Adrian

Escaping the noise around investing and sharing what I learn about quality companies.

[Adrian @QualityCashflow]

We can choose:

🔵 Blue Pill
1. Watch the news.
2. Listen to the noise.
3. Be a speculator in the price of shares.

🔴 Red Pill
1. Turn off the TV.
2. Escape the noise.
3. Be an investor in the value of businesses.

[Adrian @QualityCashflow]

The annual report is the most common source for uncovering a company’s potential:

• Overview of the core business
• How it generates revenue
• Drivers behind its growth
• Future expansion plans

Annual reports of competitors can help as well.

[Adrian @QualityCashflow]

We should only consider selling a compounder when:

a) it stops being a great business,
b) it becomes too large in your portfolio,
c) it becomes wildly overpriced, or
d) we need cash for a superior opportunity.

[Adrian @QualityCashflow]

The stock market loses about 10% of its value once a year on average.

This means patient investors usually don't have to wait more than a year or two for an attractive entry point.

Patience + Watchlist + Cash = Success

[Adrian @QualityCashflow]

Financial Health Checklist
for Quality Companies:

• Current Assets > 1.5x Current Liabilities
• Total Debt < 3x Operating Cash Flow
• Total Debt < 10x Free Cash Flow
• Debt to Equity Ratio < 50%
• EBIT > 5x Interest on Debt

[Adrian @QualityCashflow]

We are entertained by world events because they lack predictive value.

If we could study daily events and predict the future, the news would lose its novelty and cease to fascinate us.

[Adrian @QualityCashflow]

Events entertain but don't explain a system.

Events are only a system's visible output.

But they don't clarify the system or its structure.

Events therefore don't help to predict how the system will behave in the future.

[Adrian @QualityCashflow]

Capital-intensive companies often have lower ROA because they require more capital to grow.

Without high asset turnover they are less attractive to shareholders, as much of the cash flow goes to maintenance just to keep operations running.

We can check if ROA > industry average

[Adrian @QualityCashflow]

A company can fake good ROE for a few years.

But maintaining high ROE for 7 years shows true performance.

This period covers various economic conditions, proving consistency.

We can check if ROE hasn’t dropped more than 10% (relative measure) over the past 7 years.

[Adrian @QualityCashflow]

Quality Profit Margins Checklist:

✅ Gross Profit Margin > 50%
✅ Operating margin (EBIT) > industry average
✅ Avg. operating margin (EBIT) > 15% for 3Y
✅ Operating margin (EBIT) increased for 3Y
✅ Net Profit Margin positive in past 10Y
✅ Company has high operating leverage

[Adrian @QualityCashflow]

I hope you've found this thread helpful.

Follow me @QualityCashflow for more.

Like/Repost the quote below if you can:

[Adrian @QualityCashflow]

I asked https://t.co/jPNNRwWdOm’s new Grok-2 for a quality investing deep dive into Google (Alphabet Inc.). $GOOG

What I got blew my mind: 🧵

[Adrian @QualityCashflow]

I asked https://t.co/jPNNRwWdOm’s new Grok-2 for a quality investing deep dive into Google (Alphabet Inc.). $GOOG

What I got blew my mind: 🧵

[Adrian @QualityCashflow]

22/22
Google remains a high-quality investment due to its financial health, innovation, and market position, though with considerations around regulatory environments and competition.