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ELITE Strategist: The AI stocks set to DOMINATE 2027 — Transcript

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0:00Okay, Adam, big picture. Where do you
0:02think we are today in this moment in the
0:04AI cycle? [snorts]
0:07Um, fundamentally
0:0933% of the way there and stock-wise
0:12maybe halfway there.
0:13>> Okay, explain what that means.
0:15>> Well, if you take like the cumulative
0:18total capital spending,
0:21um, we probably, you know, a third of
0:23the way there. I mean, I I guess I'd
0:24start by saying I think the whole thing
0:26started around May of 2023 when Nvidia
0:28had their big upward sales revision. Um,
0:31I think we're in an 8 to 12 year
0:32spending cycle, 10 year plus or minus
0:34two years. So, we're three and a half
0:36years into what's called an 8 to 10 year
0:38cycle. It's like a third of the way
0:40through. The stocks are ahead of that,
0:43you know, but they're not as far ahead
0:45as maybe people think in the last few
0:48weeks. meaning um I still think we're
0:50going to end much higher on most AI
0:53revenue related businesses by the time
0:56the whole thing's over. So I'll say
0:58halfway through on the stocks. I think a
0:59lot of the stocks can go up a lot more.
1:01>> So help me understand the bare uh the
1:04bull case here. I know that you're
1:05bullish. I am also bullish.
1:06>> Right.
1:07>> Break down in the building blocks here
1:10why you are optimistic.
1:13Well, um,
1:16I I don't think lack of access to
1:19capital is as urgent of a problem as
1:21some of the bears do. I mean, what
1:22ultimately ended the tech bubble
1:24probably ends this cycle will be
1:26companies inability to borrow money to
1:28keep funding investment. The core cash
1:31flows from the hyperscalers are still
1:32pretty strong. Their ability to access
1:35the capital markets is still pretty
1:36strong. Musk and others have um a lot of
1:41ability to access lowcost capital from
1:43here. So I think there'll be a lot more
1:46dollars spent and we're short there's a
1:48shortage of compute and power and other
1:51things associated with the complex. So
1:53what is going to grow above nominal GDP
1:55for a long time? Um
1:59a lot of it is you know in the AI chain
2:03semiconductors
2:05power chief among them. So, it's a
2:07fundamental thing. I mean, I think
2:09they're just going to grow fast as a big
2:10requirement for them.
2:11>> And you think that they can grow fast
2:14and the fundamentals will stay solid
2:16even if they're tapping debt markets
2:18more and more. A lot of these AI
2:19companies. [snorts]
2:21>> Yes. Um I think it ends it eventually or
2:25the growth rate slows. But, you know, a
2:27lot of us were raised to believe that
2:29all that matters is rate of change with
2:30investing. And so, people, nobody I know
2:33will say, "Oh, I love how Micron's acted
2:34since it printed its last quarter."
2:36Right. But if you take a step back, like
2:39I think Micron produced
2:43I I'll say maybe the single best quarter
2:45ever produced by a manufacturing company
2:47in the history of humankind or pretty
2:48close. I mean, it's not that easy to do
2:5050 billion in quarterly revenue at 86%
2:53gross margin when you make something in
2:54a factory. It looks like there's going
2:56to be a serious shortage for several
2:58more quarters. The streets got them as
3:00an example as a poster child stock doing
3:02something like 320 billion of free cash
3:04flow over an eight quarter stretch on a
3:061 trillion market cap company. Like it's
3:08got the stock's going to appreciate a
3:10decent amount as we're talking. Hinx
3:12reported overnight the memory complex is
3:14up a lot. But I that's just I think
3:16we're headed meaningfully higher for the
3:18exposed companies. So it's never a
3:20straight line. It's never a straight
3:21line and there can be things that you
3:23know derail it. But I think the um the
3:25fundamentals are going to remain strong
3:26for quite some time. Okay. So, that
3:29that's interesting you bring up Micron.
3:30That's probably the most divisive stock
3:32out there right now. You got so many
3:34bears on Micron. They think that, hey,
3:37this is a cyclical business and
3:39therefore it's going to be just like
3:42past cycles where it goes up a lot and
3:44then down a lot.
3:45>> All right. You you poked you poked me on
3:47it, so I'll I'll I'll I'll take the I'll
3:49take the response. I mean
3:53I think there's a group of people many
3:55of them are my age meaning older and
3:59they they [snorts] are attaching
4:02irrelevant history to the current
4:03regime. I was taught a lot of people in
4:05my vintage were taught you can never say
4:07it's different this time. You have to
4:08duck lightning bolts if you say that.
4:10And a few months ago, I wrote this note.
4:12I don't want to use any exploitives on
4:14your nice benign podcast here, but I
4:16wrote this note basically saying, you
4:18know, screw you people. Like, you're
4:19already wrong. Micron's already a
4:21trillion market cap. When it goes down
4:2340% one day, you don't get to write. I
4:24told you it was cyclical. No, screw you.
4:27It's already been 100x from lows and you
4:30were brutally wrong and you missed one
4:31of the greatest securities of the last
4:32few years. You don't get to be right
4:33when it rolls over. Yes, it's cyclical,
4:35but the whole debate is the duration and
4:36magnitude of the upcycle. Okay? And so
4:39should I pay the same peak and and and
4:42normalized earnings for a company that
4:43has net debt and only exists because of
4:44the stupidity of the buy side as I
4:46should for a company that does 30% of
4:47its market cap in cash in eight quarter
4:49stretch. People thought they were going
4:50to do 6 billion of free cash flow over
4:52the next eight quarters. 2 years ago
4:53they now think it's 320 billion. Is it
4:54different this time? Yes, it's
4:56different. You're allowed to say it's
4:57different. You It's cheap to say it's a
4:59cyclical. Of course it's cyclical. But
5:01you have to have some clue about the
5:03duration and of the cycle to make that
5:04statement. So obviously I'm frothed up
5:06on that subject area having received a
5:08gazillion questions about it. It's a
5:10higher beta side of the AI trade. I
5:12think there's it's appropriate to own
5:14some memory and semicap in the
5:15distribution of things you own. And I
5:17think sure they have a lot of downside
5:19when things roll over, but there's a lot
5:21more upside when when things don't. So I
5:23will not be surprised if Micron's a$,500
5:25or 16 or $1,700 stock in the next, you
5:29know, 18 months.
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6:30Now, let's get back to the episode.
6:33Wow, that's a well said uh bullcase on
6:36on Micron there. I like it a lot. Uh I
6:38still own it personally, so I I'm with
6:40you.
6:40>> Today's better than yesterday. You
6:41should I'm and I'm in the South Korea
6:44ETF, too, which we talked about in Q1.
