[00:03:09] Kyle Grieve: So let’s kick it off by discussing the background for your book. What are the essential points you made in it and who did you write it for? 

[00:03:16] Compounding Quality: Thank you, Kyle. So the book, The Art of Quality Investing has been launched on the 15th of April. And basically, I felt like a lot has been written already about failure investing, growth investing.

[00:03:29] Compounding Quality: Everyone knows the book of Phil Fisher, Benjamin Graham, and so on. But not much, or at least not many books have been written about quality investing. So what we try to do with the book, because I work together with Luc Caruso on this book, what we try to do with the book is provide the quality investing philosophy from A to Z.

[00:03:50] Compounding Quality: So basically provide an entire framework to invest in quality stocks. So we will talk about, obviously, to start with, what is quality investing? how can you find these kind of companies? So using a checklist to find these companies. So qualitative criteria like. Looking at the modes for the competitive advantage, the skill in the game part, or the incentives of management, and also the quantitative criteria like, you know them Kyle, return on invested capital, earnings growth, the profitability, the free cash flow conversion.

[00:04:26] Compounding Quality: Quality is often recognized by the market. So the next question to solve that is, how can you look at valuation? Because the skill is to try to buy wonderful companies at a fair price, right? So how can you determine whether a stock is fairly valued, especially when it’s a great business? And then last but not least, we’ll show you how to build and maintain a quality portfolio.

[00:04:51] Compounding Quality: So really the goal here is to form a complete framework from A to Z about the quality investment philosophy. 

[00:04:58] Kyle Grieve: You wrote that, quote, quality investing boils down to selecting companies in a way that only the best ones remain. Buy them at a fair valuation level, then wait and let compounding do its work, unquote.

[00:05:10] Kyle Grieve: So you kind of already just discussed that. But. I’m interested in knowing more about how you grade the quality of a business. Obviously, some businesses have every single quality attribute that you could ask for, whereas some are maybe incomplete and don’t quite fulfill your criteria. So you’re filtering out the ones that don’t meet your criteria, but I am interested in knowing more about a watch list.

[00:05:31] Kyle Grieve: are you building a watch list of companies where maybe the quality isn’t quite at the level that you want to see it at, but you know, you’re watching them to see how they execute in the future. 

[00:05:39] Compounding Quality: Basically the entire philosophy is to buy wonderful companies at a fair price, like Buffett says, and this can be done in three steps.

[00:05:47] Compounding Quality: So in first one is wonderful companies, then led by excellent management and then try to buy those wonderful companies led by excellent managers at a fair price. The essence here, or the important thing here, I guess, is that only the very best is good enough for you as a quality investor. The interesting thing here is that when you look at the criteria, there are only a few stocks that fill all criteria of the quality investor.

[00:06:14] Compounding Quality: So you are being very strict and the philosophy in that case can be seen a bit like, like a funnel, right? So worldwide, there are around 60, 000 stocks. So the first thing you are going to do is you only want to buy the great companies so you can filter or screen for companies with a higher term invested capital, high profit margin, healthy balance sheets, low capital intensity, and so on.

[00:06:38] Compounding Quality: And when you do that, only three to 400 stocks remain. So you already excluded the majority of all listed companies. Then next step, once again, the saying of Warren Buffett, always stay within your sharp of competence. So the next thing I do is I go through the list of three to four companies and I exclude or delete all the companies where I don’t understand the business model.

[00:07:03] Compounding Quality: So just based on the company description of two sentences, you can skip many of them right away. I also, and that’s the third step, exclude all stocks within emerging markets and all cyclical stocks. maybe you can ask yourself, why would you do that? regarding emerging markets. I don’t feel like these companies are within my circle of competence.

[00:07:26] Compounding Quality: The culture is really different in emerging markets. And that’s why I prefer that when you want to exposure to emerging markets to China and so on, I prefer to do it via companies in developed countries like LVMH, for example, that will benefit from the emerging markets and the fact that they are becoming wealthier there.

[00:07:48] Compounding Quality: Also excluding cyclical industries. So think about, yeah, the construction companies, that have a large exposure to certain commodities like. like nickel, like silver, gold miners, and so on, because you really want stable and robust increasing revenues and earnings. So when you do that, only around 150 companies remain.

[00:08:15] Compounding Quality: Next step, and we talked about it, wonderful companies. Outstanding managers fair valuation. next step is the skin in the game part. When you filter down that even more and you only take into account the accomplishment skin of the game. only 60 companies remain. So remember there were 60, 000 listed stocks.

[00:08:35] Compounding Quality: Now only 60 remain. So basically only 0.1% of all companies remain. These are all very good businesses. Then the third step is to try to buy these at fair valuation levels. I think that the key takeaway here probably is, the watch list only consists of already great businesses, right? Often those companies are very expensive and the trick is to, try to find those who are trading at a fair valuation levels.

[00:09:05] Compounding Quality: Maybe another takeaway here is for me, and obviously there is no golden truth. Everyone can, fill it in how they want themselves. But I will never include a company that is on the verge of becoming quality. I will never try to invest in the next big thing, only in companies that have already won. This also means that you will never have bought, for example, Amazon or Apple, 20 years ago.

[00:09:33] Compounding Quality: But for me, that’s no problem at all, because the key objective here is to do slightly above average for very long periods of time without making big mistakes. 

[00:09:44] Kyle Grieve: You made a really good distinction between quality investors and growth investors in your book. So growth investors search, like you just said, for basically winners at a very early stage, while quality investors are focused on companies that have already proven themselves to be winners and can hopefully prove themselves to be winners for many more years into the future.

[00:10:02] Kyle Grieve: So I’m interested in just learning a little bit more about how much history or durability you’re looking for in order to qualify a business as a quality business. 

[00:10:11] Compounding Quality: In general, I would say it’s quite simple, right? The longer the track record, the better. I’m quite sure that you’ve read the latest shareholder letter of Terry Smith.

[00:10:21] Compounding Quality: And there he basically said that the average year of foundation of their companies at the year end was 1916. In other words, they have been in the business for over 100 years. And when a company has been in business for over 100 years, it’s way more likely that they will still be in business in 100 years from now, compared to, for example, a promising technology company that just IPO’d and is on the verge of becoming profitable, right?

[00:10:48] Compounding Quality: For me, personally, I always want a track record, a successful track record of at least 5 to 10 years. And you want also, yeah, what you want to see is that the return on invested capital is also, for example, over those period of 5 or 10 years, it’s higher than the ones of its rivals. Because this indicates that the company is doing something unique and they have the moat.

