Title: Time to Raise the Bar (Part I — Portfolio) Show: Compounding Quality (Substack, paid post) Guest: Pieter Slegers Date: 2026-09-01 URL: https://www.compoundingquality.net/p/time-to-raise-the-bar-part-i-portfolio Length: written post — no timestamps Note: text captured verbatim from the paid post via logged-in browser session; charts/tables are images and the ones carrying figures are transcribed inline below as [Table image — ...] blocks (per-holding NTM P/E and EPS CAGR, current position weights, per-holding free cash flow and share counts, portfolio fundamentals versus the S&P 500, and the owner's-earnings sheet). Values read off a bar chart are marked "approx.". Note two small internal discrepancies: the bucket percentages in the text (65.7 / 27.8 / 6.5) differ slightly from the pie image (66.2 / 27.6 / 6.2), and the Brookfield worked example uses a 20% EPS growth assumption in the prose while the accompanying table uses the analyst figure of 15%.
Hi Partner
This week, we'll take a skeptical look at our portfolio. What is going well? What is not going well? Should we make adjustments? The goal? Have a Portfolio you can be proud of. We might need to make a few adjustments to achieve this. This will be a very open and honest article. It will help you to know what to expect from Compounding Quality going forward.
Our Portfolio
Currently, we are invested in 21 companies. We invest in three buckets:
Owner-Operators (65.7% of the Portfolio): What? Companies still run by their founder or their family. Why? Founder-led companies outperform by 3.9% per year on average.
Monopolies & Oligopolies (27.8%): What? Only one or a few companies dominate the entire industry. Why? The best compounders in the world are monopolies & oligopolies.
Cannibal stocks (6.5%): What? Quality stocks which heavily buy back their own shares. Why? Cheap cannibal stocks can create a lot of shareholder value.
[Table image — "% of Portfolio" pie: Owner-Operator 66.2%; Monopolies/Oligopolies 27.6%; Cannibal Stocks 6.2%]
If you want to find out more, I would highly recommend you reading our Owner's Manual. The Owner's Manual was already written in 2023 and is still highly relevant today.
The goal is to outperform the S&P 500 by 3% per year in the long term. I believe we can achieve this: We are invested in better companies than the index. Our companies are cheaper than the index. Quality investing is a strategy that has proven to work in the past. And it will continue to do so in the future. As Mark Twain said: History doesn't repeat itself, but it often rhymes.
[Image — "Historical Investment Performance ($100 invested)", Quality vs Value vs Growth vs World, 1981 to date: Quality $11,310; Value $4,588; World $4,095; Growth $3,425]
Free Cash Flow
Our goal? Let our portfolio generate more and more free cash flow for us over the years. The goal? Generate $1 in Free Cash Flow for us per minute. That would be true passive income! I'm very happy with this trend.
[Image — FCF the Portfolio generates per year, 2015 to "Right now": from roughly $20,000 in 2015 to $106,000 now]
Under the assumption that we keep adding $50,000 per month and that the intrinsic value of our companies compounds by 12% per year, this would mean our goal of generating $1 in Free Cash Flow per minute would be reached in 2032.
[Image — projected FCF per year 2027-2035, rising to roughly $870,000 by 2035]
In our last Portfolio Update (July 2026), we mentioned Our Portfolio was making $96,156 in Free Cash Flow for us. Today Our Portfolio generates $106,000 in Free Cash Flow. The trend is clear: up. (Please note that adding to Our Portfolio every single month definitely helps).
Here's what Our Portfolio makes for us today: Per year: $106,119. Per month: $8,843. Per week: $2,035. Per day: $290.7. Per hour: $12.1. Per minute: $0.20.
