Can Tech Recover? With Alex King From Cestrian Capital Research
In this episode, we're joined by Alex King from Cestrian Capital Research, and we discuss specific tech investment names and if they are recommending them.
Can Tech Recover? With Alex King From Cestrian Capital Research
Summary
- Stock Market Live has been renamed to Investing Experts Podcast.
- In this episode, we catch up with Alex King, founder of Cestrian Capital Research, and who also runs Growth Investor Pro service on Seeking Alpha.
- We discuss Salesforce, semi-conductors and more.
Editor's Note: This is a transcript excerpt of the full show we record on Wednesday with a live audience. Please note that due to time and audio constraints, transcription may not be perfect.
We encourage you to listen to the show above or subscribe to listen on the go via Apple Podcasts.
Check out more of Alex King's research in Growth Investor Pro.
Grab your free 14-day trial of Austin's service Cash Flow Freaks now.
Daniel Snyder: So, you guys may know Alex. Some of you might not know Alex. Alex, welcome to the show. Wait one second, just want to make sure you’re unmute. So, for everybody that doesn't know, Alex, runs Growth Investor Pro. Over here he’s at Seeking Alpha marketplace service. You focus on growth at a reasonable price, right, or profitability?
Alex King: We focus on a lot of things. We call it Growth Investor Pro because that's where we started. But actually, in the service, you've got growth stocks, value stocks, ETFs, long-term trading, short-term trading, options, rates, dollar. But the catchy part is the growth part. And it's also the part that's been most interesting to do this year because obviously growth all over. It's all going to zero. It's never going to go back ever again ever. Everyone hates growth. No one's interested. You can't make any money in it. And so, actually, that's been the most fun part to focus on all [indiscernible].
Daniel Snyder: I love that you said that.
Alex King: My professional background before I took this was in institution vesting, all in tech, VC and the leverage buyouts, all of which are growth companies one way or another.
Daniel Snyder: Yeah. The guys, I can't communicate this enough. I mean, you're a legend in this space. So, I'm thankful that you’re here with us and joining us from across the pond. So, I think the best place to start is let's get your reaction to what's going on with inflation in the Fed right now? And I'll let you – I’ll just leave it broad. Let you take it where you think we should go.
Alex King: Yeah. I mean, I'm not sure I've got any unique insights on that. I mean, if you read all that Chicago school stuff, from a hundred years ago, you know, it proved to be correct, which is if you increase the money supply, inflation goes up and if you decrease the money supply, inflation goes down and it's that simple. And I think as is now well known and understood, yeah, the money supplier is increased massively during COVID, probably too much.
I think it's hard to argue it shouldn't have been increased at all because people forget, you know, in February, March 2020, it looked like the economy might stop, and it looked like an echo of 2008 when it looked like the economy might stop because of credit issues. So, the risk, the COVID crisis wasn't really an equity crisis. It was a cash flow crisis. If landlords weren't getting paid, suppliers weren't getting paid, if cash doesn't flow, the economy stops. I think most people would say it was right for the Federal Reserve to step in and free up that liquidity.
Think now most people would say it's overdone. You know, you wouldn't -- I don't think the Fed ever intended for, you know household savings to be an all-time high by the end of 2020 or 2021 whatever it was. So too much money came into the economy, and so low and behold, inflation out. As everyone, I think, would agree now they reacted too slowly. It wasn't just them. Most central banks across the world were the same.
And now they've had to slam the brakes on too hard. And so, it's crazy volatility in every market you can think of. You know, and what's been particularly nuts this year, I think is that, anything in late 21’, I think it was fairly obvious that the market was going to correct. If you looked at the NASDAQ or the SPY or whatever, it was going to correct. We said that so in our service loud and clear. November 21st, I think we said this is probably a talk, you know, watch out.
But I think what wasn't obvious was everything was done. Right? So normally you go, well, maybe I'll rotate out of growth and into value or buy some credit or I'll buy some commodities or whatever. The only thing, the only sectors that made money all year consistently is energy. That's it. Everything else lost money. That's incredible. So, yeah, it's been crazy. I think what -- where we are now, again, most people would agree is, they've raised rates too fast. CPI, PC, every measure is coming down. I don't see any recession anytime soon.
