Market Call: Joe Hegener's outlook on North American Equities (June 2, 2026)

Key Concepts

• AI Infrastructure Build-out: The massive capital expenditure (CAPEX) cycle driven by data center construction, semiconductor demand, and AI model development.
• Usage-Based vs. Subscription Revenue Models: The distinction between software companies charging per seat (vulnerable to AI disruption) versus those charging based on usage/infrastructure (beneficiaries of AI proliferation).
• Private Credit: An asset class currently facing scrutiny due to liquidity concerns and "gates" (restrictions on withdrawals), though the underlying management companies are viewed as potentially undervalued.
• Inorganic Growth: A business strategy relying on acquisitions to sustain revenue, which the guest views with skepticism due to capital costs and integration risks.
• Dollar-Cost Averaging (DCA): A strategy of investing fixed amounts over time to mitigate the volatility of high-profile IPOs.

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1. Market Outlook: AI Spending and Hardware

• Alphabet (GOOGL): The guest highlights the "unprecedented" nature of Alphabet’s $80 billion equity offering to fund AI CAPEX, noting that investors are surprised by the scale of free cash flow burn despite the company's massive cash reserves.
• Hardware Bottlenecks: There is a supply-demand dislocation in chips and hardware. While companies like SanDisk have seen net income margins jump from 5% to 70% due to pricing power, the guest argues that hardware will eventually commoditize as competition increases.
• The "Data Center" Paradox: The guest argues that the current projection of 1,500 new data centers by 2028 is incompatible with the current multi-year backlogs for critical components like GE turbines, memory, and GPUs.

2. Software Strategy

• Investment Thesis: The guest focuses on software companies that provide infrastructure for AI agents. Names like Datadog and Snowflake are favored because they utilize usage-based revenue models, which benefit from the proliferation of AI.
• Market Timing: The guest began aggressively buying software stocks in Q1 2025, capitalizing on "indiscriminate selling" that saw high-quality, profitable companies drop 50–70% from their all-time highs.

3. IPO Analysis: SpaceX and Anthropic

• SpaceX: The guest advises against buying the IPO on day one due to "nosebleed" valuations and potential insider selling pressure after the 180-day lockup period. He suggests dollar-cost averaging over a year.
• Anthropic: The guest expresses a more bullish outlook on Anthropic, citing the rapid improvement in their model iterations and their utility in productivity, though he remains cautious about the high valuation.
• Capital Source: A key debate is whether new IPOs will drain capital from existing tech holdings or be funded by cash/fixed income. The guest believes it will likely come from cash/T-bills rather than selling high-performing stocks like NVIDIA.

4. Sector-Specific Insights

• Financials: The guest prefers life insurance companies (e.g., Manulife, Sun Life) over traditional banks, which are heavily exposed to the Canadian housing market. He views Wells Fargo as a "value trap" due to historical management issues, preferring JPMorgan or Morgan Stanley.
• Consumer Staples: Regarding General Mills, the guest is bearish, noting that younger generations are shifting away from processed foods. He criticizes the model of using debt to acquire smaller, healthier brands to mask declining core revenue.
• Payments: The guest views the fear of disruption to Mastercard and Visa from stablecoins as "massively overblown" and considers dips in these stocks as buying opportunities.

5. Top Picks

• Rhythm Capital (RITM): A REIT transitioning into a diversified asset management business.
  • Rationale: Trading at 4x earnings with an 11% dividend yield and a 30% discount to book value.
  • Target: Expects the stock to double in 12–24 months as the market re-rates it from a REIT to an asset manager.
• WW International (Weight Watchers): A turnaround play pivoting toward GLP-1 drug delivery services.
  • Rationale: Significant insider buying and a shift to a business model similar to Hims & Hers.
• Blue Owl Capital (OWL): A private credit manager.
  • Rationale: Despite negative headlines regarding private credit, the stock offers a 9% yield and provides better transparency and liquidity than investing directly in their private credit funds.

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Synthesis/Conclusion

The guest, Joe Hagner, advocates for a value-oriented, contrarian approach to the current AI-driven market. He emphasizes that while the AI "build-out" is a secular tailwind for infrastructure and usage-based software, investors must be wary of companies relying on debt-fueled acquisitions or those with poor management track records. He suggests that the most attractive opportunities currently lie in misunderstood financial and asset management firms that are being unfairly punished by broader market sentiment.