INTERVIEW: Sam Rahman on Quality Growth, Long-Term Compounding and Owning Great Businesses

Great growth investing is about more than finding companies with fast-growing earnings. For Sam Rahman, Portfolio Manager of the Hedgeye Quality Growth ETF (HGRO), it starts with identifying exceptional businesses run by exceptional management teams. From there, the focus is on finding companies with the ability to reinvest capital at attractive rates and compound shareholder value over long periods of time.
 
Rahman brings more than three decades of global equity investing experience to that process, including 15 years at the Fidelity family office. Working for legendary Fidelity leader Ned Johnson shaped how Rahman thinks about investing today. Rather than approaching stocks as short-term trades, he learned to evaluate companies strategically through the lens of a long-term business owner. In the conversation below, Rahman explains what earns a company a place in HGRO, why investors often misunderstand valuation, how Hedgeye's macro framework informs his positioning and which business he would be willing to own for the next 20 years.

1. For readers who've never heard of HGRO — how would you describe the strategy in simple terms? What does 'quality growth' actually mean to you, and how do you decide a business earns a spot in the fund?

The strategy is a large cap growth portfolio with the aim to deliver returns compounded over time in a diversified and risk-managed manner. For me, quality growth means a great growing business managed by a great team. It is a hard exercise to choose the right stock at the right time for the fund but a key variable that helps is identifying when revenues and/or RoIC is accelerating for a company.

2. Looking back over your career, what market shift fundamentally changed the way you invest?

It wasn't so much a market shift but an opportunity in my career to work for Ned Johnson at the Fidelity Family Office. There, I learned how alpha can be generated through long-term investing and by understanding a business more strategically, as an owner.

3. When you look at markets, what indicators or signals do you pay attention to before anything else?

In the short to medium term, it has been helpful to know Hedgeye's macro Quad roadmap, and the signal positioning for key assets like the US Dollar, Treasury bonds, the S&P 500, and oil prices.

4. What is one market misconception you believe investors repeatedly fall for?

A repeated mistake I still see is investors anchoring on a stock's valuation without fully appreciating why the market is rewarding the company with that multiple.

5. How often does the portfolio actually change, and what's the difference between a shift that's driven by genuine regime change in the macro data versus something you'd dismiss as short-term noise?

Typically, key thesis changes to a company's fundamentals, and macro regime changes drive changes in the portfolio.

6. What's one mentality trait you believe every PM absolutely needs to have — something you'd consider non-negotiable regardless of asset class or strategy?

Humility

7. Do you have any rules you never break, regardless of how good an opportunity looks?

It is good to have a framework, such as not taking an active bet too big in one stock, no matter how much you might like it. But it is also important to be mentally flexible and adaptive and open to rule changes.

8. What part of the market currently looks like "quality" to the consensus, but you think it isn't?

Industrials are valued highly now as earnings growth and orders have been enhanced by the massive boom in AI infrastructure spending. That spending boom will ultimately moderate and so industrials multiples are at risk of derating as earnings growth and orders decelerate.

9. Growth and mega-cap tech names have dominated HGRO's category - how concentrated do you let winners get before trimming?

My portfolio construction process limits my position size to 3% over the index weight. This rule helps me risk manage the position and does not allow for one stock to dominate the other 49 stocks in the portfolio.

10. If you could only own one stock for the next 20 years and never trade it again, what would it be — and does it actually meet your own definition of 'quality growth'?

Amazon. It embodies many of the characteristics I associate with quality growth: multiple durable businesses, exceptional capital allocation, a culture of long-term innovation, and the ability to reinvest cash flows into attractive growth opportunities. Whether it's AWS, advertising, logistics, or artificial intelligence, Amazon has repeatedly demonstrated an ability to enter large markets, build competitive advantages, and compound shareholder value over long periods. While no investment is without risk, it remains one of the strongest examples of a business capable of creating value over decades.