VerdyktPlaybooksTerry Smith
Terry Smith
Quality franchise screen
Rules-based Verdykt interpretation of public principles. Not affiliated with or endorsed by Terry Smith or Fundsmith.
QualityFundamentals onlyMedium confidenceUS equitiesPremium
QualityMethod familyMediumSource confidence5Documented factorsv1.0Rule version
Screen thesis
Own high-quality franchises: very high returns on capital, fat gross and operating margins, and clean conversion of profit into cash. The screen is intentionally strict on quality and uses cash conversion to filter out accounting-heavy earnings.
Rulebook
Every rule is visible. Required rules must pass; scoring and guardrail rules shape or caution the result.
RuleThresholdRoleRationale
Return on capital employed>= 20%RequiredFranchise economics
Gross margin>= 50%RequiredPricing power
Operating margin>= 20%RequiredOperating quality
Cash conversion>= 90%RequiredEarnings become cash
Net debt / EBITDA<= 1.5xScoringLow leverage
Verdykt Playbooks are rules-based interpretations of public investing principles. Screens are not affiliated with or endorsed by the named investors or firms, and nothing here is investment advice or a recommendation to buy or sell securities.