To The Moon

$S&P 500(.SPX)$ profits are soaring, there’s no doubt about that. And the market has gone higher with those profits.

My question is around what’s sustainable and what isn’t in today’s economy.

For example, can you guess what company this quote is about?

[Company X] today posted robust earnings that roughly tripled expectations, a surge primarily caused by sales in its memory division.

Yep, it’s Micron $Micron Technology(MU)$ ( ▼ 6.62% ).

Now, guess what year this was written?

I’ll give you a hint, it wasn’t 2026.

It was 2000. September 26, 2000, to be exact.

Micron is by its nature a cyclical stock. When times are good, profits surge and the money is reinvested in growing capacity, which inevitably leads to the industry over-investing in capacity, causing overcapacity and a downturn in profitability. It’s a tale as old as time.

As recently as June 2018, operating margins surged to about where they are today (on a trailing 12-month basis), and the stock dropped over 50% in just six months because the profits were fleeting.

This time is different, of course (sarcasm). It always is.

But the market doesn’t seem to care that market cycles come and go. In fact, traders are feeding into it.

Intel is up 195% so far this year, $Texas Instruments(TXN)$ is up 74%, Sandisk is up 493%, and the list goes on and on. Are their revenue and profits sustainable, or is there a surge in revenue in the short term that will leave investors holding the bag long-term?

This tweet lays out part of what’s happening. To chase the “AI trade” in memory, semiconductors, equipment, and energy, traders are selling short “the greatest companies in the world” to buy “the tip of the spear of garbage.”

The “garbage” probably isn’t Micron; it’s…more speculative stocks, but the point is the same. Money is piling into specific “themes,” and long/short funds (funds that go long one stock and short another) are “funding” those long positions by selling stocks they don’t think will burn them.

These great companies and long-term compounders are what I own. And they’re having a terrible year. But in the long arc of history, I think they’ll be winners for investors. That doesn’t mean the line will be straight up and to the right.

Falling Compounders

Maybe I’m demonstrating confirmation bias by latching onto the thesis that speculation is rampant in the stocks going up, while I’m holding the compounders that are going down.

But when I take a step back and look at the Asymmetric Portfolio, I see companies doing exactly what I want, which is compound revenue growth and expanding margins. That’s what’s within their control. Over time, the stock will follow revenue and profits.

But in the short term, the stock can swing wildly, and I’m feeling the downside of that volatility in 2026. $Uber(UBER)$ stock is down 18.2% over the past year despite great results.

$ON Semiconductor(ON)$ reiterated revenue growth guidance of 23% in 2026 and said margins would be higher than expected, and still, the stock is down 38% over the past year.

$Duolingo, Inc.(DUOL)$ has had its challenges, but it’s still compounding revenue and expanding margins long-term. And the stock is down 79% over the past year.

$Zeta Global Holdings Corp.(ZETA)$ is up 23% over the past year, but has fallen 16% so far this year (as I’ve owned it) despite revenue growth surging to 50% last quarter.

The common theme across the stocks I own in the Asymmetric Portfolio is compounding businesses and falling stock prices.

Maybe the market is right, and the boom and bust cycles in memory, chips, energy, and equipment will be different this time.

But my money is on companies that can compound revenue sustainably long-term. I think that, eventually, sustainably compounding revenue and growing margins are a path to outperforming the market.

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