Not A Bubble! Julian Lin On Tech’s Profitability And Reasonable Valuations

Summary:

• Tech stock valuations are becoming less compelling, but not in bubble territory.
• Julian Lin is shifting focus to dividend stocks and conventional value names.
• Palantir has legitimate reasons to be optimistic, despite slowing revenue growth.
• Why Meta and Alphabet are Julian’s top tech picks.
• Mistake to think NVIDIA is part of AI bubble.

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Julian Lin shares his thoughts on finding dividend stocks in this environment (2:00). Tech stock valuations becoming less compelling, but don’t call it a bubble (7:45) Controversial Palantir – legitimate reasons to be optimistic (14:20) Why Meta and Alphabet are Julian’s top tech picks (19:00) A mistake to think NVIDIA is part of AI bubble (29:00).

Transcript

Rena Sherbill: Julian Lin, welcome back to Investing Experts. It’s great to have you on the show again.

Julian Lin: Thanks for having me, Rena.

RS: It’s always great to have you on. You run a group, an investing group called Best of Breed Growth Stocks, as many may already know on Seeking Alpha and you talk about a number of different sectors over there. But today, I think that we should focus on tech stocks and what’s going on over there.

But before we kind of get focused on tech specifically, I’m curious what you are looking at in the markets in general and what your feelings are generally about the markets these days as we head into the last month of the year?

JL: I think for much of the last several years, I’ve been very focused on tech stocks, especially after the big crash in 2022, valuations were very compelling, even as Wall Street was very pessimistic. So, we’ve had a nice run this year.

But I think, now that valuations are becoming definitely less compelling than just 12 months ago, I’m starting to slowly shift my focus to some more, maybe you could say conventional value names.

For example, I’ve written publicly about some of the big holdings like Enterprise Products Partners (EPD). That’s a pipeline company. As well as cannabis real estate investment trust, NewLake Capital Partners (OTCQX:NLCP). Just starting to find some opportunities within some dividend stocks as well, although I still remain overall bullish on the tech sector overall.

RS: Without getting too deep into it, I’m just curious, where or how do you look for the dividend stocks that you’re focused on or how are you seeking out outside risk reward plays outside of tech?

JL: Given the higher interest rate environment, almost every single dividend stock, or at least high yield stock has become more high yield or cheaper. I think investors need to be careful comparing the current valuations with just five years ago because the higher interest environment does change lot of things.

For example, a lot of the names, which maybe — their leverage would have been acceptable three years ago with no interest rate, with very little interest rates, now find themselves with too much leverage.

One such name is like NextEra Energy Partners (NEP). That’s a name which was one of the biggest winners in a zero-interest rate environment, but has seen the stock get, seen the same stock get crushed as growth has evaporated due to the higher interest rate environment.

Just kind of from a mathematical perspective, a lot of these dividend stocks have a lot of debt, which means every year they have to refinance maturing debt. And if interest rates now are a lot higher than before, it could mean that they’re going to pay a lot more interest costs when they issue new debt to refinance the maturing debt.

So that could really eat into the growth rates moving forward. We’re seeing a lot of, for example, in the REIT sector, a lot of REITs are showing far lower growth rates than before. I mean, to be fair there, you typically grow out like a 3%, 6% rate before interest rates rose. But now a lot of them are showing no growth, or even negative growth solely because of increasing interest costs.

So when I’m looking for investments in the dividend space, I’m mainly focused on names, which one, they have very strong balance sheets, which could only have been possible if they were conservatively managed prior to interest rates having gone up.

For example, the names I just noted was Enterprise Products Partners, that company always has among the lowest leverage metrics in the pipeline sector. But it’s also curious that even now with interest rates higher a lot of these firms, not just to call out their names, for example, like Energy Transfer in the pipeline space is still trying to pursue higher leverage ratios.

They’re not really saying they want to reduce leverage, which to me raises some eyebrows given that interest rates are higher. But not only that, there’s a lot of names which seem to be chasing yield.

