Speaker · Updated
Robert Hagstrom: latest market views
EquityCompass Investment Management
Summary
Robert Hagstrom is Chief Investment Officer and senior portfolio manager of the Global Leaders Portfolio at EquityCompass Investment Management, and author of The Warren Buffett Way and other investing books.
Chorus has 19 views from Robert Hagstrom across 2 episodes on Excess Returns since October 11, 2026. Their latest calls: bullish on GE Vernova and NVIDIA; bearish on Walmart.
Where they stand
Their latest bullish or bearish call on each company.
- GE VernovaBullish ·
- NVIDIABullish ·
- WalmartBearish ·
What they talk about most
The latest views
Newest first. Every quote is checked against the episode's transcript.
Market sentiment, positioning & volatility
When investors trade the same way, the market loses diversity and volatility rises.
Hagstrom says the market is no longer as diversified as it was, with fundamental, quantitative and pod-shop investors in very different sizes. He cites hedge fund assets of about $5 trillion, pod shops trading heavily each day, and notional options value above daily stock trading. When the market loses diversity and moves to one side, volatility increases. He says the structure explains why the market behaves this way, even if it is still hard to live through.
“the market loses its diversity, and when it loses its diversity and goes to one side, the volatility goes up.”at 2:54
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
NVIDIABullish
Nvidia trades at about 19 times earnings, cheap for 10% growth, and is not in a bubble.
Hagstrom sets a conservative case: Nvidia's returns on capital are not above the cost of capital and revenue grows 10% a year for ten years. Even on those assumptions the stock trades at about 19 times earnings, which he contrasts with Walmart at 46 times. He adds that he does not think Nvidia is in a bubble, while the newer neocloud companies are the bubble candidates. His fund bought Nvidia in October, and AI's rise came faster than he expected, which he calls luck.
“let's just say they're gonna grow revenues at 10% for the next ten years. That stock today is trading at 19 times.”at 4:58
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
WalmartBearish
Walmart at 46 times earnings is expensive for 5% growth and low returns on capital.
Hagstrom compares Walmart with Nvidia on the same valuation basis. Walmart grows about 5% with much lower returns on capital and trades at 46 times forward earnings, while Nvidia trades at 19 times. He says Walmart, Procter & Gamble, Colgate and Costco are trading very rich relative to fundamental value because investors are buying low-volatility defensive stocks during the selloff.
“Or I can go buy Walmart today that's growing at 5% with much lower returns on capital for 46 times [forward] earnings.”at 5:20
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
Investors will rotate out of defensive staples into tech, and the reversal could come within a day.
Hagstrom argues that the market has moved defensive: investors are buying stocks that have not fallen, which pushes staples and low-volatility funds such as SPLV to extremes. He says the set-up favours selling consumer staples and leaning into tech. He admits the timing is the million-dollar question, but he expects the change to be abrupt. Once it begins, he expects it to take less than 24 hours, catching investors who stayed defensive off guard.
“it's gonna set up some very interesting dynamics where the reverse trade is you should be selling your consumer staples in here, and you should be leaning in to tech.”at 6:21
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
AI infrastructure stocks are as cheap as they have been since 2022.
Hagstrom reviews the AI infrastructure names he follows and finds them as cheap as he has seen them. He says the only comparable level is 2022. He ties the view to fundamentals: he wants sales and earnings to frame the value, even if the growth or return assumptions are lowered. He notes that this is a valuation judgment, not a call on timing.
“What I see in that space that I'm looking at is these things are as cheap as I've ever... You'd have to go back to to 2022 to start it.”at 7:42
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
Neocloud AI infrastructure companies without earnings are the bubble candidates among AI stocks.
Hagstrom separates the established AI infrastructure players (AWS, Google, Azure) from newer neocloud operators. The neoclouds raised capital in public markets to build new data centers outside the big clouds and have no earnings yet. He says that if the story turns, they will be hit hardest, so they are the bubble candidates. He does not see Amazon, Google or Nvidia as bubbles.
“The new guys, if they're gonna get their head handed to you because they don't have any earnings yet. So those are the ones that are more bubbleicious in my mind.”at 8:36
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
Private equity should take private cheap, high-return businesses but is not doing so.
Hagstrom argues that some companies are so cheap that a buyer could borrow at about 7% and earn 15% to 20% returns on capital. He says private equity has plenty of capital and should buy businesses of $50 billion to $100 billion, and that management teams should consider buying back or taking their companies private. He finds it puzzling that this is not happening, which he sees as the mechanism that should correct the mispricing.
