June, 2026
Meeting Minutes
June 28, 2026
The
monthly meeting of Unable Investment Club was held at LogOff Brewing Company in
Rancho Cordova on Thursday, June 4, 2026. The meeting commenced at 2:48 pm with
KS presiding for AE. JL and CX were also in attendance.
Unable Investment Club has 2 openings.
The
Valuation and Member Status reports were reviewed and the checks were
collected.
Late:
None.
Old Business:
None.
New Business:
Tim Walls (GQ) submitted a request to withdraw
$10,000 from his account and to remain a member of UIC. His shares will be
priced on the July valuations and a check will be issued within 10 days of the
July 2nd meeting.
Stock News:
AMT American Tower provides essential
infrastructure to the global telecommunications industry through real estate
investing in towers and data centers. The company manages nearly 150,000
communications sites across more than 20 countries, leasing space to government
agencies and wireless carriers. Significant customers representing over 10% of
revenue include T-Mobile (18%), AT&T (17%), Verizon Wireless (14%), and
Telefónica (10%). Customer concentration like this adds a layer of risk to the
business, as these four tenants represent the vast majority of income. In FY
2025, revenue reached approximately $10.6 billion, up roughly 5.1% from the
previous year. The company reported a net income of nearly $2.5 billion for the
period, supported by a healthy net margin of approximately 23.8%. This steady
performance highlights the stability of long-term lease contracts in the
wireless infrastructure sector. The expansion into data centers through its
CoreSite acquisition further diversifies its revenue streams beyond traditional
tower leasing. As of its December 2025 balance sheet, the debt-to-equity ratio
was roughly 12.3x, which measures total debt relative to shareholders’ equity.
The current ratio is approximately 0.6x, indicating that short-term liabilities
exceed current assets. Free cash flow for the year was nearly $3.8 billion,
calculated as cash from operations minus capital expenditures. This consistent
cash generation allows the company to continue investing in its global
infrastructure while supporting its dividend payments to shareholders.
AAPL On Jan. 12, 2026, Apple and
Alphabet announced a deal that will see Google's Gemini AI model power a
smarter Siri. The price tag is rumored to be roughly $1 billion a year, though
neither company has confirmed terms. On its face, it looks like a confirmation
that Apple is painfully behind in the AI space race. I disagree. I think Apple
is the winner. Here's why. Google gets a high-margin licensing fee on a model
it already built, so there's no major new spending attached. It also gets
bragging rights of a sort -- Apple, a company known for its obsession with
quality, picked Gemini over OpenAI's ChatGPT and Anthropic's Claude. That means
something. On the other hand, $1 billion a year is a drop in the bucket for a
company with annual sales of more than $400 billion. And it's only 5% of the
payment Google makes to Apple for the privilege of remaining the default search
engine on the iPhone. The disparity here is revealing. If Google lost that
default search slot, it would be locked out of the search traffic from more
than 1.5 billion of the most valuable devices on earth -- a gut punch to its
core business. If, on the other hand, Apple swapped Gemini out for OpenAI's
GPT, Anthropic's Claude, or even China's DeepSeek, the average iPhone owner
would likely not notice. It shows that AI models are more or less a commodity
-- an interchangeable part Apple can shop for and replace, while Apple's hold
on its customers is anything but. Internal evaluations reportedly showed Siri
flubbing complex requests about a third of the time. It's clear that by
incorporating Gemini, Apple will be able to greatly improve its products and
the user experience. Apple needed a fix, and it got it. $1 billion a year isn't
cheap, but it pales in comparison to the investment Google has pumped into
developing Gemini. Apple gets an immediate fix while it works to perfect its
own in-house model. And -- in stark contrast to the rest of big tech -- it does
this with remarkable discipline. Apple's AI capital spending in 2025 was about
$12.7 billion. Alphabet spent roughly $90 billion. In my view, Apple has
positioned itself perfectly to reap the rewards of state-of-the-art AI without
most of the cost of creating it. So, while many people say Apple is falling
behind in AI, I say it's right where it needs to be. I think this deal confirms
it.