Realty Income (O) is a very popular name among dividend investors. But I think some of the capital allocation decisions this year have made me more of a skeptic than a believer and it’s not too hard to do that given that the stocks even that, it’s not even that cheap anymore just at 6%. I think it’s under a 6% yield at this point.

I don’t really think it’s appropriate to continue investing, that is acquiring, new properties at the same cap rates as before interest rates were rising, but that’s kind of what’s happening at Realty Income.

So when – just kind of returning back – when I’m looking for investments in the dividend space, I’m focused both on the balance sheet valuation, as well as the capital allocation policies there.

RS: And when you question the policies like that, is that enough reason to let go of an investment or does it usually go hand in hand with maybe another red flag?

JL: I would say it would be enough, but that’s mainly just due to valuation.

A lot of these dividend names, they’re cheaper, but they’re not like that cheap. For example – and let’s return back to Realty Income. Realty Income, right now is yielding around, I think it’s like 5.7%, or less than 6%. This name is not going to really grow very fast just by the nature of its business model, especially with interest rates so high. Growth might hover around 2%. If they’re optimistic, 3% if they acquire a lot of properties.

So, assuming no multiple expansion, these names, they may not really deliver 8% and 9% returns. They might actually underperform the – from the broader market. In order for these names to beat the broader market, they’re really assuming quite a bit of multiple expansion.

But if their capital allocation policies are subpar, it becomes harder to make the case for multiple expansion. You might actually start making the case for the opposite. So, just based – I guess to answer your question, it’s based on valuation, it wouldn’t be a problem if the capital allocation is not optimal just given where things are trading at today.

RS: It’s interesting. Michael Gayed was also on a few days ago talking about how he sees dividend investments as the near term future, let’s say, whereas some people thought that maybe we would be getting away from those. But based on where we are, in terms of the market cycle, in terms of interest rates, that it makes a lot of sense now. So, appreciate you letting me pick your brain on that a little bit.

Something else that we’ve talked about, more a few months ago, but also leading up into, let’s say NVIDIA (NASDAQ:NVDA) earnings is a lot of the tech names and what’s happening in the tech sector. This AI mania that we’ve seen perhaps come and go, or perhaps we’re still in the midst of it. What are your thoughts on the tech sector and what we’ve seen and where we’re at?

JL: I think with tech stocks being up by a wide margin this year, I’m seeing a lot of investors starting to call them another bubble saying it’s just the tech bubble all over again. But I think there’s some important nuances here. I mean, just — and it goes beyond the fact that tech stocks are not at all-time highs. I mean, obviously Microsoft (MSFT) is still up, is making new highs, but the typical tech stock is still down a lot since their all-time highs.

But the big difference is between now and before, just besides the recovery would be two points, one is profitability and the second one is the valuation reset. And in terms of profitability, we’ve seen a lot of these companies deliver rather dramatic transitions and margins that might be something like going from non-GAAP profitability to GAAP profitability.

We’ve seen that with Palantir (NYSE:PLTR). Palantir just has done four consecutive quarters of GAAP profitability, which gives them the ability to be included in the S&P index. And even CrowdStrike, even though I know the management team there is kind of trying to downplay expectations for them to sustain GAAP profitability, but they’ve somehow managed GAAP profitability by accident. They haven’t even been trying to do that.

There’s those other names that go from unprofitable to becoming non-GAAP profitable. And also some names that were profitable before, but are showing big margin expansion. Salesforce (CRM) comes to mind for that last point.

Salesforce, for example, was previously guiding for, I think 25% non-GAAP operating margins in like 2027, but they’re guiding for like 30% margins this year now. So, a lot of these names have accelerated their plans for operating leverage in the current environment and it’s already impressive for them to deliver such big margin increases.

But it comes even as the macroenvironment was very weak, and that’s an important detail that these tech companies are able to not only sustain resilient revenue growth, but also deliver huge, huge margin expansion in spite of a tough macroenvironment. This is a detail that should not be overlooked by investors.

