Forever Portfolio: The Software Sell-Off
Taking advantage of the sell-off
Hi Multis
Today, I added to the Forever Portfolio for the second time in January. As most of you know, I invest every two weeks. But this month was a bit of a special one. The timing was off because of the holidays and that’s why I bought in early January for December, and I bought last week and now again.
The market has been very hard on software names. I think this is an exaggeration, and one I want to take advantage of.
Vibe Coding: Promise and Reality
This week, I’ve been testing a few things. I’ve been trying (!) to vibe-code myself. For context: I have no development knowledge whatsoever but the story now goes that everyone’s mother can code enterprise-level software, right?
I’ve already shown some of the results in our Slack group and on X, like these earnings. This was by far the most successful outcome.
But here’s what I found: the technology isn’t very stable yet for non-developers.
I wanted firsthand experience, not just hearing things from others. My conclusion so far? There are definitely more people and companies who will develop great things outside of the horizontal software market. That’s real.
But if you are not a software developer, it’s still extremely difficult to see the weaknesses in what you’ve coded. And that leads to unreliable software, clunky outcomes, stupid mistakes, etc. Look at this, for example, from what I tried on Meta’s results. 108% revenue? Uhu.
I don’t think that problem will go away very fast. We’ve all seen that LLMs are not 100% reliable at this stage. You can see that in vibe coding as well. There’s a bit too much euphoria right now. I totally understand why, as I had it myself initially. It was like those first days of ChatGPT: you were blown away by the possibilities, disregarding the downsides. Don’t get me wrong, it is already really mind-blowing what it can do.
But you will still need structure. You will still need experts who can review the code. You will still need reliability, stability, deployment, consistency, compliance, and so many other things that are not there yet. I’m sure they will come but I’m equally sure that these things are underestimated in terms of how tough they are to establish.
Software development is just one small step in replacing the current software. Probably just 10%. That 10% took a lot of time and upfront costs and that will shrink enormously, but the 90% remaining things won’t speed up that much.
That also implies that the current software platforms will go away anytime soon. I think not, actually. That’s the reason why I keep adding to some of my positions. Of course, there will be winners and losers, as with any platform shift. Companies will have to adapt to the new reality.
To start, I sold my small position in Adobe. There is nothing that can replace Adobe right now, let’s be clear about that. But I’m not sure that it will stay like that for long.
I don’t follow up the company closely and I see LLMs and other AI-driven models (which Adobe is as well, of course) improve a lot. So, while Adobe might remain the leader in its industry, competitive pressure could erode its margins over time.
So, for now, I don’t know, and that uncertainty made me sell my small position at a 28% loss.
There are other software companies where I think the baby is being thrown out with the bathwater. And there I want to take advantage of the market’s oversimplification.
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