Title: Our Shopping List (Part II) — The companies we want to buy Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: Pieter Slegers / Team Compounding Quality (author; byline "Compounding Quality") Date: 2026-04-23 URL: https://www.compoundingquality.net/p/our-shopping-list-part-2 Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Fiscal.ai and investor-relations chart panels noted inline as [Image — ...]. Published date confirmed from the on-page byline (APR 23, 2026) and from the schedule announced in the 19 April issue ("Thursday 23 April: Companies we might add (Part II)"). Every candidate ends with an "At which price are we interested?" block; those figures are transcribed verbatim, including the original's typo "Faifax".
Hi Partner
Over the past few weeks, we've been giving you an extensive Portfolio Update.
In case you missed it:
Portfolio Update April 2026 (Part I)
Portfolio Update April 2026 (Part II)
Our Shopping List (Part I)
For every company in the Portfolio, you found out about our conviction levels.
And you've also found out about opportunity costs.
When you find a company with a higher expected return than one you're currently invested in, you should consider making the switch.
Let's dive into the companies we're considering adding to the portfolio.
Our Shopping List: Part 2
Fairfax Financial Holdings ($FFH)
How does the company make money?
Faifax Financial Holdings is a holding company.
It's a Canadian company operating a collection of global insurance and reinsurance businesses, collecting premiums upfront and investing the float before claims are paid.
The CEO Prem Watsa takes an opportunistic, value-oriented approach to investing the float, adding a second engine of returns alongside underwriting profit.
The goal of the company is to grow its book value by 15% per year on average in the long term.
In essence, Fairfax copied the business model of Berkshire Hathaway.
I'm currently reading the book The Fairfax Way. It's a must read.
Why is it an interesting company?
The man who made $3 billion from a single bet: Prem Watsa, Fairfax's CEO, called the 2008 financial crisis before almost anyone. He runs this company like his personal investment fund; with deep conviction and zero interest in short-term noise.
Two ways to make money at the same time: Fairfax earns on insurance premiums and on its investments simultaneously. When both engines fire together, the returns can be very powerful.
Growing in places most competitors ignore: Around 25% of Fairfax's business comes from faster-growing markets outside North America (like India). That's a growth lever most insurance peers simply don't have.
A great business at a cheap price: Fairfax has compounded book value at 12% per year for over a decade. The stock trades at just 8x earnings. You're not paying much for something that has consistently delivered.
The CEO hasn't given himself a raise in 25 years: Watsa has kept his salary at CAD 600,000 since 2000. He's not here for the paycheck. He owns the stock. His interests and yours are exactly the same.
At which price are we interested?
Fairfax is an amazing business.
Just look at how the intrinsic value evolved over the years (the stock price followed):
[Image — Fairfax intrinsic value vs stock price over time. Source: Fairfax Investor Relations]
The company massively outperformed over the past 40 years:
[Image — Fairfax long-run outperformance. Source: Fairfax Investor Relations]
In general, it's quite hard to value Fairfax Holdings.
You should make an estimate of its intrinsic value.
I would be interested in owning Fairfax at 1.2x book value.
This implies a stock price of 1,777.5 CAD (current stock price: 2,472 CAD).
Fortinet ($FTNT)
How does the company make money?
Fortinet is a cybersecurity company.
They sell network security hardware (firewalls) as an entry point. Afterwards, they make high-margin recurring revenue through software subscriptions and support contracts.
Fortinet has a strong vertically integrated model. This gives them a clear cost and performance advantage.
[Image — Fortinet business model. Source: Fortinet Investor Relations]
Why is it an interesting company?
Cybersecurity spending only goes up: Hackers get smarter every year. Fines get bigger. Fortinet's products stop being a nice-to-have and become a must-have.
Once you're in, you don't leave: Switching means retraining your team, ripping out systems, and leaving yourself wide open to attacks in the process. As a result customers stay.
The more customers they have, the better the product gets: Fortinet collects live threat data from 800,000+ customers. More data means faster detection. Faster detection attracts more customers. The flywheel keeps spinning.
Two new growth engines are just getting started: SASE and SecOps now make up 38% of billings and are growing by 40% per year. They are sold directly to existing customers at almost no extra cost.
