Warren Buffett once said that the key to investing isn’t knowing which industry will change society, but “determining the competitive advantage of any given company and, above all, the durability of that advantage.” In up-markets (especially those tinged with bubble-like euphoria) almost every theme-adjacent stock gets priced like a winner – but you can lose in a winning sector if you overpay for a stock or pick a company with a weak moat. Many great technology businesses reaped the benefits of broadband internet in the decades following the dot-com boom; even more companies had the exact same structural tailwind and failed. Getting the theme right – whether it’s space, quantum, nuclear, AI, or something else – is not a silver bullet.
For no reason in particular (ahem…cough, cough), this feels like an opportune moment to resurface a piece from April on IPO investing that highlighted the challenges inherent to picking long-term winners from newly public companies. An important counterpoint was raised by our partners at Strategas (a Baird company) last week: “The last IPO we remember generating the level of excitement [of] SpaceX or Anthropic, was Facebook in 2012.” Strategas noted that while Facebook did prove to be a good long-term investment, the stock’s “roughly 50% decline over the first six months is a reminder that [IPOs] are often more about liquidity than immediate value creation.” Hyped IPOs are noisy events and early performance is rarely an insight into long-term viability.
As a kid, I had a big book of Aesop’s fables that sat next to my Shel Silverstein poems and Calvin and Hobbes comics. Of the many fables, “The Grasshopper and the Ant” seems timely today. For those unfamiliar, a carefree grasshopper spends the summer singing and dancing while an industrious ant gathers food to survive the winter. When the cold inevitably comes, the grasshopper suffers for failing to plan ahead. In markets, we have enjoyed a robust and largely uninterrupted bull market for the last 15 years, and I think it still has plenty of room to run. But these are the times when preparing for the inevitable next recession and bear market is both most impactful and hardest to do. In our latest All That Matters, Mike Antonelli and I talk about steps that can be taken to prepare for a bear market.
Census data for April showed private construction of data centers eclipsed $50 billion (seasonally adjusted at an annual rate) for the first time in history, now representing roughly 7% of all nonresidential construction in the U.S. (up from 2% just a few years ago). The rise of AI and the data centers that enable it will not be surprising to anyone who follows markets, but the sheer speed and size of the proliferation is still stunning. And while it is providing a boost to the U.S. economy and profits now, the potential for political backlash looms large – and is growing.
in 1849 Lewis Haslett was granted a patent for the first modern gas mask, an air‑purifying respirator which established the (now somewhat obvious) concept of filtering contaminated air before it reaches the lungs. His basic design (filter à inhalation valve à exhalation valve) became the template for modern PPE, from N95s to full-face respirators used across many healthcare, industrial, and defense businesses today. Was this event important? Absolutely. Am I writing about it because Lewis lived and worked in my hometown of Louisville, Kentucky? Also, yes.
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