Value Investigator
Quality-Growth Investor, Fundamental Research & Portfolio Strategy
This ten-stock portfolio trades at just 3.7x cash flow, so multiple expansion is a major opportunity rather than a risk. Portfolios at 37x cash flow face multiple compression, as Akre Capital's Q1 2026 letter shows: its price to next-twelve-month free cash flow fell from 37x to 19x without any deterioration in operating fundamentals. x.comÂ
Amazon looks increasingly attractive at about 16x operating cash flow, well below its 10-year median of about 22x. x.comÂ
Palantir's free-cash-flow growth makes it relatively more attractive as higher rates make capital more selective. Its free cash flow is now growing more than 100% year over year; the earlier case favors businesses growing free cash flow per share faster than the market. x.comÂ
Big Tech is priced on extrapolation bias, the same error made at every bubble peak, as bulls project explosive past earnings forward. Per Kailash Concepts, the 10 largest tech stocks trade at 50 times free cash flow with a 1.5 beta and a 1% total yield, while the 10 largest energy stocks trade at a 4% free cash flow yield, 24 times earnings and near-zero beta, a historic valuation gap hiding in plain sight. x.comÂ
Fair Isaac still looks far too expensive at 90x free cash flow, even after a 75% fall in a monopoly. Even if FCF doubled, the price would equal 45 years of cash flow, and doubling at FICO's size is much less plausible after it raised prices 17 times and angered customers. The test is whether the company can earn the price paid within an investor's lifetime under generous growth assumptions. x.com x.com x.com x.comÂ
Howmet Aerospace is an obvious short because its valuation is insane for a cyclical industrial. Its oligopoly in turbine blades, where only three companies can produce at scale, is already well known and priced in at about 100x free cash flow. Even a bull case implies only a 2.7% free cash flow yield on 2030 numbers, far less attractive than Microsoft, Meta, Nvidia or Salesforce. x.com x.comÂ
Microsoft is expensive on cash flow even though its 19-22x forward P/E looks like a 40% discount to its 10-year average. Its 2.0% forward free-cash-flow yield sits below the 3.3% 10-year median, and at this point in the cycle earnings multiples mislead while free cash flow is what the market actually prices. x.comÂ
SPX Technologies looks expensive against its cash earnings, at 19x trailing and 16x next year's versus the industry's usual 12x. Applying 12x to next year's cash earnings, give or take 12%, gives a fair value of $128.38 to $163.39, leaving $191.82 about 17% above the high end. This is a levels-only read with no fundamental work. x.comÂ
There is a reasonable chance, about 35%, of a 10-15% drawdown in the Nasdaq and Magnificent 7 before year-end, alongside a return of value investing. Jim Chanos' chart reinforces the setup for what triggers a drawdown in tech-dense passive indexes, which buy indiscriminately by market cap when dollars come in and sell the same way when they leave. x.com x.comÂ
