Q3: All That Glitters

The third quarter proved to be a somewhat quieter period than the tumultuous second quarter, as investors continued navigating an uncertain economic environment and the country turned attention toward the November midterm elections.

With control of Congress hanging in the balance, the coming months promise no shortage of political debate, economic speculation, and the usual election-year theatrics. While the headlines may have been somewhat less dramatic this quarter, several important developments beneath the surface deserve our attention, particularly the direction of interest rates and an increasingly divided stock market.

Interest Rates and the Frozen Housing Market

One of the more consequential developments of the third quarter was the renewed upward pressure on interest rates, complicating an already challenging environment for the American housing market.

After beginning the quarter with the average 30-year mortgage rate at 6.43%, rates climbed to 7.03% by late September, according to Freddie Mac’s historical mortgage rate data. Meanwhile, the Federal Reserve raised its benchmark interest rate by 25 basis points on September 16, its first increase in more than three years, due to concerns about persistent inflation.

For prospective homebuyers, this was hardly welcome news.

According to the National Association of Realtors’ August existing-home sales report, existing-home sales fell 2% in August to an annualized rate of just 3.98 million homes. Despite the slowdown in transactions, the median existing-home price actually increased 1.6% from the previous year, reaching $429,100.

This is a particularly frustrating combination. Homebuyers are facing both historically elevated prices and substantially higher financing costs, while many existing homeowners have little incentive to sell, given long term financing at low rates. 

Spend any amount of time on social media, and you’ll inevitably come across young Americans expressing frustration about the cost of homeownership. Why could their parents afford a house on a single income, while two college-educated professionals today struggle to purchase their first home?

And frankly, that frustration is warranted. Things are unaffordable for young families.

The problem isn’t quite as simple as suggesting that previous generations had everything handed to them. Mortgage rates exceeded 15% in the early 1980s, and previous generations faced their own economic difficulties. But homes were generally much less expensive relative to household incomes, and the extraordinary increase in home prices over the past several years has made an already difficult situation considerably worse.

During the pandemic, mortgage rates fell below 3%, allowing millions of Americans to lock in extraordinarily cheap financing for the next thirty years. At the same time, limited housing supply, changing consumer preferences, and inexpensive credit helped fuel a remarkable increase in home prices.

When interest rates subsequently surged, those higher prices didn’t simply disappear.

But perhaps the more interesting consequence has been what economists call the mortgage lock-in effect. Millions of homeowners are sitting on mortgages below 4%, making the prospect of selling their homes and taking on substantially more expensive financing decidedly unattractive. 

The result is a housing market caught in something of a stalemate. Existing homeowners are reluctant to sell, prospective buyers struggle with affordability, and transaction volumes remain depressed.

For investors, the implications extend far beyond residential real estate. Homebuilders, mortgage lenders, real estate brokerages, home improvement retailers, and countless other businesses depend on a healthy housing market. When fewer people move, fewer mortgages are originated, fewer commissions are earned, and fewer kitchens are renovated.

As an investor who has owned both homebuilder and home improvement stocks, I’ve watched these developments particularly closely. Until some combination of lower interest rates, increased housing supply, or higher household incomes restores affordability, I suspect these industries will continue facing considerable headwinds.

The Illusion of Market Highs

If you spent the third quarter watching the S&P 500, you might reasonably conclude that things were going well for American investors. The index continued reaching new all-time highs, and the seemingly unstoppable march of the stock market continued.

But for many individual investors, the experience was considerably less pleasant.

While the largest companies in America continued seeing their share prices climb, countless smaller businesses went in the opposite direction. Stocks with little exposure to artificial intelligence, particularly those sensitive to higher interest rates or a weakening consumer, found themselves increasingly out of favor.

During the third quarter, the S&P 500 gained approximately 2.8%, while the equally weighted S&P 500 declined 1.7%. The latter gives each constituent company the same weighting, rather than favoring the largest businesses.

In other words, the headline index was reaching new highs while many of the companies within that very same index were struggling.

The largest technology companies have become so enormous that their performance increasingly dictates the direction of the broader market. The ten largest companies now account for approximately 40% of the S&P 500, allowing their gains to more than offset weakness elsewhere.

Much of this success has been driven by the extraordinary enthusiasm surrounding artificial intelligence.

Microsoft, Alphabet, Amazon, and Meta are collectively investing hundreds of billions of dollars into data centers, semiconductor chips, and the infrastructure necessary to support AI. Those expenditures have created a remarkable boom for the businesses supplying the proverbial picks and shovels.

As a longtime investor in semiconductor equipment manufacturers, I’ve certainly benefited from this trend. But I wonder how long the broader market can remain so heavily dependent on a relatively small group of businesses.

Conversely, the neglect of smaller businesses may eventually create opportunities for investors willing to look elsewhere.

Looking ahead, I’ll be particularly interested in whether the market begins to broaden beyond its largest constituents, or whether the major indexes remain increasingly dependent on the fortunes of a handful of technology giants.

Q3 Performance

As of 10/1/2026, my 10K portfolio was worth $36,211.43.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2026 the SPY had a price of $763.99. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

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Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 19.26% 18.00% 1.26%
2026 (1/1–3/31) -6.03% -4.54% -1.49%
2026 (4/1–6/30) 30.16% 14.26% 15.90%
2026 (7/1–9/30) 0.25% 2.70% -2.45%
Since Inception (8/19/18) 262.11% 203.02% 59.09%
CAGR 17.18% 14.63% 2.55%

The third quarter saw very little change to my portfolio values, with my account going up a quarter of a percent. The SPY fared somewhat better, climbing 2.7%. Though this divergence is hardly noteworthy. Overall, my portfolio continues to compound well, and my CAGR remains over 2.5% above the SPY. If I could keep that up in perpetuity, I will be extremely happy.

The third quarter was another unusually active one for the portfolio, as I exited several positions and added to businesses where I see more attractive long-term opportunities.

Q3 Transactions

Uber Technologies (UBER) — Sold

I decided to exit my position in Uber, largely due to concerns surrounding the future of autonomous driving. Uber has built an extraordinary business, but I find it increasingly difficult to predict what that business might look like ten years from now.

Will autonomous vehicles strengthen Uber’s position as a platform connecting riders and vehicles, or will companies like Waymo and Tesla increasingly bypass Uber altogether?

I certainly don’t know the answer, and Uber may very well continue to thrive. But the uncertainty surrounding its long-term competitive position was enough for me to move on.

Mobility Global (MBGL) — Sold

Mobility Global was a small position received through a spinoff from S&P Global. I had little interest in maintaining such a small holding and decided to sell the shares to free up capital for other investments.

Reddit (RDDT) — Added

I increased my position in Reddit during the quarter as I’ve become increasingly impressed with the company’s business model and long-term prospects.

Reddit occupies a rather unique position on the internet, with an enormous collection of communities and user-generated content that would be exceptionally difficult to replicate. I believe there remains considerable opportunity to improve advertising monetization while continuing to grow its user base.

The growth numbers are outstanding and I saw an opportunity to make Reddit an increasingly larger position in my portfolio. 

Ulta Beauty (ULTA) — Sold

I also exited my position in Ulta Beauty, a company I continue to admire.

Ulta remains an excellent business with a strong competitive position in beauty retail. However, I believe its growth opportunities are more limited than those of several other businesses I’ve been following.

This was less a reflection of anything wrong with Ulta and more a decision to redeploy capital into an investment I believe offers greater long-term upside.

Broadcom (AVGO) — Bought

The most significant new investment during the quarter was Broadcom, where I established a sizable position.

While Nvidia has undoubtedly dominated the conversation surrounding artificial intelligence, I believe Broadcom is emerging as one of the most interesting alternatives in AI computing.

Broadcom specializes in developing custom AI accelerators, often referred to as XPUs, for some of the world’s largest technology companies. Unlike Nvidia’s more general-purpose GPUs, these chips are designed around the specific workloads and requirements of individual customers, potentially offering considerable advantages in cost and efficiency.

Companies like Google are increasingly investing in their own custom silicon to reduce dependence on Nvidia and better optimize their enormous AI infrastructure investments. Broadcom has become a critical partner in that effort, developing custom processors while also supplying the networking technology necessary to connect them.

The growth has been extraordinary. In its latest quarterly earnings report, Broadcom reported AI semiconductor revenue growth of 221% year over year, reaching $16.7 billion. Management expects that figure to increase further in the coming quarter.

I don’t expect Nvidia’s dominance to disappear anytime soon. But the AI computing market is becoming enormous, and Broadcom doesn’t need to displace Nvidia to build an extraordinarily profitable business.

As the hyperscalers continue spending staggering amounts of money on AI infrastructure, I believe Broadcom is exceptionally well-positioned to capture a meaningful share of that investment.

Of course, much of this optimism is already reflected in the company’s valuation. But given the strength of its competitive position, substantial cash generation, and remarkable growth prospects, I believe the opportunity remains attractive.