AMAT No news.
BA No news.
BWXT BWX Technologies is a manufacturing
company that makes components for nuclear power and defense. Think of it as a
pick-and-shovel company for the nuclear sector: It doesn't build or operate
nuclear reactors but rather it supplies highly specialized reactor parts to
companies and entities that do. The company has a long history, dating back to
the 1950s when it supplied components to the world's first nuclear-powered
submarine. Today, BWX continues to hold multibillion-dollar contracts with the
U.S. Navy to make critical components for nuclear reactors and submarines. It's
no surprise, then, that the majority of BWX's revenue comes from its government
operations segment, one of two that constitute its business (the other is
commercial operations). In 2025, roughly $2.3 billion came from this segment,
with commercial making up another $853 million. Revenue growth during the last
decade has been steadily climbing, as the graph below illustrates.
Additionally, the company's backlog at the end of March 2026 was about $8.6
billion, with $1.4 billion added in May 2026 through contracts with the U.S.
Navy. BWX is profitable, and its technical experience, combined with decades of
operations, has dug a strong moat around its business. The company is also
working with GE Vernova and Hitachi to develop small modular reactor (SMR)
technology -- exactly the kind of technology that's expected to power AI data
centers.
CAT It's always surprising when a
long-standing stock in a traditional industry soars in price. Several years
ago, few investors or analysts would have expected that heavy machinery and
vehicle specialist Caterpillar would be such a title. Yet over the past year,
the company's shares have nearly tripled in price, rising far more steeply than
the S&P 500 index's 25%. Talk about a sleeper stock! Let's spend a few
moments discussing what's made "the Cat" so popular with the market.
The main secret to Caterpillar's recent success can be summarized in two words:
artificial intelligence (AI). Despite its rather dowdy public reputation (among
those who know the company at all), Caterpillar is at the forefront of the
revolution, bringing today's heavily in-demand technology to our computer
screens and mobile devices. This is because one of Caterpillar's main business
units is its power and energy division. Within this, its reciprocating engines
and the generator sets (gensets) that accompany them are go-to solutions for
advanced data centers housing AI infrastructure. AI is resource-heavy, and one
of those resources is power. Not only does a facility stuffed with AI hardware
require great amounts of this, but it also has to be supplied constantly and
without interruption. Caterpillar's power solutions were originally designed as
backup options, but their high reliability and strong reputation have made them
primary choices for many clients. Caterpillar can make quite a bundle on such
provisioning. It tends to sell the engines and the gensets as packages,
complete with comprehensive service agreements that cover items such as
diagnostics and maintenance. AI data centers are crucial to the technology, so
the entities that run them have a vested interest in securing such services for
long terms. So, the service agreements typically provide years of the
predictable revenue that so many buy-and-hold investors love. It's hardly
unusual for Caterpillar to be in the news when a massive AI data center project
is announced. Just days ago, Microsoft and oil giant Chevron signed a deal to
partner in a huge facility in Texas; no prizes for guessing which company,
along with fellow industrial GE Vernova, will provide the power infrastructure
for it. A growing company that pays a regular dividend offers extra incentive
to own its shares. Let's give Caterpillar a big check mark for this, as it has
paid a quarterly dividend for over 90 years. What's more, it's declared
dividend raises for 32 years in a row, with its most recent increase by 8%
bringing the payout to $1.63 per share. Although the skyrocketing price of
Caterpillar's shares has reduced the dividend's yield (to only 0.6%), the
company's durability and reliability are rare qualities in the businesses
participating in the great AI build-out. Meanwhile, management recently
increased its guidance significantly for the power and energy segment. It now
believes that between 2024 and 2030, its sales will triple. Previously, it was
counting on the unit "only" doubling its take across that stretch. So
even though Caterpillar's stock price has soared, I think it's yet to peak. The
coming years should see it continue to post impressive growth numbers,
underpinned by that busy power and energy business. I'd expect this storied
industrial to reach even loftier highs before long.
CNI No news.
COST Costco continues to prove to the
market that it's a consistent performer in uncertain macroeconomic times.
