The Verdad founder on the mindset he thinks is driving AI capex, why AI has not cost jobs yet, how he screens biotech with no tangible assets, and what listed PE funds say about the marks
Really interesting conversation. It also makes me think about relative valuation and what happens when sentiment starts wandering too far from fundamentals. Software really did change the world, but at some point “software is wonderful” became “therefore almost any price for software is reasonable.” Those are two very different statements.
AI may create the same problem in different places. The technology can be transformative while particular investments are terrible—and, strangely enough, the companies capturing the most economics don’t always receive the highest valuations. That’s where relative valuation gets interesting to me. Sometimes comparing what the market is willing to pay for different beneficiaries tells you almost as much about sentiment as it does about the businesses themselves.
Exactly right. What someone else is willing to pay for something doesn’t mean you should too or that it’s a ‘good’ price. ‘Good price’ is very subjective, after all.
You are right. There is always an overlooked diamond in the rough hidden somewhere, less obvious or less talked about, but just as important.
Makes me think of Mohnish Pabrai’s take on Risk vs Uncertainty. There is an opportunity in the names that are uncertain but not risky. Many confuse the two. People love certainty, so they will always undervalue uncertain but non-risky assets.
Really interesting conversation. It also makes me think about relative valuation and what happens when sentiment starts wandering too far from fundamentals. Software really did change the world, but at some point “software is wonderful” became “therefore almost any price for software is reasonable.” Those are two very different statements.
AI may create the same problem in different places. The technology can be transformative while particular investments are terrible—and, strangely enough, the companies capturing the most economics don’t always receive the highest valuations. That’s where relative valuation gets interesting to me. Sometimes comparing what the market is willing to pay for different beneficiaries tells you almost as much about sentiment as it does about the businesses themselves.
Exactly right. What someone else is willing to pay for something doesn’t mean you should too or that it’s a ‘good’ price. ‘Good price’ is very subjective, after all.
You are right. There is always an overlooked diamond in the rough hidden somewhere, less obvious or less talked about, but just as important.
Makes me think of Mohnish Pabrai’s take on Risk vs Uncertainty. There is an opportunity in the names that are uncertain but not risky. Many confuse the two. People love certainty, so they will always undervalue uncertain but non-risky assets.