Title: Portfolio Update March 2026 Show: Compounding Quality (Substack, compoundingquality.net) Guest: Pieter Slegers (author) / Team Compounding Quality Date: 2026-03-08 URL: https://www.compoundingquality.net/p/portfolio-update-march-2026 Length: written post (paid) — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; page chrome (like/share counts, webinar CTAs) removed. The portfolio-fundamentals comparison, the intrinsic-value chart and the 1999 Berkshire headlines are published as images and are not reproduced here; the figures quoted in the body are transcribed as written. ===== Another month, another Portfolio Update. How do our stocks perform? And which companies are the most attractive right now? Let's dive in right away. Crazy Mr. Market Do you know how Warren Buffett performed just before the burst of the dotcom bubble? In 1999, Berkshire Hathaway was down 19.9% while the S&P 500 increased by 21%. This means he lacked the index by 40 (!) %. People where asking whether Warren Buffett had 'lost his magic touch'. Over the next few years Warren Buffett massively outperformed the index. The lesson in here? Every active investor will face periods of over- and underperformance. The honest reality is that quality faces a challenging time right now. During times like this, you should do two things: Keep your head cool Stick to the plan I think some investors are becoming very paranoid nowadays. Mr. Market continues to be very fearful of anything he thinks AI might disrupt. Walmart versus Nvidia Do you know what's crazy? Fear is driving investors into "AI-proof" businesses. Walmart and Costco now trade at higher P/E multiples than NVIDIA. Here's what their Forward PEs look like: Walmart: 46.1x Costco: 53.7x Nvidia: 39.9x Source: Fiscal.ai Fear makes you want to follow the herd. But overpaying for Walmart or Costco could be a big mistake. Even the best company in the world can be a bad investment if you pay too much. Here's some advice from The Oracle of Omaha (Warren Buffett): Sometimes Mr. Market is euphoric. He only sees the good and names a sky-high price. Sometimes he's depressed. He only sees doom and names a rock-bottom price. The best part? He doesn't mind being ignored. You don't like his price today? Ignore him and he'll be back tomorrow. This also means the more manic-depressive his behavior, the better for you as a rational investor. Our Portfolio Fundamentally, our businesses are doing great. Our companies are healthier than the ones in the S&P 500. And this while the performance hasn't been good recently. The intrinsic value of our companies have grown by nearly 20% (!) per year. Almost every company we own is undervalued right now. Why? Because the market is afraid of a lot of things right now: AI disruption Changing tariffs The return of inflation Wars and geopolitical tension I'm sure that some businesses will be disrupted by AI or inflation. But I feel very confident that Our Companies will be fine. Why? Because we own companies with durable competitive advantages. The expected return of Our Portfolio has never been higher as today. Just think about it for a second… Our companies are fundamentally way healthier than the index Our companies are cheaper than the index The current Forward P/E for Our Portfolio equals 17.1x. This means the earnings yield is 5.8% (100/17.1x). Terry Smith says there is an easy rule of thumb to calculate your expected return: Your expected yearly return = Expected EPS growth + Earnings yield Your expected yearly return = 12% + 5.8% = 17.8% An expected yearly return of 17.8% would be amazing. This would mean you double your money every 4 years. But which stocks offer the most upside potential today? Let's dive into a full portfolio update. Four categories The 18 companies in Our Portfolio can be dividend into four categories: Basic Human Needs & Desires Where Rules and Humans Still Win Assets that last forever Specialized Services Let's look at every category. 1. Basic Human Needs & Desires These companies help people meet basic needs and desires. It would be very hard for technology to disrupt them. Think about business like: Dino Polska: Owns medium-sized grocery stores close to where people live in rural Poland People will always need food, and they'll always prefer to buy it nearby Novo Nordisk: A pharmaceutical company focusing on drugs for diabetes and obesity Novo Nordisk addresses growing, chronic health conditions Zoetis: Develops and sells medicines, vaccines, diagnostics, and other health products for livestock and pets People bond with pets and depend on livestock, both needs are ancient LVMH: Owns a diverse portfolio of luxury brands covering a wide range of consumer products and experiences Sells status (something people will always want) Games Workshop: Makes and sells tabletop games, where players use miniature figures to play battles in fantasy or