Quality Stock Shopping list

12 high-quality businesses in a drawdown >15%

Given the recent market volatility & shifting consensus view that the U.S. economy is headed for a recession, I felt that putting together a shopping list of high quality companies that are down >15% from their 30 day high would be helpful. These companies typically exhibit monopoly qualities and/or pricing power. I give a few quick thoughts on owning each equity from here. I plan to track the list as an index from here.

I’ll briefly touch on selection methodology before diving into the names.

Universe

• Quality businesses in developed market economies

• Businesses with oligopolistic qualities, high barriers to entry, pricing power, etc.

• Result: 228 names

Eliminations

• Quantitative: EPS growth >7%, PEG below 3x, +ve sales growth

• Industry: remove banks, pharma, energy, semis, chemicals, cyclicals, travel, etc.

• Momentum: screen out names within 10% of 30d high, 15% from ATH

• Result: 72 names

Filters

• EPS growth >10% = 45 names

• >15% drawdown from 30d high =24 names

• Sales growth >4% = 19 names

• Would consider owning for >1yr, prospects are decent, moaty = 12 names

Now for the fun part, the list, sorted from smallest to largest market cap. 9/12 are U.S. names with the remaining 3 being European. Enterprise Values range from $I0bn - $2T. Including a cheat-sheet table for convenience. Let’s dive in.

1. Chart Industries (GTLS)

• EV & Market Cap: $10.3bn & $6.8bn

• Industry: Industrial Machinery

• What do they do?

  • Industrial-grade vessel manufacturer for LNG and industrial gas storage

  • High switching costs and good pricing power

  • Somewhat levered

• ‘25 & ‘26 P/E: 12.1x & 10x

• PEG & EPS growth: ~0.5x PEG & ~20% EPS growth in ‘26

• % off from 30d & all-time high: 32% & 39%

• Interesting from here?

  • Orders in Q4 were up 29% and GTLS produced $388m of FCF in ‘24

  • ‘25 guidance was reaffirmed due to strong backlog

  • They expect $550-$600m of FCF in ‘25 = ~8.5% FCF yield for a 10% grower

  • Looks interesting at these levels

2. SharkNinja (SN)

• EV & Market Cap: $13.2bn & $13bn

• Industry: Household Appliances

• What do they do?

  • Manufactures household and lifestyle goods (blenders, vacuums, coolers)

  • Strong innovation engine and product launch cycle

• ‘25 & ‘26 P/E: 18.4x & 16x

• PEG & EPS growth: ~1.1x PEG & ~15% EPS growth in ‘26

• % off from 30d & all-time high: 26% & 26%

• Interesting from here?

  • Coming off a stellar year in ‘24 with sales up 30%

  • There are some risks from consumer belt-tightening discretionary SKUs

  • Potential to generate $1bn of FCF in a few years

  • Forward product launch cycle integral to growth prospects

  • Looks interesting at sub 15x P/E or ~$80

3. Pandora A/S (PNDORA DC)

• EV & Market Cap: $14.9bn (USD) & $13.5bn (USD)

• Industry: Jewelry

• What do they do?

  • Luxury jewelry manufacturer and store operator

  • Full jewelry brand encompassing precious stones, gold, silver

  • Targeting 1,400 concept stores by YE ‘26 from 425 as of Q4 ‘24

• ‘25 & ‘26 P/E: 15.4x & 12.8x

• PEG & EPS growth: ~0.6x PEG & ~21% EPS growth in ‘26

• % off from 30d & all-time high: 20% & 20%

• Interesting from here?

  • High quality profile: 7-8% organic topline growth with ~80% gross margin / ~25% EBIT margins

  • Concern is that high-end sales slow, although this is a more durable subset of the consumer wallet (HNW+ likely represents a significant share of sales)

  • Looks interesting as a way to play high-end consumer strength

4. DraftKings (DKNG)

• EV & Market Cap: $19.5bn $ $19bn

• Industry: Sports Betting

• What do they do?

  • Online sports betting duopoly (for the most part) with Fanduel

  • Best-in-class UI with a durable advantage over casino-operated books

  • Currently legal in 25 U.S. states

• ‘25 & ‘26 P/E: 28.4x & 19.5x

• PEG & EPS growth: ~0.4x PEG & ~46% EPS growth in ‘26

• % off from 30d & all-time high: 28% & 48%

• Interesting from here?

  • Still pricey at ~20x EPS as there is regulatory risk around increasing taxes

  • SBC offender, but I think DKNG and FLUT should trade on FCF - SBC

  • At 20x ‘27 FCF - SBC, there is 50% upside at DKNG

5. Wise PLC (WISE LN)

• EV & Market Cap: $19.7bn (USD) & $12.2bn (USD)

• Industry: Transaction processing

• What do they do?

  • International remittance and money flows provider

  • Platform enables multi-currency money transfers

  • Also operates “a bank” through which they earn Net Interest Income

• ‘25 & ‘26 P/E: 27.3x (‘24) & 24.7x

• PEG & EPS growth: ~2.3x PEG & ~11% EPS growth from ‘24-‘26

• % off from 30d & all-time high: 19% & 22%

• Interesting from here?

  • Has been an exceptional winner in the payments space

  • Net Income margin should decline along with rates causing slowed EPS growth

  • Would wait for this to get cheaper, perhaps around 20x EPS (~GBP 7.50)

6. TransUnion (TRU)

• EV & Market Cap: $20.6bn & $16.1bn

• Industry: Credit Reporting Agency

• What do they do?

