I think there are basically 2 prevailing strategies in the market. 1) Earnings revisions Only two questions matter near-term: Is the story getting better or worse, and are numbers going up or down? That's it. For momentum names, in either direction, that's all that matters -> is the story continuing to improve w/ beat and raises, or is the story continuing to erode with misses / guidance reductions. There is more complexity at extremes (ie second derivatives) that also works -> the story has stopped getting worse and numbers are no longer going down so upside optionality, or narrative no longer improving and downside risk to numbers so downside optionality. Earnings revisions work because they are reflexive. The company is doing well, estimates are moving higher and the stock is rising. More investors do work on the name and the due diligence will be positively biased as they generally ask more favorable questions to understand the strengths of the company. This leads to more buying and the increased stock price reinforces the bullish narrative. Hopefully, management is smart enough to set forward guidance at beatable levels and the step-ups continue. Same is true for reflexivity on the downside. A company is struggling and missing its own guidance and expectations. The stock moves lower as obviously more people sell than buy. Investors do more work but are naturally more focused on the reasons for corporate underperformance and corresponding risks. Further stock price declines fuel the negative narrative which feeds on itself. Companies often don't take their medicine as far as fully disclosing bad news and the negative revisions continue. So again, the playbook for this is simply 1) is the story getting better or worse?, and 2) are numbers going up or down? 2) Valuation From time to time, stocks get too cheap or expensive relative to fundamentals such that the disconnect is very interesting (let's say can make at least 50% to get back to conservative valuation target in either direction within 12-18 months). Very often, large disconnects occur when earnings revisions are unclear to everyone (stock is really cheap but no one has any clue when numbers stabilize, stock is really expensive but everyone thinks company will continue beating / raising). However, the insight here is that valuation is interesting in and of itself for the right kinds of companies (solid business, transitory issues, acquisition candidates, etc.). And that no one has visibility into near-term numbers is already in the stock and why the valuation is so compelling. This opportunity also always arises in tough macro periods where everyone is frozen bc who can predict how the great financial crisis or covid pandemic plays out - so that uncertainty is shared by everyone and more than represented in stock valuations. And that is why the opportunity exists - because everyone is worried about the same imponderable thing and it's already in the stock price. The only advantage you need here is a deep understanding of and conviction in the business, and freedom / willingness to buy it for the long-term (and the returns never take as along as you think). Reality My experience is most investors typically only pursue one of above strategies (and might only be allowed to pursue one or the other). So they won't / can't buy $WDAY at 20x FCF bc they think guidance might be lowered (company misexecution, tough macro, etc.), or they won't sell $WDAY at 35x FCF bc they are confident everything is great and company will continue beating. I also have found earnings revisions investors tend to have nearer-term horizons and be less valuation sensitive. This is because it's hard to fill a portfolio with names that will both beat earnings and trade at reasonable valuations. So, on balance, these investors will compromise on valuation. Valuation investors have longer-term horizons and are by definition valuation sensitive and less sensitive to revisions. This is because it's hard to fill a portfolio with names that are both cheap and that will beat earnings. So, on balance, these investors will compromise on earnings visibility. Optimal I have found earnings revisions offer the most explanatory power near- to mid-term. I want to be long stocks where numbers are moving higher and short stocks where revisions will be lower. But I also want think it is an advantage to be able to cast that strategy aside and buy companies at valuation extremes. This is when a good company is "too cheap" even if I'm not sure of near-term revisions. There are other criteria that need to be in place for this to work -> solid business w/ reasonable estimation capabilities, potential negative revisions are manageable and likely in the stock, less risk of permanent impairment over a 12-18 month horizon, balance sheet in order and not indebted, etc. Finally, the intersection of the two is where you can nail inflection points in businesses / stocks. A company is too cheap and is about to start beating numbers which will drive both estimates and the multiple higher. That's where the big money resides. Anyway, this overall thinking is why I structure my notes as follows: Is this a bad, good, or great business? Is the story getting better or worse? Are numbers going up or down? What is the risk / reward?

Well. This was wrong. SaaS shorts win again.

So my prior analysis was completely incorrect. And by "my", I mean "Claude and my". You can't just take a position's weighting in the index and multiple it by each company's net income. The missing variable is the P/E for each company which moves around the underlying EPS for the bench. So, yeah, you need to double check AI just like a person. Interestingly, $FDS has an EPS aggregation screen for ETFs where the math is done carefully and has human-written explanatory notes. So still value in the console as well. Revised view: QQQ is ~33% exposed to semis while SPY is ~20% which might be the cleanest way to look at it. If semis were to get cut in half, that would be a ~17% QQQ drop and ~10% SPY drop. Could be less if other names inflate as money rotates into them, could be more if it just brings everything down with it including overall multiples.

If you are a $FDS customer, be sure to call your rep. Mine says nearly all clients are trialing the MCP, and 100% of completed trials converted to paying for the connector. 100%. List price for the connector is a 20% uplift to contract value for the first 10 seats and then drops to an incremental 15% for additional seats. Said there has been 0 pushback on price. Single seat pricing still a work in progress as that is a minority of their business. Stock trades at 14x this year's GAAP EPS estimate which is likely too low, and 13x next year which is highly likely to be too low...

Update: SaaS short value 97b in total up from 90b on Friday's close. Ouch. Weird because isn't one of the 10 Commandments "SaaS shall not trade up with Semis"? I guess it isn't ordained:) Maybe semis and saas can make money from agents?!

