2Q26 Quarterly Webinar

At a Glance

Samantha McLemore (founder and CIO of Patient Capital, who worked with Bill Miller for over 20 years at Legg Mason and Miller Value Partners) and assistant portfolio manager Christina Siegel Malbon hosted this webinar on July 23, 2026. McLemore opened by introducing the firm's history and value-investing framework—stock prices are driven by fundamentals (the present value of future free cash flow), and value is the disconnect between market-implied expectations and fundamental judgment—before systematically laying out her assessment of the current market. The most consequential judgment in the entire presentation: "We are still in the late stage of one of the strongest, longest secular bull markets in history, which began in March 2009; sentiment is in optimism, not euphoria; the odds favor the bull market continuing; the best strategy is to sit tight rather than act frequently" (Samantha McLemore). Her strongest evidence: the cumulative gain in semiconductors is comparable to the 2000 tech bubble, but valuations and earnings support are completely different.

Theme 1: Value Is the Disconnect Between Expectations and Fundamentals, Not Low P/E

Samantha McLemore argues that the only long-term effective driver of stock prices is fundamentals—the present value of future free cash flow; the essence of value investing is not a low P/E ratio, but finding the disconnect between the market's implied expectations and fundamental judgment.

Supporting arguments:

• Framework mechanics: the present value of future free cash flow; because the future is uncertain, scenario analysis is required; incorporate management, competitive landscape, strategy, and moats. The market is a discounting mechanism; growth stocks are sometimes cheap and sometimes expensive, depending on the expectations already reflected in the price.
• Correction: "That is not value, that is a marker of low expectations, but sometimes low expectations are warranted." (Meaning: that is not value; it is a marker of low expectations, but low expectations are sometimes justified). She points out that many quality-style managers have performed poorly over the past two years because those stocks became extremely expensive two years ago, and are now more reasonable instead.
• Methodological continuity: the strategy was founded under Miller Value Partners in 2020, became independent in 2023, and acquired the Opportunity strategy co-managed with Bill; the investment and operations teams are unchanged—illustrating that the framework is a long-term evolution rather than a reaction to the moment.

Implication: Operationally, it continues to seek points of disconnect between "market pricing vs. fundamentally reasonable levels," positions where expectations are extremely low, and lets winners run. Readers should note: this is a self-positioning narrative from the perspective of an existing holder; the statement early on that "we have done well" carries a marketing element.

Theme 2: Late-Stage Bull Market—Optimism Has Not Reached Euphoria; Sitting Tight Beats Timing

McLemore judges that the current market is in an "optimism phase" rather than an "euphoria phase"; the breadth of localized euphoric signs is insufficient to confirm a top; the late stage of a secular bull market often produces the strongest returns and can last for years.

Supporting arguments:

• Historical context: this bull market began in March 2009 (amid systemic-collapse fears and extreme pessimism), and has compounded at 17% annually for 17 years, well above the S&P's long-term average of 10%; the Opportunity strategy has compounded at 18.6% annually over the same period (S&P 17%, S&P Value 15%). She cites "Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria." (Meaning: bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria), explicitly placing the current phase in optimism.
• Dual judgment: she cites Fitzgerald—the test of a first-rate intelligence is the ability to hold two opposing ideas simultaneously and still retain the ability to function—corresponding to the core position of "locally overheated but not yet dangerous overall." Sentiment evidence: at a June conference, a major bank figure said "the best hedge is to buy on dips," and the audience echoed in agreement; she views this as an optimism signal; Bill Miller reminded her that "no one can do that consistently," and there is no need to worry excessively.
• Data chain:
• Valuation: S&P P/E of 21.8x, still below the bond-implied multiple (both short- and long-term rates imply a higher bond multiple); near historical highs but below the 2021 cyclical peak or the 2000 secular peak of 25.6x; well above the 2009 trough of 10.7x and the 2020 bottom of 14x.
• Citi bear-market checklist: 97% red flags at the 2000 peak (17.5/18 items) vs. 64% now (11.5 items) → "not there yet."
• Momentum/controversy ratio: >80% in January 2000, >70% in December 2020 (70% is the empirical threshold); this cycle has not touched it.
• New-high effect: historical data shows average cumulative returns 3 months to 5 years after new highs are actually better (because major bear markets are excluded); "a new high itself is not an alarm signal."
• Earnings expectations: 2026 S&P earnings growth expectations are 4% (17% at the end of last quarter), and 2027-28 expectations are also being revised up—she says this is a feature of a late stage or potential top, but the fundamental foundation remains strong.
• Cites Livermore: "It never was my thinking that made me the big money. It was always my sitting. Got that? My sitting tight." (Meaning: it was never my thinking that made me the big money; it was my sitting—sitting tight.) She extends this: being right about the market is no skill at all; in every bull market there are plenty of early bulls, and in every bear market plenty of early bears, and none of them made real money.

Implication: She admits "no one knows how it will evolve," but judges that the late stage may still have years to run; risk signals include the controversy ratio touching 70%, accelerating IPO/M&A/capital expenditure, and valuations approaching 25.6x. In terms of market structure, retail investors plus quantitative algorithms already account for 60% of trading volume, and single-stock volatility is in a historically extreme range—volatility creates opportunities for contrarian strategies.

Theme 3: The AI Rally vs. the 2000 Bubble—Similar Gains, Vastly Different Valuations

McLemore believes that the AI rally centered on semiconductors is comparable in cumulative gain to the 2000 tech bubble, but valuations are far from bubble-like; supply shortages and earnings growth are still supporting the cycle, and the key question is how fundamentals will evolve.

