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So, our boy Tom Lee has just said on CNBC, "There is a payoff coming for the stock market that has an exact quote. You're going to hear it in just a second." And this is a guy that has been right about so much in the stock market in the last couple years. And now that he's saying there's a payoff coming, it's kind of like, hey, maybe we should listen to what he has to say cuz we just want to get as much information as we can to make a more informed investment decision.
So, I'm going to roll the clip of Tomley talking throughout his interview. I'm going to break it down about what it actually means. So, here we go. So the market obviously assumes that this is all going to happen. The government's going to reopen and we're just going to get back on our merry way in in the stock market.
That's certainly what the trade says today. Am am I right? Uh yeah, I think there's a certain measure of relief because the shutdown robbed us of visibility on the macro data and of course there's economic hit and they're suffering because you know air traffic is slowing. So I think for many reasons I think this shutdown was a problem for investors.
So, what about now between, you know, now and the end of the year? It's it's the AI trade that really seems to be debated. How how do you feel about it heading into this final stretch? Uh, I I think it's still in really good shape fundamentally. We know there's a lot of visibility for for AI spending and we know there's still innovation and gain of function taking place with the models.
So, it to me it makes sense that there's still a payoff coming. I think one of the issues that investors are going to grapple with is even though they may say AI uh stocks are expensive, Nvidia still only trades at 29 times Ford earnings. I mean, it's still cheaper than Costco. So, it's it's hardly a bubble valuation.
So, yeah, I mean, if we put Nvidia into my intrinsic value calculator, you could see that it's spitting out an intrinsic value of roughly $172 per share and it's currently trading right around 200 bucks. So, yes, it's not this extreme deal, but it's also not this extreme bubble. Nvidia is honestly fair value in my opinion.
And if we head over and check out the price earnings ratio level, you could see that Nvidia a couple years ago was up here in the 50 range, even hitting like 65 at the highest part. You can see that the PE ratio is definitely trending down, which means the company is getting a little bit cheaper overall.
So that's good. Now, it doesn't just mean that okay, the PE ratio is going down. It means that we should buy the stock. We do have to head over to the estimates. We'll flip it to annual, and we're going to take a look at the revenue. You can see that the revenue growth is very very robust. Almost doubling like every two years.
You know, this company is growing like crazy and it's showing really no signs of slowing down. And if we head over to earnings per share, like the number one thing that moves the price of a stock in a long run is what earnings per share does. Again, almost doubling every 2 years here. Like that's very bullish for the stock.
And when you're getting all that at a PE ratio of roughly 41, that's not a bad price. And the reason why my PE ratio is a little bit higher than Tom's is because he's taking current year plus two and I'm looking at current year plus one because the stock market typically looks one year ahead and Tom sometimes will take his data and you know make it look good for what he has to say and try to prove his case which I'm not bashing him on that.
I'm just letting you know that typically current year plus one is what you want to look at because the market's not usually two years forward looking. It's usually one year forward looking. All right. Now, unfortunately, not every company looks as good as Nvidia does from a growth and evaluation standpoint.
Honestly, most of them look like the complete opposite. Kind of in bubble territory. We have to break this down because, hey, maybe Nvidia does good, but maybe these other companies crash and that could bring the entire stock market down with it. No, but I don't think when they talk about the valuation of AI stocks, they're necessarily talking about Nvidia.
I think you would agree with me on that. They're more so talking about names like Palunteer and some others where you could easily say yes, the their earnings have been great and the the story is incredible, but at some point you're only willing to pay X for a stock and maybe that one's gotten a little bit too rich.
Using that as an example of the kind of names they're talking about. Sorry to interrupt, but I have to do this really quick and I just got in a fight with somebody about this recently where it's like, how much money are you willing to pay for something? Like let's just take a look at this market right here.
There's a price where you're going to say this marker is too expensive. Even though it's the best marker in the world, maybe it's the palunteer of markers. Eventually, there is a price that is too high to pay. Eventually, you're just going to say it's too much. I'm not going to pay for it. And that's how it works in the stock market.
Eventually, something is going to be too expensive. Like a good company and a good investment are two completely different things. So, let's see what Tom has to say about Palunteer. Yeah. I mean, I think Palanteer is an example of what they call like an N equals one company. you know, you've got a founder business developing products that really seem like magic for the companies that adopt it.
So, you know, should this just be getting a software multiple? I don't think so. And, you know, Palanteer's opening up so many markets and if and if it was a venture capital firm, they'd be getting, you know, potential carry for how they transform businesses. So, to me, I I think that this is still a market discovering, you know, how to define the valuation model for Palanteer.
