Title: Best Buys: June 2026 Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: Pieter Slegers / Team Compounding Quality (author; byline "Compounding Quality") Date: 2026-06-07 URL: https://www.compoundingquality.net/p/best-buys-june-2026 Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Fiscal.ai / investor-relations chart panels noted inline as [Image — ...]. The best- and worst-performer tables are published as images and are transcribed below as [Table image — ...] blocks; every figure is read directly from those images. 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. May 2026 The S&P 500 rose +5.0% in May. However, the start of June was more rough: -2.4%. To give an example, the Nasdaq was down 4.4% this week while some 'boring quality stocks' did really well: Brown & Brown: +4.8% Ameriprise Financial: +2.2% Medpace: +2.2% I expect more and more moves like this to happen going forward. Investors are 'Fearful' today according to the Fear & Greed Index. [Image — 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 May 2026 — Ubiquiti: -42.7% Zoetis: -31.9% Westlake Corp: -24.5% Napco Security Technologies: -19.7% Pool Corp: -12.8%] Best performers These stocks did well over the past month: [Table image — Performance: Best Performers May 2026 — Fortinet: +59.9% HEICO: +29.8% Qualys: +23.4% Insperity: +20.8% Fair Isaac Corp: +20.8%] Spotlight: Badger Meter, Inc. ($BMI) How Does The Company Make Money? Badger Meter provides the technology to measure and control whatever moves through a pipe. They've managed to transform from a simple mechanical meter manufacturer into a high-tech water management solutions provider. As a result, they are now a clear market leader: Over 90% revenue share in the U.S. market The market leader in smart water systems for cities One complete system: their own smart meters plus their ORION and BEACON software, all working together Why does it deserve to be in the spotlight? We can't talk about Badger Meter without talking about its durability. The business is 120 (!) years old. Since its IPO in 1971, the stock has compounded at 12.2% every year. [Image — Source: Fiscal.ai] Its dominant market position comes from 3 things: Vertical Integration: They make their own meters, sensors, and software. Because they control every piece, they can fix problems fast and bring out new ideas quicker. High Switching Costs: Water companies sign long contracts. Once Badger Meter's systems are installed, switching to someone else costs a lot of money and is a huge hassle. Recurring Revenue Mix: Money keeps coming in every year. They earn steady, easy-to-predict cash from software subscriptions, monitoring services, and water-company relationships that last for decades. The track record of Badger Meter's capital allocation is phenomenal: Gross Margin: 41.4% (> 40%? OK) ROIC: 25.8% (> 15%? OK) Free Cash Flow Conversion: Consistently over 125% of Net Income in the past 5 years (> 80%? OK) The global smart water market is set to hit $37.4 billion by 2031, growing more than 12% per year. A large acquisition Badger Meter bought SmartCover Systems in 2025. This was their biggest acquisition ever. It significantly grew its software segment. SmartCover sells hardware plus software. It lets you watch wastewater and stormwater systems in real time. Why this deal matters: Expanded Moat: It pushes Badger Meter deeper into the high-growth wastewater monitoring segment. Recurring Revenue: It heavily expands their higher-margin software and recurring revenue base. Market Leadership: It cements them as the go-to smart water platform for municipalities. They're continuing to add to this portfolio with the recent acquisition of UDlive in the UK. You might think that a company that manufactures meters for utility companies would be a capital intensive business. But that's not the case for Badger Meter. They carry no debt and their CAPEX is consistently below 2% of sales. They don't need much money to run the business. This means they can pour their huge free cash flows into deals like SmartCover and keep growing. We love businesses that: Sell must-have products Are hard to walk away from And have strong management at the top. But Badger Meter is going through some macro troubles lately. They saw revenue and EPS drop in the most recent quarter. Management blamed it mostly on two things: Customers working through extra stock they'd built up Cities holding off on spending for a while. If these issues are temporary, Badger Meter could be an interesting stock for long-term investors. Best Buys June 2026 Let's dive into our five favorite buys for the month. Please note that the companies in Our Portfolio are not mentioned here. We love all companies in Our Portfolio right now. 5. Stryker ($SYK) How does the company make money? Stryker manufacturers and sells surgical equipment, neurovascular products, and orthopedic implants (like artificial hips and knees) to hospitals worldwide. Why Stryker is a Best Buy? The aging global population provides a massive tailwind for Stryker. Its Mako Robotic-Arm Assisted Surgery system is another really interesting part of the business. It operates on a brilliant razor-and-blade model: High Switching Costs: Once a hospital invests over a million dollars in a Mako robot and trains its surgeons to use it, they rarely switch to a competitor. Recurring Cash Flow: Stryker doesn't just make money selling the robot, they make recurring revenue on the software, service contracts, and the specialized consumables required for every single surgery. Stryker is a proven compounding machine that grows both organically and through acquisitions. 