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.

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.

New Years 2024!

Happy New Year to all of my esteemed readers and fellow investors! As we usher in 2024, I find myself looking back on a year that was nothing short of an investment rollercoaster. The year 2023 was marked by shifting sentiments and fluctuating market dynamics, yet it culminated in a strong market upturn, boosting spirits and elevating portfolios to impressive heights.

2023 kicked off with a renewed sense of optimism. The shadow of COVID-19 appeared to be fading into the past, making way for a new, vibrant normal. The economy was buzzing, but this rapid growth inevitably stoked the fires of inflation. In response, the Federal Reserve implemented a series of interest rate hikes. These measures, initially perceived as a dampener, ultimately proved effective, curbing the rampant inflation and bringing a semblance of balance to the economic landscape.

The third quarter signaled a turning point in investor sentiment. The Federal Reserve’s efforts, while successful in reining in inflation, might actually have been too potent, casting a shade of apprehension over the economy. The higher interest rates diminished the allure of capital projects. In my own commercial real estate investment business, projects that were attractive at a 3% mortgage rate seemed fraught with risks as rates neared 7%. Across various industries, expansion opportunities dwindled, and for the first time in years, bonds began offering attractive yields, making them a viable alternative to equities.

In the fourth quarter however, we witnessed a dramatic resurgence in the markets. Interest rates appeared to have reached their zenith, sparking a robust recovery in the markets. Consumer confidence, apparently as resilient as ever, played a crucial role in this turnaround. The S&P 500 ended 2023 just a few points shy of its all-time highs.

Looking ahead into 2024, we find ourselves at a crossroads of opportunity and caution. The market’s recent rebound is a beacon of hope, yet it also serves as a reminder of the inherent uncertainties in investing. The coming year promises new challenges as well as opportunities. If interest rates drop back a bit as expected, strategies will shift and so too will markets.

As investors, our focus should be on staying informed, adaptable, and prudent. Diversification, always a key tenet of successful investing, will remain a cornerstone of my strategy. It is essential to balance the pursuit of growth with the wisdom of risk management. That being said, I believe in letting my winners run. I don’t sell a company for being successful, I prefer to let the market reward elite execution.

Here is to a prosperous 2024. Let’s approach our investment decisions with a blend of optimism, diligence, and a keen eye on changing market dynamics. I wish you all a wonderful year and continued success in all financial endeavors!

Q4 Performance

As of 1/1/2024, my 10K portfolio was worth $20,398.32. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 1/1/2024 the SPY had a price of $475.31. 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)
2019	37.33	32.6	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
Since Inception(8/19/18)	103.98	82.55	21.43
CAGR	14.22	11.88	2.34

Reflecting on 2023, I am excited by the success we’ve witnessed, both in the broader market and within my own portfolio. My portfolio’s performance this year has been nothing short of extraordinary, surpassing the SPY by nearly 15%, with a 21.43% outperformance since inception. While such remarkable returns are not something I count on repeating indefinitely, I would certainly welcome them with open arms should they occur. However, it’s wise to remember, as Warren Buffett often reminds us, “The stock market is designed to transfer money from the Active to the Patient.”

This year, mega-cap technology stocks have been the standout performers, just as they have been the trailing decade. My investments in this sector, GOOG, AMZN, MSFT, META, have borne significant fruits, contributing substantially to the portfolio’s impressive growth. Constellation Software now constitutes nearly a quarter of my total portfolio. Conventional Wall Street wisdom might suggest a rebalancing strategy, redistributing assets to reduce concentration. Yet, I disregard such recommendations. The ascent in the stock is a testament to the performance of the underlying business. While some may argue the valuation is stretched, I am prepared to embrace any temporary pullbacks as part of the journey. I’m not betting on the next year, but on what will be 5, 10, and 20 years down the line.

This past quarter has continued in the same vein as previous ones, with no transactions in my portfolio. This steadfast approach may not be the most exhilarating, but it is the tactic that works for me. By investing in top-tier businesses globally, I place the growth of my investments in the hands of those who know their companies best – the operators.

However, even the most carefully curated portfolio encounters challenges. A few stocks in my holdings have raised concerns, not due to a dip in their share prices, but rather because of their business performance. Dollar General, for instance, has been a particular laggard. The company seems to have hit a plateau in revenue growth, and its margins are facing increasing pressure. Additionally, the rising interest rates have started to weigh on the balance sheet, with growing interest expenses affecting profitability.

The decision making process in such scenarios is intricate. If Dollar General’s stock had remained stable while the business fundamentals deteriorated, the choice to sell would be straightforward. The stock however has mirrored the company’s declining business performance, making the decision more complex.