6:47And you said you preferred Micron over
6:49the South Korea exposure to memory.
6:51>> I mean, they're very correlated. So, I I
6:53don't, you know, I just I'm not sure
6:56what I said them on my first appearance,
6:58and thanks for having me on on a second
7:00one, but it probably was I don't like
7:03comparing multiples between other
7:05countries or something. It's not true
7:08that because something's cheaper in
7:10another country, it's an attractive
7:12relative subsequent investment. Meaning
7:14France is traded at a lower multiple
7:16than the US for many years. It's not
7:18therefore attracted to buy France.
7:20France is cheaper cuz it sucks on a
7:22relative basis. It's growth rates less.
7:24There's geopolitical well, you know what
7:26I mean? So it's not known, I don't think
7:27there's a single CA 40 that's been, you
7:30know, IPOed since 1968. Like there's a
7:32reason it's cheaper. And I think the
7:34same thing is true for South Korea. I
7:35mean, you saw with Heinix, they kind of
7:36went around, you know, Boston and they
7:39did their ADR and then they missed the
7:40next print, right? So there's a little
7:42bit of a different investor relations
7:43flavor and other stuff. I think the
7:44stocks would be highly correlated. I
7:46actually think the whole memory complex
7:47is going higher including San Disc and
7:48Western Dig and Seagate and Samsung, the
7:50whole thing because there's a shortage.
7:51It's going to last for a long time and
7:52they'll make a lot of money. But I just
7:54would prefer to own Micron just because
7:56I feel like it's um you know the the
7:59cleanest way for a US investor to play
8:02it.
8:02>> It's kind of like a best in breed memory
8:05America first.
8:06>> I think so. It has a little tinge of a
8:07sovereign too. Like I think we need the
8:09manufacturing in the US. I don't think
8:10that um we're likely to let this thing
8:13lose too much money in the next trough
8:15if it even does. So um and you you do
8:18get some weird stuff in other countries.
8:19You know, South Korea is very
8:21concentrated equity market with both
8:22Samsung and Hinx. So it's you know, it's
8:24um I I think a lot of retail investors
8:27are involved. There's a lot of double
8:28long Heinix and triple long that. So I,
8:31you know, it could be just as volatile
8:33there. So I feel like this it's not
8:35super diversifying versus Micron, but I
8:37don't I don't hate it. I think they're
8:38they're all going higher. Uh yeah, I
8:40think that's fair. I'm optimistic across
8:42the board really. Um when you think
8:45about the AI stack, let's say, uh you
8:48have semiconductors, chips, memory,
8:50infrastructure, hyperscalers, all these
8:52different angles to the AI trade.
8:54>> Do any of these stand out as bad
8:56opportunities right now? [snorts]
9:00>> So I guess since about May, um a number
9:04of our clients at Triariat institutional
9:06clients send us their portfolios to do
9:08custom risk work. We've been measuring
9:10since May are you over or underweight
9:13companies with meaningful AI revenue
9:14relative to the index and which types we
9:16think we did a bunch of
9:20fancy you know principal components and
9:22clustering and a bunch of stuff we we
9:23came up with six different AI revenue
9:25categories uh we define AI uh revenue as
9:29meaningful meaning 5% of more revenue or
9:31using natural language processing of all
9:32the transcripts and websites do they
9:35have a product announcement imminent
9:36that they're going to have meaningful
9:38revenue you I think there's about 300 of
9:40the top 3,000 US equities that have
9:41meaningful AI revenues. So, it's 10% of
9:43the companies. It's more than half the
9:44market cap because of the the
9:46hyperscalers or whatever. When you add
9:48it all up, we have memory and semicap as
9:51one bucket. They're very correlated that
9:52the semicaps do a lot of direct business
9:54with memory. We've got uh data center uh
9:58a buildout. We've got REITs, data center
10:00REITs, we've got buildout, we got AI
10:02platforms, we got vertical and edge, we
10:04have services and integration. I
10:07probably want to be overweight the whole
10:09meaningful AI revenue bucket versus the
10:10index. But I probably think the services
10:13portion is the worst just because I
10:15think it's going to take longer. I'm not
10:16sure I want to buy Accenture or other
10:18things. They're they're kind of I think
10:21the other observation I I I probably
10:23should have given a shorter answer to uh
10:25to the question, but I think the other
10:26observation I had is the relationships
10:28between different parts of the bottom
10:30neck are changing. you'll see a high
10:31correlation between say Corning and
10:34Sienna and semis but maybe their
10:37fundamentals won't pair out the pan out
10:40the same way. So I think there's things
10:41to own and there might be opportunities
10:43to be overweight different parts of the
10:44complex at different times. Maybe maybe
10:46a better cleaner example would be a year
10:48ago AI semis and AI software were highly
10:50correlated positively and now they're
10:52negatively correlated there. So u so I I
10:54think you have to monitor the exposures
10:57of of the different buckets of AI
10:58revenue really carefully. So it's not so
11:01easy as to say let me just buy the tech
11:05>> ETF like and maybe that includes all all
11:08layers of the stack.
11:11>> Um
11:13yeah, I don't think so. I think most
11:14ETFs have very specific exposures and
11:17usually we we have like this product
11:21where we do ETF analysis and we give
11:23them like Dave Portoi pizza like letter
11:25grades because a lot of them don't give
11:27you the exact exposures a gazillion AI
11:30ETFs and um some of them really are not
11:33very good like momentum is a good one.
11:35There's a momentum ETF that
11:37underperformed the S&P 500 when the
11:38momentum factor was excellent. I think
11:40we gave that one like a C or whatever,
11:41you know, like. So, you have to really
11:43be careful when you look at the ind.
11:45Some of them have cool sounding names,
11:47but when you look at the actual weights
11:49and stocks, they don't give you what
11:51they want. So, like this this business I
11:53have, we sell um to individuals and
11:56advisers, a newsletter. It's called
11:57Tactor Research. The website's tribe
12:00research.com. We have an ETF scorecard.
12:02You can go and type in the ETF. We'll
12:04tell you what it is. And a lot of these
12:06ETFs are not really that good.
12:08>> Interesting. I'd always rather own a
12:09narrower basket of individual securities
12:12to to embed the bet I want.
12:14>> Okay. So, that that reminds me of
12:16something that you wrote about recently.
12:18Um
12:19>> Oh, no. No. It's a good thing. It's a
12:21good thing. Um you had this chart that
12:25uh if you run more diversified than
12:29usual, you're probably in a better spot
12:30today than years past.
12:33>> What does that mean?
