Episode summary
The Mag 7 Sell-Off: My 3 Secrets to Picking Stocks
Summary
The host argues that the recent tech sell-off has created a rare buying opportunity in several Mag 7 names, especially Meta, Alphabet, and Amazon. His core framework is unchanged after 30-plus years: buy companies with high returns on capital, durable competitive advantages, and a price that is cheap enough to offer a margin of safety.
He says Meta, Amazon, and Alphabet now fit that pattern because their valuations have compressed to historically depressed levels: Meta around 17 times earnings, Amazon around 21, and Alphabet at 14.7. In his view, the market is discounting the near-term costs of AI investment, which he thinks will make these stocks look like “dead money” for a while even though their franchises remain strong.
The host sees Amazon’s AWS and Google Cloud as strong growth engines, while Meta’s core advertising business is still “sizzling.” Alphabet is the most concerning to him because Gemini may be cannibalizing search before monetization is figured out, but he expects Google to eventually insert ads into AI products and preserve the franchise. He says he owns these names and has been buying them on weakness since the April 2025 tariff sell-off.
Key takeaways
- The host says Meta, Amazon, and Alphabet now satisfy his three-part stock-picking test: high returns on capital, durable advantages, and a good price.
- He calls Alphabet’s 14.7 times earnings, Meta’s 17, and Amazon’s 21 historically depressed valuations for companies of this quality.
- He thinks AI spending will keep these stocks under pressure near term, but says the investment cycle is not going away.
- The host is most worried about Google because Gemini may be cannibalizing search before it is monetized.
- He says Meta’s advertising business is still sizzling, and Amazon and Google Cloud remain strong despite broader market skepticism.
Notable quotes
“there are three secrets to make money in the stock markets. They are find companies that earn high returns on capital”
“Meta, 17 times earnings, 17 to 20 depending upon their earnings range. 17, historically cheap. Amazon, 21 times earnings”
“Alphabet, 14.7 times earnings. Google, 14.7 times earnings. Nvidia, 21 times earnings”
“they're not really earning any money. They are playing a game that none of them really want to play”
“Gemini, is starting to cannibalize their search business and they haven't figured out a way to monetize Gemini yet”
How the episode opens
Good morning. This is Dylan Jovanov behind the market happy Thursday. Today is Thursday, November 12th.
The tech sector has sold off. It might retest the lows. As a matter of fact, it probably will retest the lows.
You know, which, you know, 1,000 points on the Dow down, big deal, really. But, you know, there are a lot of opportunities here both in the private markets and the public markets. But I don't want to talk about the public markets.
I want to talk about some easy opportunities that I see. And really it's really among the Mag 7, you know, Meta, Alphabet, Nvidia, Amazon. They all look cheap to me.
Again, I'm not a day trader. Do day trade things. It's not my nature.
But what I have learned in my life really over the 30 some odd years that I've been doing it, there are three secrets to make money in the stock markets. They are find companies that earn high returns on capital, find companies that will look like they will continue to earn high returns on capital for a long time. Means they have a durable competitive advantage.
And then the third thing is buy them at a good price. So if you can find companies that earn high returns on capital and number one, number two, of those companies you've picked the ones that look like they're going to be able to do that, continue to earn high returns on capital for a very long period of time, and number three, you can buy them at a good price, well, then investing becomes like playing basketball with midgets, okay? And right now we have, when you look at some Mag 7 stocks, three in particular, you have that kind of situation, okay?
You look at Meta, 17 times earnings, 17 to 20 depending upon their earnings range.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- mag 7 sell-off
- stock picking
- ai capex
- valuation multiples
- durable competitive advantage
Companies and tickers mentioned
- GOOGL
- GOOG
- META
- AMZN
- NVDA
- Alphabet
- Meta
- Amazon
- Nvidia
Watch the episode
Watch “The Mag 7 Sell-Off: My 3 Secrets to Picking Stocks” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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