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TIP622: Finding Certainty in an Uncertain World w/ Joseph Shaposhnik

Apr 12, 2024

01:11:51

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Portfolio Manager Joseph Shaposhnik discusses quality investing, certainty, and portfolio allocation strategies. Highlights include recurring revenue, understanding incentives, and the focus on free cash flow per share growth. He contrasts Buffett's advice, shares insights on industry allocation, and the importance of value accretive capital allocation decisions.

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Quick takeaways

Quality investing requires certainty in business evaluation for sustainable growth.

Management incentives and recurring revenue impact value creation and capital allocation decisions.

Exceptional leadership and effective capital allocation drive long-term value for investors.

Deep dives

Quality Investing Framework and Certainty in Business Evaluation

Joseph Schaposhnik discusses the importance of a quality investing framework focused on certainty in evaluating businesses. He highlights Warren Buffett's emphasis on certainty in business evaluation criteria, noting that predicting cash flows and business direction is crucial. Using examples like Meta and Roper Technologies, he contrasts businesses with high predictability and sustainable growth against uncertain ones, emphasizing the significance of certainty in business evaluation.

Importance of Capturing Acquisitions' Impact on P&L

01:17

Power of Incentives in Investing

01:17

Criteria for Quality Investing According to Warren Buffett

01:14

Allocate Capital Wisely

01:24

Introduction

2min

Quality Investing and Certainty in Business

16min

Finding Favorable Opportunities Beyond Software Companies

6min

Incentives and Capital Allocation in Company Analysis

14min

The Significance of Management Teams and Capital Allocation Decisions

5min

Strategic Decision-Making and Quality Investing

23min

Strategic Acquisitions and Growth Updates in Tech Companies

5min

Transformation and Strategic Focus of a Business Under New Management

3min

On today’s episode, Clay sits down with Joseph Shaposhnik to discuss his high quality investing approach. Since its inception in 2015, the TCW New America Premier Equities fund has compounded at 15.8% per year versus the benchmark of 12.0%.

Joseph is the Portfolio Manager of TCW New America Premier Equities, Global Premier Sustainable Equities, and Global Space Technology Equities portfolios. According to Nasdaq eVestment, the TCW New America fund has outperformed 99% of its peers.

IN THIS EPISODE YOU’LL LEARN:

00:00 - Intro

03:25 - The two types of recurring revenue.

13:37 - Why certainty is an essential part of a quality investing framework.

25:02 - How Joseph thinks about portfolio allocation by industry.

28:02 - Value accretive versus value destructive capital allocation decisions.

36:09 - How understanding incentives can make us better investors.

36:53 - Why we should ignore Buffett’s advice of buying businesses so great that an idiot can run it.

46:33 - How Joseph developed his own investment approach after working under two investment legends at Fidelity.

51:56 - Why Joseph believes that quality investing is the best approach to match his investment objectives and temperament.

58:33 - Why growth in free cash flow per share is Joseph’s number one focus as an investor.

1:00:28 - An update on a few of Joseph’s portfolio holdings

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

BOOKS AND RESOURCES

Join the exclusive TIP Mastermind Community to engage in meaningful stock investing discussions with Stig, Clay, Kyle, and the other community members.
Learn more about the TCW New America Fund.
Check out Buffett’s 1996 Shareholder Letter.
Book Mentioned: What I Learned About Investing from Darwin by Pulak Prasad.
Book Mentioned: Big Money Thinks Small by Joel Tillinghast.
Episode Mentioned: RWH017: Fidelity Legend w/ Joel Tillinghast | YouTube Video.
Follow Joseph on LinkedIn.
Follow Clay on Twitter.
Check out all the books mentioned and discussed in our podcast episodes here.
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