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter/X, follow me @TheGarpInvestor.

Q2: Better Than Feared

If Q1 was defined by shock, Q2 was defined by the market’s almost unsettling ability to move on.

The war in the Middle East did not disappear. Oil remained volatile. Inflation fears returned. The Federal Reserve stayed cautious. And yet, despite all of that, the S&P 500 finished the quarter near all-time highs, closing June around 7,500 after rebounding from the March lows.

That is the strange thing about markets. They do not wait for the world to feel safe. They do not wait for the headlines to become tidy. They bottom when the future is still unclear, and they often rise while the average person is still trying to understand what just happened.

Oil, War, and the Market’s Memory

Coming into Q2, the fear was simple: the conflict with Iran would keep oil prices elevated, reignite inflation, squeeze consumers, and force the Fed into a more hawkish stance. That was not an unreasonable concern. When a large portion of global energy supply is threatened, the consequences can be dire.

But as the quarter progressed, the worst-case scenario began to fade. There were still flare-ups, still threats, still the kind of headlines that make investors nervous. But oil prices came down from their panic highs, and the market increasingly treated the war as a serious but containable event.

Whether that is wise remains to be seen.

One of the uncomfortable truths about investing is that markets often look cold-blooded. Human beings see war, suffering, risk, and uncertainty. Markets see probabilities, liquidity, earnings, and whether the next data point is better or worse than feared. 

And in Q2, “better than feared” was enough.

Earnings

The simplest explanation for the market’s strength may also be the least dramatic: earnings held up. For all the focus on war, oil, and rates, corporate America continued to do what investors ultimately need it to do. Let earnings grow and compound. That does not mean the market is cheap. It does not mean risks have disappeared. But it does help explain why stocks were able to look past so much bad news. Investors can tolerate a messy world when profits are still moving in the right direction.

This is an important point because it cuts against the more satisfying narratives. It is tempting to say the market rallied because the war cooled down, or because investors expect easier monetary policy, or because AI remains unstoppable. All of that may be true in part. But markets are usually less poetic than that. If earnings estimates are rising, margins are holding up, and companies are guiding with confidence, stocks have a reason to climb. The world can feel unstable while the income statement looks surprisingly healthy. That tension defined much of Q2.

Of course, this cuts both ways. Higher earnings expectations are not just a support for the market; they are also a hurdle. Once investors price in resilience, resilience is no longer enough. Companies have to beat, guide higher, and convince investors the next few quarters still justify the move. That is the risk in a market sitting near all-time highs. The rally may have been rational, but it has also raised the bar for further execution.

Q2 Performance

As of 7/1/2026, my 10K portfolio was worth $36,121.13.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 7/1/2026 the SPY had a price of $745.76. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 19.26% 18.00% 1.26%
2026 (1/1–3/31) -6.03% -4.54% -1.49%
2026 (4/1–6/30) 30.16% 14.26% 15.90%
Since Inception (8/19/18) 261.21% 195.46% 65.75%
CAGR 17.73% 14.77% 2.96%

I’d have to dive in and look more closely to confirm, but Q2 of 2026 was likely the best single quarter my portfolio has ever seen. My portfolio was up a mind-boggling 30.16%, against a still very respectable 14.26% for the SPY. This is partially due to timing. My portfolio happened to hit a low for the year exactly when Q1 ended, and climbed rapidly all throughout Q2.

Semicaps

I have not been shy about my love for a particular sector: semicaps.

As I’ve written before, semicaps are semiconductor capital equipment companies. They are, as a group, a wonderful collection of businesses. High returns on capital, strong competitive positions, growing revenue, and free cash flow profiles that most companies could only dream of. NVIDIA, Taiwan Semi, Apple, AMD, Broadcom, and the hyperscalers could not exist in their current form without them. They are the boring picks and shovels behind the AI boom.

In my portfolio, I’ve owned four semicaps: Applied Materials, KLA, Lam Research, and Onto Innovation. To say their stock performance this past quarter was extraordinary would be a massive understatement.

That is not normal.

And frankly, it makes me nervous.

My view on the quality of these businesses has not changed. If anything, the long-term importance of the sector has become more obvious. But there is a major difference between recognizing a great business and paying any price for it. Stock prices have moved far faster than earnings, and in many cases the multiples now look stretched, if not outright ludicrous.

When companies trade in line with earnings growth, that is healthy. This feels different. This feels like exuberance. Investors have begun treating cyclical industrial businesses as if they are poised for unstoppable growth, and that changes the risk profile. At that point, future returns depend less on being right about the business and more on the crowd staying excited.

I still love the companies. I am simply less enthusiastic about the stocks. Some trimming may be warranted, not because the thesis is broken, but because the market has moved from underappreciation to something much closer to euphoria.

Transactions

I had an uncharacteristically busy quarter, with multiple purchases and sales. I generally espouse long term ownership of stocks and infrequent trading, but sometimes the market provides opportunities and an investor needs to make the best decision given in front of them. Given the number of transactions I made, I’ll keep commentary brief.

Exits and trims

  • EVO- Sold: The company remains attractive, but regulatory and business-model risks created too many variables for my comfort.
  • PHM and HD- Sold: Higher rates and weak housing turnover have created persistent headwinds. Both remain good businesses, but I saw better opportunities elsewhere.
  • ONTO- Sold: The valuation approached nearly 100× free cash flow, which became impossible for me to justify.
  • LRCX and KLAC- Trimmed: Reduced oversized semicap exposure and funded new purchases.

New positions

  • RDDT: Rapid growth, gross margins above 90%, and substantial long-term cash-flow potential.
  • MA and SPGI: Two exceptional, capital-light businesses purchased at valuations that finally looked attractive after years of high multiples. 
  • BKNG: The leading travel booking platform with exceptional margins, strong cash generation, and rapidly rising operating income.  
  • VEEV and INTU: High-quality software businesses caught in broader SaaS weakness, creating more attractive entry points. I believe their entrenched market positions and mission-critical products will prove more resilient to AI disruption than current valuations imply. 

None of this changes how I think about investing: find great businesses, understand what you own, and let time and compounding do the heavy lifting. But with the market pricing in a lot of good news and parts of my own portfolio reflecting real exuberance rather than just quality, I’m entering Q3 a bit more selective about where I add and more willing to trim into strength than I’ve been in years. The businesses remain excellent, my job now is just not to overpay for that excellence.

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter/X, follow me @TheGarpInvestor.


Q1 2026: War and Health

I’ll admit this quarterly update is coming out a little later than I would like. Life has a way of intervening. But as it turns out, the delay may have provided some useful perspective, because the story of this quarter looks quite different today than it did on March 31st.

Iran

In late February, the United States and Israel launched coordinated military strikes on Iran, killing Supreme Leader Ali Khamenei and triggering what became a full-scale Middle East conflict. Iran responded by disrupting shipping through the Strait of Hormuz, the narrow passage through which roughly 20% of the world’s daily oil supply flows. Crude oil, which began the year under $60 a barrel, surged to over $110 at its peak. As expected, the market took a swift turn downward. The S&P 500 fell nearly 10% in March. Fear gripped investors, and the specter of global escalation loomed large.

And the doomsday scenarios practically wrote themselves. Oil prices continue surging, jobs are lost, inflation reaccelerates. American military spending balloons further, while those at home are left holding the bill. China, seizing the moment, uses Iran as a proxy, supplying weapons, keeping the United States entangled, while quietly eyeing Taiwan. It is not difficult to construct a version of this story that ends very badly. Some version of it may still come to pass.

What happened next, however, is something else entirely. Instead of continuing to fall, the market came roaring back. A ceasefire took hold. Negotiations began. And investors, apparently unconvinced that the apocalypse was imminent, piled back in. As I write this, the S&P 500 has crossed 7,000 for the first time in its history. We remain in a state of intermittent peace, punctuated by occasional military strikes, and yet the market sits at all-time highs.

I don’t have a clean explanation for that. Maybe the market is right to look past the noise. Maybe it is getting ahead of itself. What I do know is that the investor who sold in March and waited for clarity has already missed a significant chunk of the recovery. That lesson has a way of repeating itself.

The Flu and More

While the rest of the world reckoned with global conflict, I was struck down in mid-March with a nasty case of the flu. I spent the better part of ten days almost completely knocked out, rotating between my bed and the couch, unable to concentrate for more than a few minutes at a time.

If that wasn’t enough, things took a more serious turn shortly after. Feeling somewhat recovered, I pushed through a workout. That night I woke up in the dead of night clutching my heart, feeling a mix of pain and pressure, certain something was very wrong. I went straight to the ER. Tests came back clean, no heart attack, but the episode shook me in a way I did not expect. I followed up with a cardiologist, who also found nothing alarming, but ordered further testing. Those tests, courtesy of the joys of the American healthcare system, are still pending.