Personally, I’d like anyone to show me any actual data that says there is going to be a recession. Because the jobs market says there isn't. GDP says there isn't. It's just headlines that says there is. So personally think that we are done with the hiking cycle. House view here is, yeah, we might get a little bit of weakness in the next couple of days in the market, but probably that October, November low was live. And probably, security just repriced now off of a higher rate and inflation rate environment. That's it?
Daniel Snyder: Alex, I like where your heads at. I was kind of curious if you had any thoughts at, you know, what you said about recession. You’re like, there is no recession. I don't see anything that says recession. Then why do we see people like Kathy would come out and be like, I think we're in a recession right now. Like is -- is that her talking her book in your opinion?
Alex King: Well, I don't like this, you know, let's all pile on Kathy Wood thing, but point to a thing she last said that was correct. Right?
Daniel Snyder: I knowwhat.
Alex King: There is no recession. You know, if you look at – okay, jobs market, look at GDP, where's the recession? The point you just made about silver and gold earlier, you know, I’m sort of remised, which is, well, that's because there isn't a recession. So, I mean, obviously, tomorrow, right? GDP will collapse and the jobs market will go to hell and rest of it. But right now, there is no recession. So, it's just fame hungry, frankly.
And people obviously get scared very easily. If you've been investing this year or trading this year, it's hard you know, to contain the worry. You’ve got to work really hard at that. But people thought it run too deep and now people will be surprised, I think, when the upside comes and no one believe the upside. If you remember the rally coming out of the COVID lows, people shorted that rally all the way from March 2020 up to the end of the year because no one believed it was real. But it was real.
And you knew it was real because it was happening. You know, the evidence was, it was happening. And so, I think when the upside comes now, that's, you know, this week or next year, nobody will believe it. And people won't make the money that's available because they'll be too busy trying to convince themselves that, you know, this is a fake out and it's going to collapse and go to zero and blah. So, in the same way that everyone – yeah, just normal psychology. Right? Everyone got too carried away on the upside in 2020, and particularly ‘21, and now everyone is too carried around the downside, just normal.
Daniel Snyder: And we know that the correlation between stocks and bonds is pretty much -- they're extremely correlated right now. More than they have been over the last decade.
Alex King: Right.
Daniel Snyder: And Christian here in the chats also bringing up the point about, you know, the inversion of the yield curves across the border. So, it sounds like we're just flatting out saying, you know, the bond market's wrong in this case. And could that be the fuel that we could see into this valid – this next leg that no one actually is expecting?
Alex King: Well, I think they are indicators of what may happen in the future, but it's not a guarantee. So, you'll know when we're in a recession because we'll be involved, but we're not in right now. And so, you know, investing been invested. We can all come up with a range of indicators that tell us exactly what's going to happen tomorrow, except they don't. And so, all you ever kind of have is look at the actual data, the real time data in front of you, and then work out whether the indicators she was using were any good.
And so right now, again, we could change tomorrow, but right now, where is the recession? I think one argument says, well, there's all these layoffs, that means less consumer spending, that means recession. I think that's probably a good argument. And if you look at why the layoffs are happening, my own view is, all companies are perennially overstaffed always, and you can always take a lot of cost out of any business with no harm to the top line, always.
Always. It's just a people don't mind to do it for obvious reasons. And right now, you have air cover. You know, if you're a CEO of a sort of CFO of a business, you know, you can take 20%, 30% of headcount out of your business tomorrow, and nothing bad will happen. Normally, you know, you get dragged to the edge for doing those things.
Now, you know, everyone's doing it, so why not? But there is I think an argument that says, that if there's enough of that that could -- that could cause a serious slowdown in consumer spending, partly if you've actually lost your job and partly if you're worried about losing your job and the effect that might have on psychology. I mean, that's probably the strongest argument for me.
Austin Hankwitz: So, let's pretend that we are going to be in a recession, right? The NBER has said we're in recessional. It's happening like –
Alex King: Yeah.