The other point would be valuation. Jamin Ball of Altimeter Capital has posted some weekly updates on valuation. I’ll just reference his models. His latest update showed that the average tech stock is trading around 5.5 times sales. And that’s actually not so crazy, right?

So you got some names like CrowdStrike (CRWD) at the high end, trading at around 13 times next year’s earnings. And then around in the middle of the pack you’ve got Salesforce trading at 5.5 next year’s sales and 24 times next year’s earnings. Valuations have, even after recovery, have definitely reset to more reasonable expectations.

And so, when valuations are no longer trading at the crazy pandemic levels, it starts to become acceptable for these names to deliver slower top line revenue growth. And again, this is also alongside the fact that they’ve all delivered really strong improvements in profitability.

And so, perhaps during the tech crash, investors would have possessed a great deal of skepticism in tech stocks, thinking that, oh, they’re not going to ever become profitable. Those fears have been, in general, in my opinion, addressed, given that a lot of these names, again, were able to deliver such strong improvements in margins, in spite of a tough macro environment.

I think that even after a big recovery, the valuations are still very compelling, or not compelling, at least I don’t view them as being bubbly. I view them as still being quite buyable in general, just given the strong fundamentals and the more attractive valuations.

RS: Do you think there is something to pay attention to for investors in terms of the downside in that sector, or on certain names?

JL: I think definitely there’s certain names that have run up too much. I think there’s some parallels to the pandemic bubble, right? There’s still some names like Affirm (AFRM), or some other names that are kind of soaring, just kind of like in a meme stock association.

But I think for the average tech stock, I think that the signs are pointing more toward upwards than downwards. I know that if you’re just focusing on the stock price, there might be reason for concern, but again, just based on the fundamentals, a lot of these names have been delivering resilient results in spite of a tough macro environment, but I expect the macro environment to improve at some point at which point we might see some upside surprises at a lot of these names.

Just to indicate why, I mean, during a tough macro environment and during economic uncertainty, a lot of companies they may not be adding to their head count, and a lot of these tech names even underwent very large layoffs. And that will impact revenue growth at enterprise tech companies which are often based on the number of heads at a company.

So in an improving macroenvironment, hiring picks up and that could help accelerate even a top line growth. So, I think, in spite of the fact that tech stocks are performing so strongly, there’s more — I’m a stronger believer in upside catalyst than downward.

Tech tends to be a very high margin business. So they don’t have that offsetting factor from price. It actually goes the other way in that the high margins, the high unit level margins only — they keep increasing due to lower cloud– sorry, due to increasing scale for the cloud operations, which in turn leads to operating leverage.

Tech is one of the strongest secular growth stories in the market. There was a reason why tech stocks became a bubble during the pandemic, even if the actual valuations were not justified.

RS: Right. And what would you say – well, I’m going to ask you kind of what are your favorite stocks in the sector at this point, especially we’ve come off earnings for some of them.

I wanted to start with Palantir, it’s stock you’ve covered and a stock you just mentioned. Victor Dergunov was on a few months ago talking about Palantir, how it can go as low as $7 and he’s still going to be buying it because it’s going to go high and he’s long-term extremely bullish on that stock.

I’m curious, how you would articulate your bullishness on that stock in particular? And then if you’d care to articulate your thoughts on your — the other kind of main stocks that you’re bullish on?

JL: Palantir is a very controversial stock. Very, very popular among growth investors. I think with Palantir, for much of its life, it seems like a lot of investors and Palantir seem to care very little about the valuation, which may add to some of its notoriety over more conventional value investors.

But the way I view Palantir is that it is an implementer for artificial intelligence and deployments. It’s always been in this kind of space. And so this rise in generative AI has only helped increase the demand for Palantir services.