12:34>> Yeah. So
12:36um we took a look at 25,50
12:4175 and 100 stock portfolios and we sort
12:45of
12:46looked at the simulated randomly
12:49selected stocks from the top 500. um cap
12:52weighted them, observed the subsequent
12:54performance and volatility performance
12:56and um and sort of said h how would I
12:59have done over time holding them for 12
13:01months and it looked like from most of
13:052000 to maybe 2020 or so there was
13:08really no benefits to owning 75 or 100
13:11stocks versus 25 or 50. The the
13:13distribution of returns from the
13:14simulated portfolios were pretty
13:16similar. But since around 2019, the more
13:19concentrated portfolios have been much
13:21lower performance with more volatility.
13:23It's just been harder to run more more
13:26concentrated. So then I said, "Okay,
13:28well, forget random. Everyone thinks
13:29they're a really good stock picker." So
13:30I took the 75th percentile performing
13:32fund there. It showed much better to run
13:36concentrated from 20 to 2018. that even
13:38for the 75th percentile alpha generator
13:41running in a 25 stock portfolio versus
13:44say 50 or 75 was much harder and more
13:46volatile over the last five or six years
13:47and I think it's a function of all the
13:51um you know multistrats and passives and
13:53zero day options and ETFs and other
13:54things that are creating the volatility
13:56in the market. So that's one analysis we
13:59did kind of on that why you should run
14:00more diversified. I think I think the
14:02second is um we did some kind of
14:06interesting work around what how many
14:08independent active bets are you actually
14:09getting from your exposures. If you look
14:11back for like a growth PM 10 years ago
14:14and you had 100 stocks you were getting
14:15around 25 kind of independent active
14:18bets and today you're getting about 10.
14:20So if you don't want all the bets to be
14:22the AI oneway trade or you don't want
14:24everything you're going to be correlated
14:26have to own more names than normal. If
14:28you ask me to be succinct and be very
14:29simple with it, the market's super
14:30concentrated and you know, not very many
14:33stocks are working, but the ones that
14:34are working by a lot, so you can't
14:35afford to not own some that are working.
14:37So, you got to own more names than
14:38normal. That might have been the easiest
14:39way to explain it. Well, it's
14:41interesting. Uh, when you sent this note
14:43over and I was reading through it, I
14:44thought it was a bit counterintuitive
14:46because there are so many examples of
14:49these legendary money managers that have
14:51said, "Hey, concentrate your portfolio.
14:53will make really specific uh bets in
14:57large quant or large volume on small
15:00names. You're kind of saying that's
15:02changed in the last few years. I think
15:04that um there's a
15:09distribution of outcomes. Okay, let me
15:12answer the question by saying this. Why
15:14do you buy a lottery ticket?
15:17>> You hope to make it big. your
15:18statistical expectation is poor but
15:21there's an outsized sort of scenario. I
15:24think that's another way of thinking
15:27about running concentrated, right?
15:31I think 65% of all options are zero day,
15:3570% of all zero day-day options are
15:38retail and something like 80 to 90% of
15:40all zero day options expire
15:43losing money. Why do so many retail
15:45investors do zero day options? Because
15:47there's this potential upside that's
15:48awesome where they can two or 3x. It
15:50only happens a few% of the time, but
15:52everyone dreams. So if I run Let me ask
15:55a question. Why don't you just own one
15:56stock right now? Don't you I assume you
15:58own multiple things. You're a
15:59diversified investor. Why do you do
16:00that? Just own Micron.
16:03>> Well, I guess uh if you don't want the
16:05lottery ticket.
16:05>> Okay. Right. You do it because you're
16:07hoping the distribution of out like
16:08you're having some risk management
16:09sense. So sure um you can have
16:13individual funds that do well. When I
16:16quoted those things about 2550 and 7500
16:18stock portfolios, those are 500 such
16:20portfolios simulated. shows that the
16:22distribution of there's always one that
16:24could or several and I think the other
16:26thing is that there's some veryo
16:27highprofile institutional investors like
16:30Ping Square with Aman or others who run
16:31concentrated and are kind of
16:33high-profile but I think if you are kind
16:35of um looking at distributions it
16:39>> if you take the median investor
16:41>> yeah even the 75th percentile investor
16:44and let me assure you it's not that easy
16:46to be 75th percentile every year you
16:48know um it's even there they should run
16:51more diversified than normal. Maybe
16:52another way to ask somebody would be
16:55could anything happen in the next 10
16:57years that would make you run to more
16:58diversified or not? What is it? And is
17:00this one of those regimes today? When
17:02you have a super concentrated market
17:03with the grade eight or mag seven and
17:06you've got a bunch of aberant things
17:08around lowquality securities and
17:09profitless companies working and and and
17:12kind of big index rebalances and other
17:15things, you know, microns in or it's out
17:17or sand. It's very hard to run
17:19concentrated um and compare yourself to
17:22an index.
17:23>> Wow. Yeah.
17:24>> I mean it's it's great data and I think
17:26most people aren't aware of that
17:27phenomenon.
17:28>> Yeah. But I do risk management for the
17:29base institutions for a living. So like
17:31I have a window into you know probably
17:3370 of our institutional clients send us
17:36their books to do custom risk work. are
17:38always looking at like what are your
17:39beta adjusted active weights for the
17:40index like how a lot of times long
17:43investors the biggest bet they have is
17:44they don't own Apple and you say okay so
17:47the single best idea you have is as a
17:49long investor is short Apple and they're
17:51like what do you mean I'm like well that
17:52if Apple goes up that given the size it
17:55is you
17:58you probably can't generate enough alpha
17:59to offset that bet so said in plain
18:02English if I asked most institutional
18:04portfolio managers 10 years ago how many
18:06names you own for alpha versus risk
18:09management. They would have said screw
18:10you 100% for alpha zero for risk
18:12management. I think now a lot of
18:14portfolio managers would say look I do
18:15own a chunk of my names for risk because
18:17of the concentration of the index
18:18because of some of this aberant stuff in
18:20the market. I can't afford to just own
18:22no palunteer in midcap growth and let it
18:24go from 2 to 9% of the index and own
18:27none or whatever. So they they might own
18:30maybe they hate micron or maybe they
18:31don't own a bit whatever one they don't
18:32like maybe Tesla most of them hate Tesla
18:34institutionally and they might I they
18:36might own half weight just cuz they
18:38don't want to be underweight something
18:39that's that big if SpaceX buys Tesla or
18:42RIPS or whatever they just can't afford
18:44to let something they don't like. So I
18:46think the mindset is evolving from
18:47institutional investors about what they
18:49should own that should they own some
18:51names in their 50 or 60 or 70 for risk
18:53management and that's another way of me
18:55saying I think you got to run more
18:56diversified than normal. Okay, so Adam,
18:58this is a perfect segue here. You have
19:00another chart from your note. Buy and
19:02hold does not work. [clears throat]
19:04Effectively, my my read on it was the
19:06odds of picking a random stock that
19:08outperforms the market, those have gone
19:11much lower today compared to a few years
19:13back.
