This fund is shorting Apple — and just bet against another popular AI stock

It’s looking like an upbeat start to fearful February as investors look past a hawkish Fed and put their faith in the last of Big Tech results coming after the close.

“An immaculate landing is fully priced in, and only downside risks remain,” warns our call of the day from wealth managers Bireme Capital, who discuss sticky inflation and “unsustainable” fiscal policy, in a just-published December investor letter.

But Bireme, founded in 2016 by two MIT classmates Ryan Ballentine and Evan Tindell, stands out even more for the axe it has taken to its Big Tech holdings.

In late 2020, the managers recall how they hailed Apple, Amazon, Microsoft, Facebook and Alphabet as “transcenders,” gobsmacked by lower earnings multiples for many of those versus the Nasdaq-100 and often lower valuations. In 2023, they jumped at the chance to buy Meta

at $110/share as well as Netflix
as many transcenders got shredded, alongside more speculative businesses.

But the “massive gap between intrinsic value and market price has been mostly realized,” they say, rattling off their fresh changes.

“We have sold our Netflix

position, and significantly pared our Meta position. We remain short Tesla

– a car company with car company margins, having an increasingly difficult time masquerading as a tech company with tech company margins – and have added a short position in Apple

– a low-growth company trading at a high-growth valuation,” says Bireme.

They explain that the “Magnificent 7 and their ilk still have transcendent businesses,” but valuations are no longer that reasonable.

“Given today’s unprecedented concentration, the fortunes of the major equity indexes – and the fortunes of hundreds millions of Americans via their retirement savings and pensions – are increasingly tied to the performance of a few increasingly overextended stocks.”

The Apple short came about in the third quarter of last year, meaning Bireme missed a year-end bounce for many tech stocks. Apple rose 48% in 2023 and is down 4% so far this year. They also bet against Arm Holdings

in the second half of last year, saying valuations were too rich and its aims to raise chip prices could backfire.

The team also took a short position on C3 ai
slamming the provider of AI enterprise software for cash burning and changing its names to suit “whatever hot new trend they were supposedly capitalizing on.” Better bets are Snowflake

or Datadog
they say. soared 156% in 2023, but has lost 13% so far this year.

Apart from tech, Bireme weighed in on consumer staples, noting a new position in…

Read More: This fund is shorting Apple — and just bet against another popular AI stock

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