Title: Best Buys: July 2026 Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: Pieter Slegers / Team Compounding Quality (author) Date: 2026-07-19 URL: https://www.compoundingquality.net/p/best-buys-july-2026 Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Charts are Fiscal.ai / investor-relations panels noted inline as [Image — …]. The two monthly performance tables are published as images and are transcribed below as [Table image — …] blocks. 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. June 2026 Last month, the S&P 500 fell by 1.5%: [Image — S&P 500 last month. Source: Fiscal.ai] Investors are 'Neutral' today according to the Fear & Greed Index: [Image — CNN 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: [Table image — "Performance / Worst Performers June 2026": Gartner -27.8%; EPAM Systems -27.0%; Copart -12.8%; MarketAxess Hldgs -12.2%; Rollins -9.9%] Best performers These stocks did well over the past month: [Table image — "Performance / Best Performers June 2026": Goosehead Insur +32.3%; Interparfums +21.1%; Qualys +20.6%; Medpace +17.3%; Insperity +12.3%] Spotlight: Paychex ($PAYX) How does the company make money? Paychex provides cloud-based human capital management solutions. These include payroll, compliance, employee management, and benefits administration. They also run a massive HR outsourcing and Professional Employer Organization (PEO) business, outsourcing HR and benefits for small and medium-sized businesses. Why does it deserve to be in the spotlight? Paychex is a well established business: They have 800,000 clients They manage payroll for 1 in 11 workers (!) in the United States They are the second-largest provider in the U.S. (2.5 million worksite employees) But because it's a software based business, the market is very fearful that AI will disrupt it. Management disagrees on this: [Image — management commentary on AI. Source: Paychex Investor Relations] Paychex does have a very sticky business model. It is based on two main things: High Switching Costs: Payroll and tax compliance are incredibly important to a business. Switching providers comes with huge risks of operational disruptions, data loss, and legal/regulatory headaches. As a result, customers almost never leave Paychex Broad Offerings: Paychex offers outsourcing of HR, retirement, and insurance, … A lot of competitors don't offer these extra services The fundamentals also look great: Net Margin: 25-30% ROIC: 15-20% FCF consistently > 100% of Net Income [Image — Paychex profitability. Source: Fiscal.ai] A large acquisition In 2025, Paychex bought Paycor for $4.1 billion. The goal was to be able to target larger businesses with more than 100 employees. [Image — Paycor acquisition rationale. Source: Paychex Investor Relations] The deals brought a few advantages to Paychex: Market Expansion: Expands Paychex's addressable market by moving further into the mid-market. Cross-Selling: Sell Paychex's higher-margin services to Paycor's existing customers. Pricing Power: Larger, stickier customers create more room to raise prices and expand margins. Best Buys July 2026 Let's now dive into our five favorite buys for the month. Please note that the companies in Our Portfolio are not mentioned here. We love all companies in Our Portfolio right now. This Best Buys list consists of the 5 companies that are most likely to be added to the Portfolio right now. You have access to Our Portfolio here. 5. Adyen ($ADYEN.AS) How does the company make money? Adyen processes payments between merchants, card networks, and banks through a single unified platform, taking a small percentage or fee on every transaction. Adyen's main advantage? They run on an unified platform. Everything is run a single global platform, making it the preferred choice for large enterprise customers. [Image — single platform vs patchwork. Source: Adyen Investor Relations] On top of that, Adyen also enjoys network effects. Every payment helps Adyen approve even more transactions. On top of that, it helps them to detect fraud earlier. It's a flywheel: More customers → better data → better results → even more customers Companies that use Adyen enjoy the following: Higher sales Less fraud Lower payment costs [Image — customer benefits. Source: Adyen Investor Relations] Another thing we love to see? Skin in the game. Pieter van der Does founded Adyen in 2006 and is still the co-CEO. He still owns nearly 3% of the company, worth over €750 million. Other insiders also own stakes worth more than €100 million each. [Image — insider ownership. Source: Fiscal.ai] Historically, Adyen built everything in-house. Recently, however, the company completed its first two acquisitions: Talon.One: a customer loyalty and promotions platform Orb: an AI-powered enterprise billing system. [Image — acquisitions. Source: Adyen Investor Relations] The goal is to transform Adyen from a payment processor into a full commerce platform. By adding billing and loyalty capabilities, the company enables merchants to manage payments, revenue, billing, and customer loyalty in one integrated system. This eliminates the need for third-party software. 