Title: The 30-Year Buying Opportunity Show: Compounding Quality (compoundingquality.net — Pieter Slegers' quality-investing newsletter) Guest: Pieter Slegers (author) Date: 2026-FEB-12 URL: https://www.compoundingquality.net/p/the-30-year-buying-opportunity Length: written post (paid) — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; page chrome removed. Chart panels noted inline as [Image — ...].
What an interesting time to be alive.
Mr. Market is very negative about a lot of Quality stocks right now.
This offers tremendous opportunities if you ask me.
It's time to buy quality
What's happening right now reminds me of this quote from Peter Lynch:
"If a stock is down but the fundamentals are positive, you should buy more of it." — Peter Lynch
That's exactly what's happening right now.
Quality stocks are currently underperforming.
It's the largest irrationality in the market over the past 30 years.
The last time this happened was in 1999, just before the dotcom bubble.
After that, quality outperformed massively (+18.5%).
[Image — quality factor relative performance, 30-year history]
I think it's likely to happen again.
Why?
Because stock prices eventually follow earnings.
Always.
Your Strategy Matters
Your strategy matters.
Just think about Joel Greenblatt.
He ran a hedge fund that delivered a yearly return of +40% (!) for over 20 years.
[Image — Joel Greenblatt track record]
Which investment strategy you choose is very important.
The two most important things? - You don't need the optimal strategy. You need a sensible strategy that works for you - Your strategy needs to be simple and easy to understand.
Our strategy is very simple: - Buy quality companies - Led by excellent managers - Trading at fair valuation levels
This strategy massively outperformed the market in the long term:
[Image — quality strategy vs market, long-term]
So now you learned quality outperforms the market.
But it gets even better…
… Because you can buy quality at a discount today.
Here's the situation for Our Portfolio over the past 5 years: - Average yearly growth in Owner's Earnings: +22.3% - Average change in valuation: -10.0%
This is exactly what you want to see.
You can buy amazing companies at a discount of almost 33%!
But which companies are the most interesting within Our Portfolio right now?
Let's dive in.
Top 3 Buys in Our Portfolio
3. Kinsale Capital ($KNSL)
How does the company make money? Kinsale Capital ($KNSL) makes money by selling specialty insurance to businesses, focusing on high-risk markets and earning profits from premiums and investments.
A fun story? The first time I found out about Kinsale Capital, it reminded me about Geico 70 years ago.
Warren Buffett wrote a lot about Geico in his annual letters, and it turned to be an amazing investment.
Berkshire Hathaway made a return of 100x (!) on the company.
So when I first read about Kinsale Capital, I immediately re-opened the annual letters of Berkshire Hathaway.
Here's what both Kinsale Capital and Geico have in common: - They are both active in an insurance segment that grows faster than the market - They are both gaining market share
This is a winning formula.
Kinsale Capital is an amazing business for four main reasons: - It's a superior underwriter - They should be able to double their market share - They have a strong moat (technological advantage) - And a superior capital allocator (Mike Kehoe)
The goal? Grow by 10-20% per year in the very long term.
If they achieve this, they will definitely continue to outperform in the long term:
[Image — Kinsale Capital growth history. Source: Fiscal.ai]
Why it's one of our favorite buys right now?
The stock is down 15% over the past year.
Over the same time EPS grew by 15%.
This means the stock became 30% (!) cheaper.
As a result, Kinsale Capital trades at one of its cheapest valuation levels ever:
[Image — Kinsale Capital forward PE history. Source: Fiscal.ai]
As Warren Buffett said: "Be fearful when others are greedy and greedy when others are fearful."
Today it might be time to be greedy for Kinsale Capital.
Our model - Expected Return from Our Earnings Growth Model: 14.6% - Current Undervaluation: 69.0%
2. Kelly Partners Group ($KPG)
How does the company make money? Kelly Partners Group is a serial acquirer providing services like bookkeeping, tax planning, and advice on how to grow a business or handle money wisely.
Kelly Partners Group is an amazing Owner-Operator.
