Why Bill Ackman Loves Uber at 16x Earnings + Our 2 Favorite Cheap Stocks

Uber Technologies

Across the shows: 5 speakers in other episodes, 1 bullish and 4 bearish calls, past 30 days

• Tim Travis · Value Options LetterBullish

  Uber's valuation and growth are attractive; robotaxi threat is manageable via new products.

  Tim relays Ackman's letter. Uber trades at about 16 times earnings and is growing profit about 25% a year, which he expects to continue for a couple of years. The fear is that Waymo and Tesla robotaxi fleets will take share in big cities where Uber earns most of its profit. Tim thinks cost and convenience will decide it. He sees room for growth from Uber Eats, Uber One, and the tiered ride options, and says Ackman made the valuation case well.

  “I think that the opportunity for Uber and some of the things that they're doing, like, with Uber Eats and Uber One and different types of cars like Uber Black, Uber”at 13:03

• Tobias Carlisle · Acquirers Funds / The Acquirers PodcastBullish

  Uber looks like an impressive business at a reasonable valuation, a good opportunity.

  Tobias says he has followed Uber closely and remembers it turning cash-flow positive. He has looked at its financials several times and finds it an impressive-looking business. He doesn't see a heroic valuation and calls it reasonable, which makes it a good opportunity. His open question is how fast robotaxis such as Tesla's Cybercab will scale.

  “It's an impressive looking business, and it doesn't seem to be... It's not a heroic valuation that you're paying for. It's a pretty reasonable valuation.”at 13:37

Oracle

Across the shows: 39 speakers in other episodes, 9 bullish and 36 bearish calls, past 30 days

• Tim Travis · Value Options LetterBullish

  Oracle bonds yielding about 9% look attractive despite AI-borrower default risk.

  Tim places Oracle among the AI-related borrowers that could see breakdowns or defaults. He nonetheless bought Oracle bonds recently at a yield he recalls as about 9%, which he found interesting. He also likes long-dated bonds such as Meta's, at about 6.8–7%, because a recession that pushes rates down would lift their prices.

  “even Oracle's on that spectrum. I bought some Oracle bonds recently. I think they were yielding, like, 9%, which I thought was interesting.”at 11:17

Tesla

Across the shows: 34 speakers in other episodes, 37 bullish and 25 bearish calls, past 30 days

• Tobias Carlisle · Acquirers Funds / The Acquirers PodcastBullish

  Tesla's Cybercab has scaled very fast in Austin, passing Waymo's ride volume.

  Tobias says the Cybercab launched in January and its ride volume has gone vertical. In a very short time it has passed Waymo, which had been building out incrementally in Austin for years. He treats this rapid scaling as the key question for how quickly robotaxis will take share from ride-hailing platforms.

  “And the CyberCab launched in January. It's just gone vertical, and it's bypassed Waymo in a very short period of time for rides.”at 14:08

Howard Hughes Holdings

• Tim Travis · Value Options LetterBullish

  Owns Howard Hughes; cheap for its real estate, with upside from Ackman's insurance pivot.

  Tim owns Howard Hughes. He says it is cheap given its real estate, which includes key assets in Summerlin (Las Vegas), Arizona, Hawaii and Los Angeles. He describes Ackman's plan: buy a small insurer, hire a strong team, sell real estate over time to fund it, and follow Berkshire by moving from fixed income into common stock with conservative leverage. He calls the 20% return on equity goal aggressive, but sees a lot of upside.

  “Look. I own I own some Howard Hughes. I think it'll be interesting. I think, you know, it's cheap with real estate where it is, and then I think there's a lot of upside to what Ackman's doing there.”at 16:54

American International Group

• Tim Travis · Value Options LetterBullish

  AIG's underwriting turnaround and cheap book value could keep the stock attractive.

  Tim follows AIG closely. After a period of poor underwriting, with combined ratios above 100 and repeated reserve revisions, a new team and a reinsurance deal with Berkshire Hathaway changed the picture. AIG now takes smaller risks while writing good premium volume. Its combined ratios are now in the low nineties to high eighties. Underwriting profit plus investment income make the stock still relatively cheap against book value if those results hold.

  “And now their combined ratios are in the low nineties, high eighties... And the stock is still relatively cheap relative to book value if those results can continue.”at 21:50

Dillard's

• Tobias Carlisle · Acquirers Funds / The Acquirers PodcastBullish

  Dillard's is cheap; it buys back stock while managing decline, and Tobias owns it.