19:14>> What what's going on here? Yeah, if you
19:16if you looked maybe from the '9s through
19:18say 2015, so over a 20-year stretch, and
19:21you said how did perform as how does
19:23funds do if they had one year holding,
19:25three year holding, or 10 year holding,
19:26they were all pretty similar. So I think
19:28you could have written a a a report in
19:302015 saying I don't really see the
19:32benefits of holding stocks for only one
19:34year, three year versus 10. 10's great
19:37but if you look in the last 10 11 12
19:40years only I think 20% of S&P 500 stocks
19:43bought 10 years ago 10 years ago have
19:45beaten the index is the lowest
19:46percentage ever right so it's it's
19:48because of the passes and the
19:50multistrats and and all the stuff the
19:52retail impact quant impact it's just
19:54much harder to hold stuff for that long
19:56and not have poorer performance and more
19:58volatility so we show it in our recent
20:00work like for a long only guy says I
20:03have 9% turnover like that's kind of
20:05first of all what do you do all Okay.
20:06And then second of all, like the
20:08evidence is pretty compelling that that
20:10it's much harder to keep up. I was
20:12talking to someone who runs a very low
20:14turnover fund recently and the poster
20:17child stock the person gave me of of why
20:20they're like, "Wow, you were able to
20:21identify things that others, of course,
20:22they have a a marketing story around
20:23it." And then the the story the guy gave
20:25me was we bought Eli Liy when it was out
20:27of favor. And like I didn't have the
20:28heart to say, "Yeah, and you had no idea
20:30about GLPs and you got lucky and it
20:32worked seven years later for reasons
20:33unrelated to why you buy it." Like give
20:35me an example where you actually had
20:36vision where it worked. Like that's a
20:38that's a that like you can own something
20:4010 years ago and just get lucky and like
20:42if you owned Micron 15 years ago, you
20:44had no idea about what happened here.
20:46You like underperformed 14 of the 15
20:48years and destroyed alpha the entire
20:51time. Then you got bailed out by a whole
20:53bunch of dynamics you had no idea about
20:54when you bought it. So like I I think
20:56it's really hard to buy stuff with a
20:5810-year view. The world's uncertain. AI
20:59makes things uncertain. you're [snorts]
21:01not really sure who's a beneficiary,
21:02who's impregnable, who's disrupted, like
21:04you can guess at whatever, but like for
21:06you to say, "I'm gonna buy stuff and the
21:08average thing I'm going to hold is for
21:0910 years." It just almost like sounds
21:11crazy to me.
21:12>> It It's very, you know, Buffet, right?
21:14Like Warren Buffett would disagree with
21:16you probably, but he was from a
21:17different era. And essentially my read
21:20on this too, what you're saying, you
21:22kind of have to be an active manager or
21:24a trader in this market.
21:26>> I think you have to hold stuff for less
21:27than 10 years. I mean, we wrote, you
21:29know, more like one or two years could
21:31be reasonable, but I think 10 is too is
21:33too too long.
21:34>> Remember, if you say 10% annual turnover
21:36and you own 40 stocks, you're trading
21:39four stocks a year. I mean, that that
21:41seems very unlikely. The halflife of a
21:44growth stock is only whatever five
21:46years. So, like the idea that you could,
21:48you know, half the stocks in the growth
21:49universe say won't be in the growth
21:50universe in 5 years. So like how could
21:52you kind of I think it's
21:56marketing
21:58you mentioned Buffett so I'll use my
21:59favorite munger phrase. I think it's
22:01marketing BS. That's what I think it is.
22:03>> That's very true.
22:04>> Everybody said earn was earn BS earnings
22:07right.
22:07>> Yes. So okay here's another I thought it
22:11was a contrarian anecdote you had in
22:13your data here. Stocks that got more
22:16expensive over the last quarter have a
22:18higher probability of beating earnings
22:20than stocks that just got cheaper.
22:22>> Yeah, totally. Yeah.
22:23>> Explain this.
22:24>> Yeah. So, I think a lot of people would
22:25say, "Oh, I want to buy stocks when they
22:27got cheaper or they go down a lot cuz
22:29you know, uh uh then they're d-risked
22:31into the print and everyone knows it's
22:32not great and it's expectations and or
22:35even worse, the phrase I'm a contrarian
22:37investor." All that means is you're
22:38wrong. Like that's let's just be honest.
22:40Contrarian and wrong are exact synonyms
22:42in the dictionary. Um, all right.
22:45[clears throat and snorts] So, let's
22:45look at the data. Um,
22:48if you look at stocks in the cheapest
22:49DESA on price of forward earnings, I I
22:51don't have the number handy, but it
22:52might be like eight times price of
22:54forward earnings or lower.
22:56>> Um, and and they just got cheaper on
22:58price of for earnings the last quarter,
23:00the probability they beat earnings, the
23:02probability when they report earnings
23:03come up in the three-month forward is
23:0548%. Okay? So, you're the cheapest in
23:07the market and you just got cheaper,
23:09probability you beats 48%. If you're in
23:12the eighth most expensive delta on the
23:14market, so pretty darn expensive. I
23:15think it's like 32 times 40 or higher,
23:17something like that, and you got more
23:19expensive in the last quarter, the
23:21probability you beat is 74%.
23:24So, do you want to own a diversified
23:25book that has a 48% chance of beating or
23:2774? The answer is 74. And the reason is
23:30because the penalty for missing has been
23:32incredibly harsh, never harsher in the
23:34last 30 years. Companies that are
23:35missing are getting punished. Companies
23:38that are cheap and missing are going
23:39down more than companies that are
23:41expensive and missing. So the market's
23:42not saying, "Oh, I made it cheap and it
23:44missed. Now I'll buy and everyone knows
23:46it." It's saying, "Oh, I got a
23:47confirmatory data point for why I made
23:49it cheap in the first place." Stocks
23:51that have bad momentum. So they were bad
23:53into the print and miss are going down
23:55even more than stocks that went up into
23:57the So the whole thing is there's a
23:59serial correlation to the beating or the
24:01missing. And that's a little bit
24:03different than history. Um, and so like
24:05main advice I have for people is don't
24:07own stuff that misses. It sounds kind of
24:10lame to say that, but at the end of the
24:11day, it used to be a lot of
24:13institutional investors would say,
24:14"Well, I know current conditions are
24:15bad. Everyone knows that, but I think
24:17the margins are low. They're going to
24:18get better in two years. The multiple is
24:19low. You're paying 10 times two bucks
24:21today. I think you're going to pay 15
24:22times three bucks in a couple years, and
24:24I'll buy it now." That math does not
24:26work now because the penalty for missing
24:28has been so harsh, and the reward for
24:30beating has been all over the place.
