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Today's software selloff offers a live example of a dispersion-rich opportunity set. For investors able to separate AI survivors from value traps, whether using intangible value or another framework, we believe software stocks represent an unusually attractive stockpicking opportunity today.
However, we find an abnormally long left tail of "value traps" – stocks, such as Duolingo, which appear unattractive even after huge drawdowns. Many of these stocks look cheap on traditional multiples but are screened out on intangible value.
While the sector is not a blanket bargain, we do uncover a handful of software stocks, such as Salesforce, that appear attractive on intangible value.
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}AISO Market Calls classifies public statements from public sources. A classification such as long thesis, short thesis, or explicit call describes the content of the public statement and does not prove that the speaker actually entered, exited, or held a position. Market performance shown is calculated from public market data around the source publication or timestamp. It is not investment advice.
Firms quietly racking up cybersecurity patents have beaten their peers since 2010, because the patents flag the companies that actually invest in tech rather than just talk about it.
Indeed, the intangible value factor produced significantly higher returns in Disruption Scare Stocks, due to their much greater dispersion.
With the AI arms race transforming Big Tech from asset-light to asset-heavy, a model we find associated with inferior returns, our value-based playbook suggests rotating toward a broader set of AI beneficiaries with lower capital requirements and valuations.
Oracle, which has been signing huge AI cloud deals, tops the chart, having ramped up capex by 249% over the past year.
The Magnificent 7, which represent both the largest AI stocks and those most exposed to a potential AI overbuild, now comprise over 30% of the S&P 500, a level of concentration exceeding even that of the dot-com bubble.
AI early adopters have not enjoyed a similar boost, trading at a mere 13% premium today.
So far, investors' enthusiasm for AI has mostly benefitted AI infrastructure firms, who have witnessed their valuation premiums expand from 32 to 137%.
its demise stems from the diminishing relevance of book value and other accounting metrics in the face of the rising intangible economy
We believe international expansion is a particularly prudent move. Non-U.S. stocks currently trade at a roughly 50% discount relative to their U.S. peers, providing a richer hunting ground for long-only value investors like Berkshire.
Buffett s philosophy can be distilled into a simple, rules-based strategy focused on stocks with high Intangible Value and Quality . As we’ll show, this parsimonious two-factor model can largely replicate Buffett’s returns.
Unlike physical goods, intangible assets are not subject to tariffs. Purely digital or services businesses are therefore largely insulated from tariff risk.
non-U.S. global firms trade at an average discount of -46% relative to their U.S. counterparts based on traditional valuation ratios
Since Liberation Day, however, we have seen an unusual pattern, with U.S. bonds, stocks, and the dollar all underperforming together. Rather than a safe haven, the U.S. is now trading more like an emerging market facing elevated country-specific risk.
Caterpillar enjoys a highly diversified supply chain, with operations in over 25 countries, including the U.S., India, Brazil, and China. As a result, its concentration score is only 15%
While global firms are vulnerable to trade shocks, they have greatly outperformed their domestic peers in recent decades. Rather than abandon global firms, we argue that investors should maintain exposure
on April 9, Trump announced a 90-day pause on “reciprocal” tariffs for all countries except China, which was instead immediately hit with a punitive 145% tariff.
While only a short time period, we find a strong 77 to 88% correlation between increases in Trump’s election odds and subsequent Trump stock outperformance.
Since 2010, companies receiving cybersecurity patents have outperformed their peers. Importantly, this success has not only been achieved by tech firms like CrowdStrike or Nvidia; non-tech companies with cybersecurity patents have also outperformed other industrial businesses.
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