Yet Another Value Blog

$ELAL: El Al is a wartime monopoly at 2x EBITDA. Is that a trap? | ASB Partners

Andrew — Thu, 20 Aug 2026 17:34:42 GMT

El Al ($ELAL), Israel's flag carrier, has spent three years as close to a monopoly on flying in and out of Ben Gurion as an airline ever gets. Turkish and Pegasus left and aren't coming back, Ryanair lost its Terminal 1 slots, Delta and United keep pushing their return, and El Al has used the windfall to go from a levered balance sheet to net cash, buy nine planes off lease, and start returning capital. It trades at about 2x EBITDA. Adam Buckstein of ASB Partners (back after his Stride episode) thinks you're buying a hard-asset-backed airline (roughly $1.3B net cash, $1B+ of owned planes, a $700M-ish loyalty program valuation) for less than the parts, with two more quarters of gushing profits still to come. (See Adam’s El Al write up here)

My pushbacks: every "delevered on wartime profits" story I can remember (steel, energy after 2022) didn't work as a stock; a chunk of the cash is customer float that vanishes if flights get canceled; the $40M competition-authority fine for wartime pricing plus the state's right to make them fly uneconomically looks like the worst of both worlds; and El Al flies 24/6 (no Sabbath, no holidays), so should you haircut the EBITDA, or does that create a moat nobody else can copy? We close with a Stride ($LRN) update: the abrupt CEO exit, the Canvas LMS disaster, the lost Texas school, why fall enrollments are the fulcrum, and whether AI is a real threat to virtual public schools.

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Why SaaS stocks might be cheaper at $20 than they were at $10

Andrew — Wed, 19 Aug 2026 13:45:15 GMT

Sometimes in investing, a stock is a better value at $20/share than it was at $10/share. Why? Often the stock is trading at $10/share because there’s some huge existential risk hanging over it, and it’s a better risk/reward at $20/share once that existential risk has been removed. After a wild year for SaaS stocks, I can’t help but wonder if that’s exactly what’s happening now with the sector.

How wild has the year been for SaaS? In mid-April, IGV (the software index ETF) bottomed down almost 30% YTD…. and, from those lows, it has climbed back to being slightly positive for the year.

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That chart probably slightly understates the pain in software. IGV is a reasonably concentrated ETF; the top 6 components each have weightings over 5% and make up just shy of 50% of the index in total:

And two of IGV’s largest components (PANW and CRWD) are having banner years, with their stocks roughly doubling YTD.

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So while the outlook for software is certainly nowhere near as dire as it was back in February, your average SaaS company today is still probably down solidly on the year / trading cheaper than it has for most of the past decade.

Anyway, I’ve spent a lot of time thinking (and writing!) about the SaaSpocalypse this year. See, for example, my podcast with Marcelo Lima from April (almost literally the exact bottom!), or my “Some ramblings on the SaaSpocalypse” or “More SaaSpocalypse at $WIX” posts from February. Hindsight is 20/20, but it obviously would have been a great time to plow into software when I was writing those posts!!!

But this blog tries not to wallow in missed opportunity! Instead, let’s go back to the $20/share versus $10/share framing. Yes, all of the companies have bounced hard off the lows…. but we’ve got a lot of new information alongside that bounce, and all of that information suggests that worst case scenarios have basically been removed. Perhaps SaaS stocks are a case where they are better values today than they were at the height of the panic a few months ago?

What new information do investors have that they can look at and say “these stocks are cheaper at higher prices than they were a few months ago?” I’d point to two different things: earnings season reassurance the bottom isn’t falling out and private equity / M&A bids coming back to the space.

Let’s start with earnings. Q2 earnings season is generally over1, which means investors have had a chance to hear updated numbers and guidance from SaaS companies. This is painting with a very broad brush, but in general software companies have performed much better than feared when the SaaSpocalypse fears were really running rampant. Perhaps every company is going to replace all of their software with internal home brews in the future, but there’s no sign of it happening in the present (as was the fear at the height of the selloff). In fact, it might be just the opposite; a lot of SaaS companies are reporting strong demand for their products driven by the AI trends. Here are just a few examples of quotes from recent earnings releases:

I’m not claiming this is a comprehensive list, but you can kind of pick up and down the board for large software components and you’ll generally find companies guiding to continued strong demand even as AI ramps up. Again, not to say that the shoe won’t eventually drop here, but in the short term software companies’ strong results and guides have generally relieved the “everyone is going to home brew their own SaaS” fears.

The other interesting thing is M&A has come back to the software space in a big way, particularly private equity bids. The big one here is rumors broke last week that Silver Lake is in talks for WDAY; that would be a ~$50B take private and one of the largest software takeouts of all time (heck, you can drop software from that statement; it’d be one of the largest deals ever!). However, the potential WDAY / Silver Lake deal is far from the only one in the space. On the definitive deal side, we’ve seen:

Nielsen buying DV for $2.16b (30% premium)
Thoma Bravo buying ARX for >$4b (~50% premium)
Nuvei buying PAYO for $2.75b (this deal got leaked, but it was a ~44% premium to the pre-leak price)
WEAV2 getting bought by Francisco Partners for $650m (~35% premium)

To be fair, a few of these are software-adjacent more than pure SaaS, but the pattern is the same! Outside of those definitive deals, there have been a lot of rumored deals that I wouldn’t be surprised to see lead to deals in the near future:

Criteo / Vista
CCC exploring a sale after Elliott builds stake
- Note: As I was writing this article, news broke that CCC had multiple bidders, including Copart.
Alkami explores sale after receiving interest

Why are all those deals / rumored deals interesting?

I’m long past believing that private equity is the smartest money in the room or anything. They’re just as prone to cyclical behavior and buying at the top as the rest of us! However, I think they can serve as a very useful signal in industries and theses where there is one obvious and very diligence-able bear point.

Why?

Because private equity has nearly unlimited due diligence budget to throw around running surveys and doing expert interviews to resolve how particular issues are trending. And they also have access to internal data (how their own portfolio companies are spending or responding to a risk) that no one else has.

And private equity doesn’t just need to get comfortable with risk points on their own. Because they generally need to raise debt for take privates, private equity needs to get lenders comfortable that there is real downside protection in these businesses. It’s one thing for a private equity firm to buy a company at a cheap multiple that’s facing terminal value questions (as SaaS is with AI). If they’re wrong, they could have a zero on their hands, but if they’re right they could have multi-bagger upside, so they can take a coin flip chance of a company going bust if the upside is high enough. In contrast, a lender’s upside is limited to their interest payments, so they’re going to be much more concerned with downside protection in a worst case scenario.

Put the two together, and I’d suggest that both the private equity firms and the lenders have internal data and due diligence metrics that have gotten them very comfortable with the terminal value risk for these companies. That’s not to say that they’re right or wrong, particularly if the AI trade accelerates even faster than it already has! It’s just that they’ve gotten comfortable with a very obvious risk, which suggests that (at worst) it’s been priced in and (at best) that the risk is diminishing.

So what’s the playbook from here? My guess is that SaaS is going to be a stock picker’s paradise for the next few quarters. There’s no doubt that some of these businesses are going to be heavily disrupted by AI, and those stocks will bleed out…. but there are plenty of businesses that are still trading at reasonable multiples that will be AI beneficiaries and potential PE takeout plays that the market is still skeptical of. As always, I’m sifting through possible candidates for this, and I may write some up in the near future.... but my inbox is always open if you have any candidates you think are worth looking at that you’d like to swap notes on!

PS- I’d be remiss if I didn’t mention that both WDAY and WEAV gave out some dark arts style grants earlier this year….. perhaps insiders knew in real time that the stock price was too cheap and a private equity endgame was in the cards?

WDAY’s dark arts grants:

WEAV’s dark arts style grants:

Software companies report on weird cycles, so there are a few large software companies that are yet to report / will report in the next month. ORCL, CRM, INTU, etc.

Disclosure: I had a small position in WEAV. A frustratingly small position given the takeout.

