HX Weekly: August 11 - August 15, 2025

Hello reader, welcome to the latest issue of HX Weekly!

So, what's HX Weekly all about?

Each weekend, we bring you a new edition of HX Weekly that includes three distinct sections.

In the first section, Thoughts on the Market, we'll offer insights into current economic and market news.

In the second section, HX Daily Redux, we'll revisit investing concepts, tactics, and more from past issues of HX Daily.

And in the third section, Market Wizard’s Wisdom, we’ll share thoughts, quotes, and theories from the greatest investing minds of all time.

Now, let's dive in!

Thoughts on the Market

We have some great subscribers to our newsletters and products!

Over time, we have developed a knowledgeable, loyal, and highly interactive group of folks.

One of our favorite activities is to respond to the (very thoughtful) questions we received from these readers.

For this week's HX Weekly, we will answer one of those questions…

Our long-time reader Brian S. recently wrote to us and asked us what he should do with his NVDA Corporation (NVDA) stock.

We do NOT give individual investment advice, but Brian presented an overall situation that we think many investors face – how do you deal with a giant winner when facing both a potential sell-off and a huge tax bill if you sell?

In particular, Brian has been reading our notes with our concerns about NVDA stock and the AI Bubble over the next few years.

His fundamental question is whether he should sell (and take the tax hit) to avoid a sell-off or stick with it for the long term.

Here is a 10-year chart of the stock price of NVDA…

We started by telling Brian that – despite our concerns about a significant pullback – we think that it is very likely that NVDA will be a $5 trillion, $10 trillion, or even $25 trillion company in the next few decades.

The challenge will be that we think it is likely a $2 trillion stock before it does that…

The AI Bubble we have seen form is as clear as anything we have witnessed in our three-decade career.

So, what should you do with the stock if you have a significant taxable gain?

This question applies to NVDA and any other AI-related stock where you might have big gains.

We think there are two good options.

First, you could just ignore the intermediate-term downside. Does it matter at all if you lose 50% of your money (on paper) in that down move?

With a massive company like NVDA, you aren't worried that it is going away. If the company survives and eventually thrives again, you should ride through the volatility.

The KEY is – will you hold on through the volatility?

Almost every investor will say that they will do so successfully. The percentage that does so is far lower.

To quote the great philosopher Mike Tyson, “Everyone has a plan until they get punched in the face.”

The second option is to use put options to hedge your position.

We recommend looking at the stock, taking the dollar amount of the next +10% upside, and then taking half of that amount and buying long-date out-of-the-money puts.

If you had $1000 worth of stock, this means taking $50 and buying those options.

This will take away some of your near-term upside (it will finance the puts) but also protect you on the downside.

In fact, you may then have a greater likelihood of buying the stock at a lower price.

This gives you some protection to the downside, helps put you in a better place psychologically to survive volatility, and doesn't generate any short-term taxable gains.

This is how we would handle a stock like NVDA.

The reality is that there is no one solution that is right for every investor. Each one is different.

The most crucial part is that you decide on a plan.

As we often say, in the stock market, you need to trade a LOT or NOT trade at all. The strategy above reflects that view.

Make a plan and stick to it. Do NOT get caught in the middle.

HX Daily Redux

My Summer Vacation 26 Years Ago: What I Learned That Can Help You

As we enter into the final leg of the summer, we wanted to share a note we wrote several years about the start of our investing career. Enjoy!

This time of year on the calendar always makes me think about what I saw when I started my investing career in the late 1990s.

While I had an interest in stocks dating back to high school and my time at the Wharton School at the University of Pennsylvania, I didn't begin working as a full-time investor until 1997. That summer, I joined my first buy-side shop, Atalanta Sosnoff Capital.

The first year of my career was spent learning the ropes from the firm's highly experienced professionals. They were a great mix of old school – like Martin Sosnoff and Bill Knobler – and new blood – like Craig Steinberg.

Atalanta Sosnoff managed almost $3 billion of assets and only had a handful of investment professionals. This presented a great opportunity... and in 1998, within a year, I was a portfolio manager.

That was also when I got some of my first lessons on how the stock markets really work...

In 1997, we saw a wave of an emerging market crisis that began in Thailand and then swept through the rest of Asia.

U.S. stocks initially sold off on this news but continued to have an outstanding year—up 33% in 1997.

But at the time, none of us knew that another crisis was brewing quietly much closer in Greenwich, Connecticut—the headquarters of the world-renowned hedge fund Long-Term Capital Management (or "LTCM").

Having come from the bond side of the business, I had heard of LTCM's famous founder, John Meriwether (the former head of bond trading at investment bank Salomon Brothers). However, given that I ran an equity portfolio, I didn't think much about the firm.

That summer, during a week that I had taken off for a trip to Colorado, many of the stocks in our firm's portfolio began to act crazy.