And as I detailed in a past public article on Palantir, I believe that they will eventually have what I call an NVIDIA moment. Meaning just there will be a moment where the company shows in the fundamental results that the demand has arrived, that customers are coming, and they’re trying to very aggressively deploy more generative AI applications. But the interesting point with Palantir is that, none of this has arrived yet.

So, there’s some impatience there, but even though revenue growth has been slowing, they have still been able to deliver incredible improvements in profitability. I still remember when it IPO’d just several years ago, a big bearish point was that it wasn’t really profitable, right? The company has always been generating high free cash flow margins. So, it was very low financial insolvency risk, but a lot of that cash flow was due to the fact that equity compensation was so high.

And that’s another topic investors like. But now that Palantir is profitable on a GAAP basis, you no longer could make that argument anymore, right? So even inclusive of any equity based compensation, they’re still generating real GAAP operating profits and their GAAP net income is even higher than GAAP operating profits because they have a large net cash position and no debt.

So they now have a bulletproof balance sheet, very strong cash flow structure. But what’s left is mainly just the valuation. Does not make a whole lot of sense if my thesis on an acceleration of revenue growth does not happen.

So, yeah it remains a controversial stock, perhaps even more controversial now that the stock is performing so strongly as of late, but I think that there are legitimate reasons to be optimistic for that name.

RS: And you don’t think that there’s — the proof is in the pudding at this point – you think there’s still further to go?

JL: Yes, absolutely. I think, well, they obviously deserve credit for making that transition to GAAP profitability. But at my core, I still care deeply about valuation. If revenue growth is, continues trending downwards and gets to like 12%, 10%, 9%. The current valuation does not quite make sense. Just – it doesn’t – it will be a little bit too rich.

The current valuation is clearly pricing in, I mean assuming the smart money is in this, is clearly pricing in acceleration to the 20%, 25% level at some point over the next coming quarters.

I guess one thing I could say is, Palantir investors, they might want to be concerned if growth is not accelerating meaningfully over the next one, two quarters. That might then be a red flag that hope may never reaccelerate based on this generative AI thesis.

RS: In which case, you think then it would be time to get out of the stock?

JL: Yeah. And at that point, I would definitely need to adjust my bullishness for the stock just given, especially if the stock is still trading anywhere close to where it’s currently trading today.

RS: Any thoughts on your other tech favorites?

JL: Yes, I think that it might be difficult to name a compelling small medium cap name just given that valuations are just so much more rich relative to 12 months ago. 12 months ago, you could have just thrown a dart at a board and you could have come up with a pretty attractive thesis for almost any name. But right now I think overall the tech sector will perform strongly, but the average tech stock and they’re kind of more fairly valued.

I think my top picks in the tech sector are still going to be some of those mega cap names. I like both Meta Platforms (NASDAQ:META) and Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) for similar, but also different reasons. It’s interesting that Meta Platforms is now trading at a premium to Alphabet, whereas it typically had traded at a discount, a lot of that is due to the fact that Meta Platforms has been executing very strongly.

They delivered an incredible year of efficiency. This year, for example, their Family of Apps profit margins is over 50%, which is quite stunning. Obviously their overall margins is being pulled back due to their ongoing investments in the metaverse, but even then their profit margin is still very high overall. And Meta Platforms have shown that they are a huge artificial intelligence beneficiary.

As a customer of their own artificial intelligence, they have been able to overcome the competition threats from TikTok, overcome the data privacy changes from iOS largely due to AI. And I personally use a lot of their products, Facebook and Instagram. I have noticed how they have been able to recommend posts that I don’t follow.

That’s all AI. It’s quite incredible how strongly they’ve executed at Meta Platforms, and the stock is still trading at compelling valuations, especially if you back out on the Reality Labs’ losses just to try to get a better sense of what you’re paying for that, Instagram and Facebook.

On the other hand, Alphabet, Alphabet is trading a bit lower just largely due to the perception that it is losing market share in search with being having that ChatGPT first mover advantage. And Google’s Bard maybe being still subpar at this point. So, there’s a couple of things with Google.