In my past experiences, I’ve learned that acting too hastily when a solid business encounters temporary setbacks can be premature. Allowing a company time to demonstrate its resilience is often a wise strategy. The critical task is to discern whether the issues faced are short-term hurdles or indicative of a longer-term decline. This judgment is where astute analysis becomes invaluable, distinguishing a reactionary decision from a strategic one.

With that I’d like to once again wish you all a happy new year. I would also 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

2023 Q3 Update

The first half of 2023 appeared bright and rosy, with soaring markets and unwavering investor confidence. My own stock portfolio saw impressive gains, and I felt like I was riding the crest of the investing wave. However, the third quarter unveiled the first cracks in this seemingly endless exuberance. While I’ve long foreseen a market correction, it seems my crystal ball is no match for Nostradomus; it took nearly three years for my prediction to materialize. Investors now find themselves rattled, and the prevailing sentiment has shifted to one of impending doom and gloom. As the adage goes, things are never quite as wonderful as they appear, but they are also never as dire as they may seem.

In the spirit of this investment blog, I’ll refrain from delving into global politics and the ongoing Middle East conflict. Suffice it to say, recent events have cast a heavy shadow, making the past week particularly challenging for me. Writing about seemingly inconsequential topics like investing becomes a tough endeavor when family and friends are living in the middle of a warzone.

Nevertheless, let’s refocus our attention on the matter at hand. The current market is under the influence of a rising interest rate environment. Rates impact on investments are akin to a gravitational pull, they change the entire framework. Assets that once seemed like bargains in a 3% interest rate scenario suddenly appear expensive when rates climb to over 7%. The question every investor must confront is whether it’s worth the risk to invest in stocks when they can purchase treasuries yielding over 5% at the moment.

It is evident that some stocks have taken a substantial hit, while others have demonstrated remarkable resilience. Notably, small and micro-cap stocks appear to be bearing the brunt of this downturn, whereas large and mega-cap equities have held their ground. Perhaps there is wisdom in considering a shift from the latter to the former, although personally, I won’t be making such changes. There is however certainly merit to considering a rebalancing strategy.

Today, we find ourselves at an intriguing juncture in time. The Federal Reserve’s efforts to quell inflation seem to be having an effect, but perhaps it is working a little too well. Companies are reporting relatively weak quarterly results, with falling revenues and earnings becoming all too common. Yet, I’ve never been more convinced that investing in outstanding companies offers the best defense in such circumstances. Owning businesses that can leverage a downturn to expand their market share, utilize their cash reserves to buy back shares, and take advantage of lower valuations by acquiring other companies represents a sound investment strategy.

As we navigate the current landscape, it is important to remember that the stock market is a long term proposition. Short term volatility, driven by shifting interest rates and economic uncertainties, is par for the course. While some investors may be tempted to jump ship and seek refuge in seemingly safer investments, it’s worth keeping in mind the wisdom of legendary investor Benjamin Graham. In the short run, the market is a voting machine, but in the long run, it is a weighing machine. In other words, fundamentals ultimately drive stock prices, and patient investors who stick with great companies during challenging times tend to reap the greatest rewards.

Q3 Performance

As of 10/1/2023, my 10K portfolio was worth $17,800.14. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2023 the SPY had a price of $427.48. 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)
2019	37.33	32.6	4.73
2020	21.22	17.59	3.63
2021	38.55	28.43	10.12
2022	(27.25)	(18.65)	(8.60)
2023(1/1-9/30)	23.44	13.51	9.93
Since Inception(8/19/18)	78.00	63.52	14.48
CAGR	13.59	10.10	2.21

Despite my somewhat disheartened tone earlier, 2023 has in fact, been a remarkably successful year for my portfolio. Year to date, I’ve seen gains of over 23%. Admittedly, I may have lost a bit of my lead over the SPY, but I can hardly voice complaints when I still lead by 9.93% this year and 14.48% since inception. After five years in this experiment, I can at least acknowledge that I’ve demonstrated a modest degree of proficiency as an investor. I’ve managed to keep my financial shirt and have steered clear of any truly ill advised forays, like meme stocks or massive uses of leverage.

Nonetheless, five years remains a relatively brief time frame for making a substantial assessment. Genuine compounding, akin to the growth of a mighty oak from a humble acorn, requires the patience of a lifetime. The greatest rewards take decades to manifest. If I can simply maintain an annual outperformance of just a couple of percentage points, it will ultimately lead to a remarkable accumulation of wealth over the long haul.

Once again, I can declare that I refrained from making a single trade within my portfolio throughout the quarter. That very well might change this upcoming quarter however. Market turbulence can usher in promising opportunities. Thus, it should come as no surprise if I opt to make some transactions during the final quarter of 2023.

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.