“by having management go out and say, well, I can borrow at 7%, and, you know, I'm... My returns on capital are 15 to 20%. I can make a go of this, take it private, but you just don't see that.”at 15:48
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
His firm's portfolio trades near 75 cents on intrinsic value, the cheapest it has ever been.
Hagstrom says his firm weights the intrinsic value of its holdings and compares it with price. The portfolio was about 85 cents on the dollar during COVID, about 80 cents in September 2022, and now about 75 cents. Morningstar's estimate of intrinsic value in 2022 matched his own, which supports the method. He says the portfolio is cheaper now than ever, so he tells clients not to sell and to consider buying.
“we're worth today about 75¢ on the dollar. We're cheaper today than we've ever been.”at 48:36
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
Market sentiment, positioning & volatility
The AI-stock selloff will reverse quickly and sharply as shorts cover and momentum buyers return.
Hagstrom says AI and electrification stocks have broken through their 50-, 100- and 200-day moving averages, so there is no technical support. He expects selling exhaustion, then short sellers worried about a squeeze to cover, which improves sentiment, changes the narrative and brings new buyers. He says speed and magnitude have risen, so the way down has been fast and hard and the rebound will likely be just as fast and powerful. He also notes that a recovery could take about six months to pay off, though he expects momentum traders to move quickly.
“I strongly believe that the bounce back will be equally as fast and equally as powerful on the way back.”at 50:50
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
If AI is universally adopted, it is a big opportunity; a few winners should do extremely well over three to five years.
Hagstrom sets out two scenarios. If AI is a scam or a bubble and is not used in five or ten years, he will be wrong and write cookbooks. If AI works and is adopted worldwide, it is a large opportunity. Not everyone will capture it, but a few companies will do extremely well over the next three to five years. He is betting on the adoption scenario.
“if you believe that AI is gonna work and that it's going to be universally adopted by pretty much everybody around the world... Then you gotta go, boy, this is a big opportunity.”at 54:34
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
AI companies have handled investor communication badly; they must show returns on capital to restore confidence.
Hagstrom argues the AI industry has done the worst public relations job of any industry he has seen. Companies rushed to release frontier models and be first, so they forgot to explain why AI matters to owners of their businesses. He says they need to explain returns on capital and show that AI is profitable, not just claim they will have the most data centers. He calls the current narrative about as negative as anything in technology since October 2000, and says there is a big lack of faith in AI that companies must address.
“I would play unabashedly that I think the AI industry has done the worst job in public relations I've seen of any industry that has.”at 56:37
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
WalmartBearish
Walmart is very expensive; its valuation looks too high for its reinvestment-driven cash flow profile.
Hagstrom says he is pushing back on Walmart because he thinks it is very expensive. He cites Michael Mauboussin's point that Walmart had negative free cash flow in its first eighteen years yet earned above its cost of capital. Sam Walton kept reinvesting all the capital, so earnings and free cash flow yield looked weak. Hagstrom draws a parallel with the hyperscalers, which also reinvest heavily. His valuation concern rests on the gap between the high multiple and the reinvestment-driven cash flow.
“I'm obviously beating on Walmart because I think it's very expensive. Walmart, the first eighteen years, had a negative free cash flow.”at 57:48
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
AI infrastructure & data centers
Hyperscalers already earn above cost of capital but reinvest so heavily that free cash flow turns negative.
Hagstrom compares hyperscalers such as Amazon and Google to Walmart's early years. He says they already earn above their cost of capital on their investments, but they put every dollar back into the business as fast as they can. As a result their cash flow yields turn negative, the same pattern Walmart showed. He therefore thinks the market is misreading the AI spending. The companies need to show that the spending is sustainable and profitable, which he believes they have not yet done.
“if you look at the hyperscalers, particularly Amazon, Google, they're already earning above the cost of capital... But they basically are just throwing it back in there as fast as they can, so their cash flow yields turn negative just like Walmart did.”at 58:08
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
GE VernovaBullish
GE Vernova benefits as data centers must build their own power plants, with 60% of revenue outside the US.
Hagstrom argues that data centers cannot easily tap the grid without raising household electric bills, so they will need to bring their own power. He says this benefits companies like GE Vernova, which build power plants. He notes that about 60% of GE Vernova's revenue comes from outside the US, where it builds plants for data centers. He presents this as a path around the power constraint that holds back data center buildout.