Shitcos, Griftcos, and alignment versus enrichment at $IREN

Andrew Walker — Tue, 18 Aug 2026 11:46:27 GMT

One of the best pieces of fintwit slang is a “shitco”1. It’s just so all encompassing and so perfect.

Some stock you’re short is getting squeezed higher? Shitco
Want to complain about a stock you own that’s done nothing for two years while the market has ripped higher? Shitco
Talking to a friend about a company you hate, a business you don’t like, or a management team you distrust? Shitco

Again, the description can be pretty all encompassing, and that is perhaps the only drawback of the term. It just gets applied to too broad a swath of companies.

There’s one particular set of companies that I often hear called “shitcos” that I think are much different. These are “businesses” that aren’t really businesses at all. They’re companies built on the promise of a future that need to raise a ton of money at huge valuations in order to justify that future…. and, along the way, they pay their executives a fortune. These businesses are also often dependent on big government contracts or regulatory support in order to survive. I’ve taken to calling these businesses “griftcos”.

Note that’s not to say that the griftco can’t be insanely valuable. Griftcos are often playing on reflexivity; if the stock price is high enough, they can raise enough money to create their own future. Consider perhaps the GOAT of griftcos, Tesla. For over a decade, Tesla painted pictures of a rosy future where the car you bought today would soon operate as part of a self-driving fleet of robotaxis that earned you money while you slept. While that future has yet to come to pass, Tesla used those promises to boost their stock price and raise an enormous amount of money…. and that money (plus a whole lot of regulatory subsidies) has created a trillion dollar business that earns billions every year.

Perhaps labeling them griftcos carries some negative connotations, and I will admit that, on the whole, griftcos aren’t really my cup of tea. But I also find griftcos fascinating: a lot of investing is exposing yourself to positive right tail optionality, and the reflexivity and opportunistic nature of griftcos often mean they’re the best companies for capturing right tails.

I also find griftcos interesting for another reason: griftcos are not shy about paying their insiders, and they’re often not shy about playing on the edge of the rules as it relates to comp. Given that combo, when a griftco decides to make a “dark arts” style big grant of equity to their executives, it’s generally worth taking note.

So today I wanted to dive into a recent griftco case that made a very interesting dark arts style grant. Not because I think it’s crazy undervalued or actionable (though, as I’ll note in the PS, I’m long a similar one in small-ish size due to a very skewed risk/reward IMO!), but because I think it’s a super interesting case study worth thinking on / using to sharpen the corporate governance toolkit.

Let’s dive right into the company / setup. IREN2 is a former bitcoin miner turned AI cloud powerhouse. They’re a perfect company to highlight in a “griftco” article because no group of companies has better exemplified the griftco model than the bitcoin miners. Almost across the board, the bitcoin miners rode inflated valuations and a promise of a rosy future mining bitcoin to build out massive bitcoin mining projects that would have been way overvalued and destroyed massive amounts of value…. until the rising demand from AI computing created a squeeze on power that the same projects were perfectly situated to fill. Overnight, projects that would have been nearly worthless were worth fortunes!

IREN has handled the pivot better than perhaps any other bitcoin miner; they’re a preferred partner for NVDA and landed a massive contract with Microsoft, and the stock has been on a magnificent run since the pivot started.

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But what caught my eye with IREN is the timing of their recent equity grants. On June 30, IREN gave their Co-CEOs ~9m RSUs each. That is a massive grant; IREN has ~360m shares outstanding, so the grant effectively hands each Co-CEO 2.5% of the company. It’s also a lot of money; IREN’s stock closed at ~$45/share, so it represented a ~$400m windfall for each of them. Quite the payday!!!… but what’s more interesting is that the 8-K announcing the grant specifically notes that the grants were made to cover ~five years’ worth of grants and that the co-CEOs would not “receive a further equity incentive grant until the Company’s 2031 fiscal year.”

So I think there are two ways of looking at that grant. Perhaps the grant is just griftcos grifting and giving management massive paydays…. or perhaps the grant represented the company rewarding and incentivizing management right before some inflection point for the company unlocked value. Or perhaps it was some combination of both!

Regardless, it’s hard not to look somewhat skeptically on that grant given it came in front of IREN announcing $2.8B of new customer contracts and then delivering Horizon 1 to MSFT while achieving NVIDIA exemplar cloud status. Does the timing of that grant raise all sorts of corporate governance and ethics questions? Yes, absolutely (in my opinion!). Remember: a big grant like this (that pulls forward five years of equity comp) is supposed to be done to ensure and encourage alignment between a management team and investors. It's supposed to be something the management team has to work for, and something that pushes them to maximize value along the way. When a board and management team are willing to give out a massive package right before some unlock comes out, you have to wonder if they’re really aligned and focused on creating shareholder value or enriching themselves at shareholders’ expense. The CEOs already owned ~14m shares each, so it’s not like they weren’t already large shareholders who’d want the stock to go higher. Here, the board just gave them a bunch more stock right before some big new deals were announced.

Ethics and governance questions aside, what’s more interesting (again, at least to me) is how actionable that grant was from an investor / trader perspective. I consider “actionable” grants to be big equity grants that signal a company is about to have some major value inflection moment. Generally, those grants have some type of price or performance hurdle associated with them that gives alignment between the CEO and shareholders (i.e. the company gives the CEO 10m shares, but the stock is trading at $10 and the shares only vest if the stock hits $20 in three years, so it’s a ton of money but shareholders need to make out well for the CEO to get paid). Here, the co-CEOs got paid no matter what they did3; their only give was this was their only grant for the next few years (though I’ve certainly seen companies say “this is our only grant for five years” and then find other ways to reward executives when the stock tanks).

So my question is: was there signal in this grant? And does the company’s history as a “griftco” in my telling make that signal stronger or weaker?

No good answers here; just something I’ve been mulling over!

PS- IREN is obviously the focus of this article, but I’ll note they’re far from the only power shell griftco to hand out juicy awards. FRMI (disclosure: long) is a very controversial power shell company that handed out a bunch of torqued awards to their whole C-Suite in late July that would grant them millions of dollars if they landed a big customer (I wrote about it in real time on the premium side). Sure enough, within a month FRMI had landed their first large customer. Nice work if you can get it!

I almost never curse and try to keep this blog family friendly, so pardon my proverbial French. However, the term “shitco” is so popular on fintwit and among investors I talk to and is such light cursing that I doubt I will be offending anyone’s delicate sensibilities by dropping it here!

Credit where credit is due: this trata call on IREN nicely details the potential inflection for IREN that originally turned me on to this situation.

Provided they don’t leave the company (the only vesting requirement is continued employment).

$NU: is Nubank Capital One in 1994 or Capital One in 2006? | Vanshap Capital

Andrew — Mon, 17 Aug 2026 16:36:37 GMT

Nubank ($NU) has 140 million customers, roughly 60% of Brazil's adult population, an efficiency ratio around 20% versus 40-60% at the legacy banks, and ROEs in the 30s. Evan Vanderveer of Vanshap Capital has owned it for four years and thinks the market is still treating it like a risky EM bank instead of what he thinks it is: a tech company that happens to hold deposits, with a founder (David Vélez) who controls it and a runway that runs through Brazil's $100 billion banking profit pool, Mexico, Colombia, and eventually the US.

My pushback is the Capital One question. Capital One was the smartest data-science lender in the room, IPO'd in 1994, went up 13x in 12 years, and then spent the next 20 as a mature bank that lagged the market. Nubank was built by ex-Capital One people, so is this 1994 or 2006? We also get into what the right cost of equity is for a Brazilian bank trading at high-teens earnings with a 30% ROE, whether MELI and Kaspi tell you EM fintech never gets a big multiple, the 13,000-customers-per-employee stat, Brazil NPLs at 15-year highs, the wave of senior departures, whether any banking fintech has ever expanded across borders, Vélez joining OpenAI's board, and my bigger worry that AI eventually commoditizes every financial product and competes away the 30% ROE.

