Happy Sunday

Every week I run the same scan. Quality companies below their 200-day moving average.

The 200-day is one of those lines that actually matters. When good companies drop below it, long-term money starts looking.

But most stocks below their 200 deserve to be there. Cheap for a reason. So I filter for quality first.

Let’s dig in…

1. Profitable
The business earns strong returns on every dollar it invests. Not just "making money" —> making money efficiently.

2. Cash-Generating
Profits are real cash, not accounting tricks. Easy to fake earnings. Hard to fake cash in the bank.

3. “Safe”
Low debt, can pay its bills. Won't blow up if the economy gets rough.

4. Consistent
Actually making money from operations. No gimmicks, no one-time windfalls propping up the numbers.

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Companies below their 200 MA, scoring 6/8+ on quality

INTU
is down 40% because the market thinks ChatGPT kills TurboTax. The actual business just posted Q1 revenue up 18%. Credit Karma up 27%. QuickBooks Online up 25%. Guiding 12-13% growth for the year. Earnings Feb 26.

APP
peaked at $745 in December, now $390. A short report started the slide, AI fears kept it going. Q4 beat. Q1 guidance beat. Software margins are 81%. They sold the gaming business and went all-in on their ad platform. Either AXON works and this is a steal, or it doesn't and the stock deserved to get cut in half.

NFLX
has 325M subs, 31% margins, and an ad tier with 190M users. Password crackdown worked. Old news. The new story is the $83B Warner Bros deal, which is why the stock has been weak. Ad revenue should double to $3B this year. The stock split makes the $77 price look weird but it's real. Big bet on integration.

YELP
did $324M in free cash flow last year and bought back 22% of shares since 2021. Just authorized another $500M. But 2026 EBITDA is guided down 15% as they pour money into AI. Revenue flat. Stock dropped on earnings because near-term numbers are soft. Long-term depends on whether the AI spend actually works.

NVR
runs the best homebuilder model in the business. 34.8% ROE, $2B cash, no land risk. But last year was rough: revenue down 2%, net income down 20%, cancellations at 19%. Q4 beat estimates. Still trades at a premium to every peer. Needs rates to come down to really move.

This is a watchlist, not a buy list. Do your own work.

Stay curious 😎

- John

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