4. Fair Isaac Corporation ($FICO) How does FICO make money? FICO is most famous for licensing its proprietary credit scoring algorithm to major credit bureaus (Equifax, Experian, and TransUnion). They also have a B2B software segment that helps global banks make complex lending and fraud decisions. Why FICO is a Best Buy? Fair Isaac is down more than 30% this year. Why? A U.S. government housing agency (the FHFA) is now allowing a rival product, VantageScore 4.0, to be used for approving mortgages. The market is very fearful that this will have a big impact on FICO's business. I don't think that will be the case. More data is always better: Even if lenders start using VantageScore, they'll still check the FICO score too to make sure they get it right. Switching Costs: Bank rules and their own risk systems are built around FICO scores. Changing that means years of rebuilding everything from the ground up Recurring Revenue: The B2B software platform generates recurring revenue with high retention rates. FICO scores are still the absolute standard when it comes to measuring consumer credit risk. The current drawdown in stock price is a chance to buy FICO near the lowest valuation we've seen in the past decade. Now let's dive in the top 3. 3. S&P Global ($SPGI) How does the company make money? S&P Global provides financial market intelligence, credit ratings, and benchmarks that help institutions evaluate risk. The company earns recurring revenue through data subscriptions, index fees, and ratings issuance. Why S&P Global is a Best Buy? S&P Global is a financial toll bridge. You literally cannot issue corporate debt without a rating from S&P Global, Fitch or Moody's. It is a legal oligopoly. But that's not the only place S&P collects tolls on the financial system. They also rent out their benchmark indexes to ETF providers and big institutions. This rides the wave of more and more people switching to passive investing. So 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) The market sold off S&P Global out of fear that AI will disrupt their business. I think that's unlikely. Their proprietary data, like Platts commodity pricing and their market data goes back over a century. Large Language Models actually need S&P's private, licensed data to be accurate. 2. Fairfax Financial Holdings ($FFH.TO) How does the company make money? Fairfax is a global insurance and reinsurance holding company. They make money the exact same way Berkshire Hathaway does: they collect insurance premiums upfront, hold that cash (called "float"), and invest it before paying out claims. Why Fairfax is a Best Buy? The company is run by Prem Watsa. People call him the Warren Buffett of Canada. Fairfax uses a decentralized structure. The business is split into two parts: Insurance subsidiaries: They operate independently with a strict focus on underwriting profitability Investments: led by Watsa's team at the headquarters The insurance business consistently writes more and more premiums each year. But writing more policies is only good if you're making profits on them. The combined ratio measures an insurance company's underwriting profitability by comparing its claims and expenses to the premiums it collects. A ratio below 100% means the insurance business in profitable. Fairfax runs a consistently profitable insurance business. This creates growing insurance float. You can see it as free money for Fairfax to compound their investments over time. 1. KKR & Co. Inc ($KKR) How does KKR make money? KKR is an American investment company. They use money from big clients (like pension funds) to buy and grow other companies. They also own Global Atlantic, a large insurance operation. Why KKR is a Best Buy? KKR is now managing nearly $800 billion (!). The more assets KKR manages, the more it collects in management fees. The beauty of this? The management fees are very stable. They have to be paid no matter how the underlying investments perform. Their growth isn't slowing down either. In 2025, they raised a record $129 billion in new capital. Their size and reputation makes them one of the top choices for large investors. It also helps individuals getting exposure to private equity and alternative assets. KKR has launched several K-Series funds. It gives individual investors direct access to KKR's private market deals. These are growing very quickly. KKR thinks this opens up another $11 trillion market for them going forward. The future for KKR looks bright if you ask me. Insiders agree. They have been buying more KKR stock recently. Conclusion That's it for today. Here are the five companies we covered: Stryker (SYK): A medical equipment company that locks in hospitals and generates recurring revenue with its robotic surgery ecosystem Fair Isaac (FICO): The toll-bridge for the American credit scoring system, backed by a rapidly growing and sticky B2B software engine. S&P Global (SPGI): A financial toll bridge and legal duopoly that collects recurring fees on global debt issuance and market data. Fairfax Financial (FRFHF): A decentralized property and casualty insurer that uses its growing premium float as free leverage to compound long-term investments. KKR (KKR): An alternative asset management titan that uses its massive scale and permanent insurance capital to acquire high-quality global assets. Everything in life compounds Team Compounding Quality