Austin Hankwitz: That’s reality. What specifically from your perspective, Alex, would, like, what are – what would those indicators be? What would the data be to say to you that we are in a recession? Right? Because, you know, 15 years, 20 years ago, you'd say two consecutive quarters of GDP contraction was a recession. We saw that sort of to a very small degree recently, but like, that's not a recession. Now it's like, to you like, what would you say is like, okay, these four things are happening? We're in a recession?
Alex King: Well, I'm old. So, I would still look to GDP. I guess you would look at, you know, overall number of payroll account and GDP. So, I appreciate they aren't particularly insightful or technical indicators. Yeah. Clearly. And they're kind of lagging indicators as well. You only find out after the fact. But in the end, those are the indicators is, you know, are people employed? Is consumer spending holding up? You know, consumer savings holding up and is GDP growing. Those are things I would look at.
Now I'm not a macro person, no claim to be, other people on this, you know, watching the show will be much smarter than me on this front, make no claim to expertise on this. All I would say is, right now, I don't see one happening. I don't see one that's actually happening right now. And I don't see why would there be a recession? Right? Just ask yourself that. Why would there be one? Because rates are up? Well, you know, that affects certain things like, am I going to buy a house tomorrow? Okay.
If I buy a house tomorrow, I'm probably going to buy some furniture. So, you can you can construct an argument like that. To me, the thing to look at is, if the layoff thing really gets hot, I could induce a recession. But I don’t see it yet.
Daniel Snyder: Got it.
Austin Hankwitz: Okay.
Daniel Snyder: I'd like to -- I mean, we're kind of seeing the conversation shift now into what earnings will be next year. Yeah. And it's going from the layoffs that you're about it. And it's all great points. I mean, I've thought that as well. I'm like, oh, is this the moment in time where it's just easy for executives on earnings call to just guide lower and do layoffs and just cut the fat, if you will, that they haven't had that opportunity. Right. Without having the market react crazy, and be like, oh, you're cutting jobs, therefore, you're not profitable. Right? We always want to see them higher. That's the positive sentiment.
Moving on to earnings of the overall market going into next year, I mean, we've seen the big firm -- Goldman (GS) came out and said, they're seeing flat growth next year. We've seen a few people say negative. Of course, there's the ones that say positive. Not much though like, do you have any thoughts of what earnings next year might look at for the overall market?
Alex King: Yeah. Overall market, no. But if I -- if I look at, you know, the stuff that we cover, So, if you look at the sectors we cover for single name stocks, we cover tech companies and more of the high growth than the Oracles (ORCL) and IBMs (IBM) and so on. And we cover space and defense. So, you know, if you look at space and defense, defense companies will have higher earnings, you know, those backlogs are rising, and they're rising because of the increasing tensions in the world. Okay.
So that backlog growth is going to flow into revenue growth. It's going to flow into earnings. So, earnings are going to get up over the course of the next two or three years. And if you look in tech, tech earnings are going up. And the reason they're going up is because, you know, in times of free money and I – again I’m old, and I've done this for three decades. Right? So, in times of free money, tech companies on purpose go, we're going to lose money.
We're going to blow money on product development, marketing, and acquisitions. And we're just going to chase the top line of expenses and everything else. And it's rational to do that when money is free. Right? And we're going to run negative cash flows, negative earnings. And then the better ones go, okay, money now costs something. So, I'm going to slow down revenue growth. I’m going to slow down the rate of acquisitions.
But what I'm going to do is become much more efficient. And for the better tech companies, mainly software businesses where you have high gross margins, you have tunable levels of OpEx and CapEx, you can kind of cut your cloth to suit the environment you're in. So, if you look at the two big, big earnings reactions just in the last -- we put a note out on this recently. MongoDB, that's MDB, and DocuSign (DOCU), both had huge earnings reactions on pretty awful quarters.
If you looked on the top line, right, the revenue growth slowed for both. [indiscernible] the revenue growth slowed for both. And their guidance is for growth to slow even further. Now if you put those quarters out in 2020 or 2021, your stock would crater because the market would say, well, what's wrong with you? Why can't you grow faster? Both companies upped their guide a little bit on the earnings front.
