The Latticework Monday Morning Briefing is a research-based, data-driven slide presentation sent on a separate mailing list (complimentary to members). If you do not wish to receive it, opt out here.
The new Briefing is embedded in full below for members. As always, it runs from a weekly scoreboard through our idea-generation screens, market valuation and positioning, and a macro and fixed-income section. Before the deck, a short orientation: what last week told us, what we are watching in the days ahead, and a few things worth reading.
Last week, and the week ahead
The headline number flattered to deceive. The S&P 500 closed at 7,354, down 2.0% on the week, and the Nasdaq fell 4.6%, yet beneath the cap-weighted indices the move was a rotation rather than a retreat. Small caps led: the Russell 2000 rose 1.0% and the S&P 600 added 3.0%. The selling concentrated in the names that have carried the market. Technology dropped 6.1% while health care jumped 7.4%, its best week in some time, and the rate-sensitive and defensive corners followed health care higher, with utilities up 3.9%, real estate up 3.6%, and consumer staples up 2.5%. The ten-year Treasury yield eased eight basis points to 4.37%, and the VIX rose two points to 18.4.
The weakness was sharpest abroad and in commodities. Asian equities slumped, with the KOSPI off 7.1%, the Hang Seng down 5.2%, and the Nikkei 225 down 2.7%. Commodities sold off almost across the board: eight of the ten tracked contracts fell, led by WTI crude down 9.6% to $69.23 and silver down 9.7%. Gold slipped 2.5% to $4,096 and copper fell 3.5%. Earnings were a quiet, with BlackBerry, MillerKnoll, and Winnebago all printing below consensus even as several of the stocks rallied on the news.
The week ahead is holiday-shortened, with US markets closed Friday, July 3 for Independence Day. The reporting calendar is led by Nike and Constellation Brands on Tuesday, General Mills and FactSet on Wednesday, and Holcim on Friday, with Prosus, Naspers, and AeroVironment opening the week. The June employment report also lands in the first week of the month. The question for the days ahead is whether last week’s rotation, out of megacap tech and into small caps, health care, and defensives, marks a durable change in leadership or merely a pause, and whether the slide in crude and the broader commodity complex continues.
Takeaways from last Thursday’s member call
We held our third bi-monthly member call last Thursday, featuring elevator-pitch versions of ideas that instructors had presented at the just-completed Wide-Moat Investing Summit. One theme tied most of the pitches together: high-quality businesses the market has marked down on an artificial-intelligence story the presenters consider either overblown or beside the point. Our full write-up is here: UnitedHealth, Salesforce, and the AI Value-Chain Debate.
UnitedHealth drew two presenters. Dave Sather of Sather Financial Group argued the market wrongly lumps it with hospital and managed-care peers and sold it on Medicare-reimbursement fears, when health insurance is short-tail risk repriced every twelve months and the real prize is Optum, which he called “a technology company with a healthcare wrapper” sitting on some 330 million identified data points. Jonathon Fite of KMF Investments reinforced the case on the economics of vertical integration and a post-COVID housecleaning, arriving at a multi-year fair value north of $600.
Amit Nath of Montaka Investments relayed Andy Macken’s Salesforce thesis: the “SaaS-pocalypse” fear has priced the stock for roughly 1% revenue growth against guidance for 10%, while the durable moat is distribution and 250 petabytes of proprietary data, not the increasingly substitutable model layer. Lowell Capital’s Jim and Abby Zimmerman pitched 4imprint, a London-listed but largely North American marketing engine they think can at least double. Chris Crawford of Crawford Fund Management made the case for Toast, founder-led and debt-free with $1.7 billion of cash against a $13 billion market cap, where his valuation methods converge near $48, about 80% above the current price. And Rodrigo Lopez Buenrostro of KuE Capital pitched Midea, a compounder at 15 times earnings with a 7% free-cash-flow yield against Western peers near 25 to 30 times, for roughly 45 to 50% upside.
The call closed with a candid roundtable on who in the AI value chain is left holding the “hot potato” as intelligence commoditizes. Bryan Lawrence of Oakcliff Capital, a longtime Alphabet holder, called Google’s most recent quarter one of the most remarkable he has seen, with backlog doubling to roughly $460 billion and incremental cloud margins above 65%. James Emanuel posed the central question: if cheap open-source and Chinese models are good enough for most enterprise work, who absorbs the cost as it moves down the funnel from hyperscaler to software vendor to customer? Amit Nath’s answer was that intelligence is becoming the most substitutable layer in the stack, noting that Microsoft is preparing to run DeepSeek inside Copilot, ring-fenced within Azure. Bryan’s counterpoint was memorable: the model running Pizza Hut’s call center need not be the frontier, so the deflationary force in that middle layer is enormous, while in drug discovery the highest-order intelligence is worth almost any price.
Three essays worth your time
SpaceX $SPCX: The New Index Fund, by Alejandro Yela, dissects the mechanics behind the largest IPO in history, which raised roughly $85 billion. His argument is that SpaceX exploited a NASDAQ rule change, effective May 1, that compressed the post-IPO seasoning period from three months to 15 trading days, fast-tracking the stock into the NASDAQ 100 and conscripting every index tracker, including the roughly $600 billion QQQ, as a forced buyer. The 30% retail allocation, against a typical sub-5%, reads to him less as democratization than as a tell of weak institutional conviction. With the company burning cash and much of its valuation resting on an orbital-data-center dream that collides with the thermodynamics of cooling in a vacuum, Yela frames the listing as “the institutionalization of a meme stock.”
Weekend Thoughts: Malone’s Born to Be Wired; Thoughts on Cable; Is CHTR Cheap?, by John Huber, works through why cable has confounded value investors, with Charter down 42% over the decade. Prompted by John Malone’s new book, Huber leans on Malone’s own discount-airline analogy: a few players with high fixed and low variable costs, fighting to fill the last seat, which makes raising prices, and even holding customers, increasingly hard as fiber, fixed-wireless, and Starlink encroach. Charter looks statistically cheap at about four times FCF, but Huber treats that as a call option on revenue stability and, applying his ten-year test, prefers to watch from the sidelines.
Executive Compensation: The Cobra Effect, by James Emanuel, uses Goodhart’s and Campbell’s laws to explain why metric-driven pay so often backfires: EPS targets can be hit with buybacks, cost deferrals, accounting choices, or underinvestment, and share-price targets reward factors outside a manager’s control. Inverting the problem, Emanuel asks not what it costs to produce elite performance but what it would cost to make a Jobs, a Bezos, or a Buffett stop, and concludes that financial incentives are closer to a contrarian indicator. His prescription favors longer vesting, clawbacks, peer-group calibration, and ownership over engineered bonuses, with Buffett’s $100,000 salary as the model.
The deck
The full 78-page Monday Morning Briefing is embedded below for members: seventy-eight pages spanning the weekly scoreboard, our idea-generation screens, market valuation and positioning, and the macro and fixed-income picture. Every chart and table carries its source and as-of date. We welcome your feedback as the format continues to evolve.
Feedback on the Briefing
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“A great piece and thoughtfully assembled.” —Brian Wolf
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“Worth its weight in gold.” —Shree Viswanathan
The new issue follows.
