I Split My 65-Stock Watchlist Into Three Tiers: Why 9%, 12%, and 15% Are Completely Different Decisions

Sorting 65 names revealed three distinct tiers

There are 65 stocks on my watchlist right now. Thirty-seven of them have moved into my calculation range, and I've sorted those 37 into three tiers by expected annual return over the next decade. Fourteen project 9-10%. Thirteen project 11-15%. Ten project above 15%.

On paper that's just a sorted list. It stops being boring the moment you realize what determines the tier — and it isn't the quality of the business.

Are the tier-one companies worse than the tier-three ones? Not remotely. Usually it's the opposite. The only variable that assigns a company to a tier is the price printed on the screen today.

Tier one — 14 names sitting on intrinsic value (9-10%)

The definition here is simple: buy today and, under my assumptions, you earn roughly 9-10% annually over ten years. Price and value have converged.

Here's the roster: Tractor Supply 10%, DoorDash 10%, Amazon 10%, Lowe's 10%, Visa 10%, Google 9%, Nvidia 9%, Hershey 9%, Netflix 9%, Chipotle 9%, Otis 9%, UPS 9%, HP 9%.

Look at those names. Nobody lands in tier one because the business is bad. Visa, Amazon, Google, and Nvidia are top-decile businesses by almost any measure. And I won't buy a single share of any of them at these prices.

One reason: 9-10% is roughly what the market itself has delivered over long stretches.

When you buy an individual stock, you take on risk the index doesn't carry. Management turns over, regulators show up, a product cycle misses, an accounting issue surfaces. In an index that idiosyncratic risk gets diluted away. In a single position, it's entirely yours.

If the reward for carrying that extra risk is the same return the market hands you for free, that's a bad trade. I buy individual stocks to beat the market. I don't buy them to match it.

Tier two — 13 names that are awkwardly attractive (11-15%)

The second tier: Sprouts Farmers Market 15%, Microsoft 14%, Meta 14%, Qualcomm 14%, Nike 14%, T. Rowe Price 13%, LVMH 13%, Disney 12%, Ulta 12%, Pool Corp 12%, Target 11%, Airbnb 11%, Paycom 11%.

Honestly, this is the most dangerous tier. Not because the companies are risky, but because this is where an investor's discipline breaks.

The market gives you 9-10%. These print 12-14%. The spreadsheet says you beat the market. The urge to click buy is real. But that number is stacked on top of assumptions I chose. Shave one percentage point off the revenue growth line, or drop the exit multiple from 18x to 15x, and 12% becomes 9% instantly.

Which means the excess return in this tier can vanish inside the error bars of my own model. That's not alpha — that's rounding.

So I treat this band as a waiting zone rather than a buying zone. Instead of buying shares here, I'll sell a cash-secured put at the price I actually want. If it comes to me, I own it at my price. If it doesn't, I keep the premium.

Tier three — the 10 names I actually pull the trigger on (15%+)

The final tier: Builders FirstSource 28%, Southwest 27%, Lululemon 23%, Adobe 21%, American Express 21%, Alibaba 20%, Uber 20%, PayPal 19%, Accenture 17%, Intuit 16%.

My personal hurdle is a 15% IRR. Clear that, and I'll buy.

I know 15% is a high bar, and I don't recommend it to everyone. It's the output of my age, my asset mix, the other investments I already hold, and how long I can sit in cash without getting itchy. Someone early in their wealth-building years who insists on 15% may go years buying nothing at all.

The real reason I use 15% isn't the excess return — it's error absorption. A position bought against a 15% target still lands near market returns when my assumptions turn out to be meaningfully wrong. A position bought against a 10% target goes negative-alpha the moment reality drifts. Margin of safety isn't a tool for predicting the future correctly. It's a landing pad built in advance for the times you don't.

What separates the tiers is price, not the ticker

Tier	Expected annual return (10yr)	Count	Character	My action
1 · At intrinsic value	9-10%	14	Price ≈ value	Watch only. Interested if it falls
2 · Modestly undervalued	11-15%	13	Fragile to assumption error	Wait · sell cash-secured puts
3 · Ample margin of safety	15%+	10	Price absorbs error	Actual buy candidates

The important thing in that table isn't the right-hand column. It's that names migrate between tiers over time. Microsoft sits in tier two today; a 10% drawdown moves it to tier three. The company doesn't change at all, but my behavior changes completely.

Finding a great business and making a great investment are two separate jobs. The first is business analysis. The second is a price judgment. Most investors do the first and skip the second entirely.

Why you shouldn't copy this list

Let me be direct: don't buy anything because it's on my watchlist or because I own it.

Don't buy something because Warren Buffett owns it either. His holding period, capital base, tax situation, and cost basis are nothing like yours. Buying because you saw a headline or a video is worse still.

Spotting a name that interests you and then digging in yourself is great — that's how I start too. But the step that follows is non-negotiable. Put in your assumptions, put in your required return, and calculate for yourself how far the price you'd pay sits from the value you'd receive.

The same stock can be tier three in my model and tier one in yours. That doesn't make either of us wrong; the inputs simply differ. What matters is that your numbers are actually yours.

FAQ

Q: Are 9-10% expected-return stocks genuinely off-limits? A: Not off-limits — just not worth the single-stock risk. At the same expected return, a diversified index gives you better risk-adjusted efficiency. An individual position is only justified when it can beat the market.

Q: Isn't a 15% IRR hurdle unreasonably high? A: It is high, which is why I don't push it on anyone. Twelve percent may be more realistic if you're early in your accumulation years, and it still leaves meaningful room above the market. The size of the number matters less than the discipline of setting it before you buy and refusing to act below it.

Q: What if nothing qualifies for tier three? A: You buy nothing and wait. Cash is a position. Ten buy candidates out of 65 watchlist names means I take no action at all on the other 55. The most underrated skill in investing is the ability to do nothing.

Q: How do you calculate the expected returns that assign the tiers? A: I run three cases — conservative, base, optimistic — across revenue growth, net margin, and the exit P/E or price-to-free-cash-flow multiple ten years out, then solve backward for the implied return. The point is running all three. Calculate one number and you'll believe the number. Calculate three and you'll believe the range.