One stock in particular – Chancellor Media – would cause me massive angst. Chancellor had been a great investment. The company had been "rolling up" the radio industry.

These days, radio is left for dead, but back then, it was booming. Chancellor was buying up stations like crazy using debt and financial engineering. That might sound like a risky strategy, but it was a savvy approach.

The stock had massive momentum... But it also spoiled my vacation.

At some point, as I was driving through the Rockies, I started receiving panicked calls from our trading desk about Chancellor. The stock was trading down 10% in the morning... and saw another 10% drop by midday. At one point, it traded down almost 50%.

Remember, this was before e-mail on phones, messenger, or pretty much anything except phone calls. So, I frantically called analysts and trading desks across the Street, trying to figure out what was going on.

The answer was... nothing. Not a single analyst or trader had any news whatsoever. They only knew that Chancellor's stock was seeing frantic selling.

I spoke to my frustrated portfolio manager and told him what I had learned. After more than 20 calls (including to Chancellor's investor relations department), I heard no reason the stock was down. My recommendation was that we stick with Chancellor.

The annoyed general partner agreed to keep our position... mainly because he likely thought it was crazy to sell the stock when it was down so much.

Little did we know that the unwinding of LTCM in the background was causing portfolio liquidations throughout the stock market.

Somehow, Chancellor had been a stock in one of those liquidations.

The value of the business hadn't changed one bit, but folks were selling because they had to sell, and they did it with such urgency that it crushed the stock.

This was one of my first hard lessons about buying stocks, not companies, and I reflected on this episode recently when I was looking at the calendar.

My memories of that vacation will always revolve around the two days I spent frantically trying to figure everything out. It was a tough experience, but it also set me on a more successful path.

It gave me a healthy respect for understanding that—in the short term—the price of a stock can have little (or nothing) to do with what's happening with the underlying company. This has guided my investing principles ever since, and it's the most important advice I could give to any investor: We're buying stocks, not companies.

Market Wizard’s Wisdom

Walter Schloss: One of the Value Masters

We have been an active professional investor on Wall Street for over three decades. Our interest in investing began even earlier.

One of my very first focuses as a young investor was to learn from the great investors of the past.

Investing is a unique endeavor that provides us with excellent access to the wisdom of these investors from ten years ago or a hundred years ago. It is also unique because much of that wisdom is as helpful today as it was then.

In the past few weeks, we have discussed modern investors (Phillipe Laffont) and older investors (Jesse Livermore and A.W. Jones).

Today, we share the wisdom of a value investing legend – Walter Schloss.

Many of you likely have not heard of Schloss before. He began his career in 1934 and was an early student of value-investing legend Benjamin Graham. Eventually, he even went on to work for Graham.

In the mid-1950s, he left Graham and founded his own company. Over the next four and a half decades, he compounded at over a 15% annual return—well above the rate of the S&P 500.

He closed his fund in 2000 and died at 95 in 2012.

Here are some of his insights on investing….

We hear this insight from many of our guests on the HX Podcast.

They emphasize figuring out what kind of investment style is best for you.

Some are comfortable with active trading and prefer it. Others are terrible at it and will destroy much value.

Some can hold through volatility and focus on the long term, while this is more difficult for others.

Be sure to figure out which type of investor you are so you don't get caught in the middle.

We have a helpful exercise with this insight.

The next time you feel either one of these emotions strongly – fear or greed – take a step back and think about taking the OPPOSITE action.

If you are fearful and worried about losing money, stop and think about what it would take you to buy into the situation.

If you feel like you can do nothing wrong, consider how it would feel to sell some instead and what the downside could be.

This seems obvious, but it is one of the most challenging aspects for new investors.

Many enter the markets, take a position, and then get frustrated when they don't make money quickly.

Remember that almost every strategy, even trading strategies, takes time to pay off.

Be sure to know how long your strategy should take to play out and BE PATIENT.

This is a subtle and essential insight.

In our long-term investing, we consider buying either GROWTH or ASSETS. We prefer to buy both.

GROWTH happens in earnings and can fluctuate over time.

ASSETS are enduring, and you can sleep much better at night if you own them.

When considering a company for a long-term investment, ask yourself if it has durable assets.

Something that will continue to hold real value regardless of the economic cycle.

If it does, that might make an excellent investment.

Again – we prefer to find BOTH, but given the choice, we will go with the ASSET.

This was one that my old partner Whitney Tilson used to talk about.

We both have had many times in our careers where we identified awesome growth companies but sold too soon.

A stock that goes up tenfold can change your investing future.

Remember, though, that for a stock to go up ten-fold, it must first double, triple, quadruple, etc.

Again – BE PATIENT and let your winners run.

We encourage you to look up more of Walter Schloss's wisdom and take advantage of his enduring insights!

We hope that you’ve enjoyed this week’s issue of HX Weekly…

Do you have any thoughts, questions, or feedback? Tell us more in the comment section or at [email protected].