TIP838: Google, Reddit, Amazon – Are Our Biggest Winners Still a Buy? w/ Daniel Mahncke & Shawn O’Malley

What It Covers

Hosts Daniel Mahncke and Shawn O'Malley review their portfolio's biggest winners — Alphabet, Amazon, and Reddit — analyzing why each position succeeded, whether they remain buys at current prices, and what patterns from missed opportunities like TSMC, Dell, and Comfort Systems reveal about identifying future compounders.

Key Questions Answered

• •Narrative vs. Fundamentals: Alphabet was purchased between $150–$190 when DOJ antitrust fears and ChatGPT disruption narratives crushed sentiment. Operating cash flow growth moved from 0% in 2022 to nearly 40% today while the price-to-operating-cash-flow multiple expanded from mid-teens to 30s. Both multiple expansion and fundamental improvement drove the ~100% return, not just sentiment recovery alone.
• •Valuation Model Limitations: Financial models almost always reflect the status quo with incremental adjustments. Alphabet's sum-of-parts model suggested fair value at $180–$200, yet the stock doubled beyond that. Reddit's 30% operating margin target for 2028 was achieved by end of 2024. Treat models as range-of-outcomes tools, not precise price targets, and weight qualitative business quality heavily alongside the numbers.
• •CapEx Transformation Risk: Both Alphabet and Amazon are guiding for roughly $200 billion in annual CapEx, with Amazon raising $90 billion in long-term debt. Free cash flow has turned negative at both companies for the first time in years. Investors should monitor whether this capital intensity becomes permanent, fundamentally shifting both businesses from asset-light software models toward capital-heavy infrastructure companies.
• •Letting Winners Run Selectively: The hosts distinguish between holding Alphabet indefinitely despite stretched valuations versus trimming Reddit at 140% gains. The framework: hold when the business is highly diversified, mature, and resilient to narrative shifts; trim when the company is earlier-stage, more volatile, and dependent on a single metric like logged-in user growth that shows early signs of deterioration.
• •User Engagement as Leading Indicator: Reddit's logged-in user growth of only 7% year-over-year, despite 60% revenue growth, signals a monetization ceiling approaching. Over 50% of daily Reddit visitors arrive via Google search rather than direct app usage. Logged-in users generate roughly 3x more revenue than logged-out users, making app adoption the critical metric to monitor for Reddit's long-term earnings power sustainability.
• •Missed Opportunities Pattern: TSMC, Dell, and Comfort Systems all doubled or more after being passed over. The common thread: each benefited from AI infrastructure spending that the hosts underestimated in scale and duration. The lesson applied going forward is to size positions at 2% even when terminal risks exist, since a worst-case scenario in any single name would likely coincide with broad market declines anyway.