[00:11:12] Compounding Quality: So to give an example, we’ll take Medbase for example. Madspace has been founded in 1992 by Ross August Schoenler. the company has been really successful since 1992. So a track record of over 30 years. The founder is still the CEO of the business. So in that case, you see that the track record is good.

[00:11:36] Compounding Quality: You see that Igor Strunle is an excellent capital allocator. So that’s what you want to see. So also for me, I will, for example, never invest in IPOs. And also when you look at the research, when you look at academical studies, they prove that. So when you look at IPOs and take all the IPOs on average, you will see it after five years.

[00:11:59] Compounding Quality: In 60% of the cases, all IPOs are roles making a lot of people are investing in companies that just IPO themselves to find the next big thing. It sounds promising. It sounds exciting. But in essence and in practice, only 0.1% of all these companies have been very successful. Only 0.1% of these companies returned more than 3,000% since their IPO.

[00:12:26] Kyle Grieve: Yeah, it’s a pretty alarming statistic about the IPO market. And it’s, you know, you look at the stats and the base rates and it’s pretty obvious that you should probably just skip it. Going back to quality investments, when you’re looking at quality investments, like you kind of mentioned on your watch list is that, you know, you’re not necessarily looking for a business to change from low quality to high quality, but you are looking for valuation changes.

[00:12:46] Kyle Grieve: And one of the biggest, I guess you could call it a drawback, but it’s not really a drawback. It’s just a feature of quality investing is that, you know, really high quality businesses rarely go on sale. So Chris Mayer actually had a really interesting solution that he takes for buying quality business. I want to share with you.

[00:13:02] Kyle Grieve: So quote. I used to pass on stocks sitting at their highs. I would try to wait for dips. I preferred to buy stocks at big discounts to their 52 week highs or stocks near their lows. Silly belief and one that has cost me money over the years. When I finally bought Constellation Software after years of watching it like a dummy, I paid something close to a 52 week high.

[00:13:20] Kyle Grieve: My return on that purchase has been quite good now. One of the things my study of 100 baggers taught me, and this is intuitive anyway, is if you think about it, is that the best performing stocks spend most of their time at 52 week highs. And it makes sense. A stock that is a great performer over a long period of time, the exact kind of stock you want to own, is a stock that is putting in 52 week highs fairly regularly.

[00:13:42] Kyle Grieve: A beautiful long term chart that is up and to the right. How else could it be a great performer? Unquote. With that said, I’m interested in learning a little bit more about your portfolio management. Do you prefer to have a cash position on hand? To, you know, deploy into positions as, you know, just as time goes by, or are you usually fully invested with these high quality businesses and just, you know, kind of handling the, volatility as it goes?

[00:14:09] Compounding Quality: So first of all, I want to say that I really love your reasoning as well as the, one of Chris Mayer. So I completely agree with it and save for me. So I really don’t believe in using technical indicators to try and time the markets or to base my investment decisions on basically. So what you try to do is just try to buy stocks when it makes sense, right?

[00:14:30] Compounding Quality: So just trying to buy wonderful companies at a fair price and regular readers of Compounding Quality probably know that, but I always use two models and it’s one, the earnings growth model and two, the reverse DCF. Maybe it will bring us a bit too far, but very shortly, with the Northern Earnings Growth Model, you can perfectly calculate.

[00:14:50] Compounding Quality: How do you expect it to return over the next few years and you want this to be an attractive number? for me, when it is larger than 10 or 12%, in that case, it makes sense to buy the company, no matter what valuation the company is trading at right now. Obviously, valuation is a part of the earnings growth model, but okay.

[00:15:11] Compounding Quality: And then the reverse DCF, with the reverse DCF, you just look. at the expected growth, which is implied in the stock market. And then you compare it with your own estimates and whether the stock market is too optimistic or pessimistic in this case. regarding timing the market and leaving cash.

[00:15:31] Compounding Quality: I’m really a big believer in the time in the market beats timing, the market. Everyone probably knows these charts that if you miss the best 5 or 10 or 20 days, your return increases or decreases dramatically. Nobody can predict what the market will do over next week, next month, or even next year.

[00:15:52] Compounding Quality: So I really prefer to stay invested in the market all the time. And what I do is, all my investable assets right now are invested in the stock market. I leave six months of cash in a proxy of a savings account, basically. And then for the rest, I think the beautiful thing for a lot of people listening right now is Most of us are still working, right?

[00:16:13] Compounding Quality: So this means that when you receive a certain income, a certain salary every month, you can use this to dollar cost average and add to your positions. So I think that’s the beautiful thing. And also what Warren Buffett says, when you will be a net buyer stocks over the next. 10 years, 20 years.

[00:16:32] Compounding Quality: you should pray for declining stock prices because this allows you to buy the great businesses you already own at a cheaper prices where you can keep buying them. So that’s the lovely thing. And also when you look at the data once again, the S& P 500, for example, when your investment horizon is at least 10 years, in 94% of the chances you will make money and when your investment horizon is 20 years, you’ve made money all the time in history so far.

[00:17:03] Compounding Quality: A very important one here is that the longer your investment horizon, the less. The multiple you pay matters and the more the underlying growth of the intrinsic value becomes important. And there is a coach of, T Smith if you bought the S&P 500 at five times earnings in 1,917. So we had the lowest valuation multiple.

[00:17:27] Compounding Quality: The S&P 500 has ever traded at five, five times earnings in 1917, and he sold it in 1999 at 34 times earnings. do you have any id. how much your yearly return will be in that case, Kyle? But in 1917 5 times earnings, sold it in 1999 at 34 times earnings. I’m not even going to bother trying, you tell me.

[00:17:50] Compounding Quality: So the correct answer there is 11.6% which is an attractive yearly return year, right? And the point I want to make is, You bought it at the cheapest valuation level ever, and you sold it at the highest valuation level ever, and indeed your return is attracted 11.6% per year, and you 7x’d your money due to multiple expansion rides.

[00:18:13] Compounding Quality: But when you look at the components of this return, only 2.3% of the 11.6% is due to multiple expansion. So you 7x’d your money due to multiple expansion, but it’s only a fraction of the 11.6%. When the multiple expansion wouldn’t have taken place, you still would have made 9.3% per year, which is actually quite good.