During its fiscal 2026 third quarter (ended May 10), the company reported 11.6%
year-over-year revenue growth. Perhaps even more impressive, its U.S. and
Canada memberships had a renewal rate of 92.2%. This didn't prevent the shares
from falling. As of June 22, this retail stock trades more than 4% below its
price prior to the last earnings report on May 28. Should investors buy the
dip? Costco opened four net new warehouses last quarter, which supports revenue
growth. However, the bigger contributing factor was same-store sales (SSS),
which were up 9.8%. The average ticket size rose 7.3%. But it was encouraging
to also see foot traffic increase by 2.4%. Excluding the impact of higher gas
prices, Costco's SSS still climbed a healthy 6.6%. The current economic
backdrop plays to Costco's benefit. Inflation is at a three-year high, so
households are starting to care more about saving money in an effort to find
greater value within their budgets. "Our goal is to be the first to lower
prices and the last to raise them," CEO Ron Vachris said on the Q3 2026
earnings call. Products in a range of categories saw price reductions last
quarter. That sort of customer value proposition might explain why the number
of membership households grew by 4.1% year over year to 82.9 million. And the
renewal rate in the U.S. and Canada was 92.2%, improving by 10 basis points
sequentially from the previous quarter. Costco's Q3 financial results looked
solid on the surface. Therefore, it can be difficult for investors to figure
out why the market reacted the way it did, bidding the company's share price
down. While revenue exceeded analyst estimates, the business posted diluted
earnings per share (EPS) that matched expectations. Investors might have wanted
to see a meaningful bottom-line beat. Whatever variables you believe pressured
the stock price, it's still obvious that shares trade at an expensive
valuation. Investors who want to buy Costco must be comfortable with a
price-to-earnings ratio of 47.8. This is what's required to own a business
whose diluted EPS is projected to grow at a compound annual rate of 11.1%
between fiscal 2025 and fiscal 2028, according to consensus analyst estimates.
Costco's durability in any economic environment certainly deserves a premium.
But even though it's trading 13% below its record, investors should stay away
from the stock to avoid the risk of severely overpaying.
EME Many stocks have benefited from
the generative artificial intelligence (AI) revolution, not just the
"Magnificent Seven" or tech stocks in general. Companies across many
other industries have also benefited greatly from the growth bonanza driven by
this revolutionary technology. A prime example of this is EMCOR Group. With a
$37.3 billion market cap, EMCOR is a fairly large company, but it is hardly a
household name. However, this is about to change. Even as shares have surged,
the AI data center build-out boom remains in its early stages. This leaves this
industrial stock well-positioned to keep winning, and for more investors to
take notice. Based in Norwalk, Connecticut, EMCOR Group is a provider of
construction, engineering, and property management services. Since its
formation in 1994, the company has grown into one of the largest names in the
space. EMCOR achieved this scale in large part due to the aggressive
acquisition of smaller competitors. That said, the main driver of growth lately
hasn't come from roll-up acquisitions or other financial engineering
strategies. Rather, chalk it up to the AI data center boom. Between 2023 and
2025, revenues zoomed from $12.6 billion to nearly $17 billion, thanks to
robust demand for electrical, mechanical, and other construction work. During
this time frame, earnings more than doubled, from $13.37 to $28.30 per share.