So, MongoDB, for instance, said it was going to be EPS positive, not EPS negative. I mean, so what? Right? EPS isn't even the thing. And the stock was up 20%, 30%. DocuSign, similar sort of story, stock up about 20% from memory. And they put in terrible quarters to be clear. And both said that growth would decelerate again next quarter. So, earnings in tech are going to go up.
Revenue growth will probably be – be know probably down a bit on this year I would think, because if you look at these flywheel type business models, the subscription business models, that flywheel is slowing. And so, you can see it in the change in the remaining poor performance obligation. That's the backlog. You can see it in change in deferred revenue. That's the prepaid, but yet to be recognized revenue, they're all slowing.
They're longer-term indicators of what the quarterly revenue growth is going to be. So, growth will slow, but earnings in the better companies will be up. The more mature things, if you know, your Oracles, your IBMs, your AT&Ts (T) who knows, but your growth companies' earnings will be up for sure.
Austin Hankwitz: So, with those growth companies like, what specific line items get you excited? Is it free cash flow? Is it their actual earnings? Is it actual earnings per share? Like, what if you could, like, create a screen of some sort, to look like a screen of a bunch of stocks too that are doing very specific things to help you predict what this might look like. Or help you choose the stocks to even begin doing more research into? Is there maybe like a line item or two? And like what those line items might be moving toward?
Alex King: Yeah. I mean, bear in mind, this is my whole career, so I can bully you for literally days on this. Right? But just to, just to cut the chase. So, if you look at -- the way we do it is, we you know, we cover a lot of stocks, and so we try and get a single lens to which to look at, you know, all the tech stocks through one lens, all the defense stocks through another. And in tech, pretty simple. Revenue growth for the quarter versus the same quarter last year, might give you a snapshot of growth.
Trailing twelve-month revenue growth versus the same period last year. So that's a slower burn measure. Right? It goes up, slower down, slower. But take no notice whatsoever of earnings per share. Who cares? Not even a thing, right? It's just an accounting thing. You can manipulate it, left, right, and center. We don't even measure it. We don't report on it.
What we look at is, in tech companies we look at unlevered pretax free cash flow, which is basically EBITDA minus CapEx minus changing working capital, which is -- if you get paid by your customers faster than you pay your suppliers, you have positive change in working capital. If you get paid slower than you pay out, negative. So, get paid fast, cash goes up relative to earnings. Get paid slow, cash goes down relative to earnings. Simple. And then we look at the net cash or net debt on the balance sheet.
Those are the headline things. The couple of things that we look out that are really informative of the future. Well, in defense you call backlog. In tech people call it, remaining performance obligations. It's a mouthful, but it's starting to appear now in most companies 10-Qs and 10-Ks. You have to, you know, [indiscernible] control F for it. It's on page, you know, 732, but it's really interesting. So, for any company that has revenue visibility as a subscription model, something like that, or in defense where you have multi-year order book.
Look for remaining performance obligation or backlog. RPO measures the total contracts that the company has signed with its customers, total value of those contracts that's yet to be invoiced or paid. Right? And then oh, I'm sorry, the total value of the forward contract book and then a subset of that deferred revenue is the subset that they have invoiced. Now, they may have been paid for it, in which case it will encashed. Or they may have yet to be paid for it, in which case it will be accounts receivable.
But look at RPO, or deferred revenue, and that's a little window into the future. Very simple. If RPO is growing, if it's a big number relative to last twelve months revenue and it's growing faster than TTM revenue, probably growth is going to accelerate. And if it's growing slower than TTM revenue, probably growth is going to decelerate. These aren't linear relationships. They're only directional. It's pretty useful.
And so, we've used it a number of times in the Growth Investor Pro service both on the way up. So, in 2020, [indiscernible] to say this thing's going to accelerate. Look, you can see in the order book, and it did, bigly. And we've seen it in things like Datadog, that’s DDOG and Zscaler (ZS) this year. And we said these things are going to slow. And they did. So, nothing's perfect. It's a pretty good thing to look at. So those are the things. Revenue growth, cash margins, balance sheet, RPO, those are the things.