[00:18:38] Compounding Quality: So that’s also, it aligns with the point you made, I guess. It aligns with the point Chris made. There are a lot of great businesses in the market today, which are trading at quite rich valuation levels. But if your horizon, if your investment horizon is long enough, in the end, The stock price will always follow the evolution of the intrinsic value.

[00:18:58] Compounding Quality: And that’s why I prefer to not hold many cash in my portfolio. 

[00:19:03] Kyle Grieve: You noted the positives of looking at secular growth when analyzing a high quality businesses, which I really enjoyed. So I’m interested in just learning a little bit more from you. You know, how are you best able to determine the difference between secular growth versus short term tailwinds?

[00:19:19] Kyle Grieve: Because, you know, coming out of COVID, There definitely were some businesses during COVID that were riding some very good tailwinds. And I think a lot of investors confused that with, you know, happening for a long time period into the future. 

[00:19:33] Compounding Quality: Great question. For me, it’s an easy one, basically, because secular trends are very clear and they last for years and even decades.

[00:19:41] Compounding Quality: Secular trends in general will change the way our economy works. So that’s something completely different compared to a short term trend line. what happened to cannabis, what happened to GameStop and so on. So secular trends are due to changes in our society and they last longer than an economic cycle.

[00:19:59] Compounding Quality: So an economic cycle usually lasts for around eight years. So you have a bull cycle and you have a beer cycle. when a trend already took place for 10 years, for example, and where it’s estimated that it will still last for 10 years. in that case, you have a secular trend. And for investors and definitely for quality investors, a secular trend is really attractive.

[00:20:23] Compounding Quality: Why? when you know that in the long term, stock prices will always follow the evolution of the intrinsic value of a share and that the free cash flow per share growth is the most important thing for the intrinsic value. in that case, I think it completely makes sense that companies that are active in an attractively growing end market, that it’s way easier for them to grow their fee cash flow at attractive rates and thus their intrinsic value and over time also their stock price.

[00:20:54] Compounding Quality: When we look at the current environment right now, what are some examples of secular trends? Think about digital payments, right? It’s no secret. Everybody knows that, I guess. Visa and Mastercard do excellent businesses. And basically today it has become almost impossible for other companies to take away the market leader, leadership of a Visa and Mastercard just because it would be so expensive.

[00:21:23] Compounding Quality: And sometimes you hear in the media, there’s a new Fintech company that will take away the market leadership. What always happens in the end is that they end up working together with Visa and Mastercard, just because they need them in order to grow and improve their business. So digital payments is a clear secular trend.

[00:21:43] Compounding Quality: Premiumization also, many people will also know, for example, that at Combined Equality, I’m invested in LVMH, a company like Hermes, and so on. Another example, urbanization, what kind of companies or which sectors will benefit from urbanization? elevated companies, for example, a company like KONE, a company like OTIS, that is very strong in services.

[00:22:10] Compounding Quality: For example, for pets, I also have a dog at my home that’s sweet like a full family member. So she needs good food. When something happens to her, we will pay for the medication, no matter what it costs. And that’s also what you see in general. the more, and more people are having less children in general, instead they are having more pets and they’re treating them as full family members.

[00:22:35] Compounding Quality: So who’s benefiting from that? A company like Suerte’s, a company like Edex. Albacity is another example. look at the companies like Novo Nordisk and Eli Lilly, for example. both companies are definitely companies that you would have wanted to own over the past 10 years. And even since their IPO, they performed exceptionally well.

[00:22:59] Compounding Quality: You can’t go on like that, right? There is also a trend like a healthy lifestyle. Think about Lululemon, and cybersecurity. For me personally, I think, Fortinet. is the highest quality play within the cyber security, space, but small side note here. I don’t own the company because I think it’s too expensive.

[00:23:19] Compounding Quality: There is an aging population. we’ll benefit from that. Companies like Solova, for example, who are active in hearing aids. So today I think there are still plenty of attractive secular trends in the markets. And as a quality investor, you love to own companies that are active within these trends.

[00:23:37] Kyle Grieve: Pricing power is a decisive competitive advantage that very few businesses possess and you talked about it quite a bit in your book. I’m interested in knowing if you can briefly describe both what pricing power is and also how you factor pricing power when evaluating a business. 

[00:23:53] Compounding Quality: So in general, I would say, I absolutely love companies with pricing power.

[00:23:58] Compounding Quality: So what is pricing power? Pricing power is basically the ability to raise prices annually without losing customers. And that’s very attractive. Why? pricing power is only possible when a company does something unique. So for example, when you have company A and company B, And they have identically the same products and company A increases its prices and company B doesn’t.

[00:24:23] Compounding Quality: in that case, I think it’s quite straightforward that everyone will go to company B. So you can only increase your prices when you do something unique or when your customers are very sticky. for example, for myself, I have an iPad, I have an iPhone, and I have a MacBook. last time, or last week, my MacBook crashed.

[00:24:44] Compounding Quality: you need to look for a new laptop. Which one are you going to buy? I bought a new MacBook. Why? Because it’s way easier. Your phone, your iPad, and so on, is immediately synced. The backup is there, so you buy the new MacBook and you’re good to go. So that’s something. Customer loyalty can also cause pricing power, by the way.

[00:25:05] Compounding Quality: The most interesting part, maybe, is that pricing power is a source of growth. And it’s a source of growth that doesn’t need many investments, right? When you need a new factory and so on, you need a lot of capex, a lot of capital expenditures, but where you just can increase your prices every year, you increase your prices every year by 34% for example, but in that case, your revenue increases by 34% and your bottom line increases even more, hopefully, due to operating leverage.

[00:25:33] Compounding Quality: So that’s something really attractive. Take, for example, most well known example, maybe See’s Candies. So Buffett or Berkshire bought it in 1972. And since 1972, See’s Candies has increased its prices every single year. So they increased their prices for more than 50 years straight. And it taught Buffett, the power of pricing power, the power of great companies.

[00:25:58] Compounding Quality: And when he wouldn’t have bought See’s Candies, he probably wouldn’t have bought. Great companies like Moody’s, Apple, Coca-cola, and so on later on. So in general, I would say pricing power is really attractive. The most preferred companies are still companies with plenty of reinvestment opportunities, but they are very rare in general.

[00:26:21] Compounding Quality: What’s maybe to add here? what are some examples of companies with pricing power? Think about the graduating agencies like SAP Global and Moody’s. they increase their prices every year by three to 4%. We have in the luxury space companies once again, like Patek Philippe, Rolex, LVMH, and so on. And what’s also interesting to see is when you look at the current portfolio of Warren Buffett, You will see that almost all those companies are active oligopoly or in the monopoly and most companies within an oligopoly or monopoly also have pricing power.