I share this not to be dramatic, but because it has had a profound impact on my daily life. Here I was, spending my days thinking about portfolios, oil prices and geopolitical risk, and suddenly the most pressing risk felt a lot closer to home. My anxiety, never a stranger to me, kicked into overdrive. Every irregular heartbeat, every twinge of discomfort became something to fixate on. It is hard to care about quarterly returns when you are lying awake at night wondering when the next palpitation might come.

There is something clarifying about a health scare, it has a way of sharpening your sense of what actually matters, and reminding you that life and health are never quite as guaranteed as we assume. 

Q1 Performance

As of 4/1/2026, my 10K portfolio was worth $27,750.85.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 4/1/2026 the SPY had a price of $655.24. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 19.26% 18.00% 1.26%
2026 (1/1–3/31) -6.03% -4.54% -1.49%
Since Inception (8/19/18) 177.5% 156.65% 20.85%
CAGR 13.3% 13.17% 0.13%

We can see I had a poor start to 2026. My portfolio was down just over 6%, compared to down 4.54% for the SPY. This brings my CAGR lead over the index to a miniscule .13% since inception. If that is all I can expect going forward, one might question whether the effort is worth it. Thankfully, a judgment like this is only done at a snapshot in time. Portfolio values are ever changing. While I had a poor first quarter of 2026, I now have the knowledge that my portfolio has greatly outperformed during the first few weeks of April. I won’t give that update yet, but I am perfectly satisfied with how my portfolio of companies is performing.

Even more important than the stock performance, however, is the fundamental business performance. I still believe in the collection of businesses I have chosen and their future prospects. As a group, they are highly efficient money making machines, with high returns on capital and strong balance sheets.

One name to note in this quarter, and the biggest contributor to the lackluster performance is Microsoft. The stock fell roughly 25% in Q1 2026, its worst quarterly decline in nearly two decades. 

The criticism seems to center on a few things. Concerns about Copilot monetization, most users are on the free tier and paid adoption has been slower than expected. Worry that AI agents will disrupt traditional SaaS models, rendering some of Microsoft’s core products obsolete. And anxiety around Microsoft’s deep ties to OpenAI, which remains unprofitable and faces intensifying competition. These are real concerns worth monitoring.

But here is what I keep coming back to: the underlying business has rarely looked stronger. Revenue grew 16.7% year over year this past quarter. Azure is growing at nearly 40% annually. The commercial backlog of contracted future revenue has surged to extraordinary levels. And unlike some of its peers who are burning cash to fund their AI ambitions, Microsoft generates enormous free cash flow even after investing aggressively. The business is not broken, far from it.

Transactions

Uber- Initiated Position

Uber needs no introduction, we have all used them. I find them to be an incredibly interesting business, sitting at the crux of the AI debate in a way few companies are. Moreover, in years prior their finances were, to put it bluntly, a mess. Since CEO Dara Khosrowshahi took over, the company has become far more focused and financially disciplined. It is no surprise that Uber has since transformed from a money-losing enterprise into one with rapidly growing margins and free cash flow.

Since buying, however, I have put more thought into the risks at play. The autonomous vehicle space is heating up rapidly, with well-funded competitors like Waymo already operating fully driverless services in multiple cities. Rather than developing the technology itself, Uber is betting on being the platform through which all AV providers distribute their rides, a potentially smart strategy, but not without risk. If players like Waymo or Tesla decide to go direct to consumers and cut out the Uber platform, the thesis changes materially. Perhaps most notably, Uber recently committed over $10 billion toward robotaxi development and fleet acquisition. This is a significant departure from the asset-light model that made the business so capital efficient and what drew me in as an investor.

Quite frankly, I may have been too hasty with my purchase. The valuation requires a lot to go right, and the margin of safety is thin. I am going to see what the next quarter presents and what management has to say before making a final decision. While I always espouse long term investing principles, selling is often the prudent choice when risks are unpredictable.

PHM- Trim

I trimmed my position in PulteGroup during the quarter, primarily to raise some cash. I also won’t pretend that concerns about the housing market didn’t factor into the decision. Affordability remains stretched, mortgage rates are stubbornly elevated, and the Iran conflict and oil price spike add a new layer of uncertainty to an already fragile consumer environment.

That said, I want to be careful not to be too pessimistic on homebuilders broadly. D.R. Horton, the largest homebuilder in the country, just reported a notably strong quarter. Net sales orders surged 11% to nearly 25,000 homes with an order value of $9.2 billion, suggesting demand is healthier than the bears would have you believe. It is an encouraging data point for the sector. I still believe in Pulte’s business long term and retain a position. This was a trim, not an exit.

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter/X, follow me @TheGarpInvestor. 

New Year 2026

The clock has officially run out on 2025. It’s a strange feeling stepping out of a year that many expected to be a train wreck, only to watch the markets finish on a note of almost casual defiance. If 2024 was defined by the agonizing wait for the shoe to drop, 2025 was the year we realized the shoe might never fall, while still remembering that gravity hasn’t gone away.

Year-end reflection is a ritual, but as we enter 2026, the fog feels thicker than usual. The pillars we once leaned on for certainty, legendary leaders, “sticky” business models, and the predictability of code, have all been called into question. I don’t have a crystal ball for 2026, but I do have a healthy sense of curiosity and a portfolio built to withstand surprises, not predict them.

The Discipline of Less

What Q4 reinforced wasn’t a new way of thinking, but the growing importance of restraint.

Markets reward activity. They provide a constant stream of “breaking” news to encourage opinions on everything, creating the illusion that staying informed is the same thing as making progress. Over time, I’ve found the opposite to be true: The most valuable skill an investor can possess isn’t knowing more; it is knowing what to ignore.

Earlier in my journey, I felt a restless need to master every industry: pharma, regional banks, biotech, quantum computing. I thought complexity was where the edge lived. In reality, it just scattered my attention and built a foundation of false confidence.

Today, I deliberately shrink my investable universe. Entire sectors are excluded without debate. I move on immediately from companies in high-regulation or high-complexity fields. Not because they can’t generate returns, but because they demand an expertise I don’t have and won’t pretend to. Complexity deserves respect. Some businesses are won through scientific breakthroughs or regulatory nuance; I prefer arenas where outcomes hinge on durable economics, aligned incentives, and business models that a ten-year-old could explain.

Systems That Endure

In December, I visited the Panama Canal. Watching 100,000-ton vessels move inch-by-inch through a lock system first conceived over a century ago was a visceral reminder of the power of a “toll-bridge” asset.

What stood out wasn’t that the canal never changes, but that it adapts specifically to protect its monopoly. The recent expansion, which added new locks and lanes to handle larger ships, wasn’t reinvention for its own sake. It was a pragmatic investment to protect relevance.

At its core, it’s geography turned into an economic engine. Ships pass through because there’s no comparable alternative, allowing Panama to collect small fees on enormous volumes of global trade. Seeing it in person reinforced a core principle: the best businesses don’t try to outrun the future. They invest so the future is forced to pass through them.

Fewer Bets, Higher Conviction

Shrinking the universe naturally changes how capital is deployed. Fewer ideas demand higher standards. Higher standards lead to concentration, and concentration forces accountability. Every position has to earn its place.

This isn’t about taking more risk, it’s about avoiding unforced errors. Risk isn’t volatility; it is the permanent loss of capital caused by being wrong about a business’s nature. Knowing what you don’t know is one of the few edges that actually compounds over a lifetime.

2025 ended with a roar. Maybe that momentum carries into 2026. Maybe the “shoe” finally hits the floor. Either way, my focus remains on clarity over cleverness, process over prediction, and patience over activity. I don’t need more ideas. I just need the right ones and the discipline to wait for them.

As of 1/1/2026, my 10K portfolio was worth $29,530.06.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 1/1/2026 the SPY had a price of $681.92. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 (1/1–3/31) -5.03% -3.76% -1.27%
2025 (4/1–6/30) 19.11% 10.43% 8.68%
2025 (7/1–9/30) 3.93% 8.52% -4.59%
2025 (10/1–12/31) 1.00% 2.31% -1.31%
Since Inception (8/19/18) 194.06% 168.37% 25.69%
CAGR 15.76% 14.33% 1.44%

Q4 was not a great quarter for my portfolio, lagging the SPY by 1.31%, but that is hardly a tragedy. Zooming out, 2025 was a fantastic year for my portfolio. I finished up 18.75%. I would happily lock that in for the rest of my life.

In gross dollars, I was up $4,644.50, about a 46% gain on that initial $10,000 I started with. Compounding is magic. It just needs time and a little emotional discipline not to screw it up.

The Constellation Dilemma: A Proxy for the Future

The defining debate in my portfolio right now centers on Constellation Software.

For thirty years, it followed a a near-perfect playbook: buy niche, mission-critical software companies, leave them alone, and reinvest the cash. But in late 2025, that trajectory snapped. The stock shed nearly 45% of its value as a “double whammy” hit the ticker: the abrupt retirement of founder Mark Leonard for health reasons, combined with a growing panic that generative AI would turn its portfolio of niche software into a collection of overpriced relics.