“So that just lays into things like GE Vernova, is you gotta build these things. You gotta build them with their own power pack. ... 60% of GE [Vernova]'s revenues are outside the... They're building power plants outside The United States for data centers.”at 1:04:03
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
AI infrastructure & data centers
Data centers bring large tax and contractor economic benefits to host states and municipalities.
Hagstrom says a data center may employ only about 20 people, but building one brings large inflows to local governments and state treasuries. Contractors and ancillary jobs add further economic activity. He argues this produces a positive economic return for municipalities and states, calling it a fact. He concedes the real question is how much is too much and how the compute cost is spread out.
“I would argue that there actually is a lot of economic inputs to the state and local municipalities that come from a data center going up. ... a positive economic return for municipalities and states. Fact. It's a fact.”at 1:05:12
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
AI infrastructure & data centers
Compute power, not GPUs, is the AI bottleneck for years; supply-demand imbalance drives excess returns.
Hagstrom says many data centers are delayed or unfinished, and the main reason is that they cannot get power. He says GPUs can be made and memory will be solved, so the bottleneck will be compute and how to power these facilities. He calls this a supply-demand imbalance, and says that is where excess returns are made. He expects the bottleneck to last for many years.
“If you really wanna think where the bottleneck is in AI, it's compute. It's not GPUs. ... The big bottleneck for many, many years will be compute. How do we power these things?”at 1:05:52
Excess Returns: Tech Is the Cheapest Since 2022. Walmart Is 46 Times Earnings. Where Is the Bubble? ·
Tech overweight no longer justified: margin of safety has shrunk, so he cut tech to market weight.
Hagstrom says his firm sold ASML after it rose 500%, and trimmed Google and Nvidia as they reached the 10% limit. Margin of safety declined as the market accelerated in mid-2026 during the Iran war episode, so payoff shrank and sizing was reduced in line with a Kelly-type logic. Tech was about 45% of the portfolio at the second-quarter change, now about 26% pure tech or 35% with Google and Amazon, which is market weight. He says the overweight was right for the prior two years but he is not sure it is right today, although clients like the AI tech boom and want exposure without being over their skis.
“I'm just not so sure it is the right thing to do today. So being a market weight here based upon margin of safety and and 10% threshold has actually in some ways helped us out, I think.”at 24:07
Excess Returns: The Winners That Get Away | Chris Davis and Robert Hagstrom on Holding Great Businesses ·
Many tech firms' high returns on capital justify a premium multiple, but its size is hard to pin down.
Hagstrom argues two companies with the same growth and earnings should not trade at the same multiple if one earns a 50% return on capital and the other 12%. He says many of the technology companies he is looking at have amazing returns on capital, so based on growth and returns on capital they deserve to trade at a premium to the market. He admits the premium is hard to quantify: a cash flow model gives a number, but high returns on capital add something extra. He notes it depends on forecasting how long high returns persist, which is a slippery slope.
“it's so funny that many of the technology companies that we're looking at today have these really amazing returns on capital. And so you'd say to yourself, okay, they obviously deserve, between the growth rate and the return on capital, they deserve to trade at something premium to the market.”at 34:52
Excess Returns: The Winners That Get Away | Chris Davis and Robert Hagstrom on Holding Great Businesses ·
AI infrastructure & data centers
Hyperscaler capex may peak around 2H 2027, after which cash flow and returns on capital rebound.
Hagstrom argues the hyperscalers' heavy capital spending may be cyclical rather than permanent. He cites Michael Mobison's free-cash-flow work, which suggests the second half of 2027 may be the peak of this reinvestment cycle, with cash flow yields and returns on capital then recovering. He says the forecasts are management's, not inside information, and that the analysis is provisional. He adds that the hyperscalers could become cash-flow machines within two to three years as capital intensity falls and subscription and rental revenue grows. He compares the buildout to Amazon's 1990s distribution-center spending, which critics called unsustainable. He also argues the AI buildout is spread across a much larger global GDP pie than the US railroad buildout. He calls the timing of the top of this capex cycle the most important data point for next year.
“We may not be in a permanent condition with the hyperscalers, that they're gonna be capital intensive businesses forever. They will return back to being cash flow monsters.”at 42:12
Excess Returns: The Winners That Get Away | Chris Davis and Robert Hagstrom on Holding Great Businesses ·
Shows
- Excess Returns · 2 episodes
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