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Joseph Shaposhnik

lines on the record: 72
first: 2025-06-20
most recent: 2025-06-20
sittings or episodes: 1
sources: podcast

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“So we will be launching the ETF on June 18th for those that would like to find more information about it. They can go to rainwater etf.com. The ticker is rw. And if they want to get in touch with me, obviously they can find me on LinkedIn, Twitter, and most of all their social platforms. We're thrilled about it and as always thrilled to be on the show with you, Clayfink, and the investors podcast.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Somewhat similar levels of concentration kind of moderate levels of concentration in the new fund, maybe a couple more names to provide a little bit more diversification to the portfolio. But aside from that, there's a lot of consistency with the old fund. And just like the old fund where I had the vast majority of my money invested in it, the new fund, same thing, will be very, very heavily invested personally in the new fund. Unlike the prior world where I ran three or four different funds, global space tech and the domestic fund. Our ambition is to run one fund and do that really, really well. We're not trying to launch an investment company to launch three or four or seven different funds and raise as much assets as we can and build this far flung diversified investment firm. That's not what we're trying to do. We're just want to focus on generating great returns in one fund, which we think will be a great compounding vehicle for advisors.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It is to some degree different. We in the new fund have committed to only investing in recurring revenue businesses. In the old fund, I operated with a somewhat wider mandate. But with the new fund and having six months to reflect on what I think would be best for investors, the world in which we're operating, which is an expensive US stock market, a less expensive outside the US market. The new fund is more exposed to outside the United States businesses because the multiples are more attractive there and the new fund will also focus exclusively on recurring revenue businesses and not other types of businesses that we had invested in the past that we think are less durable by their very nature. Aside from that, it's”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“We're not optimizing for highest return, highest projected return. We're trying to optimize for which businesses will be the most durable and can still deliver at reasonable rates of compounding, which is why Constellation has been our largest position for probably six or seven years in the old fund and is going to be projected to be the largest position in the new fund. We think it's the most durable. So in general, we're sizing things based on durability and compounding rate and our confidence in the teams. That's the way we think about it.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Sizing of positions is associated with our conviction in the durability of the investment. So we take somewhat of a counterintuitive approach to portfolio sizing. In general, as we talked about earlier, we have a investable universe which comprises the businesses that we think fit our investment process, which is only investing in recurring revenue businesses, only investing with exceptional leaders and businesses we think we can hold for a long period of time. What we're then doing, as we talked about before, is optimizing our expectation for the rate at which each business can grow free cash flow against the multiple we have to pay for. When we think about sizing going from that point to getting in the portfolio to sizing it up or sizing it down, what we're thinking about is the risk”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Frictional costs associated with them. So the ETF, from a management perspective, doesn't change much. It's basically very similar to the way we were running the old fund, but it does have these real strong advantages.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“That's a correct interpretation. In the mutual fund, when you trim a position and you've created gains, you will create capital gains for the investor, which will be delivered to them at the end of the year. Now, as you're trying to do that and you're trying to create losses or take losses to the extent it makes sense in the mutual fund to try to manage that process. And I think we did a great job of doing that in the prior mutual fund, not passing along capital gains for multiple years, which is very difficult to do. But the flexibility to be able to do that in the ETF vehicle and protect your investors from capital gains at the end of the year is extremely, extremely useful and generates at the end, because at the end, what you care about is the net return, net of taxes, net of fees, what is the investor get? We want to make sure they get the most we could possibly deliver to them without all of these.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It's not a lot different. The operational management of the ETF is pretty similar to the mutual fund. Now, as you may know, we converted the old mutual fund to an ETF at my prior firm. I've got experience with the conversion itself running the old one and then also running the converted ETF or the new ETF as well. The process for managing those vehicles is not a lot different, but the benefits are vast for the investor. The ability to defer capital gains is a huge advantage for the end investor. It's one of the reasons that I decided that the ETF was such an attractive vehicle for investment advisors, their clients, individual investors, the ability to defer capital gains is just huge.