Identifying Life-Changing Investments

12/05/25

META 0.00%↑ at 12x earnings in ‘22. GOOGL 0.00%↑ at 16x earnings earlier this year. Two of the highest quality businesses in the world, trading at lower multiples than The Coca Cola Company. (no shade intended)

In hindsight you can say these were clear buys at these prices. And they were. They’ve both done tremendously well since then ( META 0.00%↑ is up over 600% since the lows of 2022, and GOOGL 0.00%↑ is up over 100% since the lows earlier this year.)

But How Can You Identify these Opportunities?

There’s always a reason that these companies get re-rated down to these attractive levels. There’s always a narrative to scare you off. The skill is knowing which narratives to believe and which to fade. In 2022, META was burning billions in Reality Labs and the Metaverse. Shareholders and overall market sentiment turned on Zuckerberg quickly.

But if you were a rational person thinking about what Zuckerberg is incentivized to do, it’s pretty simple that eventually they would lower the capex and get lean. And that’s exactly what they did, leading to massive outperformance in the following three years.

For Google, back in the spring of 2025 the narrative was that they were giving out too much stock based compensation, and that there was regulatory risk surrounding their partnership with Apple for Search. Now they’re the fullstack AI company in the market’s view.

I think for Google, they really swung from the lower end of market sentiment to the other extreme. Not to say that they can’t be the AI winner — they definitely can, but I still think the sentiment may be slightly overblown.

Ok I’ve made a ton of money thanks to you Nick, what do I do now?

Hold. I truly believe Warren Buffett got it right when he said, “the best holding period is forever.” The thing is you can sell your shares for a quick gain, doubling your money or even more in the case of situations like Meta in 2022, but then you’re left looking for the next out of favor stock.

If you have a low cost basis in these companies why not just hold for years? Warren Buffett famously made very good returns in the “cigar-butt” net-nets that Ben Graham wrote about, but the overwhelming majority of his current wealth came from holding high quality business for decades and decades.

I think that selling these Mag-7 or similar caliber of companies after getting in at an attractive level is pretty hubristic. You’re basically saying that you can do better than companies with hundreds of millions of daily active users and incredible profit margins.

And maybe you can! But use new cash that you contribute to invest in those companies and let your winners run. At least that’s my view for now. If GOOGL runs to 50x earnings I may have a harder time arguing to hold it at that level. But then again, there will be a narrative for why it should be trading at that level.

My main takeaway is that the challenge of investing is being able to read between the lines and figure out if the market sentiment is right or wrong when everyone is certain of something. I believe that’s where true outperformance lies.