Dear All,
I hope you are staying cool and settling into the back half of the year.
After a brief reprieve as High Top Growth Partners worked through regulatory approval, my quarterly letter is back. I hope you will enjoy my personal and professional updates.
HTGP update
We are very pleased to share that High Top Growth Partners (HTGP) is now officially a registered investment advisor (RIA). You can find us on the SEC's Advisor Lookup tool, and our Form ADV Part 2 is now linked on our website. Please give the ADV brochure a read if you're interested in the specifics of what we do, or read through the "About" section of the website for more history on the professional journey that has landed me here.
It took the better part of a year to stand up the new advisory and work through necessary approvals. The fourth quarter of last year was spent on technology infrastructure and working through firm policy and procedure documents needed for any well-run business (and as required by the regulators). Early this year, everything was submitted through FINRA, and on June 24th, we were pleased to receive final approval.
In practice, little changes. As existing clients already know, I continue to support their needs with investments and financial plans initiated during my time as an advisor with Kuleana Capital Management. Investments with Kuleana remain unchanged. Financial planning, investment advisory, and consulting, including allocation recommendations, shift to HTGP. Kuleana's unique strategies continue to play an important role in portfolio construction for suitable clients, and we look forward to continuing that partnership.
But as we all know, a well-balanced portfolio can span well beyond the world of hedged strategies and public equities. For years, I've fielded questions on real estate, an asset class where I personally allocate ~40% of my portfolio. In fact, some folks seem to associate me with real estate more than anything else. And so, with HTGP, it only feels right to feather in real estate and other strategies that have personally served me well.
Market update
There's one thing that's for sure if you follow the markets... there's never a dull moment.
After a strong start to the year, it didn't take long for volatility to reenter the picture. The recent conflict in the Middle East sent oil surging, which has reinvigorated inflation concerns. This, in turn, has flipped the script on rates, with many investors now expecting a rate hike rather than a cut. Despite the Q1 sell-off, stocks came roaring back in early Q2, somewhat reminiscent of the V-shaped recovery we experienced last year in the wake of tariffs. Indices are again near all-time highs, driven predominantly by AI and chip stocks.
Although indices may be near all-time highs, we are seeing pronounced winners and losers. Whole sectors are selling off, for example, software's "SaaS-pocalypse," where AI disruption fears are applying extreme downward pressure. Even mega-cap tech stocks such as the "Magnificent Seven," which once reigned supreme, are now a mixed bag. Five of the seven now underperform the S&P 500 index on a trailing five-year basis, a few by quite a bit. Mag 7 valuations have not been this cheap relative to the S&P 500 for over a decade, due to underperformance coupled with continued earnings growth.
The question becomes, where do we go from here?
Two theories seem to have emerged. Both of which seem to agree that we're seeing a more selective shift in stock purchasing... from anything-and-everything AI to a focus more on AI spend "receivers" versus AI "spenders." Mag 7 names largely fall into the second category, whereas the chip and memory stocks that we've seen surge YTD represent the former. But does the bull market have room to run, or is the bubble about to burst?
In one camp, we have analysts at banks like Morgan Stanley who believe this is all part of a healthy AI maturation process. While the Mag 7 names have become the poster child for AI spend, this camp believes the market may be overlooking big tech's continued earnings growth and their important role as "AI orchestrators," which is more immune to the commoditization of AP capabilities relative to many others in the AI space.
In the other camp, analysts at banks like JPMorgan argue that this rotation out of AI spenders and into the stocks receiving the spend is exactly what happened in the lead-up to the dot-com bust. In '99, telecom equipment suppliers soared, while companies making massive capital investments were the first to drop. A year later, the bubble had burst.
History doesn't always repeat, but it often rhymes. Where will we go from here? We saw a June swoon, and indices have been trading sideways for the better part of two months. The market seems to be grappling with ongoing geopolitical conflicts and persistent inflation. As we head into earnings, results are expected to be strong, but concerns over forward-looking outlooks risk continued downward pressure. Meanwhile, Wall Street banks have been raising 2026 targets, with more bullish forecasts calling for the S&P 500 to reach 8,250 by year-end. That suggests almost 10% upside from current levels.
