John Mowrey 3.8 12 ideas

"These companies are growing at you know over 30% per year for their keggers [CAGRs]. So and you're getting multiples down you know in some cases in the low 20s." Despite broader market volatility, semiconductor companies leading the AI buildout are maintaining massive growth rates. The recent market pullback has compressed their valuation multiples, creating a mismatch between their fundamental growth and their stock price. LONG because the combination of 30%+ growth rates and compressed multiples offers a highly attractive risk/reward profile, especially ahead of positive AI capex commentary. Hyperscalers reducing their capital expenditure on AI infrastructure could derail the growth narrative.

"I think particularly down the cap scale names that are more affected by, you know, a little bit concerns around where interest rates could go. I think that is going to be an area that investors could really, you know, see some potential gains from." Small-cap stocks have been disproportionately punished by fears of higher interest rates. Because the current inflation spike is driven by temporary "shock inflation" (oil) rather than structural "hot inflation," the Fed is likely to look through it, setting up small caps for a significant relief rally. LONG on small-cap equities as they are undervalued and poised to rebound when interest rate fears subside. The Fed may keep rates higher for longer if shock inflation bleeds into core inflation metrics.

Mowrey is bullish on refiners, noting they are growing earnings at 40% (faster than the Nasdaq) due to healthy crack spreads. Josh Brown adds that he has been "pounding the table" on these names (Marathon, Valero, Phillips 66) based on technical accumulation. The market misunderstands these as "dirty value" stocks, but they are currently high-growth momentum names with fundamental support. The "peer group" logic suggests they are undervalued relative to their cash flow generation. LONG. A global recession or a sharp drop in crack spreads (refining margins) would instantly invert the earnings growth story.

Mowrey points out that Consumer Staples are trading at peak multiples (23x forward P/E) despite many having negative or flat earnings estimate revisions. Investors are paying a "fear premium" for safety. They are buying these stocks solely because they are "real things" (defensive), ignoring that they are paying tech-like multiples for utility-like growth. This creates a valuation air pocket if the "safety trade" unwinds. AVOID. If the economy enters a hard recession, Staples may still outperform on a relative basis due to consistent demand, even if expensive.

Mowrey is overweight Materials and specifically discusses Gold Miners. He explains that once gold prices pass a certain threshold, miners become "money printing machines" due to fixed costs. Operating Leverage. If a miner's cost is fixed at $1,600/oz and gold moves from $2,000 to $2,400, the profit margin expands disproportionately (e.g., earnings double on a 20% move in the commodity). Current gold prices suggest miners could grow earnings 130-140%. LONG. A sharp reversal in gold prices would immediately crush the earnings growth thesis, as miners are a levered bet on the metal.

Mowrey is overweight Financials, specifically noting Regional Banks are growing earnings at 30% and valuations reset to 2008 levels during the 2023 crisis. The 2023 banking crisis was a "liability crisis" (rates up, bond portfolios down), not an "asset crisis" (bad loans) like 2008. With the yield curve normalizing and the economy holding up, these banks are re-rating from distressed levels. LONG. Commercial Real Estate (CRE) exposure remains a significant overhang for regional bank balance sheets.