The business gets more profitable every single year: More software, less hardware. Operating margins are expected to climb from 30% today to 36% by 2030. Same revenue base, more profit flowing through.
At which price are we interested?
Fortinet currently trades at a Forward PE of 29.2x.
Stock Based Compensation equals 15% of Fortinet's Net Income.
If we adjust for this, the adjusted Forward PE equals 33.6x.
We would love to own Fortinet at 25x their adjusted Forward PE.
This implies a target price of $65.7 (current stock price: $85.1).
Heico ($HEI)
How does the company make money?
Heico produces FAA-approved aircraft replacement parts at meaningfully lower prices than original equipment manufacturers.
This saves airlines and MRO shops significant cost.
It also runs a repair and overhaul segment, and grows steadily through disciplined bolt-on acquisitions of niche aerospace businesses.
[Image — Heico business overview. Source: Heico Investor Relations]
Why is it an interesting company?
They sell the exact same airplane parts for 30-40% less: Airlines have to maintain their planes no matter what. Heico reverse-engineers the exact same parts, gets approval, and undercuts the original manufacturers on price.
Getting in the industry is nearly impossible: Years of regulatory approvals, millions in R&D, hundreds of certified parts just to be a viable alternative. Heico already has all of that. New competitors start from zero.
Once Heico is in, nobody switches: Airlines can't gamble on untested parts. Heico has a 30-year record of zero in-flight part failures. That track record is priceless and nearly impossible to replicate.
Defense is a whole second business: Heico's components sit inside targeting systems, satellites, and missile guidance systems. When you're that deeply embedded in critical defense hardware, nobody swaps you out for a cheaper option.
The numbers keep getting better: 14% revenue growth and 15% operating profit growth last quarter. Older planes are flying more than ever, and original manufacturers keep raising prices, which only makes Heico's discount more attractive every year.
At which price are we interested?
Heico is an amazing company that has always been expensive/
They currently trade at a Forward PE of 46.7x.
I would only be willing to pay 30x earnings for Heico.
This means we're interested at a price of $178 (current stock price: $270).
[Image — Heico valuation. Bron: Fiscal.ai]
Now let's dive into the final 4 companies.
Hermes ($RMS)
How does the company make money?
Hermes sells iconic luxury goods, particularly the Birkin and Kelly bags.
They sell their products at very high prices with intentionally limited supply.
They use vertical integration and artisan craftsmanship. It keeps quality high and margins exceptionally wide. They use a waitlist model, using scarcity a marketing tool.
[Image — Hermes segments. Source: Hermes Investor Relations]
Why is it an interesting company?
The waitlist is the product: You can't just walk in and buy a Birkin bag. The scarcity is the strategy, and it works like nothing else in retail.
Luxury goods: A bag bought for EUR 6,500 sells for EUR 35,000 at auction. That's not a handbag.
The founding family still runs the show: They own 67% of the company and control 78% of the voting power. They think in decades, not quarters.
While luxury struggles, Hermes keeps growing: Hermes has grown their revenue by 12.8% per year over the past 10 years
The moat is unlike anything in luxury: They have 300 stores worldwide, No other luxury brand comes close to the level of control Hermes has over its own products.
At which price are we interested?
The stock of Hermes came down recently. Over the past year, the stock is down 33%.
As a result the valuation also plunged:
[Image — Hermes forward PE, 10-year range. Source: Fiscal.ai]
As you can see, the stock now trades at one of its cheapest valuation levels of the past 10 years.
However, a Forward PE of 36.4x is still expensive.
I would love to own Hermes at a FWD PE of 30.0x. This implies a stock price of EUR 1,364 (current stock price: EUR 1,676).
Mastercard ($MA)
How does the company make money?
Does Mastercard still need an introduction?
Together with Visa, they have a duopoly as a global payment provider.
Every time someone uses Mastercard's network, they earn a fee.
You can see Mastercard (and Visa) as an asset-light toll booth on global consumer spending.
[Image — Mastercard economics. Source: Fiscal.ai (formerly Stratosphere)]
Why is it an interesting company?
A tollbooth on the global economy: Every time someone swipes a credit card, Mastercard collects a fee if their payment network is used.
The network is basically impossible to copy: Merchants accept it because consumers use it. Consumers use it because merchants accept it. That flywheel has been printing cash for over 50 years.