The bear case is straightforward. If an AI agent can write a custom billing system for a small-town utility for pennies, Constellation’s high-margin moats evaporate. The market is now pricing $CSU as if it’s on the wrong side of an AI propelled asteroid.

This fear was amplified by Leonard’s exit. For many, Leonard was the thesis. A brilliant conductor standing before an orchestra he built from scratch. Without his disciplined hand on the tiller, investors are questioning whether the decentralized machine he built can still identify value in a world where the very definition of “software” itself is being rewritten.

The Rational Reset

It’s tempting to label a 45% drawdown as pure market panic. In this case, the correction feels largely rational.

For years, Constellation traded at a perfection premium, a valuation that assumed Mark Leonard would remain at the helm indefinitely and that the moat of VMS was impenetrable. Late 2025 challenged both assumptions at once. This wasn’t a glitch. It was a re-rating of what certainty is worth in a world that just got more uncertain.

That doesn’t mean the company is dead.

At today’s price, Constellation has shifted from an expensive legend to a balanced bet on execution. The machine Leonard built is now in the hands of Mark Miller, a 30-year veteran who founded the company’s very first acquisition. Free cash flow is still pouring in. Capital is still being reinvested. But the narrative has moved from inevitability to possibility.

As we enter 2026, the path forward is essentially binary.

If Miller maintains the culture of hurdle-rate discipline while navigating the AI transition, this will be remembered as a generational buying opportunity. If the bears are right and AI agents begin rapidly displacing legacy VMS systems, this 45% drop may just be the opening chapter of something much uglier.

For now, the price feels rational. I’m content to watch execution, hold my shares, and not pretend I can predict which branch of that forked road we’re actually on.

Transactions

TSMC- I started a position in Taiwan Semiconductor this quarter.

It’s hard to overstate how central this company is to the modern world. TSMC isn’t just another chip business, it’s arguably the most important company on the planet. Every major AI breakthrough, smartphone upgrade, data center expansion, and next-gen chip design eventually bottlenecks through their fabs. If silicon is the new oil, TSMC is the Saudi Aramco of the digital age.

What makes the story so compelling is that TSMC sits at the intersection of insatiable demand and near-impossible supply. Apple, Nvidia, AMD, Qualcomm, and the hyperscalers are all fighting for limited cutting-edge capacity. Even in slowdowns, TSMC’s most advanced nodes stay fully booked.

That’s because TSMC is an irreplaceable choke point in the semiconductor ecosystem. Designing chips is hard. Manufacturing them at scale, at leading-edge yields, is borderline insane. The capital costs are staggering, the learning curves are brutal, and the process knowledge compounds over decades.

The economics reflect that reality. Operating margins around 50% are absurd for a manufacturing business. Even while spending tens of billions a year on capex, TSMC still throws off massive free cash flow. The balance sheet is one of the strongest on earth, they sit on roughly $97B in cash and equivalents.

This isn’t risk-free. Geopolitics are a permanent storm cloud, and I’ll let others opine on the China-Taiwan situation. Capex intensity is extreme. Should demand ever meaningfully falter, earnings would get hit fast. That said, TSMC is so far ahead of any competitor that it could probably stop investing for years and still own the world’s best fabs.

Given the economics and the sheer dominance of the business, I’m willing to live with the risks.

HD and GOOGL- I trimmed my holdings in Home Depot and Google. Not too much to write about this, I needed to free up some capital to buy Taiwan Semi and something had to go.

LULU- I decided to exit my position in Lululemon.

It’s still a phenomenal brand, just one that’s hit a rough patch. A mid-December pop in the stock, driven by a holiday guidance bump, gave me a clean window to step away.

On paper, the metrics still look fine: under 20x free cash flow, a strong balance sheet, and aggressive buybacks. If this were a spreadsheet-only decision, I’d probably still own it. The problem is the narrative.

Lululemon is at a real crossroads. The entire athletic apparel space is in a lull, just look at Nike and Under Armour. Lulu is also facing new competitive pressure. Fashion-forward upstarts like Alo and Vuori are chipping away at its premium positioning, while dupe culture is quietly commoditizing its core products. When a solid alternative is sitting at Costco for a quarter of the price, the Lulu premium gets harder to defend.

Could they turn it around? Absolutely. But it’s not a battle I need to be in. Fashion is brutally competitive, brand moats are fragile, and there are easier places to compound capital without having to guess what people will want to wear three years from now.

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter/X, follow me @TheGarpInvestor.

Netflix Quietly Did Something Smart (Again)

Netflix just made a move that perfectly captures why they keep winning. Almost no one has even noticed, but I bet they will.

They added a party game tab called Game Night.

On the surface, that sounds trivial. It is not. It is a small feature that reveals a lot about how Netflix thinks about scale, engagement, and staying indispensable.

Netflix has been circling the gaming space for years now, and most of it felt awkward. Mobile games tied to shows always seemed like a solution in search of a problem. They did not meaningfully deepen engagement, and they did not change how or when people opened the app. It felt like Netflix was experimenting simply because that is what large tech platforms are expected to do.

https://youtu.be/iCfinMXQN0E?si=DIDxgRfqc-tC_mMX

Game Night is different.

These are essentially Jackbox-style party games. One screen on the TV, everyone uses their phone as a controller, and it works instantly. No console. No setup. No friction.

Netflix did not invent this format, and that is exactly why it works. They took a proven idea and dropped it directly into a platform that already dominates the living room. They are leaning into hardware people already own by using the phone’s gyroscope, microphone, and speaker as part of the gameplay. While a Jackbox pack might cost thirty dollars and require a separate gaming console or computer, Netflix makes the experience “free” and accessible to anyone with a remote and a subscription.

That is leverage, not innovation theater.

Netflix understands that their real product is not any individual show or movie. Their real product is default behavior. They are the app people open when they do not want to think. They are there when guests are over, when kids and adults need something that works for everyone, or when someone says, “Just put something on.”

By adding Game Night, Netflix expands the number of moments where it can be the answer. This is not just passive viewing. It is shared, interactive entertainment. They are even launching a daily live game show with cash prizes to ensure users have a reason to log in every single weekday at the same time. People do not cancel Netflix because one show ends. They cancel when Netflix stops feeling essential.

It also highlights Netflix’s broader strategic advantage. They do not need to be best-in-class at everything. They just need to be good enough across enough surfaces that the subscription feels obvious. A decent movie. A bingeable series. Kids content. Now, casual party games. Individually, none of these justify the subscription. Collectively, they make cancellation feel irrational.

Now, here is where I am less charitable.

Given their financial firepower, I genuinely wish more of their big-budget projects were actually great rather than merely acceptable. Too many expensive shows feel algorithmically optimized. They are safe, bloated, and forgotten weeks later. Netflix often spends like a prestige studio but delivers like a volume-first content factory.

However, that critique runs straight into the core of their model. Netflix is building a moat out of features because they know they cannot rely on hits alone. Their advantage is probabilistic success at massive scale. They flood the platform with content, accept that much of it will be mediocre, and let audience behavior surface the winners.

Game Night fits this same philosophy. They are not here to compete with PlayStation or Xbox. They are creating a completely new way to play that is as easy as streaming a show on a Friday night. It is not about reinventing gaming. It is about adding another low-risk reason not to cancel. It is another moment where Netflix wins by default.

Netflix is not optimizing for elegance or critical acclaim. They are optimizing for inevitability.

Quiet move. Boring headline. Very smart strategy.

Q3 2025: More Than a Business

The third quarter of 2025 will be remembered for one thing: the market’s refusal to quit.

Every time it looked ready to correct, it found a way to climb higher. A dip on Monday became a rally by Friday. The bears growled, the bulls shrugged, and the indices marched to new all-time highs. It was the type of market that made skeptics look foolish, and optimists look prescient.

Semiconductors and AI once again led the charge. The spending spree in artificial intelligence is unlike anything we’ve seen in decades; a corporate arms race funded not by speculation, but by companies drowning in cash. Every major tech firm is building data centers the size of small cities, and Wall Street can’t decide whether to call it the next industrial revolution or a bubble prophesied to tank the entire economy. 

Frankly, I don’t know which it is either. There’s something surreal about watching hundreds of billions flow into AI infrastructure, but when the money is coming from balance sheets bursting with cash, it’s hard to call it reckless. When you’re minting $20–$30 billion in free cash flow every quarter, you have to spend it somewhere. And right now, AI is the only story worth telling. With valuations already stretched, share buybacks offer meager yield by comparison.

Elsewhere, inflation cooled slightly, yields eased, and talk of rate cuts returned to the conversation. Investors are once again dreaming of a soft landing, and for now, the dream seems intact.

Still, there’s a quiet tension beneath the euphoria. When everyone’s on one side of the trade, history has a way of humbling the crowd.

The Industrial Hangover

Beneath the surface of market euphoria, the real economy looked tired.