[00:26:58] Compounding Quality: So when you look at the current portfolio of Buffett, but also all the positions he has held in the past, the majority of them has pricing power. And if even Warren Buffett thinks it’s attractive, I think we should definitely keep an eye on it too. 

[00:27:14] Kyle Grieve: So you made a really good point about action bias, which is our tendency to take action often without good reason.

[00:27:21] Kyle Grieve: This is one of the most prevalent biases that I’ve observed in the market and one of the most harmful to investors potential returns. You and I both spend a lot of time studying great long term investors with incredible track records as well as market psychology and history of markets. We both probably have come to the same conclusion that, you know, doing nothing is indeed where a lot of money is made.

[00:27:44] Kyle Grieve: But for other investors listening to this show who maybe aren’t obsessed about it like we are, how can they best educate themselves to understand the power of doing nothing and the downside of being too active? 

[00:27:55] Compounding Quality: You know the saying that the best investor is a debt investor, right? And that’s actually, or fortunately, that’s true.

[00:28:03] Compounding Quality: So each year, for example, you have a study of JP Morgan and they look at the performance of different asset classes. And over the past 20 years, you see that the S& P 500 returned 9.5% per year, while the average investor only had a return of 3.6% per year. So that’s really bad, right? That’s really not good.

[00:28:24] Compounding Quality: Especially because those people, those investors, they have been invested in the stock market. They have taken the risks of being invested in the stock market. But I didn’t, they didn’t get the reward for that. So that’s something to be really cautious of. Risk reward is very important in the investment field.

[00:28:42] Compounding Quality: I think it was Paul Samuelson who said, Good investing is very boring. Good investing is like watching paint dry. And if you want excitement, go to the Las Vegas, go to the casinos. And in that case, you’re sure that, you will lose all your money, right? I would say the most important thing here is, to really get out the noise, don’t focus on the quarterly results and focus on decades instead.

[00:29:08] Compounding Quality: And I think the best example of this, and I’m a huge fan is, Francois Rochot, you also know them. last week he published his latest annual shareholder letter and each year he compares the stock price or the performance of a spunt with the owner’s earnings of the businesses and the owner’s earnings are simply calculated by.

[00:29:28] Compounding Quality: During the EPS or adding the EPS for the dividend yield, and what you see is that since 1996, while his portfolio returns 2887% and the owner’s earnings were equal to 2859%, so in the very long term. stock prices follow the owner’s earnings almost exactly. And the key reasoning here is that in the short term, so in one year, and in some cases, even two years or three years, stock prices might differ from the owner’s earnings, but in the longterm, they always follow each other.

[00:30:03] Compounding Quality: If stock prices decline and the owner’s earnings increase, you know that the company became more attractively valued. It might be an opportunity to add more to your positioning rights. So the essence here is, I think always focus on what matters in the big picture. Last summer I quit my job, I worked in the industry, and basically what we did, and especially during results season, is, we have those reports from JP Morgan, Maureen Stanley, Goldman Sachs.

[00:30:32] Compounding Quality: And so on. So what you did during the results season is you were reading all those quarterly reports and company X, the BS and the consensus was 2. 20. 21. So that’s not good. And the stock price declines 4% and so on. But in the end, I think that’s just noise. And today I’m working full time on compounding quality.

[00:30:54] Compounding Quality: I don’t read those quarterly reports from the broker or from the research houses anymore. And I think it’s actually a good thing just to reading the 10k, just reading the transcripts of the earnings calls. That’s more than enough. And it helps you to focus on the big picture and don’t get distracted when a certain company reports two cents below consensus or some, something like that.

[00:31:18] Compounding Quality: I think that’s indeed true and also know it or see it with some friends. some people in detail want excitement, but excitement is not a good thing on the stock market. So if you know from yourself that you really want some excitement, I would advise you to do it only with a very small fraction of your portfolio because the essence of investing is really trying to do a bit above average for very long periods of time.

[00:31:46] Compounding Quality: And you can do that by investing in very boring, great companies. 

[00:31:51] Kyle Grieve: So I want to discuss another bias that you discussed in your book, which was the neglect of probability. So this is the tendency to consider the magnitude of an event, but not at the probability. So I’m interested in knowing how do you think investors can combat this bias to ensure that they aren’t neglecting probabilities in their investing process?

[00:32:09] Compounding Quality: So I think in general, investing, especially looking for the next big thing, it sounds really exciting, right? So for example, when you invested in Amazon at the IPO in 1997, when you did that for 10, 000, today you would have more than 50 million. And I guess that’s, it sounds really appealing.

[00:32:28] Compounding Quality: Everyone wants to have a company like that in their portfolio. And you see a lot of articles also in the media. will this company be the next Amazon and so on. But what nobody could have imagined, I guess, for example, for Amazon, is that one of the, when they were at the IPO, was just a loss making online bookstore, right?

[00:32:48] Compounding Quality: Nobody could have predicted that they would have evolved to one of the, just the largest e commerce company in the world. To add to that, when you look at Amazon since 1997, there have been multiple times that the stock declined by 50%. And even one time the stock declined by more than 90%. For me personally, when I’m honest to myself, when I would have bought Amazon in 1997, I definitely probably wouldn’t have kept the company until today because there are so much uncertainty.

[00:33:22] Compounding Quality: Also, the last decade, the stock increased so much, so you really needed to have a strong stomach to be still invested in Amazon today, when you already bought it at the IPO. And I think that people who bought it at the IPO, only a fraction of them will still own the shares or still own all the shares.

[00:33:41] Compounding Quality: So and still many people try to find the next Amazon right, but chances you’ll find one are less than 0. 00001%. When your investment philosophy, when your investment strategy consists of trying to find the next Amazon, it’s very likely that we’ll be at this point. And I think that the best way to avoid things like that, and the best way to avoid black swan events is to really invest in very boring companies and don’t seek excitement.

[00:34:15] Compounding Quality: So invest in companies that have already won, companies with a very strong track record and everyone knows the quote from Warren Buffett. rule number one, don’t lose money. And rule number two, never forget rule number one. That’s exactly true. So we all know that when your investment loses 40% in value, you need to make almost 70% to recover from that.

[00:34:37] Compounding Quality: So that’s something you want to avoid at all costs. 

