Samuel Schlütenreit

Please do a quick read of this. It’s short, well written, and will remove a bit of wool from over your eyes.

One of the biggest mistakes I constantly see investors make is blindly looking at reported numbers and stopping there. “Company reported $0.05 vs expectations of $0.03 therefore they beat.” That kind of thinking is surface level and honestly ignorant. If your goal is to truly compound capital at a high rate for a very long time, you eventually need to own businesses through volatility, scary headlines, margin pressure, and periods where the reported numbers do not fully explain what is actually happening underneath the surface. Think about the greatest compounders like $AMZN or $NFLX. If you held them through their journeys, you experienced drawdowns of 50%+ multiple times. The only way you survive those periods is if you deeply understand the business and what it is you are actually betting on. That requires going far beyond “did they beat earnings by two cents or guide above the expectations of analysts”. Every business has to be analyzed differently because accounting numbers alone often fail to capture the true economics of what is happening. Take $TTD as an example. A lot of investors look at the SBC expense and immediately conclude the business is low quality or massively overearning. But as @SagaPartners correctly points out, if you actually study the business, you realize a large portion of the SBC since 2022 came from a special long term CEO performance award tied to stock price hurdles through 2031. If a CEO takes massive risk and ties their compensation to stock performance, and only gets truly paid if shareholders win big alongside them like Elon did, that is the ultimate form of skin in the game. And the other important nuance people miss is that if those long term performance targets are never achieved, large portions of those awards may never actually vest at all. Or take $WING as another example. If you simply pull up the income statement, the operating margin is around 26%, which is very good for a restaurant business but nothing that immediately makes you think you are looking at one of the best business models in the market. But once you actually study the business, the picture changes completely. A large amount of the reported revenue is pass through advertising revenue that gets spent back on advertising. Economically, that revenue has no value to shareholders, yet it inflates the reported revenue base and distorts many of the margins investors look at. Then there are the roughly 60 company owned stores which most investors view as lower margin restaurants that dilute the franchise model. I actually view those stores very differently. I view them more like R&D centers that pay for themselves and even generate profit while doing it. Those stores allow $WING to test operations, pricing, efficiency, flavors, kitchen innovation, and technology in real time. That is incredibly valuable and not something you immediately notice from reported numbers alone. If you strip out the advertising revenue that has little economic value and isolate the true franchise royalty business, suddenly the business looks far less like a traditional restaurant company and much more like a recurring revenue software. The operating margins are no longer the mid 20s, they are in mid 50s. Elite! That is something you would never notice without actually sitting down and studying the business deeply. Investing is not about reacting to whether a company beat estimates by two cents. It is about understanding the underlying economic engine of the business and what that business could look like five or ten years from now. The investors who make the biggest returns are usually the ones capable of understanding a business deeply enough to hold it through periods where the headline numbers temporarily look awful. That is where conviction comes from, and conviction is what actually allows compounding to happen. 🌹

Thank you. The important part is zeroing out taxes on the bottom half. Best way to put money in someone’s pocket is to not take it out in the first place. Bottom half is only 3% of total tax revenue. But it’s very meaningful to that person. Zero it out.

Jeff Bezos said the bottom half of Americans should pay zero federal income tax. He cited a nurse in Queens making ~$75K and paying ~$12K in taxes saying “we shouldn’t be asking this nurse in Queens to send money to Washington.”

"If you have to walk through the streets crying for a few hours every day as part of soldiering through then go ahead and cry away." But you can't quit. Post my GBM / glioblastoma diagnosis I understand Charlie Munger's words so much better that I did before. "The iron rule of life is that everybody stuggles. Everybody has some tough stretches." CNBC Cures.

I think the market is focusing too heavily on near term margins while underappreciating how much larger $MELI could be 5 to 10 years from now. The real question is not whether EBIT margin was 7% this quarter. It’s whether this becomes the default commerce and financial infrastructure across Latin America. That’s why Nick Sleep’s “destination analysis” is so valuable here. As long as the ship is still sailing in the right direction, obsessing over every decline in the NIMAL rate or every lending experiment duration matters far less than people think. In situations like this it’s often far more important not to overthink your own genius and emotionally convince yourself to do something dumb like sell the stock over short term noise or psychological misbalance. 🌹

"Add up the tax and the philanthropy, and the citizenry gets 59% of what billionaires earn, or 73% if you follow their fortunes into death. Estimates that billionaires pay lower tax rates than everyone else rest on distortions, tricks and lies." wsj.com/opinion/free-e…

I am glad that Elon Musk @elonmusk exists and that he does what he does. He is advancing human civilization. But I am just fine to not be invested with him - or for that matter to have him as a friend or as a part of my family. As usual, Charlie Munger said it best.