One obviously valuation. This is a name that’s trading quite cheaply. And that’s even before accounting for its large other bets losses. But I think people are underestimating the high moats at Google. But more importantly, what I don’t see being talked about much is the fact that Google has not done the same aggressive cost cutting, seen at something like Meta Platforms, or other tech names.

If I recall they only laid off around 3% of the workforce, which relative to maybe the 30% layoffs at Meta Platforms indicates that if Google were inclined they could always have that lever up their sleeves to even to make — to further increase their earnings and then the stock will be even more cheap. So, I think that there are some in spite of the — perhaps relative bearishness on the name due to the competitive threats on being and the ongoing lawsuits, the DOJ and it’s payments to Apple (AAPL). There’s a lot of reasons like Alphabet over the next, over a five year time horizon.

RS: And speaking of kind of what there is to like and the fact that there’s been press about it, any thoughts about Microsoft and the brouhaha over the CEO position changing and then changing again?

JL: Yeah, it’s quite interesting to see this kind of drama unfold so quickly. All of this drama at OpenAI doesn’t really affect it at all. It mainly affects, maybe its investment in OpenAI basically all of that drama mainly affects OpenAI investors.

Sure, Microsoft has quite a bit of money invested in OpenAI, around, I think they’ve put in around $11 billion, $13 billion or so just a couple of months ago. And OpenAI has been trying to issue new shares at a much higher valuation. I think the latest report was around $90 billion. That would imply that Microsoft stakes is sort of a maximum of around $40 billion, maybe, right, based on that multiplayer. But even at $40 billion, that’s not very much given that Microsoft trades at nearly a $3 trillion valuation.

And in terms of how I’m viewing that partnership, I think Microsoft’s main benefits from OpenAI is simply integrating OpenAI’s capabilities into their existing products like Microsoft Word, they have their copilot. That’s the kind of stuff that isn’t really being impacted by who’s on top. This is just integrating functionality.

So I don’t see any of the drama at OpenAI, I mean, it’s been pretty much resolved. I don’t see that drama impacting Microsoft at all. It’s mainly related to their equity investment.

RS: And any thoughts in terms of what might not go or what they may not continue to do right at Google and at Meta Platforms?

JL: For Meta Platforms, at this point, they’re firing on all cylinders, but the main potential issues might be, one, the company might invest too heavily in Reality Labs without much return.

That’s definitely an important risk, that might be rising just given that the stock has been performing so well ironically, and their profit margins are increasing at the Family of Apps. Perhaps management might see those two as justifying increasing aggressiveness in their metaverse investments.

And at Alphabet, the main possible issues might be if they’re unable to prove that search is a business with high moats and high barriers to entry. If it turns out that search is just a commodity. And let’s say, Apple removes Google as the default search provider, and Apple users are very okay with either being or maybe a future unreleased Apple search product, then that would be a big problem at Alphabet.

It’s largely out of their control, what is going to happen at the DOJ and what happens with Apple.

RS: I was going to ask, if were are a betting man, how would you bet? But it could be just one of those crystal ball questions.

JL: I think I’ve always had the hunch that Apple (AAPL) is developing their own search product. I think at some point, they are going to be – they are not going to be the default search engine for Apple. They’re going to maybe save on some fees, but they’re going to have to cede some market share. I think it’s inevitable.

It just never really made sense why Apple would not own search. They try to own everything else of their product, but they don’t own search. I think at some point that will happen. But I think that there’s enough levers for margin expansion.

At Google, there’s a lot – it’s a very big market in terms of the long tail end secular growth opportunity. The current valuation is quite attractive that even as the Apple threat unhappens over the next 10 years. I think the stock still is quite compelling, attractively valued and I know that this Apple threat is not even really the focus of Wall Street at this point.

RS: And in terms of Meta’s focus on the metaverse and the whole VR world, do you think that’s something that Zuckerberg is personally focused on to his detriment or do you think there’s something there, it just has to be done smartly and perhaps conservatively?

