Hostages and Probability

I am honestly at a loss to value those stocks right now given their shift to heavy capex investment. I believe the notion that they will be cutting back this level of spend at some point is growing increasingly unlikely. Instead, I am buying the companies that are benefiting from the spend, like $NVDA and $AVGO.

$MSFT, $META and $AMZN are ridiculously undervalued. Michael Mauboussin says 65% of the S&P 500 market cap has historically been from steady-state value, while 35% is from future growth. I looked at how this is for $MSFT, $AMZN, and $META by capitalising their NTM earnings using the cost of capital. Currently, 55% of the S&P 500 market cap is basically made up by the present value of the future growth opportunities (PVGO), which is the inverse of the historical averages. Meanwhile, all these mega-caps have a higher percentage of their value coming from steady-state than the broader index. This is absurd, as these companies are of higher quality and have higher growth expectations than the index average. This is how undervalued they are relative to the market.

@Mark4XX Well, that guy has been dead wrong on gold and oil. Maybe the third time is the charm. Lol

Warning signs of a major market correction are becoming impossible to ignore. A deep unease is palpable among many on X. It's like a towering haystack drenched in accelerants — with the still-unresolved Hormuz crisis as the potential spark.

@realroseceline $MA, $V

Name the best business you know that meets all of the following criteria: 1. Simple to understand (no AI, chips, biotech, banking, insurance, etc). 2. Requires little capital reinvestment 3. Consistently generates free cash flow 4. Strong balance sheet 5. Durable competitive advantage 6. Trading at a reasonable valuation What company comes to mind first? 🌹

@Brookltnwilliw @WBPetersen The billionaire who decries capitalism.

All my adult children are complaining about the high price of vet bills and have moved to only involving the vet when absolutely necessary. Moreover, they are declining more and more tests, and maintenance care. They love their pets, but they honestly can't afford the vet bills.

vet clinic - visits (y/y)

@realroseceline @TheRayMyers $MELI

@TheRayMyers Which would u choose if you had to own only 1 company on this list for the next 5-10 yrs?

If you must choose, which one are you buying? - $IREN vs $NBIS - $GRAB vs $UBER - $MELI vs $SE - $AMD vs $NVDA - $NVO vs $LLY - $MSFT vs $GOOGL - $HIMS vs $WW - $HOOD vs $SOFI

When both a company's CEO and CFO open their wallets and buy shares for the very first time (despite receiving massive SBC), it might be worth taking notice. $ADSK

@oguzerkan Maybe FCF matters.

How does this make sense? $META, $AMZN and $MSFT are underperforming S&P 500 for the past 5-year period. These are the companies controlling the AI buildout and poised to get the biggest payoffs going forward. If we believe AI will work, their current valuations are a crime.

@LogicalThesis Agree 100%. Zuck’s dopamine needs drive capital allocation. It has nothing to do with shareholder returns. See their SBC, for example. $META

I still don't get why $META is spending all this money on AI capex when they aren't a hyperscaler. They don't have the model. They aren't the toll booth for compute. This isn't their business Imo this is diworseification.

While I agree with much of what you posted, there is a world of difference between an asset-light business and a capital-heavy business, especially when that business is highly dependent upon the global advertising spend and all its fickleness. The big question is whether or not $META's current level of CapEx spend is temporary. If yes - then the stock is a bargain. If no - not so much.

$META Noise, noise, noise, and more noise. Forget all that. It's actually very, very straightforward. META’s distribution is vast and it isn't going anywhere. While all your family, friends, and neighbors are on these platforms, you will be. And while you're on these platforms, your family, friends, and neighbors will be. Facebook has over ~3 billion users. WhatsApp has ~3.3 billion users. Instagram has ~3 billion users. Messenger has ~1 billion users. Threads has ~450 million users. Distribution like this is immensely powerful. Even small monetary extractions on these vast user bases can move the needle. I'm not even sure there's any profound execution that has to happen here for investors to do well. Here's why. The current cash flows are severely undervalued. Sometimes valuations can be tricky depending on the business. This is NOT one of those times. Just value the cash flows in any simple way you want. Even if you slash the last 5 years’s growth rates by a lot, any valuation you choose will show you a return in the upper teens or higher. These projections should be taken very seriously. In fact, I think it's so undervalued that if $META hardly grows cash flows at all in the next 5 years, investors probably wouldn't lose much, if anything, from here. This is a very long way of saying that the downside is covered. This is one of those things where all that's left is potential upside. I don't own it, but that doesn't mean I don't like it. I'm not sure of the runway, but I think it works from here over the next few years. The noise around this stock makes investors think there's a lot that needs to be weighed. There isn't. The two things here in this post– the enduring, vast distribution and the current valuation of cash flows– are what actually matter. Not financial advice. stockunlock.com/valuation?t=ME…