2023 Q2 Update

Allow me to begin with a humble apology for the delayed release of this update. Regrettably, a mishap befell my poor laptop just as I started crafting this update. I unfortunately broke my laptop, then had to wait for Amazon to deliver my new one before I could continue writing up this update. If you ever got the impression that I was intelligent, just know that I am incredibly clumsy and broke my laptop in an incredibly foolish way. I was sitting up in my bed with my laptop open next to me. I felt a sudden urge to stretch out my arm and as I thrust out my hand, I somehow managed to punch directly into the screen, breaking it instantly. While I was understandably upset with myself, I couldn’t help but laugh at the absurdity of the situation.

Nevertheless, another quarter down, another quarter of unexpected market resilience. The market continued its triumphant march forward and economic data continues to come in strong. I must confess that I am awful at predicting the future. My yearlong forecast of a market downturn again looks premature. Thankfully, I possess the wisdom to refrain from acting act on such predictions, allowing my portfolio to grow and flourish. I just hold my stocks and let the businesses do the work. I invest in high quality companies that can weather any storm, executing in both favorable and challenging times.

Let’s quickly discuss the current investment landscape. Interest rates have continued their gradual rise, though the pace appears to have slowed down. As a result of these rate hikes as well as the swift gains seen in the market, finding enticing opportunities has become quite the challenge. Valuations have stretched and fixed income investments appear more enticing by the day. Fear not however, the market has a habit of rewarding those that exhibit the virtue of patience. Opportunities will present themselves, we just need to be prepared to act when they are revealed.

Now, on to a matter of far greater consequence and utmost importance: the showdown of tech billionaire titans, Elon Musk and Mark Zuckerberg! After months of fighting with words, they have decided to settle the feud with fists. They will brawl in a MMA cage match. Personally, I couldn’t be more excited for this matchup. Watching tech billionaires beat the crap out of one another is exactly my idea of a good time. As for my prediction, my money is on Zuckerberg. The guy is in remarkable physical shape, reportedly winning a Jiu Jitsu tournament. He even posted an elite time in a difficult athletic challenge called The Murph. I can’t guarantee the accury of his time or whether he performed each exercise with proper form, but his dedication to fitness is undeniable

A picture of him training with MMA legends should be all the proof we need. I can’t say the same for Musk, we have all seen the infamous boat photos. I’m hoping for his sake he has gotten into better shape, but I’ll wait for his shredded picture to drop for verification. As if the story needed any more juice added to the fire, Meta dropped an absolute bomb with their Twitter clone, Threads. A direct shot at Elon Musk and Twitter, one meant to cripple them in the midst of struggle. I have no idea if Threads will actually be successful, but with Meta’s resources behind them and Zuckerberg’s deep understanding of social media, I wouldn’t bet against them. I’ll be counting down the days to this showdown.

Q2 Performance

As of 7/1/2023, my 10K portfolio was worth $18,600.09. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 7/1/2023 the SPY had a price of $443.26. 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)
2019	37.33	32.6	4.73
2020	21.22	17.59	3.63
2021	38.55	28.43	10.12
2022	(27.25)	(18.65)	(8.60)
2023(1/1-6/30)	28.99	17.28	11.71
Since Inception(8/19/18)	86.00	68.85	17.15
CAGR	13.59	11.38	2.21

Q2 went remarkably well for my portfolio, almost unfathomably so. I have crushed the SPY since the new year, beating the ETF by 11.71%. I’m now up on them by 17.15% since inception and trending in the right direction. That of course means my portfolio is likely about to implode, so perhaps steer clear of my companies for a while. If you’re feeling frisky, you could even short my companies just to spite me. I wouldn’t do it if I were you, but someone has to be on the other side of the trade.

Most of my companies were up considerably this past quarter, with the only laggards being Dollar General, Etsy, and Ulta. Both DG and Etsy reported pretty weak quarters, so their falls make sense. I’ll hold my shares for now, but will need to see business recovery if I am to hold my shares indefinitely. Ulta’s business continues to dominate, I see no weakness whatsoever. If the stock falls further, it could soon present a strong entry point.

I actually made zero real transactions during the quarter. In fact, I have only made a single transaction in all of 2023 when I purchased a single share of INMD for $33.90(big spender over here.) This is actually how I prefer to run a portfolio. Assemble a group of high quality companies and then sit back and let them do the work. I would categorize myself as a lazy investor, or as Warren Buffett would say, I exhibit the characteristics of “lethargy bordering on sloth.” As long as the businesses remain strong, there is really nothing for me to do.

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.

2023

Happy new year everyone! The start of the new year is a time to reflect on the past and look ahead to the future. 2022 was a tumultuous year for investing, with markets experiencing volatility and interest rates climbing rapidly. These factors contributed to a decline in asset prices. While the Federal Reserve’s efforts to curb inflation seem to be having some effect, there is no guarantee that the situation will improve. In fact, it is possible that interest rates may continue to rise, putting even more strain on the economy.

