New Age Alpha Chief Investment Officer Julian Koski says current market conditions reflect deeply undervalued stocks, with last earnings season delivering exceptional growth across major companies.
Koski argues that investor fear is disconnected from reality, stating that fundamentals are “very, very strong” despite persistent anxiety driving market volatility in recent weeks.
Adam Johnson, Portfolio Manager at Bullseye American Ingenuity Fund, points to software companies as a clear example of market mispricing driven purely by emotional reaction rather than underlying business performance.
Johnson highlighted that Salesforce (NYSE: CRM), ServiceNow (NYSE: NOW), and Oracle (NYSE: ORCL) had been trading at just 12 to 13 times earnings while still delivering 20 to 25 percent growth rates.
Koski identified the core problem plainly, saying “human behavior is the biggest risk to a portfolio” and that the danger does not come from fundamentals but from investor reactions to perceived threats.
The discussion touched on AI regulation fears, with both Johnson and Koski pushing back against calls for government intervention following high-profile commentary from tech executives over the weekend.
Johnson argued that AI companies are perfectly capable of managing their own risks, pointing out that most S&P 500 companies still operate on AI models from two years ago rather than cutting-edge frontier systems.
On the Federal Reserve, all three commentators agreed the Fed should hold rates steady, with Koski stating “I don’t think they should do anything” given that bond markets are already doing the tightening work independently.
Johnson noted that bond yields have reached 20 to 22 year highs, and that if the Fed’s inaction is communicated compellingly enough, markets may accept that the combined pressure of elevated yields is itself a form of monetary tightening.
Koski described New Age Alpha’s investment philosophy as managing risk like an actuary rather than a stock picker, focusing entirely on whether a company can deliver the growth implied by its current stock price.
He explained that the firm relies on four broad measures, specifically the LEI, the VIX, market momentum, and a proprietary decision indicator, none of which are currently flashing recessionary signals.
Johnson offered a contrasting but complementary view, saying his approach involves identifying companies where cash flow could double or triple over several years, sizing positions at two to four percent of capital and holding without trading.
Koski challenged the conventional earnings-per-share framework, arguing that stock price adjustments actually make it easier for companies to meet expectations, not harder, because the growth bar moves down with the price.
He illustrated the point using BlackBerry, noting that after its stock collapsed, the company’s lowered price meant it could still deliver relative to expectations, surprising investors who had already written it off.
Johnson reinforced the broader economic picture, citing GDP growth running somewhere in the fours, inflation declining, more than 100,000 jobs created per month, earnings rising 50 percent per year for 21 consecutive weeks, and record personal income figures.
Both investors expressed confidence that markets will move higher heading into 2027, with Johnson saying “we are definitely going higher” once political clarity emerges around the midterm elections.
Koski acknowledged geopolitical risk as the one genuine wildcard, noting that domestic economic data remains sound, and that investors who ignore short-term portfolio volatility will ultimately be better positioned over time.