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Of course, the team at lore, they happen to be very, very good operators that have a long track record of success. And so with Lore, that's one in the same family of businesses that's come out. I'm not ready to reveal our investment thesis on it yet because I think it's underfollowed and a great opportunity. But maybe next time we'll get into that a bit. But it follows in the family of the same types of businesses that we've liked for a long period of time. And obviously we think they're going to do very well”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Are very high. The aftermarket part is very high margin and very cash generative. And the ability to allocate capital to the industry continues to be plentiful and attractive. So we like the industry. We like the durability and the recurring revenue nature of all of the businesses. number is very predictable and the part usage is also very predictable and recurring and in the businesses we've invested in there really isn't a replacement part for the part that our company is making that combination is very attractive to us also just so happens that the management teams of these businesses the mendelson family nick howley and kevin stein and”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Then they have to certify the seatbelt with the share and the seat location on the plane with the FAA. The level of certification on an airplane is so sufficiently high that it makes the switching costs so painful for the airline. It's like nothing changes. The strategy for these companies is can we just get on the airplane just get me on the airplane. Once you get me on the airplane, I'll be selling the recurring product for the next 30 years. And it'll be very difficult to swap me out, particularly if I'm delivering the product well and on time and with high quality. So the overall thesis for the industry, and we've been investing in the industry for quite a long period of time, is that the switching costs”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“He felt it will say I am safe on it. And what makes this industry so attractive to investors is this. Translating acquired AMSAF. AMSAFE has 90% of the seatbelt market. And the reason it's attractive is if the airline who buys the replacement seatbelts wants to change AMSAF for another supplier of seatbelts. They have to go to the FAA and they have to have this seatbelt that the new supplier is creating certified by the FAA. They then have to certify this seatbelt with the seat model itself with the FAA. And there's multiple suppliers of seats out there. There's probably four or five major suppliers of seats. They have the certify the seatbelt. They have to certify the seatbelt with the seat itself, the model.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Clay, you're giving away all my secrets today. Hopefully, I'll have something live. I'll give you kind of a brief summary of that threesome of companies, lore, trans. You might throw in GE in bad business, GH's now an unbelievable company run by an unbelievable CEO. But the common thread here is that they're selling these critical components to the airlines that have generally speaking few replacement parts available for them. They're generally a design that is specific to that particular application and is very difficult to alter once it's on the airplane itself. And I'll just give you a brief example of that. A number of years ago, Transnyme acquired a company called AMSAFE, which makes seatbelts. When you go on a plane next time, flip the back of the seatbelt and you'll see on the back of the”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Tariffs. And as you mentioned, inflation, a lot of the businesses, because they're selling a critical product and it's tied to these long-term contracts, which have inflation built into the pricing of the businesses, they are well protected from the impacts of inflation. So just by the nature of the recurring revenue models, they just tend to be better protected from the impacts of the outside world.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“That's right. One of the nice things about a recurring revenue business is that they tend to be more insulated from all of these political factors and all of the noise that happens in our country, which can impact the actual cash flows of companies. But with software businesses, with capital light businesses, these businesses tend not to be affected by tariffs. What's also nice is our businesses tend to sell inside of the countries that they operate in. So most of our U.S. businesses operate in the US, waste collection business tends to be a local for local business. Our investments outside the United States, they tend to be selling local to local. So are European investments have heavy exposure to European customers, very little exposure to selling it to the United States. So it insulates the portfolio from the impacts of”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“I won't go over it, but it's a business with 75% recurring revenue. It's a business run by one of the great capital allocators of our time with an incentive structure, which is the most attractive to investors that you can find. And it's a stock that you can hold for the long run. That's what we look for in companies. And we think that this is going to be the stock of the next 10 or 15 years, which is why we've invested it.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Culture and the importance of that is it really allows the company to broadly find opportunities around the world and do that rapidly, efficiently. And it gives the company the opportunity to maintain high rates of return, acquire businesses at lower multiples, and do that for a much longer runway than most of the compounding stories that we evaluate and that we focus on. So I think this is the Berkshire Hathaway of the next 10 or 15 years the CEO is still relatively young by buffet standards. I think he's going to be doing it for a long, long period of time. And I think with investing, it's important not to overthink situations. This is a great situation. Most of the listeners know the core thesis.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“A kitchen cabinet of geniuses sits there and looks at the presentations and decides okay, this is the deal we want to do. This is a good one. That is a very cumbersome, slow, and inefficient process, which at the end gives you relatively few options and generally if you're only able to look at deals in the United States or in your core market, you're confined to the multiples that you have to pay to get things done in your core market. But the remarkable part of the constellation story is that they have a culture and a management system which trusts the people far away from headquarters to allocate capital to deals that make sense in that country all around the world. I can't think of another example of a culture that is approximate to that.