[00:34:41] Kyle Grieve: So moving on to the financing aspect of quality investing. So you made some really good points about how if a quality investment wants to fundraise, they, you know, some of them are going to have a lot of tangible assets. Some of them are going to have a lot of intangible assets and, you know, depending on their mix of those things, One company might be able to secure a higher degree of funding than another.

[00:35:04] Kyle Grieve: So for people who don’t understand the difference between tangible and tangible, do you mind just actually briefly covering what those are? And then as well, just briefly discuss why you think or where you think quality investors should give preference to between one or the other, or if they should give a preference at all.

[00:35:21] Compounding Quality: Tangible assets are physical assets. So they have a measurable value. You can touch them, think about real estate. Factories, inventory and so on. And on the other side you have intangible assets. So intangible assets are non-physical as assets can touch them. Think about in IP and show intellectual property.

[00:35:42] Compounding Quality: Brand recognition. patents, copyrights. and so on. What is a good example of a company that has a lot of intangible assets? think about Coca-cola, for example, right? Buffett said, if you, gave me 100 billion and said, take away the market leadership of Coca-cola, I would give it back to you.

[00:36:01] Compounding Quality: And I’d say to you, it can be done. So they have a lot of very strong intangible assets. The brand name of Coca-cola is very strong. Same goes for Constellation Software, for example, their reputation is so good, their culture is so good that when you are in the VMS field, so the vertical market software, and you need to, or you want to sell your business, Constellation Software, everyone knows them, knows that within the segment and it’s the place to go.

[00:36:29] Compounding Quality: What is the difference here is the thing that when you look at classical companies and industries, tangible assets were really important. Think about the 1970s, for example, right? You have those classical industries. Factories producing goods and so on. While nowadays, intangible assets are very important.

[00:36:48] Compounding Quality: The fact that intangible assets are becoming more and more important, this has advantages, but it also has disadvantages. What is, for example, the disadvantage of tangible assets? tangible assets can be copied, right? Let’s go back to the example of the factory in the 1970s. when you have enough capital, you can just copy or rebuild another factory and do exactly the same.

[00:37:13] Compounding Quality: That’s an advantage of intangibles because some intangibles are very hard to copyright. Think about, once again, about the example of Coca-cola or when other companies like Alphabet, Apple, and so on are doing. So in that case, Increased intangible is an advantage, but it’s also a disadvantage or a risk.

[00:37:35] Compounding Quality: While because, intangible assets have no recco recoverable value. When you go into bankruptcy and you have a factory, and you have some inventory, you can still sell the factory, you can sell the inventories and so on. But when most of your assets are intangible assets and you’re going to bankruptcy, ip, it can become wordless in that case.

[00:37:58] Compounding Quality: So the consensus here, or the key takeaway, I guess. is that I think that’s no problem at all, but intangible assets are becoming more important, especially for quality companies, especially for software companies. But it’s really important that you look at the strength of those intangible assets. So for example, for Coca-cola, the strength of their brand is very strong.

[00:38:22] Compounding Quality: But another company where there’s way more uncertainty, in that case, when there isn’t a proven track record and it’s only intangible assets, that’s something to be a bit more worried about, I guess. 

[00:38:34] Kyle Grieve: So take me through your process here for evaluating management. So in your book, you discuss things like compensation, incentives, and insider ownership.

[00:38:43] Kyle Grieve: So I’m just looking, what specific numbers are you generally looking for in these metrics that help you determine whether you like a company’s management or not. 

[00:38:52] Compounding Quality: It was Charlie Munger who said, show me the incentive and I’ll show you the outcome, right? And he also said, I’ve always thought that the incentives are very important and I’ve always underestimated them.

[00:39:04] Compounding Quality: And I completely agree with him. So management is very important. And that’s also why combine quality, for example, 60-70% of the portfolio is invested in companies with skin in the game. So skill in the game is really important, to me. Why? you want the incentives of management to be aligned with the ones of you as a shareholder.

[00:39:29] Compounding Quality: And it has been proven that these kind of companies also perform better on the stock market. When you, for example, take the Credit Suisse Family Downturn Study, they conclude family businesses outperform by 3.7% per year on average. And then you also have another study from the Harvard Business Review, will basically conclude.

[00:39:48] Compounding Quality: that founder led businesses are performed by 3.9% per year on average. So preferably, I really want to invest in companies that are still led by their founder, and when the founder still has significant insider ownership, like Medspace, we already briefly touched upon, or Kelly Partners Group. And when this isn’t the case, I prefer the companies, the family businesses, or companies with a high insider ownership.

[00:40:12] Compounding Quality: think about EvolutionDB. Brown and Brown, and so on. So that’s also what I do, and it’s available on the website. I made an investable universe with 100 quality stocks. The whole 100 quality stocks, where all the companies within the list are quality, and they have skin in the game. And the main reasoning there is that I guess when you just would, for example, create an equal way to the ETF.

[00:40:36] Compounding Quality: Of those one our names, but you tend to do quite well, on average in the long term, hopefully, or that’s the goal already better than the S&P 500 and maybe I will add a little story here to make everything more clear. While I guess we will meet each other at the a GM, of Berkshire and Oma, this year.

[00:40:56] Compounding Quality: Carl, last year I also went and I live in Belgium, so when I went back. I needed to catch my flight, so it was from Omaha to Chicago, then from Chicago to London, and then London, Brussels. I was traveling alone, and Chicago is a really large airport, and I was feeling a bit lost there, and I didn’t know where to go, because you need to take the metro to go to another departure aisle, and so on.

[00:41:23] Compounding Quality: When we, took off in Omaha, I heard someone behind me say that was also going to London. So I saw him in the airport in Chicago. I asked him, you also need to go to London if I’m not mistaken. do you know where we need to, where we need to go? Which metro we need to take? okay. We went together.

[00:41:40] Compounding Quality: He was really kind. And obviously we start to talk and first thing you ask is because everyone in Omaha that’s weekend is there for the Berkshire AGM. what brought you or what brings you to Omaha to the Berkshire AGM? And his answer was, I come there every year. I’ve come or went for several years now.

[00:42:01] Compounding Quality: And that’s because I really love the philosophy of Warren Buffett and Berkshire Hathaway. And I want to have the same philosophy or we have the same philosophy within our businesses. As an investor, that’s what starts you to get you interested. So we started to talk even more than I asked him, which company do you work for?

[00:42:20] Compounding Quality: And he tell me, I work for judges scientific and judges scientific is 100 beggar in the UK. And they are basically, they can be seen a bit as a mini Danaer. So they are active in scientific instruments and they acquire other companies within this niche. with a decentralized business model.