Austin Hankwitz: Got it. And quickly before Daniel -- I'm sure ask a question, the thing you mentioned too is the net debt. Are you at all like, when you're thinking about investing into or it wasn't just analyzing, right, you know, a tech company. Like, are there specific net debt multiples you try and keep in mind that are like the safe zone? Or are you really looking for no debt? I mean, what's that kind of like, you know, Goldilocks spots?
Alex King: Yeah. So, it depends on, depends on the company. So, if you look at, you know, a mature business, like, you know, an Oracle, let's take as an example. You know, if Oracle is running at, you know, two, three, even four times debt-to-EBITDA, that's fine, right. Most of these interest costs are hedged out and fixed. The cash flow in a business well that's not going to change anytime soon. That’s not going to stress anybody out.
With the growthier companies that either don't generate much cash or they've just started to them you have to look a bit differently and say, well, how much net how much liquid cash is on the balance sheet? Not, you know, marketable securities because you don't know what they are. There might be see bills or there might be shares in the private crypto firm you don't look out. So how much actual cash money is on the balance sheet?
How much do they burn on average each quarter after tax? And so how many quarters runway do have? That's a venture capital toolkit, right? But it's relevant because so many companies went public at such a young age, if you like, in the last five years, that with a lot of them, you have to look at them as venture capital investment. So, is this thing going to need to raise money anytime soon?
And if you have to raise money in this environment right now, that's going to hurt the stock because either you have to raise debt, which will, you know, spook shareholders, we have to raise equity at some even further depressed price. So, I think it depends on the company, mature, low growth, 30%, 40% cash flow margin, software business, big leverage, that's just fine. I mean, don't forget, there's a whole LBO industry that makes a living out of 7x, 8x leverage. So, it's fine. High growth business that doesn't generate much cash. Look how much liquid cash you’ve got versus the quarterly burn.
Austin Hankwitz: I love this guy. You want to come back like every episode? This is so interesting to me.
Alex King: Sure. Yeah, why not. Yeah.
Daniel Snyder: I told you he’s a legend. Alex or maybe Austin, maybe we should kind of pivot it back to Salesforce. Alex, I know you recently…
Austin Hankwitz: Yeah. Yeah.
Daniel Snyder: …put out some article about Salesforce here. I think it was the end of last month. I was looking through. Austin, you had the question about management. Maybe you want to ask it to Alex and get his thoughts?
Austin Hankwitz: Yeah. For sure. So, I had written down -- we've seen a laundry list of executives at Slack step down. Right? Bret Taylor, the co-CEO. Stewart Butterfield, the CEO. Tamar Yehoshua, the Chief Product Officer. Jonathan Prince, SVP of Marketing. And not to mention, you know, that was Slack and at Salesforce, they lost their Chief Strategy Officer and the CEO of Tableau. What might be going on behind the scenes here? Why is this happening?
Alex King: Yeah.
Austin Hankwitz: And what may be a person that has no idea, like myself, I don't own Salesforce. I'm not very keen in the business, but I'm seeing these things and I've seen the headlines. How would you kind of break it down for someone like me?
Alex King: Yeah. So, I think you have to – so first of all, again, I'm old. I remember Salesforce's IPO, back in 2002 or 2003, I forget which. I think you have to separate it into two things. The departure of execs whose companies have been acquired. That's normal. You should expect that. You know, if you're a guy like Stewart Butterfield, I mean, if you're -- if you look at Butterfield's background, really interesting guy. So, he set up two gaming businesses.
You know, Slack was supposed to be a multi-user dungeon for want of a better term. Right? A guy like that is never going to live very long in a corporate structure because he's going to go insane. Right? If you say you have to arrive x time in the morning and leave at y time at night and use, you know, this business card and wear that and all that. You know, these guys last months. Even if they have to surrender their own ass, they just can't bear.
So, for -- you know, Butterfield from Slack, Tableau guys, that I don't think should spook anybody. That's just normal. Right? And they're both – both of those companies have been owned for long enough now by a serial acquirer like Salesforce, and they're very good acquisitions. People don't think they are, but they're very, very good acquisitions. People have even squealed and overpaid and blah, but they always work out really well. They'll have sucked out the DNA out of those businesses by now.
