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- The ROA Watchlist portfolio is up 480%
Dear Investors,
Today, we look at the ROA Watchlist portfolio.
It has been 5 months since our last look. I’ll bet some of our newer subscribers don’t even know what this is.
The ROA Watchlist is a portfolio created from all the companies that we have discussed, and that we consider to be extraordinary.
The portfolio also gives you a convenient all-in-one list, where you can find everything we have looked at.
Let’s dig in.
Today’s menu:
ROA Watchlist portfolio performance
ROA Watchlist portfolio financial ratios
Conclusion
Extraordinary Investor buying the dip during the tariff war
ROA Watchlist performance
The graph below shows the performance of the ROA Watchlist portfolio compared to two benchmarks - the S&P 500 and a World Index.
Despite recent market turmoil, if you had been a long-term holder of an equally weighted portfolio comprising the ROA Watchlist companies, your investment would now be 5.8 times larger than it was on 1 January 2019.
A $100 000 would have become $580 000 in these six and a bit years. The same amount invested in the benchmarks would have become $262 000 in the S&P 500 or $230 000 in the World Index.
ROA Watchlist vs S&P 500 and World Index
The table below shows the returns for each portfolio over different time periods. The ROA Watchlist is significantly ahead in all periods.
Return period | ROA Watchlist | S&P500 | World Index |
|---|---|---|---|
1-year | 15.9% | 13.6% | 13.1% |
3-years | 33.3% | 15.6% | 14.5% |
5-years | 31.1% | 17.4% | 15.9% |
Since 1 Jan 2019 | 31.8% | 16.3% | 13.9% |
Financial ratios
Where does this superb stock market performance come from?
It all starts with superior operating performance at the company level. The main premise of our Extraordinary Companies investment philosophy is that extraordinary companies will deliver extraordinary performance in the long-run.
In general, compared to the S&P500, the ROA Watchlist companies:
Are more profitable (higher margins)
Earn higher returns (higher ROCE)
Have higher valuations (lower FCF yield)
Use less debt (lower risk)
Are capital light (lower capex)
At the bottom of the table, you can see the ROA Watchlist portfolio average versus the S&P 500 average. In every meaningful way, the ROA Watchlist portfolio is superior to an S&P 500 portfolio.
ROA Watchlist - May 2025
Conclusion
The ROA Watchlist consists of 34 companies. As a rule of thumb, anything above 20 companies is a reasonably diversified portfolio. So there is plenty of diversification in our portfolio.
Usually, the more companies you own, the closer your portfolio performance is to the market. Therefore, with so many companies it is surprising that the ROA Watchlist outperformed the benchmarks so significantly.
This might be testament to the strategy of finding the best companies in the world and then owning them for a long time. That’s a simple strategy. But who says investing needs to be complicated?
Perhaps, we can summarise our whole investment approach with the acronym KISS.
Keep it Simple, Stupid.
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