Freight and industrial activity continued to lag, showing none of the exuberance seen in tech. Truckload volumes remained weak, pricing stayed soft, and carriers kept exiting the market. Trucking is a bellwether for the broader economy, so when truckers suffer, it is rarely a good omen.

Manufacturing data told a similar story. New orders cooled, backlogs thinned, and companies quietly pushed out CapEx plans. The industrial engine of the economy is idling, even as markets behave like we’re in a boom.

AI and semiconductors can only levitate the indexes for so long. Eventually, for the economy to hum, there needs to be goods to move. And right now, the people who actually move them are still waiting for the recovery to arrive.

In Memory of My Father

This quarter wasn’t just about markets, it was about loss. Unfortunately, my father passed away in mid-August, and life hasn’t been the same since.

He taught me everything I know, about business, yes, but more importantly about life. How to think independently, act with integrity, and treat people with respect. To him, every action was personal and every moment a lesson. He believed in fairness, in treating others the way his own immigrant parents would have wanted to be treated. That philosophy shaped not just the way I work, but the way I try to live. 

My dad was the reason I got into business and investing. He’s the reason I never had to get a “real” job, bringing me into the family business right after college. That gave me the freedom to study the greats: Buffett, Munger, Graham, and Fisher. To build my own investing philosophy. Without his support, guidance, and belief, nothing I do today would have been possible.

But more than that, he’s the reason I care about doing it the right way. He had a deep sense of honor that guided everything he did. He believed business should be tough but decent, that success meant nothing if it wasn’t shared with those less fortunate. He never cared much for appearances or praise; he just wanted to build something lasting and to take care of those around him.

Losing him has been devastating. There’s an emptiness in my days that I don’t think will ever fully fade. But even through the grief, I can feel his presence, in the way I approach a problem, in how I weigh a risk, in the quiet reminder to do things with integrity.

He built more than a business; he built a foundation. One strong enough for his family to stand on long after he was gone. My goal now is simple: to keep building on what he started, with the same integrity, patience, and determination that defined his life.

Q3 Performance

As of 10/1/2025, my 10K portfolio was worth $29,112.76.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2025 the SPY had a price of $668.45. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 (1/1–3/31) -5.03% -3.76% -1.27%
2025 (4/1–6/30) 19.11% 10.43% 8.68%
2025 (7/1–9/30) 3.93% 8.52% -4.59%
Since Inception (8/19/18) 191.12% 162.30% 28.82%
CAGR 16.10% 14.50% 1.60%

Quarter three was solid overall, but I trailed the broader market. While the major indexes marched higher, my portfolio moved at a slower pace. A couple of names drove nearly all the results, one on the way up, the other on the way down.

On the bright side, Alphabet (GOOGL) was a star performer. It began the quarter at $176.23 and closed at $243.10, a gain of nearly 38%. For a company of that size, such a move in a single quarter is remarkable. What changed wasn’t the business, it was sentiment. In the spring, investors feared AI might erode Google’s dominance; by late summer, they were convinced it would strengthen it. As usual, the truth probably lies somewhere in between. Alphabet remains an extraordinary company, cash-rich, dominant, and still early in monetizing its AI potential.

On the other side of the ledger was Constellation Software, my largest holding. Constellation dropped from $3,670 to $2,714 a share, a 26% reduction. 

In response to growing investor questions, management held a webcast to address how AI could affect their business. Their tone was measured, cautiously optimistic. They acknowledged that AI could reshape parts of the vertical market software industry, but also emphasized opportunities to integrate it within their own products to enhance functionality and efficiency.

In my view, the real long-term threat isn’t customers replacing Constellation’s software with in-house tools. It is from competitors utilizing AI to create cheaper alternatives, compressing pricing power. That risk remains theoretical today, but over the next decade, it could emerge more clearly. For now, the company’s deep customer relationships, decentralized structure, and disciplined acquisition strategy remain intact.

Then came the tougher news: on September 25th, founder and CEO Mark Leonard stepped down immediately due to health reasons. Details were limited, but the situation sounded serious. I wish him a full and speedy recovery.

Operationally, little should change. Constellation remains famously decentralized, with capital allocation delegated to hundreds of individual managers. But what the company will miss is Leonard’s quiet wisdom. He had a rare blend of rationality, restraint, and long-term discipline. He built a culture that prized shareholder alignment and focused relentlessly on achieving high hurdle rates. 

Constellation’s next chapter will test whether that culture endures without its architect. My bet is that it will, because the best systems, like the best investments, are built to outlast their founders.

I’m far from the first to notice that Leonard and Buffett stepped down in the same year, but I owe both men a debt of gratitude. Together they’ve shaped my investment philosophy more than anyone else. Each rejected the noise of the moment and instead built patiently for the decades ahead. They rewarded shareholders and turned compounding into an artform. Buffett’s eventual retirement was inevitable, but Leonard’s came as a shock. Still, Constellation will carry on, and every future result will trace directly back to the framework he built.

Q2 2025: Compounding Amid Chaos

The second quarter of 2025 began with a thud.

Markets fell hard in early April, spooked by persistent inflation and the lingering threat of new tariffs. Investor sentiment, already fragile from Q1’s grind, cracked under the weight of more uncertainty. For a moment, it looked like the bottom might give out entirely.

Then, almost inexplicably, the market reversed.

There was no major economic shift. No rate cut. No breakthrough on inflation. But over the course of the quarter, the S&P clawed its way not just back to prior levels, but to fresh all-time highs. It was a rapid climb built on improving sentiment. The panic around tariffs began to ease. Political rhetoric softened and investor confidence soared.  

Markets don’t always need great news to rise. Sometimes, they just need the bad news to stop getting worse.

The Breakup No One Could Have Possibly Seen Coming

Elon and President Trump broke up. They shocked the world, ending the greatest romance of our time. Apparently, when you combine the two biggest egos on the planet, even love isn’t enough.

Of course, we all knew this was coming, it was never a matter of if, but when. And interestingly, it wasn’t President Trump who threw the first punch. It was Elon.

Frustrated by the Big Beautiful Bill’s attack on EV tax credits, and perhaps realizing that DOGE was not as effective as he would have hoped, Elon lashed out publicly. In a now infamous Tweet, Elon claimed Trump to be on the Epstein list. Trump responded in kind, and soon the whole thing devolved into a gloriously public feud.

It’s entertaining, sure, but also meaningful. And while Elon often acts like he’s above politics, he’s very much inside the game. Meanwhile, the President doesn’t take betrayal lightly, so beware what this might mean for any company Elon is involved with. 

So yes, it is a breakup. Yes, it was inevitable. But when the President and the richest man on Earth start taking shots at each other, investors should pay attention. The stakes aren’t just personal, they’re political, financial, and potentially market-moving.

The Magnificent Seven Out of Sync

Once hailed as the dominant engine of the market, the “Magnificent Seven” are no longer moving in lockstep. This quarter brought separation.

  • Apple struggled with slowing sales in China and regulatory scrutiny.
  • Google got dinged by AI concerns and existential questions around the future of search.
  • Tesla continued to bleed, caught between rising EV competition, margin compression, and Elon’s increasingly scattered focus.

That’s the bad news. What about neutral?

  • Amazon as of June 30th, somehow finished the quarter exactly flat (0.0%). Statistically, I’m not sure how that is even possible. I can’t think of a more neutral sign, so the market is telling us Amazon is a hold. 

The winners?

  • Microsoft, Meta, and Nvidia haven’t flinched. Whether it’s cloud, chips, ads, or AI, they continue to dominate, print profits, and drive the index upward with terrifying efficiency.

And while we’re reassessing who really belongs in this elite club, one outsider might be making a push to get included. Netflix. Erasing any doubt, they’ve posted record profits, strong subscriber growth, and flexed pricing power. If there’s room for an “Elite Eight,” they’ve earned a seat at the table.

That being said, I would not bet against any of the Seven, with the possible exception of Tesla, which is clearly the most volatile of the bunch. These are still the biggest, most profitable companies the world has ever seen. Each investing billions to crush competition and deepen their grip on the financial system. They remain the axis around which the market spins. 

Final Thoughts

This quarter was a lesson in patience, again.

The best investment decisions rarely feel good when you make them. Buying in March felt like catching a falling knife. Staying invested through April meant ignoring every bearish headline. But Q2 rewarded those who did nothing. Who endured and who held on. 

It’s tempting to trade the noise, to react, to do something. But most wealth isn’t built by guessing right. It’s built by enduring well. 

There will be a time when markets fall again. There will be more recessions, maybe even another depression someday. But unless the entire economic system collapses, markets recover. They always have.  

Stay invested. Stay patient. Let the noise fade. Time does the rest.