[Table image — per-holding free cash flow, dated 17/08/2026 (Company / Number of shares / FCF in $ per share / FCF entire position): Medpace 260.0 / $24.54 / $6,380.40 Evolution AB 1,670.0 / $7.19 / $12,000.44 Kelly Partners Group 29,900.0 / $0.17 / $5,202.47 Brown & Brown 1,120.0 / $4.38 / $4,905.60 LVMH 173.0 / $35.93 / $6,215.60 Games Workshop 400.0 / $10.22 / $4,088.66 Dino Polska 14,550.0 / $0.43 / $6,227.97 Kinsale Capital 289.0 / $20.83 / $6,019.87 Interparfums 595.0 / $6.17 / $3,671.15 Ameriprise Financial 202.0 / $45.40 / $9,170.80 Visa 300.0 / $10.93 / $3,279.00 Topicus 1,515.0 / $3.48 / $5,269.26 HgCapital Trust 11,975.0 / $0.29 / $3,428.62 Novo Nordisk 1,410.0 / $2.13 / $3,002.40 Constellation Software 50.0 / $79.80 / $3,990.00 Brookfield 2,280.0 / $2.60 / $5,928.00 Zoetis 440.0 / $5.11 / $2,248.40 3i Group plc 1,700.0 / $1.64 / $2,793.19 KKR 520.0 / $6.11 / $3,177.20 S&P Global 120.0 / $28.03 / $3,363.60 Fairfax 30.0 / $191.90 / $5,757.00 TOTAL $106,119.62]
Bill Ackman's exercise
Recently, I was intrigued by Bill Ackman's shareholder letter. He provided this chart in his letter. It inspired me to do something similar. What does the situation look like for Our Portfolio?
Our Portfolio is cheaper than the S&P 500: NTM P/E of 18x versus 20x. The expected growth is higher for Our Portfolio: 3-5 year EPS CAGR of 14% versus 12%.
[Table image — per-holding share price performance and valuation (Company / YTD / Last 12 months / NTM P/E / Estimated 3-5 year EPS CAGR): Medpace 21% / -11% / 30 / 15% Evolution AB 15% / 13% / 11 / 12% Kelly Partners Group -4% / -30% / 14 / 20% Brown & Brown -5% / 2% / 15 / 13% LVMH -41% / -51% / 20 / 10% Games Workshop -13% / -31% / 33 / 12% Dino Polska -12% / -19% / 18 / 10% Kinsale Capital -29% / -4% / 17 / 15% Interparfums -3% / -15% / 19 / 12% Ameriprise Financial 4% / 21% / 11 / 13% Visa -21% / -33% / 23 / 16% Topicus -9% / -26% / 22 / 20% HgCapital Trust -15% / -16% / 24 / 15% Novo Nordisk -18% / -24% / 12 / 7% Constellation Software 1% / 25% / 17 / 15% Brookfield 34% / 1% / 14 / 20% Zoetis -19% / -40% / 12 / 12% 3i Group plc -48% / -56% / 18 / 15% KKR 5% / 6% / 17 / 15% S&P Global -11% / -15% / 19 / 15% Fairfax -13% / -5% / 10 / 15% Average — / — / 18 / 14% S&P 500 15% / 10% / 20 / 12%]
As you can see, Games Workshop and Medpace are the two most expensive companies in Our Portfolio. The valuation of companies like Fairfax, Ameriprise Financial, Evolution AB and Zoetis look the most attractive today.
If we rank our companies based on expected EPS Growth over the next 3-5 years: All expected growth rates of 15% or higher are phenomenal. Topicus, Kelly Partners Group and Brookfield are the 3 companies with an expected growth rate of over 20%. The least satisfactory growth rates? Novo Nordisk, Dino Polska and LVMH.
[Table image — the same table sorted by NTM P/E, descending (Company / NTM P/E / Estimated 3-5 year EPS CAGR): Games Workshop 33 / 12%; Medpace 30 / 15%; HgCapital Trust 24 / 15%; Visa 23 / 16%; Topicus 22 / 20%; LVMH 20 / 10%; Interparfums 19 / 12%; S&P Global 19 / 15%; Dino Polska 18 / 10%; 3i Group plc 18 / 15%; Kinsale Capital 17 / 15%; Constellation Software 17 / 15%; KKR 17 / 15%; Brown & Brown 15 / 13%; Kelly Partners Group 14 / 20%; Brookfield 14 / 20%; Novo Nordisk 12 / 7%; Zoetis 12 / 12%; Evolution AB 11 / 12%; Ameriprise Financial 11 / 13%; Fairfax 10 / 15%; Average 18 / 14%]
Portfolio Fundamentals
If we look at the Portfolio Fundamentals, Our Portfolio is in a very healthy shape.
