The Quality Stocks Investment Framework: My Complete GARP Investing Process

Over the past 15 years, the way I invest has evolved considerably. Like many investors, I started by betting on stocks hoping to get rich quickly. It did not work. Then I focused on finding great companies: huge growth, attractive markets with strong tailwinds, competitive advantages and solid financials. But experience gradually taught me that finding a great business is only one part of the investment process.

You can identify a great company and still make a poor investment by paying too much. You can calculate its fair value correctly and still execute badly. You can buy at the right price only to hurt your returns through poor position sizing, emotional decisions or selling for the wrong reasons.

Good investing requires more than good stock picking. It requires a process. Over time, I developed the Quality Stocks Investment Framework to structure my own investment process. Now I am sharing it with you so that everyone can benefit from it and make investment decisions based on rational analysis rather than pure narratives.

I first formalized it in my original guide to how I analyze stocks. Since then, both the framework and Quality Stocks have evolved. So it was time to bring everything together into one complete guide, from finding and valuing a business to buying, managing and eventually selling it.

The Quality Stocks Investment Framework is my GARP (Growth at a Reasonable Price) investing methodology to select high-quality companies, estimate their expected returns and fair value, determine buy zones and manage them within a portfolio.

At its core of the Quality Stocks Invesment Framework, there is one simple philosophy:

GARP Investing = Great Businesses + Attractive Valuations

I don’t want mediocre businesses simply because they are cheap. And I don’t want exceptional businesses at any price. I want great businesses built for the decade, bought at execution targets built for right now. The objective is not to predict exactly what a stock will do next, nobody can. It is to bring clarity, consistency and discipline to capital allocation.

The complete Quality Stocks Investment Framework can be summarized in 5 steps following a simple logic

🔎 FIND → 🏢 UNDERSTAND → 💰 VALUE → 🎯 EXECUTE → 🚪 EXIT

1. 🔎 Selection & Scoring - Find potential great businesses

2. 🏢 Business Model Analysis - Understand how they create value

3. 💰 Expected Returns & Fair Value - Determine what they are worth

4. 🎯 Buy Zones - Execute with discipline

5. 🚪 Sell Decision - Know when to exit

2 elements apply throughout the framework:

1. ⚖️ Position Sizing & Money Management - Manage risk and capital exposure

2. 📊 Monitoring - Follow the thesis and business performance

Let’s go through each one.

The stock market is made up of thousands of companies. The first objective of the Quality Stocks Investment Framework is to decide which companies deserve deeper research. For that, I use a proprietary scoring system built around the 3 pillars of GARP investing each of them ranked from 0 to 100.

• Growth. Is the business expanding? Growth is the primary return engine over the long-term. It is therefore what I look at first. I look at both historical performance and forward expectations across key metrics such as revenue and EPS, with particular attention to the consistency of that growth

• Quality. Is the business strong? Growth alone is not enough. I want businesses capable of converting that growth into profits efficiently and delivering long-term shareholder value. The Quality score therefore looks at characteristics such as profitability, returns on capital and balance-sheet strength

• Valuation. Is the stock reasonably priced? Finally, even the best company can become a bad investment when expectations are too high. The Valuation score compares the company's current valuation with its growth profile, using metrics such as PE, FCF yield and PEG. At this stage, I am not trying to calculate exactly what the company is worth.

The output is simple:

• 📈 Growth: XX/100

• 🏆 Quality: XX/100

• 💰 Valuation: XX/100

Together, they provide a fast and consistent way to compare companies across the market and identify the most promising candidates for deeper analysis. But, there is something to keep in mind: the Quality Stocks scores are filters, not buy signals. That is why passing the quantitative filter only earns a company the right to move to the next stage.

Numbers alone are not enough to understand a company. Before trying to determine what a business is worth, I need to understand how it actually makes money and whether its business model can create value over the long term.

I start with the basics:

• What does the company sell?

• Who are its customers?

• How does it make money?

• I also look at the underlying market: its size, growth prospects, competitive dynamics and the company’s positioning within it

The objective is to understand the fundamental drivers behind the numbers. Is the company operating in a structurally growing market? Does it have a competitive advantage? Can it gain market share? And ultimately, what could make the business significantly larger and more profitable 5 to 10 years from now?

I then use a simple 6-point Business Model Checklist to quickly assess whether the company has the characteristics I typically look for:

• Acquisitions. Does the company have a proven ability to use acquisitions as an additional growth engine?

• Recurring revenue. Does the business generate recurring or highly predictable revenue?

• Increasing margins. Are margins consistently improving as the company grows?

• Market-share gains. Is the company taking share from competitors and strengthening its market position?

• No (or low) dilution. Is the company protecting shareholder ownership through limited dilution or reducing its share count through buybacks?

• Risk level. What are the main risks to the investment thesis and how significant are they?