Q2 Performance

As of 7/1/2025, my 10K portfolio was worth $28,010.80.  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 7/1/2025 the SPY had a price of $617.65. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 (1/1–3/31) -5.03% -3.76% -1.27%
2025 (4/1–6/30) 19.11% 10.43% 8.68%
Since Inception (8/19/18) 180.10% 141.68% 38.42%
CAGR 16.17% 13.71% 2.46%

This was surely one of, if not the best quarters I’ve had on record, both in total return and relative to the index. I finished the quarter up 19.11% and beat the SPY by 8.68%. I don’t expect this type of performance to be the norm, it was clearly anomalous, but I’ll gladly take it.

The rally was broad across my holdings. Some of the gains were driven by multiple expansion, but much of it reflects the strength of the underlying businesses. These aren’t speculative names riding hype cycles, they’re durable cash-generating machines with real competitive advantages. I remain hopeful for continued outperformance, but more importantly, continued execution. 

Transactions

MSFT– I trimmed a couple of shares of Microsoft. Nothing dramatic, the company continues to execute exceptionally well, particularly in cloud and AI. But with the stock running hot and the position growing oversized, I wanted to free up some capital for a new high conviction idea. 

ANET- I used that capital to initiate a position in Arista Networks, a business that I believe exemplifies what a modern compounder looks like. 

ANET is one of the most quietly dominant businesses in the market. They’ve taken meaningful market share from Cisco by focusing on high-performance networking equipment, primarily for data centers, and they’re riding major secular tailwinds: AI infrastructure, cloud migration, and enterprise network upgrades.

But what makes Arista truly exceptional is its economics. Gross margins near 65% and operating margins that have gone up every year, now at 42%. Arista has a fortress for a balance sheet, sitting on over $8B in cash, with only $4.4B in total liabilities. Every metric points in the same direction, up and to the right.

Growth has been consistent, capital allocation has been disciplined, and the business scales with impressive efficiency. When I finally found an opportunity to buy it at a reasonable multiple, I pounced. ANET has proven its compounding ability over the past decade, now I’m just hoping they keep the momentum going. 

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter, follow me @TheGarpInvestor.

Q1 2025: Tariffs and Turbulence

The first quarter of 2025 was a test of patience. It wasn’t dramatic, but it was draining. Markets didn’t crash, they just quietly slid lower, day after day, until doubt began to mount in investors’ confidence. There was no headline moment, just a slow erosion of optimism.

Then, just as the quarter ended, everything changed.

New tariff threats and a sudden shift in political rhetoric out of Washington threw gasoline on a smoldering market. Volatility surged. It felt like being tossed around in the open sea with no life raft to reach out to.

This isn’t normal. But it’s not unprecedented either. Markets often move this way: long periods of calm followed by sharp, confusing bursts of chaos. These swings are drastic, but conventional investing wisdom tells us to be brave. In fact, it is likely the most important thing an investor can do. What is that action we can all take to protect our portfolios? Nothing. It feels like we need to act, do something, counteract the downward momentum. But history has been clear: panic selling is the fastest way to destroy wealth.

Warren Buffett has often said that the stock market is designed to transfer money from the active to the patient. The greatest action you can take in moments like these is to stay invested. Even better, keep buying. Keep adding with each paycheck and let time do the heavy lifting.

Tariffs

Trump’s tariff announcements landed like a thunderclap. For months, markets had been pricing in a “business as usual” political environment. Then came talk of sweeping tariffs 10%, 25%, 60%, 90% maybe even more on certain countries and items, and suddenly the calm was gone.

Markets hate uncertainty. But they really hate abrupt, hard to quantify change. And that’s exactly what sweeping tariffs bring. Sudden cost increases ripple through supply chains, pricing models get upended, and companies are left scrambling to adjust. The result? Margin pressure, inflation concerns, and a wave of investor unease. 

To be clear, there’s a certain logic to Trump’s strategy. He wants the Federal Reserve to cut rates, weaken the dollar, and ultimately make U.S. debt easier to refinance. But even if he is correct and tariffs lead to a major uptick in American manufacturing, better trade deals and lower prices for the American people, the way he went about it is ridiculous. There’s no nuance, no predictability, just a tweet here, a threat there, and a market left to pick up the pieces.

AI CapEx

While headlines scream about tariffs and inflation, one of the most important investment stories of 2025 is happening quietly in server farms and substations.

We’re in the middle of an AI infrastructure boom, something akin to the railroads in the 1800s or broadband in the 2000s. The biggest companies in the world: Microsoft, Amazon, Google, Meta, are spending tens of billions to build the physical backbone of AI. That means more chips, more power infrastructure, and more data centers.

AI may still feel like a buzzword to many, but the capital being deployed is very real. If you’re a long-term investor, this is an investment you want exposure to. But picking the winners will be hard, frankly I have no idea who will ultimately be the winners 10 years from now. Therefore, there are a few different ways to get that exposure. You can get exposure through broad market ETFs, or more targeted ones focused on semiconductors or data centers.

Capital Discipline

In uncertain times, investors don’t need excitement, they need reliability. With markets whipsawing on headlines and political posturing, there’s comfort in companies that keep things simple: generate cash, reinvest prudently, and return the rest to shareholders. These aren’t the loudest businesses in the market, but they tend to be the ones you can sleep well owning.

Capital discipline doesn’t mean stagnation, it means focus. Companies with strong balance sheets and consistent buybacks or dividends offer something rare right now: predictability. When so much feels out of control, owning businesses that know how to allocate capital wisely is one of the few defenses you have. No need to guess the next macro turn when your portfolio is built on steady compounding.

Q1 Performance

As of 4/1/2025, my 10K portfolio was worth $23,514.83  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 4/1/2025 the SPY had a price of $560.97. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

Year 10K Portfolio SPY Outperformance
2018 (8/19–12/31) -13.95% -13.71% -0.24%
2019 37.33% 32.60% 4.73%
2020 21.22% 17.59% 3.63%
2021 38.55% 28.43% 10.12%
2022 -27.25% -18.65% -8.60%
2023 41.36% 26.72% 14.64%
2024 21.39% 25.59% -4.20%
2025 (1/1–3/31) -5.03% -3.76% -1.27%
Since Inception (8/19/18) 133.51% 118.87% 14.64%
CAGR 13.80% 12.56% 1.24%

I underperformed the index in the first quarter, tightening what had previously been a  solid margin of outperformance. I’m still ahead overall, but my CAGR lead has narrowed to just 1.24% gap that could vanish with a few bad days. That’s investing. Progress often comes in zigzags. Still, I remain confident in the businesses I own. Not blindly, but with risk-adjusted conviction based on how they’re actually performing, not just how the stock happens to trade.


INMD- In mid-March, I finally sold my position in InMode. It’s tough to watch a company consistently underdeliver. I’m not concerned with daily stock moves, but I care deeply about business performance, and InMode’s kept heading in the wrong direction. The continued stock decline was no mystery; it was a reflection of weakening fundamentals.

Their business model is particularly sensitive to interest rates. InMode sells high-ticket medical devices, and most of their customers, small clinics and doctors’ offices, finance those purchases. As borrowing costs soared, the ROI on that equipment shrank. What was once a no-brainer purchase became a tough sell. Add potential tariff pressure on top, and the near-term outlook looks cloudy.

If rates return to more attractive levels, I’d absolutely revisit the name. InMode still has a strong model under the right conditions, but for now, the environment is stacked against them.

PHM- This quarter, I initiated a new position in PulteGroup, a homebuilder that, in my view, stands apart in an industry not known for its discipline.

Homebuilding can be a brutal business. It’s cyclical, capital-intensive, and sensitive to rates, labor, and materials. But what drew me to Pulte is how they’ve built a business that respects those realities rather than fighting them. They don’t chase volume. They don’t overextend. They allocate capital with care, prioritize returns on equity, and run a tighter operation than most in the space.

Pulte leans heavily on spec home construction, which shortens build cycles and improves cost control. Albeit, that does introduce some risk, they could be stuck with inventory if demand cools, but Pulte mitigates it by focusing on buyer segments less sensitive to rates, like move-up buyers and retirees. Combine that with a conservative balance sheet and consistent share buybacks, and you get a business that compounds value even when the housing market isn’t on fire.

This isn’t a bet on housing roaring back. It’s a bet that Pulte, even in an average housing environment, can quietly outperform thanks to its operational rigor and capital stewardship. That’s the kind of company I’m comfortable owning for the long haul.

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter, follow me @TheGarpInvestor.

2024: Reflections and Resilience

The sun has set on 2024 and just begun to rise on 2025, marking the threshold of a new chapter brimming with opportunities, challenges, and, as always, the ever-shifting tides of market sentiment. Reflecting on the year gone by and preparing for the road ahead is a timeless ritual. While we cannot predict the future, we can meet it with preparedness, curiosity, and resilience–traits that have served both investors and dreamers well throughout history.

Costa Rica

I spent a little over a week in Costa Rica around Christmas, and the country’s beauty is truly breathtaking. Towering rainforests alive with vibrant wildlife, pristine beaches meeting turquoise waters, and sunsets that feel like paintings—it’s a place where nature’s magic is on full display.

