5 new stocks to consider from my Compounding Quality screen

In my last article, I looked at the performance of my compounding quality screen over the last two years. I concluded that a more active approach to management might have improved performance.

On revisiting the screen results, I found that 12 stocks were still the same, but that eight new companies had also appeared. This week I’m going to take a closer look at five of these to try and understand whether they have the potential to become true compounders.

To start with, here’s the full list of eight new stocks:

Briefly, I want to explain why I’ve ruled out three of these from consideration in this piece:

• Integrated Diagnostics: as Graham commented in June, this may well be an excellent business with enviable quality characteristics. But it operates in the Middle East and Africa and reports in the Egyptian pound. High inflation, a volatile currency and geopolitics add a layer of risk that make this hard to analyse.

• Central Asia Metals: this mining business is popular with private investors and doesn’t have a bad record. But like all commodity producers it’s inherently cyclical and thus unlikely to ever be a true high-quality compounder.

• Foresight Group: I have a broadly favourable view of this specialist asset manager, which is focused on infrastructure and private equity and benefits founder management. However, the company’s exposure to cyclical forces and external asset values mean that I’d probably choose to analyse it through a value and growth lens.

These exclusions leave me with five stocks I am going to consider:

• Wise

• Spectra Systems

• Experian

• FRP Advisory

• Sage

Wise (LON:WISE)

Unlike many of the stocks in this screen, currency transfer specialist Wise’s QualityRank is not the currency transfer specialist’s strongest suit:

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