  Tobias says Dillard's has managed its decline well. Like AutoZone and O'Reilly, it is a cash cow in slow decline that uses its cash flow to buy back stock. The market prices it as if its problems are the end of the line, which makes it too cheap. He says the playbook is simple and effective, and that he tends to hold it.

  “Dillard's is no exception to that even though everybody knows what's wrong. They're just throwing off cash and buying back stock. ... it's one that I tend to participate in.”at 26:08

Assured Guaranty

• Tim Travis · Value Options LetterBullish

  Assured Guaranty trades near its cheapest levels in years and is a compelling value.

  Tim says Assured Guaranty trades near one of its cheapest levels, apart from the financial crisis and the COVID peak, on tangible, operating and adjusted book value. He says legacy problem exposures are being resolved: Puerto Rico is mostly done, and in BrightLine, AGO insures senior secured loans backed by rail cars and land even though the holding company went bankrupt. He is watching buybacks and reserve additions at the upcoming earnings.

  “And right now, it's trading at one of the cheapest levels other than, like, the financial crisis or or maybe even the peak of COVID. ... I think it is a pretty compelling value.”at 30:36

Alphabet

Across the shows: 65 speakers in other episodes, 58 bullish and 42 bearish calls, past 30 days

• Tim Travis · Value Options LetterBullish

  Alphabet is extremely compelling; cloud grew 100% and revenue grew 25%; Tim added aggressively.

  Tim says he has added aggressively to the hyperscalers, including Google. He points to Google Cloud growing by 100% and total revenue growing about 25%, which he calls remarkable for a company of its size. He calls the hyperscalers extremely compelling.

  “Google's cloud business grew by a 100%. They grew their revenues by... 25% revenue growth.”at 35:42

Amazon.com

Across the shows: 47 speakers in other episodes, 60 bullish and 10 bearish calls, past 30 days

• Tim Travis · Value Options LetterBullish

  Tim has added aggressively to Amazon and thinks few companies are better to own.

  Tim says he has added aggressively to most of the hyperscalers, including Amazon, and that he thinks they are extremely compelling. He calls Amazon one of the few companies he would rather own. The case rests on the hyperscalers' position as the main beneficiaries of AI spending, which he sees as strong, though he gives little detail on Amazon itself.

  “I think there's not many companies I'd rather own than Amazon in the world.”at 35:57

Deckers Outdoor

Across the shows: 4 speakers in other episodes, 6 bullish and 2 bearish calls, past 30 days

• Tim Travis · Value Options LetterBullish

  Deckers is cheap at about 11x earnings with a strong balance sheet despite slowing running-shoe growth.

  Tim says his fund just sold puts on Deckers, whose big brands are UGG and HOKA. He acknowledges the growth in running shoes has slowed and the market is wary. But he argues the stock trades at about 11 times earnings with a really good balance sheet. He frames the trade as a way to capture the premium from volatility after a sharp drop, which implies he sees the price as attractive.

  “the growth on the running shoes has kind of slowed down a little bit, and so the market... has some trepidation there. But the stock's trading at, you know, like, 11 times earnings with a really good balance sheet.”at 36:36

AI infrastructure & data centers

• Tim Travis · Value Options Letter

  Data-center opposition could delay builds and lower memory prices, which would benefit hyperscalers.

  Tobias suggests that anti-data-center pressure from blue-state governors could be good for hyperscalers, which already have enough funding. Tim builds on that. If some projects don't get built, chip and memory prices could fall a little, which would help hyperscalers because they are such big consumers of those components. He hedges with 'potentially'.

  “if there is pressure and if some of these projects don't get built, potentially, you could see chip prices and the memory prices go down a little bit, which would be beneficial for those companies because they're such big consumers of them.”at 5:35

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Hyperscaler AI capex of $7T needs ~$2T revenue, implying unrealistic labor-share cuts; not feasible soon.

  Tobias sets out the arithmetic. About $7T of capex over the next few years would need roughly $2T of annual revenue to justify it. Getting that revenue from labor would mean carving out about 10% of the global workforce, and he cites John Hampton's point that the labor savings would need to be about $4T. He says this won't happen in a short period, and that it resembles the early-2000s overbuild.

  “And then to justify 7,000,000,000,000 in CapEx, you need 2,000,000,000,000 in revenue on that, say.”at 7:21

• Tim Travis · Value Options Letter

  AI data-center capex returns are good, and chip-refresh ROI should improve each cycle.

