Episode summary
Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble?
Excess Returns
· · 1 hr 6 min · Guests: Chris Mayer, Robert Hagstrom, Matt Zeigler, Bogumil Baranowski
Summary
The conversation centers on how long-term investors should think about a sharp Nasdaq selloff, especially in AI and software names, without confusing price action with business value. The guests argue that markets have become more fragile because different players now trade in the same direction at once, which can amplify volatility. One guest says the recent move looks like a rotation into defensive stocks and away from tech, but that the underlying businesses in much of AI infrastructure do not look obviously expensive when judged against growth, returns on capital, and free cash flow.
Both guests push back on the idea that a stock’s short-term decline automatically means the thesis is broken. They emphasize studying the business first, then using price weakness to test whether the original view still holds. They also connect this to Ben Graham’s voting machine and weighing machine idea, saying stock prices should ultimately follow free cash flow per share and returns, even if the path is chaotic.
The discussion closes on what CEOs should say during uncertainty: explain the benefits of AI clearly, and show how communities, customers, and shareholders benefit. The guests think the biggest winners may not only be the obvious AI infrastructure names, but also other businesses that apply the technology well.
Key takeaways
- One guest argues the market is less diversified than it looks, so when everyone crowds into the same trade, volatility rises sharply.
- Robert says Nvidia and much of AI infrastructure do not look like bubbles if you focus on growth, returns on capital, and earnings power.
- Chris says a sharp selloff should trigger a business review, not an emotional reaction, because price alone does not prove the thesis wrong.
- Both guests still believe the long run is a weighing machine: stock prices should follow free cash flow per share and returns.
- Chris says the best way to handle drawdowns is to bank research before the drop, so you can tell whether the decline is temporary or fundamental.
Notable quotes
“the market loses its diversity and when it loses its diversity and goes to one side, the volatility goes up”
“I think it's I feel highly confident in saying that AI technology in some form is going to be here in 10 years from now”
“the north star is the stock prices actually follow that free cash flow per share and and returns”
“I have no idea whether to buy this stock or not but I'm going to take a look at it”
“I think indexing would be the antithesis of the evolutionary state of markets”
How the episode opens
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use where better questions lead to better decisions. I'm Matt Ziggler. Bodil Baronowski talking billions is in the co-host seat with me. This is 100year thinkers. We're getting the band back together on this one. We've got Robert Hackro of the Warren Buffett way, CIO and Equity Compass. Say hello, Robert.
Hey, good afternoon everyone. And of course, we've also got Chris Mayer, resident 100 Bagger explainer, co-founder Woodlock House Family Capital. How you doing, Chris? Hello, everybody. Good Reagan. All right. Well, you know, nothing's going on in the world of markets. I feel like you just call this a wrap. Go back to sleep.
Just another boring day. Just another boring day on just another boring week. So, hundred-year thinkers. So, this is from long-term thinking perspective, but midterms market chaos. I mean, we're here on the 5th of November. with the NASDAQ's getting wrecked today. You're long-term thinkers. I mean, Robert, you stressed about anything? You care at all? Are you making any adjustments on this? How are you interpreting a wild week like we're living through right now?
Well, I I I think we've we've kind of come around to the recognition that the structure of markets, and we've talked about this before, guys. I mean, the structure of markets are very, very different today. The players are different, the species are different, the assets under management are different.
you know, hedge funds are what five trillion today of of that. If you kind of peaked inside the uh you know, the the pod shops are, I don't know, 350 billion, but they're trading like banshees every single day. Notional value of stock options are greater today than than what we're actually trading on a day-to-day basis.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- value vs growth
- free cash flow per share
- market selloffs
- valuation multiples
- ai data center community impact
Companies and tickers mentioned
- NVDA
- WMT
- Nvidia
- Walmart
- EquityCompass
- Woodlock House Family Capital
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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