24:31Sometimes it's not good, sometimes
24:33isn't. So you have to avoid owning stuff
24:36that misses. And one way you can tell
24:37it's going to miss is if it's cheap and
24:39just got cheaper.
24:40>> So it's almost
24:41>> there's information in that.
24:43>> Buy the rich stocks that are getting
24:45richer is is another way to think about
24:47it.
24:47>> But it's not just dumb dumb momentum or
24:49whatever people used to think it is.
24:50There's actually information in it. It's
24:52just the chance they're going to beat is
24:53higher and the chance they beat a second
24:55time given they beat the first time is
24:56also higher than the unconditional
24:58probability. So there's fundamental
24:59information in it. Now we could ask why
25:01that is. I think part of it is sell side
25:03doesn't really publish what they believe
25:06right like so you need the buy side
25:08expectation not not not the sell side so
25:11people have outperform ratings on stocks
25:14all the time and they don't have their
25:15estimates above consensus because they
25:17don't want the company to miss
25:21to be clear there's no information in
25:23sellside ratings ratings changes or
25:25price targets so you don't necessarily
25:26want to buy a stock that's got high
25:28ratings on outperform and like there's
25:30no subsequent turn to that.
25:32>> I think a lot of people do that. They
25:34look
25:34>> Yeah, we've demonstrated in a lot of our
25:35research that there's that's a bad way.
25:37You actually lose money doing that.
25:39There's somewhere between useless and
25:41negative to do that.
25:43>> Oh, that's pretty good to know. That
25:44that's useful.
25:45>> Publish that once a year. And uh that's
25:48one of those fun things you can publish
25:49when you have your own firm that you
25:50can't when you work at Morgan Stanley or
25:52somewhere. Yeah.
25:52>> Checks out. Um buy low and sell high
25:56used to work really well. And this is
25:57exactly what you're saying, but now it's
25:59not really a winning strategy. What
26:01happened?
26:02>> It means buy when the estimates are low,
26:04not the price or the valuation. And I
26:05think people used to think like buy at a
26:07low multiple and sell it at a higher
26:09multiple, but that doesn't work. You
26:11just want to buy where the estimates are
26:12too low.
26:13>> Okay. Um,
26:15>> yeah,
26:15>> that connects to this other idea that
26:18you have a chart for. Uh, mean reversion
26:20for sizing has been the worst in 25
26:23years.
26:24So, for people who are on audio, explain
26:26what this means.
26:27>> You're asking me a lot of good
26:28questions. I I can't believe we
26:29>> I read your re I get smarter by reading
26:31your research. That's why.
26:32>> Holy cow. Uh, all right. So, I think a
26:36lot of us of an older generation were
26:38taught um, you know, you should add to
26:41your losers a little bit and trim your
26:43winners. is that you should kind of use
26:44a meaning trading strategy that if you
26:46believe in the fundamental research
26:47you've done and the stock goes down a
26:49little bit that you should kind of just
26:51top it back off to make sure that when
26:53it works you kind of you know benefit
26:55from it. So we studied that um and again
26:59all all the work I think I can probably
27:00get in the vibe we we try to like
27:01empirically show things and um and uh in
27:05a bit of like a mythbuster kind of
27:07fact-based way and so what we did there
27:09was some work maybe a year ago now where
27:12we said imagine you randomly select 50
27:14stock portfolios 2% positions each and
27:17um if if one of your stocks gets down to
27:191.9% of your total um let's top it back
27:23off to 2%. if it gets up to 2.1, let's
27:25sell it down to two and just kind of
27:27tightly manage it. Then that was one
27:29strategy. The next was 1 and a.5% up to
27:31two or two and a half down to two. And
27:33the last was, I think, 2% going down to
27:351%, let's make it back up to two. So,
27:38you know, various flavors of mean
27:39reverting strategies. If one of your
27:40stocks underperforms all the way down to
27:421% of your book, let's make it back to
27:43two. If it outperforms all the way up to
27:45three, let's So, classic mean reverting
27:47trading behavior. And then we also did
27:49some strategies of, well, wait a minute,
27:50if it gets down to 1.9%, let's sell it
27:52down to one. let's actually like use the
27:54momentum. If it gets up to two, let's
27:57make it bigger up to three. And then we
27:58observe the performance of all these
28:00strategies for hundreds of portfolios
28:02every month back for 25 or 30 years. And
28:04what we kind of showed is in the last 3
28:06plus years, it's never been a worse idea
28:08ever than it is to add to your losers.
28:11That you were much better off taking the
28:121.9 when it went from 2% to 1.9, selling
28:15it down to one than you were topping it
28:17back off. And the reason is again I
28:19think related to what we just talked
28:20about about earnings revisions and
28:21getting cheaper and the probability of
28:22missing and the kind of fundamental
28:24momentum. So I I I think for a lot of
28:26people that's hard because they were
28:27sort of taught like you know let's let's
28:29let's use it. When you really studied it
28:31mean reverting sizing only really worked
28:33after the financial crisis after the
28:35tech bubble and after co so it made me
28:38think well maybe I thought mean
28:39reverting was a good idea but it was
28:40more regime specific and it wasn't
28:42really as good as I thought. these
28:44people benefited from the recovery that
28:46was more broad in the in as opposed to
28:49it being like a good decision. So netn
28:51net net I don't think you want to add to
28:53your losers at all. See these are I I
28:58would say quite contrarian ideas but
29:00obviously the data as you're showing
29:02backs it up but most people don't know
29:05this information because there's almost
29:07uh like legacy bias to them.
29:09>> Yeah. Yeah. And and I think a lot of the
29:10world is like I now believe things that
29:12I used to believe the opposite or the
29:14world's changed, right? Like things I
29:16don't know if we talked about this last
29:17time, but things like high quality, I
29:19buy quality. Well, that doesn't work.
29:21And buying stocks that are cheap doesn't
29:22work. So, it might sound you don't want
29:25to say if you're gathering assets as an
29:27institutional investor, I buy lowquality
29:29securities that are expensive. Like, I
29:30don't think you should do that. But I
29:32don't think you need to be overweight,
29:34high quality, or own a in a a portfolio
29:36that's cheaper than the market to make
29:38money. In fact, I'm I've showed that
29:39those are both bad ideas.
29:41>> Yeah.
29:42>> Okay. So, speaking of ideas, Adam, let
29:46let's talk about healthcare.
29:47>> Yeah.
29:47>> You made this call. I think it was
29:49February or March when you were last
29:50here. You were bullish on healthcare.