Not every great business needs to check every box. A company can have an exceptional business model without recurring revenue, for example. The checklist is not a rigid pass-or-fail test. It is a quick way to identify the characteristics, strengths and weaknesses of the business before going deeper.

Only once I understand those three things do I move to valuation.

Once I have identified a strong company and understood how its business model creates value, the next question is obvious: what return can I reasonably expect if I invest at today’s price?

To answer it, I use the Quality Stocks Expected Return Model, my proprietary approach combining a projected Total Shareholder Return (TSR) with a Fair Value calculation.

Rather than relying on a single price target, I break down the potential shareholder return into 6 components, each estimated on an annualized basis:

• Organic growth. The expected growth of the existing business

• Acquisitions. The additional growth expected from M&A

• Margin expansion/contraction. The impact of improving or declining profitability

• Valuation expansion/contraction. The impact of the valuation multiple moving toward a normalized long-term level

• Dividends. The cash return distributed directly to shareholders

• Share buybacks. The impact of a decreasing or increasing share count

Together, these 6 components provide an estimate of the stock’s potential annualized return:

Projected TSR = Organic growth + Acquisitions + Margin expansion/contraction + Valuation expansion/contraction + Dividends + Share buybacks

This decomposition is important because 2 stocks offering the same projected return can have completely different investment profiles. It also helps me move beyond static valuation metrics such as a simple PE comparison by explicitly identifying the assumptions required to generate the expected return.

More importantly, those assumptions can then be monitored against the company’s actual performance over time. If growth, margins, capital allocation or valuation evolve differently from my initial assumptions, I can update the model and reassess the expected return accordingly.

The Quality Stocks Fair Value is typically calculated using 3 scenarios: a Bull Case, Base Case and Bear Case. Each scenario uses different assumptions for the company’s future growth, margins and other key financial drivers, with a separate Discounted Cash Flow (DCF) valuation calculated for each. As with the TSR calculations, this makes it easy to track the different assumptions.

Finding a great business with attractive expected returns is not enough. The price at which I enter matters. Who hasn’t bought a stock only to watch its price drop immediately afterward?

Market prices move much faster than business fundamentals, often leading investors to overpay during periods of excitement or panic during drawdowns. Instead of trying to identify one perfect entry price, I use staggered Buy Zones to define in advance the price levels at which I am willing to deploy capital.

The Quality Stocks Buy Zones combine fundamental and technical analysis:

• Fundamental analysis tells me whether the expected return becomes attractive enough at a given price

• Technical analysis helps identify relevant support levels and price areas where an entry may offer a better risk/reward

I typically define 3 Buy Zones, with the expected return becoming increasingly attractive as the stock price declines:

• Buy Zone 1. The stock reaches an attractive entry point and I can start building a position

• Buy Zone 2. The risk/reward becomes more compelling and I can increase my exposure

• Buy Zone 3. The stock reaches a particularly attractive level where I may deploy additional capital

This staggered approach prevents me from trying to predict the exact bottom. I don’t need to know whether a stock will fall another 5%, 10% or 20%. I need a plan for what I will do if it does.

There is, however, one critical rule: a Buy Zone is never an automatic Buy signal.

A falling stock price can create an opportunity, but it can also reflect a deterioration in the underlying business. Before adding to a position, I always reassess whether the investment thesis and the assumptions behind my Quality Stocks Expected Return Model remain valid.

And even when the thesis remains intact, an attractive price does not determine how much capital I should deploy. Every investment must also respect my rules for position sizing, risk management and overall portfolio diversification.

Buying is only half of the investment decision. Eventually, I also need to decide when to sell. My philosophy here is relatively simple: I sell rarely.

A stock can only become a 10-bagger if I allow it to become one. Selling great businesses simply because they have appreciated, reached an arbitrary price target or become a large winner can significantly limit the power of long-term compounding.

That is why my default decision for a great business with an intact investment thesis is generally to hold and let it compound. There are, however, a few situations that can make me reconsider.

• The investment thesis is broken. This is by far the most important reason for me to sell. Every investment should start with a clear thesis: why I believe the business can create significantly more value over time. If the share price falls but the thesis remains intact, I don’t automatically have a reason to sell.But if the original thesis itself is no longer valid, I sell immediately. The biggest mistake at that point is to invent a new thesis simply because I don’t want to realize a loss.

• The valuation becomes extreme. Sometimes the business remains excellent but the stock price moves so far ahead of fundamentals that the expected return becomes unattractive. This is where I return to the Quality Stocks Expected Return Model. If the valuation becomes extreme relative to realistic growth and profitability expectations, I may decide to trim or, in exceptional cases, exit the position. But an expensive stock is not automatically a Sell.

