and durable intangible assets, which possess pricing power and low capital intensity.
Above definition summarizes a lot of the attributes I look for in compounders, but I needed to ‘dumb it down’ a bit for me to use it actively in my analyzing process.
Therefore, I formulated the following criteria that I seek in compounders. Companies that: a) generate b) sustain c) further re-deploy measurable competitive advantage assets at an exponential rate. The assets can both be traditional capital (Warren Buffett style) or structured customer data (Google).
Why invest in compounder companies?
Because they offer what most retail investors want the most. Stable and robust wealth creation machines. Investing in them is simple: buy and hold. The tricky part is finding them and paying a fair price.