Brett Kelly owns over 46% of the company.
Despite the recent drop, KPG has grown over 19% yearly since it went public.
[Image — Kelly Partners long-term share price. Source: Fiscal.ai]
At a return of 19% per year, you double your money every 3.75 (!) years.
But as you can see in the long term chart above, the stock has sold off recently.
It's down nearly 50% in the past 6 months.
[Image — Kelly Partners 6-month decline. Source: Fiscal.ai]
You would expect something is seriously wrong with such a market reaction.
But the company is actually executing well on its expansion to the United States.
Management says they have plenty of acquisition targets.
In fact, they're seeing more growth opportunities than they can currently fund.
That's why they've raised some debt.
Management expects the company to continue growing at 20%+ into the future.
[Image — Kelly Partners growth guidance. Source: Kelly Partners Investor Relations]
So what's the sell-off all about?
People are afraid AI will disrupt the accounting industry.
I think it's quite funny. All of a sudden, it seems like AI can disrupt any industry.
I'm not very concerned about this.
Here's what Brett Kelly said about this when we interviewed him last year:
[Image — Brett Kelly interview quote, not reproduced]
During the latest shareholder meeting, Brett Kelly said he thinks the stock is undervalued:
"We are quite constrained currently with the capital that we have available to take on the opportunities to bring firms into the group that want to join us. We are, frankly, overwhelmed with opportunity at the moment, so we haven't undertaken any buybacks… the company is trading at a share price today, that if we had excess capital, we would certainly be buying our shares back, and we would do that with a great deal of enthusiasm and at large scale."
Since Brett Kelly said this, the stock became even cheaper.
Earlier this week, Kelly Partners Group published its results. You can find an extensive update in the Community.
Our model - Expected Return from Our Earnings Growth Model: 15.3% - Current Undervaluation: 94.9%
1. 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 +28% per year. Just 15 years after their IPO in 2006, Constellation had already joined the 100-bagger club. It's an amazing business.
Constellation Software is the best serial acquirer in the world.
Today, Mr. Market believes AI will destroy the business model of every software company.
Just look at the price of the iShares Software Sector ETF.
It's down more than 25% in the past 6 months.
[Image — iShares Software Sector ETF, 6-month decline. Source: Fiscal.ai]
Constellation Software has sold off along with the sector.
It gives you the opportunity to buy an amazing business at just 16x FCF.
I don't think AI will disrupt companies like Constellation Software: - Software for niches like healthcare and public safety has be 100% reliable - The switching costs are very high for vertical market software - AI will help Constellations developers work faster and improve the software even more
Last week, Jensen Huang (CEO Nvidia) said that investors are exaggerating.
He said people misunderstand how technology works.
The idea that AI will replace software is 'illogical'.
What Jensen Huang Said - Companies are building AI that can operate the software we already have - AI will operate like a smart helper that knows how to use your existing programs, instead of replacing them
In other words, software companies are becoming the toolbox that will let AI get things done.
I think this view is correct.
Remember that Constellation owns thousands of Vertical Market Software companies.
They are customized to specific industries and needs.
It would be very hard (probably even impossible) for AI to disrupt all of them.
Constellation Software's valuation just keeps getting more attractive:
[Image — Constellation Software valuation history. Source: Fiscal.ai]
That's exactly what we want to see as a quality investor.
Our model - Expected Return from Our Earnings Growth Model: 14.4% - Current Undervaluation: 118.7%
Conclusion
That's it for today.
Quality companies are extremely cheap right now.
Their stock prices don't match how good their businesses are.
This gap is the biggest we've seen in 30 years.
Mr. Market is currently panicking.
But let me tell you something: AI won't disrupt everything.
That's why we see amazing opportunities in these three companies today: - Kinsale Capital ($KNSL): undervalued by 69.0% - Kelly Partners Group ($KPG): undervalued by 94.9% - Constellation Software ($CSU): undervalued by 118.7%
If you don't have a full position yet, it might be interesting to buy more of these companies.
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: Financial data
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