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I already know you’re going to like trata. Why? Because you’re reading this blog post, meaning you’re interested in this podcast. And trata is just like this podcast (though without the handsome host!). Trata is anonymized transcripts of buysiders discussing stocks they are following and what they really think will drive the stock. I’ve been mentioning it on the podcast for months, and the most frequent complaint I hear from people who check it out is they wish trata had more content on more of their stocks. Even better: they recently released an MCP that lets you connect their transcripts to the AI model of your choice. If you’re interested, check out a free transcript on NU here.

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$DNOW: the boring distributor that could double on 2029 numbers | Firebird Management

Andrew — Fri, 14 Aug 2026 14:28:58 GMT

DNOW spun out of National Oilwell Varco at $35 in late 2014. A year later it was $13. Today it is around $16. Steve Gorelik's argument is that ten years of that chart is one long headwind rather than a broken business: 1,800 US rigs at the spin, under 600 now, global oil and gas investment 40% below 2014 in real dollars, and DNOW still grew margins and bought companies at 4 to 5x EBITDA the whole way through. Rigs have started ticking back up. The MRC Global merger brings $75m of synergies to two businesses that earned $325m of EBITDA apart in 2024. Management has soft-targeted $350m of EBITDA for 2027 against roughly a $3.5B enterprise value, which Steve gets to about $300m of free cash flow on a $3B market cap.

My pushback is that 10x is not deep value, and the double comes almost entirely from multiple expansion back to the 5 to 6% free cash flow yield the market used to pay. Why is 10x the wrong number and not 12 or 14? We also get into the acquisitive compounder paradox, whether the incremental drilling actually shows up in US shale or somewhere else, the Oracle implementation they inherited from MRC and why they are now running it alongside SAP on purpose, the $50m of stock they bought back in the middle of that mess, and whether a business private equity would happily lever to four or six turns belongs in the public market at all. Steve's 2029 case is $30 to $32 per share.

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When AI reads every 10-K, the only edge left is the CEO's flop sweat

Andrew — Thu, 13 Aug 2026 10:18:07 GMT

What happens to active (human) investors as AI gets better? Will there even be a role for humans in the process or will we be out of a job?

It’s a smaller version (and more selfish, given I am an investor!) of a bigger fear on AI displacing / replacing knowledge workers. Those fear probably peaked this April when people started resurfacing a video of Anthropic’s CEO saying AI would destroy 50% of knowledge work and lead to 10-20%+ unemployment. I’ve generally thought those fears were overblown, but I will admit that AI is so revolutionary that my belief that we weren’t about to face some mass unemployment event wasn’t quite as steadfast as I’d like it to be.

For investors, the implications of the rise of AI are basically infinite. You can spend endless hours thinking about how AI will impact you individually as an investor (or the process of investing in general), building out tools to streamline or improve your investing process, or looking for opportunities that AI creates (whether it’s shorting AI losers or buying AI beneficiaries)…. and I have spent a lot of time doing just that!

But today’s article I wanted to focus on something slightly different: the outlook for humans in investing.

A lot of investors1 think of a super-powered AI in investing as some all knowing god that can predict the future and thus sets prices based on things before they even happen (a la Minority Report or some other scifi work). While that’s a cool (and very scary) concept to think about, even super-powered AI cannot predict the future. So the AI bear case for investors isn’t some prophet that knows how stocks will move in advance; the “AI fully displaces humans” bear case would look something like this: at its core, investing is about reading and processing information. An investor generates alpha by either having more information or reading the same amount of information but processing it better. If you imagine a world where a super-powered AI can process all information basically instantaneously and with a super-genius IQ, what hope do human investors have in that world?

That’s not to say that stock prices won’t move or move dramatically! Again, the AI is not predicting the future; there will still be massive stock pops if a company is acquired out of nowhere or stock drops if a company’s plant blows up or something. So new information can and will move stocks, often dramatically2…. but in the AI world I’m laying out you basically have a perfectly efficient market where all known information is already in the price. You could still make (or lose!) a fortune in the stock market by making a big bet on something…. but you’ll make a fortune in the same way you could make a fortune by going to Vegas and betting it all on black. Your fortune came through luck or beta, not through alpha generation.

In that world, I think all of the “analysis” edge goes away. One of the classic stories every investor dreams of having is finding the needle in the proverbial 10-K: some line or number buried deep in an SEC filing that shows a company is undervalued or some event is about to happen. I suspect all of that edge gets competed away (if it hasn’t already!) by AI that is instantaneously reading every SEC filing in real time and comparing it to every SEC filing ever made. Humans simply can’t compete with that!

However, “analysis” edge going away does not mean that all edge goes away. If computers can perfectly analyze all information that they have, that means you can still generate edge through unique data. In fact, that means having unique data might have more alpha.

What does this look like? Well, an extreme example will show this nicely: if your best friend is the CEO of a company and tells you they’re announcing a deal at a huge premium in two days, that is a very unique piece of data. In the perfectly efficient market I laid out above, you will make even more money with that information because a perfectly efficient market means lower trading and liquidity costs and that tail events (like unexpected mergers) generally come with bigger payoffs.

Again, this is an extreme example: what I laid out above is clearly insider trading, so while your bank account might go up on the actual day of the announcement you’ll end up giving all of that up in SEC fines and jail time. But I think it illustrates the opportunity nicely.

So where could we see a (legal) data edge?

I could imagine a few places. Let me start with the simplest, because I think my next ideas build off it: historical stock market data. This might seem basic and easy if you’ve never tried to use historical stock data…. but anyone who has tried is almost certainly nodding their head in agreement at this. Companies get delisted or go bankrupt all the time; how are they handled in the historical data that you’re training your AI on? If the answer is “we’re missing them,” then your AI is going to have a very positively biased view of the world. An example might show this simply: consider a binary like a drug readout and imagine a world where if the drug reads out successfully the stock goes up 10x and if it fails the stock immediately files for bankruptcy and delists. If you train an AI on drug readouts and all of the failures aren’t captured because those companies are gone, then your AI is going to think every drug readout leads to a 10x and buying every drug readout on max margin is a ticket to world beating returns. That’s a recipe for going bankrupt fast! Now, that is a very simplified example…. but you could start getting more and more complicated with it. Is there a world where there’s a cascading data advantage for large firms that have decades of detailed (and accurate!) stock market data to train their AI on?

Of course, historical stock market data is generally publicly available. Perhaps the AI gets so good that it can clean everything up and adjust to those errors I mentioned on its own. So maybe that edge is fleeting or non-existent to begin with.

Perhaps future edge comes from nonpublic data. That kind of makes sense: if the AI can perfectly interpret and price all data, the way to outperform is to have data that no one else has.

What could that look like?

Well, MNPI like the insider trading example I mentioned earlier is one clear example. But let’s assume that you’re trying to avoid jail time and try to think of a few others.

The first that comes to mind is private meetings. If you have a 1x1 with a CEO or some other member of a management team, by its nature that meeting generates data that no one else has. Yes, Reg FD limits just how juicy the data a management meeting can generate, but even small amounts of data could be enough to have an edge in a perfect market, and there are lots of things that are material to an investment thesis that can be revealed in an investor meeting and certainly aren’t part of Reg FD. A somewhat extreme example might show this nicely: imagine that a company has their Q2 earnings call at the end of July and the CEO says “we are confident in our full year guidance” and all of the AIs immediately incorporate that into their models. Then pretend that you have a company visit to see the company in mid-September, and you’re the only one on that visit. After the tour, you ask the CEO about guidance, and the CEO pauses for a second, nervously takes a sip of water, breaks into a flop sweat, and says “I said on the earnings call that we are confident in our full year guidance.” That would be a very juicy piece of information! Feed that into your AI and you’d have a heck of a unique data point.

Now, you might be thinking “but that data point is already unique / actionable in today’s world.” That is certainly true! The point is what happens to the value of that data point in a world where everything else gets priced instantly; I’d suspect it’d be increasingly valuable in the hands of an AI who can use it to tune their model of all sorts of different derivative plays.

