The Compound: Stock Picks & Accuracy

Jessica Ray indicates that semiconductor stocks, after triple-digit advances and high valuations (averaging 52.5x forward earnings), face a much higher bar for continued outperformance. Earnings revisions have been the primary driver, but the current valuations suggest a potential for a pullback or underperformance relative to other tech names.

“But after tripledigit advances this year for all of the S&P's top five semi-names, the bar for them to keep outperforming is just far higher than it was 6 months ago.” — ▶ 18:38

The speaker strongly advises against Charter Communications due to its high debt, secular decline in its core business (cord-cutting), and lack of clear operational turnaround strategy. They see no bottom for the stock and believe it's not a viable investment at any price.

“No. Too much debt. Too much secular decline. Just no. No. At no price. No price. It reminds me of I'm This is the worst stock in the world.” — ▶ Watch clip

The speaker believes Microsoft is unjustly down 23-24% year-to-date, highlighting its 34% return on equity, $78 billion cash on balance sheet, and consistent 25% earnings growth. They argue it's a strong company that should rebound.

“Microsoft's the one that I'm kind of focused on. You think 34% return on equity, 78 billion on the balance sheet, 25% earnings growth, quarter after quarter, consistent. So that one to me doesn't make sense in terms of being down 23 or 24% year-to date.” — ▶ Watch clip

The speaker bought Microsoft, along with Netflix, with the intention of holding for five years. He believes that the current market rerating of hyperscalers, including Microsoft, presents a generational buying opportunity, despite recent underperformance compared to the S&P 500.

“I bought Microsoft and and Netflix and I said I'm going to close my eyes and and look at it again in five years.” — ▶ 30:00

The speaker holds Netflix, believing it always comes back stronger after periodic sell-offs, citing its strong cash flow, content, and potential for consolidation in the sector. They acknowledge the current challenges but remain confident in its long-term prospects.

“I hold it. I'm holding it too. I hold it. Cowards. You buy after it goes up and you sell after it goes down. Do I have to teach you guys everything?” — ▶ Watch clip

The speaker bought Netflix, along with Microsoft, with the intention of holding for five years. He believes that the current market rerating of hyperscalers, including Netflix, presents a generational buying opportunity, despite recent underperformance compared to the S&P 500.

“I bought Microsoft and and Netflix and I said I'm going to close my eyes and and look at it again in five years.” — ▶ 30:00

The speaker is not a believer in Meta's strategy, particularly its ventures into cloud services and the metaverse, viewing them as unfocused and a poor use of cash flow. They highlight the company's past missteps and question the rationale behind its new initiatives.

“I'm not a believer I'm not a believer it is that does that even make sense if you're a meta shareholder is that what you would want to see them investing in how is there excess compute I don't understand I thought all we hear about is shortage” — ▶ Watch clip

The speaker is sticking with Oracle, believing it's unjustly punished due to AI fears. They note Oracle was an early adopter in AI investment and its stock took off with the OpenAI relationship, suggesting the current downturn is an overreaction.

“I'm still sticking with Oracle. I'm sticking with Microsoft. I'm sticking with pound. Do you think Oracle is trading? Because I think in the in this in the late winter, early spring when everything else was going down, it made a lot of sense.” — ▶ Watch clip

The speaker identifies Google as a 'pick to click' and a favorite, noting its strong performance relative to Meta. They imply Google's core business and strategic direction are more sound.

“So, I think the pick to click is Google. I still think Google. And if you look historically except for the you know since really historically um Google and Meta from a price performance basis they're very correlated right but I think they're going to something that we talked about when we were here last we're going to have more stock picking more differentiation yeah and look at communication services in particular terrible performing sector year today you know AT&T but” — ▶ Watch clip

The speaker owns American Airlines in their small/mid-cap portfolio, suggesting it's a favorable pick within that segment. They imply a belief in its potential for growth or value.

“Delta, United and you got American and American's a great we we own American in our small midcap because I think” — ▶ Watch clip

The speaker likes exchanges like CME, believing they are cheap after a sell-off. They suggest the sell-off was an overreaction to news about perpetual listings, implying the threat is not as significant as perceived.

“I like the exchanges. I think they're cheap. I think they sold off. I'm not even kidding. On the Koshi perpetual listing Yeah. news and fine, it may be they're a threat, but are they that big of a threat to suddenly start crashing?” — ▶ Watch clip

The speaker finds Schwab interesting, suggesting it's a favorable financial stock.

“Um Schwab Schwab looks interesting. I like the exchanges. I think they're cheap.” — ▶ Watch clip

The speaker suggests that MicroStrategy's struggles with its Bitcoin strategy, including an 82% drawdown and issues with preferred securities, could be a positive development for Bitcoin itself. This implies that the removal of such leveraged, high-profile institutional players might be beneficial for the cryptocurrency's long-term health.

“I think strategy getting blown out of Bitcoin is the best thing that could happen for Bitcoin.” — ▶ 50:00

The CEO and co-founder of Robo Strategy, Andrew Kang, argues that the BOT fund offers retail investors a unique opportunity to invest in leading, predominantly private, robotics companies. He believes the robotics industry is poised for massive growth, with innovation primarily occurring in the private sector. The fund aims to identify and invest in companies with significant 'power law potential' and substantial upside, similar to early-stage AI companies like Anthropic or OpenAI, by leveraging a 'multiples arbitrage' strategy where private company valuations can increase significantly once part of the fund.