This growth wave has yet to slow down. During Q1 2026, EMCOR reported 19.7%
year-over-year revenue growth, with quarterly earnings rising 30%. Alongside
strong results, management also issued an upward revision to full-year 2026
guidance, raising its revenue guidance from between $17.8 billion and $18.5
billion to between $18.5 billion and $19.3 billion, with earnings per share
(EPS) guidance raised from between $27.25 and $29.25 per share to $28.25 to
$29.75 per share. Better yet, some sell-side analysts anticipate an even
stronger 2026 performance. For 2026, the high end of analyst forecasts calls
for revenue of $19.2 billion and earnings of over $30 per share. Even as the
market has yet to fully catch on, EMCOR's AI growth has already driven the
stock higher. Trading at around $175 per share in mid-2023, the stock now
trades at around $845 per share. With this big run-up, EMCOR has also climbed toward
a premium valuation. At current prices, the stock trades for around 28.5 times
forward earnings. While reasonable compared to other construction stocks,
shares may seem at risk of a de-rating due to slowing earnings growth. However,
taking a closer look, don't assume this is imminent. For instance, consider
EMCOR's reported earnings growth last quarter, plus the fact that it beat
consensus by $0.94 per share last quarter, the latest forecasts appear too
conservative. Comps could prove tough in the coming quarters, but as long as
growth merely normalizes rather than screeches to a halt, shares will likely
sustain a premium valuation and continue to rise in tandem with earnings
growth. AI data center growth could slow, but EMCOR could still maintain elevated
growth. Data center construction and electrical work today translates into
maintenance and property management work for EMCOR tomorrow. As high growth
continues, and the broad market becomes aware of EMCOR's "AI growth"
bona fides, shares could reach even loftier price levels. Given this
opportunity, it's prime time to make this AI stock a long-term holding and
build a position on any major weakness.
GOOGL Is Alphabet's run finally over? The
company's shares had been performing very well, but over the past month,
Alphabet has lost momentum, with its stock price declining 13%. There are
several factors behind Alphabet's recent dip, but the company's prospects
remain intact, making it an excellent stock to buy right now. Here's why.
Alphabet has recently lost some key employees, including John Jumper, a leading
artificial intelligence (AI) expert and Nobel laureate, who left the company to
join Anthropic. On top of that, investors are increasingly worried about
Alphabet's AI-related spending. The company recently announced an $80 billion
equity capital raise to fund its AI ambitions. The tech leader expects capex
spending -- which should be in the $180 billion to $190 billion range this year
-- to rise significantly in 2027. If Alphabet's spending doesn't pay off, we
could see decreased revenue growth as profits and margins compress. However,
the data we have suggests that Alphabet is right to invest heavily to fuel its
AI business. In the first quarter, the company's revenue from its cloud
segment, Google Cloud, was about $20 billion, up 63% year over year. It grew
much faster than the rest of the business. Alphabet's total revenue came in at
$109.9 billion, 22% higher than the year-ago period. Google Cloud's sales
growth also accelerated significantly from the already impressive 48% it posted
in Q4 2025. One of the key drivers of this performance was Alphabet's AI
business. The company reported that sales from products built on its generative
AI models grew by almost 800% year over year in the first quarter. Further,
Alphabet ended the period with a cloud backlog of $462 billion, which almost
doubled from the previous quarter. This highlights sustained -- and even
accelerating -- demand for its cloud services, especially its AI products,
which are helping drive incredible growth. So, it makes sense that Alphabet
continues to spend, as there may still be lucrative opportunities to tap into.
One of the great things about Alphabet's business is its relative
diversification. Cloud computing and AI may be driving much of the growth right
now, but the advertising business is also performing well. Alphabet has a
nearly insurmountable lead, with the undisputed top search engine in the world,
a strong brand name associated with it, and network effects that allow it to
grow search queries and improve results, thanks to the massive data at its
disposal. That's to say nothing of the company's strong position in video sharing
and streaming through YouTube, which also generates substantial ad sales and
recurring subscription revenue. The best part is that the digital advertising
market is still on a growth path and will continue contributing massively to
Alphabet's results for a long time, and the streaming market should also expand
over the next decade. Beyond that, Alphabet has potential opportunities that
aren't currently contributing to sales growth but might eventually do so, such
as its work in the autonomous vehicle market through Waymo. All of these
initiatives highlight Alphabet's attractive long-term prospects. And after the
company's recent slump, it is a great opportunity to buy its shares on the dip
and hold them for the long term.
LIN With a full name of Space
Exploration Technologies, the "X" in SpaceX is short for
"exploration." However, it could stand for "extra-high
valuation." SpaceX's IPO market cap of roughly $1.8 trillion was the
biggest ever. Only days after its public listing, SpaceX ranks among the
largest companies in the world based on market cap. This IPO stock now trades
well above the price targets even the most bullish Wall Street analysts set.
