Most value investors use the 52 week low or all-time low stock list as a screening tool. I myself was certainly in that camp. Logically speaking, it makes sense to shop in the bargain department as demonstrated by lowest prices.
What I found interesting is that I see many stocks appear on the all-time low list day after day after day and a good amount of them stay on the low list for an extended period of time. This made me think – do I really want shop in this department?
On the other hand, I started to track the all-time high list and interestingly enough, I see some names popping up on that list also day after day after day. We are all familiar with Berkshire Hathaway (BRK.B, Financial), Visa (V, Financial), MasterCard (MA, Financial) but there are some other less familiar names that are very interesting. Obviously there may be some bubble stocks fall into this category as well but more importantly, this list may be a good starting point to discover the compounding machines.
To illustrate my point, let us walk through the most recent all-time high list. Unfortunately gurufocus does not offer this feature. However, barchart.com offers a free list on a daily basis. On the most recent all-time high list, there are over 170 stocks. You can argue that because the market is also at an all-time high level, more stocks are likely to make it to this list than what the number would be under another less-expensive market environment. This is a valid argument but regardless of the general market level, compounding machines still tend to trade at all-time highs.
The next step in the exercise is much more fun but it also takes much longer. You will have to download the 15 year financials and look at what the company has done on a per share basis (book value, earnings, or free cash flow, depending on the industry) over an extended period of time. You may also want to look at the return on capital profile of the business over the 10-15 year period. As I was doing the exercise, a company called Danaher (DHR, Financial) jumped out. This business has been compounding at a faster rate than Berkshire Hathaway.
Below is a revenue growth and per share book value growth chart of Danaher (DHR, Financial).
Then you get curious about why this is the case and you will find out about the Mitch Brothers and the Dahaner Business System. You will also likely to find out that the Rales Brothers have started a new venture called Colfax (CFX, Financial) a while ago. Chuck Akre (Trades, Portfolio) and Tom Gayner (Trades, Portfolio) both hold large positions in Colfax. You can’t help but to wonder why that is. It gets more mentally stimulating and interesting further down the road and I’ll let the readers to discover the fun by themselves.
You should also notice that a few banks such as JP Morgan (JPM, Financial), M&T Bancorp (MTB, Financial) and Wells Fargo (WFC, Financial) made it to the list very often while Bank of America and Citibank did not. Again, you start to ask why that is. Repeat the process a few times. You will be surprised by how much you can learn.
I want to point out that you should not use only one day’s list. Ideally you want to track this list for a certain period of time (track it daily for say 6 months to 3 years). Over time some less familiar names will jump out. I doubt there are that many names over a 3 year period and for those businesses who survive the list for an extended period of time, they are certainly worth our time and effort.
