Episode summary
Small Value is Back. Is Mag 7 Finally Rolling Over?
The Acquirers Podcast
· · 43 min · Hosts: Tobias Carlisle, Jake Taylor
Summary
Small value had a sharp rebound in October after a weak late-summer stretch, and the host and a guest argued that the market is still highly bifurcated. The guest said the biggest winners remain the hyperscalers and their AI capex suppliers, while much of the rest of the market looks cheap after a long grind lower. They also tied recent consumer weakness to inflation pressure, high gas prices, and squeezed household budgets, saying those conditions have hurt consumer discretionary stocks and other retail names.
A major theme was whether the AI buildout will ultimately justify the enormous spending now underway. The guest was skeptical that today’s winners will be the long-term winners, comparing the current wave to the fiber-optic boom, where the infrastructure endured but many builders did not. He argued that if revenues do not scale to match trillions in capex, the bull case for many AI-linked companies could weaken.
The conversation also leaned into value-oriented special situations and options income. The guest discussed selling puts and covered calls on names like Decker’s and Lululemon, and pointed to insurance, retail, and permanent-capital vehicles like Howard Hughes and Assured Guaranty as places where management and capital allocation can matter as much as headline valuation.
Key takeaways
- The guest thinks small value and mid-cap value have started to recover after a weak August-September stretch.
- The guest believes the AI trade is still concentrated in hyperscalers and chip suppliers, but the long-term winners may not be today’s biggest spenders.
- The guest said consumer-facing stocks are under pressure from inflation, gas prices, and weaker household spending.
- The guest views insurance and retail as fertile but risky value areas, where management quality and capital allocation drive outcomes.
- The guest favors options strategies like cash-secured puts and covered calls on beaten-down quality names to capture volatility premium.
Notable quotes
“the big end of town has done really well. Mag 7's done really well out of um”
“I think that AI is an incredible tool that is going to be absolutely transformative for the entire economy”
How the episode opens
Welcome to the Value Options Letter podcast. I'm Tobias Carlisle, joined as always by my co-host Tim Travis. How are you, Tim? — Good, Toby. How are you, my friend?
I can't complain. Uh October was pretty good uh after a pretty miserable September, August. I feel like there there was a little turnaround sometime uh like it's been a pretty good year for small value, mid-cap value on the whole, but there was a little bit of a wobble um September, August, but October small value came back pretty strongly and uh the market had a little bit of a stumble.
So, but though I like to see the market have a stumble, but I enjoy uh small value working and outperforming. How about you?
Yeah. Yeah, what what other sectors are you seeing value in small value? Like what are some of the industries that you've kind of been focused on there?
Yeah, I think consumer discretionary has been one that really stands out to me. And I I think that the reason is that the consumer's been very squeezed. So, I think that you know, I I saw uh energy inflation is like 20% year over year, which is a big number.
And then that feeds into everything else, but like the headline number in the CPI I don't know how accurate that is. You know, if anything it underestimates a little bit, right? But like 5.7% uh it is not out of the question.
I follow a guy on Twitter and he he has this uh his metric is he goes and buys a slice of pizza a slice of handmade pizza, and he just records the price every year. And so, in 2020 it was $2.50. And the last one he bought was $3.49, which is pretty substantial inflation over 6 years.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- value investing
- options income
- cash-secured puts
- covered calls
- ai semiconductor cycle
Companies and tickers mentioned
- MU
- Micron Technology
- Value Options Letter
Watch the episode
Watch “Small Value is Back. Is Mag 7 Finally Rolling Over?” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Acquirers Podcast, this episode and its artwork belong to Tobias Carlisle. Octagon is not affiliated with the show; this page is an independent summary.