The stronger pushback against the “unique data is edge” thesis is probably alt data over the past two decades. A huge amount of money was spent on alt data in the 2010s (credit card data, satellite images of parking lots, etc.) and that edge decayed fast (if you’re the only one with credit card data, you can destroy everyone else when it comes to trading quarterly prints…. if everyone has that data, then you’re all out the cost of the credit card data and no one has an edge!). I get that pushback, but that alt data was generally broadly available if you were willing to pay up. There was nothing unique about credit card data; everyone paid basically the same price and got the same data. The stuff I’m talking about isn’t broadly available; analysts who are good at getting management teams to open up or reveal things that they maybe don’t mean to are creating genuinely unique data. Anything with a price list gets arbitraged away. What’s left is the stuff you have to go get yourself.

And I wonder if the value of getting that unique data goes up in an AI world; maybe knowing the company is likely going to miss guidance causes the AI to come up with all sorts of strange trades that a human could never find (i.e. Apple is going to miss their quarter, so tax revenue in California is going to be lower than expected, so California deficits are going up and we should short Cali bonds while buying Texas munis?).

Again, that’s an extreme example. But you can imagine softer examples that create smaller edges that might be really relevant. Expert calls are the ones that really come to mind here; could they become increasingly important as a tool for generating unique data that feeds the AI’s view of the world in real time?

Maybe I’m overthinking this. Buffett famously said that, in investing, if your IQ is >130 you’d be better off selling the extra points. Maybe the rise of 200+ IQ AI that can instantaneously read and interpret every data point and compare it to all of human history changes nothing for active investors. I sort of doubt that, but who knows. The world is weird!

But I’m increasingly of the view that, in the future, alpha is going to be generated more by people who can find, source, and feed unique data to our AI overlords, and that the major question for most investors is going to be how to do exactly that. Is it being part of a big shop with a huge expert call budget? Is it developing deep sector expertise and industry relationships? Is it remaining small and nimble so you can get unique data across lots of different industries?

I don’t have the answer, but it’s something I’m thinking about all the time (and how I can best position myself for it!).

And at my most pessimistic I’d throw myself into this bucket

In fact, I think you could argue unexpected news will move stocks more dramatically in a perfectly efficient world

$UWMC lost $600m hedging a deal they'd already lost

Andrew — Tue, 11 Aug 2026 10:55:04 GMT

On the heels of losing a bidding war for TWO, in late March UWMC published a fabulous press release that called TWO a “melting ice cube.” I said at the time “that press release definitely does not make me think UWMC’s a bunch of whiny losers who I’d never want to invest with.”

Things have only gotten funnier since then, as UWMC followed up that press release by raising their bid for TWO and thus restarting the bidding war for an asset they had just called a melting ice cube. UWMC eventually lost that bidding war too…. and now they are blaming the busted deal for a ~$600m hedging loss they took in Q2, and that massive hedging loss was partly responsible for UWMC needing to raise some very expensive capital. The only problem with that explanation is the TWO deal had died in March (UWMC had the break fee wired to them on March 31)…. so UWMC spent all of Q2 hedging an asset they were no longer under contract for.

I’ll get to how strange that is in a minute, but let me back up and give a little background (in case you didn’t read my first mention of UWMC / TWO back in March) as well as provide an update on some of the crazy happenings since then that have led to this whole hedging fiasco.

The backstory

I’m a big, big fan of bidding wars. Writing that almost feels trite; what investor isn’t a fan of people competing to pay top dollar for a company they own?

So I’m not exactly breaking new ground saying “I love bidding wars”…. but I do. So much so that I wrote a mea culpa for missing the Metsera bidding war late last year.

Earlier this year, there was another bidding war that almost led to me writing another mea culpa. This one was between UWMC and CrossCountry for TWO. TWO had originally agreed to be acquired for all stock by UWMC back in December. However, UWMC’s stock was hammered after the deal was announced, falling >30% between mid-December and late March:

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Let me pause here: one of my favorite event setups is when a company with a lot of strategic value agrees to sell themselves for stock and then the buyer’s stock collapses. Why do I like that setup? Because it creates an easy opportunity for someone else to step in with cash. A somewhat extreme example might show this nicely: pretend you and I are bidding on a company. I bid $90/share all cash and you ultimately win with a bid of $100/share all stock. If your stock falls by 90% in the next month, suddenly your $100/share bid is worth $10. Now, maybe your stock is down because the industry is imploding and the target company isn’t worth close to the original bid…. but maybe your stock is down for other reasons, and I have an opportunity to lob in an all cash bid at a massive discount to my original bid but a huge premium to the current price and make a fortune for myself (and save a ton of money versus my original deal!).

If you read TWO’s proxy, you could see something similar could play out: multiple companies bid on TWO, including one company who offered 1.15x TWO’s book value at closing in all cash. TWO ultimately chose to go with UWMC’s offer, which valued TWO around 1.15x their tangible book value and offered more closing certainty than other offers. However, even a definitive deal did not stop TWO’s strategic suitors, as the proxy reveals company C1 called TWO up after the UWMC merger had been announced to see if they could hash out a deal.

So I was thinking about writing a “mea culpa” because TWO filed that proxy in early February. Combine that background with UWMC’s stock price melting down, and it seems logical that a competing bid for TWO could emerge. Sure enough, in mid March, TWO announced they had received a superior proposal.

This is where things start to get strange. Generally, when a company has a superior bidder, they run another process and then sell to the highest bidder. So if I had a deal to buy you for $10/share and someone offered $11, the company would hold a mini-auction and sell to the higher bidder. However, that’s not exactly what happened here. A few days after receiving the superior proposal, TWO announced that they were breaking the UWMC deal to enter a definitive deal to sell themselves to CrossCountry for $10.80/share cash…. only for UWMC to come in late April and try to break that definitive deal with an offer of $12/share for TWO. That set off another round of bids for TWO, which saw CrossCountry bump their bid to $11.30/share and then $12/share. UWMC would eventually again bump their bid to $12.50/share, but it had a lot of conditions and limitations and TWO shareholders would eventually agree to the CrossCountry deal at $12/share in cash plus a stub-dividend (UWMC was not happy with how it played out).

Again, I kind of can’t emphasize enough how weird that process is on the UWMC side. In March, they had a signed contract with TWO. A signed contract includes matching rights. Letting TWO break the contract and go with another bidder means UWMC let their matching rights lapse…. then thought better of it and tried to get back into the TWO business! That’s quite strange…. and horribly inefficient. It adds weeks of uncertainty to the business, to say nothing of the increase in advisor and legal fees for ramping a bidding war back up plus the break fee that TWO would owe to CrossCountry if UWMC was successful in breaking the new deal (a break fee that UWMC would not have owed if they had just matched the contract under the original deal!).

The part that doesn’t add up

So it was all just very, very strange…. but it also all happened months ago, so why am I writing about it now?

Last week, UWMC announced ugly Q2 earnings alongside a big new capital raise. The headliner here is a ~$450m net loss driven by ~$600m in derivative losses. That massive loss caused leverage ratios to explode higher; in response, UWMC suspended their dividend, raised ~$1.6b of prefs (on very expensive terms) from Oaktree + the CEO’s family, and will hold a $400m rights offering (backstopped by the CEO + Oaktree).

The surprise raise saw the company’s stock plummet, though it has regained some of that ground. As I write this, the stock is trading for ~$1.50/share (versus the ~$5/share it was trading when they agreed to the TWO deal in December!).

