The Games that Monkeys Play
A Major Risk to Consider; Thoughts around AI Disruption
“Sometimes the best thing is to know that you don’t know” - Le Shrub
Every day we get a tape-bomb of yet another industry getting disrupted by AI. Every day we get billions of $$$ wiped out of companies that were previously perceived as defensive:
On Monday it was the Insurance Brokers (AJG and MRSH down 8-10%; these are $50-80bn companies)
On Tuesday is was the financial Data Providers (SPGI down 10%; a $100bn company)
On Wednesday it was the Real Estate Service Providers (CBRE down 12%; a $50bn company)
Our Boomerification™️theme has shielded us from this “SAAS-pocalypse”, as we have been heavily allocated in Miners, Energy, Commodities, Brazil and Boomer Stocks.
Furthermore, Shrubstack’s motto is “Don’t Be Stupid”. Not being stupid means knowing that we don’t know.
Case in point, we recently took a look at SAAS stocks (aka “Software-as-a-Stoploss”):
What was supposed to be a “moat” and “recurring revenue” of these companies, got destroyed “overnight” by Claude, which can replicate many of them at the click of a button.
I’ll admit I have zero clue about Software. I don’t even use Excel for modelling since I prefer the anguish of using a pen and a “back of the envelope” or the “corner of the FT”.
But you would expect the Private Equity funds and Tech Investors who poured billions into the sector to have seen it coming.
Nope.
Instead, they keep trying to call the bottom because they weren’t taught at monkey school that you shouldn’t catch a falling knife. Not their money anyway.
At the same time, the CEOs of the SAAS companies aren’t buying their own stock, so why should I?
I’ve been spending time looking at these companies, and I concluded that I know that I don’t know...
…but more importantly, I concluded that I DON’T CARE…
…because the valuations are still un-interesting, with many companies trading at 50-100x PE. So why should I waste my remaining brain cells on this?
Moving on.
The right question to ask is:
“Were there any babies thrown out with the bathwater during the SAAS-pocalypse?”