@benbstwits you blocked me? How come

Bloomberg's competitive advantage: outwork everybody else.

Finally get to see Druck speak in person today which is pretty much the entire reason I started Citrini. Good run everyone, mission accomplished.

@canis_lupus_68 Wieviel haste investiert?

Ich habe mit dem Amundi MSCI Semiconductors ETF meinen ersten Verdoppler.

@ken_trails @fastrlife Not sure about this whole 200ml straight vodka part tho

@fastrlife I would say that hunger is default. Although, some heroin users who avoided overdose seem to live long lives.

Sleep is actually our default state. Nobody is willing to acknowledge it… Our consciousness is metabolically super expensive; Evolution doesn’t keep expensive things. Every animal sleeps, even though sleep could mean death (in the wild); Dolphins shut off half their brain instead of skipping sleep. Understand this: Whatever sleep is for is so important that evolution would rather risk you being eaten than let you skip it… That’s insane. You spend a third of your life unconscious because the alternative was worse. Deep deep rabbit hole no one wants to discuss; Everything on the planet just knocks out for a major portion of our lives… And you think it’s just for recovery? Please.

There’s a big difference between a business and a stock, just like there’s a big difference between price and value. A company can execute perfectly, grow customers, expand margins, increase profits, and still give you a mediocre return. That’s because the stock is not just the business, it’s what you paid for it. If you pay too much, even great execution will deliver underwhelming returns for investors. At the simplest level, your return comes from two things. Earnings growth and the change in valuation. If a company compounds earnings at 15% but the multiple falls from 40x to 20x, you end up going nowhere, 0% returns. The business is doing great, but the stock is worked against you. Think about it like this. You buy a company earning $1 per share at 40x, so you pay $40. Five years later it earns $2, which is an amazing outcome. But if the market now values it at 20x, the stock is still $40 and your return is zero. The business doubled and you didn’t make money. We’ve seen this with $AMZN and $TSLA where the businesses kept improving but the stocks went sideways for 5 years. Even with elite models like $SPGI and $MSCI the returns are terrible if you start from a high valuation. That’s the trap. When everyone already knows a business is great, that greatness is already embedded in the price. From that point on, execution doesn’t create upside, it just justifies the premium you already paid. You’re not earning from surprise, you’re waiting for reality to catch up. This is also why investing feels so confusing sometimes. You can be right about the business and still be wrong about the stock. The headlines look great, earnings beat, margins expand, and yet your portfolio doesn’t move. It’s not because you’re wrong, it’s because you overpaid. The flip side is where it gets interesting. Some of the best returns come from good or even “messy” businesses bought at the right price, ie $CVNA. When expectations are low, you don’t need perfection, you just need things to be a little better than feared. That gap between expectation and reality is where superior returns are made. Great businesses bought at high prices often require time, not brilliance. You’re waiting for the business to grow into what you already paid, which can mean years of sideways returns. Meanwhile, a less loved business with improving fundamentals can outperform because the bar was set lower. So when you look at a stock, the real question isn’t just how good the business is. It’s how much of that goodness is already priced in today. What has to go right from here, and how much upside is actually left? The goal isn’t just to find great businesses. It’s to find mispriced greatness. 🌹

I loved the article, "AI Isn't Coming for Your Job. It's Coming for Your Mind" by Tom Slater at Baillie Gifford. h/t Ian McKinnon, chairman of the board of trustees @sfiscience. Points about mastery and cognitive diversity are particularly relevant. Worth discussing in professional and educational contexts. bailliegifford.com/en/uk/individu…

Really enjoyed reading this article on $PM from @Quartr_App you guys write the finest articles on here! Great job 🌹 quartr.com/insights/edge/…

It's the superbowl for value investors: IBKR finally added Korean equities. Here are the three value setups that caught my eye: SK Hynix at a 45% discount, an inflecting bank at half book with a significant repurchase program, and a specialized valve maker brimming with cash open.substack.com/pub/thechiefin…

@ken_trails @GoyaFoods You serious about the vodka?

3:30AM. Woke up from an otherworldly lucid dream. Here was my dream machine. 21 hour fast 150ml straight vodka, double IPA 2 avocados 1 tin of @GoyaFoods sardines in olive oil 1 hard boiled egg A handful of Italian olives (medley) 10% plain Greek yogurt with strawberries

@fasteddy707 @KalshiPolitics 😂

@KalshiPolitics He is going to go far in politics. This is going to send him into the fray of politics. He is going to the top. We need him in the future to run the country.

NEW ALL-TIME HIGH: Vivek Ramaswamy has a 97.6% chance of being the Ohio Republican Governor nominee

rolex makes objectively good watches, but the brand is so closely associated with a kind of status-obsessed braggart who's constantly assessing other people's social positions that it's hard to get into their watches. spiritually painful.