It's understandable if many investors are nervous about SpaceX's astronomical
valuation. There's good news if you want to profit from the space boom, though.
The company that fuels SpaceX's rockets is trading at a discount to peers --
and Wall Street overwhelmingly views its stock as a "buy." Rockets
existed only in science fiction novels when Linde was founded in 1879. The
German company soon became a leader in manufacturing and marketing industrial
gases. In 2018, it merged with U.S.-based industrial gas company Praxair,
cementing its position as the world's largest industrial gas supplier. From the
early days of NASA's Apollo space program in the 1960s, Linde was a primary
provider of liquid oxygen for the Apollo rockets. The company continues to
supply liquid oxygen and liquid hydrogen for NASA today, including for the Artemis
missions focused on returning humans to the moon. Linde is also a major partner
with SpaceX. It fuels roughly 70% of SpaceX's launches, according to Barron's.
SpaceX's reusable Starship vehicle could make it even more dependent on Linde.
Starship burns around 10 times the oxygen of a Falcon 9 rocket, based on an
analysis by Rothschild & Co. Redburn analyst Tony Jones. As an exclamation
point for the opportunity Linde sees with SpaceX, the company built a new air
separation unit (ASU) in Brownsville, Texas. Not so coincidentally, this
facility is near SpaceX's Starbase rocket launch site. The new ASU produces
liquid oxygen, nitrogen, and argon for SpaceX. Of the 27 analysts surveyed by
S&P Global in June who cover Linde, 22 rated the industrial stock as a
"buy" or "strong buy." Four analysts recommended holding
the stock, while one outlier labeled Linde as an "underperform."
Granted, Wall Street doesn't expect huge returns from Linde over the next 12
months after its 20% year-to-date gain. The consensus price target reflects a
modest upside of around 6%. But this average target could rise as more analysts
update their projections. As a case in point, RBC Capital recently raised its
price target from $552 to $570 -- a double-digit percentage increase from Linde's
current share price. Why are analysts generally bullish about Linde? For one
thing, management expects to grow earnings per share by 10% per year on
average. The company also boasts a strong project backlog of $10 billion as of
the end of 2025. Linde remains attractively valued compared to peers. Its
shares trade at a discount to several other S&P 500 materials sector
stocks. As icing on the cake, Linde offers a reliable dividend that yields
1.2%. The company is a member of the Dividend Champions, a group of stocks that
have increased their dividends for at least 25 consecutive years. During the
heady gold rush days of the mid-1800s, the suppliers to gold miners often made
greater profits than the miners themselves. Could Linde be a modern-day
equivalent? Maybe. To be sure, Linde doesn't have the explosive growth
prospects of SpaceX. However, it could ultimately be a bigger winner for
investors based on the current share prices of the two stocks. Unlike SpaceX,
Linde isn't a moonshot bet. It's a company that makes moonshots possible, but
with a valuation more down-to-earth than SpaceX's.
MP No news.
MSFT Microsoft has had a rough go as of
late; the stock is down by around 30% from its all-time highs. Although it bounced
from the 52-week low that it reached in April, this month, it has been sinking
back toward that level again. The sell-off doesn't make a ton of sense because
Microsoft's business looks fantastic. In its fiscal 2026 third quarter (which
ended March 31), revenue rose 18% year over year. In addition, Azure cloud
revenue increased by 40%, and its AI segment's annual revenue run rate rose
123% to a $37 billion. Looking just at those figures, one would not expect
Microsoft's stock to be doing so poorly. From a valuation perspective, it also
looks like an absolute steal. Because Microsoft's fiscal year ends on June 30,
it's best to use next year's earnings projections to gauge the forward
valuation of the stock. Trading at just over 19 times next year's expected
earnings, Microsoft is cheaper than the S&P 500, which trades for 22 times
forward earnings. That's a low price to pay for a company that by all accounts
is doing quite well.
