The Long & Short Opportunities for 2026 | Thomas Thornton
Audio Brief
Show transcript
This episode explores year-end market sentiment, current investment strategies, and critical insights into the electric vehicle sector.
There are four core takeaways from this discussion. First, investors should exercise caution in the electric vehicle sector, mindful of high valuations and the rapid depreciation affecting all EV models. Second, in a market demanding exceptional results, opportunities exist in high-quality companies punished for delivering merely good earnings. Third, when evaluating autonomous driving technology, prioritize companies that employ redundant and proven safety systems like Lidar. Finally, consider incorporating seasonal trends, such as the potential for energy sector strength in late January, into investment strategies.
The electric vehicle sector demands caution. Rivian, for example, is noted for its high valuation, while Ford scaled back F-150 Lightning production due to a mismatch with its core customer base. A significant observation is the severe and rapid depreciation affecting all electric vehicles, from Tesla to Porsche.
Current market expectations are extremely high; "pretty good" corporate earnings are often met with disappointment, rather than reward. This dynamic creates opportunities for investors to find long positions in fundamentally strong, high-quality companies that have been unfairly penalized. An example is actively searching for undervalued firms like Adobe amid broader market short positions.
Regarding autonomous driving technology, the emphasis is on systems employing redundant and proven safety mechanisms. Lidar, for instance, is preferred over approaches relying on fewer, less comprehensive data sources. Prioritizing more technology for enhanced safety is a critical factor for evaluating companies in this space.
Finally, investors should consider incorporating predictable seasonal trends into their strategy. The energy sector, for instance, often shows a pattern of strength in late January. Identifying such patterns can help uncover contrarian investment ideas with potentially asymmetric risk-reward profiles.
These insights underscore the importance of selective investing, cautious sector analysis, and strategic positioning in today's demanding market.
Episode Overview
- The discussion opens with a year-end review, exploring market sentiment and Tommy Thornton's current mindset as 2023 comes to a close.
- A deep dive into the electric vehicle (EV) sector, analyzing Rivian's high valuation and use of Lidar technology versus Ford's strategic pullback on the F-150 Lightning due to weak demand.
- Thornton shares his current market positioning, revealing he is heavily short but actively searching for long opportunities in high-quality, beaten-down stocks like Adobe.
- The conversation touches on the extremely high expectations embedded in the current market, seasonal trends in the energy sector, and the concept of asymmetric risk.
Key Concepts
- Market Sentiment: An analysis of the prevailing mood among investors at year-end, characterized by exhaustion and high expectations for corporate earnings.
- EV Market Dynamics: Examination of the electric vehicle market, including Rivian's expensive valuation, its strategic use of Lidar for safety, and Ford's production cuts in response to a mismatch with its core customer base.
- Vehicle Depreciation: A broad observation that all electric vehicles, from Tesla to Porsche, are currently experiencing severe and rapid depreciation in value.
- Investment Strategy: Thornton's approach of maintaining a significant short position on the overall market while seeking specific long opportunities in fundamentally strong companies that have been unfairly punished by investors.
- Sector Seasonality: The observation that certain sectors, like energy, exhibit predictable patterns, often showing strength during specific times of the year, such as late January.
- Asymmetric Risk/Reward: The concept of an investment or trade where the potential upside is significantly greater than the potential downside, humorously illustrated with a lottery ticket.
Quotes
- At 0:16 - "Congratulations, you've had a great year with your channel. I tune in all the time as you know." - Tommy Thornton congratulating Maggie Lake on her platform's growth at the start of the show.
- At 1:00 - "I'm just curious sort of what what's your mindset right now... as we close out 2026, like, how are you feeling?" - Maggie Lake asking Tommy Thornton for his general market sentiment to begin the discussion.
- At 19:57 - "Just like Tesla, it's not trading at a reasonable valuation. It's pretty expensive." - Thomas Thornton commenting on Rivian's stock price, comparing its high valuation to Tesla's.
- At 21:01 - "I would rather have more technology for an autonomous car than less." - Thornton explaining his preference for more redundant safety systems like Lidar in self-driving vehicles.
- At 22:11 - "The buyer of the Ford F-150 wants utility and they're not looking for the electric motor car." - Thornton analyzing why Ford's F-150 Lightning is struggling to gain traction with its traditional customer base.
- At 23:22 - "The depreciation on electric vehicles, every electric vehicle, from Tesla to Porsche... is terrible." - Thornton making a broad statement about the significant loss of value that electric vehicles experience after purchase.
- At 27:45 - "Pretty good is awful for this market. They want, you know, blistering, blowout... the greatest thing ever." - Thornton describing the market's high expectations, where solid earnings are no longer enough to impress investors.
- At 47:06 - "It's an asymmetric trade here. For 20 bucks, I can win, I guess after tax, like 400 million." - Thornton humorously framing his lottery ticket purchase as an investment with highly skewed potential returns.
Takeaways
- Be cautious when investing in the EV sector due to high valuations and be mindful of the severe depreciation affecting all-electric vehicles after purchase.
- In a market with elevated expectations, look for buying opportunities in high-quality companies that are punished for delivering merely "good" instead of "blowout" results.
- When evaluating autonomous driving technology, prioritize companies that employ redundant and proven safety systems like Lidar over those relying on a single technology.
- Consider incorporating seasonal trends, such as the potential for energy sector strength in late January, into your strategy to identify contrarian investment ideas.