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Diversify into other market segments, some of which are not as good as insurance, some of which are not as good as the core assets that he started with. Constellation still has this long runway of being able to allocate to its core business, which is the best business of all businesses. And that runway, I think, is underappreciated and will be carried forward for a long period of time. And I think what's most unique about the constellation story is that they have the ability, unlike the other great compounders, to allocate that capital globally. Most of the compounders, the decision-making is done out of Cleveland, New York, South Florida, wherever headquarters is. So all of the investment perspectives, all of the write-ups, all of it's got to come to headquarters. A handful of people, a group of people.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It would be constellation. And the way I think about it today is it's the Berkshire Hathaway of our modern times. Buffett used float as a way of amplifying returns and driving a lot of capital allocation into other great businesses. The opportunity that we have today with Mark Leonard and Constellation Software is you have one of the greatest capital allocators of our time who still is allocating capital in one of the most attractive industries you can allocate capital to, which is software. And he's using his flow, which is software. You could say paid in advance maintenance contract revenue. I'll call that float to reinvest that in other very high margins. To high return software businesses. Unlike Berkshire, who had to diversify because of size, because of the”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Multiple of the SP 500 from a free cash flow perspective. And if we can get the capital allocation for free, that's a great situation to be in. Some businesses trade at very high PE multiples, but much lower free cash flow multiples because the businesses we tend to invest in have lower capital intensity than most. And so they're more reasonable on a free cash flow basis. But in general, that's generally the way we're looking at it. We're trying to pay a multiple that's not a lot more expensive than that of the market from a free cash flow perspective. We're trying to get a lot of compounding with that and we're trying to make sure that the compounding and the free cash flow stream is very durable.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“CEO was saying that the stock was overvalued at 600. You rarely find CEOs say that their stock is overvalued. And when you do, my experience is you should pay attention. I went back to the annual meeting because Mark doesn't really do any other meetings outside of the annual meeting. The next year, and the stock was 650 or 700. And again, he said he thought the stock was overvalued. And when you look at the stock chart from 2006 to 2016 on your Bloomberg screen, it's literally like this. It's like a vertical line. And when we entered in 2016 or 2017, the stock was trading at a multiple that was kind of in line with that of the S&P 500. So not particularly expensive. And we thought we were getting all of the capital allocation for free. So we're looking for situations that approximate the”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It is interesting, you know, when I first got to know the constellation software story, I went to go visit the management team at its annual meeting in 2016 or 2017 in Toronto. They had the annual meeting in a law firm's office. It was like a conference from for their law firm. They're very frugal people out there in Toronto. So I was out there and Mark Leonard was standing up in front of with maybe a couple hundred people, maybe less, maybe 150 people in this kind of tightly packed conference room. And he was talking about his business and he said that he thought his stock was overvalued. The stock was $600 a share or something and the stock had gone from an IPO price of $16 or so 10 years prior to $600. And I thought to myself, geez, that's been a huge run. I mean, maybe we've missed it. But what could be interesting about the story is that this.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Cash flow of the business not five years at one year out. And so valuation is important, but it's not everything and it's not every factor. And so we lean a lot more on the quality of the business, the durability of the cash flow, the talent level of the management team, more than anything. That to us is what's important. From evaluation perspective, what we're trying to do is we're trying to gain as much compounding as higher rate of free cash flow compounding as we can get for every point of free cash flow multiple we're paying. So we're looking for the most durable businesses that fit the framework, but what we're also doing is we're trying to trade off the multiple that we're paying for cash flow with the rate that we expect the cash flow to grow in the future. It gives you an example of valuation and stock prices that I think is”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Is an important part of the process, but it's so frequently talked about. And I would say overtalked about. Because how many times do you see a situation where the valuation seems to be attractive and one year later the earnings are actually 30% lower? So valuation is important, and I'll get into how we think about valuation in a second. I think the quality of the company, the durability of the cash flows and the talent level of the management team have a much greater impact on the outcome of the investment because you could have a business which is trading at this high multiple, let's say 30 times, 25 times these high multiples. And a great management team can make an acquisition that will totally change the”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Jump in and jump out is really not our strategy. We think that that will hurt returns. We also don't charge performance fees. And I think that performance fees and fees in general can be a huge drag on investors. So we don't charge performance fees. We don't time the market. We don't hug the benchmark. We've talked about the benchmark and we're cognizant of the benchmark that we would like to exceed and outperform. But we're not there looking at the individual benchmark constituents like a lot of fund managers and trying to decide well are we going to be buying a little bit of this or a little bit less of that. We're not hugging the benchmark. All we're trying to do is find these great recurring revenue businesses that we think can compound at a mid-teens rate and give them the time and space to do their thing over a long time frame.