JL: I think that there’s definitely potential in the metaverse and those pursuing something like that. I mean, just the way I view it is, imagine if we’re able to look at 20 years later look at some baby videos and you could have a more immersive experience almost like reliving what it was like to play with your baby. That’s invaluable. That would be incredible.

But I think that this might be a case where maybe technology is not quite there yet, but they’re trying to, even though the technology is not quite there yet, they’re trying to address that issue by solving, by throwing as much money as possible into it.

It’s possible that this will have great societal implications. But the ROI and the financial part of it just wouldn’t make sense over the long-term. So, a lot of the things with Meta Platforms is having to be okay with the stock in spite of the large losses at Reality Labs. While also hoping that at some point that those Reality Labs losses will either become zero or at some point they start selling and becoming a profit. Just at some point in the long future.

RS: What are your thoughts on NVIDIA (NVDA)? Just because it’s such a kind of oft-mentioned name when we’re talking about tech and AI and especially when we’re talking about AI mania and whether or not there’s a bubble that’s definitely the stock that people point to, if I’m just curious your thoughts there?

JL: Yes, NVIDIA. Yeah, this is a good one. So, I think, I was previously a big skeptic. It was very embarrassing. I was a skeptic of NVIDIA before, this big generative AI moment then after the stock went up a lot because of generative AI, I was a bigger skeptic. I doubled down. But as I noted in my last publicly published article on NVIDIA, I was clearly wrong. So, what’s happening at NVIDIA is quite interesting.

Sure, the valuation has soared incredibly, but I’m viewing this moment as being very similar to what happened when Apple overtook BlackBerry. And BlackBerry previously to Apple releasing the iPhone, BlackBerry was the dominant smartphone provider.

Obviously, that’s not quite the same with NVIDIA and (AMD). They were kind of more of a duopoly, but with BlackBerry after the iPhone came out, you know, BlackBerry just could not compete. They were just on a different competitive playing field to the iPhone and to Apple. So, I’m viewing that to be the case with NVIDIA.

I think this is explaining why NVIDIA is trading is such high valuations, mainly because now it is being viewed as having this kind of barriers to entry similar to Apple, right? You find Apple trading at around 28x earnings in spite of very modest growth. That is because of the perception of having such a high quality business.

At NVIDIA, a lot of those barriers come from the fact that in order to power and fully optimize these chips to get the best performance, you have to program them and programming every company uses their own language. So, the fact that NVIDIA has been doing these GPUs, their language called CUDA, the fact that they’ve been doing this forever means that they have the largest developer community coding and working on their chips in the world.

And so they have this advantage, everyone knows they have this first mover advantage in generative AI, but the idea is that the longer this advantage persists, the greater the switching costs increase, right? You get all these companies, they’re all coding for NVIDIA generative AI chips.

And the more this happens, it’s not like they’re going to just switch to an AMD chip because they could save a few bucks because it’s going to have big implications for – they have to retrain, for example, all their developers, the developers have to suddenly switch to coding in AMDs language instead of NVIDIA’s, it’s a very, very big switching cost.

So, the fact that NVIDIA has a first mover advantage right now, it’s actually not just that it’s actually long-term, they’re having these network effects, they’re having these switching cost effects. NVIDIA has developed, I guess we put it, NVIDIA is in the right place at the right time.

Generative AI is exactly what was needed for NVIDIA’s stock to perform strongly. It’s given them – it’s basically made it possible for the stock to command a very high earnings multiple that is not affected by the previously perception of cyclicality.

So I think that, right now, I’m not buying NVIDIA just because I tend to prefer stocks with higher ROI, but I think that over the long-term it should be performing, you know, very, quite solid returns, possibly even, you know, in-line with the market. I think that it would be a mistake to think that NVIDIA is just a pure AI bubble at this point.

RS: And would there be a price that you got in on it at?