  • Offers consumer credit reports and risk / information services

  • Reports are used by lenders to determine consumer creditworthiness

  • Triopoly along with Experian and Equifax

• ‘25 & ‘26 P/E: 20x & 16.9x

• PEG & EPS growth: ~0.9x PEG & ~19% EPS growth in ‘26

• % off from 30d & all-time high: 19% & 34%

• Interesting from here?

  • Recent acquisition makes the PEG and EPS look optically better

  • Trades at a several turn discount to EFX and EXPGY on P/E

  • Interesting with around 50% upside from here if it re-rates back to ~25x P/E

7. ResMed (RMD)

• EV & Market Cap: $32.7bn & $32.5bn

• Industry: Healthcare Equipment

• What do they do?

  • Medical equipment manufacturer and seller for sleep disorders (think CPAP)

  • Treats chronic sleep and respiratory illnesses such as COPD

  • Primarily used in the home and has a SaaS tracking solution

• ‘25 & ‘26 P/E: 23.3x & 21.2x

• PEG & EPS growth: ~2.1x PEG & ~10% EPS growth in ‘26

• % off from 30d & all-time high: 16% & 26%

• Interesting from here?

  • Has been on a strong run as they have taken share from competitor Philips

  • Not quite a bargain like it was around $150 in late 2023

  • Would wait for a further drawdown and a mid to high teens P/E

8. Vulcan Materials (VMC)

• EV & Market Cap: $34.8bn & $30bn

• Industry: Construction Materials

• What do they do?

  • Construction aggregates producer across asphalt, ready-mix concrete, crushed stone used in roads, tunnels, bridges, airports, etc.

  • ~50% of revenue from the gulf coast market where it operates local monopolies across 23 states

• ‘25 & ‘26 P/E: 26.8x & 22.8x

• PEG & EPS growth: ~1.3x PEG & ~17% EPS growth in ‘26

• % off from 30d & all-time high: 19% & 24%

• Interesting from here?

  • Beneficiary of “build America” programs and infrastructure fiscal stimulus

  • Earnings compounder with superb aggregates pricing power

  • Likely to wait for a further drawdown although attractive on PEG ratio

9. Autodesk (ADSK)

• EV & Market Cap: $53.8bn & $53.6bn

• Industry: Application Software

• What do they do?

  • Design, engineering, and construction software for 2D and 3D applications

  • AutoCAD is essential to builders and manufacturers developing products

  • New transaction model should help push operating margins to ~42% by ‘26

• ‘25 & ‘26 P/E: 30.3x & 26.4x

• PEG & EPS growth: ~1.8x PEG & ~15% EPS growth in ‘26

• % off from 30d & all-time high: 20% & 27%

• Interesting from here?

  • SaaS revenue accelerated to 14% growth as of Q4 on $1.5bn of FCF in the year

  • Trades at ~25x NTM FCF, solid for a rule of 40 business, but no bargain

  • Would wait for a pullback to the ~$210 level where it is cheap on FCF

10. Moody’s (MCO)

• EV & Market Cap: $84bn & $79.5bn

• Industry: Information Services

• What do they do?

  • Credit rating, research, and risk analysis information services business

  • Publishes credit ratings on debt listings and their issuers

  • Analytics division provides research, data, and insights to corporates

• ‘25 & ‘26 P/E: 31.3x & 27.9x

• PEG & EPS growth: ~2.2x PEG & ~12% EPS growth in ‘26

• % off from 30d & all-time high: 17% & 17%

• Interesting from here?

  • 17% drawdown for a oligopoly name, attractive if looking to high-grade a portfolio into a potential economic slowdown

  • Basically a toll road monopoly on the financial system

  • There is a lot to like (pretty consensus) but I’d want to wait for ~25x P/E

11. Hermes (RMS FP)

• EV & Market Cap: $275bn (USD) & $288bn (USD)

• Industry: Luxury goods

• What do they do?

  • Designs and sells luxury leathergoods, clothes, perfumes, watched, etc.

  • Premium / pinnacle luxury goods with a fantastic track record

  • Ability to take price is relatively unmatched across any luxury good

• ‘25 & ‘26 P/E: 53x & 48x

• PEG & EPS growth: ~2.9 PEG & ~16% EPS growth in ‘26

• % off from 30d & all-time high: 15% & 15%

• Interesting from here?

  • Could raise prices 30% overnight and people would still buy products

  • I’ll quote Munger on Hermes’ valuation specifically:

    • “I suppose if you offered me Hermès at a cheap enough price I'd buy it, but short of that, I'm not going to buy any style company.”

  • On prices +30%, Hermes earnings might be +40%, maybe 30x is a fair multiple

  • Interested in shares below EUR 2,300 where +40% earnings * 30x is in reach

12. Alphabet (GOOGL)

• EV & Market Cap: $1,969bn & $2,035bn

• Industry: Internet

• What do they do?

  • Web-based search, video platform, cloud infrastructure, mobile OS

  • Monopolized search (margins >90%) and could do ~$180bn FCF by ‘30

  • Conglomerate with businesses like Google, Google Cloud, YouTube, Waymo

• ‘25 & ‘26 P/E: 18x & 15.8x

• PEG & EPS growth: ~1.1x PEG & ~15% EPS growth in ‘26

• % off from 30d & all-time high: 20% & 20%

• Interesting from here?

  • Contentious one: competitive threats, risks to Search, Waymo, and regulatory

  • Not quite at a trough multiple (2yr forward P/E was ~12.5x in ‘22) but attractive entry if you believe they can navigate AI search risks

  • Google SOTP analyses peg value at $225 - $250 / sh

  • Interesting entry level over the short and long-term

If you made it this far, congrats.

My top picks from this list are: GTLS, PNDORA, DKNG, TRU, VMC, and GOOGL. I’ll plan to track this list and the top picks list vs the S&P 500. Thanks for following along!