00:00 Jon
Nancy, always great to see you, especially on set.
00:02 Nancy
I know.
00:02 Jon
Uh, let’s start with the great AI bubble debate, because I know you push back on that. Why do you push back, Nancy?
00:09 Nancy
So Jon, I mean, listen, at some point maybe we will see a bubble. We’re just not there yet in my view. I managed money in the ’90s. Um, we we had a very different setup going in. The the leading stocks in terms of capital appreciation were actually experiencing contracting earnings. Our leading stocks in terms of valuation growth are are generating about 20% earnings growth, the growth stocks in this in this whole debate. Uh, CAPEX soared the entire decade.
00:33 Jon
Mhm.
00:35 Nancy
We’re just getting started. So there there’s a whole host of other reasons, but I think everybody’s making that comparison to the 90s. We were making it three years ago on a whole different set of criteria, but I just don’t think that this is constructive because we are in the early innings.
00:46 Jon
One theme that really interests me, I’m going to get your take on this is how the narrative narrative around these AI names though, Nancy, how quickly they can shift. What I mean is if we went back earlier this year and I talked about Google, Google was out of favor. Like here comes Open AI and Sam Altman and he’s going to crush Google search. Now that stock is a rocket ship.
01:08 Nancy
Yeah.
01:08 Jon
And I could have told you the same thing about Apple, right? I, you know, Tim Cook, what does he know? He’s got no AI strategy. He missed out on the AI CAPEX. That stock’s up 40% now in six months. And it works the other way. Like we could talk about Oracle, right?
01:21 Nancy
Oracle.
01:21 Jon
Larry Ellison, Safra Catz, they’re geniuses, it’s an AI must own. But then all of a sudden, I have people talking about customer concentration risk and they’ve got debt worries, and the stock gets whacked. How do you invest through all that?
01:34 Nancy
Yeah, it’s hard. It’s it’s exhausting. Um, we added Go what what you do is you anticipate, you try to, you do your research. We added Google 19 months ago. So we’re pretty happy in our value strategy. We’ve owned it in growth for four or five years. We’re pretty happy with the holding. Um, I couldn’t have told you that that they were going to become the next AI darling, but what I did know is was they weren’t going to go out of the search business and they would figure out a way to to monetize AI and they’re doing that. With Oracle, I think some of this or most of it is overblown. It’s a company that’s always used debt, had a debt to equity ratio of 781% last year, growing at half the rate. It’s at 500% debt to equity, growing at double the rate with an RPO or, you know, backlog of 312 or 18 billion. Take out the open AI part, they still have robust growth coming.
02:18 Nancy
And I think that became the poster child for debt is bad, pair trade on the CDS. So we were in buying last week. Um, Apple, we added, we owned a little bit of it, we added pretty liberally in August, not because we thought they were good at AI, but we thought the the handset trade or the smartphone trade was going to
02:35 Jon
Was the iPhone 17? Wow. End of the day. You got it.
02:38 Nancy
Um iPhone 17 was going to be a pretty good launch. And you know, I can’t tell you. I I don’t think they are even in the game in AI. I don’t know that they’ll ever get in the game. They may have to partner with Google Gemini, but um it is about not following the headlines
