Friends,
Last week was one of the most painful for tech investors in quite a while. With the exception of "Liberation Day" crashes, investors couldn't sell their shares fast enough.
Consider how far many popular names have fallen from their 52-week highs:
- Figma - 85%
- The Trade Desk - 80%
- HubSpot - 75%
- Atlassian - 70%
- Axon Enterprise - 55%
- Unity Software - 55%
- ServiceNow - 50%
- AppLovin - 50%
These stocks all share one thing in common: they have all been cut down over (paradoxical) fears about AI agents eroding their moats
There is -- as they say -- blood in the streets. It really doesn't matter the quality of the companies; everything is being thrown out.
It's times like these that vast fortunes are lost...and made.
That's because when high-quality stocks are traded down indiscriminately, it presents a once-in-a-decade opportunity to buy those shares on the cheap.
The steps for identifying these companies are simple -- though not easy:
- Financials: Investigate the trends in key metrics, including standard ones (gross margins), and industry-specific ones (like remaining performance obligations).
- Scuttlebutt: Listen to conference calls, talk to friends and associates who work in an industry or use a company's products. Ask them what they're seeing.
- Moat: Determine which companies -- in the face of deflationary AI agents -- can maintain their moat and profits.
- Valuation: Figure out what a fair price to pay might be.
On yesterday's weekly livestream, Stoffel shared a specific framework investors can use to see if their SaaS stocks are vulnerable to AI. (You can watch the replay here.)
The point isn't to go watch it and then just copy what he found. Rather, it's to use it as a starting place.
Take a deep breath and go for a walk. Sit down and look over the companies you own and follow the four steps above. Go for another walk. And then decide what deals might really exist out there. It's entirely possible you'll end up deciding to keep your portfolio exactly as it is.
As Rudyard Kipling once said, "If you can keep your head when all about you are losing theirs... Yours is the Earth and everything that's in it."
That's true in investing and life.
Wishing you investing luck in the months ahead,
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Brian Feroldi, Brian Stoffel, & Brian Withers
Long-Term Mindset
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