Update from the PM – October 2025

Getting your Trinity Audio player ready...

– Andrew Macken

---

 

There is no doubt the current state of global equity markets is complex. Moreso than ever, when investors are assessing opportunities, they need to carefully apply ‘first principles’ thinking.

The S&P 500, for example, has approximately 50 companies with a P/E ratio higher than 60x. That doesn’t include the 40 or so companies with negative trailing earnings (so the P/E ratio is undefined). 

Many investors are pointing to high P/E ratios as reasons for caution – and we, too, would always prefer lower P/E ratios when investing in businesses, all else being equal.

But it’s important to remember that the usefulness of P/E ratios erodes quickly when there are significant changes in company earnings power (up or down).

This idea is increasingly relevant in today’s dynamic environment of rapid and accelerating change, where some seemingly high P/E ratio companies appear undervalued, and some low P/E ratio companies overvalued.

We dig into this topic further in Montaka’s Quarterly Letter, which we will release in the coming days.

This month, in “Extend the runway” – Why Tencent is still undervalued, Andy’s case study of Tencent finds the company is highly advantaged with a long runway of growth ahead. It is one of China’s clear leaders in AI. And like companies such as Meta and Alphabet, Tencent’s investments in its core businesses have been both prudent and demonstrably high returning.

But not everything is looking prudent in the AI space today.

Oracle’s extraordinary result in recent weeks, which included circa US$300 billion of new revenue commitments from OpenAI, is stretching credulity.

To put OpenAI’s new announcements into perspective, Amazon – the world’s largest hyperscaler – typically sees its backlog tick up by around US$10 billion each quarter.

And OpenAI did not stop there, subsequently announcing enormous additional datacenter build-out plans with Nvidia and AMD. 

In this month’s Spotlight Series podcast, Amit, Lachlan and Andy share an internal research discussion where we are trying to make sense of some of these baffling recent announcements.

Finally, check out this essay by Lachlan titled Uncrowded Advantage: Investing Where Others Cannot. Lachie shows how drastically the investment industry has changed over the last several decades. It used to be the case, for example, that only a handful of investors had up-to-date information and this could be exploited easily for persistent gain.

Today, on the other hand, investment professionals are all armed with real-time data feeds and powerful AI search tools. Lachie argues that most of today’s market inefficiency resides in long-duration opportunities – and this is exactly what Montaka is seeking to exploit.

 

Sincerely,

Andrew Macken 

---

 

Podcast: Join the Montaka Global Investments team on Spotify as we share real-time examples and investing tips that govern our stockpicks. Click below to listen. Alternatively, click on this link: https://podcasters.spotify.com/pod/show/montaka

 

 

 

---