Invest only in the "best stocks"! Then, your investing life will change.
This is the best investment strategy proven by many greats, including Warren Buffett, Charlie Munger, Terry Smith, and Peter Ceylon.
In short, it is the surest way to make money by investing in the world's best companies.
This book clearly organizes 'quality investing' according to 13 criteria.
The key is to find the best stocks, buy them at the right price, and hold them for a long time.
And we've compressed it into a 'one-page checklist' so that anyone can easily understand and apply it.
The book is full of 'excellent investment techniques'.
It provides intuitive, practical investment methods that are no less than clear explanations.
It's packed with tips that investors will want to keep an eye on.

Quality investing is, in a word, the 'cream of the crop.'
First, once you've secured a company that meets most of your quality criteria and has confidence in its potential at a reasonable price, you can "wait with peace of mind."
Because value is constantly being created and time is working in the investor's favor.

--- p.22, from “Chapter 1: What is ‘Quality Investment’”

By building on quality investing as a foundation and adding elements of value investing and growth investing, the strengths of various styles can be blended into something very attractive.
This is the optimal way to invest in individual stocks for the long term.
But such opportunities rarely appear in reality.
In normal market conditions, it is virtually impossible to acquire a quality company at a low price.
Buying quality stocks at cheap prices is usually only possible when a company is in trouble.
In such cases, it is necessary to assess whether the problem is temporary or permanent.
When market perceptions are wrong, these moments present opportunities for agile, quality investors.
The only opportunity to buy quality stocks at a somewhat lower price comes during the occasional moment of blind panic.
--- p.26-27, from “Chapter 1: What is ‘Quality Investment’”

Numbers don't lie and provide a wealth of information.
You can quickly see whether a company is growing, making a profit, generating cash flow, and controlling debt through numbers.
But what the numbers don't tell you is how they came to be.
To understand this, we must first understand the business model.
--- p.49, from “Chapter 3_Qualitative Standards: What ‘Numbers’ Don’t Tell Us”

Therefore, quality investors reinterpret the 'margin of safety' to fit the current market situation.
This has a slightly different meaning than the traditional safety margin.
If the competitive advantage is so strong that the company is likely to still dominate the market in a few years, I consider that a significant margin of safety.
If this company's competitive edge weakens, it could lose a significant portion of its profits to competitors.
If this happens, the company's performance and valuation will inevitably decline.
The stronger the competitive advantage, the greater the margin of safety.
Therefore, the value of a quality company depends on the strength of its competitive advantage.
--- p.92, from “Chapter 3_Qualitative Standards: What ‘Numbers’ Don’t Tell Us”

Now, let's learn about 'how to determine pricing power numerically'.
However, it should be noted that this is only a rough estimate, as many factors often come into play.
A commonly used quantitative method to determine pricing power is to use the high and stable gross margin.
--- p.107, from “Chapter 3_Qualitative Standards: What ‘Numbers’ Don’t Tell Us”

Investors should go through at least two steps when discovering stocks.
Because just finding one ‘innovative product’ in the first step is not enough.
A second step is absolutely necessary and important: to once again select the companies with 'excellent management teams' from among the many companies selected here.
You need to choose a management team that has proven successful at further developing business models, fending off competition, engaging customers, and, above all, continuously innovating.
Amazon's Jeff Bezos and Microsoft's Bill Gates are such CEOs.
For investors, discovering such companies early is like finding the Holy Grail.
--- p.112-113, from “Chapter 3_Qualitative Standards: What ‘Numbers’ Don’t Tell Us”

● An ideal portfolio would completely eliminate exposure to economic cycles.
But realistically, we have no choice but to do our best to minimize our exposure to business cycles.
Aim for companies that are resilient even in recessions and select companies that demonstrate stable sales trends over a long period of time.
During a recession, avoid companies that produce durable goods.
And ask yourself what products we use all the time.
--- p.145, from “Chapter 3_Qualitative Standards: What ‘Numbers’ Don’t Tell Us”

● Investment is ultimately about predicting future outcomes and then assigning a fair value to them in the present.
But predicting the future involves uncertainty.
To strengthen future expectations, it is useful to consider past performance.
‘Numbers’ serve as evidence of performance and can aid in analysis.
--- p.183, from “Chapter 4_Quantitative Standards: It is important to read ‘numbers’ accurately”

Now that you know the most common ways to calculate free cash flow, you can determine how much of your earnings are converted into free cash flow.
And this is also a process of evaluating the ‘quality’ of the profit.
Although there may be some exceptions, when a company's reported accounting profits leave little cash behind, the quality of its profits is considered low.
In other words, the extent to which profits are converted into free cash flow determines the quality of profits.

--- p.188-189, from “Chapter 4_Quantitative Standards: It is important to read ‘numbers’ accurately”

As an investor, you must be interested in how companies use their capital to generate profits.
Fortunately, there's a way to gain insight into this: return on invested capital (ROIC).
If a company generates 10 cents of profit for every dollar it invests, its ROIC is 10%.
This ratio tells you how efficiently a company uses its capital and manages its balance sheet to generate profits.
--- p.199-200, from “Chapter 4_Quantitative Standards: It is important to read ‘numbers’ accurately”

Even the example figure of 'ROIC 10%' would not satisfy a quality investor.
This is because what quality investors are looking for is not ‘average’ or ‘good’, but ‘excellent’.
In my experience, I aim for a ROIC of at least 15%.
It will attract more attention if it comes with a high ROIC and an attractive valuation.
--- p.209, from “Chapter 4_Quantitative Standards: It is important to read ‘numbers’ accurately”

There is no exact rule for a good debt-to-cash-flow ratio, as it can vary across companies and industries.
However, for quality companies that generate predictable profits, a ratio of 0 to 5 can be considered healthy and manageable.
A one-time spike due to a large investment may not be a problem, but anything above 5 is considered risky, and anything above 9 is considered unacceptable.
--- p.231, from “Chapter 4_Quantitative Standards: It is important to read ‘numbers’ accurately”

In real estate, it is often said that the first thing that determines the value of real estate is location, secondly, location, and thirdly, location.
And everything else is seen as secondary.
Just as we emphasize the importance of location in real estate value, if I had to pick one thing to emphasize in investing, it would be ROIC.
In this comparison, the prime location of real estate equates to a 'high ROIC' for the business.
Just as a property in an absolutely prime location justifies its high price, so too does a company that stands out in its industry with a high ROIC.
--- p.241, from “Chapter 5_Methods of Evaluating Corporate Value”

Now, we can review the first screening results under the following seven conditions:
· Sales growth rate of 5% or more
· Operating profit growth rate of 7% or more
· Profit quality (FCF/net profit) of 80% or more
· Return on invested capital (ROIC) of 15% or more
· Debt to free cash flow ratio of 5 or less
Debt ratio of 80% or less
· Interest coverage ratio of 5 or higher
--- p.263, from “Chapter 6: Portfolio Composition and Management”

What's left for quality investors now? Lean back and do nothing.
If you have nothing left to do as a shareholder of a top company, that's a good sign.
Because at that very moment, money keeps growing.
Most investors cannot resist the urge to buy or sell stocks, so they must learn to do nothing.

--- p.280, from “Chapter 6: Portfolio Composition and Management”