NU Nu Holdings is an exciting
digital bank based in Brazil. Although the stock soared last year, it's dropped
in 2026 and is down 22% year to date. However, it might have bottomed out for
the year, and it has several tailwinds that could send it higher. Here are
three catalysts for Nu stock in 2026. 1. It's getting bank charters in Brazil
and Mexico. Nu operates a financial app in Brazil, Mexico, and Colombia. It has
135 million users as of the end of the first quarter, 115 million of them in
its home country, Brazil, where it's the largest private financial institution.
It has become popular among mass users who are often closed out of the banking
system in Brazil, which has high barriers to entry. It has released several
products targeting more affluent consumers, and that segment is also growing.
It has achieved this level of engagement and popularity, with more than half of
the adult population in Brazil using the platform, without a full bank charter.
Instead, it has operated as a payments, credit, financing, and investment
company. Obtaining a full bank charter, which it has applied for, will let it
offer more products and achieve greater stability, as it can operate all of its
services under one umbrella instead of applying for various licenses and permits
in different areas. Since it's getting closer to saturation among new users,
this opens up an opportunity to cross-sell and deepen engagement with its
existing user base. It's also getting a bank charter in Mexico, where it still
has just a fraction of the adult population at 15 million users. 2. It's
getting a bank charter in the U.S. Management has implied that it would
continue to expand into new regions, and it recently received a conditional
bank charter to operate in the U.S. It hasn't provided many details about this
new venture yet, and it's still waiting for full approval from regulators.
During the next 12 to 18 months, it needs to fully capitalize the bank in
accordance with regulations. Once approved, it plans to offer the full gamut of
banking products, including deposit accounts, credit cards, and other lending
products through its app. The U.S. population of 342 million is almost as big
as the populations of Brazil, Mexico, and Colombia combined, providing a vast
new market opportunity. In March, it announced a partnership with soccer
franchise Inter Miami CF and named its new stadium Nu Stadium. The company said
that it's a "significant milestone in its international growth strategy
and reinforces its long-term commitment to the United States," and the
partnership is meant to build its brand as it gets started in the U.S. Given
its roots, it's likely to target the large Spanish-speaking population in the
U.S. South. Management also said this is part of Nu's "global
mindset," and more could be on the way. 3. It's using AI to make better
lending decisions. Artificial intelligence (AI) is proving its value in many
different areas, and one field where it's disrupting norms is in credit
scoring. Upstart Holdings and Pagaya Technologies are both making waves as AI
credit-scoring platforms, and Nu has its own foundation model called Nuformer
that uses AI and machine learning to approve more borrowers without increasing
risk. Its newest model reduced risk by 70% for the same population as previous
models. That drives financial inclusion, one of its missions, as well as
increased revenue and improved credit quality, which has been an issue for
investors recently. The company believes that its immense data store from its
highly engaged users gives it an edge in identifying good borrowers, and there
have already been tangible results. In the 2025 fourth quarter, Nu posted a
half-percentage-point increase in credit card purchase volume market share in
Brazil, the highest absolute increase in the past 10 years for any bank. The
credit book increased 40% year over year, and the write-off rate was steady at
2.8% to 2.9%. These are incredible results and could get even better. Nu stock
is on sale right now, but it could soar in the second half of the year.
NVDA The beating heart of the artificial
intelligence (AI) boom is, without a doubt, Nvidia. The chipmaker's graphics
processing units (GPUs) -- the specialized chips that do the heavy math behind
AI -- power the data centers that train and run ChatGPT, Claude, and the vast
majority of AI models. It's no surprise, then, that Nvidia has managed a
multiyear win streak nearly unmatched in the modern era. In its fiscal 2022,
the company booked $26.9 billion in revenue. Over the last 12 months, it booked
nearly 10 times that -- $253.5 billion. The stock has followed suit, up more
than 600% since January 2022. That kind of run can make an investor nervous. As
unstoppable as Nvidia looks, there are real risks here, and most of them have
been talked to death -- customer concentration, fierce competition, the
physical limits of the AI build-out. But the one I think matters most still
flies under the radar. The AI boom is being fueled, in large part, by the
capital expenditures (capex) -- the money a company sinks into long-term assets
like buildings and equipment -- of just a handful of firms. Big tech names like
Meta, Alphabet, Amazon, Microsoft, and Oracle are spending on a scale we've
never seen. Last year alone, these five shelled out a combined $412 billion --
well over twice the total just two years prior. That capex is the lifeblood of
the AI economy. It flows to the construction firms building the data centers,
the neoclouds operating them, and, most critically, to chipmakers like Nvidia.
