Forward Momentum: Q3 2025

Thought of the Quarter: Are we in a bubble?

A growing number of financial forecasters have begun calling the market a bubble. They draw comparisons to the 2000 dot-com era, when hype for a small group of unprofitable Internet companies fueled euphoric returns that ultimately collapsed in a historic crash.

Are we in a bubble today? To answer this question, we must examine the price vs. value equation for the market’s most consequential companies. As Warren Buffett wisely said:

“Price is what you pay, value is what you get.”

Investors often use the price-to-earnings (P/E) ratio to measure this relationship. The P/E is simply the stock’s price divided by its annual earnings per share (EPS). It’s a convenient shorthand for determining whether a stock looks cheap or expensive relative to its perceived intrinsic value — the present value of all future profits. 

The challenge, however, isn’t finding the P (which is just a quote on Google Finance), but forecasting the E. How will a company’s earnings change over the next year, five years, or even two decades? Investors must estimate a company’s sustainable earnings power far into the future — a notoriously difficult exercise that Wall Street often gets wrong, especially in fast-evolving industries like AI.

We believe the consensus is still underestimating the future earnings power of many leading companies today, including AI beneficiaries such as Nvidia (NVDA), despite their spectacular performance over the past few years. Put simply: the consensus is getting the “E” wrong.

The Nvidia Example

To illustrate just how dramatically earnings expectations can shift, consider Nvidia – the poster child of the current AI boom.

In early 2023, Nvidia traded at over 50x forward P/E. Many pundits pointed to this elevated P/E as evidence of a bubble, arguing the stock was “too expensive.” But what happened next was extraordinary: the company’s actual earnings power exploded. Analysts’ EPS estimates for Nvidia’s next fiscal year were revised up by more than 5x (!) in less than 18 months, as demand for its AI chips surged.

Fortunately, our analysis suggested to us that the analyst consensus was indeed very far behind the ball at the time. We thus bought NVDA for the first time in Titan Flagship in September 2023, as we described to clients below.

Titan’s NVDA Initiation Email (9/6/23):

“Nvidia’s fiscal Q1 earnings were one of the largest beats in recent memory and their Q2 results a few weeks ago proved that market expectations continue to lag reality. Their impressive report made it clear to us that shares may not be as expensive as we originally thought, and might actually be trading at a very reasonable valuation compared to Wall Street’s estimates for the next year...

Sure, skeptics might say ‘didn’t Titan miss the boat’? We don’t think so. Given the implied valuation on our earnings estimates is now closer to the lower-end of its historical range, where it traded pre-COVID, we believe that the setup presents a strong opportunity to start building a position in the clear market leader.”

A stock that once looked expensive at 50x P/E suddenly looked cheap as the “E” caught up to (and even surpassed) the “P.” The multiple compressed not because the price fell but because earnings soared. Investors who focused only on trailing or one-year-forward earnings completely missed this dynamic. They also missed a 4x return in NVDA since then.

This example underscores a critical point: what a company earned last year is irrelevant to its valuation today. Last year’s earnings can sometimes act as a proxy for stable businesses, but for companies undergoing rapid structural growth, valuation depends almost entirely on what they will earn in the future.

Why This Matters

Many commentators today are applying traditional valuation lenses to companies whose business models are evolving at breakneck speed. They emphasize current or next year’s P/E ratios but give far less weight to what earnings could look like in five years. That’s a mistake if you plan to be a long-term owner.

In fast-changing industries like AI, the gap between price and consensus value can close rapidly as companies deliver results that exceed expectations. And when that happens, what once looked “expensive” can suddenly appear very cheap.

We do not believe we are in an equity bubble today. P/E valuations look high on the surface, but the rapidly growing “E” justifies them in many cases. As active managers, our job is to identify these equities for you.

Portfolio update: Uranium, gold, AI paying off

Our high-conviction thematic bets delivered strongly in the third quarter, powering meaningful gains across Titan active equity portfolios. Several of the structural themes we’ve been positioned for – from the global uranium renaissance to precious metals strength and select tech execution – played out in force.

Our uranium and gold allocations were the standout contributors across strategies. These are two of the clearest long-term themes we’ve leaned into over the past few years: the global push toward nuclear energy as a reliable, carbon-free baseload power source, and gold’s role as a beneficiary of a shifting monetary regime. Both themes gained powerful tailwinds this quarter.

Uranium prices continued their ascent amid tightening supply-demand dynamics and renewed geopolitical focus on energy security, while gold rallied as real yields stabilized and central banks remained net buyers. Beyond commodities, select technology holdings also delivered outsized gains, reflecting both company-specific execution and the ongoing AI-driven capex cycle.

Taken together, these thematic bets underscore the power of patiently building exposure to durable, secular stories ahead of the crowd. While short-term macro noise can obscure the signal, our portfolio’s performance this quarter reflects the payoff from aligning capital with multi-year structural tailwinds.

You can find updated performance metrics on our equity strategies here. 

Latest Trades: New positions in FNMA and FMCC

This past quarter was one of patience. Rather than “cutting our flowers to water our weeds,” we largely stayed put across our three active equity strategies.