But to me, that's that doesn't mean it's a bubble. You know, people would have said that about Tesla in 2018 because it looked incredibly expensive and the stock in Tesla has been a huge performer since then. So, I kind of get what Tom is saying here like Palunteer is an amazing company and yes, it's kind of hard to value it.
But if we just look on traditional metrics right here, if we just go to the PE ratio level, current year plus one, you can see that Palunteer is trading at 246 times forward earnings, which is absolutely insane. Remember, Nvidia was in the 40s. This is 246. So maybe it's justified though. Maybe the revenue growth, maybe the earnings per share growth is like out of the world.
It's going so good that it just justifies it. So let's look at revenue growth first. We're annually here. Let's take a look. So you can see that revenue growth is kind of doing a similar thing as Nvidia, doubling every couple years. And then heading over to earnings per share. Like yes, it's a very similar scenario as Nvidia where it's kind of doubling every two years.
So like I can't say anything bad about the company. I can't say anything bad about the growth of the company. I know that the team I know that Alex Karp works very very hard but he's a CEO by the way. The thing that I just can't get past is the valuation level. So I want to make this crystal clear. So let's just use this marker here as an example.
So the PE ratio for Palanteer again is $246. Okay. So that's like buying this marker which will say it's Palanteer as a business. You're going to pay $246 for this marker but it only generates $1 per year in profit. You pay 246 bucks, but you get $1 per year in profits. And the profits are doubling every two years.
So in two years from right now, maybe you're going to get $2 in profit, but you still paid 246 bucks for it. That's going to take you a long time to get your initial investment back. Like if the earnings don't grow, that's 246 years. Like yes, of course the earnings are going to grow, the revenue is going to grow, the company's going to do good.
But did the stock already make a humongous move and it now kind of has to grow back into its valuation. In my opinion, hands down, 100% yes. This stock is expensive. This stock has to take a breather. And the more that it goes up, the more risky that it's getting. Like if we just take a look at historically in a 5-year range right here, what the PE ratio was, it started at 36.
It went to a max of 288 and now it's somewhere around 246. Like I promise you guys, these companies do not sit at a PE ratio of 250 or whatever the heck it is for a sustained period of time. This is going to blow off a topping and crash or the stock is going to trade sideways for some time while earnings per share catches up.
Like AI is amazing. Palunteer is amazing. These companies are doing great. But price is what you pay and value is what you get. And Palanteer in my opinion ran up way too much. And we can't just sit here and say we're willing to pay anything for this company because it's a very good company. Eventually, we have to figure out what are the profits, how long is it going to take me to get my initial investment back and just invest responsibly.
Like when and if the market takes a dip, which the market valuation is a little bit hot right now in my opinion. Like when we get that dip, Palunteer is going to be one of those companies that if this AI trade starts to slow down, that company's probably going to get whacked because it has a higher beta, higher volatility.
You get it? So, you know, again, I could be completely wrong. I'm just giving you my honest opinion that this company is great. It's an amazing company, but the valuation level is just simply too high. I cannot pay 250 times earnings for this company right here. And one last thing on my rant right here, remember how Palunteer's revenue and earnings per share growth is very similar to Nvidia, but Nvidia's PE ratio is 41 and Palanteer was 250.
You're getting the same growth on the top and bottom line. And I could argue that Nvidia is more important than Palunteer in a way. Like why would you not want to pay 41 times earnings for Nvidia? Why would you want to pay 250 times earnings for Palanteer? Like think about that for a minute. Does it really make sense to do that?
In my opinion, no. But what was last week about then do you think at its heart? Well, I think at the at the heart is we the market wobbles. And so when the market wobbles, people two things, you know, one is they start to take shots at the leaders, right? Because they try to take down the leaders thinking that's what leads us down.
But the second it it really highlights the grim reality that we're about to have a third year of double digit gains. The S&P is up 80% over the past 3 years and funds are measured on three-year performance. Only 21% of fund managers are beating 80% over that three-year period. It is one of the worst ever periods for fund managers.
And so they'd rather see the market fall so that it falls to their performance level. I think what's more likely, of course, is the market follows a seasonal pattern, which means there's going to be a lot of chasing into year end. So, a lot of chasing into year end. Tom is so bullish right now. This is that major payoff coming that he was talking about that you clicked on a video for.
