Denise Chisholm

Yeah, when you look at the data, I mean, there's certainly concerns around the technology sector since it's been such dominant leadership in the markets.

But it's interesting, when you look at the mathematical setup, we saw this very, very briefly in the tariff tantrum last year.

But the sector is now in the bottom third of its cheapest when you look back to the data since the 60s.

And we haven't really been this cheap from a valuation perspective in over 10 years.

And look, I mean, there's always the potential that it could be different this time or there's a value trap, but there is a very linear relationship between the cheaper the sector has been historically, the more likely it is to outperform.

70% odds are not 100% odds, but the risk reward when you take a one-year time horizon, I can't say if the bottom is in right now,

But when you take a longer term time horizon, it does look more like an opportunity.

Now, those 70 percent odds are actually sticky, even if things like operating margins decline or earnings revisions come down, which is kind of a mathematical way to say whatever it is that you're worried about might be partly priced in at this point.

Right, to your point in terms of a value trap.

Now look, I'll let the fundamental analysts tackle what will happen to software from a long-term perspective, but when I look at the data, you see something very rare historically.

You have an industry that's never been more profitable, pinned to the hundredth percentile of their profitability, and yet what we've seen over the last three months only has been a devaluation such that relative forward PEs are now in almost the bottom decile.

So you have this massive disconnect between the valuation and the operating profit.

That is rare historically.

When you look back in all industries to the 60s, you only see this happen 2% of the time.

The instances that it happens are things like the financial crisis.

So, one of the ways that we can sort of tackle this quantitatively is to say, well, it is different, but we have seen a little bit of this movie before.

In some ways, software is going through its own great financial crisis pricing.

Now, how has that worked, historically speaking?

Now, N is only 2%, so you can't draw broad conclusions, but we have seen this historically in technology sectors like communications, you know, com equipment.

And hardware, even though we haven't seen it in software, we've also seen it in semiconductors when you look back historically.