So if that spending slows, Nvidia is in trouble. That much is obvious. What's
not obvious is why it might. Investors have stomached the enormous spending
these past few years for one simple reason: They've watched big tech's earnings
grow right alongside it. You see earnings per share (EPS) -- a company's profit
divided across its shares -- jump 100%, and you stop worrying about the bill.
Why fret about spending when profits are exploding? Here's the thing: There's a
lag in the system, and that profit growth could soon look a lot smaller than it
does today. When Meta spends $50 billion on Nvidia chips, that doesn't hit the
books as an expense all at once. It counts as capex, and Meta can spread the
cost over time. Say, $10 billion a year for five years. That's depreciation:
spreading the cost of a big purchase across the years a company expects to use
it. There's nothing shady about it. It's the same thing every business with
trucks or factories has always done. What's different is the scale and the
timing. A company often doesn't start the depreciation clock until the
equipment actually goes into service -- and given how long it takes to build an
AI data center, that can be a long wait. We're in a stretch where revenue is
climbing while the true cost of all those chips hasn't fully shown up in
earnings yet -- a "golden window where everybody looks good," as one
Morgan Stanley analyst put it. That period won't last. A wall of depreciation
is coming, and when it lands, it could drag down big tech's reported earnings.
And that's when investors may start to care about the spending. Faced with
shrinking earnings, the Metas and Amazons of the world could trim those massive
capex plans. Fewer dollars spent means fewer chips ordered, and fewer chips is
bad news for anyone holding Nvidia. Now, bulls will tell you Nvidia's order
book is booked solid -- CEO Jensen Huang says he expects a $1 trillion backlog
by the end of the year -- so there's not a real risk to Nvidia's sales coming
any time soon. I don't discount that, but stock prices are based on where
investors think things are headed. Which means that Nvidia shares can take a
hit well before Nvidia's actual order book does. All that's required is for
investors to believe big tech is likely to scale back in the coming years. The
real questions are when this happens and how big the hit will be -- and, I'll
be honest, no one knows. You can see the uncertainty in Wall Street's own
forecasts. Analysts' revenue targets for big tech over the next few years are
fairly tight. Their depreciation estimates are all over the map. None of this
makes Nvidia a bad company -- it's a great one, selling every chip it can make.
But Nvidia relies on capex spending continuing to expand. That could slow once
investors start to see the true cost of that spending show up in income
statements. For my money, the depreciation wall is a big reason I'd think twice
before buying Nvidia shares today.
SPGI No news.
TSM Taiwan Semiconductor
Manufacturing, also known as TSMC, is the leading chip foundry, meaning it
makes the chips for other companies that design them. Making chips is all it
does; it doesn't design its own, so it's agnostic in that sense, welcoming all
customers, including chipmakers and hyperscalers like Nvidia, Advanced Micro
Devices, and Apple, to name a few. It is also the dominant player in its
market, particularly when it comes to manufacturing AI chips. TSMC owns a
roughly 90% share of the advanced and AI chips market because of its scale and
pricing power, its advanced technologies, and its reputation. This makes TSMC
an entrenched part of the AI boom, positioned to make the chips for the AI chip
leaders, no matter who they are at any given time. The stock hasn't put up
outrageous numbers like Micron and Western Digital, as it's only up 54% year to
date and 116% over the past year. But it is reasonably valued with a forward
P/E ratio of 29, which makes it a strong buy given its dominance.
V On a global level, Visa and
Mastercard are the two dominant credit card networks. They have virtually
ubiquitous acceptance, with a presence in more than 200 countries and
territories. They process trillions of dollars in payment volume each quarter.
