Joe Hegener, CIO and founder, Asterozoa Capital
Focus: North American equities
Top Picks: Rithm Capital, WW International, Blue Owl Capital
MARKET OUTLOOK:
Our thesis on software has continued to yield favourable results across the fund complex. Two of our highest conviction names are having a stellar month after blowout earnings: Datadog and Snowflake.
Looking at the macro backdrop, I continue to believe interest rates should move modestly lower from here. If we ultimately achieve a durable resolution with Iran and the Strait of Hormuz remains open, I do not think the market is fully prepared for the potential relief rally across both rates and equities.
Near term, I remain structurally bullish on risk assets. I also believe this cycle is unlikely to end cleanly. While the momentum remains powerful today, I am increasingly mindful of where the nearest available chair may be when the music eventually stops.
Artificial intelligence (AI) and chip stocks have gone parabolic this year, and there are many parallels to dotcom.
Cisco was considered the “picks and shovels” trade in the Dotcom era much in the same way Nvidia is considered that in the AI era. If you look at AI infrastructure supply chain bottlenecks, such as memory chips, the performance is eyewatering.
In June of 2025, Sandisk (SNDK) was a US$37 per share stock. Today it is US$1660 per share. That’s 45 times more in one year. Most incredibly, despite that enormous rally, Sandisk still only trades at nine times forward earnings.
Historically, markets get blindsided when investors extrapolate the status quo indefinitely into the future, and that feels increasingly relevant today. The memory market is facing an extraordinary supply bottleneck — SK Hynix and Sandisk simply cannot produce enough supply, and what they canproduce is being sold at prices far above historical norms. Despite being a hardware manufacturer, Sandisk generated a 65 per cent net income margin last quarter versus just 5.5 per cent in the fall of last year. SNDK trading at nine times forward earnings may appear cheap, but in our view there is virtually no chance the current imbalance persists for much longer than 18 months. At some point competition enters, capacity expands, and pricing power compresses. Hardware has historically trended toward commoditization eventually, even if the cycle lasts longer than expected.
There is also an interesting paradox embedded in the broader AI infrastructure narrative. Either there is a severe multi-year shortage of critical infrastructure components — from General Electric (GE) turbines to dynamic random-access memory (DRAM) — or we are actually going to build 1500 new data centres in the U.S. by 2029. Both cannot simultaneously be true. Another paradox is the Nvidia (NVDA) model upgrade cadence incongruent and accelerating against data centre depreciation curves that are being extended to make balance sheets appear healthier than reality. We are spending considerable time thinking through the second-order implications of how these constraints ultimately resolve and who emerges as the winners and losers on the other side.
I do not believe the “AI trade” unwinds in 2026. There is simply too much momentum behind the theme, and we still appear to be in the relatively early stages of both development and deployment. Interest rates remain the most obvious candidate to crash the party, but it is also our contrarian view that consumer price index (CPI) and personal consumption expenditures (PCE) have the potential to surprise to the downside over the next several quarters relative to currently elevated expectations.
We remain focused on idiosyncratic, less correlated opportunities that show asymmetric upside potential relative to downside risk. Now, in particular, is an appropriate time to take a hard look at portfolio exposures and consider rebalancing into less correlated alternatives.
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TOP PICKS:
Rithm Capital (RITM NYSE)
Rithm Capital is a mortgage-focused real estate investment trust (REIT) spanning origination, servicing, and asset management. Joe sees it as misunderstood and trading at a significant discount to book value.
WW International (WW NASD)
Weight Watchers emerged from bankruptcy last year and is now executing on a turnaround plan centered on glucagon-like peptide-1 (GLP-1) integration. We are watching insider buying as a conviction signal.
Blue Owl Capital (OWL NYSE)
Blue Owl is an alternative asset manager with US$315 billions in assets under management (AUM) that we view as misunderstood and unfairly caught up in headlines around private credit gate concerns. We see the approximately nine per cent dividend yield as sustainable.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| RITM NYSE | N | N | Y |
| WW NASD | N | N | Y |
| OWL NYSE | N | N | Y |
