00:00 Speaker A
Let’s dive deeper into the markets now with Wall Street wrapping up the trading week. Michael Monahan joins me in studio. He is portfolio manager at founders 100 ETF. Michael’s great to see you. Um so this is an interesting day in the markets say yields, higher, stocks, lower, you remain bullish, right? despite uh geopolitics, energy volatility, you know, you got concerns about AI driven job losses. Why, Michael, what gives you the confidence to say bullish?
00:21 Michael Monahan
So we’re bullish. We see three waves moving through the market. On one hand, we have the geopolitical instability bringing potential inflation and energy price. Secondarily, we have the CAPEX build out with the Hyper scalers, and thirdly, we have the concerns on job losses. So we see those three waves moving through and affecting the markets, but we’re bullish. We think that more jobs will be replaced than those that are destroyed.
00:41 Speaker A
What when your clients ask you having said all that, what what’s the list of worries? What’s chief on your radar? What would you tell them?
00:46 Michael Monahan
So, we really look for the long term and believe in our founders to navigate some of these issues that happen in the background. So our founder CEOs typically mitigate through inflation pressures or supply uh chain pressures. If you think about Elon, right? He typically will solve around a supply chain issue. And so, when clients come to us with concerns, we reiterate that’s why we’re invested for the long term. That’s why we’re using founders, is that’s a methodology to move through some of those concerns.
01:11 Speaker A
What, what is it about? I mean, so your ETF is interesting because it it it focuses on these founder led companies, right? What is it about founders, Michael, that makes them different than a professional operator and manager?
01:21 Michael Monahan
So, qualitatively, they’re visionaries, they’re charismatic, they can be irreverent. They’re relentless and they execute flawlessly. And finally, in times like this when the markets are changing, they have the moral authority to pivot if necessary.
01:33 Speaker A
So do do they move fast? Do they take bigger risks? I mean, I guess what do you think? Let me put it this way. Do you think vision and leadership is as important as the as the technology itself as these companies?
01:41 Michael Monahan
I think it’s the most important.
01:43 Speaker A
The most important. Interesting. Explain that.
01:45 Michael Monahan
So all of the financial metrics that fundamental investors look at fall down from how well is the product built and how well is it distributed? And that’s all driven by how good the leader’s vision is and how well they execute against that vision. So without the right vision of knowing where to go and the right work ethic to drive the team there, and the charisma to get the mission going, you’re not going to build these generational companies that founders bring.
02:04 Speaker A
Are you’re invested in some some big personalities, right? Got Larry Ellison, Sir Larry at Oracle. You say Oracle is one of the most misunderstood AI plays. How so?
02:11 Michael Monahan
So, they’re going to play the boring but highly profitable side of the infrastructure. And this is Larry’s fourth time completely reinventing Oracle. He got punished in the beginning as he took on some debt to build out these data centers. If you think about it, debt’s the right financing for a medium to long-term asset, number one, and two, we’re seeing bottlenecks in infrastructure. It’s not chip bottlenecks necessarily on the GPU side, but it’s infrastructure and Larry leaned in early on that and we’re starting to see the stock start to believe in that again.
02:37 Speaker A
And you’re confident obviously, you think uh Larry and his co-COs, they’re going to execute and win against those other hyperscalers, right? Amazon, Microsoft, Google.
02:43 Michael Monahan
We think they’ll compete. You know, Larry’s kind of the original hardcore founder. He was a hardcore founder before the rest of any of these other guys.
02:48 Speaker A
Uh another name you like uh founder led by Dr. Karp, of course, Palantier. You talk there about trusted end points. What does that mean?
02:56 Michael Monahan
It means that the enterprise that’s going to have AI hooked in to help automate and improve their processes, they need somewhere trusted to both touch and store their data. So we think names like Palentier and even names like Salesforce will be the trusted endpoint and we really see that for Palentier. Now, Alex does have to move through a change in his shareholder base. So we think that might trade
03:17 Speaker A
What do you mean by that Michael change in the shareholder base?
03:18 Michael Monahan
So, he had a very strong, as you know, retail share base and I think a lot of that marginal retail buyer is chasing these chip names, the socks, uh the microns. And so he’s going to have to print another quarter or two, which we think he will of these incredible revenue and incredible margin expansion, and it’s going to take a quarter or two to really bring in the institutional investors, but we see it as an opportunity for us and our in investors, and we think we’ll get paid in a quarter or two on this.
03:40 Speaker A
Yeah, I’ve had financial analysts come on, Michael Cover Palenteer and they’ll say on the show they like Palenteer, they like the tech, they like carp, but they’ll say I cannot recommend it at this valuation. It’s a nose bleed valuation. What do you say to that?
03:52 Michael Monahan
So, it has typically been one, it’s actually growing into its valuation. Right on a PE to growth basis, it’s not that expensive. Yes, it’s an expensive stock, but go find me another stock in the market that’s moving from a rule of 40 of 127 to 145. I mean, these are unprecedent. Remember 40 is the great number. They’re doing 127 and just moved to 145 combining revenue growth and margin expansion.
04:10 Speaker A
Finally, Michael, just curious to get your broader take because you’re invested in a lot of tech, you study tech. This debate we’re having about AI disruption fears, front and center for the software sector. Um and how you think about that? We did learn today. I thought it was interesting. Bill Ackman, you saw this now saying Pershing Square has built a new stake in Microsoft. Just curious what do you make of that debate?
04:25 Michael Monahan
We’re big believers in enterprise software, back to this trusted endpoint. Enterprise software like Salesforce is going to be the trusted endpoint into the corporates. So what we believe is the multiple compression phase is gone and people are going to realize that enterprise software is not going away or even going to be compressed. It’s going to actually expand because of AI. So we’re very bullish on enterprise software.
04:41 Speaker A
Michael, great to have you on set today. I appreciate it.
04:43 Michael Monahan
Great to be here. Thanks for having us.