And billions of their cards are used worldwide. Their industry positions have
resulted in tremendous profits. During the past five years, Visa's quarterly
net income margin averaged 51.2%, while Mastercard's was slightly lower at
45.4%. When it comes to generating earnings, there is no issue. What makes
these companies such durable money machines? Both Visa and Mastercard operate
open payment networks. This means that their partner banks issue credit cards
to customers, taking on the credit risk. And those transactions run across the
Visa and Mastercard payment platforms. Think of Visa and Mastercard as
controlling the highway system within the broader economy. And each time a card
gets swiped at checkout, the payment flows must pay a toll to be processed. These
companies are essentially a tax collection system on commerce. The
technological infrastructure is already built, with minimal capital
expenditures needed to continue growing. Every additional transaction adds
virtually no marginal cost. These are businesses with significant fixed
expenses that are more than offset by their substantial revenue. The result is
that each transaction produces extremely high margins. Visa's operating margin
in its fiscal 2026 second quarter (ended March 31) was a superb 64.4%, while
Mastercard's operating margin was 58.4% during the same period (representing
its Q1 2026). Free cash flow (FCF) generation is robust. Combined, Visa and
Mastercard brought in $5.2 billion in FCF during the first three months of this
year. This allows them to return substantial amounts of money to shareholders
through dividends and stock buybacks. Now that we've learned why Visa and
Mastercard are money machines, it's time to understand what makes their
performance so durable. These companies are essentially pegged to economic
growth, generally, and to higher spending levels, specifically. What's more,
they benefit from the secular shift toward cashless transactions. In the U.S.,
one of the most developed economies, 83% of consumers still used cash at least
once in the previous 30 days (more than any other payment method), according to
October 2024 data from the Federal Reserve Bank of Atlanta. The opportunity for
digital penetration is much more sizable in emerging markets. Visa and
Mastercard can also be viewed as beneficiaries of inflation, or at least
positioned not to be hurt by rising prices across the economy. When the
Consumer Price Index surged a few years ago, both businesses were reporting
more than 20% year-over-year revenue growth in late 2021 and early 2022. This
setup makes them particularly resilient in the current macro environment. Visa
and Mastercard have had to deal with volatility in the past several months. The
former's shares trade 11% off their peak (as of June 16), while the latter is
16% below their record. You might be wondering if you should buy these two
financial stocks on the dip. The bull case rests on their ability to continue
increasing profits. Sell-side analysts expect double-digit annualized diluted
earnings per share growth through their respective 2028 fiscal years. I believe
there is a high probability this will happen, given their historical trends.
Visa trades at a price-to-earnings (P/E) ratio of 29, about the same as
Mastercard. The dominant competitive positions these businesses have
established, which support their status as durable money machines, warrant what
appear to be premium valuations. These stocks can provide a solid foundation
for any portfolio.
WM No news.
Stock Picks:
CX: Buy Fundrise Innovation Fund LLC (VCX) a
publicly registered, exchange-traded venture capital fund that allows
individual investors to access high-growth private technology companies. Listed
on the New York Stock Exchange, it targets mid- to late-stage startups across
sectors like artificial intelligence, data infrastructure, and space
exploration. Buy additional Boeing (BA).
KS: Buy additional MP Materials (MP).
JL: Buy additional MP Materials (MP), and/or Trilogy
Metals Inc. (TMQ). Company is dedicated to advancing exploration and
development at the Upper Kobuk Mineral Projects (“UKMP”), high-grade
copper-zinc-lead-gold-silver-cobalt properties in Northwest Alaska.
On
Monday, June 8, 2026, the following order(s) filled:
Buy 20 BA @ $216.36/share; total $4327.20
Meeting
adjourned at 3:12 PM.
Respectfully
submitted by Ken Bauman.
Next Meeting:
Thursday, July 2, 2026 at 1:30 p.m. at:
El Dorado Saloon & Grill
879 Embarcadero Dr
El Dorado Hills, CA 95762
916-941-3600