I am very long $MA. Yeah, Bill Gurley claims stablecoins "heavily threaten" $V and $MA. More likely, the networks co-opt stablecoins: Visa has settled in USDC since 2021 and lets banks pilot stablecoin settlement on its rails, and Mastercard mints and redeems USDG via Paxos. And his "cheap instant rails already exist" point cuts the other way. India's UPI handles 75%+ of retail digital payments - but largely because the government pays for it (free market forces, Mr. Gurley?) - and UPI has actually displaced cash and debit while credit continues to grow. Moreover, V/MA are now trying to get onto UPI, not fend it off. His deeper flaw is what gets compressed. The 2%+ merchant discount rate is overwhelmingly interchange flowing to the issuing banks - the slice that funds rewards, unsecured credit, and float. That's what a stablecoin actually attacks. The networks keep only a thin toll for switching, near-universal acceptance, and the fraud/dispute and settlement rails. Stablecoins compress the bank's bundle, not the network's.

If $META is so cheap - why hasn't there been a single insider purchase?

I have been buying $ADSK, $AVGO, and $UBER. $MELI is a steal here as well.

@SenSanders You, sir, are an idiot. Elon will also receive the same benefit as someone who is making $184,500. Or is grasp of basic math too much to expect from politicians?

Today, Elon Musk, a trillionaire, pays the same amount into Social Security as someone making $184,500. If we end that absurdity and lift the cap on taxable income, we can make Social Security solvent for 75 years and expand benefits by $2,400. My Social Security bill does that.

@AustinHorton6 @joecarlsonshow Interesting. Thank you. Where’s Q4 2025 and Q1 2026?

@HostagesandProb @joecarlsonshow Here you go. Still looks pretty good to me.

These are the companies the market is currently selling.

@dgsommersmkts Honestly, I have a great deal of respect for valuation. It is a fundamental part of my approach. I don't even consider companies that have negative EBIT. However, I imagine your table would look much different using P/E ratios. Also, the chart I provided goes back to 1986.

You are picking a spot in a 35 year period in which a very tech heavy S&P 500 is enjoying big profits while a lot of spending is being accounted for as capex. You also need to extend the chart a lot further back than 1991. That's also just one aspect of the post. It's important to understand how bad things got for people who said the exact same thing that you are saying now back in 2000. McNealy is a really smart, sophisticated guy. You can ignore history and savvy corporate insiders if you so choose.

"What were you thinking?" -- Scott McNealy, 2002

@dgsommersmkts When do they mean revert? This is a 40 year chart. Where would you draw the historical mean? Looks like a fairly straightforward uptrend to me.

Profit margins always means revert over time, H. That's a fairly basic principle, which is why looking at revenues can be worthwhile. And the point is that at 10x (or higher) sales, the chances of something going wrong are just enormous. You should do whatever you want to do of course, but people who bought at these price to sales levels 25 years ago got destroyed. McNealy's point was that their fate was obvious.

@oguzerkan I agree, but why buy the companies spending the cash ($CRWV, $NBIS) instead of the companies receiving the cash ($NVDA, $AVGO)? If it's a high beta play, I get it - but that isn't my game.

There is no reason $CRWV should be valued below $NBIS. Its financials have improved materially as it raised $20 billion YTD through equity and debt with no major maturities until 2029. Plummeting credit spread validates this. Yet it’s still valued below $NBIS. Opportunity.