[00:42:39] Compounding Quality: really intrigued, really interested. Obviously, a one hundred breaker. I’ve known it because it’s a serial acquirer, excellent business, and so on. next question I ask him is, which role do you play at the company? he was actually, it was actually David. David Cicerell. So he’s the founder and CEO of Gigi’s Scientific.

[00:42:59] Compounding Quality: And it was really friendly, and he was quite surprised that I knew the company because it isn’t that large. So we talked about the business for one hour, two hours. Obviously, there are two things clear. You have skill in the game because David is still running the business. And second part, it’s an excellent business.

[00:43:16] Compounding Quality: It’s a 100% backup. So I had two main questions for him. First one, I think if I recall it correctly, I think David is 71 years old right now. what will happen with the business after you decide to retire? and his answer was very clear. we have been working just like Berkshire on the company culture for very long periods of time.

[00:43:39] Compounding Quality: So after I retire, the culture will remain intact. And then the second question I had for him is, since 2004 judges has been a 100 bagger. Over time, everyone or every company suffers from the law of large, numbers. So when you look at the next 20 years, what do you think the business will do or be able to do over the next two days?

[00:44:02] Compounding Quality: He needed to laugh. He didn’t want to, answer the question immediately and we moved the conversation to something else. But then after 30 minutes, he came back to me and he said, I think that judges can still 20X its intrinsic value over the next 20 years. So that’s something you love to see, right?

[00:44:21] Compounding Quality: And that those are the stories of excellent owner operators in great businesses that we are looking for. And maybe the side note here, I really think that judges is an amazing business. It’s a company I would love to own, a company I would love to be associated with. But today I don’t own them or don’t own them yet because I think the valuation is a bit too high, but those are exactly the companies where you’re looking for as a quality investor.

[00:44:47] Kyle Grieve: Moats are obviously a massive part of quality investing. Without a moat, you know, a business simply can’t protect its profits from being withered away by competitors. But, you know, I think moats have different strengths at various times in a business’s life cycle. when you’re analyzing a business, how are you analyzing the strength of each moat and whether or not it’s getting stronger or weaker?

[00:45:11] Kyle Grieve: A business like Amazon has, they have scale economies, they got network effects, you know, are you looking at each specific moat and, yeah, just love to know more about how you’re, analyzing their moats on an individual basis. 

[00:45:26] Compounding Quality: Yeah. so for quality investors, it all starts with the moat rights. So we will never invest in a company that doesn’t have a moat, or at least where you think that they don’t have a moat.

[00:45:38] Compounding Quality: So moat is very important. how are you going to quantify this or how do I do it? I want the gross margin to be larger than 40%. This is also an indication of pricing power and you want to return invested capital to be larger than 15%. So in general, there are five mode sources. So the first one is for the cost advantage.

[00:45:57] Compounding Quality: So being able to produce something cheaper than someone else. Think about IKEA, right? This is a mode source. I, really, or I prefer the least. Because it’s the weakest one, basically, and studies have also proven that when you look at all the mode sources, a mode source based on cost advantages, they don’t outperform as much as the other mode sources.

[00:46:19] Compounding Quality: You have one, based on intangible assets, think about Coca-cola example. Switching costs. think about the MacBook example I gave you. I’ll just bought a MacBook again because it’s easier and you know the platform and everything syncs. Four mode sources, economies of scale. So when you produce something more that you benefits more from the right to, so they can produce it cheaper and so on.

[00:46:43] Compounding Quality: And then last but not least, network effects. This is the best mode source, the strongest mode source. And it means that the more people use a certain product or service, the more valuable it becomes. So probably everyone, for example, today will have already used a service of a meta platform.

[00:47:02] Compounding Quality: So Facebook, Messenger, WhatsApp, or Instagram, that’s a very strong mode source. And what I think is really important to understand here is that a mode is never constant. in other words, a company’s mode is widening or shrinking every single day. And how can you look at this? How can you see that a mode is widening or shrinking?

[00:47:28] Compounding Quality: when a company, and that’s exactly what you want to see, when a company’s gross margin as well as return on invested capital is increasing over the years, it’s a very good indication that the company’s mode is widening. and the other way around. And for quality investors, but maybe more broader for every investor in general, disruption is really your worst enemy.

[00:47:50] Compounding Quality: So when you invest in a quality stock and the market recognizes quality, so the valuation is often a bit more expensive and the most disappears. You will end up with very bad results. It’s a two edged sword, so the valuation comes down, and maybe the growth you thought the company would report, it stagnates or even declines, so that’s something really bad.

[00:48:14] Compounding Quality: Now, how can you protect yourself against disruption as an investor? a company should always keep innovating. So in the book, The Art of Quality Investing, we also gave two examples. Netflix and Kodak. I think everyone knows both companies. Kodak had a really strong mood 25 years ago. It was even mentioned the Kodak moment, so the perfect picture moment, right?

[00:48:40] Compounding Quality: But they didn’t innovate, they didn’t keep reinvesting in themselves, and they completely missed the boat of the digitalization of photography. So today, Kodak is only a fraction of itself. And compare that with Netflix, for example, Netflix in the early days when it was founded was just an email service for physical DVDs, right?

[00:48:59] Compounding Quality: That’s a good order of DVD. at your house and they evolved and they keep kept innovating and kept investing in R& D. And today it’s the largest subscription revenue streaming platform in the world. So innovation is really crucial and disruption is always your worst enemy. And you have other examples like Amazon, we touched upon.

[00:49:20] Compounding Quality: So the evolution from an online bookstore to the largest e commerce player in the world. Same for Microsoft. So Microsoft. Today, trades at quite rich valuation levels. And in 2011, they only traded at around 11 times P. E. What was the reason? the consensus was that the growth phase from Microsoft was over.

[00:49:42] Compounding Quality: So all from the laptops from Microsoft and so on, they couldn’t grow any more from that. but then the cloud came right, and it’s the most important growth pillar for Microsoft right now. And as a matter or due to that, the valuation levels of Microsoft triplets again from 2011 compared to base levels.

[00:50:03] Compounding Quality: and the cloud obviously is really important. So longevity here is also crucial, I guess. So the longer company already has a mode, the better and the longer the track record of the company and the longer the track record of management. Thanks. of continuously innovating, keep reinventing of itself, the better, because that’s really important for investors and as a company.

