Rule #1 (the 4Ms)
Phil Town's four Ms: meaning, moat, management and margin of safety, measured with the Big Five growth rates.
Phil Town looks for 10% or better yearly growth in return on capital, sales, earnings and book value, debt that free cash flow could repay in about three years, and a price well below value. We use five-year averages and our own fair value for the margin of safety.
Based on Rule #1 (Phil Town, 2006).
$10,000 in this list since 2016
Rebuilt every month from the data public at the time
- Per year
- +8.3%
- All stocks +9.4%, S&P 500 +13.8%
- Worst fall from a peak
- -45%
- All stocks -35%
- Months ahead of all stocks
- 53%
- 120 months tested
- Stocks held, on average
- 9
- Equal weights
- Past 12 months
- +15.0%
- All stocks +4.1%, S&P 500 +12.4%
- Volatility, per year
- 28%
- All stocks 22%
- Sharpe ratio
- 0.33
- All stocks 0.40; return over cash per unit of volatility
- Replaced each month
- 25%
- Share of the list that changes at a rebalance
Live since Oct 19, 2026. Holding the list as published, rebought at each month end: -0.4% against +2.1% for all stocks and +0.7% for the S&P 500, to Oct 30, 2026. Too short a period to read much into.
- Rule #1 (the 4Ms)
- All US stocks, equal weight
- S&P 500 (price only)
Year by year
| Portfolio | 2016from Oct 31 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2026to Oct 19 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| This list | +7% | +13% | -17% | +25% | +13% | -12% | -1% | +53% | +5% | +9% | +2% |
| All US stocks | +12% | +19% |
13 stocks on the list today
As of the close on Oct 30, 2026; 1 joined and 0 left since Oct 29, 2026
| # | Company | Share price | 1D | Market cap | ROIC 5Y | Rev. 5Y | EPS 5Y | BV 5Y | Debt/FCF | Margin of safety |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | $174.40 | −1.4% | $18.7B | 14.7% | 14.0% | 30.7% | 11.3% | 0.5× | +59.9% | |
| 2 |
More quality ideas
A list produced by rules, not a recommendation. Past results in the backtest don't predict future returns. How the backtests work.