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“I think what we don't do is we don't spend time timing the market. We will stay fully invested. And the reason we don't do that is because we don't believe we can time the market and we don't believe that we've met anybody that can actually time the market. It was funny. I was having a conversation one time with Will Danoff and I asked him about the macro. And he said the macro doesn't matter most of the time. And when it does matter, nobody knows. I think he meant to say nobody knows which way to go and nobody knows which way the macro is going to go. So we spent some time thinking about the macro, but we don't allow it to overwhelm the investment decision making. We don't time the market because as I said, we don't think that we know the direction of the market. So we stay fully invested. We want the portfolio to compound and there will be dips and valleys and peaks. And that's the natural state of markets and businesses.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It's mind blowing. And I mean, we're using it every single day as basically in a system, as a part of our research process. And you can ask GPT to do so many things, gather so much information and organize it for you. It is just incredibly helpful. And I think in our industry, the investment industry, there are so many opportunities to adopt technology and artificial intelligence as an assistant and an adjunct to what we do. It'll be interesting. We're spending a lot of time studying and implementing that, but we'll see how that evolves and impacts the industry, but it'll impact all industries for sure.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“More rapidly adopted than AI. And I think the data says that GPT has reached 365 billion searches in two years. It took Google 11 years to reach 365 billion searches. So the adoption rate of AI is remarkable. And the question is who benefits and who is threatened by it. I think that we're trying to invest in situations where we don't have to make heroic assumptions about the future of companies. And so we're very comfortable with Broadcom because we're pretty convinced about its future and the durability of its cash flows. But with the other, some of the other businesses in the MAG7, they either don't fit the recurring revenue strategy. Or we're not sure whether AI and technology is a benefit to them or a mortal threat.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It happens to be going through a very capital intensive part of its growth cycle. So we're evaluating it. We're thinking about it for sure. And we'll see what happens. There are others. You know, Google is certainly one of the companies that can fit. But the question is, I think it's an open question. Is AI an assistance to Google? Is it a threat to Google? And I think that that question is uncertain. And I certainly believe that AI is a huge factor that will impact all businesses, definitely impacting technology businesses. The adoption and AI has been so rapid in setting records. So you may have seen this, but there's basically been no technology that has been”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Very possible in general, some of the MAG 7, in my mind, are in the too hard, too difficult to predict category. Some of them don't generate recurring revenue. So that puts them outside of our fund and our strategy. But some of them do. And we're constantly studying them. As you know, we invested in Microsoft when we started the last fund in 2015 and held it the whole way. And that's an example of an incredible recurring revenue business. I can't think of anybody who's going to be canceling their Microsoft 365 or Office 365 subscription. I know now as a business owner what that feels like, but it's so important, you know, who's canceling that? Nobody's canceling that. So Microsoft, along with Azure and its other phenomenal recurring revenue businesses, is up there for consideration.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Despite it being somewhat counterintuitive, it is counterintuitive. It's like we're delivering a more predictable outcome with lower volatility, but with better performance. And I think that's what advisors can get behind and most investors hopefully almost everybody has some index allocation. This is a great diversifier to your index allocation because we don't own these in big index positions and it provides this kind of nice level of diversification with somewhat lower levels of volatility associated with it.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Broadcom is going to be generating $40 or $50 billion of revenue in AI over the next couple of years. So you can find great growth businesses that meet this stringent recurring revenue strategy in all parts of the market. They don't have to be the boring, non-growing parts of the market. And you can find them outside the United States. So you've done a great job of profiling these great businesses outside the United States. We're looking outside the United States to find somewhat less expensive stocks because the United States, the US market is expensive today. And we're finding though. So you don't have to be constrained by the United States. You can find gray growth businesses that are recurring outside the United States. And there's lots of opportunity. So I think those are some of the reasons the strategy has been able to generate significant outperformance.