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What’s interesting here isn’t the capital raise (though the capital is very expensive)…

What’s interesting is the reason UWMC is giving for that ~$600m derivative loss. According to UWMC, they put a massive hedge in place when they had a deal to buy TWO. UWMC then took a bath on that hedge and lost out on TWO and thus got hit with a double whammy of losing on the hedge while not getting the gains on the asset they were allegedly hedging. Here’s how the CEO described it on the call (emphasis mine):

Let me go into the hedge loss because I think that’s a handful of other questions here. Can you please explain the hedge loss, what caused it and how investors should think about it?
So listen, hedging in general in the mortgage industry is expensive. And it’s something I actually don’t believe in, in general. We have never hedged our MSR, I say never. We don’t traditionally hedge our MSRs. Our origination machine is so big and strong that if the rates drop, you’ll lose MSR value and equity, but you’ll do so much more business that you’re good. And if rates go up, your MSR values go up and you do less originations, but your equity goes up. That’s kind of how we’ve always played it.
Well, when you’re going through and acquiring a company like Two Harbors and a massive MSR book, then our MSR book became double the size of what we’ve always managed. And therefore, it created a little more risk. So when we did put a hedge on to protect against that risk and then a lot of things happen.
Let’s just be real with whether it’s a war, a lot of different things that happened that created the 10-year to go up -- and then obviously, the Two Harbors transaction went away. And so a confluence of events that created a hedge loss. We hit a certain risk threshold that I said we’re not going to continue hedging regardless because we didn’t want to have more of an equity drain, and we took the hedge off. And of course, that’s the strategy that we’ve always had is let’s not hedge, let’s run the business effectively.
Once again, Oaktree has a strategic perspective on this, and I’ll go through that with them after this process and whether we hedge going forward or not. But once you have $3 billion of equity, you’re really not at a risk of the MSR values go down $400 million for this quarter or go up $400 million, it’s less relevant. But when you’re hovering around $1.5 billion or $2 billion, it becomes a little bit more relevant. And so that became an issue. We hedged -- and it was a onetime event, to be honest with you, because of Two Harbors, we were overhedged, if you think of it that way, protecting against the Two Harbors transaction. The market moved against us, and it’s a onetime event that won’t happen again. We feel like our hedging policies are much stronger now, but also we’re not acquiring another company that has an MSR book like that, at least that’s not the plan of now, and we know how to handle it differently going forward.

On the surface, that sounds reasonable. UWMC put on a big hedge, unexpectedly lost the asset that they were hedging, and thus got hit with a double whammy, right?

But here’s the thing: TWO broke their deal with UWMC in late March. UWMC reported the massive hedging loss in Q2, which runs from April to June. In other words, UWMC is saying they took a $603m hedging loss in Q2 hedging a TWO deal that they were no longer under contract for. And UWMC knew they were out; if you read TWO’s merger proxy with CrossCountry, it notes that UWMC gave TWO the wire instructions for their ~$25m break fee on March 31 (and TWO subsequently wired the money).

So the whole thing is just extraordinarily strange on a host of levels. UWMC got the break fee on March 31 (the last day of Q1) and then just sat on that fee for the entire quarter while their hedges were moving against them? What were they doing?

The obvious defense is that UWMC still thought they were going to win TWO. They were back in with a $12/share offer in late April and a $12.50/share offer in May, so you could argue they kept the hedge on because they expected to own that MSR book after all…. but I think that answer is even stranger!!! Under that version, UWMC desperately tried to re-engage with TWO after letting their first bid lapse and trashing the company and management on the way out. It makes them look like petulant children who are in over their heads. And by the CEO’s own telling, they didn’t take the hedge off when the deal went away; they took it off when they “hit a certain risk threshold.”

It also raises the question of how UWMC has been communicating with the market. UWMC reported Q1 earnings in early May; they noted “rates went up in March, and they've gone up even more in April”, but they don’t note anything about a massive hedging loss. They do note that their leverage ratios “are a little bit of an anomaly based on -- and same thing with the liquidity number based on some trades we have out there to help balance the MSR book,” but they don’t mention some massive hedge to cover the TWO bid or that they have anything out of whack. In fact, they say that the leverage ratios have “already come down a little bit now,” that they have “extremely experienced capital markets team” handling it all, and they talk about how they don’t really want to give UWMC stock away at these levels. It’s pretty hard to square how they talk about the environment and their balance sheet / value with the results they reported and the desperate capital hole they found themselves in.

Perhaps I am missing something. Maybe the hedges were so illiquid that UWMC couldn’t get out of them (though if that’s the case I’d suggest the hedges were very poorly designed to begin with). Or perhaps there’s some other reason they held on.

I don’t know. But UWMC is a wholesale mortgage originator and servicer. Those are businesses that operate on a whole lot of leverage and are very sensitive to interest rates. UWMC’s Q2’26 balance sheet shows ~$17.9B of assets against $985m of equity; that’s a little over 18x leverage. Admittedly, that’s due to the hole left in their balance sheet by the hedging loss, but even in normal times this is a business that runs with lots of leverage. When you’re running that levered, you have to be very disciplined at hedging and maintaining risk in order to survive through a cycle. For UWMC to lose that much money on a hedge for an asset they had already lost calls into question the trustworthiness of management, the competence of management, or perhaps both.

I have no horse in this race, but as someone who follows a lot of quirkier M&A news and a lot of lower quality companies that trot out some really outlandish excuses for awful results, the whole saga was right in my wheelhouse and I wanted to put something up on it!

PS- as I was wrapping this article up, news broke that UWMC is suing TWO for $500m over the failed deal. As someone who has followed a lot of deals, that suit seems like a huge hail mary…. but I’m ready to get my popcorn out!

A future proxy filing would reveal Company C to be CrossCountry, who eventually won the TWO deal.

August 2026 Premium update

Andrew — Mon, 10 Aug 2026 00:47:58 GMT

Before we get to the updates- first, thank you so much for subscribing to the premium site!

Second, please remember you can always reach out to me if you have questions or want to swap thoughts on any…

$HIMS: Paul Cerro wouldn't trust the CEO to walk his dog. He's still long. Why? | Cedar Grove

Andrew — Fri, 07 Aug 2026 15:06:35 GMT

Paul Cerro was long Hims & Hers in 2024, short it through the compounded GLP-1 unwind, and covered when the stock broke $14 after Q1. He’s long again, and his thesis has almost nothing to do with peptides, testosterone, or the international launches everyone else is excited about. Those, he says, are table stakes. Hims has never had a problem acquiring customers. It has a problem keeping them, and subscriber counts have barely moved in three quarters. His argument is that labs and patient data are what push retention and LTV up, and that is the part the market isn’t paying for.

I push back in three places. The data play doesn’t look unique to me: Whoop and Oura own a wearable and a daily interaction, Hims owns commoditized blood work, and if Hims does unlock it, Apple or Amazon can walk in on top of them. The 2030 targets ask you to double trust management, once on 4x-ing EBITDA and again on a very heavily adjusted EBITDA number, from a CEO Paul says he wouldn’t trust to walk his dog. And when peptides go legal, I think a hundred Instagram churn-and-burn startups compete away the customer acquisition edge. Paul’s answers are worth the hour, especially the balance-sheet argument for a price war and the story about his old boss at Ro turning down ADHD scripts. We close on what to watch in the August 10 print.

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August 2026 Random Ramblings

Andrew — Tue, 04 Aug 2026 21:06:07 GMT

Strategy filed an 8K this morning: they sold $300 million of stock, sold $100 million of bitcoin, and put the proceeds into buying back roughly $80 million of their own preferred at a discount. So you have a company trading over NAV, diluting shareholders, and selling the one asset it exists to hold, and it is still trading at a premium. Management is presenting the move from "one-way capital issuer" to "multi-way capital issuer" like it is a financial engineering breakthrough. It is just normal capital allocation, and it took them five years to get there.

That is the through line for this whole ramble: selling. Strategy made a genuinely good call in 2020 and then never sold a thing. Situational Awareness made a generational call, long AI winners and short AI losers, went up something like 10x on it, never rebalanced, kept pressing a trade that naturally degrosses, and blew up when software went from 20 back to 30 and semis went from 400 back to 370. I do a miniature version of the same thing every time I decide in advance that I will start trimming at 15 a stock I bought at 10, and I am not sure that plan is as smart as it feels. I also get into why thematic trades are so hard to sell when there is no price to anchor to, whether the crossover funds actually had an AI information edge or just conviction, why I cannot make the memory valuations work under any assumption I am willing to make, and where I think the real opportunity is: the beaten-up AI power names Situational owned in size, several of which are not trading far above the DCF of the contracts they already have.

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Everyone said crossover funds like Situational Awareness had the AI edge. Now they're telling you to buy.

