'I don't think the AI theme is over': Ahmed

Key Concepts

• Momentum-Based Investing: An investment strategy that focuses on assets showing strong price trends, prioritizing risk-adjusted returns over fundamental valuation alone.
• Risk-Adjusted Return: A measure of how much an investment returns in relation to the risk taken to achieve that return.
• "Picks and Shovels" Strategy: Investing in the infrastructure or equipment providers (suppliers) rather than the end-product companies during a market boom (e.g., semiconductor manufacturing equipment for AI).
• Crack Spread: The price difference between a barrel of crude oil and the petroleum products refined from it; a key profitability metric for refineries.
• Geopolitical Insulation: Assets or sectors that remain resilient or benefit from geopolitical instability (e.g., energy refiners).
• Algorithmically-Based Rebalancing: Using data-driven, systematic processes to adjust portfolio weightings, removing human emotional bias.

---

Investment Methodology and Philosophy

Sharaz Ahmed, CEO of Storio, employs a momentum-based, systematic investment framework. The core methodology involves:

• Dynamic Rebalancing: The portfolio is treated as a living entity that "breathes" with the market. As market sentiment shifts toward geopolitical risk or volatility, the portfolio automatically rebalances to align with current price momentum.
• Agnostic Approach: The firm views sectors as "widgets" or tools. They do not hold long-term emotional attachments to specific stocks; they enter and exit positions based on whether the asset demonstrates positive price momentum and strong risk-adjusted returns.
• Decoupling Rhetoric from Reality: Ahmed notes a disconnect between negative news headlines (e.g., Middle East conflict) and market resilience. He argues that markets are effectively pricing in volatility, leading to new index highs.

---

Portfolio Positioning and Sector Analysis

1. Energy (Refining)

• Key Holding: Marathon Petroleum.
• Rationale: As a refiner, the company is insulated from the volatility of crude oil drilling. They benefit from increased "crack spreads" during periods of geopolitical tension.
• Catalysts: The company recently announced a $5 billion share buyback, signaling strong capital allocation and confidence.

2. Healthcare (Defensive)

• Key Holding: Roche Holdings.
• Rationale: Viewed as a defensive play, Roche provides stability through a combination of diagnostics and pharmaceuticals.
• Strategy: While the firm does not invest solely for dividends, Roche’s sustainable dividend and consistent performance make it a reliable anchor during volatile periods. It also provides geographical exposure to Europe.

3. Semiconductors (AI Infrastructure)

• Key Holding: Tokyo Electron.
• Rationale: Rather than betting on specific AI software winners, the firm uses a "picks and shovels" approach by investing in the manufacturers of semiconductor equipment.
• Strategy: This provides exposure to the ongoing AI theme—which Ahmed believes is still in its early stages—while diversifying geographically into Japan.

4. Software (The "Penalty Box")

• Current Stance: The firm has significantly reduced or eliminated exposure to the software sector.
• Rationale: Based on their algorithmic momentum indicators, software is currently underperforming and is considered to be in a "penalty box." They remain open to re-entering if the momentum trend reverses.

---

Key Arguments and Perspectives

• Time in the Market vs. Timing the Market: Ahmed emphasizes that investors often struggle with the "double dutch" effect of trying to time entry points during volatility. He advocates for staying invested, noting that the market can remain irrational longer than an investor can remain solvent.
• AI Sustainability: Despite the shift in media headlines toward geopolitical crises, Ahmed maintains that AI remains a critical background theme. He notes that corporate capital expenditure (capex) remains high, and companies are actively integrating AI strategies.
• Geographical Diversification: By selecting companies like Tokyo Electron (Japan) and Roche (Europe), the firm mitigates domestic market risk.

---

Synthesis and Conclusion

The primary takeaway from the discussion is the importance of removing human emotion from investment decisions. By utilizing an algorithmically-driven, momentum-based framework, Storio navigates volatile markets by focusing on objective data points—specifically risk-adjusted returns. Ahmed’s strategy highlights that in uncertain times, investors should prioritize resilient infrastructure (refiners and semiconductor equipment) and defensive, diversified assets (healthcare) while remaining disciplined enough to exit sectors that lose momentum, regardless of their long-term narrative.