GeoWire Monthly, Vol. 5, Issue No. 1, January 2025 Review

During MS Microcaps’ 1/22/2025 Starting Five Virtual Conference #3, several investors—led by Maj Soueidan—talked about whether and how they incorporate politics, macroeconomic trends, and market cycles into their investment approaches, especially in the microcap space. Below is a breakdown of the main themes and insights that emerge from the conversation:

The Role of Politics in Investing

Maj Soueidan opens the discussion by questioning whether politics, macroeconomics, or market cycles influence investment decisions. Sean Westropp from Deep Sail responds that, when evaluating microcap stocks and conducting long-term investment research, it’s best to minimize political considerations. However, given his involvement in short-selling, he remains mindful of market cycles and acknowledges that political events, such as those under the Trump administration, have had a noticeable impact on market behavior. He notes the potential for a speculative bubble, particularly given extreme valuation levels, and suggests the current bull market may be in its late stages.

Trump Administration’s Market Influence and AI Investments

Maj notes that stocks are rallying in anticipation of Trump’s potential policies, particularly regarding AI spending. He questions whether Trump will be able to follow through on his initiatives. Sean responds that Trump may modify existing legislation, such as Biden’s infrastructure bill, potentially keeping certain provisions while cutting out green initiatives. He highlights recent AI investment announcements, particularly regarding Texas-based AI infrastructure, which could benefit companies like TSSI.

What is The Starting Five?

The ‘Starting Five Virtual Conference’ is an event series hosted by MS Microcaps. The formats can vary, at times featuring presentations and stock pitches from five various investors and industry experts, and at other r times features five microcap company managements teams, ,or a combination of both. These conferences provide a platform for sharing investment strategies and insights into specific stock opportunities, as well as a peak into the culture and business of invited companies.

Maj considers whether the market has already priced in the AI-related tailwinds for TSS, given its ties to Dell and the hyperscaler market. He speculates that TSS may look to acquire businesses for diversification and highlights the company’s government division as a key revenue driver. However, he raises concerns about the sustainability of demand once hyperscalers complete their data center build-outs, questioning whether smaller businesses will pick up the slack. He remains uncertain about the long-term revenue trajectory but acknowledges potential growth opportunities.

Skepticism Around AI Spending and Market Realities

Sean suggests that recent AI-related spending may be more of a financing strategy for OpenAI rather than a true new investment push. He notes that major players, like SoftBank’s Masa Son, may be structuring these deals to bring in external funding. He also references Elon Musk’s claim that there isn’t actually $500 billion allocated for AI investment, but rather a significantly lower figure.

The Challenge of Predicting Policy-Driven Market Trends

Jason Hirschman from Hudson 215 Capital shifts the conversation back to the unpredictability of politics in investment decisions. He points out that major geopolitical and economic events, such as 9/11 and COVID-19, were unforeseeable and had significant policy ramifications. Given that most federal spending is tied up in entitlements, he argues that policy changes affecting specific stocks are often minor and difficult to forecast.

Maj’s Investment Approach

Maj agrees, explaining that he mitigates political risks through portfolio diversification. He prefers investing in strong businesses and treating favorable policy outcomes as added bonuses rather than core investment theses. However, he remains open to exploring investment opportunities once concrete trends emerge, particularly when government money begins flowing into specific sectors.

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