[00:50:28] Kyle Grieve: So you wrote about your preferred capital efficiency metric in your book, which was return on invested capital. And I share your sentiment that it’s also my favorite metric to determine how efficient a business is at managing its, invested capital. But I’m interested in knowing, can you compare and contrast returns on invested capital to returns on assets and return on equity and also tell the audience why you think return on it on invested capital is such a powerful metric and has advantages over those two others that I mentioned?

[00:50:57] Compounding Quality: It’s a very good question and very important one to understand though. So when you compare return on assets. Return on equity and return on invested capital. I completely agree with you return on invested capital is by far the most preferred, metric. Let’s shortly explain why. So first of all, when you look at return on assets, this is a metric I really don’t like to use.

[00:51:18] Compounding Quality: Why? return on assets is calculated by dividing the net income by the total assets of the company. Actually, this is a wrong formula, so it’s a mismatch. Why? in the numerator, U. S. net income, right? And net income is something that is for the shareholders. It’s the money for the shareholders basically, but in the denominator use total assets and total assets.

[00:51:42] Compounding Quality: they can be linked to the shareholders as well as the debt holders. So they’re comparing something that’s only for the shareholders in the numerator to something that is for the shareholders and debt holders in the denominator. And that’s something that is just mathematically not correct. And to add to this, when you look at the total assets, in total assets, there are also certain things that aren’t needed during the business.

[00:52:08] Compounding Quality: Think about excess cash and goodwill. So in general, some people still use the metric, but I would advise everyone to not use that return on assets metric. Return on assets is a no go for me. Now return on equity. Already more interesting, I guess, return on equity can be calculated by doing the net income and dividing it by the equity.

[00:52:30] Compounding Quality: But it can be a good metric because you look at, yeah, what is, what’s attributable to the shareholders, right? But it’s very important to understand here that companies can lower their equity parts by buying back shares or by leveraging their balance sheet. So as a matter of fact, they can increase their return on equity by taking more risk by leveraging their balance sheet.

[00:52:53] Compounding Quality: Also, the share buyback part, in extreme situations, you can even have, can have a negative equity and as a result, a negative return on equity because the company bought back shares so heavily. Think about Starbucks, for example, while they have a negative equity due to the heavy share buybacks. As a matter of fact, it can actually be a good thing, right?

[00:53:14] Compounding Quality: return on equity, you can use it, but please be cautious with it. Don’t use return on assets if you ask me. Most preferred metric is definitely the return on invested capital. In the book, we talk about, make a distinction between two kinds of return on invested capital, traditional variants. and the operational return invested capital.

[00:53:36] Compounding Quality: the traditional return invested capital is calculated by taking the NOBAT, Net Operating Profit After Tax, and dividing it by the invested capital. And you want this to be larger than 15%. And when this is the case, it’s a great indication investment rate and capital allocation and then you have also the operational return on invested capital.

[00:54:01] Compounding Quality: And this one is maybe a bit less well known, but it’s really an interesting one. And it’s a really important one, especially when you want to calculate your investment rate of a company. You Now, what’s the formula for the operational return invested capital? It’s once again, NOBODY divided by invested capital, but within the invested capital part, you exclude the goodwill and all the excess cash.

[00:54:24] Compounding Quality: And this is really interesting to calculate the reinvestment needs of a company. So when you want to calculate the reinvestment needs, you take the growth rate of a company and divide it by the operational return on invested capital. So to give you an example, when a company wants to grow by 10% this year and they have a return on invested capital or an operational return on invested capital of 50%, you take the growth rate of 10% and divide it by the operational return on investment capital of 20%.

[00:54:57] Compounding Quality: And 10% divided by 20% is 50%. So in this case, you, see that the company needs to reinvest 50% to grow at 10% per year. But, and it’s also an interesting example here, the higher the operational return on invested capital, the less they need to reinvest. Let’s take an extreme situation.

[00:55:19] Compounding Quality: Company wants the same 10% growth per year, but their return on invested capital is 100% right now. 10% divided by 100%. In that case, the company only needs to reinvest 10 % in order to grow 10% and they can use the remaining 90% of their free cashflow to distribute to shareholders, get dividends, share buybacks, and so on.

[00:55:41] Compounding Quality: And this also shows, for example, why. Compounding machines or quality stocks that can reinvest all their free cash flow in the business are so rare just because their return on invested capital is often really high and they just don’t need a lot of capital in order to grow at attractive rates. 

[00:56:00] Kyle Grieve: So one of the points that you made in your book that really resonated with me was how if you have a high enough return on invested capital benchmark, you don’t really have to worry about the weighted average cost of capital.

[00:56:11] Kyle Grieve: Can you just briefly discuss what the weighted average cost of capital is and the relationship it has with a return on invested capital? 

[00:56:20] Compounding Quality: Yeah, so it’s the important thing to know here that growth only creates value when the return on invested capital is larger than the weighted average cost of capital, right?

[00:56:30] Compounding Quality: And it also means that when a company with a very low return invested capital, you invest in the business while they actually destroy shareholder value. So that would be better off to just distribute the shareholders via dividends and share buybacks that the shareholders can get invested in other more attractive opportunities.

[00:56:49] Compounding Quality: So take, for example, Airbus and Boeing, those companies are very capital intensive. They have a low return on investment capital. So it’s really hard. It’s very hard for them to create shareholder value and compare this with a company like Visa, with a company like Mastercard. While Visa has a return on investment capital of a bit over 20%, Mastercard almost 40%.

[00:57:15] Compounding Quality: we can all agree, or I hope that we can all agree that the rated average cost of capital.

[00:57:25] Compounding Quality: Just at which rates you need to return in order to break even on a certain investment. And as a matter of fact, for me, from my side, to keep it simple, I always just use a proxy of my required return as a proxy for the weight damage cost of capital, which is 10 to 12%. But when you’re, for, to come back to the Visa and Mastercard example, while Mastercard has a return invested capital of 40%, You can basically just say that they can do any growth investment and it will always create value for them.

[00:57:59] Compounding Quality: And that’s what’s so attractive. Companies with a high return on capital and plenty of reinvestment opportunities. those are actually real compounding machines. So to take the formula again, reinvestment rate is growth rate divided by return on capital. While if Mastercard wants to grow by 10 % per year.

[00:58:20] Compounding Quality: They only need to reinvest 25% of their fee cash flow to do that. And they can use the remaining 75% to do share buybacks, dividends, and so on. And that’s actually what they, what they do. And when you can find as a quality investor, a great business with a high return on invested capital, with plenty of investment opportunities, that’s actually really interesting.

