Is Cash Flow Replacing AI?
I'm not sure that's the right question.
As investors, we often jump between narratives.
A few months ago, AI could do no wrong.
Now investors are rotating into businesses with stable cash flows, strong balance sheets and predictable earnings.
The market's favourite story keeps changing.
What doesn't change is the price we pay.
I've increasingly come to realise that I don't know what a business is worth with any precision. I don't think anyone really does.
What I do know is when I am comfortable owning a business.
My best investments were never made because I could accurately predict the future. They were made because I bought strong businesses when expectations were depressed and held them through periods of uncertainty.
The attraction of cash-generating businesses isn't that they're exciting. It's that they don't require heroic assumptions.
When a company is priced for perfection, many things need to go right.
When expectations are already low, fewer things need to go right.
That's where I find my margin of safety.
I'm not trying to predict whether AI succeeds or fails. The technology may well change the world.
I'm simply asking:
How much optimism is already embedded in today's price?
The older I get, the less interested I become in forecasting and the more interested I become in understanding expectations.
Good investing isn't about being right all the time.
It's about being comfortable owning a great business even if the market disagrees with you for a while.
As always, time will tell.
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