Title: Best Buys January 2026 — Top 5 stocks today Show: Compounding Quality (compoundingquality.net — Pieter Slegers' quality-investing newsletter) Guest: Pieter Slegers (author) Date: 2026-JAN-18 URL: https://www.compoundingquality.net/p/best-buys-january-2025-b50 Length: written post (paid) — no timestamps Note: Verbatim article text captured via logged-in session; page chrome (like/share counts, nav) removed. Charts referenced as "Source: Fiscal.ai" are images not reproduced here. URL slug says "january-2025" but the post is Best Buys January 2026 (published JAN 18, 2026).
By monthly tradition, you'll get an update on our Best Buys of the month.
What's going on in the markets? And what are our favorite stocks?
Let's get a little bit wiser today.
December 2025
The S&P 500 was flat in December.
Investors are neutral today according to the Fear & Greed Index.
Best & Worst Performers
This overview shows you the best and worst performers in our investable universe.
Worst performers
The cheaper we can buy great companies, the better.
Here are the worst performers of the past month:
A lower stock price is actually a good thing for Autozone.
Why? It's a Cannibal Stock.
This way, the company can buy back shares at more attractive valuation levels.
Best performers
These stocks had a year-end rally:
Retailers like Ulta Beauty and RH had an excellent year-end.
Spotlight: 3i Group ($III)
How does 3i Group make money?
3i Group is a holding company. They are a UK-based investment company focused primarily on private equity and infrastructure. Unlike software companies that sell products, 3i makes money by investing its own balance sheet into high-quality businesses and growing their value over time.
3i Group is an interesting holding company with one crown jewel: Action.
Let's start with some history first.
Brief introduction
3i was founded in 1945 as the Industrial and Commercial Finance Corporation.
Over time, 3i transitioned away from being a diversified private equity manager into a highly focused, conviction-driven investor.
Its strategy today is based on one simple rule: Let your winners run.
Action is a prime example of that.
On March 31st, 2025, Action formed 76% of the Private Equity portfolio.
This is by far the most important part of 3i Group's whole Portfolio.
An investment in 3i Group is basically an investment in Action. So let's dive into the retailer every European loves.
Action
Action is the engine behind 3i's success.
The business operates a hard-discount model. They sell everyday non-food items at very low prices.
They have a cost advantage based on their size:
Bigger size allows Action to buy products in bulk. Bulk buying lowers product costs. Lower costs mean lower prices for customers. Lower prices attract more customers. More customers lead to more growth, strengthening Action's advantage.
This creates a powerful cycle where everyone benefits.
It's a competitive advantage in which customers win too. Just like Amazon and Costco.
Why is the stock cheap?
An amazing company, right?
Now, let's take a look at the price chart. Since October 2025, the stock declined by almost 20%.
The reason?
Action's like-for-like growth was 'just' 6.5%. Investors expected this number to be 6.8%.
Investors were totally upset by the 0.3% difference. I kid you not.
What is like-for-like growth? Like-for-like growth measures how much sales or performance have changed for the same set of stores over time. It excludes the impact of new openings.
This is short-term noise if you ask me.
So let's zoom out and focus on the intrinsic value growth of 3i Group.
As you can see, 3i Group's NAV (intrinsic value) doubled (!) in the last three years.
3i Group delivered excellent returns for shareholders over the past years:
"This is the fifth consecutive year we have delivered a total return over 20%; over this same period, our average annual total return was 30%." - CEO Simon Borrows
Zooming out even more, you'll see the magic of compounding put to work.
Best Buys January 2026
Now, let's dive into our five favorite stocks for January 2026.
We only talk about companies that aren't in Our Portfolio today. Why? We love all companies we own.
Partners have 24/7 access to the Portfolio here.
The 5 examples we talk about in this article can be considered as serious candidates for the Portfolio.
5. Pool Corporation ($POOL)
How does Pool Corporation make money?
Pool Corporation makes money by distributing swimming pool supplies, equipment, and outdoor living products. It is the largest wholesale distributor of pool-related products in the world.
Someone who owns Pool Corporation? Berkshire Hathaway (Warren Buffett).
The reason?
Pool is the largest wholesale distributor of swimming pool supplies, equipment, parts, and related outdoor living products globally.
It serves roughly 125,000 wholesale customers across multiple continents.
Pool Corporation's advantage comes down to one simple idea: economies of scale.
The larger your company, the easier and cheaper you can operate.
Pool Corp benefited from a jump in new pool construction demand during the COVID.
Since 2022, demand has dropped due to a weak macroeconomic environment.
As a result, revenue and earnings have declined.
And yet… We think Pool Corporation remains an amazing company.
4. Fortinet ($FTNT)
How does Fortinet make money?
Fortinet makes money by selling cybersecurity products and services that protect networks, users, and cloud environments from cyberattacks. Their customers range from small businesses to large enterprises and governments.
The name Fortinet comes from two words: Fortress. Network.
It reflects the company's original mission: building a strong digital fortress around networks.
The company was founded in 2000 by brothers Ken Xie (CEO) and Michael Xie (CTO).
Together, they still own 15% of the company.
But despite being billionaires… They avoid publicity, flashy spending, and social media.
This is exactly what you want to see as an investor.
The stock is currently down 18.9% from its all-time high.
Investors were disappointed with the lowered guidance last summer.
It's just short-term noise if you ask me.
As a result, the company is trading at attractive valuation levels.
Now let's dive into the top 3.
3. Fairfax ($FFH)
How does Fairfax make money?
Fairfax makes money by selling insurance and reinsurance policies, collecting premiums from clients while carefully managing risks. It then invests the money it holds before paying claims (the "float") to earn additional returns.