• The position becomes too large. Sometimes the problem is neither the company nor its valuation, tt is the portfolio exposure. A successful investment can grow into a disproportionately large position and make the overall portfolio excessively dependent on one company, sector or investment thesis. In that situation, I may trim the position to manage risk without abandoning the long-term investment thesis.

Just as important as knowing when to sell is knowing when not to sell. I generally don’t sell simply because:

• The stock has gone up significantly

• I am finally back to break-even

• The stock price is falling

• The market or financial media suddenly becomes pessimistic

• The stock reaches a specific price target

• I become impatient because the thesis is taking longer than expected

Long-term investing is not about constantly finding reasons to trade. It is about finding exceptional businesses, buying them at attractive prices and giving compounding enough time to work.

A 10-bagger can only become a 10-bagger if I don’t sell it along the way

🔴 Thesis broken → Sell
💰 Valuation absurd → potentially Trim / Sell
⚖️ Position too large → potentially Trim
✅ Otherwise → let the business compound

Finding the right stock and the right entry price is only part of the equation. How much capital I deploy also matters. My staggered Buy Zones naturally lead to staggered position building. Rather than initiating a full position at once, I progressively increase my exposure as the stock consolidates and attractive entry opportunities appear.

My position sizing also depends on the stock’s price action:

• When a stock is consolidating or showing healthy momentum, I can progressively build the position through my Buy Zones, generally up to a maximum of around 10% of the portfolio at the time of purchase

• When a stock remains in a persistent downtrend, I am more cautious. Even if fundamentals remain attractive, I generally avoid building the position above 5% of the portfolio until momentum improves

This second rule is particularly important for risk management. A stock can look fundamentally attractive and continue falling for much longer than expected. Limiting my exposure during a persistent downtrend reduces the potential damage if my thesis turns out to be wrong. If the stock subsequently recovers strongly, the position can naturally grow toward 10% of the portfolio through price appreciation without requiring me to deploy additional capital while momentum remains negative.

Position sizing is only one dimension of risk management. Owning 20 stocks does not necessarily create a diversified portfolio if they are all exposed to the same underlying risk. I therefore also seek diversification across:

• Sectors, to avoid excessive exposure to a single industry

• Investment themes, to avoid having multiple companies dependent on the same underlying trend

• Geographies, to reduce concentration in a single country or economic environment

The objective is not to diversify for the sake of diversification. It is to avoid allowing one company, one theme, one sector or one geography to determine the performance of the entire portfolio.

Investing does not stop once I buy a stock. An investment thesis needs to be continuously tested against what the company and its market are actually doing. My monitoring process is primarily fundamental and follows the natural rhythm of corporate reporting.

• Quarterly earnings. Every quarter, I review the company’s results to compare actual performance with the assumptions behind my investment thesis and the Quality Stocks Expected Return Model. I focus particularly on changes in growth, margins, cash generation, market share, guidance and capital allocation. The objective is not to react to every quarterly fluctuation, but to determine whether the long-term trajectory remains consistent with my expectations

• Investor presentations and company communication. I regularly read earnings presentations, investor presentations and other company communications to understand how management sees the business evolving. Beyond the headline numbers, these documents help me track strategic priorities, new products, investments, acquisitions, competitive positioning and changes in the underlying market.

• Competitors and the broader market. Understanding a company also requires understanding its competitors. I therefore follow the earnings and investor presentations of key competitors and other companies across the same value chain. This helps distinguish company-specific developments from broader industry trends and identify changes in market growth, market share, pricing, competitive intensity and customer demand.

Ultimately, monitoring comes back to one question: is the investment thesis becoming stronger, remaining intact or starting to deteriorate?

When new information materially changes my assumptions, I update the analysis accordingly: Growth, Quality and Valuation scores, projected TSR, Fair Value and Buy Zones can all evolve over time. This is exactly the kind of information I share in my Portfolio Reporting every month.

The Quality Stocks Investment Framework is not designed to predict what the market will do tomorrow. It is designed to make better investment decisions without needing to.

The process starts by finding companies with attractive Growth, Quality and Valuation, then understanding how their businesses actually create value. From there, I estimate their potential returns through the Quality Stocks Expected Return Model, determine the prices at which I am willing to invest and progressively build positions while managing risk.

And once I own a company, the process continues. I monitor the thesis, update my assumptions as new information becomes available and sell only when there is a fundamental reason to do so.

Ultimately, the entire framework comes back to 5 actions:

🔎 FIND → 🏢 UNDERSTAND → 💰 VALUE → 🎯 EXECUTE → 🚪 EXIT

with Position Sizing & Money Management and Continuous Monitoring applying throughout the process.

None of this eliminates uncertainty. No framework can. The objective is to make uncertainty manageable by replacing narratives, emotions and impulsive decisions with a repeatable investment process.

That is what GARP investing means to me: Great Businesses + Attractive Valuations