It is worth noting that while prices have fallen, there has not yet been a corresponding decrease in earnings. In times of uncertainty, investors and companies tend to become more conservative, focusing on cost-cutting and efficiency rather than growth. This can have a ripple effect on individuals and businesses throughout the economy, as people reduce their spending on non-essential items and industries that rely on consumer spending struggle.

For example, the housing market has been hit hard by the recent increase in interest rates. With monthly mortgage payments now much higher than they were a year ago, potential homebuyers are hesitant to make a purchase. This has led to a significant drop in home sales, which has had a knock-on effect on industries such as real estate, mortgage brokering, and home inspection. As those who work in these fields see their incomes decline, they may be forced to cut back on their own spending, which can then impact other businesses.

It is important to be aware of these potential impacts and to be prepared for any scenario. Building up your savings and making smart investment decisions are always good ideas, and the new year is a great time to review your financial goals and assess whether you are on track to achieve them.

Let’s take a look at my 2022 investing results:

Q4 Performance

As of 1/1/2023, my 10K portfolio is worth $14,419.07. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 1/1/2023 the SPY had a price of $382.43. 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)
2019	37.33	32.6	4.73
2020	21.22	17.59	3.63
2021	38.55	28.43	10.12
2022(1/1-12/31)	(27.25)	(18.65)	(8.60)
Since Inception(8/19/18)	44.19	44.58	(.39)
CAGR	8.72	8.82	(.1)

While my portfolio underperformed the S&P 500 in 2022, I am happy to see that it has remained relatively close to the index since its inception. Despite the challenges of investing, I am confident in the composition of my portfolio and believe that it will perform well over time. It’s important to remember that investing can be tough, and it’s important to stay humble and cautious. As Warren Buffett has pointed out, as long-term investors, we should actually be hoping for stock prices to go down so that we can buy more shares at lower prices and increase our ownership stakes in the long run.

Transactions

MCO- I sold my shares of Moody’s in early October. This has little to do with the long term prospects of the business, they are still top notch. They will continue dominating their corner of the market, I just thought shares were too expensive and there were better opportunities elsewhere.

ETSY- I also trimmed my Etsy position, selling off 3 of my 7 shares. I still like the company, but will admit to losing some faith. I think they operate a great business and could have robust growth in their future, but I question management capital allocation. They spent an exorbitant amount buying smaller companies like Depop and Elo7. Maybe these will be good businesses, but they paid ludicrous multiples to buy. Now that the market has tumbled, these acquisitions just look awful. I want to see management commentary after this upcoming quarter, but if I don’t feel confident, I will be selling off the rest of my shares.

POOL- I bought a single share of Pool Corp in mid December. Pool is the leading distributor of swimming pool supplies and parts. They sell to contractors, pool retailers and pool owners amongst a myriad of others. Distribution is a fantastic business and Pool is second to none. They have fantastic returns on capital and have a lengthy record of consistent success. Simple but immensely profitable business model.

AMZN- I presume Amazon needs no introduction, but until recently,I had never held any shares. The stock saw a sharp drawdown in 2022, down almost 50% from the start of the year, presenting myself and others with a potentially great opportunity. I think the market is being shortsighted and Amazon is a business unlike any other. They are simply the most dominant business in the world and the one I would least like to compete against. They invest heavily into their business, spending $66B in R&D and $66B in CapEx in 2022. That is a wild amount of money spent in order to widen their moat. Just imagine how dominant they will be 10 years from now. I think they know exactly what they are doing, time will tell.

AMAT- I decided to pick up another share of Applied Materials in mid December after the stock had fallen 10% in a single day on the back of no real news. I’ve held shares in the company for a bit of time now, so picking up an additional share was a no brainer. Great business with fantastic execution and discipline.

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.

Q3 Update

2020 has been a remarkably odd time to be an investor. Granted, it has been an incredibly strange time to be alive in general. It is now October and Covid continues to rage on, a seemingly never ending storm without respite. Our President just tested positive for the virus and has entered the hospital. He has the best medical care and will therefore almost assuredly be fine, but you never know. The word has been used over and over, but that is because it rings true, these are unprecedented times. I think we would all like to just get this chapter over and move on with our lives. With an election right around the corner however, I expect more volatility to be on the horizon. I’m not one to make market forecasts, but I would not be surprised to see some pretty big swings in the near future.

Q3 Performance

As of 10/1/2020, my 10K portfolio stood at $13,047.01. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 10/1/2020 the SPY had a price of $334.89. In reality, the SPY has done even better due to dividends given out, so I have accounted for dividend reinvestment in the return calculations.

