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AI fears oversell vertical market software giants
The guest argued that premier vertical market software (VMS) companies are trading at historically cheap valuations due to overblown fears of AI disruption.
The argument
He noted that companies like Constellation Software and Topicus have been heavily sold off, yet their business models remain highly resilient, creating a rare, high-upside buying opportunity that has begun attracting deep value investors.
The thesis, stress-tested
✓ What validates it
- ✓Stabilization or growth in organic revenue for VMS companies
- ✓Prominent value investors increasing their stakes in these names
▸ Risks discussed
- ▸AI disruption of vertical market software actually materializes
- ▸High-momentum and volatile stocks continue to outperform quality factors in the near term
Hear it yourself
"But why am I telling this story? Why am I making this point? Well, if you look at the performance of Warren Buffett, well, it has been tremendous. Right? 20 per year. But on the other hand, if you look at the data, you see that since 1962, he underperformed in one out of every three years. So in other words, if you are an investor, if you are a stock picker, well, by definition, there will be times of over performance and times of under performance. And the most interesting part I see is, well, if you look at 1999, and we all know what happened after '99. Right? The burst of the dot com bubble."