The Ticos, as Costa Ricans call themselves, embody the spirit of “Pura Vida.” More than a phrase, it’s a way of life—an embrace of gratitude, simplicity, and joy in the moment. Adventure is everywhere, and I made the most of it. I ziplined through lush canopies, hiked to cascading waterfalls, and even raced down what my resort claimed to be the world’s longest jungle waterslide.

But my most unforgettable moment came on a whitewater rafting trip down the Tenorio River. After a steep drop, our raft flipped, and I was thrown into the churning water, trapped beneath the raft as the waterfall above pummeled me. The force of the current was overwhelming, dragging me down no matter how hard I fought to resurface. My life jacket, meant to keep me afloat, seemed useless against the relentless pull of the river. Panic set in as my lungs burned and the seconds stretched into what felt like an eternity.

Just when I thought I couldn’t hold on any longer, a guide grabbed my life jacket and pulled me to safety. Gasping for air, heart pounding, I realized how close I had come to the edge. That moment has stayed with me—a stark reminder of nature’s raw power and life’s fragility. It taught me to cherish the small things—each breath, each heartbeat, each fleeting moment of calm—as gifts not to be taken for granted. Pura Vida isn’t just a saying; it’s a mindset. Costa Rica taught me to appreciate life’s fleeting beauty, a lesson I’ll carry long after leaving its shores.

Markets in 2024: A Tale of Two Realities

The markets demonstrated remarkable resilience in 2024, with indices reaching new highs. Yet, investor sentiment often felt curiously subdued—like a fire that burns brightly but doesn’t radiate warmth. Many approached the market cautiously, bracing for a correction that, for now, remains purely hypothetical. Indices have begun to surrender some of their recent gains, leaving investors wondering whether we are on the verge of a prolonged downturn or merely pausing before another rally.

The truth, as always, is that no one knows. Predictions are easy; preparation is harder. The wise investor focuses not on timing the market but on understanding the businesses they invest in, assessing valuations, and maintaining discipline. The market, after all, has never rewarded haste or fear but has consistently favored those who think long-term, act rationally, and embrace uncertainty as part of the game.

Trump Presidency: A New Economic Chapter

I make it a point to avoid diving into political commentary in this blog. My goal is to keep this space neutral, welcoming readers of all perspectives, not creating division. That said, the policies and platforms of any administration inevitably ripple into the economy and, by extension, the investing universe. Let’s examine what a Trump presidency might mean for the economy and markets over this next presidential cycle

Tariffs and Trade Deals

President Trump’s primary platform revolved around implementing tariffs on foreign goods–a strategy that breaks with decades of economic orthodoxy embraced by both Republican and Democratic leaders. Critics argue that tariffs function as a tax on Americans, raising costs for consumers as importers pass on those increases. While this critique has merit, it risks oversimplification. Tariffs are not merely tools to raise prices on foreign goods, but bargaining chips designed to secure better trade deals and incentivize foreign nations to purchase American goods.

Another dimension of the tariff strategy is its potential to bolster American manufacturing. By increasing the costs of imports, domestic alternatives become more attractive. Of course, the viability of this approach varies across industries. For sectors where American manufacturing is prohibitively expensive, tariffs will have little impact. But in industries where the cost differential is narrow, even a slight shift in incentives could bring production back to U.S. soil. The long-term effects of these policies remain uncertain, I think it is too early to tell what the results might be.

Immigration and the Labor Market

Immigration policy is another cornerstone of Trump’s agenda. The debate reached a crescendo in 2024, with Elon Musk and Vivek Ramaswamy defending the H1B visa program against opposition from within their own party. This clash highlights the nuanced interplay between immigration and economic growth. High-skilled immigrant workers contribute significantly to innovation and industry, while broader immigration policies impact labor markets, demographics, and consumption patterns—all of which ripple through the economy.

Trump’s stance on immigration, particularly on curbing illegal entry, aligns with his broader theme of prioritizing American labor and industry. However, the balance between protectionism and the need for a dynamic, skilled workforce remains a key tension that will shape economic policy in 2025 and beyond.

Q4 Performance

As of 1/1/2025, my 10K portfolio was worth $24,761.42  When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 1/1/2025 the SPY had a price of $586.08. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

10K Return(1)SPY Return(2)Difference(1-2)
2018(8/19-12/31)(13.95)(13.71)(.24)
201937.3332.64.73
202021.2217.593.63
202138.5528.4310.12
2022(27.25)(18.65)(8.60)
202341.3626.7214.64
202421.3925.59(4.2)
Since Inception(8/19/18)147.61127.9819.63
CAGR15.2713.811.46

Portfolio Performance: Wrapping Up 2024

My portfolio ended 2024 with a bit of a stumble. By the end of the third quarter, I was slightly ahead of the S&P 500, but the fourth quarter erased that lead, leaving me trailing the index by over 4% for the year. Not ideal, but far from cause for alarm. A single year of underperformance is no reason to reconsider one’s strategy—patterns over the long term are what matter most.

Overall, I’m satisfied with how the portfolio has held up. My compound annual growth rate still leads the S&P by nearly 1.5% and sits just under 20% in overall outperformance since inception. Beating the index is no small feat, but I didn’t start this portfolio just to edge out the market. The hope is that this divergence grows meaningfully over time. That said, the index itself has been an exceptional competitor, delivering two consecutive years of 25%+ returns. In such an environment, it’s worth reminding oneself that expectations need to stay grounded. If you’re measuring yourself against perfection, a dose of humility might be in order.

After a busy first three quarters filled with buying and selling activity, the fourth quarter brought a welcome return to stability. I made no portfolio changes, but that doesn’t mean it was uneventful. Businesses are always evolving, and competitive dynamics constantly shift. Let’s dive into how some key holdings fared:

INMD- InMode remains a challenge. The stock continued its downward slide in the fourth quarter, reflecting the stagnation in its growth story. While the company’s fundamentals, particularly its balance sheet, remain impressive, the investment thesis has not played out as hoped. Sitting on $685 million in cash against only $87 million in total liabilities, InMode is in no financial trouble. In fact, it could operate for three years without earning a dime in revenue and still have cash to spare.

This balance sheet gives InMode significant optionality, but the core problem persists: growth has stalled. The company’s reliance on low interest rates has left it vulnerable. Selling high-cost machines to doctors’ offices—a market often reliant on financing—has become a tougher proposition as interest rates remain elevated.

If I were on the board of directors, a role I’ve openly aspired to for any public company, I’d strongly advocate for ramping up R&D spending. InMode’s cash reserves provide ample room to invest in future growth while simultaneously reducing taxable income. Over the past 12 months, the company spent only $14 million on R&D—a figure that could easily be tripled or quadrupled without jeopardizing profitability. Developing new products and diversifying revenue streams would help extend the company’s growth runway and reduce its dependence on economic cycles.

EVO- Evolution had a similarly rough quarter, though the underlying business remains robust. Revenue and margins continue to impress, but regulatory concerns have cast a shadow over the stock. Adding to the turbulence, technical challenges integrating their various platforms have introduced operational headwinds.

The key question is whether Evolution can sustain its current business. Given its extraordinary cash generation and enviable margins, even maintaining the status quo would more than justify the current valuation. If they can navigate regulatory hurdles and deliver even modest growth over the coming decade, the potential for strong returns remains very much on the table.

LULU- Lululemon has been a bright spot. Mid-2024 saw low sentiment around the stock, largely due to Nike’s struggles, which many interpreted as a broader signal of weakness in the athleisure market. Instead, Lululemon has defied expectations, delivering performance.

Revenue and earnings climbed significantly, and the company reduced its share count—a powerful combination under most circumstances. While it’s always tempting to let success breed complacency, Lululemon’s consistent execution in a challenging retail environment is worth celebrating.

Pura Vida!

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter, follow me @TheGarpInvestor.

2024 Q3 Update

It’s been an eventful third quarter here in 2024. With an election just around the corner, it seems as though every news outlet is gearing up for what they’re calling a decisive moment in history. As usual, we’re told that if the other side wins, it’s the end of America as we know it. Well, here’s a little context: since 1789, we’ve had 46 different presidencies–Democrat, Republican, and even a few Whigs and Federalists thrown into the mix. 

Yet, through each one of these administrations, America has persisted. The stock market, which is sitting at all-time highs today, didn’t get there by luck. It’s a reflection of ever-increasing productivity and the ingenuity of American businesses. Despite the noise, the fundamentals remain strong, and by almost any measure, life is better today than at any other time in human history. 

Now, I’m not blind to the challenges that lie ahead. Our country will face its share of obstacles in both the near and distant future. Illegal immigration, inflation, a crisis in the Middle East, climate change—these are all very real and important issues just to name a few. But no matter who sits in the Oval Office, things have a way of working themselves out. We can sit around mulling over doomsday scenarios, but that doesn’t really get us anywhere. 

