TIP686: Big Tech Stocks w/ Adam Seessel
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Deep Dive
Why did Adam Seessel transition from traditional value investing to what he calls 'Value 3.0'?
Adam transitioned to 'Value 3.0' because traditional value investing strategies, which focused on buying cheap and unloved securities, stopped working around 2014. He realized that in the digital age, many old-economy businesses were being disrupted by technology, and there was no longer a reversion to the mean. He shifted to investing in high-quality businesses with strong growth prospects, many of which are in the tech sector.
What percentage of the U.S. stock market value is now represented by tech companies?
Tech companies now represent 46% of the U.S. stock market value, up from 19% in 2004. This includes the IT sector, communication services, Amazon, and Tesla.
Why does Adam Seessel believe Alphabet (Google) is a dominant business?
Adam believes Alphabet is dominant because it controls over 90% of the search market, making it the 'toll road on the information superhighway.' Despite attempts by competitors like Bing and Amazon to challenge its position, Alphabet's search dominance remains unchallenged, even after Microsoft's partnership with OpenAI.
What is Adam Seessel's view on the potential impact of AI on big tech companies?
Adam is skeptical of the AI hype and believes that while AI is a significant trend, the big tech companies like Microsoft, Amazon, and Alphabet will be the ones to monetize it. He argues that these companies have the resources and infrastructure to exploit AI and other mega-trends, making them the primary beneficiaries.
Why does Adam Seessel consider Progressive Insurance a strong investment?
Adam considers Progressive a strong investment because it has used technology to become the low-cost producer in auto insurance, outperforming competitors like Geico. Progressive's tech-enabled underwriting allows it to match insurance rates to risks more effectively, leading to lower loss costs and significant market share gains.
What is Adam Seessel's opinion on NVIDIA and the AI craze?
Adam is highly skeptical of NVIDIA and the AI craze, stating that he has never considered NVIDIA for his portfolio. He believes the digital semiconductor business, which NVIDIA operates in, is inherently unstable due to rapid product cycles. He predicts that NVIDIA will eventually be disrupted by a competitor with better innovation.
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