Pieter Slegers — 5 Stocks Superinvestors Are Buying

Constellation buys small software companies — the unglamorous programs that run a bus depot, a golf club, a municipal water utility — and never sells them. Each one is tiny, each one is essential to the customer that uses it, and the licence fee is small enough that nobody notices it on the budget. That last detail is the whole argument here: when a company goes looking for costs to cut, it does not start with the software that would take two years and enormous risk to replace and that costs less than the coffee budget.

The market has decided that artificial intelligence will make writing software cheap, and therefore that companies selling software are worth less. That fear is what put the shares into the deepest fall in the company's history. Mohnish Pabrai — an investor who built his career on openly copying Warren Buffett — is named as a buyer at these prices, and the article uses him as the evidence that other serious people see the same thing.

The track record is the reason anyone is looking: roughly 30% a year since the 2006 listing, and a hundredfold return within fifteen years of going public.

Aon does not sell insurance. It is the adviser that sits between a very large company and the insurance market, works out what could go wrong and how much cover is needed, and then negotiates that cover on the client's behalf. It gets paid a fee for the advice and the placement, and it never puts its own money behind the risk — so when a hurricane or a lawsuit hits, the insurer pays and Aon does not.

Two things make this durable. There are effectively only two firms — Aon and Marsh McLennan — capable of arranging cover for a global business with genuinely complicated risks, so the customer's choice is narrow. And changing broker is a serious operational risk for very little gain, which is why roughly nine out of ten clients stay put every year.

Because there is no capital tied up backing policies, almost all of the profit turns into spendable cash, which is used to buy back shares. It is the same business the portfolio already owns in Brown & Brown — middleman, not risk-taker — but one tier up in client size.

TransDigm buys the companies that make small, highly specific aeroplane parts — the sort of part where the regulator has certified exactly one supplier for exactly one aircraft. About 90% of what it sells, only it is allowed to sell. Aircraft stay in service for decades and are legally required to have parts replaced on a schedule, so demand does not depend on whether airlines feel optimistic; it depends on flying hours and the maintenance manual.

Put those together and you get a business that can raise prices every year and lose nobody, because the alternative to paying is grounding the aircraft. Most of the profit comes from those replacement parts rather than from selling to the aircraft manufacturers in the first place, which is the more profitable and more predictable half of the industry.

MercadoLibre runs the biggest online marketplace in Latin America, and around it has built a payment system, a delivery network and a lending arm. A seller lists on the marketplace, gets paid through Mercado Pago, ships through Mercado Envíos and borrows working capital from Mercado Crédito — four businesses, one customer, each making the others harder to leave.

The reason this is worth more in Latin America than the same idea would be worth elsewhere is that the region's two chronic problems are exactly the two the company solved: parcels that do not arrive, and payments that are not safe or not possible because a large share of people have no bank account. Solving them created the infrastructure, and the payments arm has now outgrown the shop it was built for — physical stores and small traders use it on its own.

Visa is a toll road for money. It does not lend, it does not carry credit risk; it takes a small percentage of the value of each payment that runs across its network. Shops accept it because everyone carries the card, and everyone carries the card because every shop accepts it — a loop that a new entrant cannot start from a standing position.

Two consequences follow. Because the fee is a percentage rather than a fixed amount, revenue rises automatically with prices and with the size of the economy: inflation is a tailwind rather than a cost. And because the network is already built, an extra payment costs almost nothing to process, which is why more than 60% of revenue drops through as profit year after year.

ASML makes the machines that print the circuit patterns onto silicon. The most advanced type, called EUV, uses extremely short-wavelength light, and ASML is the only company on earth that can build one. Every leading-edge chip — the ones in modern phones, data centres and AI systems — is made on its machines, and the machines cost hundreds of millions each. It also earns steadily from servicing and upgrading the ones already installed.

That makes it a way to own the artificial-intelligence build-out without having to pick which technology company wins it: whoever wins still needs advanced chips, and the chipmakers all buy from the same single supplier. Copying it is not really a question of money — the machine depends on hundreds of specialist partners assembled over decades — which is why the article calls it a true monopoly rather than merely a strong business.

Intuit sells the software small businesses and households use to keep their books and file their taxes — QuickBooks and TurboTax. That has been a very good business for a long time, because once a company's accounts live inside a program, moving them is painful, and that pain let Intuit raise prices every year without losing customers.

Three well-known quality investors reduced or eliminated their holdings in the same quarter. The reasoning has two parts and both matter. First, the shares had been priced at fifty to seventy times profits — a price that only makes sense if the pricing power lasts indefinitely. Second, artificial intelligence is improving fast at exactly the tasks this software performs, so it is now plausible that Intuit either wins new customers more slowly or has to stop raising prices. Neither risk on its own would be fatal; combined with that valuation, it was enough for them to leave.

Prem Watsa — who runs the Canadian insurer Fairfax — sold his entire holding in an S&P 500 index fund, starting in late 2025 and finishing in early 2026. The argument is about what the index has quietly turned into. Buying the S&P 500 used to mean owning a slice of the whole American economy across hundreds of unrelated industries. Today a handful of enormous technology companies dominate it, and those companies are all spending vast sums on the same thing, so the index has become a concentrated bet on artificial intelligence dressed up as diversification.

The price check offered is the Buffett Indicator: the total value of the American stock market divided by the size of the American economy. Anything above 100% suggests share prices have run ahead of the economy that ultimately produces the profits. It currently reads 219%.

Microsoft is the clearest example in the article of professionals disagreeing with each other rather than with the market. Bill Ackman made it a core position at twenty-one times expected profits, calling it "really cheap" after a fall following a results announcement. In the same quarter Chris Hohn cut his holding by more than 80% and put the money into Alphabet, and the trust holding Bill Gates's own shares sold out entirely.

No view of Compounding Quality's own is offered here — but it is worth reading alongside the Buy-Hold-Sell list published four days later, where Microsoft was upgraded from Hold to Buy and Alphabet was downgraded from Buy to Hold: the archive quietly sided with Ackman.