Aside from some portfolio optimization at the margins, the only major new positions were Fannie Mae (FNMA) and Freddie Mac (FMCC), in our Flagship and Offshore strategies. Below we summarize our investment thesis and illustrative returns math in these companies.

Return of the Mac

We first invested in Fannie Mae and Freddie Mac in our Opportunities strategy back in February. At the time, both firms were still in government conservatorship, more than 15 years after the 2008 financial crisis. Despite having fully repaid the Treasury’s $187 billion bailout – plus another $110 billion in dividends – they remained in a state of regulatory limbo, with the government sweeping nearly all their earnings.

We believed that was about to change. With the return of a Trump administration and the appointment of privatization-friendly leadership at the Federal Housing Finance Agency, we saw a credible path toward one of the most significant restructurings in U.S. financial history: the return of Fannie and Freddie to public markets.

In early August, that thesis began to be validated. Both FNMA and FMCC rose ~20% on headlines that the Trump administration is preparing to take both firms public later this year in an offering that could raise $30 billion, with estimates placing their combined valuation at $500 billion or more. The offering would float 5% to 15% of shares, potentially making it one of the largest stock offerings in U.S. history.

We believe a successful exit from conservatorship could potentially unlock upside from here, as earnings are redirected to shareholders and valuations converge with traditional banks. Given their central role in securitizing and guaranteeing trillions in U.S. mortgages, these companies remain both profitable and systemically critical: characteristics that make this one of the most attractive asymmetric opportunities in markets today.

Just as we’ve done with gold and uranium, holding them across multiple Titan strategies when we see what we consider to be exceptional risk/reward, we took the same approach with FNMA and FMCC in our Flagship and Offshore strategies during the third quarter. We initiated positions in each company in late August (1.5% each in Flagship, 2.5% each in Offshore) and then added to those positions modestly in Flagship in late September.

Market update: Optimistic into year-end

The excitement around AI today has echoes of past transformative moments – think railroads in the 1800s, electrification in the early 20th century, or the internet in the 1990s. Each of those waves began with intense enthusiasm and concentrated leadership. A few pioneering companies blazed the trail, drawing capital and headlines. But over time, the real story wasn’t just the early winners – it was how innovation diffused across the broader economy, lifting entire industries and reshaping markets.

We’re in a similar stage now. A small group of mega-cap tech companies has been carrying much of the market’s weight, propelled by extraordinary expectations for AI. Their upcoming earnings reports are critical because the market is pricing in near-perfection. That’s a tough bar to clear. Some of these businesses will grow into their lofty valuations, and perhaps even surpass them, but others will inevitably prove that trees don’t grow to the sky.

This is where breadth enters the picture. Healthy and enduring bull markets can’t rely indefinitely on a handful of companies. They must broaden out. Gains start showing up in financials, industrials, healthcare, energy, and smaller firms – not just in Silicon Valley boardrooms. When innovation moves from being a niche story to an economy-wide tailwind, that’s when bull markets develop real staying power.

We’re starting to see the first hints of that transition. Participation is widening beyond the “Magnificent 7,” albeit gradually. Early signs of strength in cyclical sectors, small- and mid-cap names, and select international markets suggest investors are looking for opportunities beyond the obvious winners. That’s encouraging. A rally led only by a few giants can make the market fragile; a rally carried by many shoulders is far more resilient.

Taken together, we think the setup favors optimism as we head into year-end. Some of the headwinds that kept markets on edge earlier in the year are easing, participation is starting to broaden, and the economic backdrop remains resilient. AI innovation may have lit the spark, but a wider base of contributors can keep the fire burning. Risks remain – valuations are demanding and expectations are high – but with fading technical pressures, a firm macro foundation, and widening market leadership, we lean bullish into the close of the year.

Final thoughts

Markets are rarely quiet, and the months ahead will likely bring their fair share of noise. Inflation trends, Fed policy, geopolitical risks, and AI execution will continue to dominate headlines. But we do not see signs of widespread euphoria or the kind of indiscriminate exuberance that typically characterizes market tops. Instead, we see an environment where fundamentals, positioning, and macro policy are all interacting in complex but ultimately constructive ways.

We continue to hear from pundits who want to “call the top,” move to the sidelines, and re-enter after a correction. Putting aside the extraordinary difficulty of accurately timing market exits and re-entries like this, we simply do not see anything on the fundamental or technical fronts that we believe warrants such behavior. We believe the path of least resistance is higher through year-end.

Regardless of the market’s near term direction, our philosophy remains unchanged: use volatility to your advantage, not as a signal to retreat. Periods of macro fear and short-term dislocation often create opportunities to accumulate ownership in high-quality businesses at attractive prices. Recurring deposits are your friend. Over long horizons, disciplined participation – not market timing – is what compounds wealth.

“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.”
– Peter Lynch

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Titan Global Capital Management USA LLC (“Titan”) is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Titan’s investment advisory services are available only to residents of the United States in jurisdictions where Titan is registered. Please refer to Titan’s Program Brochure for important additional information. Titan’s affiliate, Titan Global Technologies LLC (“TGT”), is a registered broker-dealer and member of FINRA/SIPC. For more information, visit our disclosures page. You may check the background of these firms by visiting FINRA’s BrokerCheck. Contact Titan at support@titan.com.

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