And so that the founders leave, why wouldn’t it stress me at all and also Salesforce yet. And Bret Taylor leaving, this is a sort of periodic spasm that Salesforce goes through, and it's all to do. With the founder, you know, the Founder CEO Benioff's desire for control. So, you know, in 2015, the company came very close to being sold to Microsoft, very close indeed, didn't go through on price ultimately. And so, since then, Benioff has sort of flirted with, could he possibly bear to hand over any kind of control whatsoever to another CEO.
And the answer so far has been, no. So, they've hired at least two co-CEOs to my memory. And then torched them within the space of 12, 18 months, which just kind of makes me laugh, which is who would take the job to be co-CEO with a Founder that's been there, you know, what, 21 – 20 years as a public company and 25 years, if we include his private history. It's just nuts. You're always going to be road killed. And so, I think the, again, just step back, acquired, execs leaving, non-issue, normal, Benioff grasping back control.
So far, when he's done that, it's worked out well. Right? Now everyone has, you know, everybody has their sort of best window of their career and all of us get old and all of us go off the ball as we get older. So, the question is, is Benioff there now. Right? Is he prepared to work hard enough? You know, or does he want to spend more time on Hawaii? Who knows? But that these guys are leaving in and of itself doesn't stress me out. It comes down to, is Benioff basically going stock prices on the floor.
I'm going to award myself a bunch more stock. You know, what is it? $135 or something, $136. And then I'm going to ramp this thing, which is more than capable of doing to have one final [indiscernible] going by myself to another Hawaiian island and then quit. Right? But he won't quit by handing over to a CEO. He'll sell it to some. Right? So that's the question. My own personal view is, I've seen a lot of founders over the years.
And I've seen a lot of founders run public companies like this, and they're usually the ones to back. And Benioff so far, every time he's throwed a co-CEO or senior manager under the bus, it works out well. So, for us this has you know, me as an individual and us as a firm, I'd say benefit of the doubt there. But he is getting on a bit.
So, at some point, that trick is going to not work. For now, you know, we rate the thing up. Accumulate. Right? I own it. I'm happy to own it. It's on the floor right now. It should go up over time. It's the next Oracle. I know it's mature. It's just going to be part of plumbing for the next 20, 30 years, so it'll probably be fine. But he can only do this so many more times.
Daniel Snyder: I love all those thoughts because that's kind of where my head went. I mean, you made up the good -- you brought the good point about, you know, CEOs that are a part of an acquisition. Usually, they have their, what, two to three-year contract where they stay on board and then they're usually pushed out the door.
But you're talking about CEO of Salesforce and it's like the guys, like, I can imagine it's almost like working with, like, Carl Icahn, where the guy is just like, I don't want to go. Like, I'm not going to let go. This is my baby I built it x, y, z. But -- so I was looking at the Seeking Alpha Assemble page. I'll just pull it up for everybody real quick. On Salesforce, our Quant system does have a strong buy. I know you mentioned you have an accumulated as well.
Trying to get your thoughts on it though. I mean, the valuation is a little high, but of course, it's tech. And if you -- as you were talking about, you know PE and earnings per share and how they can be manipulated and stuff, but we were also talking about I mean, this company has already experienced massive growth throughout the years that it's been on the market and all the acquisitions. And I was scrolling down here at the bottom earlier and I was looking at, you know, cash and debt balances and everything else.
And obviously, they have $14 billion in debt. Most of that's probably from the Slack acquisition, I would guess. And do you have any thoughts on how they're, you know, financially running the company right now?
Alex King: Yeah. I mean it’s a cash machine this day. And don't -- get most of their cash is paid upfront on a subscription basis. And so, the cash flow does not stress me out, I'm missing. I don't have the numbers in front of me. If you look at the valuations and multiple of trailing 12-month unlevered free cash flow, it's not scary, and all support. If you look at -- if you look at any conventional debt metrics and that thing, you know, interest cover ratios, anything you care to look at.
There's no -- I don't see any credit risk with that whatsoever, really not. The company again is, has been a really excellent acquirer. So, if you look over the last let me see 10 years, 13 years of Salesforce to stock history it takes a big dive anytime they do a big acquisition. It fell off a cliff with Tableau, MuleSoft, Slack, obviously. And in each time, they paid big for relatively small companies. And what they've done is they bought product innovation.