[Table image — Portfolio Fundamentals vs the S&P 500 (Portfolio / S&P 500): Balance Sheet — Interest Coverage 45.5 / 14.6x; Net Debt/EBITDA 0.97x / 1.8x Capital Intensity — CAPEX/Revenue 3.7% / 19.2%; CAPEX/OCF 21.1% / 34.5% Capital Allocation — ROE 33.3% / 18.0%; ROIC 17.7% / 14.5% Profitability — Gross Margin 63.8% / 34.4%; Profit Margin 27.1% / 17.5%; FCF/Net Income 175.0% / 70-90% Historical Growth — Revenue (5-year CAGR) 15.0% / 11.3%; EPS (5-year CAGR) 17.5% / 12.0% Outlook — Revenue (2-year CAGR) 9.5% / 8.0%; Earnings Growth 18.8% / 13.0% Valuation — Forward P/E Ratio 18.5x / 20.4x; PEG Ratio 1.8x / 1.5x Value Creation — CAGR 3-years 1.3% / 20.1%; CAGR 5-years 5.9% / 13.1%; CAGR since IPO 18.8% / 9-11%]
Owner's Earnings
Owner's Earnings = EPS Growth + Dividend Yield. Why this is so important? Because it's actually really easy to calculate your future yearly return. Your return = EPS Growth + Dividend Yield +/- Multiple expansion (contraction).
Let's use Brookfield Corporation as a practical example: Expected EPS Growth next 5 years: 20%. Dividend yield: 0.6%. Multiple: to evolve from 14x to 15x over the next 5 years. Expected return = 20% + 0.6% + 0.2*(15x-14x/14x) = 22.0%. This means that if our assumptions would be correct, Brookfield would compound by 22% per year over the next 5 years.
Please note that instead of our own estimates, we now used analyst estimates. That's why some growth rates might differ (e.g. 15% for Brookfield here versus 20% in our model). The Owner's Earnings of our companies are expected to grow by 13.2% per year over the next 3 years.
[Table image — Owner's Earnings sheet (Company / EPS 2025 / EPS 2028 / Dividend Yield / Total EPS Growth / Yearly EPS Growth / Expected yearly return next 3 years): Medpace 15.28 / 20.81 / 0.00% / 36.19% / 10.84% / 10.84% Evolution AB 5.24 / 6.71 / 0.00% / 28.05% / 8.59% / 8.59% Kelly Partners Group 9 / 20 / 0.00% / 122.22% / 30.50% / 30.50% Brown & Brown 4.26 / 5.23 / 0.96% / 22.77% / 7.08% / 8.04% LVMH 21.85 / 27.67 / 2.90% / 26.64% / 8.19% / 11.09% Games Workshop 594.9 / 666.93 / 2.80% / 12.11% / 3.88% / 6.68% Dino Polska 1.59 / 2.31 / 0.00% / 45.28% / 13.26% / 13.26% Kinsale Capital 19.51 / 28 / 0.20% / 43.52% / 12.80% / 13.00% Interparfums 5.24 / 6.49 / 2.60% / 23.85% / 7.39% / 9.99% Ameriprise Financial 39.29 / 55.39 / 1.20% / 40.98% / 12.13% / 13.33% Visa 11.47 / 16.85 / 0.70% / 46.90% / 13.68% / 14.38% Topicus 3.43 / 5.49 / 0.00% / 60.16% / 17.00% / 17.00% HgCapital Trust 0.28 / 0.39 / 1.30% / 40.49% / 12.00% / 13.30% Novo Nordisk 23.03 / 22.98 / 3.50% / -0.22% / -0.07% / 3.43% Constellation Software 79.8 / 121.37 / 0.20% / 52.09% / 15.00% / 15.20% Brookfield 2.6 / 3.95 / 0.80% / 52.09% / 15.00% / 15.80% Zoetis 6.41 / 7.91 / 2.70% / 23.40% / 7.26% / 9.96% 3i Group plc 1.63 / 2.48 / 3.10% / 52.09% / 15.00% / 18.10% KKR 6.11 / 9.29 / 0.80% / 52.09% / 15.00% / 15.80% S&P Global 17.83 / 23.03 / 0.90% / 29.16% / 8.90% / 9.80% Fairfax 26825 / 43708.00 / 0.90% / 62.94% / 17.67% / 18.57% PORTFOLIO TOTAL — expected yearly return next 3 years: 13.17% * FOR KPG we use NPATA ** For Fairfax Revenue was used]
Now we still need to look at the multiple expansion/contraction. Our Companies are trading at their cheapest valuation level ever (FCF Yield: 6.0%). I assume a FCF Yield of 5% is fair for Our Portfolio (I'm probably even being conservative here). FCF Yield of 6.0% = P/FCF Multiple of 16.7x. FCF Yield of 5.0% = P/FCF Multiple of 20.0x.