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It's massive, which can definitely be the case. Or the capital allocation somehow will get you there, or there's a cannibal situation where they're buying back enough shares to where you've got some leverage at the operating line, and then you've got more leverage with the buybacks, and that gets you to bottom line compounding rate of 15% or something like that to get you to that outcome. But what I would also say is there's probably a misconception that these businesses all have to be boring and unexciting and not particularly high growth. There are opportunities all over the place in recurring revenue businesses. It's such a great category and focus area because we invest in Broadcom. I think we talked about it on the last call a year ago. That's a phenomenal recurring revenue business. It's like 50% recurring post VMware. And they're one of the great beneficiaries of AI, of all of the AI stocks.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Investors underestimate the power of capital allocation. And so while these businesses tend to generate somewhat lower top line revenue growth than most companies or than some companies, maybe the fastest growing companies, they can make it up with capital allocation. And that means buybacks, acquisitions, or other activities, which at the end of the day will generate free cash flow compounding at a rate that exceeded that of the market. We're targeting a mid-teens rate of free cash flow compounding for the portfolio, which means the portfolio constituents need to have an individual basis the ability to get to a mid-teens rated free cash flow compound. That's not so easy for a 5% growth, 90% recurring revenue business. So you have to find situations where either there's operating leverage.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Generate good returns while building a diversified portfolio and not blowing yourself up in these individual stocks because it's very difficult to have 20 good ideas. I mean, our fund has 20 stock portfolio. It's focused. I really like what we own, but you're always trying to prevent being in businesses that will blow you up or have these really negative outcomes. The Bessemer study says if you hold stocks long enough, half of them will generate a negative return. That's counterintuitive. You think that if you give businesses enough time, they will dig out of their problems. The activists will come in and change management. Something good will happen. But a lot of times, nothing good will happen. So I think the first key point is that these businesses die less frequently than that of the average company. So your starting point is better. I think the second key point is that investment.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“It's a good question. I think that the Hendrik Bessemer study made this so clear. For lack of a better term, most stocks die. And when I say die, what I mean by that is the study said that over 50% of all stocks generate a negative return. I was shocked when I read the study. Half of stocks generate a negative return. Wow. I mean, that's just shocked. I think one of the reasons why the strategy works is that it keeps you out of bad situations. And the challenge for the portfolio manager isn't always generating good ideas that will deliver a lot of value or go up a lot, but it's the stocks that blow you up. And how do you deal with that? And invariably, this is the constant challenge for the portfolio manager and for the investor. How do you”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“This engine that can continue to generate cash flow and do it in a way that will create value for shareholders. Strategy, I think, is a little bit counterintuitive in a way because more of recurring revenue brings more certainty to a business, more certainty means lower risk, which you think would bring lower returns alongside that. And yet you manage to continue to be the market over long periods of time. You know, my take might be that, you know, the market generally is just underestimating a business's potential and where it's going to be five, ten years down the line. Many investors like mutual funds are trading in and out of this and playing a bit of a different game. I'm curious to get your take on why this strategy can simultaneously bring less risk yet higher returns.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Combination that we're always trying to do. Can we find that great recurring revenue business that has grown with the right management team, with the incentives aligned? And that combination is a great combination for the investor because when we analyze incentive plans, what we're trying to do is incentivize the management team to play offense and compound free cash flow. But at the same time constrain them against their worst instincts, which is to grow the company at all costs without an awareness of generating high returns on capital. So can we find an incentive plan which incentivizes both, protects the investor on the one hand, incentivizes growth on the other hand and the right types of growth, put that together with a great business. And now you kind of have”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“They know that the revenue will be there next year. They know what their costs will be next year. And they can take that cash flow and do something which will be value creating for the investor and for their business because they have the confidence to know that the cash flow will be there next year, the following year, and the year after that. And so you have this added benefit of capital allocation being your friend with the recurring revenue business and with the other business you kind of don't have it there because it's so unpredictable and unknown where the business is going to be in the not too distant future. So putting together this recurring revenue business with the right management team and the right financial incentives for the management team is this like magical”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Or an oil extraction company. It's much more difficult for them to take the cash flows that they generate like for the first time in five years. They're generating free cash flow. To take that cashflow and invest in the next great acquisition or the next great project, which will create more compounding if the returns are