THEORY AND I GOT TO TELL YOU A
LOT OF PEOPLE WONDER IF MAYBE
WE’RE GETTING THERE.
I WANT TO BRING IN SARTORI
PORTFOLIO FUND MANAGER
DAN NILES.
THE PROBLEM WITH THE GREATER
FOOL THEORY, IT IS LIKE MUSICAL
CHAIRS, SOONER OR LATER THERE IS
NOBODY LEFT TO PLAY.
HOW MUCH OF THIS RALLY IN YOUR
MIND IS CHASING THE WINNERS?
>> IT IS CHASING -- IT DEPENDS.
YOU HAVE TO SPLIT THIS APART.
IF YOU’RE TALKING ABOUT A
NVIDIA, A AMAZON, A META, YOU’RE
CHASING THE WINNERS BUT ALSO
CHAIRING THE ONES WHERE THE
EARNINGS HAVE GONE UP THE MOST.
META, FOR EXAMPLE, THE ESTIMATES
LAST YEAR WENT UP ALMOST 90%.
IF YOU LOOK AT NVIDIA, THE
ESTIMATES TRIPLED, YOU KNOW, THE
STOCK TRIPLED.
THE ESTIMATES QUADRUPLED.
IT IS ACTUALLY CHEAPER TODAY
THAN IT WAS THEN.
NOW IF YOU LOOK BROADER YOU KANG
SAY, WELL APPLE, THAT STOCK WAS
UP 48% LAST YEAR.
WELL ACTUALLY THE ESTIMATES WHEN
DOWN.
TESLA’S STOCK DOUBLED LAST YEAR.
WELL ACTUALLY THE ESTIMATES WENT
DOWN.
SO YOU’RE RIGHT IN THE SENSE
THAT UP UNTIL VERY RECENTLY IT’S
BEEN AS YOU EXACTLY POINTED,
CHASE THE MOMENTUM, JUST LOOK AT
THE CHART, DON’T WORRY ABOUT THE
FUNDAMENTALS, IT IS GOING TO BE
GREAT BUT I THINK YOU HAVE NOW
ENTERED A PERIOD OF TIME, IF YOU
LOOK AT "THE MAGNIFICENT SEVEN"
AS PROBABLY THE YOU KNOW, THE
POSTER-CHILD FOR THIS THE THREE
COMPANIES THAT CUT ESTIMATES OR
DIDN’T HAVE ESTIMATES GO UP VERY
OF WHEN THEY REPORTED THEIR
DECEMBER QUARTERS AND GUIDED FOR
MARCH, THOSE THREE STOCKS,
TESLA, APPLE AND GOOGLE, ARE ALL
DOWN FOR THE YEAR.
THE OTHERS, THE FOUR THAT HAD
ESTIMATES GO UP A LOT, WHICH IS
WHY I’M CALLING THEM THE
"FANTASTIC FOUR," NOT
"THE MAGNIFICENT SEVEN," THOSE
STOCKS, META, AMAZON, MICROSOFT,
YOU KNOW, THOSE STOCKS ARE UP A
FAIR BIT THIS YEAR WITH
OBVIOUSLY NVIDIA LEADING THE
PACK.
CHARLES: SO, DAN, WE READ YOUR
NOTES AND WE KNEW YOU WERE GOING
TO BRING THAT UP.
WE HAVE A PESTER OF THE
MAGNIFICENT, THE "FANTASTIC
FOUR" HERE.
I’M CURIOUS, WHICH ONE IS THE
ROCK DUDE, WHICH ONE IS THE ROCK
DUDE BECAUSE HE IS MY FAVORITE?
>> YEAH, FOR ME -- OH, THE ROCK?
YOU HAVE TO PUT JEFF BEZOS WITH
THE WAY HE IS BUILT.
HE WOULD BE THE THING, RIGHT?
HE IS PRETTY BULKY.
I THINK THAT IS WHO YOU MAKE THE
THING.
CHARLES: SO, YOU KICKED OTHERS
TO THE CURB.
YOU HAVE GOT THE "FANTASTIC
FOUR." ARE THEY ENOUGH TO LEFT
THIS MARKET?
WHAT DO YOU THINK OF COMMENT
FROM PIPER SANDLER, THIS
PARTICULAR STRATEGIST SAYING
HEY, THE RALLY HAS TO BROADEN
OUT AT SOME POINT, OTHERWISE IT
IS GOING TO PULL BACK?
>> FOR SOMEBODY LIKE ME THIS IS
ACTUALLY A REALLY GOOD MARKET
BECAUSE NOW YOU ACTUALLY HAVE TO
KNOW THE FUNDAMENTAL AS BIT BUT
YOU KNOW THE THING IS, THAT
STOCKS CAN GO UP A LOT MORE THAN
WHATEVER YOU IMAGINE.
COULD YOU BE IN A SITUATION
WHERE YOU HAVE THESE FOUR
STOCKS, THE "FANTASTIC FOUR,"
CONTINUE TO DO WELL BECAUSE THEY
HAVE THINGS PARTICULAR TO THEIR
OWN BUSINESSES?
EACH ONE OF THEM DOES, THAT CAN
MAKE THEM GO HIGHER, ABSOLUTELY.
WHEN YOU LOOK BROADER, YOU DO
HAVE AN EARNINGS PROBLEM.
IF YOU TAKE OUT KNOWS FOUR
NAMES, ACTUALLY BROADEN IT OUT
TO THE "MAGNIFICENT SEVEN," YOU
TAKE THOSE NAMES OUT, THE
EARNINGS ARE ACTUALLY DOWN
YEAR-OVER-YEAR FOR THE REST OF
THE S&P 500.
