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Hope you are having a great holiday so far. I take this moment to wish you a profitable and joyous New Year!
My Quick Take on Tech
Previously I spoke of the Big Short Michael Burry turning negative on the AI stocks. If you recall, I spoke of my misgivings on the AI trade in The Early Bird podcast way back in November. There are arguments being made that some of the tech stocks are fairly cheap. Take Nvidia for example. It trades at 0.8 PEG, which is clearly in a value stock category. So why all the doom?
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Good investors look at the current valuations. Great investors put these valuations in context.
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Howard Marks talks about something called second-level thinking. He explains the concept in detail in one of the memos to his clients. This is a great read and I recommend it heartily.
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Coming back to Nvidia and other tech stocks, while I agree that many look undervalued considering the current growth and future growth estimates, I have not seen much evidence that the buyers of AI products and services have started to realize a positive ROI in their investments.
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Salesforce made news sometime ago when they laid off 4000 customer support employees and replaced them with AI agents. Slightly less splashy news is that they now admit they were over-confident in AI capabilities, and are now rehiring 6000 human employees to work in a hybrid human-ai model.
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The positive ROI will come eventually. Until then the industry is over building and the valuations for most companies are running ahead of their business. There will be a correction.
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Just like internet stocks ~25 years ago.
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Quick Housekeeping Notes
- I will send out a year end report for the portfolio by this weekend (Jan 4) to the Inner Circle members and another report to all free subscribers to this newsletter.
- I have started to track the Current Watchlist on the website itself. You can follow it here. You do not need to be a Inner Circle member to follow the watchlist, but most of the research and ratings are reserved for the Inner Circle members. This page will fill out over time. Please note that I will be using X to post tidbits from my research so following me there is a good idea.
- I have recovered a large number of articles I previously published on Value Stock Guide. I am adding these articles to the website with any edits as necessary.
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Inner Circle Portfolio Performance
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The portfolio performance is updated once a month, and tracked YTD until the end of the prior month. Performance is tracked as time weighted total return.
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Upgrade to Inner Circle
- My actual Small Cap Value portfolio with highly profitable but under followed stocks and Kelly Criterion optimized weights
- Detailed investment thesis for portfolio stocks, including target prices and expected returns emailed to you as soon as published
- 1 year membership with NO auto-renewal. Repurchase membership again if you wish to continue for another year once your term completes.
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Net-Net Stocks in 2026: Are Graham's Deep Value Criteria Still Findable?
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Benjamin Graham made his career finding them. Warren Buffett called them the most reliable source of investment returns he ever found. And virtually every serious value investor has, at some point, asked the same question I asked when I first discovered them: why isn't everyone doing this? Net-net stocks, companies trading below their net current asset value, are one of …
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Piotroski F-Score in Practice: How I Use It to Confirm a Value Pick
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I want to be upfront about something: I do not use the Piotroski F-Score as a primary stock screen most of the time. That might surprise you, given how much ink gets spilled on Piotroski scores in value investing circles. But my process is different: I use it as a confirmation tool, not a discovery tool. Most of the cases, …
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Managing Drawdowns: How I Protect Capital Without Losing Upside
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In 2008, one of my portfolio positions fell 67% in four months. I had bought a small industrial company with a clean balance sheet, a long operating history, and what I thought was a conservative valuation. Then the financial crisis hit, credit markets froze, and customers stopped ordering. The stock went from $18 to $6 in the time it takes …
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