Andrew — Mon, 03 Aug 2026 13:09:49 GMT

By far, the best tweet I saw on the Situational Awareness blow up was this meme

I already put up some (very) fast thoughts on Situational Awareness’s blow up last Thursday… but it’s been pretty much the story for finance over the past few days. Combine that buzziness with a really interesting angle / potential alpha opportunity I see in that tweet, and I wanted to put up a follow-up post.

What is that angle / alpha opp?

The biggest wins in the “AI trade” on the public markets have generally belonged to crossover funds that invested in both public and private equities. So, for the past two years, you’ve heard a lot of people complaining that a lot of those funds’ alpha has been driven by them getting access to monthly numbers from AI startups, seeing usage and demand go through the roof in real time, and then using that info to go buy all of the public AI beneficiaries. You can get as deep as you want with this theory; you can say they were just getting monthly numbers and using those to buy beneficiaries, or you can go as far as to say they were discussing component pricing, shortages, user usage, and potential deals in real time and using those to buy beneficiaries.

No fund better illustrates this than Situational Awareness. Leopold was not only a former researcher at OpenAI, but he’s engaged / just married the chief of staff at Anthropic. Hard to imagine someone better positioned to trade on AI news flow than that; all it takes is his fiancé coming home and saying, “Man, business is booming. These new coding tools are exploding and we can’t bring on enough compute to keep up with demand” and off to the races!

Personally, I think that thought process is a little too conspiratorial. While I’m sure that seeing Anthropic’s monthly numbers helped build conviction as the positions started skyrocketing (it’s easy to sell a stock up 100% and miss the next 500%; it might be easier to hold a stock that’s gone up 100% when you see demand has gone up 500%!), I think all of these funds had on all of this exposure (and invested in Anthropic and other AI start ups directly!) because they were true believers in the AI trade, not because they were swing trading quarters on the Anthropic data!

But let’s put my personal beliefs to the side for a second. Pretend you do believe that these crossover funds are trading on “insider” info on the pipelines and outlook from the large private labs, and that a bunch of the crossover funds got margin called because they failed to properly risk manage or something.

That makes what a lot of them are saying right now very interesting. Consider one of the closing lines in Situational’s letter to LPs:

On the portfolio itself: we are very optimistic about the current investment opportunity set. The underlying fundamentals are accelerating at the very same time that prices have declined significantly.”

Situational is not alone in that call out. Across the board when I talk to investors who are doing privates and publics, they are saying that demand continues to explode.

I am aware that asking crossover investors who are massively long privates exposed to AI and AI bottleneck trades if the outlook remains strong despite a 30-50% drawdown over the past month is somewhat akin to asking a barber if you need a haircut…. but it’s not just them saying demand is booming! Go read the Q2 calls for Amazon / Microsoft / Google1 / META2; all of them are telling you that demand is outstripping supply, that the ROI on buildouts and implementing AI is awesome, and that they’re only scratching the surface of demand. For example, here are three quotes from AMZN that make exactly those points:

“I'll start with AWS, which is booming right now, and I'll share the numbers what we think is going on and why we're enthusiastic about the ROIC equation,”
“the demand we already have for 2028 is striking. And remember, enterprises are still very early in using inference at scale in their current production applications.”
“Brian, we have so much demand right now. Apart from what we've talked about in '26, a lion's share of capacity in '27, we're adding a lot of capacity, as I mentioned just a few minutes ago, is largely reserved. And we have quite a bit of capacity that's already been reserved for '28.”

What I’m driving to is this: if you have been looking at everyone trading AI stocks through crossover funds over the last 18 months and jealously saying “they’re just using private company data to generate a once in a lifetime trading edge,” then right now you’ve got a unique alpha opportunity. All of those same funds are saying the fundamentals only continue to get better at the same time that the stock prices of their holdings are imploding. Maybe that implosion is being driven by the market’s skepticism of the future, maybe the implosion is forced selling from degrossing, maybe it’s a combination of the two…. but, whatever it is, if you believe the crossover funds, then this sell-off is a unique opportunity to generate a heck of a lot of alpha as the companies report continued record earnings and the degrossing fades away.

So that’s the setup / opportunity. Do I believe in it? Honestly, I’m not sure! Despite the recent pullback, a lot of these companies continue to trade for massive valuations. That said, there do seem to be some pockets of value. Remember that most of these companies are minting money in the short term, so, even if some of them are up quite a bit, a good chunk of that move could be attributed just to the near term cash generation of the businesses. And many of these companies have taken advantage of the supply crunch to sign long term deals that should materially derisk them and support longer term earnings.

So, yes, the stocks are up a lot despite the pullback…. but the fundamentals support a lot of those moves, and I do want to keep an eye out for value despite big moves. Just to tip my hand a slight bit, the place I’m personally most interested right now are power shells. Generally, these are former bitcoin miners that have converted to data center plays. Many of them have signed long term deals with hyperscalers for their power, and the recent pullback has a lot of them priced at valuations that simply credit their current signed contracts and give them no real value for future deals or the terminal value of the assets after the hyperscaler contract rolls off.

PS- I am working on a post or three diving into the power shells a little more; don’t forget to subscribe if you want to receive those!

I covered a lot of the Google bullishness in my “What is Google seeing in AI?” series; Part 1 (history's biggest, weirdest equity raise), Part 2 (Google's telling you the returns are real), and Part 3 (the real bear case).

Disclosure: Long META, largely because of their YOLO options package

Management interviews: the most underdeveloped skill in investing | Ross O'Toole

Andrew — Sun, 02 Aug 2026 16:06:31 GMT

Management interviews might be the most underdeveloped skill in fundamental investing. Ross O’Toole has been investing for 25 years and read over 500 investment books, and he couldn’t find a single one on how to actually conduct an investor-management interview.... so he wrote Breaking the Script, a field guide to getting management teams off their rehearsed talking points. We get into why “what” questions beat “why” questions, whether you should grade a plastic surgery CEO and a coal company CEO on the same curve, the case for recording your management meetings, and why asking for examples is one of the biggest double edged swords in investing.

I push back with my standing worry: management teams are really, really good salesmen, and I always walk out of these meetings wondering if I’m the patsy at the poker table. Ross’s answers (build a longitudinal baseline over repeat interviews, ask for the negative example every time you get a positive one, and save the hard questions for the crescendo) are why this book went straight to the top of my “hand it to an intern” list.

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Did Situational Awareness inflate the AI bubble?

Andrew — Thu, 30 Jul 2026 20:39:59 GMT

The internet (at least my little corner of it) is abuzz with the (seeming) implosion of Situational Awareness.

For those unfamiliar, Situational Awareness is (was?) a buzzy hedge fund that called the AI trade basically perfectly last summer. They rode that call to unbelievable returns; I think the reporting is they were up something like 500% in the first half of the year (and I don’t say 500% as a loose number to say they were up a lot; I believe the reporting is they were up literally almost 500%). However, as the AI and momentum trade have suffered a rough July, Situational Awareness appears to have been caught in the crosshairs. There were online rumors1 that they were down ~30% YTD, which would imply they drew down 85-90% from the peak (and in a very short time frame).

There’s plenty of reporting2 to do on the implosion of the fund, and there will be plenty of schadenfreude from people celebrating Situational Awareness’s (seeming?) demise…. and I’ll admit it’s hard not to have a little schadenfreude at someone in their mid-20s with no investing experience starting a fund and generating legendary returns3 and then imploding because they couldn’t manage risk.

But I’ll leave the reporting and schadenfreude to someone else. I wanted to talk about two intertwined angles to the Situational blowup that I can’t get out of my head: the opportunity (or lack thereof) angle, and the bubble / capital allocation angle.

Let’s start with the opportunity angle. As investors, there is nothing better than a forced seller for a very simple reason that is literally in the name: forced sellers are forced to sell at basically any price to someone who can give them liquidity. However, finding forced sellers is devilishly hard; sellers know that they’ll get destroyed if people realize they’re forced to sell, so they don’t exactly go around emailing everyone saying “we desperately need liquidity; we’ll take whatever you bid but you have to bid right now.”