Supporting arguments:

• Core comparison table:

Metric	2000 Tech Bubble	This AI Rally
Starting point	Netscape IPO (August 1995)	ChatGPT launch (November 2022)
Semiconductor cumulative gain	550-600%	550-600%
Core hardware stock valuation	Cisco peak 150x P/E	NVIDIA 21x P/E
S&P 500 cumulative gain	~200%	94%
Technology sector cumulative gain	564%	190%
Technology sector P/E	Peak 58x	21.5x

• Individual stock evidence: Micron is up +247% YTD, but only 6.8x forward P/E; the stock is around $1,000 (this year's EPS estimate is $7, last year was $8), with earnings up 8.8x vs. the stock up 9x—"almost perfectly in sync"; she believes SK Hynix better represents this semiconductor rally than NVIDIA. The bubble period lasted about a year; this cycle has so far been shorter.
• Supply side: demand outstrips supply, supply constraints are substantial, and new supply is difficult to add; "absent a dramatic change, it will not ease in the near term" → the cycle still has room to run.
• Extrapolation: if the market were to top at 2000-style premium valuations, it would still have room to double (from early 1998 to the 2000 peak, technology stocks rose another 257%); she does not expect that, "but things can get crazy."
• Comparison to the 2021 cyclical peak: every inflation metric is lower, rates are higher (the 2022 decline was mainly an interest-rate shock), and the market is cheaper.
• AI capex return evidence: trillions of dollars are being invested in AI; xAI (under SpaceX) disclosed pre-IPO compute deals with Google and Anthropic, implying an after-tax return of 30%+; Alphabet's cloud business is +82%, with incremental operating margin of 54%, incremental operating profit of $6B; even if all $91B of capex is counted as AI, the after-tax return is still >20%—"if sustainable, you should invest as much as possible." But Alphabet posted its first negative free cash flow in Q2 and raised capex → the stock fell sharply (she believes the results were "very strong," and the market dislikes negative FCF); the stock is already up +120% from its Q1 2025 low. She reveals that Warren Buffett (95 years old) making the call to buy Alphabet surprised her—buying at historical highs does not fit his style, but Alphabet's 20-plus P/E, AI's transformative nature, and the portfolio's overall underweight to technology "make sense."
• Mag 7 and market breadth: 2026 expected earnings +38% vs. the rest of the market +19% (2025: +22% vs. +10%); the S&P's top 10 weighted stocks' P/E is only 4% above their 30-year average (104), while the remaining 490 are 123% higher—the leaders are actually not that expensive. Year-to-date the Mag 7 has lagged, and 50% of individual stocks have beaten the index (only 25-30% in the prior three years).
• Individual stock stance (explicitly stated in the source): Amazon, Meta, Alphabet, and NVIDIA are "among the most attractive names in the market," best positioned in the AI revolution, with valuations having pulled back; Tesla is "still very overvalued," and SpaceX may acquire it (Elon wants to put everything into one entity); SpaceX itself is "crazy priced," one of the extreme indicators of market euphoria; Apple is "expensive," and AI is "the first real risk to the business."
• Quote: "We don't see these valuations, for the most part, that are way above what's justified by the fundamentals." (Meaning: for the most part, we do not see valuations far exceeding what fundamentals justify.)

Implication: The key variable is how earnings/fundamentals evolve; if the current shortage pattern persists, the cycle still has legs. Note: she holds several of these companies (Alphabet, Amazon, Meta, NVIDIA), so her positive reading of AI returns carries a holder's bias; but she also names Tesla/Apple/SpaceX as overheated, so this is not an across-the-board bullish call.

Mentioned Names

Name	Stance	Key Data
NVIDIA	Bullish (held)	21x forward P/E; only semiconductor holding, lagging YTD
Micron	Not stated (market example)	+247% YTD; 6.8x forward P/E; stock around $1,000; earnings up 8.8x vs. stock up 9x
SK Hynix	Not stated (market example)	Believed to represent this rally better than NVIDIA; no valuation given
Cisco	Not stated (historical comparison)	150x peak P/E in 2000
Alphabet	Bullish (held)	Cloud +82%, incremental operating margin 54%, incremental profit $6B, $91B capex → after-tax return >20%; first negative FCF in Q2; +120% from Q1 2025 low; 20-plus P/E
xAI	Not stated (AI return observation)	Deals with Google/Anthropic imply after-tax return 30%+
SpaceX	Risk warning	"Crazy priced," extreme indicator of euphoria; may acquire Tesla
Amazon	Bullish (held)	No specific data given
Meta	Bullish (held)	No specific data given
Tesla	Risk warning	"Very overvalued"
Apple	Risk warning	"Expensive," AI is the first real risk

Judgments Worth Remembering

1. "We are still in the late stage of one of the strongest, longest secular bull markets in history; the late stage often produces the strongest returns and can last for years; the current phase is optimism, not euphoria, and the odds favor the bull market continuing" — Samantha McLemore (supporting data: 17-year annualized return of 17% vs. the S&P's long-term average of 10%; Citi checklist at only 64% red flags vs. 97% at the 2000 peak; semiconductor gains comparable to 2000 but valuations are vastly different)

2. "A low P/E is not value; it is a marker of low expectations; value is the disconnect between market pricing and fundamentally reasonable levels" — Samantha McLemore