	10K Return(1)	SPY Return(2)	Difference(1-2)
2018(8/19-12/31)	(13.95)	(13.71)	(.24)
2019	37.33	32.6	4.73
2020(1/1-9/30)	10.41	5.32	5.09
Since Inception(8/19/18)	30.47	21.85	8.62

As we can see, I have done reasonably well in both 2020 and overall. I am by no means crushing the index, but a steady outperformance compounded over years can grow into a massive delta. If I can keep beating the S&P by 4-5% a year, I will be thrilled. So far, my GARP strategy has worked. I hope my portfolio keeps up the momentum, but don’t be surprised to see some reversion to the mean.

My stocks are now worth $12,778.29 and I am sitting on an additional $268.72 of cash, meaning I am almost fully invested. The market does appear to be frothy in my opinion, but in general I like to have my money invested rather than sitting on the sidelines. Should the market fall, I expect my companies to make intelligent capital allocation decisions, coming in the form of share buybacks or acquisitions of target companies at lower prices.

BUYS

INTC– I saw someone on Twitter(I would give credit, but I don’t remember who) mention that Intel shares looked attractive given current prices. I decided to take a look and based on numbers alone I liked what I saw. Problem was, the semiconductor industry was well outside of my circle of competence. I then went on to do a mini deep dive and educate myself. Admittedly, I will never be a semiconductor expert, far from it. But I think I have learned enough to be able to assess the competitive dynamics, time will tell if I am right or wrong.

So why the Intel discount, what’s the rub? Intel has been perceived to be in a losing CPU race against smaller faster competitors, AMD and Nvidia. They have the advantage of being fabless, in other words they do not manufacture chips themselves. Rather they design the chips and outsource manufacturing, mostly to TSMC, the Taiwanese semiconductor giant. TSMC brings fantastic technology to the table, enabling the smaller competitors to leapfrog over Intel in ultra high performance technology. This perception very well may be correct, but I feel it fails to paint the full picture. Intel is now so diversified that they are no longer completely reliant on the microprocessor. The second quarter of 2020 marked the first time that the data center portion of the business overtook the CPU portion, accounting for 52% of overall revenue. Data centric revenue was up 34% YoY. Certainly doesn’t look like a company on the brink of death to me.

Intel likely did take their eye off the ball and let competitors catch up in areas they previously held complete dominance. While Intel used to be a microprocessor company, they now are involved in so many different lines of business. Their focus has shifted to data, which they estimate to have a total TAM of $230 billion by 2030 according to this past quarter’s earnings transcript. This is significantly higher than the PC market TAM and Intel has therefore made it into the priority.

At the end of the day, Intel is still an incredible business that spins off loads of cash that can then be reinvested back into the business. In 2019, they spent 16.2B on CapEx and an additional 13.3B on R&D. That is 29.9B being spent on innovation and improvement, almost 3x what Nvidia and 5x what AMD did in total 2019 revenue. Intel trades at around 13x expected 2020 FCF, a deep discount to the rest of the market. I expect the company to continue to make use of their vast resources to invest in the future. Simultaneously, they will continue to pay out increasing dividends, make accretive acquisitions and opportunistically buyback shares.

CBOE- This one is a little less controversial and much less discussed on the Twitter-sphere. CBOE, which started as the Chicago Board Options Exchange but now goes by CBOE Global Markets, operates as a market maker, creating a marketplace for options and futures as well as a global stock exchange. It is a brilliant business model, they take none of the risk, but rather create the rails for others to work on. They exhibit classic GARP characteristics that I like to see, high return on invested capital and a capital light business. The business requires very little reinvestment, which allows the company to use their cash flow elsewhere. In 2019, they generated operating cash flow of $632 million. CapEx for the year was a mere $35 million. This left just under $600 million to be used in value creating activities. For instance in 2017, CBOE made a $3.2 billion acquisition of BATS Global Markets that has really bolstered the company. Since then, top line, bottom line and FCF have all grown considerably. I expect more large acquisitions in the future.

There is actually a whole group of companies working within this greater marketplace industry that exhibit superior economics. Just some examples are CME, Intercontinental Exchange and Market Axess. I happen to like CBOE the most at the moment given current prices, but they are all great companies. Should an opportunity come available, I could see myself owning one or more of these companies in the future. I’m actually surprised I have never seen Warren Buffett play in this sandbox. Seems to be right up his alley, but he has his reasons.

As always, I would like to thank you for taking the time out of your day to give this a read! Feel free to leave some comments or questions. Follow me on Twitter @TheGarpInvestor.

Q1 Update

Well that was a doozy! We just finished the quarter in what has easily been the scariest investing environment I have ever faced. In fact, it has probably been the most frightening time for any investor, young or old. Unfortunately, the situation we all face isn’t close to being over. I don’t know how long this will last, nor do I know how devastating the consequences will be. The best we can do is hold strong and remain ever vigilant waiting ready for opportunities.

