Marcellus’ Global Compounders Portfolio (GCP) invests in 20-30 deeply moated global companies based on rigorous bottom-up research around moats, capital allocation and sustainability of cash generation into the long-term future.
GCP companies have track record of consistent free cash flow compounding driven (a) the nature of products and services – ‘pick and shovel’ to the global economic megatrends, utilities and consumption; and (b) moats built around process capability, R&D and capital allocation.
GCP companies have historically grown their free cashflows per share at about 20% (USD) annually over last decade. With average age of the portfolio companies being more than 6 decades, with more than 20 years of greatness and dominance in their present lines of businesses, GCP companies display the characteristics of exceptional resilience while delivering compelling growth.
GCP portfolio of 20-30 companies is selected from large and mid-cap stocks listed in the US. The portfolio construction involves 2-stage process:
For each GCP company a composite score (Business Score) is calculated. Marcellus’s uses combination of business score, proprietary style framework (Torque) and valuation framework to determine the final weight allocation to the selected companies.
GCP portfolio companies have high cash generation ability which allows them to invest in organic and inorganic growth opportunities and return excess capital to shareholders through dividends and buybacks.
The high ROCE of GCP companies enables them to grow faster organically with lower reinvestment. This allows GCP companies to have excess capital which can be used for acquisitions and for the return of capital.
Fundamentals of GCP companies vs. S&P 500 Index
GCP companies score significantly higher than an average S&P 500 company on fundamental parameters. The average ROIC of GCP companies at 19% is around 2x that of the S&P 500. The superior fundamental performance of GCP companies comes from deep competitive advantages, efficient operational execution, and superior capital allocation.
Performance (as of 31st December, 2023)
Kristal GCP Portfolio (US Only) is a sister portfolio of Marcellus’ GCP PMS Marcellus GCP PMS – Live Performance