[00:58:46] Compounding Quality: That’s the Golden Sax for investors. And so far, I, only know two main companies, I guess, that can do it at, that can reinvest all of all their free cashflow in our government approach. And that, those are Copart and Dino Polska. 

[00:58:59] Kyle Grieve: So speaking of, Dino Polska, I want to finish this conversation off by discussing, the business, as I know it’s a newer position for you.

[00:59:07] Kyle Grieve: This is a stock that my colleague Clay and I discussed in a lot of detail on The Investor’s Podcast episode 587 for anyone who wants to learn more about it and full disclosure, I own shares in Dino Polska, so once this podcast episode is released, I won’t be buying or selling any shares within 14 days, but I want to get an overview of the business, you know, just simply put, why do you own it?

[00:59:28] Compounding Quality: Short answer, I think that Dino Polska has equality stock rights. What I think is really attractive is that they can reinvest everything back in the business in organic growth. That’s very rare and that’s exactly how compounding machines are created. So I think that Tino still has plenty of room for growth to add.

[00:59:47] Compounding Quality: Now, what is Dino Polska? Dino Polska is basically a Polish company, and it’s a Polish grocery company active in the rural areas of Poland. So they are focusing on standardized store designs, and they have fresh products, they have their own meat supplier, they have their own distribution centers, and so on.

[01:00:05] Compounding Quality: So the company, if you ask me, definitely has a moat. Why? they are the number one store in Poland when you talk about price, convenience, and selection. And what also provides them with a competitive advantage is that they own almost all their own stores. And nobody else does that when you look at the math, when you look at the numbers.

[01:00:27] Compounding Quality: buying your own stores and buying the land, creating the stores and so on, it only gives you a competitive advantage when your investment horizon is larger than nine years. And that’s also the case for DINAPOLSKA, and it shows management focus relentlessly on the long term. The founder, Thomas Wienacki, he’s still involved within the company.

[01:00:49] Compounding Quality: He still owns more than 50% of the business, and he’s really well known for being a penny pincher. So looking for the cheapest garbage bins to spare or to save a few dollars every year in every store. that’s what it’s known for. So it reminds you a bit of, or it reminds me at least a bit about Mark Leonard.

[01:01:11] Compounding Quality: So being very secretive. focusing relentlessly on the business. And that’s exactly what you want to see. So I guess it’s a quality business. The fundamentals look really great. And the most effective thing for me is that they can still reinvest almost everything in organic growth at a high return on investment.

[01:01:31] Kyle Grieve: Yep, I agree with your sentiment. So one thing that’s been interesting about Dino Polska just over the last year is that it’s been an incredibly volatile stock to own. you know, for short term investors, probably not a good fit, but for long term investors like yourself and myself, and probably a lot of listeners of this podcast, It’s really good because it just gives you opportunities to decrease your cost basis.

[01:01:50] Kyle Grieve: So I’m interested in just knowing a little bit more about what you think specifically about evaluation of Dino Polska. Can you kind of discuss what kind of growth you’re expecting in the near future? 

[01:02:00] Compounding Quality: Yeah, sure. I think the future still looks bright for the company. So Dino basically started in the west of Poland and they’re gradually expanding to the east.

[01:02:10] Compounding Quality: And when you look at the numbers, I think that Dino can actually almost double its store cards from today’s levels. So this means that the number of stores are expected to grow from around 2, 400 today to 5, 300 in a few years from now. And what is interesting that during the latest earnings call, and let’s be honest with each other, the latest numbers weren’t that good.

[01:02:32] Compounding Quality: So numbers were a bit below estimates. There was some margin pressure and so on. The reason there is that there was more competition and obviously you have some inflation. But what was really interesting in the latest earnings call is that they said, okay, growth will accelerate again in 2024 and margins will also go up in the long term.

[01:02:53] Compounding Quality: And when you compare 2025 to 2024, growth will accelerate once again. So over the next two years, I think that the results the company will publish should be quite good. And they also said that after they matured in Poland. they will expand to neighboring countries like Czech Republic and so on.

[01:03:14] Compounding Quality: And what is really important in this investment case, in the investment case of Dinobolska, I guess, is that in practice, the fundamentals are way better than how they look like on paper. So when you look at Dinobolska today, they have 2, 400 stores. But you know, or you see that 40% for 0% of these stores are still less than three years old.

[01:03:38] Compounding Quality: And why is that so interesting? because these stores haven’t reached their full profitability yet. And when you look at the fundamentals, when Dino Polska opens a new store after one year, it’s still a loss making. After two years, the free cashflow margin is usually on average equal to 2%. And then after three years, it goes to the normal or long term profitability of 8%, which is actually not bad for a retailer, by the way.

[01:04:07] Compounding Quality: So this means that all these stores, their margins and 40% of their stores are still lower than what they will be in three years from now. So right now, DDoS is still investing heavily in future growth. But once, one day, the growth will mature and the growth will stagnate, they need to reinvest less in upward growth, so their growth capex will go down, their fee cashflow will go up, and the margins of the business will go up, because all stores will reach their full profitability over time.

[01:04:39] Compounding Quality: I think what’s also interesting, and it’s the last thing I will add, is the valuation looks quite attractive. So when I run my own earnings growth model. the expected return is 11.7% per year. So in other words, I’ll expect that shareholders will get 11.7% per year return in my model.

[01:05:00] Compounding Quality: And when you look at the reverse DCF, You see that currently the market expects Dino to grow its free cash flow by 7% per year over the next few years. This in comparison with the guidance of management, in comparison with the guidance of the consensus of analysts, over the next two years, they think that free cash will grow by 25%.

[01:05:24] Compounding Quality: So the market thinks Dino will grow its free cash flow by 7%, The consensus state that will go by 25%. So there’s a mismatch here and it’s why I think that Tito Polska is true. That’s one, the quality business and two, to achieve today, which is why I’m very happy to be a shareholder today. 

[01:05:44] Kyle Grieve: So compounding quality, I want to thank you so much for joining me today. But before we say goodbye, I want to hand it off to you. Where can the audience connect with you and learn more about you and your services? 

[01:05:54] Compounding Quality: Yeah, sure. So obviously the book, The Art of Quality Investing has just been published. It would be lovely to, get some feedback on the book and to learn from each other.

[01:06:05] Compounding Quality: And for the rest, yeah, people can also find me via Twitter, obviously, Compounding Quality, or via the website, compoundingquality.net. 

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