🚢 Five growth stocks with steady valuations

Hi and welcome to this week's update.

Firstly, I'm pleased to annouce that we have finally been able to extend the Global Compounders Database coverage to India. You may remember that I undertook a deep dive into Indian equities last year.

Also, in case you've not yet seen it, you can now also filter by whether the company is a serial acquirer:

And whether the company is frequently invested in by quality focused fund managers (based on 13F filings):

This week we will be looking at the results of from two screens that I recently ran side-by-side: the first looking for stable FCF yield and the second looking for consistently high FCF growth. The filters were applied to the 1,500 companies in the S&P 500, S&P 400 and S&P 600. The results brought to my attention a group of five companies with the same business model in common.

As a quick reminder, share price is intrinsically linked to:

1. growth (in free cash flow per share) and
2. valuation (the free cash flow yield).

If a company's share price goes up, then it's either the result of the company becoming more profitable (i.e. FCF per share going up) or becoming more expensive (i.e. FCF yield going down).

Therefore, looking for a steady FCF yield means that any change in share price is down to a change in FCF per share and nothing else.

First Filter: Stable FCF yield

The first screen was to look for a steady FCF yield. I calculated the 5yr share price CAGR and FCF per share CAGR. I then calculated the difference. If a company's FCF per share goes up 10% and so does its share price, then FCF yield would have stayed the same. I sorted the 1,500 companies by the difference between the two. Cavco, for example, saw its share price completely align with its free cash flow.