Cash is dying and Mastercard wins from this: Digital payments only just overtook cash globally a few years ago. Billions of people in emerging markets still haven't made the switch.
52% Free Cash Flow Margin: For every $100 in sales, Mastercard generates $52 in pure cash after taxes.
Very asset light: Mastercard needs almost no capital to operate. Mastercard is using its Free Cash Flow to buy back shares.
At which price are we interested?
Mastercard currently trades at a Forward PE of 26.0x.
This is not very expensive for the amazing business Mastercard is.
They are only slightly more expensive than Visa at this point in time (Forward PE of 23.5x).
I would love to own Mastercard at 24x earnings. This implies a stock price of $470.
[Image — Mastercard valuation history. Source: Fiscal.ai]
Installed Building Products ($IBP)
How does the company make money?
Installed Building Products installs insulation and complementary products (gutters, fireplaces, shelving) in newly built homes.
They serve homebuilders across the US.
Revenue is closely tied to housing starts. However, their fragmented local market, branch-based model, and consistent acquisition strategy gives them a durable competitive position.
[Image — IBP overview. Source: IBP Investor Relations]
Why is it an interesting company?
Every new home needs what they sell: Insulation, drywall, framing... you can't build a house without this stuff. IBP installs it all. No construction boom happens without them.
The stock has been a monster: EPS grew over 1,000% since 2016. This is not a boring construction company.
Serial acquirer in a fragmented market: IBP is acquiring other companies in the fragmented insulation and complimentary products market.
America needs millions more homes: The U.S. housing shortage won't fix itself anytime soon. Every home that gets built is a guaranteed customer for IBP.
The government is their best salesman: New energy efficiency rules mean more insulation required by law. IBP doesn't need to sell harder... Washington is doing it for them.
At which price are we interested?
Installed Building Products is a company you should want to own at the right price.
Unfortunately, the valuation is rather expensive today.
You pay a Forward PE of 27.6x for this company while you could buy it for just 9x earnings in 2022.
We would start considering IBP at a FWD PE of 15x. This implies a stock price of $168 (current stock price: $305.8).
[Image — IBP valuation history. Source: Fiscal.ai]
Interactive Brokers ($IBKR)
How does the company make money?
Interactive Brokers is an American online broker with over 3.6 million client accounts.
They earn revenue from trading commissions, interest income on client cash balances and margin loans, and from currency conversions.
Their focus on technology keeps their costs exceptionally low, and they pass some of those savings directly on to customers, which is a key part of why they keep growing.
Discover more about Interactive Brokers here.
[Image — Interactive Brokers overview. Source: Interactive Brokers Investor Relations]
Why is it an interesting company?
Industry-leading profitability: Interactive Brokers keeps 77 cents of every dollar it earns. Schwab keeps 48 cents. Robinhood keeps 45 cents. No other broker comes close, and that gap has held for years.
Best trading platform in the business: 160 exchanges, 36 countries, 28 currencies. Hedge funds and professional traders use IBKR because their trade execution is simply better than anyone else's. That kind of infrastructure takes decades to build.
Extreme efficiency: They manage $780 billion in client assets with only 3,200 employees. Big banks are ten times larger but far less efficient. They use automation to do the work that usually requires thousands of people.
Rapid growth: Their customer base grew by nearly 32% last year, adding over a million new accounts in 2025. Because they operate globally, they still have a massive opportunity to expand into new countries.
A moat that is difficult to replicate: Schwab took five years just to absorb TD Ameritrade. Big banks have no incentive to build this. Market makers operate differently. Interactive Brokers has built something that nobody else can copy.
At which price are we interested?
Interactive Brokers has traded across a wide valuation range over the past few years, which creates occasional opportunity.
The stock currently trades at a Forward PE of roughly 20x.
Given the quality of the business and its growth, buying it at a Forward PE of 15x would be amazing.
This implies a stock price of around $51.
[Image — Interactive Brokers valuation history. Source: Fiscal.ai]
This Sunday you'll receive Part III of our shopping list.
Everything in life compounds Team Compounding Quality
Book
Order your copy of The Art of Quality Investing here
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
Disclaimer As a reader of Compounding Quality, you agree with our disclaimer.