strong, that's difficult because they just don't know when the cash flow will come. They may have to service the debt of the existing business. They may have to engage in other projects or maintenance capex. But for the recurring business, the software company, the credit bureau, the stock exchange, the way”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“Because the revenue stream is so durable and predictable and tied to subscriptions. And I think lastly, obviously in recessions, these businesses will hold up much better because they're selling this important product and the customers are tied to these contracts. So you kind of know where cash flows will be in a recession. And so it's easier for the investor and for us kind of hold those businesses because the businesses will decline less and be more durable in recessions. So that's kind of a nice added benefit to investing in recurring revenue businesses. But I think the last key thing that's somewhat underappreciated is that these businesses give management the confidence to make great investments because the investments are more likely to pay off. So as an example, if you think about a steel company,”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“That you can predict. It's not very pleasurable, but the waste management industry, there's going to be waste at all times. Good economies, bad economies. Unfortunately, there'll be lots of waste created. Maybe with AI a little bit less waste, but I think still quite a lot of waste that'll be created. But those are the kinds of businesses with a lot of recurring revenue. The waste industry kind of has these monopoly markets that we like. And those kinds of businesses you can predict. And what we found over the years is that these businesses, they produce fewer surprises, negative surprises. They're just easier for the management teams to manage. And so it's easier for a management team to kind of match expenses with revenues because they kind of have a census to where the revenues are going to be. They also, from a investors in an analyst portfolio manager's perspective, we have a much better census as to where the cash flows will be in a year, two years, and three years.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“I think that we start from this position of humbleness where we think that businesses are in general very difficult to predict. And if you can't predict where business is going to be in a year or two, you certainly can predict where it's going to be in a couple of years. And if you can't predict where it's going to be in a couple of years, you don't have a really good chance of valuing it. So we try to take that kind of humble approach to investing. And so we step back and we say, well, what can we predict? Well, the businesses that have 90% recurring revenue tied to long-term contracts, businesses that are exchanges like stock exchanges, whether they're this national asset, this toll booth for activity, that you kind of can predict. Credit bureaus where there's only a couple of them and in order to have commerce occur, you need to have them operating. Well, that's kind of something.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“In us to make this cornerstone investment and to back rainwater and the rainwater equity ETF, I've had the opportunity to bounce different ideas off of him and to talk to him about different investment strategies that he's followed. And I think one of the reasons he's been interested in our fund is that it's just so different than what he's been investing in for a number of years. I think he was attracted to the different approach that we're taking and have taken to investing. And as I said, I'm just so honored that he's decided to invest with us and to be somebody that I can talk to on a regular basis.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“As you said, Bill Miller, an incredible investor outperformed the SP 500 15 years in a row. Unbelievable record and probably one of the greatest investors of our time. I met him in 2006 or 2007 when he came to visit at the invitation of Fidelity's portfolio managers, came to visit Fidelity to talk to Fidelity about invest in. Can you imagine that? He was so prominent and highly respected that Fidelity invited him in 2006 to talk to the entire research team and portfolio management team about investing. I was very special, obviously a very special meeting with him and getting to know him a little bit back then. I've gotten to know him over the years and I'm so honored and pleased that he had the confidence.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“With Shopify, nothing stands between your idea and a real business, so go make it one. Start your free trial at shopify.com slash TIP. Start your free trial at shopify.com slash tip. Right, back to the show.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“As investors, we spend all day studying great businesses, but some of the best returns come from building one yourself. If you've been sitting on a business idea, Shopify makes it easy to actually make it happen Everything you need to start selling is included and ready from day one. Take the moment your first customer is ready to pay. Shopify checkout helps more of them finish the purchase. And when they come back, their details are already saved. One tap and they're done. Because Shopify handles the setup and the checkout, you get more time to focus on what actually grows the business plus the tools to do it. If I were starting a business, I would absolutely use Shopify myself. It powers millions of businesses worldwide, from names like Mattel and Gymshark to founders just getting started at shopify.com slash TIP.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
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2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT
“from all of the other strategies that are out there in the market. We don't think that we can have an opinion on every single stock out there. We think that only those businesses that are predictable and generate recurring revenue are the areas we want to focus on where we think we can do well.”
2025-06-20 · We Study Billionaires · TIP731: Owning Best-in-Class Businesses w/ Joseph Shaposhnik · IDENTIFIED FROM THE TRANSCRIPT