Fairfax stands for Fair & Friendly acquisitions:
Fair: Fairfax generally offers reasonable prices and deals with sellers and shareholders in good faith.
Friendly: They like to work with management teams, not against them. You won't typically see Fairfax launching hostile takeovers.
Sounds good, right?
But Fairfax is way more than this.
You can split the company in two segments:
1. Write insurance and reinsurance policies (63.8% of total revenue)
They collect premiums from businesses and customers worldwide.
Their subsidiaries underwrite all sorts of risks. Think about property damage, liability claims, specialty coverage, you name it.
When they're disciplined about which risks they take on (and price them right), this creates a nice, steady stream of cash flowing in.
2. Invest the money sitting in their accounts (36.2% of total revenue)
The premiums Fairfax collects don't just sit there waiting to pay out claims.
That money (called the "float") becomes essentially free capital that they can invest.
They put it to work in bonds, stocks, and strategic positions that generate interest, dividends, and capital gains.
This dual-engine setup (writing insurance + investing the float) is what makes Fairfax so attractive.
Prem Watsa
The importance of Prem Watsa can't be underestimated in this investment case.
He is the founder and CEO of Fairfax.
Watsa was born in India and grew up in a middle-class family.
He studied chemical engineering in India, then moved to Ontario, Canada to keep learning.
He arrived with almost nothing… just $8 in his pocket. To get by, he sold furnaces and air conditioners while studying.
That entrepreneurial mindset? It never went away.
In 1985, he bought a small Canadian trucking company and gave it a new name: Fairfax Financial Holdings.
2. Asseco Poland ($ACP)
How does Asseco Poland make money?
Asseco is a Polish developer and serial acquirer of Vertical Market Software businesses. Vertical market software is specialized software designed to meet the needs of a specific industry or niche.
You can compare Asseco's service with oxygen.
No one pays attention to it when it's present, but it will be the only thing you can think about when it's absent.
The VMS software Asseco provides is crucial to governments and businesses. They create software and IT systems for businesses, banks, and governments around the world.
The company was founded 30 years ago as one of the first start-ups in Poland.
Now it's the leader of digitization in the country and the largest IT company in Central and Eastern Europe.
Asseco popped up on my radar when Topicus bought shares recently:
January 31, 2025: 8.3 million shares (10% of the company).
October 1, 2025: 12.3 million shares (14.8% of the company).
Why does that matter?
Topicus is extremely disciplined when buying companies. They use a proven playbook that they will also use at Asseco Poland.
According to Michael Gielkens (Tresor Capital), Topicus will improve Asseco Poland's business model in four ways:
Improving working capital: Get cash in faster by using Constellation's proven methods for billing and collecting payments.
Value-based pricing: Charge what your software is actually worth. In some cases, that means raising prices by 50% or more.
Cost discipline: Kill projects that don't generate good returns. Put that money into things that actually work. This means watching R&D spending closely and making sales teams more efficient.
M&A alignment: Only buy companies that meet strict return targets. Every acquisition needs to boost ROIC. No exceptions.
And guess what?
The Constellation magic is already being put to work.
Here's what Michael Gielkens from Tresor Capital wrote about the transition:
"This strategic shift was first confirmed by one of Asseco's subsidiaries. Piotr Jelenski, president of Asseco South Eastern Europe (ASEE), offered a rare glimpse into the internal developments within the group. According to Jelenski, ASEE is conducting 'its first in-depth cost analysis in several years,' identifying savings across five to six areas that should significantly improve profitability. This suggests that management is already committed to a new level of operational discipline, mirroring the efficiency-focused approach long practiced by Constellation and Topicus. It appears that this mindset is now starting to take root within Asseco as well."
Another positive?
The head of M&A at Volaris (another part of Constellation Software) said this:
"Constellation Software is pretty confident that they can acquire just about any software company and take it to around 30% profitability, regardless of the shape or size of that business." – Head of M&A in the Volaris Group of Constellation
Asseco's Net Profit Margin and Free Cash Flow Margin are nowhere near 30% right now.
This gives a lot of improvement for growth.
1. Zoetis ($ZTS)
How does Zoetis make money?
Zoetis is the world's largest animal health company. It sells medicines, vaccines, and other products for pets and farm animals around the world.
Picture this: you walk into a vet's office.
Maybe your dog needs a check-up. Or your cat needs a vaccine. Or a sick calf on the farm needs treatment.
Look at the medicines on the shelf. The vaccines. The diagnostic tools.
Almost all of them? Made by Zoetis.
Zoetis is the world's largest animal health company.
And here's the crazy part...
Despite its dominance, Zoetis trades at its cheapest valuation level in 10 years.
Our Reverse DCF states Zoetis should grow its Free Cash Flow by 7.4% to justify the current stock price.
Is this realistic?
Free Cash Flow Growth past 10 years (CAGR): 18.2%. Expected Free Cash Flow Growth next 3 years (CAGR): 13.9%. EPS LT Growth Est: 7.8%.
Zoetis seems to be undervalued right now.
It could be an interesting buying opportunity for long-term investors like us.
Conclusion
That's it for today.
Here are the five companies we covered:
Pool Corporation: Steady cash flows from selling pool supplies. Nobody can match their scale.
Fortinet: High-margin cybersecurity revenue that keeps coming back. Customers hate switching because everything is integrated.
Fairfax Financial: They make money from insurance. Then they invest that money to make even more money.
Asseco: Mission-critical software that customers can't live without. Recurring revenue. Margins are getting better.
Zoetis: Essential animal health products. People will always have pets. Farmers will always need protein. That means steady growth.
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)