science fiction worlds Physical games give people an offline hobby and community Evolution AB: Develops fully integrated B2B Online Casino solutions like Roulette, Blackjack, and Baccarat Gambling has been around for thousands of years Interparfums: Manufactures, markets, and distributes a wide range of fragrances under licensing agreements. AI can't replace fragrances Let's use an example so you know what I mean. LVMH ($MC) LVMH is a French company that owns famous luxury brands like Louis Vuitton, Dior, and Moët & Chandon. They sell high-end fashion, watches, jewelry, perfumes, and champagne. LVMH is built on the fundamental human desire for social status. It doesn't sell purses that hold more, or have better organizational features. It sells exclusivity. Luxury goods are Veblen goods. This means people buy more of it when the price increases. That's exactly why LVMH is such a profitable business. Someone else who believes LVMH is a good business? The CEO Bernard Arnault. He keeps buying more and more of his own company. The Arnault family now owns about 50% (!) of LVMH. 2. Where Rules and Humans Still Win These companies benefit from the following: High regulatory barriers Humans need to coordinate They depend on trust, human judgement, and consultation. We currently own 5 companies in this segment: Kelly Partners Group: A network of accounting firms handling tax, compliance, and financial advice for private businesses and their owners. Taxes and accounting are legally required, and business owners need a trusted advisor to navigate them. Kinsale Capital: A specialty insurance company focused on hard-to-place, unusual risks that standard insurers won't cover. Insurance is necessary and human judgement is required in the niche and unusual cases handled by Kinsale. Brown & Brown: An independent insurance brokerage that connects businesses and individuals with the right insurance policies. Finding the right insurance coverage takes experience and relationships. Ameriprise Financial: Provides financial planning, wealth management, and retirement advice to individuals and families. The financial industry is heavily regulated and many investors will always want a person to help them make decisions. Medpace: Runs clinical trials on behalf of pharmaceutical and biotech companies seeking drug approval. Solves the complex problem of finding trial participants, coordinating scientists, and controlling the actual science of testing new medications. Let's take Medpace as an example. Medpace ($MEDP) Medpace is a Clinical Research Organization (CRO). When a company develops a new medicine, they hire Medpace to run their clinical trials. Medpace manages the entire process: from recruiting patients to navigating the Food and Drug Administration (FDA). AI can analyze data. But it cannot do science on real humans. Clinical trials are messy, physical, and deeply human: Physical Medicine: You can't digitize a blood draw. You need real nurses, real doctors, and real patients. Biological Complexity: AI can predict how a drug might work. But regulators demand proof of how it actually works in a human body. Cost of Failure: One poorly managed trial can wipe out $100 million and 10 years of work overnight. Guess what happens when the stakes are that high? Executives want the most trusted partner with the best human judgment. That's why they are choosing Medpace. That trust and reputation is exactly what drives their revenue and earnings higher every single year. Source: Fiscal.ai 3. Assets that last forever These companies own physical assets, control essential infrastructure, or run networks that nobody can replicate. We own 3 companies in this space: Visa: Operates the world's largest electronic payments network. Processing transactions between consumers, merchants, and banks in over 200 countries. The network becomes more valuable with every new user, and rebuilding it from scratch would take decades and trillions of dollars Brookfield Corporation: Owns and operates long-lived physical assets across real estate, infrastructure, renewable energy, and private equity globally. Pipelines, power grids, and toll roads can't be disrupted by software Judges Scientific: Acquires and operates small, specialist companies that make precision instruments for scientific research. The instruments last decades in labs, and once a researcher depends on one, the consumables and servicing revenue follows for life Let's take Brookfield Corporation as an example. Brookfield Corporation ($BN) How does the company make money? Brookfield Corporation makes money by owning and operating large-scale, high-quality real assets globally. Think about things like renewable power, infrastructure, real estate, and private equity, and by earning substantial fees from managing capital for a massive base of institutional clients. Crucial infrastructure AI can write code