WEBVTT

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- So there's a new theory out
there that OpenAI could lose

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as much as $5 billion this year

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and could be headed to
bankruptcy by next year.

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Do you think there's any credence to that?

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Should the investors in
the AI boom be worried?

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- Look, we think we're
in the early stages of,

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of the AI adoption.

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It's got many years to go
in terms of implementation.

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I think what investors are
concerned about right now is

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how is it being monetized?

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It's the show me moment as far as AI

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and the tech sector goes.

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And I think that's one reason

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that we've seen some challenges
around earnings season.

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The earnings are still there,

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but again, investors really wanna see

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how this is being shown up in
sales growth and monetization.

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So when we think about ai,

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we're still overweight mega cap tech.

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These are high quality companies.

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They have tons of cash, they
have great return on equity.

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They have a limited need to tap
the capital markets in order

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to grow, which is a huge
advantage in an environment

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where interest rates are at 5.5%.

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The challenge, of course,
is in the valuation.

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So a lot was in the price
going into this earning season.

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And now the s and p 500 growth
index, which is where a lot

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of those companies live, is
trading at almost a 50% premium

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to its 20 year average.

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You know, valuations are
not necessarily a catalyst.

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We can see them continue to expand here,

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but we wanna diversify also
from that mega cap tech names

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by owning things that are on sale.

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And right now we're really
focused on quality at a

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reasonable price.

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I think we've made that term
up, I'm not entirely sure,

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but it's really focused on
looking for parts of the market

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that are on sale.

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- So what's on sale?
- Well,

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we like areas like mid-cap value stocks,

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industrials in particular.

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So there's another trend
that's happening right now

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that's kind of more under
the surface, which is one

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of Onshoring reshoring.

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There's manufacturing happening
in the United States today

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that's a result of supply chains
being moved back here from

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China and other parts of the world.

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It was a trend that was
in place prior to Covid

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that's really been accelerated,
especially in the light

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of the fact that we're doing a ton

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of fiscal spending on manufacturing.

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Whether it's things like the
CHIPS Act, the Infrastructure

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and Jobs Act, all

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of those things are being
funneled into this kind

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of manufacturing renaissance

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that we're seeing in
the United States today.

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And we look at industrial
stocks as really being kind

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of the key beneficiary of those trends.

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So think mid caps Midwest, which is

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where we're seeing a bulk
of this activity happen.

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And it's a longer term secular trend

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that you're not overpaying for.

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In fact, mid cap equities
are trading at the steepest

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discount to their large
cap counterparts since the

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late 1990s.

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So we think there's a
nice opportunity there.

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- Earning season is underway

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and a lot of the big tech
companies are getting punished

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for missing

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and punished more than usual
is, are Midcaps the place

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to go to, to for safe harbor
in these moments? Yeah,

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- We certainly think
that's one opportunity

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to diversify away.

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And you know, let's face it, midcap

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or mega cap tech is
probably due for a breather.

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There's been a huge runup.

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Tech stocks are up 33% over the past year,

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far better than the broad market.

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Some of those magnificent seven,

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or I guess you can call them
the lag seven right now,

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not the Mag seven, have
seen a huge runup in price.

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So the expectations are very
high. The bar is very high.

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Trying to come up with an
Olympics analogy for us right now.

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But the bar is tough to overcome.

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So we wanna think about,
again, diversifying from

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that mid-caps or one spot to do that.

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We've seen a huge rotation
into small cap equities.

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We can talk about that. We
would probably fade that.

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We think a lot of that is sentiment driven

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and driven from kind of expectations

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of a shift in the
political regime right now.

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But again, mid-caps really
being the sweet spot in terms

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of playing that rotation.