Investing in Quality: Insights from Constellation Software

On today’s episode, Clay is joined by Joseph Shaposhnik to discuss the launch of his new ETF, Rainwater Equity. The Rainwater Equity ETF just launched on June 18th, 2025, under the ticker RW, and its objective is to compound capital at an above-average rate by investing in publicly listed recurring revenue businesses.

The fund Joseph managed at his previous firm compounded at 16.7% since 2015, versus the S&P 500’s 13.1% over that same time period. It was also the top-performing fund out of 343 in its US Large Cap Core Equity category by Nasdaq eVestment.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

02:39 - Joseph’s lessons from spending a day with Peter Lynch.

12:09 - Why the active management industry is broken and how Joseph has set out to fix it.

22:12 - Why Bill Miller invested in Joseph’s new ETF.

28:25 - Why recurring revenue is the ultimate business model.

40:11 - Whether any of the Magnificent 7 companies fit into Joseph’s recurring revenue framework.

46:35 - The role that valuation plays in Joseph’s quality investing framework.

55:30 - Joseph’s top stock pick to hold for the next 20 years.

01:03:00 - Why Joseph is attracted to the aerospace aftermarket industry.

01:08:09 - Why Joseph chose the ETF structure over the mutual fund.

01:10:53 - How Joseph determined the appropriate position sizing for his fund.

And so much more!

Disclaimer: Slight discrepancies in the timestamps may occur due to podcast platform differences.

BOOKS AND RESOURCES

• Join Clay and a select group of passionate value investors for a retreat in Big Sky, Montana. Learn more ⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠⁠.
• Join the exclusive ⁠⁠⁠⁠⁠⁠⁠⁠⁠TIP Mastermind Community⁠⁠⁠⁠⁠⁠⁠⁠⁠ to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
• Related Episode: TIP622: Finding Certainty in an Uncertain World w/ Joseph Shaposhnik.
• Related Episode: TIP522: Unconventional Wisdom from the Greatest Minds in Investing w/ Joseph Shaposhnik.
• Follow Joseph on LinkedIn & X.
• Follow Clay on ⁠⁠⁠LinkedIn⁠⁠⁠ & ⁠⁠⁠X⁠⁠⁠.
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