As for my own investing performance… it has been rather putrid. I have scolded myself many times in the last few weeks for not keeping more cash on the sidelines. This was a rookie mistake and I own up to it. I just personally hate sitting on cash, I enjoy owning partial shares of some of the world’s greatest businesses. Cash can’t compound, it sits idly losing value due to inflation. It does however provide a lifeline should an opportunity come knocking. If there is no cash available, you either have to watch it go by or tap into a margin balance, which I personally refuse to do.

While the future looks grim, now is not the time to panic. These kinds of events are what separate novices from those who outperform. This crisis will shuffle money from the know nothing investor, to those who have done their homework. It will expose those who made use of excess amounts of leverage and those who bet on companies that lack durable competitive advantages. As Warren Buffett put it “You don’t know who’s swimming naked until the tide pulls in.” Everyone looks great during a bull market, it is only when the bear roars that the score is settled. This can be applied not only to investors, but to companies as well. Some are prepared for these kinds of situations and can prosper, others will be forced into bankruptcy.

For that reason, I try and invest into companies that perform well in all economic conditions, feast or famine. A strong balance sheet is imperative. It is hard to go broke if you don’t owe any money. Cash is king and I prefer companies acting like a dragon sitting on a hoard of gold, protecting that cash at all costs. You can bet a company such as Berkshire Hathaway won’t be filing chapter 11 and instead will be using this occurrence as an entry point into outstanding businesses.

Q1 Performance

As of 4/1/2020, my 10K portfolio stood at $9,700.23. When I started on 8/19/18, the SPY had a price of $285.06 and my account started with $10,000. As of 4/1/2020 the SPY had a price of $257.75. The SPY has also given out $8.44 in dividends since I started tracking, so I have accounted for that as well.

10K Return(1) SPY Return(2) Difference(1-2)

2018(8/19-12/31) (13.95) (13.71) (.24)

2019 37.33 32.6 4.73

2020(1/1-3/31) (17.91) (19.92) 2.01

Since Inception(8/19/18) (2.99) (6.62) 3.63

As you can see, I have actually beaten the S&P since the inception of this account, albeit I have done so while still losing money. I therefore find no sense of accomplishment in this feat. If the S&P was to fall 50% over a 10 year period while my own account only fell by 35%, I’m not going to be happy. The ultimate point is to make money, not just outperform an index.

Current Portfolio

Here is an updated look at my portfolio as of 3/31/20

Screenshot 2020-04-07 at 5.50.41 PM

We can see I have $9,652.61 invested and have an additional $47.62 in cash. I made some changes to my portfolio this quarter, time will tell if any of these were good ideas.

Buys

CNSWF- I invested into Constellation Software, which has immediately become my largest holding. The company acquires small companies that provide vertical market software to niche customers such as dentists, fitness centers and hospitals. They serve customers in virtually every market you can think of. They own hundreds of businesses and have extremely high customer retention. Constellation is a company I have followed for years and given a large fall, I became a happy buyer. Of course right after purchasing, the stock continued to plummet. I could have gotten a much better price, so be it. They are run by Mark Leonard, a brilliant capital allocator with an amazing beard. I have great confidence holding this company indefinitely.

HEI.A- I also bought shares of Heico corporation. They have a dual class structure, so I bought into the A shares, seeing that they traded at a discount to the standard shares. They offer only 1/10th the voting power, but given how small a position I hold, I find this to be immaterial. Heico is a niche supplier of airplane parts. They are a fantastic company that has fallen greatly due to the decimation of the travel market. While I was initially thrilled by the drop in price, I may have acted in haste, not fully appreciating how long the impact of the virus will last. I will continue to monitor the situation, but am considering getting out. I don’t like quick in and outs, but sometimes you can get lured in on false hope. The travel market might be impacted for years to come, I’m hoping that is not the case but who knows at this point. If people aren’t flying, planes won’t need new or replacement parts. Even a great business with a pristine balance sheet can get into trouble if sales fall off a cliff for years.

Sell

BKNG- For the very reason I am considering selling out of Heico, I have already sold out of my position in Booking Holdings. They are a fabulous company, but the impact of the virus on their business is immense. They make their money selling hotel rooms, car rentals and airline tickets. It is a brilliant business model, they take on none of the heavy lifting and merely act as an agent. As long as this pandemic lasts however, their entire business has essentially been cut to 0. They have a strong balance sheet and smart management, so I have no doubt they will weather the storm. I just can’t predict how this will impact their bottom line and for how long. I wouldn’t be surprised if I one day get back into the company. I’m not comfortable holding them right now, but that won’t always be the case.

Hold???