  Tim relays Andy Jassy's framework and agrees with it. Data centers last about 30 years and are a heavy one-time investment, while chips, servers and memory last less time but pay back faster. Equipment is bought close to deployment under existing contracts. Each refresh cycle should improve returns because the heavy building spend is done only once.

  “And the ROI should improve on each sequence of that because you're only doing the heavy data center spending one time.”at 10:32

• Tim Travis · Value Options Letter

  Neoclouds like CoreWeave and Nebius look likelier to see defaults than hyperscalers.

  Tim says he doesn't know the neocloud businesses well. He doubts their path to profitability and their AI monetisation is as strong as that of Amazon, Meta and Alphabet, which have several income pillars. If there are breakdowns or defaults in AI infrastructure, he expects them to come from the neoclouds first.

  “I don't know that their path to profitability and the multiple pillars of capitalizing on AI are as powerful as it is for the Amazons and the Metas and the Alphabets of the world. ... if you see breakdowns or defaults, they're the more likely ones.”at 10:58

• Tim Travis · Value Options Letter

  Slower Texas data-center approvals may reduce chip demand, which could explain Nvidia's selloff.

  Tim speculates that after the Democrats swept, Texas and some other states may be building fewer data centers and granting fewer approvals. That could mean less demand for chips. He links this to Nvidia selling off that day. He also notes that Vistra, a big Texas utility that expected huge power demand from data centers, was down about 14%. He hedges the whole idea with 'maybe' and says they will have to watch what happens.

  “maybe Texas and some of these states aren't aren't building some of these data centers, less approvals, less demand for the chips maybe.”at 44:16

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Hyperscalers are overspending, borrowing and diluting, with deeply negative free cash flow that revenue must eventually cover.

  Tobias argues the hyperscalers are spending more than they take in. They are borrowing, raising equity and running massively negative free cash flow. He says that can't be sustained unless revenue arrives to cover the spending. He adds that the hyperscalers are competing so viciously that the resulting consumer surplus is great for users but poor for the companies investing. He views the buildout as a bullwhip that will stay cyclical unless the revenue shows up.

  “they're all just overspending. And at the moment, it's coming from the hyperscalers spending more than they're taking in. They're they're borrowing, and they're raising... They're taking on raising equity capital and their free cash flows are massively negative.”at 45:27

US consumer

• Tim Travis · Value Options Letter

  Consumer discretionary stands out as a value opportunity because the consumer is squeezed.

  Tim says consumer discretionary is the sector that stands out to him as a value area. His reason is that the consumer has been very squeezed, which he links to the inflation pressure Tobias described (energy inflation around 20% year over year feeding through to everything else). The case rests on that squeeze and is not backed by specific spending or credit data.

  “I think consumer discretionary has been one that really stands out to me. And I think that the reason is that the consumer's been very squeezed.”at 1:40

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  The US consumer is clearly struggling under higher rates, gas prices and cumulative inflation.

  Tobias says consumer-facing names have been struggling because the consumer is clearly under pressure. He cites higher interest rates and high gas prices at the pump. He notes oil is up and crack spreads are very wide, so refiners are earning a lot while customers feel the cost. He adds that inflation is hurting people even though the CPI rate of change looks tame, and that these pressures bite restaurants, retail and apparel.

  “The consumer's clearly struggling. Higher rates, high gas prices at the pump.”at 38:03

US inflation

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Headline CPI likely understates inflation; a 5.7% annual rate is plausible.

  Tobias says energy inflation is around 20% year over year and that this feeds into everything else. He doubts the headline CPI and thinks it, if anything, underestimates inflation. His support is a Twitter tracker who records the price of a handmade pizza slice: $2.50 in 2020 and $3.49 six years later, which implies about 5.7% a year. He calls it not a robust study but says it matches real-world prices.

  “I don't know how accurate that is. You know, if anything, it underestimates a little bit. Right? But, like, 5.7% is not out of the question.”at 2:10

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  The CPI rate of change hides a price level up 40-50% in five or six years.

  Tobias says the CPI figure does not match what people experience. CPI measures the rate of change over the year, not the level of prices. He argues the level is up substantially, around 40 to 50% over just five or six years, based on his pizza index. He ties this to the consumer squeeze.