So MuleSoft gave them in, you know, an integration bus as it used to be called. Slack gave them, obviously, collaboration tools. Tableau analytics. And so rather than develop their own. They've acquired it. And they've paid with, you know, partly stock, partly debt. And every single time that's worked out really well. But no one expect it. There's this sort of general mantra that says, M&A is bad. Well, yeah, it's bad if you're not very good at it.
But it's not bad if you are good at it. If you have a serial process, you can get the integration costs done and you can afford these things. And so, you know – I don’t think there is anything stressful personally about Salesforce now. The big question I will say is, this isn't the question is, you know, can Benioff deliver, you know, another episode of growth himself? Or is this overconfidence in his own judgment? And so based on history, my view is, yeah, he'll do it.
But I’ll have to say last time he did it, my view is, yeah, I'm not stressed at all. Now with two, three years on, I forget how old he is, but he's not young. You know, he doesn't dislike the fire things in life, and he doesn't dislike being on vacation. Right? And so, for all that we've said about recession, doesn't mean it's easy. And you do have to get up for work early in the morning right now if you want to do that. So that that's the risk I would say, not the balance sheet.
Daniel Snyder: Love that you laid that out. One more -- one more thing before we let you go. You've been so generous with your time. And actually, Greg, who does Alex King work for you? He works for himself. Cestrian Capital. Go check out his service on Seeking Alpha Market Place. It's called Growth Investor Pro. Like he says, Alex, you should work for the Fed. That's a great thought.
Alex King: Why would I want to do that?
Daniel Snyder: No one wants to do that, but just throwing that out there. So, Denise had a question here, asking you, any thoughts on Nvidia? And maybe I mean, you're talking about how you love tech. You've always been in growth investing in tech sector specifically. And I think we know, of course, Nvidia (NVDA) is the semiconductor industry, but they had the cores of their chips in the GPU, which is going to be running AI. And all the data centers and everything else. So just kind of wondering, do you have any thoughts that you might want to share with people about Nvidia or AI or tech?
Alex King: Yeah. I mean – yeah, I mean, it does things for machine. Right? No pun intended. And it's going to -- it's just going to keep going. I mean, what's the competition? So, first of all, if you sort of step back, and it's worth saying by the way that, you know, when you when you do tech for a career and I've been in tech, let's say, three decades now, it always does this. It always, you know, gets destroyed every few years and everyone declares it to be over and the oldest you know, going to zero and you know, blah blah blah. This happens all the time.
And so, you know, that that isn't true. Right? It's just very, very, very cyclical. And the up cycles are insane and the down cycles are insane. Right? It just is this volatile. But technology as a whole it's an incredibly young industry. If you compare it to, you know, railroad or, you know, consumer packaged goods or, you know, any industry you can think of. It’s still an incredibly young industry. You know, the first independently sold software as opposed to bundled with, you know, a piece of IBM kit. Probably isn't older than, you know, what, 40-ish years ago.
So, the software industry as an industry is maybe in its fourth or fifth decade. That's an incredibly young industry. And that means that it's just going to keep growing as an industry. And that it's volatile and scary just because they’re youths of the industry. So, if you look at semiconductors, you know, semiconductor -- software for that matter remain rubbish. Right? You know, most people's computer remains rubbish. It can't do things that you wanted to do very easily unless you think like it and, you know, that's pretty limited.
We're all amazed about, you know, Chat-GPT. But if you ask Chat-GPT an actual question, ask it what's the best stock to buy? Well, I’ve tried that. It can't tell you. Right? What it can do is pass together bits of language to make it sound like a person when it's just reassembling words from somebody else's website. It's quite good at that. Right? Ask it. I asked it three days ago whether, you know, the FTX thing was really a fraud or not, and I can't tell the answer. Right?
Technology is really basic and dreadful still. AI is really basic and dreadful still. Computing is really basic and dreadful still. So Nvidia who knows on the cutting edge of what good looks like in compute, but still really basic. Now they have hardly any competition, and that's because Intel (INTC) were too arrogant to spot the opportunity just as they were with mobile originally. AMD sort of caught up a bit by an acquisition.