LUV- I haven’t made a decision on Southwest yet. Just like the last two companies I discussed, Southwest’s business has been crushed by this pandemic. I am loath to get out of an industry leader that is trading at a deep discount to prices seen just a few months ago, but my hands might be tied. The company just announced they are cutting 50% of flights through the end of June. Don’t be surprised if they are forced to cut flights deep into the summer or longer. Will Southwest need to be a part of the government bailout? Maybe, I honestly don’t know and I’m also not sure what kind of stipulations will come as part of such an agreement. No dividends or stock buybacks? That would really impact the investment potential. I’m weighing all these variables, but might pull the trigger soon and sell. I also notice I have allocated too heavily into the travel industry. I did not foresee this kind of crisis impacting so many of the companies I invested in, but I have to play the hand that is dealt. I need to make sure I diversify better so one industry can’t bring me down.

As always, thank you all for reading! This is a strange and difficult time. I invest to make money, not to watch it wash away. Let’s hope the rest of 2020 sees a return to normal and we can all start leaving our houses again. You can follow me on Twitter @TheGarpInvestor.

COVID-19

Fear, agony, depression, anger, and desperation are just a few of the feelings creeping through my mind over the last couple of weeks. As I’m sure you are aware, the market has gone into free fall and the world is in a true state of panic. Coronavirus has spread and brought the world down to its knee. I know things look grim, but as always when investing, it is best to remove emotion from the process. Take a deep breath, go for a walk, whatever you need to do to get yourself into the right mindset.

One mantra I have been repeating over and over is an ancient Persian proverb, This Too Shall Pass. Things look terrible, but the world will one day return to something that resembles normal. In America, we have gotten through the great depression, the financial recession, two world wars, a civil war, four presidential assassinations and once came on the brink of mutually assured nuclear destruction. I have confidence that in time we will overcome and get through this pandemic. We will look back on this as one of those events that we will never forget. This too shall pass.

I don’t say that to minimize the current state of affairs. This is an extremely serious situation that has ramifications felt in all walks of life. Our economy has essentially been put on hold and our most vulnerable citizens are left scared and hopeless. Unfortunately innocent people who did nothing wrong will die. Our hospitals will be strained far beyond capacity. People will lose their jobs and companies previously thought to be impenetrable will fold and go out of business. All we can do is persevere and make the best out of a terrible situation.

Peak to trough, markets have fallen roughly 35%. If your accounts have taken a massive hit, do not feel alone, everyone is suffering. I myself am suffering right along with you. It pains me to my core watching my money wash away. Across the nation, the sense of freedom and security has disappeared in the blink of an eye. Many have lost a significant portion of their retirement savings. I am lucky enough to be somewhat young and hopefully have a long runway ahead of me, but I sympathize with those who don’t. For those who plan to be net buyers of stocks in the coming decades, the only positive way to spin this is knowing that you can now buy stocks today at a 35% discount to what they were just a few weeks ago. I know that doesn’t make it any better, but it is now more important than ever to keep investing.

At some point in the future, there will be a resolution. I don’t know if that will be a month, a year or even many years from now, but eventually we will know where things stand and how the COVID-19 virus played out. In the end, this situation can really only go one of two ways. Either things will ultimately recover and return to normal or our entire world order will collapse and our financial system will turn to ruin. In the first situation, patience and delayed gratification are crucial. In the second, financial assets will cease to matter. Human society will have broken down, so what’s the difference? Who cares what stocks you own or cash you have if the entire system has collapsed? I happen to think the second scenario is incredibly unlikely, but just my 2 cents.

So the question is, how can we make the best out of this awful situation as an investor? Below I have listed 5 actionable steps we can all take.

5 Actionable Steps

Stop Panicking- Easier said than done, but panic provides no benefit. Calm, rational well thought out decision making will always win. Now is the time to start formulating a game plan. Most of us have been quarantined and are stuck at home. You have an abundance of time, make use of it. Take this as an opportunity to learn and grow. Determine what your goals are and how you can reach them.
Give Gratitude- I find myself to be a bit useless at times like these. Other than giving away money, I have no ability to save anyone. I do not have the necessary skills for these kinds of disaster situations. For that reason I find it especially important to be thankful. There are men and women out there on the front lines risking their lives in order to give care to those who fall ill. Thank the doctors, nurses, hospital staff and administrators, emergency responders and anyone else who is out there providing vital relief. They are not the only ones putting themselves at risk however. Thank the cashiers at the grocery store, thank the delivery driver who drops off a package so you don’t have to leave the house, thank the bar and restaurant workers providing you with food to go. There are countless other brave souls out there potentially exposing themselves to the virus, making sure our society continues to function. Thank them!
DO NOT SELL!- The absolute worst thing you can do is to sell out in the middle of a panic. It truly sucks watching your stocks go down every day. I hate it as much as you do, but you never know when the tide will turn. I am not in the game of timing the market. The market will likely recover long before we see the end of the virus. It will turn when sentiment burns bright. I’ll leave it up to Peter Lynch to describe it better than I can. “A stock market decline is as routine as a January blizzard in Colorado. If you’re prepared, it can’t hurt you. A decline is a great opportunity to pick up the bargains left behind by investors who are fleeing the storm in a panic.”
Look To The Greats- We may not immediately know what some of the best investors out there are currently doing, but we can at least attempt to put ourselves into their shoes. Even better, what would they do if they were in our own shoes? If Warren Buffett wasn’t handicapped by Berkshire’s massive size and the public scrutiny that comes along with all of his decisions, how would he proceed?. I can’t tell you exactly, but I would imagine he would be turning over every rock trying to find the diamond in the rough. He would be looking for great companies with a strong moat, that have fallen to a price far beneath their intrinsic value.
Put Your Research Into Overdrive- As an investor, this is probably the most important step. Everything else you do is all for naught if you don’t put in the work. Populate your watch list, start reading 10Ks and sift through as many balance sheets as you can. As for myself, I plan on taking a look at every company within the S&P 500. I’ve gotten to the point where it only takes me about 30 seconds to know if I might have interest in a company. If I do, more work needs to be done, but otherwise I Just pass on to the next one. After that I’ll start using screeners to help me find smaller companies not located within the S&P. This might feel like a daunting task, but truth be told, you don’t get the reward without the process. When the time comes, you will be ready to pounce.

