Title: Adding to Three High-Quality Stocks — Has the market gone crazy?! Show: Compounding Quality (compoundingquality.net — Pieter Slegers' quality-investing newsletter) Guest: Pieter Slegers (author) Date: 2026-FEB-01 URL: https://www.compoundingquality.net/p/adding-to-3-stocks Length: written post (paid) — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; page chrome (like/share counts, nav) removed. Fiscal.ai chart panels noted inline as [Image — ...].
Hi Partner
What an incredible time to be alive.
I see amazing opportunities in the market today.
It's like Mr. Market has lost its common sense.
For some companies, Mr. Market is euphoric (Artificial Intelligence) while for other companies, it seems like Mr. Market thinks the world is ending.
This is exactly what you want to see as a rational long-term investor.
Today, we are adding to 3 companies from Our Portfolio.
Company 1: - A company I would love to work for when I wouldn't run Compounding Quality - One of the best run companies in the world
Company 2: - Is a stock Buffett says you should always buy when its down (spoiler alert: it currently is) - Expected return in our model: 15.9% per year
Company 3: - Trades at its cheapest valuation level of the past decade - Should double in size every 5 years
Let's dive in.
Constellation Software ($CSU)
How does the company make money? Constellation Software is the best serial acquirer in the world. The stock has consistently compounded at +30% per year. Just 15 years after their IPO in 2006, Constellation had already joined the 100-bagger club. It's an amazing business.
Does this company still need an introduction?
Constellation Software is the best serial acquirer in the world.
In 2024, investors were willing to pay 35 (!) times the cash flow for Constellation Software.
And today? Just 16.2x.
Constellation Software is currently facing its largest drawdown ever.
Just look at this chart:
[Image — Constellation Software drawdown history. Source: Fiscal.ai]
This looks like a great opportunity to me.
As Warren Buffett said:
The best time to buy stocks is when there's blood running through the streets.
A lot of people think VMS companies like Constellation Software (and Topicus) will be disrupted by things like AI.
I don't believe this.
Kosta Ristovski summed it up quite well in the community:
"Wall Street occasionally turns against certain sectors, creating opportunities. I believe highly specialized business software has minimal AI disruption risk for several reasons:
1. AI solutions are probabilistic, not deterministic—they make inevitable mistakes that require human oversight for business-critical code. They can't make tailored design decisions or understand complex architectures. While AI helps engineers code faster, building maintainable enterprise software requires intentional design that AI can't provide.
2. Additionally, AI needs consistent data to function, but companies use varied formats that resist generalized automation. Migrating operational software is difficult and expensive, making embedded enterprise solutions sticky.
Bottom line: companies deeply integrated into business ecosystems will likely leverage AI for productivity rather than be disrupted by it. Current AI isn't reliable enough for high-stakes automated decisions—it's a tool, not a replacement."
Arne Ulland also made an interesting comment on X:
[Image — Arne Ulland tweet, not reproduced]
And finally, here's an interesting comment from Michael Gielkens (Tresor Capital):
"The recent turmoil surrounding AI has led to fears that software could be built virtually free of charge in the future and that even specialised niches will no longer be protected. However, this reasoning misses the point of where the real value of Vertical Market Software lies. It is not the development costs, but mission-critical data, complex regulations, deep integration into work processes and high switching costs that form the moat. For established players such as Chapters Group, Constellation Software and Topicus, AI therefore does not pose an existential threat, but rather a productivity lever that can increase margins and, through lower market valuations, even create new acquisition opportunities."
The lesson you can draw from this? It might be an amazing time to add to Constellation Software today.
And that's exactly what we're doing.
You can read our Deep Dive of Constellation Software here.
Transaction Constellation Software We will add $15.000 to our Constellation Software position. We will enter an order for Q 8 with a limit price of CAD 2600.
Visa ($V)
How does the company make money? Visa makes money by processing payments and charging fees for using its card network. They dominate the market together with Mastercard.
Something that always stood out to me?
Warren Buffett who said the following about Visa and Mastercard:
"I should have bought Visa and Mastercard. These stocks don't dip often, but when they do... Take notice."
Visa and Mastercard are both down after Trump proposed a 10% credit card interest rate cap.
The good news? I think Trump will never be able to push this through in court.
Here's a look into Visa's valuation:
[Image — Visa forward PE history. Source: Fiscal.ai]
Visa is a pure cash machine.
They translate more than 50% (!) of its sales in pure cash.
The company has a dividend yield of 0.8% and buys back roughly 2.3% of its outstanding shares every single year.
This means the shareholder yield equals 3.1% per year.
If you combine this with an expect earnings growth of 12% per year, you could expect the stock to double every 5 years.
Some famous investors who also own Visa are Chris Hohn, Chuck Akre, Terry Smith, Francois Rochon, Tom Gayner, Thomas Russo and Warren Buffett.
Last Thursday, Visa published its results. Results were great if you ask me. You can find more information in Our Community.
Transaction Visa We will add $20.000 to our Visa position. We will enter an order for Q 60 with a limit price of $325.
Topicus ($TOI.V)
How does the company make money? Topicus is a spin-off from Constellation Software. It's a serial acquirer focusing on Vertical Market Software (VMS) companies in Europe.
The reason we're adding to Topicus is exactly the same as why we're adding to Constellation Software.
As you probably know, Topicus is a spin-off from Constellation Software.
Topicus has an excellent article on their website about how they are using AI to improve their business.
You can read it here.
The key takeaway? Topicus positions AI as a transformative force that shifts software from passive "systems of record" to active "systems of action".
They use their domain expertise for the following: - Reduce the workload - Support decision-making - Create real customer value across education, healthcare, finance, and the social domain.
And guess what? Topicus currently looks cheap.
In 2021, the stock price was at the same level as it is today.
The Free Cash Flow has doubled in the meantime.
In other words: the valuation halved. It's like buying the same house that cost $200,000 five years ago for $100,000 today.
[Image — Topicus valuation history. Source: Fiscal.ai]
Transaction Topicus We will add $15.000 to our Topicus position. We will enter an order for Q 180 with a limit price of CAD 105.
Conclusion
That's it for today.
We are adding to 3 stocks: - Constellation Software: Add $15.000 - Topicus: Add $20.000 - Visa: Add $15.000
[Note: the closing summary reverses the Topicus and Visa amounts relative to the transaction blocks above, which read Visa $20.000 and Topicus $15.000.]
Everything in life compounds Pieter (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
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