Buying Amid Market Weakness

Key Concepts

Tesla (energy business, AI play), Nvidia (AI core, "poor man's Nvidia" - Broadcom), Amazon (defensive technology, retail/cloud dual mandate), Spotify (AI adoption, cost-cutting), Netflix (recession-resistant), Policy Rollout (botched communication, tariff impact), Client Sentiment (measured, flows in).

Tesla

• Main Topic: Rationale for holding Tesla despite China exposure concerns.
• Key Points:
  • Tesla was added to the portfolio after the market peaked, when its price was lower than current levels.
  • The primary reasons for owning Tesla are its energy business and its potential as an AI play.
  • The EV aspect is considered analogous to the iPhone's role in Apple's early days (2013-2014), where the hardware was a means to the services business.

Nvidia

• Main Topic: Justification for investing in Nvidia despite China exposure.
• Key Points:
  • Jensen Huang's meeting with the president to seek tariff carve-outs is a positive sign.
  • The Deep Sea event (likely referring to advancements in AI) is expected to increase the use cases and availability of AI.
  • Nvidia's Q4 earnings reflected broad AI adoption across sectors, with CEOs indicating widespread usage.
  • Spotify's hiring policy (only hiring if AI can't do the job) exemplifies the growing importance of AI.
  • Nvidia is considered the core of the AI movement.
  • The portfolio's investment focus shifted to software about five to six months ago.
  • Broadcom is referred to as the "poor man's Nvidia," indicating a similar but less direct exposure to the AI trend.
  • Nvidia is added to on weakness, recognizing its historical volatility.
• Example: Spotify's hiring policy as an example of AI adoption.

Amazon

• Main Topic: Amazon as a defensive technology stock.
• Key Points:
  • Amazon is considered a defensive technology name and a good addition to a portfolio.
  • It was included in the "Five for '25" list and the "12 Best Ideas" portfolio.
  • Amazon has a dual mandate as both a technology and a retail stock (similar to Walmart).
  • Amazon is a poster child for old economy companies pivoting to new technologies.
  • Andy Jassy's announcement of cost-cutting measures, similar to Jamie Dimon's, indicates a well-managed company.
  • Amazon's ad revenue is projected to decline less than Meta's, making it a preferred investment.
• Quote: "Amazon is the better player from here and that's where we've been putting our money to work."

Spotify and Netflix

• Main Topic: Resilience in a low-growth environment.
• Key Points:
  • Spotify and Netflix are expected to perform well in a low-growth or potentially recessionary environment.
  • Meta was sold and the proceeds were invested in Spotify.
  • The relative performance of Spotify has been better than Meta since the switch.

Policy Rollout

• Main Topic: Criticism of recent policy communication.
• Key Points:
  • The recent policy rollout was described as "horrific" and the worst in over 40 years of experience.
  • The communication is seen as damaging to the administration.
  • The explanation that the outcome was intended all along was not well-received.
  • The speaker disagrees with Bill Ackman's positive assessment of the policy execution.
  • The speaker believes that figures like Scott Bessant and Kevin Hassett could improve the administration's messaging, despite their own imperfections.
  • A 10% tariff is presented as a less distorting alternative to current policies.
  • New factory construction is being put on hold due to policy distortions.

Client Sentiment

• Main Topic: Client reactions to market volatility and policy uncertainty.
• Key Points:
  • Webinars have been conducted with clients since the market peak to address concerns.
  • Clients are generally measured in their reactions.
  • Some clients inquired about adding more money to their investments, but were advised to wait.
  • Overall, there have been net inflows into the funds.

Deep Seek vs. MAGA

• Main Topic: Disagreement with attributing market issues solely to MAGA.
• Key Points:
  • The speaker disagrees with the assertion that the market's "franticness" started with MAGA policies.
  • The speaker attributes the initial market correction to the "Deep Seek" (Mark VII) problem.
  • The speaker believes that attributing everything to MAGA undermines credibility.

Conclusion

The speaker is strategically navigating market volatility by focusing on companies with strong fundamentals and growth potential in key areas like AI and defensive technology. While acknowledging concerns about China exposure and policy uncertainty, the speaker remains committed to a long-term investment approach, emphasizing the importance of picking spots, trimming gains, and adding to positions on weakness. The speaker also criticizes the recent policy communication, highlighting its negative impact on market sentiment and investment decisions.