🧠 Lessons From A 30-Bagger

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Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.

Today’s Issue Read Time: <3 minutes

• Lesson: Big Stocks Getting Bigger
• Timeless Content: How to think about your cash position
• Thread: 10 Investing lessons learned the hard way
• Resource: Deep dive on the 4% rule
• And more!

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Friends,

On June 17, 2011, The Motley Fool’s flagship newsletter — Stock Advisor — recommended buying shares of Apple. At the time, I (Stoffel here) considered it to be an insane choice.

1. Apple was already one of the biggest companies in the world, valued at $300 billion.
2. The stock was a 30-bagger over the past decade (see below).

Why would anyone buy shares of a stock that had already been on such a run?

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I was making a fundamental error: I thought there were hard limits to growth. My idea of the “law of large numbers” led me to believe something that’s grown fast couldn’t possibly continue to grow fast. The missing piece for me: technology is erasing these barriers to growth at scale.

Here’s what Apple has done since then.

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Don’t get me wrong: there probably are still limits to growth. But we have no idea where they are. It took well over 100 years for an S&P 500 company to reach a $1 tillion valuation.

It only took 2 years for Apple to reach $2 trillion. Two years later, it hit $3 trillion.

In the real world, companies that can scale quickly and have hundreds of billions in cash (Apple, Google, Meta Platforms, NVIDIA, etc.) are more likely to continue gobbling up market share.

That doesn’t mean all of these will continue to be winners. But it does mean that if they aren’t winners, it won’t be because the stocks have already had a successful run. It will be because — for whatever reason — they were unable to execute on the opportunity in front of them.

In a world where these behemoths could have outsized influence for decades to come, that’s an important lesson to remember.

Wishing you investing success,

– Brian Feroldi, Brian Stoffel, & Brian Withers

P.S. Need help analyzing a company’s quarterly results? Check out this YouTube video we made on how we review quarterly earnings.

One Simple Graphic:

One Piece of Timeless Content:

Do you set cash aside to invest during market downturns or always stay “fully invested”? How We Think About Cash by Chuck Akre provides a useful perspective on how Akre Capital manages its cash.

One Thread:

Brian Feroldi @BrianFeroldi I’ve been investing for 20 years. Here are 10 expensive lessons I had to learn the hard way: 8:13 AM • May 1, 2024 485 Retweets 3580 Likes Read 41 replies

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One Resource:

Michael Kitces, Financial Planner Extraordinaire, and Super Investing Nerd is a great read when you want to dive deep into an investing topic. Here are Kitces’ thoughts on the 4% Rule.

One Quote:

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More From Us:

📗 If you’ve read Brian Feroldi’s book, he’d love a review.

👨‍🎓 Interested in learning to read financial statements like Warren Buffett? Check out our self-paced course, The Buffett Method.

🎬 Want a review of popular company earnings? Check out our YouTube channel! Unity, AirBnb, Shopify, Datadog & Palantir earnings videos are now available!