Investor reflections
One of the primary goals of having started my own investment advisory is to widen the lens, focusing on a wider array of investing strategies and asset classes. I started writing these letters over four years ago, and largely, my reflections have centered around US public equities. With this being the inaugural letter with HTGP as a registered investment advisor (RIA), it only feels fitting to talk about something other than stocks.
My foray into real estate investing was accidental. Almost 20 years ago, in my mid-20's, I simply wanted to do the responsible thing and own my home. I bought a 2-bedroom home in an up-and-coming neighborhood within walking distance of work and bars, and rented out the second bedroom to one of my best friends and colleagues at the time.
But within less than a year, I was thrown a curveball. It's the classic story - love. She was smart, she was beautiful, and she was ambitious (she's still all these things, and more). With only one year to go in her four-year JD/MBA program at UVa, the writing on the wall was that her ambitions would land her elsewhere. And so when she took a technology, media, and telecom (TMT) banking job in San Francisco, I was braced to leave.
Before following Clare across the country, I decided to lock it in. Right after she took the BAR exam and before the new job kicked off, we flew down to my happy place, Jost Van Dyke, BVI, where I popped the question on the sands of White Bay. She said yes.
But for better or worse, the relocation didn't stick. After jetting back and forth between SF and VA for almost a year, "The Hook" (as Charlottesville is aptly nicknamed) had pulled us back. The problem was, I had since boxed up and rented out my house. So we found an apartment, focused on wedding planning, and started shopping for a new home.
Just like that, I owned two homes. The landlord job came easily. It didn't take long for me to appreciate the many benefits of being a real estate investor - things like passive income and tax write-offs. As time went on, I bought more. Before long, I owned eight rentals.
Real estate isn't for everyone. In fact, it can be a bit of a love-hate relationship, even for me. Nothing is perfect, and just like stock market investors have to be prepared to weather volatility, real estate investors have to be prepared to weather a whole host of things that can go wrong with a very tangible and illiquid asset.
But while the lows can be low (and I've got stories - everything from burst pipes to pest infestations to a deceased tenant), I've learned the highs can be pretty high, too. In March of last year, I exited a multi-family investment property with a 28.29% IRR and a gross return of over 5X in under eight years. The late-night tenant calls had paid off.
It's taken me years to wrap my head around the many unique benefits of real estate investing. In fact, I continue to explore new topics, whether it be the 1031 exchange I recently completed, or carbon credits that I'm weighing now on a large tract of land. Opportunities abound, and if you ask me, it's not by chance that many of the world's wealthiest either started in real estate or have ended up diversifying their wealth there.
I won't dive into them now, but below is a sample of some of the many great perks of real estate, some of which I've touched on in earlier letters. I look forward to exploring more of these topics in letters to come, as I genuinely enjoy thinking and talking about this stuff:
Some of the topics seem obvious, but in my experience, until you live them, there's often more to be appreciated. For me, the lessons have been invaluable, even when thinking beyond real estate and applying them to the lens through which I view other investments.
In my humble opinion, there's no right answer on how to approach any of this. Personal finance is just that... personal. It requires reflection and discussion - with yourself, your family, and your advisor. The problem is, a good advisor is hard to come by.
As they say, a jack of all trades is the master of none. In my experience, most traditional advisors don't act as a strategic partner when it comes to alternative investments, like real estate. I wrote plans for AMEX and have paid for plans with other advisors. All have their systems, and upon collecting your data, will plug it into a black box that is their algorithm.
When it comes to something like real estate, they may offer high-level insights into things like refinancing opportunities or whether they think an investment is carrying its weight, relative to investments they might be incentivized to sell. But, in my experience, rarely do they dig deep and factor in more strategic topics... like debt and tax, for example.
Instead, traditional advisors seem to work off canned formulas centered around their area of expertise. 60/40 portfolios, tailored to age, risk tolerance, and other basic inputs. It makes sense; this scales. Some advisors pick stocks; others preach passive indexes and mutual funds. Some work for insurance companies and write plans to expose gaps they can insure against. Don't get me wrong, these things mostly have a time and place.
