Portfolio Performance
In MoneyWiseSmart, we research and discuss great businesses that could compound their value (and the shareholders’ wealth) over a long period, becoming multibaggers (i.e. stocks that have gone up multiple times in value) in the long run.
In the section below, we present the key operating performances of the companies we have covered under our Multibagger Research Series (MRS) program (as of October 2024).
These key performance metrics are the exact same as those tracked by Terry Smith (a successful British investor with a long term investing track record of ~15% CAGR over ~14 years (from Nov 2010 to Aug 2024)) for his Fundsmith funds, as discussed in this video.
Companies Covered Under The MRS
As of Oct 2024, we have covered 16 companies under the MRS, operating in different industries and geographies, as shown in the table below.
Market capitalisation as of late September 2024, based on share price multiplied by rough number of basic outstanding shares then.
Operating Performance*
The MRS Companies have overall maintained solid business performances consistently in the past several years.
The MRS companies generally have high return on capital employed (ROCE), averaging ~21% in FY2023 (despite including some companies with low ROCE in FY2023, mainly due to heavy reinvestments or higher goodwill from recent acquisitions), or ~27% excluding goodwill (from the capital employed).
The MRS companies generally have stable or rising gross profit margin (GPM), of more than 40%, with the exception of Company 6 which has substantial business in retailing with low industry GPM.
The MRS companies generally have stable or rising operating profit margin (OPM), of 20% or more, with the exception of (i) companies that are currently reinvesting heavily in sales & marketing and/ or research & development expenses to drive future growth and hence record low GAAP accounting (i.e. Companies 10 and 15), and (ii) company with a substantial business in retailing with low industry GPM (i.e. Company 6).
The MRS companies generally have high free cash flow conversion (calculated as: free cash flow (after deducting share based compensation (SBC) expenses, before deducting any amounts spent on acquisitions), divided by net profit), of close to (or for some companies, more than) 100%, with the exception of some companies that are reinvesting heavily in capital expenditure for growth (e.g. Companies 7, 9, 12 and 15), and some companies with some net working capital needs (e.g. Companies 4 and 8).
Note: Free cash flow conversion is not shown for Companies 3 and 5, as the accounting FCF conversion is not meaningful (due to the nature of their businesses).
From FY2016 to FY2023, the revenue of the MRS companies compounded at a compounded annual growth rate (CAGR) of 30% on average.
Note: For Company 8, the CAGR is from FY2018-FY2023.
From FY2016 to FY2023, the operating profit of the MRS companies compounded at a CAGR of 33% on average.
Note: (1) The CAGR is not shown/ meaningful for some companies (Companies 3, 5, 6 and 10), as the EBIT was negative in FY2016. (2) For Company 8, the CAGR is from FY2018-FY2023.
* Overall notes:
(1) For companies with March financial year end (i.e. Companies 5, 8 and 14), the data for a certain FY relates to the FY ending March the next calendar year (e.g. FY2016 relates to the FY ending March 2017).
(2) The earliest data available for Companies 5 and 8 are in FY2019 and FY2018 respectively.