Pretty much the only time you know there’s a forced seller on the other end is when it’s a big fund that’s getting margin called somewhat publicly. Unfortunately for us, Situational Awareness seems to have done a good job of keeping their liquidity problems private; if you look at some of their chunkier positions (SNDK, BE, NBIS), they were moving in lockstep over the past few days and had huge bounces today on the unwind news, so while the prices are down a little it’s hard to point to a massive dislocation.

That said, while the price dislocation in the past few days was reasonably contained given the level of blowup, a lot of these are still down massively over the past month or two. Even with today’s big pop, most of these are down 30-40% over the past month:

And it’s not just Situational driving that big sell off; a Goldman note apparently estimated there were 1.2m margin calls in South Korea over the past month, meaning a not insignificant percentage of the adult population got hit with a margin call (it works out to ~3% of the adult population, but if you assume that the average person trading on margin is overwhelmingly likely to be a male in their 20s or 30s, I think there’s a possibility that >10% of South Koreans in the target demographic got hit with margin calls).

So you’ve got a whole sector getting swamped by margin calls and forced sales. The trader in me sees that and thinks “o man, I’ve got to buy and be on the other side of that!” because there will be a big snap back once the margin calls are finished.

Maybe! But here’s where I think some history is interesting. What you have in Situational + the Korean margin calls is a giant sector unwind leading to liquidations. These types of setups are pretty rare; the last one of these I can remember was when Archegos blew up and took down the media space and some Chinese internet stocks with them.

If you had asked me on the heels of the Archegos implosion, I would have guessed that every one of the stocks Archegos had been forced out of was an opportunity. While Archegos was a little smaller than Situational is today, Archegos was much more concentrated in much smaller stocks. So Situational owned like 2-3% of stocks like NBIS and BE, while Archegos owned 10%+ of stocks like WBD and PSKY (then ViacomCBS and Discovery)…. and often more ownership on an effective float basis given large controlling shareholders! Anytime you have a 10%+ shareholder getting blown out of a stock, I’d guess there’s opportunity!

And I would have guessed wrong! Below is a chart of the majority of Archegos’s holdings when it blew up; you can see that not only did all of them fall precipitously when Archegos was liquidated in early 2021…. but they all kept falling in the weeks and months and even years after. Despite a strongly rising market, basically every one of those stocks is well below the price Archegos got when it was margin called.

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That’s strange, no? If you had told me that there was a stock with a big forced seller, I would have guessed that the company’s stock was crazy weak leading into the big sale, but then rebounded as time passed and supply / demand got more equal. I’d also guess that a stock with forced selling would outperform the market from the forced selling driven bottom. Archegos is very different; you have several different companies in different industries that are all underperforming even after a massive dislocation event!

That brings me to the second point: bubbles and capital allocation. Markets are designed to send pricing signals. Prices go up, rational actors respond to incentives and create more of that thing, and thus demand equals supply. When oil prices go up, oil stocks go up, oil companies can issue stock to go look for more oil, and eventually the world gets more oil.

Bubbles represent a misallocation of capital. The market is super hot for some sector or theme, it sends a pricing signal to fund lots of that thing…. and then it turns out that we overbuild whatever that pricing signal was pointing at. A great example of this is the digital asset treasury (DAT) trade from last year: the market was pricing any and every DAT at a premium to NAV, so tons of small companies pivoted to become DAT companies. That turned out to be a horrific allocation of capital and now all the DATs trade at a discount to NAV (with one exception!).

Generally, bubbles happen because of some mania…. but what happens if a sector wide bubble is caused by one fund levering up and doubling down on a specific bet?

I am not saying that’s what happened with Situational…. but I’m also not not saying that!

Go back to Archegos a few years ago. With the benefit of hindsight, it’s clear that they squeezed the stock prices of the companies they owned…. but it was not clear in real time. You can go look at what they were saying at the time; Viacom was talking about the stock run up just being “The market recognizing our potential as a global streaming powerhouse.” Viacom used that stock run up as a signal and raised ~$3b to invest even more heavily into streaming.

Now consider Situational Awareness. Almost every company they were invested in over the past few months saw their stock prices scream higher. At the time, we thought the price movement reflected the endless demand and bottlenecks from the AI buildout, and to some extent it probably was/is! But some of that squeeze was almost certainly Situational doubling down (plus everyone rushing to front run or clone Situational’s book).

Many of Situational’s investments raised a lot of capital over the past few months. SHAZ raised $1.6b in June. NBIS raised $4b in March. And even if they weren’t raising equity (or convert) capital on the open market, many of them were raising project financing that was in part supported by their stock price (or perhaps supported by the stock price and equity financing of the customers they were building the project for!).

If you go read the earnings calls for any of the hyperscalers, they’ll talk about how their massive investments in AI are backstopped not just by the ROI they’re seeing on their internal projects but also the massive demand / offers they have from third parties to buy their compute and power… and I can’t help but wonder if a lot of that demand came from stock prices that were, in some part, inflated by Situational Awareness.

I’m not saying AI is a bubble, or any of these gains aren’t real…. but it is kind of funny to think that there’s a world where a few years from now people look back and say “damn, that tiny little hedge fund managed to inflate an entire AI bubble / cause hyperscalers to commit to literally trillions in investments that there was no end demand for.”

PS- a lot of people have suggested to me that LTCM (of When Genius Failed) has parallels here. There are certainly some similarities (smartest guys in the room blow up with too much leverage), but LTCM was much more a macro fund that was really levered up on quant trades. It did almost bring down some banks given its leverage, but I don’t think it had huge impacts on specific stocks or sectors. In contrast, Archegos and Situational both really helped companies / sectors squeeze, but they didn’t really represent contagion risk to the overall economy….. so I think they fit together much better.

And online rumors are, of course, always 100% accurate!

As I was writing, Matt Levine published a nice overview / background / explainer.

In investing, you’re approaching GOAT territory if you do 20% annualized for 10 years. That’s ~500% returns; Situational Awareness did that in roughly six months to start the year!

Burn the boats meets the dark arts (premium idea)

Andrew — Mon, 27 Jul 2026 20:11:07 GMT

Today’s (premium) idea combines some (heavy) activism with a bit of dark arts. Let’s dive in:

(Note: Below are five bullets I try to start every write up with as I think they help frame ideas / thinki…

July 2026 Random Ramblings

Andrew — Mon, 27 Jul 2026 11:41:52 GMT

Investing is a game of arrogance. The base rate when you buy any stock is that it just does the market return, so every position you hold is a bet that you know something the market doesn't. My July ramble is really one question asked five ways: when do you look in the mirror and admit you were wrong? I walk through my three-year rule on a single name (if it has gone nowhere for three years, the problem is probably you, not the market), and the harder version, a value fund that has underperformed for a decade.

I use myself as the example. I saw AI inflecting in late 2024 and didn't pull the trigger, because I'm a value and event guy and I didn't see the bet, and a lot of those names then went on a generational run. Was that discipline or a mental block? From there I get into why you're effectively short Nvidia if you don't own it and you're benchmarked to the S&P, the Fundsmith letter walking back its principles as the cautionary tale on both sides, my own April 2025 book (the net-cash biotech and the Nebius trade I sold way too early), and why London increasingly trades like an emerging market: a takeover wave, private value miles above public value, and the frustration of owning cheap names that only move if someone buys the whole company.

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A (quickie premium) springload

Andrew — Fri, 24 Jul 2026 20:03:19 GMT

I’m going to keep this fast for personal reasons (I’m allegedly taking the day off and am scheduled to do my first escape room in almost two years in about two hours1!)….. but sometimes a filing is so…

$LNW: a slot machine oligopoly at half Aristocrat's multiple | Zack Buckley

Andrew — Fri, 24 Jul 2026 13:02:29 GMT

Light & Wonder ($LNW) is one of three companies in the slot machine oligopoly, with 70%+ recurring revenue, and it trades at 7-8x EBITDA while Aristocrat, its closest peer and arguably its slower-growing twin, trades at roughly double that. Zack Buckley thinks the market is wrong on almost every count: the stock has traded like a SaaS chart on AI fears even though slot content has almost no AI exposure, the Street doesn't believe 2028 targets from a management team that already hit the last three-year guide it set, and the soft first half is a game-launch timing story (Aristocrat launched in H1, Light & Wonder's slate lands in H2), not share loss. Zach has sized this the largest he's ever sized anything, and you can hear it.