29:53>> And at the time, I didn't really
29:55>> It was pretty early. I I wasn't really
29:56talking to that many people that said,
29:58"Hey, I like healthcare a lot."
30:00>> Increasingly, I've heard more people say
30:02it.
30:02>> Yeah. Tell me your thesis on healthcare
30:05and also if you're still bullish on
30:08this.
30:08>> Yeah, very bullish to the point that I'm
30:10worried I'm tethered to it and nothing
30:12will um [clears throat]
30:15kind of get me off it and I don't like
30:16that feeling. Um it's worked recently
30:19and now a lot of people are piling on
30:21saying they like it, but the reason
30:23they're saying they like it is because
30:24it it's still um parts of it, not all of
30:28it, parts of it look cheaper than other
30:30parts of the market. Again, I don't
30:31think valuation is a good reason to like
30:33it. I I like healthcare for a few
30:35reasons. Um,
30:38portfolio construction wise, a lot of
30:40healthcare stocks have a low or negative
30:42correlation to AI semis. So, like pretty
30:45good when when semis sell off, they kind
30:47of hold in pretty well. So, I think it's
30:49good to own some for risk management.
30:51But the alpha part I like too. So,
30:53there's two elements to it. One, what
30:55are the fastest growing areas of the
30:56entire stock market that are having
30:58upward revisions? We did some we used an
31:01LLM maybe four months ago and went
31:04through again the top 3,000 US equities
31:06and we look for businesses that are
31:08forecasted to grow fast and have um had
31:12upward revisions to their outyear
31:13numbers four five year forward. Five of
31:15the fastest 14 growing categories were
31:17in healthcare. They're you know
31:18precision diagnostics and cancer
31:20therapeutics and there's a bunch of you
31:21know medtech and other stuff. So I think
31:23there's some growthier stuff to own.
31:25>> [snorts]
31:25>> The second thing I like is that a lot of
31:27older school services companies have
31:30this double whammy of demand's going to
31:31be good with an aging population. People
31:33demand services, tools, diagnostics,
31:35drugs, etc. And a lot of those
31:37businesses are low margin with lots of
31:40employees. So, as they predict their own
31:42customer behavior, employee behavior,
31:44they'll be AI productivity
31:45beneficiaries. And I think one thing
31:47that people have been a little
31:49dismissive of is we aren't really even
31:51seeing AI productivity in corporate
31:53earnings yet. that's going to come in 27
31:5428 and 29 not backward looking. So
31:57they're looking at the massive cap
31:58capbacks from the hyperscaler saying
32:00where the hell is the benefits and I'm
32:02giving up on this or I'm frustrated but
32:04like the company's always said it was 27
32:06and later. So I think you'll ultimately
32:08see a lot of healthcare companies
32:09benefit whether it's McKesen Cardinal
32:11Sora Quest LabC
32:14you know um you know etc. And I and I
32:17think cyclally on top of it all some of
32:19the managed care should work you know
32:20United and Elevance and and Sigma and
32:22others. So I think you want to be
32:24overweight healthcare uh versus the
32:26index by quite a bit. Um and and I like
32:29it for alpha plus risk management.
32:31Moreover, I actually think human beings
32:34can add value in security selection
32:36there because a lot of things are
32:37idiosyncratic in that sector. So if I
32:40were like a CIO of a large complex, I
32:42would be hiring more healthcare alpha
32:44generators in that sector probably more
32:46than any other sector.
32:47>> Okay. So this is interesting you bring
32:49that up. Uh I was just speaking to one
32:52of the CIOS from Goldman Sachs and uh
32:54she was just on the show and she was
32:56saying a big theme.
32:57>> What am I doing here? If you can get CIS
32:59from Goldman Sachs, why do you get the
33:00>> Well, I I need Triaria Capital seems a
33:02little weak.
33:03>> This is the alpha here. You're giving me
33:04some alpha. Uh
33:06>> I'll tell you a funny story.
33:07>> Well, it's funny cuz you guys had a very
33:09similar view. A lot of what she was
33:10saying was the investment theme she's
33:13watching for the next few years is the
33:14longevity theme, right? which is
33:17everything you can imagine that makes us
33:18live longer and also the negative
33:21>> be more live longer be more productive
33:22while your life just to be clear they're
33:24a client of Triarian and I have a
33:25meeting there later today socredible I
33:27shouldn't be totally surprised
33:28>> we uh we like to keep things close
33:30circles here so
33:32>> I mean they all we want them all to pay
33:33Triariat so it's good it's good to be
33:35the whisperer to the to the CIOS of the
33:37biggest firms in the world I I have
33:38pride in that
33:39>> is there a slice of healthcare that you
33:43like best like there's pharma biotech
33:45life sciences I think I think it's I
33:46think it's the drug distributors that
33:47manage care. It's um the the diagnostics
33:51like some of those tickers I just ripped
33:52off. Um I think it's also um it's it's
33:55it's probably ultimately also going to
33:56be some of the drug development, but I
33:58think that's a little bit longer in the
33:59future where you start seeing like
34:00Google computational chemistry and other
34:02stuff. It's tools, services, drug
34:05distribution, managed care labs. Um but
34:09you made me think of something funny
34:10just earlier uh which I think will be
34:13funny. years ago, I um was invited to do
34:16there there's a there's a um a retail
34:19focus magazine called Kipingers. Have
34:20you ever heard? Yeah. I get asked when I
34:22worked at Morgan Srategist to go I was
34:25on the cover and and they were taking
34:27pictures of me and it was this very I
34:29had never been in that situation.
34:30There's photographers and beautiful
34:32women handing out espressos. It was like
34:33an interesting situation and the
34:35photographer is a very interesting guy
34:37and he's telling me to like do action
34:38stuff and I'm like I like what do you
34:40mean like typing my Blackberry and
34:42talking on the phone? Wait, what do you
34:43mean? And it turned out the day before
34:46um he had done LeBron James for Sprite.
34:49And I'm like, I can't tell you what a
34:5124-hour degradation LeBron James sprite
34:54and Adam Parker Kibbingers is like that.
34:56That's the biggest possible range. So
34:57when you said I had like the Goldman CIO
34:59on I was like, "Holy cap, that's like
35:01going from LeBron James. That's going
35:03like LeBron James to to to not tri
35:07Goldman to triariat." But I'm happy to
35:09I'm flattered to be on. Thank you.
35:11>> I I'm learning a lot. which you so that
35:13that's usually my indicator. Cool. I'll
35:14take it. And uh Okay. So, I was looking
35:17at the names you have in healthcare.
35:20>> Uh and you [snorts] shared a couple, but
35:22I saw Merc or Generon, uh Corset
35:24Pharmaceuticals.
