It’s Time To Sell America

Key Concepts

• Sell America Trade: A market trend driven by geopolitical concerns (specifically President Trump’s policies regarding Greenland) leading to investors selling off US assets.
• Alpha Generation: Achieving investment returns exceeding market benchmarks.
• Concentrated Portfolio: An investment strategy focusing on a small number of carefully selected assets.
• Personal Super Intelligence: Meta’s ambition to create highly personalized AI assistants.
• Operating Leverage: A measure of how much a company’s operating income changes in response to a change in revenue.
• Booking Growth (Duolingo): The amount of subscription revenue booked in advance, indicating future revenue expectations.

Market Sell-Off & The “Sell America” Trade

The episode begins with a discussion of a significant market downturn, particularly affecting large US tech companies. This is characterized as a “Sell America” trade, fueled by President Trump’s controversial rhetoric regarding Greenland and the potential for escalating trade wars. Analysts, like those at Evercore ISI, are predicting increased risk premiums on US investments and a possible flight of capital. The Dow Jones, S&P 500, and especially the NASDAQ are experiencing declines (NASDAQ down over 1.5% on the day, Nvidia down over 2%, Amazon significantly down). Simultaneously, US Treasury prices are falling while gold prices are rising, indicating a shift towards safer assets. Ray Dalio reinforces this sentiment, suggesting US allies are looking to diversify away from US assets and towards “hard currency” like gold, framing the situation as a “capital war.” Dalio’s concerns echo a similar analysis he presented in 2019, highlighting a long-term shift in the global order.

Portfolio Impact & Investment Strategy

The host details the impact of the market sell-off on his own portfolio, noting a 1.1% decrease overall. Global monopolistic companies (Mastercard, S&P Global, Moody’s, Equifax) are experiencing the largest declines, reflecting investor concerns about reduced deal flow. However, atypical holdings like Costco and Texas Roadhouse are performing positively. The Story Fund, a secondary portfolio, is also down 1%. Despite the downturn, the host maintains his core investment philosophy: to “buy America” when others are selling. He firmly believes America remains the best place to generate alpha, citing its abundance of innovative companies. He references the April 2025 tariff sell-off as a similar situation where fear created a buying opportunity. He emphasizes the importance of focusing on company fundamentals rather than short-term geopolitical noise.

Company Specific Updates & Analysis

Duolingo (DUOL): Despite a nearly 60% decline in price, the host added another $5,000 to his Duolingo position, bringing his total investment to $20,000 (with a $15,000 loss). The sell-off is attributed to Duolingo reporting 22% booking growth, falling short of Wall Street’s 27% expectation. However, the host argues the market is overreacting, pointing to strong underlying fundamentals: 40% revenue growth, 46% subscription revenue growth, 35% growth in daily active users, and significant increases in EBITDA and free cash flow per share. He believes Duolingo remains fundamentally sound and is being unfairly punished.

Netflix (NFLX): Netflix reported earnings after market close, which were generally positive (17% revenue growth, subscriber growth, flat content budget leading to margin expansion). However, the earnings are overshadowed by the proposed acquisition of Warner Bros. Discovery. Netflix is now pursuing an all-cash transaction valued at $27.75 per share, aiming for a shareholder vote by April 2026. The host believes the acquisition is the primary focus and the earnings report is less significant in the current context.

Chris Hohn (TCI Fund Management): Chris Hohn’s TCI Fund Management achieved an astounding $18.9 billion in gains in 2025, making it the most profitable hedge fund. This success is attributed to long-term bets on aerospace companies (GE Aerospace, Safran, Airbus) benefiting from increased military spending. Hohn’s strategy involves avoiding the AI hype, maintaining a highly concentrated portfolio, and holding investments for extended periods. He outperformed all major indices.

AI & Tech Trends

Andy Jasse (Meta) discussed the impact of AI on jobs, acknowledging that many existing roles will be impacted by automation but also predicting the creation of new jobs in areas like AI, robotics, and healthcare. Joel Kaplan (Meta) outlined Meta’s ambition to build “personal super intelligence” leveraging its massive user base and investing heavily in data center infrastructure. The host notes that even if Meta fails to achieve this goal, the computational power will still be valuable for improving existing products and services.

Fail of the Week: Mr. Beast Games Betrayal

The “Fail of the Week” segment focuses on a clip from Mr. Beast Games where a contestant, Joseph Taurus, accepted $1 million to eliminate his teammates. The host criticizes the outrage expressed by the eliminated contestants, arguing that taking the money was a rational decision in a competitive game show environment. He believes the moral dilemma presented was weak and that future challenges should be more complex.

Conclusion

The episode concludes with a reaffirmation of the host’s bullish stance on the US market, despite short-term geopolitical concerns. He advocates for a long-term investment horizon, focusing on fundamental company performance, and capitalizing on market downturns as buying opportunities. The key takeaway is to resist panic selling and maintain a disciplined investment strategy based on sound principles. He emphasizes that while short-term news can be unsettling, it rarely dictates the long-term success of fundamentally strong companies.