I push back where I can: whether Caesars could ever build its own boxes (Zack: Marriott doesn't build elevators), why management is paying down debt to appease Australian shareholders instead of murdering the share count at these prices, what the Dragon Train settlement really cost them, and SciPlay's genuine AI risk. We also cover the move to a sole Australian listing, the Grover charitable-gaming acquisition at ~7.5x EBITDA, and what would actually break the thesis.

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Most AI tools are very good at sounding right; the summary is clean, but can you trace it back to the filing, the transcript, the exact passage that drove the answer? AlphaSense owns the content (over 500 million curated documents, from broker research and expert transcripts to filings and earnings calls) and the retrieval layer on top of it, so every answer links back to an exact, verifiable source.

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It’s the jockey, stupid.... right?

Andrew — Thu, 23 Jul 2026 11:34:14 GMT

Football1 is a ratings juggernaut in the U.S.; it made up 92 of the top 100 rated telecasts in 2025.

Football has a lot of things going for it that make it perfect for a TV broadcast (natural commercial breaks, scoring plays that are rare enough that games are naturally tense, etc.), but one of the big things is how much strategy there is. On any given play, each team is making countless strategic decisions: run or pass? Shotgun or under center? Four wideouts or two? And there is no perfect answer; the right decision on any given play is impacted by endless factors (time left in the game, score, personnel, what the other team is doing, etc.).

That strategic variety doesn’t just make for entertaining games; it creates natural storylines and discourse, so much so that there’s a name for second guessing a team’s strategy after the game (Monday Morning Quarterback).

Contrast football to, say, chess. Chess can be a lot of fun, but there’s just not a lot of discussion. The number of moves is limited, and there’s always an “optimal” move (or a few optimal moves). You wouldn’t suddenly start moving your king erratically because the game situation demanded it or something.

Investing is a lot like football in that way. Because we’re dealing with a lot of unknowns and the real world, there are no “optimal” moves. Do you want to buy great companies that are growing quickly? Sure! But price matters; Microsoft is a great company, but if you had bought them in early 2000 it would have taken you almost 15 years just to break even on your investment! It’s not like MSFT performed poorly as a business over that time; revenue grew ~10% annually and EPS compounded high single digits from 2000-20152, but it takes much more to grow into the ~70x P/E that Microsoft started the century with!

Source: fiscal.ai. You can get a 15% discount on fiscal.ai membership by signing up here

Anyway, the reason I’m writing this post is because over on Value Investors Club (VIC) someone put up a message titled “it’s the jockey, stupid” that noted they were a value investor and their biggest mistake over the years had been passing on businesses with good “jockeys” because the price was too high only to watch the business outperform as the good manager continually beat expectations. That post created a (somewhat) lively debate: some people suggested price matters, others suggested it’s better to focus on good businesses versus good management or good prices (one snarkily posted “it’s the business, stupid”), while still others chimed in suggesting focusing on founders3.

Again, nothing is guaranteed in investing. The answer to “low price versus great management versus good business quality” is generally “it depends.” How low is the price4? Something trading at 5x earnings is generally pretty cheap…. something trading at 0.5x earnings is much cheaper! How great is the management team? There’s a difference between having Steve Jobs (perhaps the GOAT CEO for his AAPL turnaround) and Eric Schmidt (who did a fantastic job at Google, but isn’t on anyone’s Mount Rushmore for CEOs). How great is the business? Home Depot is a very good business, but it’s got nothing on Google Search (the core business).

So all of those variables matter…. but industry context matters too! If you offered me the choice between a coal business run by a C+ CEO at 10x earnings and a similar coal business run by an A CEO at 50x earnings, I’m taking the cheaper one, no question (though, given we’re talking coal companies, I’d also be wondering why the multiples were so high!). That’s probably the right decision; Warren Buffett himself coined the line, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact,” so if you’re buying a commodity business like coal you probably just want absolute cheapness…. but switch from a coal business to a tech company, and I’m taking the more expensive business with the best management every time. Tech evolves so quickly and has such fat tails that the manager probably matters more; there’s a reason Myspace is basically defunct while Facebook is a giant today and and his name is Mark Zuckerberg.

So tech is a place where management matters more, right? Perhaps! But it’s interesting that the “tech at 50x earnings” example I laid out is basically MSFT in early 2000, and that didn’t exactly work out well. It’s also worth noting there are plenty of examples where brilliant management stepped into a tech business and failed anyway; Marissa Mayer was about as star a hire as Yahoo could have made, and all that talent couldn’t outrun the decline of the core business. And it’s not just tech! Ron Johnson looked like a genius building out the Apple Stores, and then he took over JCPenney and nearly ran the whole thing into the ground in under two years. When can a brilliant management outrun the yoke of a bad or declining business?

On the flipside, Buffett said business outweighs management…. but then how do you account for Elon Musk? Historically, you would have been better off literally lighting your money on fire than trying to do a start-up rocket or car company. Why? Because all of them would involve you losing all your money, but at least if you lit it on fire you’d do it quickly and save yourself the time and heartbreak of trying to build a business that lit all the money on fire anyway. But neither those base rates nor valuation mattered for Elon Musk… so is Elon just the exception that proves the rule?

Charlie Munger once noted that what made the market so difficult is it effectively operated on a pari-mutuel system (the better the horse looks, the worse the odds you get; in investing, the great jockey and the great business come with the price already marked up), but what’s so interesting is that the market offers you the ability to trade off so many different levers against each other. If you increase the “management” lever and demand better management, you generally pay a higher price. Ditto business quality.

So how do you decide which lever to push and how hard to push them against the others?

I’ll end this article the way I end so many of my articles: I have no good answers here! But that VIC post has wormed its way into my head and I’ve been thinking about it a lot, and I wanted to share those thoughts with you!

Given the World Cup just ended, I’ll clarify for my international readers I mean American Football. The World Cup was awesome though!

The EPS math depends on your endpoint; GAAP FY2015 EPS was dragged down by the giant Nokia writedown, so the exact CAGR lands somewhere in the 7-9% range depending on how you adjust for it.

A related argument noted VCs’ huge focus on founders and their belief that truly exceptional individuals / founders are what drive the majority of gains.

To clarify, low price means cheap valuation, not absolute low price in stock price terms!

July 2026 (Premium) Update

Andrew — Tue, 21 Jul 2026 16:14:46 GMT

Before we get to the updates- first, thank you so much for subscribing to the premium site!

Second, please remember you can always reach out to me if you have questions or want to swap thoughts on any…

$PRKS: SeaWorld, an 8% cash yield, and a possible 80% short squeeze | Hawkins Entrekin

Andrew — Mon, 20 Jul 2026 13:57:26 GMT

United Parks ($PRKS) owns SeaWorld and Busch Gardens, trades around 8x EBITDA with an 8%+ unlevered cash yield, and is plowing basically 100% of free cash flow into buybacks while Hill Path sits on roughly 60% of the stock. Adjust for passive holders and effective short interest lands somewhere near 80% of float; Bloomberg's short squeeze score is 93 out of 100. Hawkins Entrekin (Valyte, and the guy who pitched Vornado on this podcast right at the bottom of New York real estate) thinks you're buying irreplaceable hard assets below replacement cost, with a squeeze as the cherry on top. His fair value: low $80s against a stock in the high $40s.

It's catnip to me, which is exactly why I push back. EBITDA fell from roughly $700 million to $600 million in an inflationary environment; is that Epic Universe's one-time supply hit, or a sign SeaWorld is the industry's swing capacity? Management has blamed weather in 15 of the last 16 quarters (I counted). And when a 60% owner is pushing every dollar into buybacks while attendance sits 20% below the 2008 peak, you have to ask whether this is being run for long-term operations or just for the spreadsheet. (If you’re interested, here’s the PRKS trata call I used to help prep)

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