35:25>> One name I did not see was Eli Liy.
35:28>> Y
35:28>> that is I own that stock. It's a lot of
35:31the smarter folks I know. They own that
35:34stock.
35:34>> Yeah.
35:35>> This is not one in your list here. Well,
35:37I think that list you saw was which ones
35:39have high company specific risk and are
35:42hard to replicate or hedge and it was
35:43just some of those. It depends on I'm
35:45not sure exactly what list you saw.
35:47Well, I I I think the GLP thing is is
35:49massive and real. So, I I certainly
35:51don't um have any negative views of Lily
35:53um at all. Um and um I do think that
36:00there will be a continued massive growth
36:03rate for the um weight loss area. Uh I'm
36:09not sure all of that's in the price, but
36:12you've seen um
36:14the well recently they've reversed, but
36:16you've seen the alcohol companies and
36:18others really get hurt on demand and and
36:21I think that's um maybe similar to the
36:24AI question, the very first one of the
36:26day. Probably only a third unfolded on
36:29the fundamentals, right? You're still
36:30going to have for some people uh a pill
36:34form come out that will be in pretty big
36:37volume. Wow. And so I I guess
36:40>> no oral, right? Right now it's an
36:41injectable. I'm not sure they can make
36:44enough injectables
36:46globally. So a lot of people have orals
36:49>> when the pill version comes for these
36:52GLP1s. That will be a massive tailwind.
36:54>> Yeah, it's already partly the price, but
36:56you know, but yeah, but I think there
36:58was there was no negativity on Lily just
37:00cuz we had a screen that like more
37:02asyncratic names.
37:03>> Okay, that that's reassuring. Um, and I
37:05guess the other interesting thing you
37:06bring up here, you can almost short
37:07anything that goes against the longevity
37:09trade.
37:10>> Yeah.
37:10>> Is that is that an easy framework?
37:13>> I mean, I think a little bit like AI,
37:15there's going to be some businesses that
37:16are impregnable and some that benefit
37:17and some that are disrupted. Um I think
37:20there's no question that um there was a
37:24period where and I think it un it will
37:26unfold a little bit differently but
37:27there was a period where you saw um a
37:30lot of the med medical device companies
37:33act bad um the diabetes companies act
37:37bad and then select snacking and and and
37:43uh alcohol companies act bad. But, you
37:45know, it's interesting. Then you go
37:46through and then you get some weird
37:48stuff that's happening where um you
37:51know, I don't know there was a I don't
37:53know if you heard the pretzel maker. It
37:55got taken out like a 90% premium. So,
37:57you wouldn't have thought it would be.
37:58So, that you always have to be careful
38:00when you're when you're too negative on
38:01some of the staples, but I mean in the
38:03last as we sit here in the last month, a
38:05lot of the you know kind of previously
38:08losing staples are up double digits. You
38:10know, Brown Foreman and others. So, um I
38:14I do think the trend is still out there
38:15and will be for a while that um there'll
38:17be a lot of bad staples that are
38:20disrupted by that trend.
38:22>> Yeah. So, let me ask you, do you have a
38:25second favorite sector, let's say, for
38:27the year ahead? If if we say healthare,
38:30>> we're recommending semis uh comp comp
38:32semis power and and and healthcare.
38:35Those are the three areas we're
38:36recommending.
38:38Uh, we've been underweight financials
38:39and consumer generally.
38:43Oh, is that like 70% correct? I'll take
38:45it. That's pretty good. I mean, I don't
38:47know.
38:47>> Financials are one of the most popular
38:49sectors I'm hearing from other
38:51strategists and investors saying they
38:52like it for the year ahead.
38:53>> Yeah, we've been underweight this year.
38:55If you go back to the year- ahead
38:56outlooks, one of the great things about,
38:59>> you know, uh, uh, the the AI tools, um,
39:02most firms come out with their year
39:04ahead outlooks in November. So in the
39:05next two or three weeks you'll get them
39:06from mortgage semi Goldman JP Morgan EBS
39:08whatever and then a lot of bicep firms
39:09post them on social media. We ingest
39:11them all using one of the LLMs and we
39:13know late December what the consensus
39:15view on everything. So we do our year
39:16outlook in early January and I actually
39:18know like the top down consensus views
39:20when we did our outlook in early
39:21January. What you wrote is the universal
39:23consensus is that there'll be two more
39:26Fed cuts and that financials is a
39:28preferred sector. So, we kind of said,
39:30"I don't know anything about the Fed,
39:31but I'll bet they don't do two cuts and
39:33I'm underweight financials." So, I don't
39:35know that worked. That's worked four
39:36years in a row. Actually,
39:37>> that was a great call.
39:38>> It's worked four years in a row. I mean,
39:39I don't I think part of it was people
39:41thought the the curve argument and part
39:43of it was uh euphoria about the alts
39:47post the election that I think didn't
39:49materialize. Part of it was um
39:53people I think some people think
39:56financials will be a primary AI
39:58productivity beneficiary. I do not. I
40:00think it'll be healthcare. So well we'll
40:02see. I mean the some of the high quality
40:04names JP Morgan Sally Goldman have come
40:06in enough with the the risk is probably
40:08pretty attractive particularly relative
40:10to other financials but um I think being
40:12cautious generally on stables and
40:14discretionary and preferring um you know
40:18semis is generally good. the software
40:20part that's been a strong counter rally
40:21and and obviously we get asked about
40:23that a lot so you know there's nuances
40:24to all these calls but yeah um power
40:28semis and healthcare
40:30>> can you give an example of a power name
40:32you like
40:35>> sure um I mean a lot of the independent
40:38power producers have sold off a lot but
40:41even today like I kind of like oil
40:42related securities actually because I
40:44think if you take the mantra of like
40:46let's own stuff that doesn't miss that
40:48grows fast because the price to forward
40:51earnings multiple probably you can track
40:53for most securities. I I I'll take I'll
40:55take Devon and Exxon and Chevron right
40:57here. I think ultimately it'll be more
41:00on the AI power side as well.
41:03>> And are are those
41:05>> all CEG or whatever.
41:07>> Do you like oil as it relates to the
41:09Middle East or something else?
41:11>> Um well I probably don't have any skill
41:16answering that. I I I think it's just
41:17because they're not going to miss and
41:18they're growing fast and they have a low
41:20correlation negative correlation to
41:21tech. So like if you're loaded to the
41:23gills and AI stuff, then you can own
41:24some healthcare and oil and then get
41:26that kind of reduced the ball of your
41:28portfolio. I think that's pretty
41:29prudent. Um but medium to long term,
41:32I'll probably take constellation or
41:34some, you know, or or talent or like the
41:37the AI energy stuff will work.
