Researching compounders and stocks with asymmetric upside. Content = informational. Not financial advice. Always do your own research. Invest at your own risk.
Bahrain
Joined September 2023
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“The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.” - Warren Buffett
Durable Moat retweeted
AI predictions for next 6-9 months
-> Anthropic/ OAI fail to ban OSS in the US
-> Anthropic/ OAI continue to innovate product but stall on fundamental tech breakthroughs
-> SOTA Gemini 4 launches at 10x lower cost
-> Elon open sources Grok
-> Anthropic/ OAI ARR growth stalls as enterprises move from tokenmaxxing to rational token consumption/ OSS
-> slow realization in public markets that AI may not replace human labor in next 1-3 years/ has not had a fundamental tech breakthrough in over a year/ lacks ROI/ AI hyper and lab spend not durable
-> moonboy VCs/ hedge funds/ softbank continue to fund Anthropic/ OAI equity raises in private markets as public markets for them are now fully closed
-> CXMT, YMTC announce capacity expansions significantly above market expectations
-> hypers deliver good q326 results on first look but fail to show meaningful AI ROI, guide to "significant capex expansion in fy27"
-> broad realization in public markets the AI dream we got sold on is not anywhere close to realization
-> 10yr hits >5%
-> hyper bonds reprice >10%, CDS hit 3x current levels, and AI credit market dries up as market realizes GPU ABF was not a good idea
-> hyper equities reprice 30-50% lower
-> ORCL falls below $30 as rumors of bailout make the round
-> market realizes memory is cyclical and LTAs won't hold
-> 50% of korean traders get wiped within a week
-> hypers cut fy27 capex
-> semis reprice >80% lower
-> fed cuts >150bps to avoid recession
Durable Moat retweeted
What happens to equities if yields continue to rise? The simple answer is that per the DCF model the present value of future cashflows will decline, all else being equal. Fortunately, all else is not equal and earnings are booming. That means that the stock market can withstand a P/E derating without causing a bear market. Remember that in 2022 the P/E ratio fell 33% while earnings only grew 8% (and were decelerating from the post-COVID recovery). The result was a 28% bear market entirely driven by contracting multiples. I fear that a milder repeat could lie ahead if this bond bear market continues. Again, as long as earnings keep growing at double digits, the damage to price could be modest. For instance, per the Fed model below (which compares equity valuation to bond valuation), if the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x. It is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Maybe a 2022 echo or aftershock. 🧵(1/2)
Durable Moat retweeted
It's crazy how cheap $AMZN is right now.
At $251 it trades at 26x forward earnings and 11x forward EV/EBITDA. That EV/EBITDA is the lowest it's been in a decade outside the 2022 bottom.
In 2020 and 2021 it was 24x. Forward EV/revenue is 3.1x, same as it was in 2019 when AWS was a quarter of the size.
Last quarter: revenue $200.6B, up 20%. Operating income $27.5B, up 43%. AWS $42.2B, up 37%, the fastest growth in 18 quarters and the fifth straight quarter of acceleration, at a 39% operating margin. Ads up 26%.
AWS ended the quarter with $496B in signed customer commitments, growing triple digits. Jassy said most 2027 capacity is already spoken for and demand for 2028 is "striking."
Then he said AWS will "very possibly be a trillion dollar annual revenue business for us in time." From the guy who never makes bold predictions. The run rate is $169B. No company on earth has ever done $1T in a year, and he's saying one division gets there.
Every other hyperscaler gets paid an AI multiple. Amazon still gets priced like a retailer with a cloud business attached. It's sitting on the 200 day at 11x EBITDA.
At some point that gap closes.
Durable Moat retweeted
Bro, $AMZN semi ETF portfolio is probably going to end up more compelling than what $NVDA owns...
Today Amazon signed a $49.8M private placement into PCB maker Gold Circuit Electronics (2368). So now Amazon has ownership/warrants in:
- $AAOI
- Alchip
- $MRVL (Celestial)
- $ALAB
- $CRDO
- $JBL
- $FLEX
- $STM
- $CBRS
- $GNRC
- $FN
- TD SYNNEX
- $QCOM
- Gold Circuit Electronics
And others..