I know this time is challenging and things are likely to get worse, but remember This Too Shall Pass

Thanks for reading. I’ll be back sometime next week to give you my Q1 portfolio update. Sneak Peak: It’s bad! You can follow me on Twitter @TheGarpInvestor.

Goodbye Summer (Q3 Update)

Unfortunately, all good things must come to an end. Summer came and went in the blink of an eye. Labor day weekend is now well behind us and so are any hopes I once had of not gaining a good 15 lbs over the Summer. A couple of trips and way too many burgers and beers are probably the primary culprits. I hope you all got to enjoy the summer heat as much as I did.

September however brings a new level of excitement. Kids are back in school and if they are forced to learn, we should be as well. We are all mere students of the game and therefore we need to work on our investing practice. A day doesn’t go by where you cannot learn something, so seize hold of the opportunity. A little bit of knowledge every day, will turn into a mountain of information over a lifetime. With that out of the way, let’s check in and see how I did this quarter.

Q3 Performance

As of 9/1/2019, my 10K portfolio stood at $11,088.12. When I started on 8/19/18, the SPY had a price of $285.06. As of 9/1/19 the SPY closed at $292.37(it’s actually had quite a run up since.)

Return(1) SPY Return(2) Difference(1-2)

Portfolio value $11,088.12: 10.88 2.56 8.32

With dividends reinvested into the SPY their returns would look a bit more like this.

Return(1) SPY Return(2) Difference(1-2)

Portfolio value $11,088.12: 10.88 4.42 6.46

I have to say that I am more than satisfied with my results thus far. I have cut a few of my losers and held tight onto my winners. I like to let my winners ride and let compounding do the work. Some might be overvalued and others are hopefully undervalued. In the long run, stocks will follow suit with growth in intrinsic value. I feel good about the companies I’m invested in and their prospects for the future. That being said, I hold onto almost $1,700 in cash. I am finding it hard to find deals I am comfortable with in the current environment. That doesn’t mean the search is over, just means I have to turn over more stones. One will appear and I will be ready to put my remaining capital to work.

Taxes

One topic I don’t see talked about nearly enough is the effect of taxes on investment returns. So often I hear analysts talk about a stock hitting their price target, meaning it is now a sell. Too often, these recommendations fail to mention taxes. Should you have a good gain, the second you initiate that sale, your gain is now realized. You will now be responsible for the taxes. Let’s just look at a simple example. Say you bought company A at $100. You made a great pick and after 6 months, the stock has now doubled to $200. Obviously you have made a fantastic investment, the question is what do next? If you sell out entirely, you will have a gain of $100 and it will be considered a short term capital gain, as you have not held it for longer than a year. It will be taxed at your normal income tax bracket. As of now, these taxes will fall somewhere between 10% and 37%. Let’s just assume a middle tax bracket of 24%.

On the $100 gain you will have to pay $24, leaving you with $176 to work with. Additionally, depending on where you live, you will owe state and local tax. Here in Baltimore County, Maryland you owe 5.75% to the state and 2.83% to the county. This lops off another $8.58, bringing that initial $200 down to $167.42.

The variables are of course ever changing. Should the characteristics of company A fail to live up to expectations or should your investment thesis no longer hold true, it very well might be a good time to sell out and switch companies. The important lesson is to take the effects of taxes into consideration and make an apples to apples comparison. In this example it is not $200 in Company A vs $200 in Company B, but instead $200 in Company A vs $167.42 in Company B. With that in mind, selling out of Company A might not be as enticing.

As always, thank you for reading. Be sure to subscribe and follow me on Twitter @Thegarpinvestor. Feel free to share the post, thanks!