00:00 Speaker A

I mean, Scott, it’s interesting that you used the Mag 7 as an example because of course, in that cohort, there’s a pretty big range of of those valuations and how close they are to the average, um, you know, valuation ratio. But is that something that you would be advising individual investors to also look at, sort of look at things that are not outliers in terms of their valuation?

00:23 Scott

So, yeah, where we go with this, I I’m sort of a a free cash flow junkie if you will. I pay a lot of attention to free cash flow trends and growth and growth drivers, okay? When you look at this Mag 7 component, now, there’s a couple that are probably outliers that we have to handle differently. Um, Tesla would be an example of that. But in aggregate, when you look at these companies, the free cash flow generation coming out is is astounding and something I haven’t seen in my 40 plus years of doing this. This is much different than the tech bubble, okay? So what I have is is a set of companies with different phases in the way they’re playing through this AI opportunity that are spending a lot on CAPEX, got that, but still generating positive free cash flow, and in most cases, still reducing fully diluted share count. This is a very healthy setup, right? So these companies are spending, but not in a way that is in excess of what they’re generating in free cash.

01:21 Scott

They’re not having to leverage up that much, um, and they’re not having to issue that much stock to do that, which again, big difference from back in the 99 2000 time frame. So all told, when we look at this, the financial health of these companies is is very, very compelling. And so they’re in a good shape to continue to spend and and have it be persistent, so long as those underlying free cash flow trends persist. Big focus for us and it it kind of permeates the way we’re thinking about large cap US equities more broadly right now.