If we look at the private placement amount for GCE in speciifc, it's like .36% of the company... Kinda small financially, meaningful strategically. Esp. since there were claims that GCE supplies ASIC-server PCBs to the four major hyperscaler CSPs...
Regardless it's pretty funny to see Amazon to Nvidia start to own all the worlds leading companies.
Since Amazon has exposure to the entire supply chain like PCBs now, optical fabric with Celestial, lasers with $AAOI, assembly from $FN to $JBL, ASIC partners like $QCOM / ALchip.
$MCD
Right now the market is pricing it as McBond: a stable coupon that has to compete with an actual coupon.
Growth stocks like $NBIS and $BE are being priced as AI capex call options. Those can keep working while yields rise until the funding cost of the buildout, or the growth revisions, break.
If yields stay at 5%+ and the incremental project IRR compresses, they can still get the classic growth-stock smash. They just have not gotten it yet, because the narrative is still pulling cash flows forward faster than the bond market is pushing them back.
The market believes the numerator for these growth stocks is exploding fast enough to offset a higher discount rate. Think AI infra, chips, power-for-data-centers: sales are being revised up hard, and a lot of that cash is expected in the next few years, not 2035.
$WM
Pricing is still working (core price ~+5.7%). Margins expanded. FCF and the dividend/buyback machine are intact. They are choosing price and mix over volume on purpose. That is classic WM. The stock just stopped getting paid a premium for it.
July earnings said “profits okay, tons weaker, sales guide down.” A richly priced compounder does not get to do that without giving back 10–15%. That is the whole move.
$SOFI
What has to go wrong for the bear to win?
Rates stay high or go higher → origination growth rolls over → credit costs rise as the book seasons → Galileo stays soft → they keep spending and not raising EPS → multiple compresses toward a mid-cap bank (1.0–1.4x book) instead of a fintech.
What kills the bear?
Sustained 30%+ revenue, NIM holds, charge-offs stay contained, fee mix keeps rising, Galileo restocks clients, and they finally raise EPS guidance. Then $16 is a midcycle washout, not a value trap.
$BN grinding to a 52-week low.
Brookfield = leveraged real assets.
Yields up, holding co. gets punished even when fundraising/DE look fine.
$NBIS ripping on AI compute price hikes + CoreWeave upgrade while 10 year treasury yield sits at ~5.1% (highest since ’07). Demand story > duration… for now.
Durable Moat retweeted
The real purpose of wealth is to have the calm to live your life your way. It's to have the freedom to slow down. To spend your days doing things that you actually care about. That’s what money is really for. Not to impress strangers. Or to collect expensive distractions. But to own your time. To have a quiet breakfast without checking emails. Long dinners without looking at the clock. Conversations without feeling rushed. A calm weekend without thinking about the spreadsheet you need to turn in on Tuesday. Time to read. To think. To explore your interests. That’s real wealth. Everything else is noise.
Durable Moat retweeted
You need to stop and read this again…
Warren Buffet’s final words of advice from his very last annual letter 🥹
"One perhaps self-serving observation. I’m happy to say I feel better about the second half of my life than the first. My advice: Don’t beat yourself up over past mistakes – learn at least a little from them and move on. It is never too late to improve. Get the right heroes and copy them. You can start with Tom Murphy; he was the best.
Remember Alfred Nobel, later of Nobel Prize fame, who – reportedly – read his own obituary that was mistakenly printed when his brother died and a newspaper got mixed up. He was horrified at what he read and realized he should change his behavior.
Don’t count on a newsroom mix-up: Decide what you would like your obituary to say and live the life to deserve it.
Greatness does not come about through accumulating great amounts of money, great amounts of publicity or great power in government. When you help someone in any of thousands of ways, you help the world. Kindness is costless but also priceless. Whether you are religious or not, it’s hard to beat The Golden Rule as a guide to behavior.
I write this as one who has been thoughtless countless times and made many mistakes but also became very lucky in learning from some wonderful friends how to behave better (still a long way from perfect, however). Keep in mind that the cleaning lady is as much a human being as the Chairman."
