Chris Bloomstran 5.0 3 ideas

Berkshire Hathaway is trading at a discount to intrinsic value (~$570 per B share, ~0.85x fair value) with intrinsic value growing ~9.3% annually, expected to compound at 10-12% per year from operating businesses and share repurchases. Greg Abel has initiated buybacks, signaling management's view of undervaluation.

The S&P 500 trades at 26x earnings with the second-highest profit margins ever. High multiples combined with high margins historically lead to poor returns. Margins are likely to contract due to rising AI capex, competitive pressures, and mean reversion, resulting in subpar forward returns (possibly 5% or less).

The Mag 7 (large-cap tech) stocks are at an inflection point. Massive AI capex (nearly $400B) is turning them into EBITDA stories, reducing free cash flow and increasing depreciation and interest expense. Profit margins are at risk of contracting, and the high multiples are vulnerable. The group is likely to underperform.