Whether the White House belongs to Trump or Harris next year, my investment advice remains the same: invest in quality businesses that earn high returns on invested capital. If picking individual stocks is too hard— and for most, it is not even worth attempting– a diversified selection of low-cost index funds will do just fine. Stick to a sensible plan, avoid the temptation to react to short-term noise, and keep investing steadily over your lifetime. Do that, and the odds of success are overwhelmingly in your favor.

Hurricanes

I’m writing this after yet another major hurricane hit Florida, with Hurricane Milton having made landfall. Thankfully, the damage and loss of life were less severe than feared, but storms of this magnitude are always tragic events. Insurance companies, as usual, will bear the brunt of the financial burden. It will likely take years for claims to be fully settled, and we can expect to see local and regional insurers pushed to the brink, if not into outright bankruptcy. Even some of the world’s largest reinsurers will likely feel the impact.

What’s next for Florida? That’s a tough question. If I were running a major insurance firm, I’d think long and hard before writing any new policies in the state. The risks are simply too high and unpredictable. Insurers are faced with a difficult choice: either pull out of the market entirely, leaving homeowners stranded, or raise premiums to levels that make owning a home unaffordable for most families. Neither option is appealing, and neither bodes well for the future of Florida. And that’s just looking at the residential side. The commercial insurance market, which is critical for businesses, faces its own set of challenges and could be hit just as hard.

The issue is far from simple, and frankly, its one I’m glad I don’t have to solve. It’s going to require a combination of government intervention and innovative solutions from the private sector to keep the state insurable. It’s not an easy fix, but it’s necessary. In the meantime, I wouldn’t fault any insurer for pulling back. Sometimes, when the odds are stacked against you, the smartest move is to walk away. 

Port Strike

A big storyline that flew somewhat under the radar was the East Coast port strike. There was some media coverage, sure, but I don’t think the public truly grasped just how close we came to economic calamity. Thankfully, cooler heads prevailed, and they reached an agreement within 72 hours of the strike beginning. But make no mistake–this could have been a far bigger story. If the ports had been shut down for any significant length of time, the repercussions would have rippled throughout the entire U.S economy. 

Think of the ports as arteries of commerce. A shutdown in port activity doesn’t just impact hte coasts–it brings the entire logistics system to a standstill, creating a logjam that clogs up everything from shipping to trucking to rail. And when the gears of the economy grind to a halt, everyone–from the largest manufacturers to the corner grocery store, feels the squeeze. 


We should all be breathing a huge sigh of relief that a deal was struck, and the prots are back in operation. It’s a reminder of just how fragile and interconnected our economic systems really are. When one piece of the puzzle goes missing, it doesn’t take long before the whole picture starts to blur. 

Q3 Performance

As of 10/1/2024, my 10K portfolio was worth $24,929.89 When I started on 8/19/2018, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2024 the SPY had a price of $568.62. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculation.

10K Return(1)SPY Return(2)Difference(1-2)
2018(8/19-12/31)(13.95)(13.71)(.24)
201937.3332.64.73
202021.2217.593.63
202138.5528.4310.12
2022(27.25)(18.65)(8.60)
202341.3626.7214.64
2024(1/1-9/30)22.2121.38.83
Since Inception(8/19/18)149.29112.2937
CAGR16.1013.093.01

The third quarter saw only a small change in my portfolio performance. This quarter, my portfolio continued to closely mirror the index, achieving only a marginal outperformance in comparison. It is vital to acknowledge, however, that a tiny outperformance will lead to large differentials over time. I continue to be satisfied with the portfolio’s execution in both actual and relative terms. If you had told that this portfolio would compound at a 16.1% CAGR when I first started this blog, I would never have believed you, but here we are.

2023 saw few, if any, changes to my portfolio. 2024 however has been uncharacteristically busy for me, particularly in this past quarter. I generally recommend not making too many adjustments to your portfolio once it is constructed. I am often an advocate for the “coffee can portfolio” strategy–a long term, buy and hold approach where you set aside funds in a metaphorical coffee can, remaining untouched for decades. But sometimes I think activity is necessary. Quality remains paramount, and when companies no longer meet our high standards, they must be replaced with superior alternatives.

Transactions

SBUX- Starbucks is a name that needs no introduction. People are addicted to coffee and no one does it better than Starbucks. Under CEO Laxman Narasimhan Starbucks experienced some challenging times. Drink prices had climbed too high, and competition began to eat into its market share, particularly in China, which was supposed to be a key growth driver. Narasimhan appeared to be in over his head, and he struggled to provide effective solutions. His now infamous interview with Jim Cramer left viewers shaking their heads, as he talked about “providing value to customers” without offering any actionable steps. 

In early July, I saw a dip in the price and felt it presented a good opportunity to accumulate shares. Starbucks is a brand with immense staying power, and I believed the challenges it faced were temporary. Even with a subpar CEO, the underlying strength of the brand made it a worthwhile investment. I was betting that a focus on brand protection would lead to long term success and strong returns.

Well so far, my purchase has done extremely well. I had no inkling that Narasimhan would be fired and replaced by Brian Niccol, but I’m certainly pleased with the outcome. Niccol is a restaurant industry veteran, having previously led Taco Bell and Chipotle to impressive heights. Wall Street is confident that he can do the same with Starbucks, as the stock has surged since his appointment. Has the stock gotten a bit ahead of itself? Probably, but I’m in it for the long haul, and these short-term price movements don’t concern me. 

POOL- Now it’s time to confess one of my portfolio’s biggest mistakes. I sold out of Pool Corp shortly after buying Starbucks. Why did I sell? The easiest answer is that I’m an idiot. In all seriousness, I sold due to what I perceived as declining business fundamentals. Revenue in 2023 began to fall, and that trend has continued into 2024. The pool industries going through a rough patch, as many people who wanted a pool installed one during the pandemic, pulling forward years of demand. 

The maintenance side of the business is still performing well, as all those newly built pools now need constant upkeep. This is a great source of recurring, high margin revenue. However, overall sales have dipped.

In hindsight, selling appears to have been a clear error. Pool Corp’s stock is up more than 20% since I exited. I try not to check the price too often, as it’s just a painful reminder. Pool Corp remains a tremendous business, and it dominates its sector. I simply believed I had better opportunities elsewhere. So far, that bet hasn’t paid off. 

LULU- Lululemon has always been a name associated with premium quality, and for years, it commanded a premium valuation. Until recently, it was nearly impossible to buy this brand at a reasonable price. However, recent challenges have caused the stock to take a tumble, offering what may be the first real opportunity in the company’s history for long term investors to buy at an attractive valuation. 

The issues behind the price drop are mainly related to concerns about slowing growth and increased competition. We saw a disappointing quarter from Nike, indicating that apparel and footwear sales are likely to be challenged as rising prices squeeze consumers’ budgets. Despite these headwinds, I believe this has provided an opportunity. Lululemon’s brand equity, loyal customer base, and unique product offerings make it a compelling buy at current levels.

At a fundamental level, Lululemon is a very good business. If you can sell a pair of yoga pants for $100, it’s hard not to generate strong margins. Lululemon boasts nearly 60% gross margins and close to 25% operating margins. For reference, both Nike and Under Armour have gross margins that hover around 45% with operating margins of 12.5% and 4% respectively. That means for every dollar of sales, Lululemon makes double the operating income of Nike and six times that of Under Armour, a testament to its status as a true premium brand.

Growth has also been stellar over the years. In 2016, Lululemon had less than half the sales of UA. Today their sales are nearly double those of UA. Perhaps that is more indicative of UA’s decline than Lulu’s ascendence, but in that same time period Lulu increased sales by almost five times, which for any company is pretty incredible.

In summary, Lululemon’s stock price decline presents a rare opportunity. While the short term may be rocky, the long term outlook for this brand remains bright, as it continues to occupy a unique position in the market. It is a classic example of being able to buy a great business at a fair price, and that’s exactly the kind of opportunity I like to take advantage of.

ETSY- I finally decided to liquidate my holdings in Etsy. Since I initially trimmed the position in 2022, the company’s performance has continued to disappoint. Revenue has flatlined, and Etsy has struggled to find new growth avenues. Has the market simply reached saturation? Or has management failed to connect the right products with the right consumers? Time will tell.

More concerning, however, has been their capital allocation. Etsy made multiple acquisitions at inflated prices and spent on share buybacks at overvalued levels. Capital allocation is critical in any business, and Etsy’s missteps in this area were a major red flag. Unfortunately, I was correct when I first trimmed my position, but I should have sold out entirely. I ended up selling my remaining shares at a 50% lower price than my initial sale. Still, it wasn’t all bad news, as the stock has fallen another 20% since I exited. I’ll root for Etsy in the future, but it will no longer be a part of my portfolio. 

As always, I would like to thank you for taking the time to give this a read! Feel free to leave some comments or questions. Best way to reach me is on Twitter, follow me @TheGarpInvestor.