JL: So, I think just given how much it has run up, the valuation — the fair valuation range is very wide and it’s definitely trading near the high end of the range. So, it’s still viable, still going to do positive returns, but the chances of it beating the market are not so high right now. I think it would need to drop a lot.

It would have to drop a lot before I would get interested, but that would not happen unless maybe the thesis breaks down and if that were to happen, maybe I wouldn’t be interested anymore. So, it’s very unlikely I think at this point that I would be able to buy into this NVIDIA stock story.

RS: And do you think, you mentioned that we’ve talked about the big cap names when it comes to AI, because those are the names worth looking at. Are there any non-mega cap names that you feel like are worth looking at or peeking at in the sector?

JL: So in AI, I would say that’s harder just because due to the huge tech recovery, a lot of the smaller names seem to be getting some meme like bumps in valuation.

But I think for investors looking for value in tech, there are still a lot of interesting picks, a lot of these names because of the valuation reset, net cash on their balance sheet is making a larger percentage of their market cap.

That wasn’t really something that came to play during the pandemic bubble, but just for example, a name that’s been out of favor for quite a long time is that discount brokerage Robinhood (HOOD). This is a name where net cash still makes up around 50%, 55% of the market cap and the company is profitable, most notably profitable on a GAAP basis largely because it’s earning a lot of interest income, on their cash balance.

I view their acquisition of the X1 credit card as being potentially transformative. I think a big issue facing Robinhood was main — was not really the product related because they arguably have one of the better UIs and not the best experiences among any platform today. But it’s more just perception due to their — some of their failures and missteps during the GameStop (GME) bubble. But I think if there’s one thing that could change perceptions, it’s free money.

I think that their X1 credit card, they have not made any announcements, but my assumption, just as some background. Currently the X1 credit card is a metal credit card, which is I don’t know how many listeners really like credit cards. I like credit cards. The metal credit cards are always quite popular.

And then the way it offers quite lucrative rewards based on selective merchants, you could get 3% or so based on selective merchants, my assumption is that Robinhood is probably going to offer some very aggressive cash back rewards for using the credit card, especially if you’re subscribed to the Robinhood gold, their membership and you have a lot of investments at Robinhood.

I am of the view that something like this, some promotional activity like this would be very efficient in attracting new assets to come to the company. And I’m also of the view that offering cash back like some 4% return on the credit cards is probably it’s actually not very expensive relative to the amount of money, that they will be generating on the assets being brought to the platform.

But I think there are still some maybe I hesitate to say deep value opportunities, but there are some value opportunities still available in the tech sector. You know, you got some protection from the net cash and then there’s also the idea that there could be some acceleration in growth either due to improving macroenvironment or maybe some execution things like what we just talked about with Robinhood.

RS: Yeah. Appreciate it Julian. Appreciate another great conversation. Happy for you to share with investors any final thoughts that you may have on the market or on this specific sector or on what subscribers can get from Best Of Breed Growth Stocks.

Happy for you to have the last word here, but appreciate the conversation.

JL: Sure. Yeah, I think, I guess some important takeaways would definitely be to not just view tech stock as being in a bubble. I think there’s a lot more nuances to it.

Definitely need to keep in mind that the profitability profiles is dramatically different now than just one, two years ago. I think that valuations are also much more reasonable. So, at the very least I find it dangerous, it would be very dangerous to be shorting the tech sector overall.

And if any listeners are interested in more of my overall portfolio, which tends to be more growth oriented, but not necessarily tech oriented. Yes, as you mentioned, I do run investing group on Seeking Alpha called Best Of Breed Grow Stocks. You get access to the Best Of Breed Growth Stocks portfolio, as well as the universe, which is a watch list of all of the names that I follow. Yeah, otherwise I am also available on Seeking Alpha.

RS: Awesome. Appreciate it, Julian. And I would say nuance is the word of the quarter, if not the year, if not the decade. Here’s to more nuance in our analysis and research.

Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

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