r/valueinvesting
Current thoughts
Views current dip as healthy but predicts Aug-Oct correction; raising cash to 30%+ and hedging defensively ahead of potential political volatility.
- Corporate earnings remain strong and AI capital expenditure shows no signs of slowing down.
- Market pullbacks provide necessary liquidity for institutions to rebalance portfolios.
- Long-term clarity on AI business models will eventually allow true winners to emerge.
- Recent jobs data has reduced expectations for imminent rate cuts, removing a key market support.
- Historical patterns suggest midterm election years often experience a second market correction between August and October.
- Potential political manipulation and post-IPO sell-offs (e.g., Anthropic) could trigger significant volatility.
I see this as a pullback. Earnings look good, and AI spending doesn’t show any signs of slowing. Institutions needed a reason to pull back, and the jobs report priced out a rate cut (we’ll see, in my mind). The market needed a pullback after running too far, too fast over the last three months. Institutions also needed liquidity to buy into SpaceX.
I foresee SpaceX creating headlines about Elon Musk becoming a trillionaire, only for the stock to be sold off afterward. I expect chop and possibly a pullback leading up to Micron’s earnings on June 24th, which could open the door for a blow-off top heading into Anthropic’s fall IPO.
That’s where I think the market sells off. Something political will likely emerge, and knowing Trump, he won’t pass up an opportunity to manipulate markets. The froth will get scrubbed out, and investors will finally digest what AI means for different businesses, allowing the true winners to emerge afterward.
I currently hold 20% cash and plan on raising that to 30%+ by the end of July. Midterm years typically see two corrections or crashes. We’ve already had the first one, and I predict the second begins sometime between August and October.
I’m all set on shorting/buying put options. It works when done correctly, but it adds too much stress to my life. I’ve learned that hedging with defensive stocks and cash is the better approach for me.
Market won't sell off until there's a better place for the money to go.
What you said is true. Contrary to even Buffetts advice, cash isnt "better" in a crash. It's a rotation into "something".
What is that something? Well in 2000 it was companies that made great money that had nothing to do with the Internet.. say mo, pool, Azo, I'm missing a ton but that.
My thesis is saas, cable internet, consumer defensive like food, depending on the exact ticker ... You can get 30 percent fcf yields on stagnant companies like chtr, or 10 percent fcf yields on debt free compounders like Adobe.
In a nutshell cash is king.. but not you in cash, buying companies that make real cash and not basically nothing but sbc like palantir or snowflake.
There are some cable internet companies with 80%-90% FCF yield. That is absolutely insane to me.
I think we're entering a bear trend. Idk if we're going to see a new high for a while.
It's interesting how the script has flipped on AI - Q1 it was all fear about returns on the capex, Q2 market runs up, suddenly the capex is a good thing - I think original narrative was correct. It's going to create a structural drag on earnings as the depreciation kicks in. Will it generate enough top line to cancel that out? I doubt it. I'm still not convinced AI is monetising that well. Money that is being made is in areas which are experiencing supply squeezes, this isn't sustainable long term growth. And the tech is evolving fast. Didn't NVDA announce last week they've got a chip which can run LLMs natively on desktops now... So is all the money being poured into datacentres really necessary? Difficult not to waste money investing in something which quickly evolves
But, the broader economy is still doing well, so while the index might go down as the big tech names weigh, there will probably be a rotation into value and defensive sectors - banks, insurance, healthcare, consumer staples etc
This was the sell-off to free up cash for the space x ipo. After the pump and dump is complete the money will flow back in to the ai trade.
Dell is going to double — they’re going all-in on AI infrastructure and the market hasn’t even priced it in yet
AMD will take once ai agents come into play with cpu and inference. Which is the 2nd leg. We’re still in training. Investors have just begun pricing in cpu demand, from its last earnings report
many good stocks there.
How have you determined the market hasn’t priced any of this in?
I’m not selling any of my investments regardless of the jobs report.
This is very true. Massive debt. They have spent a lot of money to build out networks. My understanding is that a lot of that spend is winding down. Then the question is about competition. But in my view these types of doom scenarios are usually overblown, and then there is money to be made when these things get super beat up like they are.
Are you just talking about charter?
Correct
I'm buying Monday, just a small position