Compounders: Don't fall in this trap. Explained by Terry Smith @Fundsmith

Hey compounders! We need more data 😀! What do you think about a Guy & Matt Patreon account? Please let us know. /M

I’m glad i found this channel. You guys are speaking my language. Please cover what Terry smith says/does with additional data. This is perfect. Thank you guys

Even if the business doesn't compound itself. You can still compound your investment by re-investing your payout back into the company. Of course it can be less efficient due to taxes on dividends. Or more efficiently the company can do so by doing buybacks (hopefully not when it's overvalued).

Essentially, compounders have common three characteristics:

1) They earn high and sustainable ROCE with high profit margins.
2) They have opportunities to reinvest and grow their future profits at high rate of returns.
3) They are able to keep competitions at bay or economic moats.

The tricky part is in identifying the sustainable competitive advantages that deter competitors and allow the compounders to keep generating high margins and growing at the same time. For example, British American Tobacco (BAT) was able to grow its profits and generating high margin by cutting costs without much competition. Because it operates in no growth sector and this deter new competition.

Not a bad idea. I'd appreciate more insight from you.

There is a very cheap service that provides that data called "Fundamentei". It is charged in Brazilian Reais, so USD 55/year. And the section of US assets is all in english.

I am wondering is there any progress on compounding back testing? It might be a good investment. How might you going to measure reinvestment opportunities to weed out companies like WD40?

I am not wealthy at all but I would be willing to donate a low tier a month to you guys.

Interesting that he says to not invest in a company that can't compound, but he has a large bet on Philip Morris. Any idea why? I suppose PM has a massive moat, has pricing power & an addictive product, but its not going anywhere.

As for the data, have you thought of using TIKR terminal? It's pretty good for what they offer.