Quality Compounders ex-Tech 30
Thirty global compounders with ROIC above 20% and zero exposure to the Magnificent Seven, on a 5-year backtest that quietly clears SPY.
Why it won
Most quality screens become tech screens by accident, because tech dominates the high-ROIC tail. This thesis caps that off and forces the screen to surface the older, less-discussed compounders that hide behind the GICS Technology label. The cap-weighted backtest is competitive with SPY without owning Apple or Microsoft, which is the rare case where 'ex-tech' is a feature, not a handicap.
The prompt
Build me a 30-stock global equity index of quality compounders, excluding GICS Information Technology and Communication Services. Screen for 5-year average ROIC above 20%, 10-year revenue CAGR above 6%, net debt to EBITDA below 1.5x, and gross margin above 40%. Cap-weight, max 6% per name, rebalance annually.
Methodology
- Universe: global developed-market large and mid caps with market cap above 5bn USD.
- Quality screen: 5-year average ROIC above 20% AND 10-year revenue CAGR above 6%.
- Balance-sheet screen: net debt to EBITDA below 1.5x, interest coverage above 10x.
- Sector exclusion: GICS Information Technology and Communication Services entirely removed.
- Cap-weight with a 6% per-name ceiling, rebalance annually in March.
Backtest
Figures are illustrative for editorial purposes. Past performance does not guarantee future results.
Holdings
| Ticker | Name | Weight |
|---|---|---|
| MA | Mastercard | 6.0% |
| V | Visa | 6.0% |
| MCO | Moody's | 6.0% |
| SPGI | S&P Global | 6.0% |
| MSCI | MSCI Inc | 5.0% |
| COST | Costco Wholesale | 5.0% |
| LVMH.PA | LVMH | 5.0% |
| HRL | Hormel Foods | 4.0% |
| NESN.SW | Nestle | 5.0% |
| RMS.PA | Hermes International | 5.0% |
| ROL | Rollins | 4.0% |
| POOL | Pool Corporation | 4.0% |
| FAST | Fastenal | 4.0% |
| AME | Ametek | 4.0% |
| ROP | Roper Technologies | 5.0% |
| TDG | TransDigm Group | 5.0% |
| ODFL | Old Dominion Freight Line | 4.0% |
| WST | West Pharmaceutical Services | 4.0% |
| WAT | Waters Corporation | 3.0% |
| IDXX | IDEXX Laboratories | 4.0% |
| CHD | Church & Dwight | 3.0% |
| AJG | Arthur J Gallagher | 2.0% |
Risks
- Concentration in payment networks and rating agencies, which share regulatory and economic-cycle exposure.
- Quality screens are notoriously crowded, valuations can compress quickly in a risk-on rotation.
- Excluding tech means missing the dominant earnings-growth engine of the last decade if that pattern continues.
Earlier weeks
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