7 Pillars For Profits (Issue #23)
Pillars and Analysis Process
1. Competitive Advantage
To have long-term growth first a company has to survive for a long time. Further, a company needs to prosper within its competitive environment. This means it has to be better than its competitors for long periods of time. In order to do this, the company has to have tangible competitive advantages or moats.
2. Fortress Balance Sheet
Fortress balance sheets are often talked about, but now they are more important than ever. Having low debt, cash reserves, and valuable assets are crucial to surviving uncertain times. These also allow you to have success in bad times as well as good.
3. Growth
At the end of the day, investments are there to make money. The main way to do that is for the company to grow in some way (comps, acquisitions, etc). All the businesses in the portfolio must be growing and have strong future growth potential. Buybacks are important, but other growth is necessary for share growth.
4. Long-Term Focus
“If you wouldn’t hold it for 10 years, don’t hold it for 10 minutes”
- Warren Buffett
Sustaining strong returns and a fortress balance sheets over extended periods of time isn’t easy, but it is possible and very valuable. In the short term, investors are subjected to the madness of the people, but in the long term fundamentals and core investing and business values win out.
5. Capital Allocation and Operation Skills
Businesses (and management) like this often can turn their niche or sector into one with moats and make safety, growth, and sustainability possible. This is strategic, but also having capital allocation and operation skills bring them to the next level.
i.e. Liberty Formula One uses its capital to buy undervalued or struggling businesses. Then they use their superior operation ability to make that business cash flow. They use the cash flow to buy more businesses and on and on.
6. Undervalued In Context
While I do appreciate a “cheap” company I have a greater appreciation for quality. I am not afraid to pay for quality. Some of the companies in the portfolio have high valuations, but compared to their sector the valuation seems reasonable.
i.e. Often tech companies or those that are I high quality can be good investments at higher multiples (40-80x Price/Cash Flow)
7. Single Digit Portfolio
“Your 50th idea isn’t as good as your first”
- Warren Buffett
Diversification is often necessary (in some amount), but lowering your standard of investment to be more diversified has never made any sense to me. This is why I will keep this portfolio under 10 stocks. This forces the portfolio to only consist of the best opportunities for long-term sustainable and safe growth.
Before we continue if you like these values and analysis framework and you are not already subscribed. Subscribe! And join the journey
Go check this out on Twitter too:
Portfolio Updates:
In this new section, I will post short news and updates (if there are any) on the companies in the portfolio. Also a weekly spreadsheet update on the portfolio. You can follow this link to the full spreadsheet where the deep dives are linked on each company.
The first 3 companies in the portfolio are listed below. As of now there are 7 companies with new deep dives coming out bi-weekly. Stay tuned for the remaining 4 companies!
Just one short update this week: Audi is entering a team into Formula One starting in 2026
Fans Of The Pillars:
Insight Of The Week:
Meme Of The Week:
Just because it’s in the portfolio
Thread Of The Week:
It is a tad biased but here you go…
Until Next Week,
Soren
Disclaimer: Soren Peterson and Pillars And Profits Newsletter are not responsible for any investment results. This is not financial advice. Always do your own research.