4. Copart ($CPRT) How does the company make money? Copart makes money by charging fees for online vehicle auctions, primarily selling salvage cars to dealers and dismantlers. The biggest customers of Copart? Insurance companies. They sell total loss vehicles after accidents. For every sale, Copart takes a fee. Copart is a company that enjoys a lot of network effects. Insurance companies want to sell where the most buyers are. Why? More buyers = higher prices Buyers want to shop where the most cars are. Why? More cars = more choice [Image — the Copart flywheel. Source: Copart Investor Relations] This flywheel is almost impossible to break for competitors. Another advantage Copart has? They own all their salvage yards while its competitors lease theirs. This gives them a serious cost advantage. [Image — owned vs leased yards. Source: Copart Investor Relations] No one wants a noisy salvage yard dealing with toxic materials built next to their house. As a result, strict zoning laws and environmental permits make it nearly impossible for new competitors to build yards near major cities. The dense network of yards that Copart owns lets them dispatch tow trucks and collect damaged vehicles from insurers quickly and at a lower cost. Copart owns the land itself. That means the company never has to deal with rising rent prices. This gives Copart operating leverage. Once the land is bought and the yard is up and running, processing each additional total-loss car costs almost nothing. More volume means higher margins and more cash flow. [Image — margins. Source: Fiscal.ai] Recently, Copart's growth has slowed. To accelerate growth again, the company brought back Jay Adair as CEO. Adair previously led Copart from 2010 to 2024, a period during which the stock returned more than 2,000% to shareholders. [Image — Copart share price under Jay Adair. Source: Fiscal.ai] Currently, Copart has a lot of cash on its balance sheet: [Image — net cash position. Source: Fiscal.ai] It is expected that Copart will buy back a lot of shares. Their net cash position equals 15% (!) of the current market cap. Now let's dive into the top 3. It's very likely that we might buy 2 of the 3 companies from our top 3. 3. Mastercard ($MA) How does the company make money? Mastercard runs a network that connects consumers, merchants, and banks worldwide. They make money by charging a tiny fee on every single transaction that runs through their network. Mastercard operates one of the most profitable and asset-light business models in the world. [Image — asset-light model. Source: Fiscal.ai] It operates in a functional duopoly alongside Visa. This duopoly is protected by very strong network effects. Merchants accept Mastercard because all consumers carry it Consumers carry Mastercard because all merchants accept it Building a competing network from scratch is practically impossible. Just like Copart, Mastercard enjoys a lot of operating leverage. As the infrastructure is already in place, every new transaction costs almost nothing to process. That gives them huge margins. Just look at this chart: [Image — Mastercard margins. Source: Fiscal.ai] Mastercard's traditional payment network is a great business. Visa is no longer just a payment network. The company also sells cybersecurity, fraud prevention, and data analytics to the banks and merchants on its network. These value-added services are growing rapidly and are becoming an increasingly important part of Mastercard's revenue. [Image — value-added services. Source: Fiscal.ai] As you can see here, Mastercard is a clear compounding machine: [Image — long-run compounding. Source: Fiscal.ai] 2. Fairfax Financial Holdings ($FFH.TO) How does the company make money? Fairfax is a global insurance and reinsurance holding company. They make money the exact same way Berkshire Hathaway does: they collect insurance premiums upfront, hold that cash (called "float"), and invest it before paying out claims. Fairfax stands for Fair & Friendly acquisitions: Fair: Fairfax generally offers reasonable prices and deals with sellers and shareholders in good faith. Friendly: They like to work with management teams, not against them. You won't typically see Fairfax launching hostile takeovers. The company is run by Prem Watsa. He's called "The Warren Buffett of Canada". Fairfax has built a very strong track record for itself over time: [Image — long-term track record. Source: Fairfax Investor Relations] Just like Warren Buffett, Prem Watsa uses the float of insurance companies to invest money in the stock market. They are doing an excellent job: The combined ratio compares an insurance company's claims and expenses to the premiums it collects A ratio below 100% means the insurance business in profitable Here's what the combined ratio for Fairfax looks like: [Image — combined ratio. Source: Fiscal.ai] The float of Fairfax keeps growing and Prem Watsa invests this money at attractive rates. It's like free money that he can keep compounding over time. [Image — growth of float. Source: Fiscal.ai] 1. S&P Global ($SPGI) How does the company make money? S&P Global provides financial market intelligence, credit ratings, and benchmarks that help institutions evaluate risk. S&P Global generates recurring revenue through: Data subscriptions Index licensing Credit rating fees [Image — revenue split. Source: Fiscal.ai] S&P Global operates two financial toll bridges: credit ratings and benchmark indexes. S&P Global gets paid every time: A company issues a bond An investor buys an S&P 500 ETF (they own the S&P 500 index) And you know what's even better? These businesses are both oligopolies: Credit Ratings: S&P Global, Fitch, Moody's Indexes: S&P Global, MSCI, FTSE Russell Oligopolies tend to be great businesses. They enjoy high barriers to entry, pricing power, and high margins. [Image — oligopoly characteristics. Source: Wall Street Mojo] The profitability of S&P Global looks very attractive: [Image — profitability. Source: Fiscal.ai] It's noteworthy that S&P Global recently spun-off its mobility division. The market seemed to like this. The stock went up in the days after the spin-off: [Image — post-spin-off share price. Source: Fiscal.ai] Conclusion That's it for today. Here's the top 5: Adyen ($ADYEN.AS): A modern payments platform powering seamless transactions for global businesses. Copart ($CPRT): A dominant online auction marketplace turning damaged vehicles into valuable assets. Mastercard ($MA): A global payment network benefiting from the unstoppable shift to digital payments. Fairfax Financial ($FFH.TO): A disciplined insurer and investor focused on long-term value creation. S&P Global ($SPGI): Essential financial data and ratings that support decision-making across global markets. See you next month! 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)