But I believe investors should expect more. Spending thousands on cookie-cutter static plans, or tens of thousands on management fees inclusive of planning, does not seem like a deal to me, especially considering the opportunity cost of compounding. It's why I've taken a more DIY approach, exploring these topics with curiosity, and outsourcing certain strategic and specialized investments, or, where applicable, functions like tax or legal.
I'll be the first to admit, I know far from everything. But I'm happy to learn and continue to do so. Like it or not, "family finances" (as I grew up hearing my Dad call it) is a job that will span well beyond retirement. In fact, retirement is when it becomes all the more important that things are tracked and adjustments made, as necessary. Why not start now?
Fully outsourcing your finances is an option, but it can be costly and requires a high level of trust. Trust, which sadly the industry lacks. Fee compression, the rise of robo-advisors, and DIY execution are all evidence that advisors are increasingly not seen as worthwhile.
And so, increasingly, investors go it alone. Which is where HTGP comes in. We can relate. Our goal is not to grow AUM. We have zero aspirations of managing everything you have. In fact, we don't manage money at all, other than our own. Instead, we're here to share strategies that have worked well for us and to help you do the same.
Whether it be modeling out a prospective real estate acquisition or taking a fresh look at your family's comprehensive plan, we are here to act as your strategic partner - à la carte. And if we can't help you DIY, we have a Rolodex of service providers and specialized managers; relationships that, in time, we expect will grow in number and in depth.
Personal update
There's a lot to catch up on given my decision to skip a Q2 letter as HTGP worked through regulatory approval. At the time of my last writing, I was recapping holidays and the start of ski season. It's now July, we just celebrated the nation's 250th, and it's hotter than Hades! Without rambling on too much, I'll do my best to catch you up.
We wrapped up another strong season at Snowshoe, with five trips up the mountain as a family. Cole got to the point where we felt it was no longer necessary to continue sending him to ski school, and he and I ski together now. He's tackled almost every trail.
In February, I had planned to visit my Dad in Florida for his 85th birthday. Turns out, we had to move the visit up to coincide with my birthday instead. After a year on the market, his Sarasota condo finally sold. We spent a few final days enjoying Siesta Key together, and then we boxed up a U-Haul, which I drove back to Virginia by way of Savannah.
In March, I took a ski trip out West, joining friends from Charlottesville on what has become an annual trip to Jackson Hole. The trip is timed to coincide with the ACC basketball tourney, so we ski by day and watch hoops together by night. This year's trip also coincided with the Gelande Quaffing World Championships and an appearance by G. Love at the Mangy Moose Restaurant & Saloon, which added to the fun.
In April, we spent Spring Break in Cape Charles, enjoying a relaxed week of biking and beaching it. We returned in late May and enjoyed almost three weeks on the shore as we kicked off summer. Cole did sailing camp for his second year in a row, earning the "most likely to captain a boat" superlative award when camp wrapped up.
As summer progresses, it's a series of kid camps and family vacations. Cole and I enjoyed Scout Camp at Camp Shenandoah in June. It was our third year in a row doing summer camp, and as usual, we had a blast doing everything from BB guns to archery.
The one week this summer that our home in Cape Charles didn't rent coincided with the Fourth. So we seized the opportunity to enjoy some extra time on the shore. Celebrations included a parade around town, a free matinee showing of The Sandlot at the historic theatre, and two(!) fireworks shows over the Bay. It's the quintessential small-town Fourth.
Later this month, we'll enjoy a brief family trip to Snowshoe before Cole and I head on to Beckley, WV, to participate in the once-every-four-years National Scouting Jamboree. After that, it's once more kid camp here in Charlottesville while Clare and I enjoy a week of productivity, before taking one final family vacation before school starts up in August. I'll be excited to report back with pictures, etc. from both the National Jamboree and our trip to Florida, where we'll enjoy Universal Studios and beach time on Key Biscayne.
Life is busy, and life is good.
Closing
As always, thank you for taking the time to read this far. It would be my pleasure to chat, regardless of whether you're interested in chatting about investing or would simply like to catch up. Please feel free to give me a buzz any time or schedule a meeting.
Respectfully,
Chris Lewis
High Top Growth Partners LLC
703.966.3653
chris@hightopgp.com
chris.lewis@alumni.harvard.edu
