TechStockFundamentals

Happy belated 4th. My occasional reminder that the best gift you can give yourself and everyone around you is the awareness of index ETFs. 99% of investors cannot beat these incredible ETFs that provide exposure to the best companies in the strongest economy in the world, automatically rebalance to add winners / remove losers, can be held forever, and require you to pay little to no taxes. SPY: 13.8% compound return over 15 years. Up 11% YTD. Trades at 21x forward P/E vs 10 year mean of 20x. Average of 9% EPS growth over past 10 years. (If you want the SP500, buy VOO which has lower fees instead of SPY). QQQ (Nasdaq 100): 18.5% compound return over 15 years. Up 18% YTD. Trades at 24x forward P/E vs 10 year mean of 25x. Average of 13% EPS growth over past 10 years. SMH (Semi's): 24.8% compound return over 15 years. Up 71% YTD. Trades at 25x forward P/E vs 10 year mean of 20x. Average of 22% EPS growth over past 10 years. IGV (Software): 16.0% compound return over 15 years. Down -12% YTD. Trades at 20x forward P/E vs 10 year mean of 35x. Keep in mind this EPS also is a blend of consensus so excludes plenty of SBC depending on the company (just saying despite the SaaS-pocalypse, the group doesn't stand out as "cheap"). Average of 12% EPS growth over past 10 years. Think about that for a second. You can own QQQ which is America's best tech companies (and the world buys American tech) for 24x EPS or a 4.2% yield on NTM that goes to a 4.7% yield on Y+1 to a 5.3% yield on Y+2, ... And you regularly get to buy QQQ at 20x or a 5.0% yield that increases over time. To me, that's a shockingly good deal compared to a risk-free rate that pays you in devaluing USD and is taxed. It's kind of remarkable that vehicles that have provided better returns than 99% of the active management industry (and 100% of the industry on an after-tax basis) with pretty digestible downside volatility aren't at least 50% of everyone's portfolios. I guess there is no face to these vehicles out there promoting them non-stop and no fees to feed an eco-system of advisors / marketers / etc. Anyways, I just encourage people to actively think about VOO / QQQ. Have you outperformed it over 20 years on an after-tax basis? Have your fund managers? ...

@jonrice80 @sapiensdiary @hoosier_to Thx for the update. Yeah, I think it's sort of a no-brainer for every seat to have the MCP. Even the private wealth managers can be a lot smarter about client questions armed w/ Claude + FDS MCP.

@sapiensdiary @TechFundies @hoosier_to We've finished our trial now. I think we will pay for it. It's still missing a fair amount of functionality and even data points but I expect it will get better. Potentially tactically bullish for $FDS but I still worry any time you are pushing users outside of your interface.

@jonrice80 Thanks for the thoughts. I’ve found value in some more open ended exploration with Claude having all the FDS context as well. Probably not useful as a fixed comp table that needs to stay static. Let me know what you end up deciding.

@LongVollllll Fair - but SMH is trading at 24x 2027 EPS for very rapid growth. That includes the other names as well.

@TechFundies I mean you’re cherry picking the “cheapest” semi stocks and the mag 7 are overearning (capex)

I think you could argue the market is pretty fair right here. Semis: NVDA / AVGO / MU / ... growing at insane clips and trading at 8-22x 2027 EPS. Offset being market doesn't know for how long cycle lasts. Semi-cap within this far more expensive. Internet media: META / NFLX / BKNG / ... growing at 10-25% and trading at 15-20x EPS. Payments: V / MA / ... growing at 8-12% and trading at 23x EPS. Hyperscalers: GOOGL / MSFT / AMZN / ORCL growing 10-20% yy and trading at 19-25x EPS. Software: CRM / WDAY / NOW / VEEV growing 8-20% yy and trading at 17-25x EPS. QQQ overall is trading at 22x 2027 EPS. So semis are optically cheap w/ fastest growth / revisions - makes sense that's where all the action is. And everything else is sort of cheapish for what it is but not by comparison to semis (or not yet at least). This all just strikes me as pretty fair - and pretty compelling from a QQQ perspective - diversified basket of best 100 tech companies globally, will include all the private stars as they come public, no brain damage from trying to figure out which names outperform due to AI, protection from a rollover in semis, etc. 5% EPS yield for EPS that has grown 13% yy historically over the past 20 years (!). Oh, and probably not a single tech active manager has beaten it over time - definitely not on an after-tax basis.

