Quality Portfolio: Second Tranche of Stocks
And a little high level investing theory.
Second Tranche of Stocks
I just wrapped up reviewing the second tranche of stocks in the investable universe that will shape the Quality Portfolio. This batch included 25 companies I was already familiar with, names I’ve known for some time but hadn’t reviewed in detail recently. After running them through my high-level due diligence process, I didn’t find any major red flags. All 25 companies have earned their place in the final investable universe.
You’ll find the full list below. With these additions, the investable universe now consists of 47 companies. The final tranche, 39 companies I’m less familiar with or require a deeper dive, will be reviewed next.
Why Go Through This Process?
You might be asking: Why take the time to do this at all? Isn’t investing supposed to be simple, buy great companies, don’t overpay, and let compounding do its thing?
In theory, yes. But in practice, it’s more nuanced.
What defines a “great” or “quality” company? And with thousands of potential stocks out there, how do you find them at scale? This is where a structured, repeatable process matters.
A Simple Framework With a Clear Goal
My goal is straightforward: build a portfolio capable of achieving a 12% long-term compound annual return. That’s the benchmark that, if met, will satisfy my expectations.
To get there, I screen for companies with a higher likelihood of being high quality relative to peers. I use a simple valuation model, because complexity doesn’t guarantee better results, and apply basic future return assumptions. The goal isn’t precision, it’s directional clarity.
This approach is designed to work whether you’re investing a lump sum or using a dollar-cost averaging (DCA) model. It’s grounded in simple math and consistent logic:
Maintain a list of high-quality companies.
Estimate future returns.
Allocate capital where expected returns are highest.
Adjust only when fundamentals change.
25 New Additions to the Investable Universe
Here are the newly reviewed and approved companies:
Allegion PLC
Blackrock
Broadridge Financial
DICKs Sporting Goods
Fastenal
Factset Data Research
Graco
Genuine Parts Company
Global Payments
Grainger
HCA Healthcare
Heico
Jack Henry and Associates
Merck
NXP Semiconductors
Old Dominion Freight
Paychex
PepsiCo
Parker Hannifin
Qualcomm
ROSS Stores
Tractor Supply
Trane Technologies
Wingstop
Watsco
Each of these companies has a defensible moat, a strong long-term track record, and the potential to continue compounding value. Of course, no business is without risks, but none showed red flags serious enough to warrant exclusion.
What’s Next?
The final tranche consists of 39 companies that I’m less familiar with or feel require deeper evaluation. I expect to complete this review within the next week.
After that, I’ll revisit valuations and finalize future return assumptions. Once the model is complete, I’ll construct the portfolio using the same math-first, logic-guided approach.
From there, it’s about letting the process do its work, invest the capital, monitor for material changes, and conduct annual reviews to ensure quality standards are still met and to scout for any new opportunities.
Stay tuned, more updates are on the way soon.