How to Invest in an AI-Disrupted Market | Ask Me Anything with Jonathan Wellum

High-level takeaways (finance focus)

• AI is disruptive but uncertain. Focus on company-specific defensibility rather than making blanket sector calls. Expect continued volatility and the possibility that even high-quality businesses can fall 50–80% in downturns.
• Rocklinc’s (Jonathan Wellum) approach is value-oriented: prioritize durable moats, balance-sheet strength, and long time horizons. Maintain cash and hedges, be disciplined with position sizing, and take profits when allocations exceed predetermined limits.

Assets, sectors and instruments mentioned

• Equities / companies: Charles Schwab; Salesforce; Adobe; ServiceNow; Thomson Reuters (Westlaw); Burford Capital (litigation finance; transcript may have alternate spelling); an insurance brokerage transcribed as “Tura” (name may be inaccurate); Sandstorm Royalty; Wheaton Precious Metals; Royal Gold; Prologis; Eaton; Schneider Electric; Power Metals / Power Metallic Mines; Brookfield Renewable; Brookfield Infrastructure.
• Commodities / precious metals: gold, silver, copper, uranium.
• Infrastructure / real assets: data centers, unregulated utilities, nuclear power.
• Macroe indicators / market metrics: Shiller CAPE, Buffett indicator (Total Market Cap / GDP).
• Other thematic items: tariffs on imports, energy grid capacity, data‑center buildout.

Key numbers, valuations and macro metrics

• Shiller CAPE: ~40 (only the second time in ~155 years); historical average ~18–20.
• Buffett indicator: ~220% of US GDP (dot‑com peak ~150%).
• Concentration: Top 7 companies accounted for ~53% of S&P 500 returns.
• Tariffs: average import tariff ~13.5% (highest since 1946); estimated to have added ~0.5 percentage point to inflation last year.
• Energy / data demand: digitization/data‑center growth cited at ~2–3%/yr (pressure on capacity).
• Gold (figures from discussion; currency/transcription may vary):
  • JPMorgan gold target mentioned: $6,300/oz.
  • Speaker referenced gold starting the year at ~4,100 and trading around ~4,900 (units unclear; may be CAD or due to transcription).
  • Viewer example: gold moved from under 2,000 to over 5,000 in two years (likely currency/translation differences).
• Portfolio sizing and outcomes:
  • Precious metals allocation initially targeted 12–15%; in practice grew to ~25% for some clients; some client portfolios reached >33% before trimming.
  • Rocklinc typically holds ~20–25% cash/short-term securities as a buffer.
  • Insurance-brokerage example (“Tura”, per transcript): $81m write-down on a ~$2bn company; shares fell ~20–25% (mid‑40s → low/mid‑30s); Rocklinc bought in the high‑20s/low‑30s and later held/sold when stock traded near $50 after a strong report.
  • ServiceNow: Rocklinc bought down to ~100 (nibbling as price fell).
  • Sandstorm royalty example: bought at ~8 → fell to ~3 → later sold to Royal Gold (a $3 claim became equivalent to ~$20+ in sale price).

Methodology / Step-by-step framework (Jonathan Wellum)

1. Drill into the business — know the “playing field,” not just the stock scoreboard.
2. Assess moat durability using specific questions:
   • Are switching costs high?
   • Are network effects strong?
   • Is brand or trust critical?
   • Are there regulatory/legal barriers or patented/specialized data that attackers can’t replicate?
3. Prefer capital‑intensive businesses and those with deep balance sheets (hard to replicate quickly).
4. Determine whether AI is incremental (adds a few percentage points of growth) or core to the company’s viability.
5. Use insider buying and company behavior as validation signals.
6. Portfolio construction and risk management:
   • Concentrated, active value portfolios (Rocklinc typically ~20–25 stocks).
   • Maintain a cash/short-term buffer (~20–25%) to reduce forced selling risk and to deploy into opportunities.
   • Set allocation caps for themes (e.g., precious metals) and trim when positions exceed upper bounds.
   • Use precious metals as a macro hedge while accepting volatility.
   • Do not buy stocks with money needed within 1–2 years.
   • Avoid overexposure to “pure‑play” AI names; prefer companies where AI is additive to an already‑strong business.
   • When a company suffers an idiosyncratic shock, verify fundamentals before averaging down — be patient but active in re‑evaluating the moat.

Explicit recommendations, cautions and behavioural guidance

• Be cautious about buying broad indices at current valuations; highly valued names can decline substantially if momentum reverses.
• Prepare mentally and operationally for large drawdowns (paraphrase of Buffett: be prepared to tolerate a 50% drop).
• Avoid investing capital you will need in the short term into equities.
• Trim large winners (for example, precious metals positions) rather than letting single-theme positions grow unchecked; redeploy proceeds or hold for liquidity.
• Avoid “pure‑play” AI exposure unless you have conviction and it fits client risk tolerance; prefer diversified business models that benefit from AI tailwinds.
• Tariff risk: avoid direct exposure to companies heavily dependent on vulnerable supply chains where reshoring/tariffs could hurt; favor companies producing domestically or otherwise insulated.

Performance examples and anecdotes

• Insurance brokerage (transcribed as “Tura”): bought through a write‑down event, exercised patience, benefited from strong subsequent earnings and stock recovery to ~$50; valuation metrics referenced (P/E, PEG) suggested attractiveness.
• Sandstorm Royalty: purchased at depressed prices after corporate issues; management rebuilt value; eventual sale to Royal Gold delivered large gains from the lows.
• ServiceNow: opportunistic purchases during a selloff (nibbling down toward ~100).

Macro themes tied to investment ideas

• AI + electrification → increasing demand for energy and data centers. Potential ideas: unregulated utilities, data‑center real estate (e.g., Prologis), and component suppliers (Eaton, Schneider Electric).
• Nuclear / uranium: cited as a play on power-generation shifts (Cameco or equivalent referenced).
• Copper and mining exposure: beneficiaries of electrification and infrastructure buildouts; royalty/mining equities as proxy exposure.
• Tariffs / reshoring → beneficiaries include companies producing domestically and industrials supplying reshoring projects.
• Structural drivers for gold: large government deficits, high debt‑to‑GDP, deglobalization, and aging demographics — gold viewed as a structural hedge (with expected volatility).

Disclosures, caveats and transcription notes

• The transcript did not include an explicit “not financial advice” disclaimer. The show offers a free portfolio review with Rocklinc/Wealthon advisers (link referenced in the video).
• Several company names and figures in the subtitles may be mis‑transcribed (examples: “Berford” vs Burford; “kamico” vs Cameco; “Tura” may be incorrect). Validate company names and tickers before trading.
• Some quoted price levels for commodities (notably gold) may reflect different currencies or transcription errors; confirm numeric values independently.

Presenters and sources

• Jonathan Wellum — CEO and CIO, Rocklinc (primary speaker answering viewer questions).
• Maggie Lake — host, Wealthon.
• Additional referenced sources: JPMorgan (gold target), Goldman (tariff outlook), Warren Buffett (aphorisms/quotes), Brookfield, Nolan Watson (Sandstorm), and others (some proper names may be mis‑transcribed).