I had Claude / $FDS whip up a spreadsheet showing me how short interest in SaaS has changed since 3/31 which was more or less the bottom. Total shares short are up 27%. Single stock short interest increased by 102% for $VEEV, 98% for $SAP, 94% for $NOW, 63% for $WDAY... If you take the market value of shares short on 3/31 and compare it today, it has gone from ~60b to ~90b. That's not nothing. Market tends to do whatever causes the most pain... (And let's be clear, if you're long semis / short SaaS, you've already made a killing so might just be time to give some back, or not).

AlphaSense has proprietary expert interviews with an increasing number of them conducted by AI (which generally lowers quality per interview but more than makes up for it with additional volume). I have an "agent" set up for each of my portfolio positions. The prompt includes my concise 1-2 paragraph investment thesis. I then have it review all relevant expert transcripts, summarize what confirms and disconfirms my thesis, and email me the result for Sunday afternoon reading. Pretty useful. Below is for $NOW:

As a former and recovering short-seller, one of the best ways to know if I had overstayed a profitable short was to ask myself whether "it was too easy". The tricky thing about a short being too easy is it's also too natural to let the downward price action tell you that your fundamental view is correct and reinforce your conviction - sometimes falsely so. Shorting is very hard so, if it's too easy, watch out. Because the next stage sometimes is a reversal of the crowd and that false intellectual reinforcement from the downward price action alone can trap you... Check out these SaaS charts. They all look like this. Short interest went up ~5x - AFTER the bottom was put in. So 80% of shorts are underwater here. Most people just can't move that quickly intellectually (myself included). Pretty hard to be yapping about how SaaS is dead all based on future projections, put on a short position, tell everyone you know about how SaaS sucks, and then quickly change your mind simply because the stocks are now going up. Who knows if this is the start or end of a SaaS rally - just pointing out a lot of people are intellectually stuck short. (I don't think the CRM rise in shares would be due to dealer hedging the ASR at this point but could be wrong).

I don't know who needs to hear this but AGI is already here. $FDS just made unstructured data available via MCP and I asked it to read four transcripts for $VEEV, update me on what's going on, tell me if the story is getting better or worse, and whether numbers are going up or down. If this response isn't AGI, I don't know what is. Claude costs $240 / year. $FDS MCP costs $1,500-2,500 / year. Claude has serious COGS underneath that $240. $FDS MCP has de minimis incremental COGS. And people are bearish on important SaaS with critical data? Now I wonder if semis third deriv just turned negative... If all the big LLMs hit AGI within the next 12 months, the focus might shift to efficiency pretty hard.

$WDAY reported a perfectly fine Q1 which is also their most irrelevant, smallest qtr. Subscription rev grew ~13% yy cc organic and they highlighted "record NNACV" which is not what you would expect in a seasonally weak qtr that had a global conflict and all-eyes-on-Anthropic-spend. They highlighted headcount at their customers was flattish - layoffs in tech offset by growth elsewhere. And they highlighted that net new business drove 40% of subscription growth while 60% came from expansion. Turns out, there are still plenty of companies (mid-market) and verticals (government) that want to modernize their HCM / ERP software. Layering AI on top of critical data / workflows is still an exploration process but their AI business is approaching 500m ACV or 5% of revenue while net new ACV in AI is growing 200% yy. Like the rest of the industry, they are building proprietary agents, acquiring them, and largely providing them for free to start via a flex credit model. If the agents add value, then customers will pay once they cross included thresholds. They are promoting leaders from acquired companies to infuse entrepreneurial spirit into the company which seems like a smart idea. PF OM of 31.8% improved from 30.2% last Q1. SBC of 16.1% down nicely from 18.6%. GAAP OM of 13.3% up nicely from 9.2% and has, you know, a long way to go since the business ought to be generating 35% GAAP margins pretty easily and at this level of growth. For the second qtr in a row, they spent ~1.5b on buy-backs. Nice to see. Story is kind of the same here. Leading cloud HCM / ERP provider growing at a more mature rate but also managing margins more "maturely". Business is more about upselling modules across their heavily locked-in customers. But there remains white space in the mid-market, government and abroad. AI is a tailwind as far as decreasing implementation cost for new customers, improving product velocity, and increasing upsell via new functionality introduced. But this isn't a company that's going to grow at very high rates like AI infra (and it also won't go through as rough a period when the AI infra build out cools). Risk / reward remains stupid - even up here. Worth noting this is likely a 10-12% top line grower w/ expanding margins that drive profit growth of 25-30%. Stock trades at 17x NOPAT on CY2027. Upside of 80% to 25x CY2028 GAAP EPS which equates to 18x earnings power. Downside of 5% to 10x street CY2027 FCF. AI is the bear case or "who cares" case. If you're truly concerned about AI impact, I'd recommend hanging out with Linda in HR or Rodger in Finance to hear how excited they are to take on additional work / headaches displacing WDAY rather than just doing their jobs and planning their kids' birthday parties.

Here is the plan for $FDS: All of you who have a FactSet terminal should immediately call your sales rep to turn on a trial of the MCP with Claude. Play with it for a day and you'll see it is the easiest value-add unlock for investing out there. Ask yourself if your firm is going to switch from $FDS anytime soon and whether any analysts have been laid off because of AI. Answer is no to both for 99% of you - so the core business is obviously fine. Then buy the stock ahead of the MCP ramp accelerating revenue at high margin flow-through trading at 15x NTM GAAP EPS consensus which is too low. Then have your firm purchase the MCP from $FDS. Then call your friends who use Bloomberg which has no MCP and tell them how far behind they are (NGMI). And then have the $FDS investment more than pay for the cost of the MCP for your investors.

Pretty crazy that $NVDA is 33% of $QQQ 2026 EPS and 37% in 2027. Also wild that $NVDA $AVGO $MU are 40% of $QQQ 2026 EPS and 46% in 2027. Something to be aware of although not sure what to do with it. Certainly relevant re @RealJimChanos pov.