BECAUSE OF THOSE NAMES IT LOOKS
LIKE THE EARNINGS ARE ACTUALLY
UP.
IT IS REALLY DRIVEN BY THE FOUR
OR SO WE’RE TALKING ABOUT OR
SIX.
CHARLES: RIGHT.
>> SO I THINK IT’S A LITTLE BIT
OF BOTH BUT I THINK WHAT YOU
CAN’T ARGUE IS THAT WE’RE IN AN
OVERALL BUBBLE BECAUSE THE
VALUATIONS ON THE WHOLE ARE NOT
THAT HIGH.
FOR PARTICULAR STOCKS THEY MAKE
NO SENSE BUT NVIDIA AS THE
POSTER-CHILD FOR THIS A.I.
RALLY.
IF YOU LOOK AT IT, YOU CAN SAY
REVENUES ARE UP 90%.
THE PE IS 35 TIMES.
IF YOU GO BACK TO THE TECH
BUBBLE, CISCO AT THAT TIME
WASN’T GEEING 90%, THEY WERE
GROWING 60%, BUT THE PE WAS 138
TYPES AT ITS PEAK.
CHARLES: RIGHT.
>> I DON’T THINK YOU CAN EQUATE
MOMENTUM IN STOCKS WHERE
EARNINGS WERE GOING UP SO MUCH
FOR LIKE AN NVIDIA WHERE
ESTIMATES QUADRUPLED OVER THE
COURSE OF A YEAR WITH A BUBBLE
BECAUSE THE PE IS THAT MISSING
LINK TO IT AS WELL AS QUITE
HONESTLY TIME.
IT HAS ONLY BEEN A YEAR AND A
QUARTER WE EVER HEARD WHAT
CHATGPT AND OPENAI.
SO YOU KNOW THE LAST INTERNET
BUBBLE TOOK ABOUT FIVE YEARS
BEFORE IT REALLY PETERED OUT.
WE’RE NOWHERE NEAR THAT RIGHT
NOW.
CHARLES: I THINK A LOT OF PEOPLE
FORGET THAT THE INFAMOUS OR
FAMOUS IRRATIONAL EXUBERANCE
SPEECH, THE MARKET REMAINED
IRRATIONALLY, EXUBERANT FOR
ANOTHER FOUR YEARS.
TO YOUR POINT ON CISCO, A LOT OF
THAT GROWTH WAS ACQUISITION.
IT WAS NOT EVEN ORGANIC GROWTH.
THEY KEPT BUYING COMPANIES.
THE NUMBERS LOOKED PRETTY GOOD
UNTIL THEY COLLAPSED UNDER ITS
OWN WEIGHT.
SOMEONE NEW TO THE MARKET,
HIGHER IT GOES, WE’RE SEEING
BILLIONS OF DOLLARS COME INTO
THE EQUITY MARKET, YOU’RE ALWAYS
LOOKING, LISTEN, YOU’RE
WELL-KNOWN FOR SOMEONE ALWAYS
AHEAD OF THE CURVE.
WHERE MIGHT YOU LOOK FOR THE
NEXT OPPORTUNITY?
>> WELL, I MEAN, WE’VE GOT SOME
SMALLER NAMES THAT ARE
INTERESTING BUT I THINK FOR
INVESTORS, THIS ISN’T THEIR
FULL-TIME JOB, I THINK YOU CAN
LOOK AT THESE FOUR NAMES, MAYBE
GO THROUGH THEM QUICKLY, META IS
USING A.I. REALLY WELL TO
RECOMMEND VIDEOS TO PEOPLE SO IT
KEEPS THEM ENGAGED TO MONETIZE
THEIR ADS.
IT WITH GOOGLE MISSED SYSTEM
REVENUES AND MISSED THEIR
YOUTUBE REVENUES WHERE YOU HAVE
GOT COMPETITION FROM NETFLIX ADD
SUPPORTED TIER.
META, VERY GOOD VALUATION.
STILL REALLY GOOD GROWING.
AMAZON IS THE PUBLIC CLOUD
VENDOR FOR A.I.
I THINK ESTIMATES THERE CAN
DOUBLE OVER THE COURSE OF 2023
TO 2025.
SO DOING QUITE WELL THERE.
OBVIOUSLY NVIDIA WE JUST TALKED
ABOUT AND THEN MICROSOFT GETS
ALMOST HALF THE PROFITS FROM
OPENAI.
SO THEY’RE KIND OF BENEFITING
FROM THAT AS WELL.
SO THOSE ARE FOUR NAMES IN A
PORTFOLIO, DIFFERENT RISK
PROFILES, YOU KNOW, MICROSOFT’S
PROBABLY MY LEAST FAVORITE OF
THE FOUR BUT THAT’S WHERE YOU
CAN GET KIND OF A NICE MIX OF
HOPEFULLY SOME DEFENSIVENESS,
REASONABLE VALUATIONS AND SOME
UPSIDE FOR THE FUTURE BECAUSE AS
I SAID BEFORE, RIGHT, THE
INTERNET BUBBLE TOOK FIVE YEARS
TO PETER OUT.
WE’RE ABOUT ONE YEAR AND A
QUARTER INTO THIS ONE AND SO YOU
DO WANT SOME EXPOSURE TO THE
STRONGEST THEMES IN THE MARKET.
CHARLES: RIGHT.