And then today, his last letter to shareholders as chairman…
Warren Buffett is stepping down as chairman of Berkshire Hathaway $BRK.B, effective immediately - CNBC
Durable Moat retweeted
Nobody who beat the market did it by being right more often than everyone else.
They did it by being right bigger.
Most people get the picks roughly right and still make nothing, bc the winner was 2% of the book and the loser was 8%.
Hit rate is the vanity metric. Payoff matters.
The real money is made when the market is still uncertain and you aren’t. That’s conviction.
Do the work, form the view and trust your judgment enough to put real size behind it before everyone else gets the proof they’re waiting for.
The information is everywhere. Conviction isn’t.
By the time everyone feels comfortable, the asymmetry is usually gone.
Growth stocks are holding up on a Fed hike day .. because the 25bp move was already priced in, and the market is betting the reason rates are rising matters more than the hike itself.
AI earnings are offsetting higher discount rates. Nominal GDP and capex are strong. The Fed looks in control. That’s the bull case.
The bear case: oil shock is driving a big chunk of today’s inflation. If that sticks and hits core, the Fed keeps hiking into slowing growth .. earnings fall while yields stay high. That’s the combo that crushes long-duration names.
Today’s tape is a vote for the good path.
Watch the 10-year and whether it holds below 5%.
Durable Moat retweeted
The market hasn't really gone anywhere since June. That was the high. Since then we've chopped in the same band for three and a half months, and if you've been trading it you already know the feeling. A setup looks great going into the weekend, triggers Monday, fails by Wednesday, and you're flat again.
To be clear, it hasn't been a bad year. $MU, $SNDK, $DELL, $INTC all worked. The semi move by itself was enough to make a year if you were positioned for it. But I think that's the point. The opportunity got concentrated into a pretty narrow window, and outside of it there hasn't been much to do.
2024 was different. 2025 too, to a lesser degree. In both of those years you could get your timing wrong and the trend would eventually cover for you. This year it doesn't. You get one clean entry, and if you miss it the next one looks identical on the chart and just doesn't pay.
I don't think the answer is in equities though. It's the bond market.
10yr hit 5% today, highest since 2007. Three weeks ago it was 4.66. The 30yr is over 5.20. Every tenor from 2s out to 30s is above where it peaked last year and the curve is bear steepening, so the long end is leading. That's investors asking for more term premium, not less. Add Brent over $100 and you have a fairly plain explanation for why nothing breaks out. Multiples can't expand while the discount rate is moving the other way.
Fed tomorrow. We're at 3.50–3.75 now. July was a 9-3 hold with three regional presidents dissenting for an immediate hike, first time in about a decade you've seen three members line up on the hawkish side like that.
For what it's worth, I'm not doing anything into the print. Never have. I don't take risk off Tuesday and put it back on Thursday over a calendar event. Positions come off when the thesis breaks or the chart breaks. If I want to express something around an event I'll sell calls against what I already hold and take the premium.
The market’s question is not “will they hike?.” It’s “how many more hikes and does the 10-year year believe it.” That’s decided in the statement and press conference, and it can go either way in minutes.
Durable Moat retweeted
10 legendary investors. Their biggest lesson, one sentence each.
1. Nick Sleep: Find businesses that share their scale advantages with customers, then give the flywheel decades to work.
2. Warren Buffett: Buy a wonderful company at a fair price and let time do the compounding.
3. Charlie Munger: Avoid obvious stupidity, wait for the fat pitch, and sit on your hands.
4. Chris Hohn: Concentrate in a few exceptional businesses and use ownership to make them stronger.
5. Bill Miller: Value is the cash a business will produce, not a low multiple — go where the crowd refuses to look.
6. Li Lu: Demand a margin of safety, then own businesses that can compound for a very long time.
7. Peter Lynch: Start with what you actually understand, then do the work most people skip.
8. Chuck Akre: Find a great business, great people, and a long runway to reinvest — then don’t interrupt it.
9. John Templeton: Buy at maximum pessimism, then let time prove the crowd wrong.
10. Mark Massey: Own a handful of exceptional businesses and do almost nothing else.
Notice how many of them need time: a holding period long enough for the investment to play out and for compounding to do its magic.