Every private and institutional investor has their own way of stock picking. A genuine comparison among peers alone can be laborious, but sometimes financial media brings new views to this. It was nice to see Finnish financial daily Kauppalehti listing the top quality companies on Nasdaq Helsinki at the end of March.
In the listing that Kauppalehti’s analyst Ari Rajala helped make, good quality stood for financial quality, provided by profitability, safety and quality of earnings. Gofore deservingly made it to fourth place on the listing, which is something we can be very proud of.
In uncertain times, attention naturally turns to investment targets that provide stable growth and value formation. A quality company’s business must be exceptionally profitable, which can be attained by having a differentiating competitive advantage. Competitive advantage also translates to stable earnings, which is what Gofore has been serving its happy shareholders for years.
A stable growth company – not a paradox
As an example of a satisfied shareholder, I will use a positive flagging that took place around the same time of the article. Swedish asset management company Alcur has increased its Gofore stake over two years over the 5% limit to 7.2%, which is not just a result of active rapport and good investor relations.
Alcur Grow fund’s investment philosophy resonates with both the choice to accumulated holdings and the quality company thinking. Alcur Grow prefers companies who put their cash flows to work, as well as show stable organic growth and scale with the growth. Alcur Grow prefers companies whose short-term value is too pessimistic in the fund’s view, considering the long-term outlook. Gofore is perhaps a rather rare combination or exceptionally strong growth and steady profitability track record, making the risk-profit ratio ideal for an investor.
Considered as the world’s best investor, Warren Buffett has said he only invests in quality companies with a strong profit-making ability and a high return on capital ratio, which have been achieved with little or no debt. A too high debt ratio increases dependency on interests and cycle changes. This is why high return on capital and low debt ratio were also among Kauppalehti’s comparison criteria.
Reporting adds safety
Gofore considers it a priority to offer profitability, safety and quality of earnings to its shareholders. There are no safe havens on the stock market, but a stable, predictable business combined with active reporting is as close to unsurprisingly safe as a direct share investment can get.
We also find it important to invest in the predictability of our stable growth. In addition to Kesko’s sales numbers and Inderes – who in their words develops monthly reporting inspired by Gofore – we are the only company on Nasdaq Helsinki who reports monthly performance.
Without the quality companies’ differentiating competitive advantage I mentioned earlier, we wouldn’t be a profitably growing company. This competitive advantage is offered to our great customers and developed further every day by each of the over 1,300 Goforean top experts. Over half of them also save on Gofore’s shares, and hence obviously consider their investment a quality company.