ACTIVE CAPTIAL

Upper-middle-class families are in a weird dead zone with college. They make too much to qualify for meaningful financial aid, but not enough to casually write $100,000 checks every year without it completely changing their life. So the kid looks rich on paper, gets little help, and the parents are expected to absorb the cost of a house down payment every single year. College pricing has also obviously become absurd.

Name an education opinion that’ll have you like this…

The Invisible Transfer One of the biggest investing mistakes sounds completely logical. Find an extraordinary business, hold it for a long time, and exceptional returns will naturally follow. It feels almost impossible to lose, yet this simple assumption has probably cost investors more money than almost any other mistake. Imagine a business is intrinsically worth $100 per share today. Over the next 10 years, it compounds its intrinsic value at an incredible 20% annually. By the end of the decade, that same business is now worth $620 per share. Now imagine 3 investors all buy that business and hold it for the next 10 years, and they all watch the same management team make the same decisions. The only difference is the price each investor was willing to pay. The first investor pays $100 because that’s what the business is worth. The second investor becomes excited and pays $200 because he’s convinced it’s a once in a generation company. The third investor becomes even more optimistic and pays $300 because he simply “has to own it”. Now assume that after 10 years, the market recognizes the company’s intrinsic value and the stock trades at $620 per share. Nothing about the business disappointed. It compounded at 20% annually, strengthened its competitive advantage, generated mountains of cash, and became one of the greatest businesses in the world. Yet their investment results couldn’t be more different. The investor who paid $100 earned 20% annually because he captured nearly all of the company’s compounding. The investor who paid $200 earned only 12% per year, while the investor who paid $300 earned 7.5% annually, despite owning the exact same business for 10 years. — Here’s the math: Annual return = (Ending value ÷ Starting value)^(1 ÷ Years) − 1 Think about how remarkable that is. Three investors owned the exact same company, for the exact same length of time, while management made the exact same decisions. One earned nearly three times the annual return of another because of a decision made on the very first day. The business didn’t create different returns. The purchase price did. Most investors spend their time asking one question. How big can this company become? That’s certainly important, but it isn’t the most important question. A much better question is this: How big must this company become just to justify today’s stock price? Those two questions sound almost identical, yet they produce completely different investment decisions. One focuses on the business, the other focuses on the investment. Great investors understand that those are not the same thing. Now let’s make the example even more interesting. Imagine investors believed this business would compound at 35% annually for the next decade. Instead, it “only” compounded at 20% per year. Who was wrong? Certainly not the business. A company that compounds its intrinsic value at 20% for 10 consecutive years is top tier and extraordinarily rare. Management executed brilliantly, customers remained loyal, margins expanded, and free cash flow continued growing year after year. The problem wasn’t the company. The problem was that investors had already paid for something even better. They weren’t buying a business capable of compounding at 20%. They were paying as though they were buying one that would compound at 35%. That’s one of the strangest truths in investing. A business can produce extraordinary results and still become a disappointing investment. Not because the company failed, but because the expectations embedded in the stock price were even more extraordinary. This is why I believe expectations behave like a hidden form of debt. It never appears on the balance sheet, yet it can become one of the largest liabilities a company carries. The higher the valuation climbs, the more future perfection the business owes investors simply to justify where the stock already trades. 1/2

For those who have a $100,000+ stock portfolio. Give one crucial advice for someone to get there too.

At what point should you reach $250,000 invested in the stock market?

You can buy $SHAZ cheaper than Leopold's $68.73 cost basis right now btw