  “whatever number that the CPI is putting out just doesn't reflect what people are experiencing. It's... That's just the rate of change over the course of the year. It doesn't talk about the level, and the level is up substantially”at 38:31

AI bubble & tech valuations

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Fiber builders went bust despite heavy later use; today's AI sellers may not capture the benefit.

  Tobias uses the fiber-optic build-out as a precedent. The cable laid still gets used decades later and internet usage far exceeded expectations, but most of the companies that built it went bust. He expects AI usage to grow far beyond what is imagined, yet thinks today's AI sellers won't necessarily be the ones who benefit. He is in two minds: AI is transformative, but the spending numbers are staggering.

  “But the ones that built out all of that fiber optic cable went bust for the most part. ... it doesn't mean that today's AI sellers are gonna be the ones that benefit from it.”at 9:07

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  The biggest, fastest-growing companies historically underperform, so valuation will eventually matter more than growth.

  Tobias contrasts the top end of the market, which is growing fast and deploying huge amounts of capital at very high multiples, with cheap struggling companies. He cites over a century of data showing the biggest companies tend to underperform, and the fastest growers that deploy the most capital also tend to underperform. He concedes the pattern failed over the last ten years and calls the boom-time outperformance cyclical and short-lived. He questions whether AI-era businesses are different enough to escape this, and says valuation will eventually matter more than growth.

  “the biggest companies in the market have tended to underperform the market... Got a hundred plus years of data showing that.”at 40:16

AI chips & semiconductors

• Tim Travis · Value Options Letter

  Chipmakers are cyclical like homebuilders: high margins now invite oversupply later.

  Tim says he is in the camp that chip businesses are cyclical. He compares them to homebuilders, which print money during supply-demand imbalances and then face too much supply. He argues that the very high margins in chipmakers like Nvidia and Micron are a sign of that cycle rather than structurally better economics. Strong margins today therefore make these stocks look cheaper than they are if the cycle turns.

  “I think it's somewhat analogous to, like, homebuilders where... they're printing money because it's supply demand. And then you get too much supply out there.”at 43:55

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Chipmakers' record margins reflect a short-lived demand spike; they remain cyclical and are poor buys at peak profits.

  Tobias argues the chip businesses that were once cyclical still are. Frantic short-term demand lets them charge unheard-of prices, which drives their unusually high margins and earnings. He doubts that demand can persist at that level for long. He says the market knows the profits are short-term, so these are better bought when they are expensive and loss-making, not when they look optically cheap at peak profitability.

  “For mine, I think they're probably still cyclical because what we're seeing is that, like, that sort of bullwhip effect where you have a lot of demand in the very short term allowing them to charge, you know, unheard of prices... I just can't see how it can.”at 44:46

Market sentiment, positioning & volatility

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Markets hate uncertainty more than the worst-case outcome, as the DOJ-block rally showed.

  Tobias describes a merger-arbitrage spread on two health insurers that were stuck at an antitrust review. Both stocks rallied hugely when the DOJ blocked the deal, the bad outcome. From this he concludes the market prices uncertainty as worse than the worst case itself. Uncertainty over either outcome was pricing both good and bad results, so the rally on the bad outcome shows that the uncertainty was the real cost.

  “all that sort of illustrates to me is that the market really hates uncertainty more than even the worst case outcome.”at 5:04

US stock market outlook

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Non-AI stocks look as cheap as end-2022; forward returns approaching high teens without multiple expansion.

  Tobias says the market is bifurcated: hyperscalers and AI capex beneficiaries have done well, while much of the rest, including high-profile names like Nike, Lululemon and Deckers, has fallen sharply. Those declines are mostly idiosyncratic, but there are so many that it looks systemic. He says his portfolios are as cheap now as at the end of 2022, when forward returns were around 20%. He thinks forward returns are approaching the high teens without any multiple expansion.

  “And I looked across the portfolio, and I thought my portfolios were as cheap as they were at the end of twenty two.”at 34:26

Consumer & retail

• Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

  Consumer-facing stocks passed their best valuations in early October; cheap opportunities are emerging there.

  Tobias argues consumer pressure has led to slightly depressed earnings, lower growth and very depressed multiples for restaurants, retail and apparel. He says the sector's best valuations have probably already passed, at the beginning of October, and that there has been some recovery since. He is buying these names for the accounts he manages, so he sees good opportunities among them even though the worst may not be over.

  “I think that we passed the best valuations that we're gonna see at the beginning of October.”at 39:24