“Robo Strategy is essentially a publicly listed venture capital company. It is exclusively focused on investing in leading robotics companies and predominantly private robotics companies.” — ▶ 20:50

The speaker notes Micron's outstanding recent earnings, with revenue up 364% year-over-year and forward earnings up 1440% since January 2025. They argue that the market is currently underestimating the sustainability of this growth, driven by tight supply-demand conditions for DRAM and NAND expected to last beyond 2027, and that the company's high profit margins are justified by its critical role as a choke point in the AI supply chain.

“Micron's market cap is about to pass meta. Does that sound right? Mhm. Like literally what they're both 1.3 billion. Well, this last quarter they made more profits than Nvidia made a year ago.” — ▶ 24:00

The speaker believes that memory companies like Micron lack a competitive moat, making them vulnerable. Their current high profits are primarily due to price increases rather than technological innovation or added value, which is unsustainable. He predicts Micron will not be among the top five S&P 500 earnings contributors in the next 24 months to 5 years.

“I don't think these memory companies have a competitive mode.” — ▶ 40:00

The speaker mentions that their tactical models recently sold off a portion of their gold allocation. This decision was based on the observation of rising real yields and a more hawkish Fed stance, which are typically headwinds for gold. They note that gold has declined significantly since this shift in market perception.

“We actually just sold um some of our gold allocation in our tactical models for the first time again since we had way back a long time ago. And it's like gone straight down every day and Sonia was one pounding the table saying, 'Look at real yields here going higher. You know, there's something going on here.'” — ▶ 46:00

The upcoming SpaceX IPO is unusual due to its fixed price issuance of $135 per share, bypassing traditional price discovery. This means retail investors will largely determine the day-one valuation, which is already considered a stretch at $1.8 trillion. Additionally, lockup periods for insiders are shorter than usual, potentially leading to significant stock supply hitting the market after Q2 and Q3 earnings, which could create volatility and balance out index demand.

“This is a very odd deal and it's a fixed price issuance. It's $135 a share. It's not an typically speaking when you market an IPO, and I marketed a ton of IPOs in the '90s. You go around, you visit institutional investors, you gauge their interest, you build a book, the bankers look at the book and say, "Okay, we think the price should be X." The company says okay and off you go. Here the company has said it is $135 a share at 1.8 trillion 1.7.” — ▶ 00:18:00

Unlike the tech sector, the broader S&P 500 is not exhibiting the same extreme levels of excess, despite a strong two-standard-deviation move. Historically, when the S&P has crossed this two-sigma threshold, the market has been higher 50 trading days later, with an average forward return of 7.3%. This suggests that price momentum remains a powerful factor, and the S&P still has room to run.

“So since 2015, the S&P has first crossed that two sigma threshold five other times. And in every case, the market was higher 50 trading days later. And the average forward return was 7.3%. Even the weakest outcome still gained 2.6%. So ultimately, price momentum is a powerful factor in capital markets. Tech may be stretched and semis may be due for a pause, but history uh history says the S&P itself still has room to run from here.” — ▶ 00:10:00

The analysis indicates that US large cap semiconductor stocks have significantly outperformed software stocks, reaching a four standard deviation extreme over the last decade. While fundamentals for semis have been strong, historical patterns suggest that when leadership becomes this concentrated, a rotation is often the next move rather than continued acceleration. Therefore, tactical investors should consider reducing semi-exposure and looking more closely at software.

“Historically when leadership becomes this concentrated and relative performance reaches these kind of extremes. The next move is often rotation rather than continued acceleration. So for tactical investors that argues for reducing semi-exposure and looking more closely at software here.” — ▶ 00:08:00

The sponsor, Wisdom Tree, suggests that Japan is entering a new era due to corporate reforms and stronger shareholder policies, which have attracted investors like Warren Buffett. The OPPJ ETF is designed to invest in Japanese companies that are expected to benefit from these macroeconomic policies, industrial innovation, and shifts in trade and consumer behavior.

“Wisdom Tree believes Japan is entering a new era. Corporate reforms and stronger shareholder policies are changing the game and investors like Warren Buffett have taken notice. The Wisdom Tree Japan Opportunities Fund, ticker is OPPJ, is designed to invest in Japanese companies positioned to benefit from macroeconomic policies, industrial innovation, and shifts in trade and consumer behavior.” — ▶ 00:00:10

The speaker owns shares of Toast and appreciates its technology for streamlining the restaurant checkout process. He believes the company's solution addresses a common pain point for diners, making it a valuable investment.

“I'm I'm own shares of the stock, but like can I have a check? Yes. Here it is right here. I have the control. I just want to press a button. Literally the last fork full. I want to drop the fork and walk out of the restaurant.” — ▶ 3:00

The speaker is bullish on Nvidia, viewing it as a 'blue chip survivor' due to its CUDA software platform, which forms the bedrock of the AI ecosystem. He likens CEO Jensen Huang to 'the Walmart of compute,' constantly driving down costs and providing better value and quantity. Despite recent stock performance, he sees it transitioning to a blue-chip investor base with strong fundamentals like dividends, buybacks, and cash flow, making it a long-term hold.

“My thesis is if is that Nvidia is a blue chip survivor because of CUDA because of the software they are there's nothing more motivated than a founder who used to be in a commodity business which he was when he was just selling GPUs to you know game players right then wow now I can control an ecosystem right so he did a deal on inference he's doing a deal everywhere in the universe to be and and you know the analogy I look at is IB BM, right?” — ▶ 41:40