But Nvidia is way out there in front. AI, you know, everybody thinks that AI has got a long way to run, and it will be the next substantial compute model. And Nvidia is just going to run with that. The stock's, you know, been beaten up. It's been -- it's rebounded really fast. And, yeah, I own the stock. We're ready to accumulate. We think it's got a fantastic future. A fantastic future. So, yeah, very, very bullish on that.
Daniel Snyder: Awesome. Alex, thank you so much for your time. Also…
Alex King: Anytime.
Daniel Snyder: Also, just for the record, I asked Chat-GPT, what's the best Seeking Alpha marketplace service? And I'm sorry, Austin, but it says Cestrian Capital.
Alex King: It’s a big lie.
Daniel Snyder: Because you know, Alex, you are a legend. Thank you so much for all the time.
Alex King: Thanks for having me on. Great show. Thanks a lot, guys.
Daniel Snyder: We really appreciate it. You take care. Alright?
Alex King: Okay. Bye.
Daniel Snyder: Alright. Ah men Austin. Well, I mean, come on. Talk about it.
Austin Hankwitz: We got to get him around like monthly cadence if he's open to it man. This guy is an absolute rock star. I feel like I just learned more from him than I did the four years I spent studying finance in college. Are you kidding me? Jeez.
Daniel Snyder: Absolutely incredible. I mean, Denise over here fabulous. Vida says thanks, Alex. Christian says excellent session. Alex was great. I mean, this is Investing Experts Podcast. I mean, that right there, I think, is like I could have not asked for a better episode to just break down let's talk about growth, and let's talk about tech, and let's talk about I mean, he said no recession. Right. Very firm. Very confident. Very, like, just laid it out. Employment strong.
Obviously, we got about 58 minutes here until the FOMC decision is released. And I think everybody's going to be watching the future markets after what happened with CPI in that early move yesterday. I don't know if you saw that. That was wild.
Austin Hankwitz: Yeah, very wild.
Daniel Snyder: Thanks for joining us today, everyone. If you have any questions, thoughts, stock ideas, people you want to see, maybe on the podcast, shoot us over an email at investingexperts@seekingalpha.com. If you have questions, concerns, if you want to know where the video replays are, those are on Seeking Alpha under the investment – why are you saying investment -- Investing Experts Podcast. It's going to take me a second, we're going to get into it.
Of course, Austin Hankwitz, as always joining us for the hour. He is over on Seeking Alpha Marketplace at Cash Flow Freaks. How's that going by the way? I keep seeing all your articles there. They were…
Austin Hankwitz: It’s fine man. We're having a blast. We're hosting live streams on Mondays. We're posting a little bit here and there. I think I post a little something about Academy Sports and HIMSS in Health the other day. And it was really cool. We're just -- we're keeping a close eye on a couple of ideas. And yeah, just really fortunate to have so many people rocking with us over there.
And if you have any questions about that, shoot me an email. Ask me something on Twitter. I mean, I am on every social media platform, especially TikTok. So here to serve you guys. Again, thank you all so much for hanging out. Yes. Go check out the chat. Alex just dropped his Seeking Alpha Marketplace. And personally, I'm going to go browse a little bit. I'm now a major Alex King fan. And thanks everyone. This was a lot of fun. We will see you very soon.
Daniel Snyder: If you guys are listening to the podcast, or you’re watching the video replay, we're going to drop a link down in the description as well or beneath the video so that you guys can find the service as well. I mean or even if you have Seeking Alpha Premium, just go read the articles under his author page. I mean, very enlightening. He's very on top of it and he publishes very, very frequently. So, guys, go check it out. Thanks for hanging out with us today. You guys enjoy the rest of the day.
Alex, if you're listening still, we owe you some pints. Next time we see each other in the future, drinks are on us. Thank you so much. Everyone, take care. Have a great rest of the day. Disclaimer, of course. All opinions on this episode are our own. Do not take them as financial advice. Do your own research. Talk to a financial advisor, and we'll see you guys next week Wednesday, 12 PM Eastern. Myself, Austin Hankwitz, we'll see you then. Take care everyone. Have a great rest of the week.
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