- Published on
Major trade in my $150k TFSA Portfolio
- Authors
- Name
- Solo FIRE
I have sold DG and bought MSCI stock in my TFSA.
I discovered MSCI is a very high quality company selling at 18% discount from its 2021 ATH, while its free cash flow (FCF) has grown 30% between 2021 - 2024. MSCI provides indexing and investment research services, which is a very profitable business model similar to Moody's and S&P Global. They provide many popular international indexes such as the EFA and IEMG index. With the trend of passive investing, I believe the company will continue to grow over the next 10 years. Here are some key metrics that reflect the strength of the company:
- 10 YR average revenue growth of 10%
- 10 YR average FCF growth of 15.3%
- 10 YR average ROIC of 31%
- 53% operating margin, 43% net margin
While I still think DG has potential and is trading at a low valuation, I'm disappointed to see its FCF and operating margin continues to fall during the past year of my ownership and I am not sure how much longer it will take for things to start improve. I made the trade because I have limited capital in my TFSA and I can't afford to invest in potential underperformers.
Here is the DCF assumptions and valuation for MSCI:
- TTM FCF $1.18 Billion
- FCF growth rate of 12% (5YR AVG 16%)
- Share repurchase of 1.48% per year (5YR AVG 1.48%)
- Future Price/FCF ratio of 30 (5YR AVG 40)
- Discount rate of 10%
This gives a fair value of around $546.07 per share.
By the way, my TFSA portfolio is publicly shared and updated monthly, so you can check it out anytime.
Comments and Questions
Make sure to leave your comments/questions on my original Blossom post and I will try my best to answer them.
DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.