Creating a long term portfolio

After several years investing in funds and stocks, I decided to create my own portfolio. To do so, I will start my search for great companies priced bellow their intrinsic value. (or at fair value).

I’m not a deep value investor nor a trader.

My focus: Invest in great companies and let them compound over time.

I will commit a significant part of my savings to this project and share my results. Pure skin in the game.

What I’m looking for?

• I'm seeking great companies: industry leaders with strong competitive advantages. Always on the lookout for deep moats:

  • Industry Leaders: Companies at the forefront of their sector.

  • Protection from New Competitors: Establishments with barriers to entry.

  • Other Moats: Examples include high switching costs, privileged locations, etc.

• Attractive Industries: I'll steer clear of unattractive sectors such as airlines and telecoms. However, this doesn't mean I'll never consider companies within these sectors.

  • Oligopolies: Industries dominated by a few key players.

  • Rational Industries: Sectors marked by sound decision-making.

  • Barriers to Entry: Factors that deter new entrants.

• Good Returns on Capital: Measured by Return on Invested Capital (ROIC).

• Strong Management with a Clear Focus on the Long-Term: Assessing if they create shareholder value and prioritize shareholder interests.

• Strong Capital Structure: Avoiding highly leveraged firms.

I conduct valuation at the end of the analysis. Why? Because the market is volatile, and rejecting a great company based on today’s price might cause us to miss a future opportunity.

• If the current price is greater than the intrinsic value, the company remains on my watchlist.

• If the current price is equal to or below intrinsic value, I'll consider investing.

How Will I Implement This Strategy?

“The big money is not in the buying or the selling, but in the waiting” Charlie Munger

“The most important thing is to be in the right place at the right time and to be sufficiently liquid to seize the opportunity when it comes” Howard Marks

I will follow a private equity approach:

1. Commit a significant portion of my savings

2. Invest only when I find an attractive company after extensive study.

3. Invest in a maximum of 10-15 companies.

4. Allocate the initial investment, with 1/3 reserved for potential additions to profit from volatility.

5. Maintain a long-term investment approach.

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