Your return = 13.2% + 0.2*(20x-16.7x/16.7x) = 17.1%. Under these assumptions, the expected return for Our Portfolio equals 17.1% per year for the next few years.
Another method to calculate your expected return? Your return = Expected FCF Per share growth + FCF Yield = 12% + 6.0% = 18.0%. Under this model, the expected return looks very attractive too.
Our Portfolio
And I need to confess something to you, invaluable Partner. I almost feel a little bit ashamed about it. But looking at the Portfolio today, I think some of our weights are skewed.
[Table image — "Current weight (%) versus Company" bar chart (values approx., read off the chart): Medpace ~8.3%; Evolution AB ~7.7%; Topicus ~6.1%; Visa ~6.1%; Constellation Software ~6.1%; Ameriprise Financial ~6.0%; Kinsale Capital ~5.9%; Kelly Partners Group ~5.5%; Games Workshop ~5.3%; Brookfield ~5.0%; LVMH ~4.9%; Brown & Brown ~4.4%; HgCapital Trust ~3.9%; Interparfums ~3.7%; Dino Polska ~3.7%; 3i Group plc ~3.5%; Novo Nordisk ~3.5%; KKR ~3.0%; S&P Global ~2.8%; Fairfax Financial ~2.6%; Zoetis ~1.8%]
If you ask me, companies like Brookfield, S&P Global, and Fairfax Financial are some of the highest quality names in Our Portfolio. They have a clearer path to future growth than companies like LVMH, Novo Nordisk, and Dino Polska. As a result, these companies should get a higher weight in Our Portfolio. That's why we will make a few portfolio changes going forward. (Please note that companies like Brookfield, S&P Global and Fairfax Financial were fairly new additions. That's why they still have a lower weight).
The goal? Make Our Portfolio even higher quality than what it used to be. It's one of the key lessons I learned from running Compounding Quality for 3 years. Almost every time I made a buy decision because I thought the company was somewhat quality but definitely cheap, it was a mistake in hindsight. I think it's important to become even stricter with our selection criteria.
Portfolio going forward
We will stay loyal to the key philosophy we outlined in our Owner's Manual. The portfolio will invest worldwide (developed countries only). We'll own 15-20 stocks. The portfolio is aiming to invest in the best companies in the world. We won't trade a lot. Activity and costs harm our results. We won't try to time the market (I'm way too dumb for that). The characteristics of companies in the portfolio: sustainable competitive advantage; integer management with skin in the game; healthy balance sheet; low capital intensity; good capital allocation; high profitability; plenty of reinvestment opportunities; trading at fair valuation levels.
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price." - Warren Buffett.
Financials have the highest weight but the definition of 'Financials' is also wide. From a payment network provider like Visa to an insurance company like Kinsale Capital and a credit rating agency like S&P Global.
Every position
On Thursday, we are going to run over every single position in Our Portfolio. This will help taking Our Portfolio to the next level.
Everything In Life Compounds Pieter
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).