and analyze spreadsheets, but it cannot replace physical infrastructure. Source: Brookfield Infrastructure Partners Brookfield owns the physical stuff that makes AI actually work: AI needs a lot of electricity: Brookfield owns huge renewable energy plants powered by water, wind, and sun. Want to move oil, gas, or cargo around the world? You'll likely pass through a pipeline or port that Brookfield owns. Nobody can just build a competitor overnight. These assets take billions of dollars, decades of permits, and years of construction to create. In essence: the more AI grows, the more valuable Brookfield's assets become. Microsoft and Amazon are already signing deals with Brookfield just to lock in the energy their AI data centers need. And owning great assets is one thing… but having one of the world's best capital allocators running the company makes it even better. Bruce Flatt is called 'Canada's Warren Buffett' for a reason. Brookfield has returned +18% per year (!) for two decades. Source: Fiscal.ai Brookfield Corporation has one simple goal: double the company every 5 years. This would be amazing for long-term investors like us. 4. Specialized Services These companies sell specialized software to industries that are slow to change. We own three companies in this segment: Constellation Software: Acquires and operates vertical market software (VMS) businesses built specifically for a single industry, like funeral homes, golf courses, or transit authorities. Once a business runs its operations on specialized software, switching is so painful and risky that almost nobody does. Topicus: A European spinout of Constellation Software that follows the same playbook: acquiring niche, mission-critical software businesses across a range of industries. Same model as Constellation, focused on Europe's fragmented software market with sticky customers in slow-moving industries. HgCapital Trust: A listed investment trust that backs software businesses serving highly regulated industries like tax, accounting, legal, and healthcare. Regulated industries are slow to change and can't afford software failures, making their tools among the hardest to rip out. Let's dive into Topicus. Topicus ($TOI.V) How does the company make money? Topicus is a spin-off from Constellation Software. It's a serial acquirer focusing on Vertical Market Software (VMS) companies in Europe. Topicus buys small software companies that solve a very specific problem for a very specific niche. Think about software for local libraries, public transit systems, or specialized medical clinics. Should you be worried about AI? The market is worried AI will disrupt companies like Topicus. As a result, the stock seems to be trading at a wild discount. Free Cash Flow keeps going up while the stock went down heavily recently. Source: Fiscal.ai I don't think the market is right. Here's why: Stuck in the system: Once a library or courthouse has used the same software for 20 years, switching feels like moving a mountain. Deep niche knowledge: These programs are packed with tiny rules specific to that niche. AI might know the law… but it doesn't know how a small-town court in the Netherlands actually runs day to day. Cheap to keep, costly to lose: The software might only cost a few thousand dollars a year. But if it breaks down, the entire business will face problems. Topicus is active in crucial software for its clients. As a result, customers almost never leave. Topicus has an excellent article on their website about how they are using AI to improve their business. Furthermore, Topicus also published great results last week: Q4 2025: Revenue up 20% to €436.8M (4% organic growth) Net income up 41% to €79.4M (€0.59/diluted share) Cash From Operations up 35% to €107.7M; FCFA2S up 40% to €51.2M Completed acquisitions totaling €69.8M, plus a €216.9M net investment in Asseco Poland Full Year 2025: Revenue up 20% to €1,552.3M (4% organic growth) Acquisitions totaled €390.4M, plus €384.9M net investment in Asseco Poland Cash From Operations up 19% to €412.7M; FCFA2S up 23% to €218.7M It shows you what an amazing business Topicus is. Conclusion We are very comfortable with the current positioning of Our Portfolio. We own fundamentally better companies than the S&P 500 that are currently trading at a discount. Our Portfolio consists of four categories: Basic Human Needs & Desires: Dino Polska, Novo Nordisk, Zoetis, LVMH, Games Workshop, Evolution AB & Interparfums. Where Rules & Humans Still Win: Kelly Partners Group, Kinsale Capital, Brown & Brown, Ameriprise Financial, Medpace. Assets That Last Forever: Visa, Brookfield Corporation & Judges Scientific. Specialized Services: Constellation Software, Topicus, HgCapital Trust. Everything in life compounds Team Compounding Quality Used sources Interactive Brokers: Portfolio data and executing all transactions Fiscal.ai: Financial data