41:39>> Okay. I I like it a lot. Um, if we think
41:43about next year and we try to do
41:45tomorrow's news today, what do you think
41:47people will be saying about the AI
41:49trade?
41:52>> Uh, I think they'll be much more bullish
41:54post the midterm. I won't be surprised
41:56if we have a huge rally after the
41:58midterm when we just get some of the you
42:00know I think right now there's some
42:02politics around the data center and you
42:04see them in these I'll say like pretty
42:07nasty little commercials during college
42:08football on the weekends and I think a
42:11lot of that's just you know posturing
42:13and that ultimately on the other side of
42:14it none of it really matters and that
42:16we're still going to have a shortage of
42:17power and a shortage of compute and
42:18it'll be game on. Um, so I think people
42:22will be looking at the power of the
42:23earnings from Nvidia and Micron and
42:25Broadcom and others and there'll still
42:26be a healthy amount of hyperscaler capex
42:30and and and the fundamentals will be
42:31pretty good. I mean earnings will
42:32probably grow 20% for the S&P next year.
42:35Their current numbers are bottom up or
42:3620. Maybe it'll be 22 23 and I think
42:39people looking at growth again in 28
42:41thinking I doubt the S&P will be
42:43commensurately cheaper than all that
42:44earnings growth as we look out. So
42:46you'll be in the same position you are
42:47this year with strong earnings and some
42:49multiple contraction and a higher
42:50market. I think that that's what I think
42:52>> that's a pretty good call. I think uh
42:55again a lot of what you're saying it
42:57reinforces my optimism.
42:59>> All right. Let me give you a crazy
43:00optimistic view.
43:01>> Okay. Or did you
43:02>> No, please go for
43:04I I mean I'm I'm I think there's like a
43:08decent chance that the 2030s in America
43:11are like a industrial revolution that's
43:13kind of massive and and that some of the
43:16white collar jobs that are cut out from
43:18AI productivity in 2720 and 29 get
43:20filled in by this revolution. So what do
43:23I mean like I think there's a chance we
43:26make millions of humanoids in the US. I
43:28think a lot of us will be using them.
43:29There's a shortage of geriatricians. I I
43:32could see having a humanoid take care of
43:35the elderly in a very efficient way. Um
43:39and um there's a lot of tasks that are
43:43measurable that people shouldn't be
43:44doing. Climbing up a tree to knock a
43:47hornets's nest out on a ladder should be
43:49done by exactly zero overweight
43:5270-year-old Americans ever again. Like
43:54that you should just get your humanoid
43:55to do or whatever. So, I feel like
43:56there's a lot of that kind of stuff
43:57that's coming and be all kinds of
43:59logistics and and and and consulting and
44:02actuators and semis and compute and
44:03sensors and other things that are sold
44:05and I think a lot of it will be built in
44:06America and um I think there's a
44:09reasonable chance that um I mean Musk
44:13has done a lot of disappointing in a
44:15two-year time frame and and kind of
44:17being exciting in a 10-year time frame
44:18and you can watch him talk about the
44:20humanoid thing and you get a little more
44:21excited and I think now people realizing
44:23like star everything is kind Awesome.
44:26Like Starlink is I fly a lot on Delta
44:29and the Wi-Fi is kind of
44:32is is crap. Can I use the word crap on
44:34your podcast? I'd say it's mixed and
44:36Starlink it's like you can watch you can
44:38be on a Zoom. I mean you can watch you
44:40can live stream the Celtics or whatever
44:42your I'm a Boston guy but whatever your
44:44jam is. Yeah.
44:45>> Amazing. I um you know it's funny uh you
44:48bring up the human robot robots. I've
44:51been using various AI agent tools.
44:53Grockbot, right? That's a big one.
44:55>> And if I think about
44:56>> how much I'm deploying AI agents to do
44:59digital work, what could I be doing in
45:02the physical world if I had the physical
45:05equivalent of AI agents working for me?
45:07That's pretty exciting to think about.
45:09>> Totally.
45:09>> And probably means uh we need more
45:11micron.
45:12>> You need so much more silicon. You don't
45:14know about it. And there's a shortage
45:16that's a long time. And you know, again,
45:19like I think I mean, I always worry when
45:21I say something like this because then
45:22you're going to write up the summary
45:23with some sexy thing that, but like
45:25Micron's going to be way higher before
45:26the cycle's over. They're just going to
45:27make so much more money than people
45:28think. And what's in the price is a
45:30massive collapse in earnings in second
45:32half of 28 into 29 and then it's like
45:35they're back to being, you know, where
45:37they always were. And I think that
45:38that's possible, but there's also a lot
45:41of other things in the distribution of
45:42outcomes that are way better than that.
45:44And so a lot of investing is like
45:46statistical expectation and distribution
45:48of outcome and assigning probabilities
45:49to each and multiples to each and like
45:51what's in the price is the only like a
45:53massive bare case and what's not in the
45:55price is a much more high likelihood
45:58that things go way better than that.
46:00>> Wow. So uh baked into the micron price
46:03people are not optimistic enough because
46:05people are expecting a turnover in
46:07earnings. Did I say that right?
46:08expecting capacity to come online and a
46:10there what's in the prices they lose
46:11money in 29 and maybe a lot of it like
46:1450 billion or some big number
46:16>> cuz you know otherwise the thing is
46:20ridiculous. Yeah,
46:21>> it is ridiculous. I mean in the current
46:23state it's ridiculous already. Um
46:24>> but there's other things too. I mean I I
46:26again I think you know we talked about
46:27it before. I think Nvidia is going to be
46:29way higher at the end of the cycle and
46:30the semicaps and others are because
46:32we're just there's a shortage of silica.
46:33We need to make more and there'll be
46:35massive demand. It's way above nominal
46:37GDP for many many years.
46:39>> Adam, where can we send people to find
46:41more your work?
46:42>> Yeah. So, you know, if you're an
46:43individual investor or, you know,
46:45adviser, just go to our our our website
46:48called tvecctorresearch.com
46:50and uh it's also on X or on LinkedIn and
46:52you can subscribe to our newsletter.
46:54It's $110 $10 a month, 1,200 a year. We
46:57do um monthly uh you know, webcast. You
47:01can ask me questions. We do weekly
47:02videos commenting on stuff and um we do
47:06three or four, you know, interesting
47:07short publications a week to try to, you
47:10know, help people make better decisions.
47:11So, it's it's would love to um you know,
47:15have people check it out.
47:16>> Amazing. You do excellent work. Probably
47:19some of the best charts and research in
47:21the business. Uh and I really appreciate
47:22your time. We will definitely do this
47:24get out. Thank you very much.
47:25>> Yeah. Nice to see you. Nice.

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