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Ankur Shah on LinkedIn: My first stock investment was in Tsingtao Brewery. A friend and I were… My first stock investment was in Tsingtao Brewery. A friend and I were still in high school, but we pooled our money and opened a brokerage account with Dean…

Do you know the first rule of compounding?

According to Charlie Munger, it's "never interrupt it unnecessarily."

Naturally, the second rule of compounding is to carefully select your investment vehicle.

Over a 220-year period, stocks have produced a 6.9% annualized return after inflation.

No other asset class comes close.

You can bring up this chart the next time somebody claims gold is an inflation hedge.

Source: Jeremy Siegel's "Stocks for the Long Run, Sixth Edition"

Constantly underperforming the market is painful for any investor.

Naturally, you keep trying different strategies...

I know, because I've tried them all from trying to game the quarter to deep value.

Nothing in my opinion is as simple or effective as quality investing.

What exactly does quality investing mean?

My definition is the following:

1. Buy good businesses. The single best indicator of quality is ROIC.
2. Own businesses with high gross margins. It signals a company has some form of competitive advantage and will be able to withstand inflationary periods.
3. Pay a reasonable price. Pick your favorite profitability metric from adjusted operating earnings, EBITDA, EBIT or FCF but avoid paying silly multiples.
4. Financial strength - beginning with the balance sheet - is crucial for long-term success.
5. Hold for the long-term.

Want to learn more about my process? Sign up for my weekly newsletter: Consistent Compounding. The link is below:

https://buff.ly/3O8qnUd

Landing Page 1 - Ashva Capital Once a week, you'll get actionable advice on how to identify profitable companies, learn about valuation and obtain our latest take on market moving…

https://ashvacapital.com/cc-002-one-metric-to-rule-them-all/

CC #002: One Metric To Rule Them All - Ashva Capital Why ROIC is the best metric to analyze the quality of a company.