Like, let's take a look at the NASDAQ here. In the last 5 years, this bad boy is up 114%. Is this justified? Is this sustainable? Can the market keep going up? Like even if we go just off of Liberation Day tariff dip right here. Look at how hard the market ran up. This is absolutely insane. It ran up 50% in like 6 months.
Like this is insanity how much this market's going up. And the momentum is strong. Like it's so hard to bet against this market right now. I'm personally not betting against the market. And in my $1.2 million account, I am just simply capitalizing on when things make sense. The S&P is a little bit expensive in my opinion.
The NASDAQ's a little bit expensive, but it's not like I'm selling those stocks. I'm going to ride those pretty much forever because number one, I think they're going to be way higher in the future, and it's very hard to time the exact top to a market. So, I'm not going to get into that business of trying to say, "Oh my god, the market's topping right now.
I'm going to sell everything and pay all these taxes, too." I'm not going to do that. I'm going to let that base portfolio ride, as I call it. And also, that base portfolio is critical to sell put options because I use that to secure the trade. I don't use cash to secure the trades. But overall, like, yes, the market's running up a lot.
I'm making a lot of money. Like, look at my two-year change. It's up 165%. So, we're making a lot of money, but in this account, I am starting to allocate a little bit more conservatively. I do not have a lot of leverage. I do not have a crap ton of LEAP calls. I do not have a crap ton of sold puts.
Like yes, I still have some on companies that I feel like are cheap and it makes sense, but I'm not going super leveraged out right now because the name of the game in the stock market is to buy low and sell high, but most people simply buy high and they sell low. So, as things are getting more expensive and a little bit more disconnected from the fundamentals, like the overall market, I mean, I am starting to allocate a little bit more conservatively.
And I feel like that honestly makes sense. And maybe I leave a little bit of money on the table at the end of the day, but what I'm going to tell you is this. There's nothing that's going to happen in this market. Like even if it falls 50%. That's not going to wipe me out. I'm going to be prepared for all scenarios.
If the market goes up, I'm going to go up a little bit more than what the market goes up. Like if the NASDAQ goes up 2% in one day, I might go up like 2.1% or something like that. But if the market goes down 10%, I'm probably going to go down like 8%. So I get similar upside, a little bit less downside.
And the benefit of that also is that when and if we get a dip, because we will at some point, I'm going to have money on a sidelines, like 20% of this portfolio is in bonds right now, collecting a monthly yield. Like, yes, the yield's not amazing. It's like 5 to 6%. But I'm collecting that yield while I'm sitting on the sidelines waiting for opportunity to pop up.
I'm not shorting the market. I'm not betting against the market. I just have a little chunk of my portfolio sitting on the sidelines when things are running up to the moon just waiting for something to happen so I could capitalize and get in at a good price. But if it doesn't come, guess what? I think that interest rates are going to go down with time.
And when interest rates go down with time, that bond portfolio that I have is going to appreciate in share price because when yields go down, bond prices go up. So either way, like I'm positioned to win in this market and it doesn't matter if the market goes up or down. I'm going to do fine either way.
Don't you have any concern at all about the level of money that these companies are spending on their their buildout and now the new wrinkle of tapping the debt market rather substantially to help do it? Uh I mean Scott, yes and no. I mean AI is proving to be a scale game. You know it's not like you and I could start a garage and make a model competitive with open AI.
You know we need to be SC have scale and a lot of chips. So Tom Le is definitely right. Like if you want to compete with Cororeweave, Amazon, Google, Microsoft, OpenAI, Perplexity, Grock, XAI, whatever. If you want to compete with them, you have to buy a crap ton of chips. So, all these companies are investing a lot of money right now with the hopes that they're going to be able to make a lot of money back in the future.
If it works out like that, great. Everyone wins. But if it doesn't work out like that and maybe these chips aren't as good as what people think or maybe we're going to need less chips in the future, which honestly I don't think that. But, you know, they're just betting big on this right now and it's probably going to work out.
But if it doesn't work out, you will see a major stock market crash. Trust me. I'm not saying that's my best case scenario, though. But I'm just saying like if these companies blow this much money on these chips and they don't fetch a ROI on that down the road, trust me, bad news bears for the stock market.
It's not going to look good out there. All right, so that's what I got for you guys today. Definitely like and subscribe. It really helps out the channel a lot. Drop your comment. Let me know your thoughts. But also, 10day stocks and options complete transformation. I break it down each day, 10 days in a row of exactly every single thing that you have to know in the stock market with stocks and options.
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