@sapiensdiary The raw data was correct. The methodology that AI used was not. That’s on me as well I guess.

@TechFundies yeah that's the problem with not connecting with vetted data - you don't know where the errors are with raw AI and it's a pain in the ass to comb through everything. how's your Factset experience been lately?

So my prior analysis was completely incorrect. And by "my", I mean "Claude and my". You can't just take a position's weighting in the index and multiple it by each company's net income. The missing variable is the P/E for each company which moves around the underlying EPS for the bench. So, yeah, you need to double check AI just like a person. Interestingly, $FDS has an EPS aggregation screen for ETFs where the math is done carefully and has human-written explanatory notes. So still value in the console as well. Revised view: QQQ is ~33% exposed to semis while SPY is ~20% which might be the cleanest way to look at it. If semis were to get cut in half, that would be a ~17% QQQ drop and ~10% SPY drop. Could be less if other names inflate as money rotates into them, could be more if it just brings everything down with it including overall multiples.

Well. This was wrong. SaaS shorts win again.

@hoosier_to @jonrice80 Their sales engineer provided some examples of prompts for trialing. I personally find the plug-in most useful for ad-hoc questions and stock catch-ups.

@TechFundies @jonrice80 We are trialing as well. Has your FDS support team provided any helpful resources covering best practices for prompts, integrating MCP data into existing workflows, etc? Our rep mentioned they have a bunch of pre-built skill files but haven't gotten our hands on anything yet

I agree. The world has built plenty of dashboards that work just fine as they are. No need to recreate the wheel. But, I think the unlock is doing additive analysis w/ AI that is now possible. ie have Claude take your comp sheet, track total employees via LinkedIn and see if that foots with consensus opex growth expectations, etc.

@TechFundies There's also a fair bit of overlap in what I already export out of Factset into Excel. For instance, I've spent a long time building out a Factset FDS code comp table. It's not clear just how much more valuble this is to that.

If you are a $FDS customer, be sure to call your rep. Mine says nearly all clients are trialing the MCP, and 100% of completed trials converted to paying for the connector. 100%. List price for the connector is a 20% uplift to contract value for the first 10 seats and then drops to an incremental 15% for additional seats. Said there has been 0 pushback on price. Single seat pricing still a work in progress as that is a minority of their business. Stock trades at 14x this year's GAAP EPS estimate which is likely too low, and 13x next year which is highly likely to be too low...

@FundamentEdge @GutFeelCapital The minimum commitment for now is $10k. That comes with 3 MCP seats. It is then $3k a seat on top of that. They seem to be figuring out a pricing model for 1-2 seat shops which is obviously a small percentage of their seats.

@TechFundies @GutFeelCapital Can u explain the $3k/seat? It is my understanding the sticker price is $10k/seat

@ablemoney1337 Why do you say that?

@TechFundies It’s pretty poor quality though

@jonrice80 What did you think?

@TechFundies Our trial just ended and we have not converted yet (considering it). So far the connection points are not comprehensive.

@GutFeelCapital Is there an alternative that has most of the same data? Thx. For their client base, an extra $3k / year / seat for meaningful value add is totally fine.

@TechFundies Incredibly overpriced relative to alternatives

@strinh23 @dpgahagan Believe that’s incorrect. It’s $10k for first three MCP seats, and starts only at that level.

Update: SaaS short value 97b in total up from 90b on Friday's close. Ouch. Weird because isn't one of the 10 Commandments "SaaS shall not trade up with Semis"? I guess it isn't ordained:) Maybe semis and saas can make money from agents?!