CompoundingQuality
Quality Pieter
Compounding
PieterSlegers
Slegers
Compounding Quality Pieter Slegers
Buy-and-build
Just like Warren Buffett, Mark Leonard thinks
like an owner.
When Constellation Software acquires a
company, they do this with the intention to
own it forever.
Compounding Quality Pieter Slegers
High autonomy creates value
Leonard keeps the autonomy of his employees
as high as possible.
When they acquire a company, they do not
seek to take over day-to-day operations.
Compounding Quality Pieter Slegers
Pray for stock price corrections
Buffett once said:
"Any calls you get on Sunday, you're going to
make money. Those calls are the best since
they are from distressed sellers."
Mark Leonard has said the same, as his most
attractive acquisitions took place during
recessions.
Compounding Quality Pieter Slegers
Focus on Return On Invested Capital
Mark Leonard uses the ROIC as a proxy for a
company’s moat.
A high and stable ROIC is a great sign that the
company has a sustainable competitive
advantage.
Compounding Quality Pieter Slegers
Size matters
The law of large numbers states that the
larger you get, the harder it is to grow at very
high rates.
It’s way easier for a company which earns $1
million to double its earnings compared to a
company which earns $50 billion.
Compounding Quality Pieter Slegers
Culture is everything
Culture eats strategy for breakfast.
A good culture creates shareholder value.
Compounding Quality Pieter Slegers
It’s all about capital allocation
A lot of CEOs don’t have proper capital
allocation skills.
That’s a pity because capital allocation is the
most important task of management.
Compounding Quality Pieter Slegers
Founder-led businesses
The best companies are run by people who
have skin in the game.
They aren’t running the company for the
money it earns.
Compounding Quality Pieter Slegers
Price versus intrinsic value
In the long term, stock prices will always
follow the intrinsic value.
That’s why you shouldn’t focus on daily stock
price fluctuations.
Instead, focus on the fundamentals of the
company.
Compounding Quality Pieter Slegers
Reinvestment opportunities
The best businesses have very high margins
and a low capital intensity.
These companies can reinvest their FCF (Free
Cash Flow) at attractive rates.
Compounding Quality Pieter Slegers
Cash is like oxygen
Cash can pile up when Mark Leonard doesn’t
see investment opportunities.
Mark Leonard only wants to acquire
companies when it makes economic sense.
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Pieter Slegers
Compounding Quality