Ask The Compound — "Is It Time to Buy Software Stocks?"

Date: February 11, 2026
Hosts: Ben Carlson, Duncan Hill
Guest: Josh Brown

Episode Overview

In this episode, Ben, Duncan, and guest Josh Brown tackle a turbulent moment in the market for software stocks—spurred by a major AI breakthrough reported to be led by "Claude." Major tech names like Adobe, Salesforce, Oracle, and even Microsoft have seen their stock prices plunge, prompting many investors to question whether this is a "falling knife" scenario or a buying opportunity. The trio fields a range of audience questions focused on how to approach battered software companies, Netflix's transformation, technical topics like trailing stops, solutions for the housing market, and career advice for young advisors.

Software Stocks in the Age of AI Disruption

[02:00 – 14:10]

Recent Software Stock Carnage

• Problem Statement: AI, specifically advances attributed to "Claude," has tanked software stock prices. Microsoft is down 25%, while some others are down up to 60%.
• Common Investor Mentality: Investors are used to buying dips in tech, expecting rebounds—but "what if this time is different?"

Ben:

"What if the moats for these companies have been altered forever? This seems like a hard one because it happened really fast too." (03:10)

Why the Panic Now?

• The market seems to have shifted from seeking out AI winners to aggressively identifying losers.
• Notable volatility is being driven largely by algorithmic trading rather than rational assessment.
• Josh:

  "It's not thinking rational human beings that are making these trades. It's algorithms." (04:31)

Rethinking the “Software Group”

• Josh:

  "We have to stop talking about them as a group and start thinking about each one individually... This is so much bigger than just software." (03:29)

• Two Camps Emerge:
  • Halo Stocks: Heavy asset, low obsolescence companies that benefit or are shielded from AI disruption (e.g. industrials, consumer staples).
    • Josh:

      "We fetishized these asset-light business models... and this year that paradigm has been flipped on its head after 15 years." (07:02)

  • Information Vendors: “Vertical Market Software” companies and legacy info providers, whose IP-based products are vulnerable to rapid obsolescence.
    • Josh:

      "The value of selling information to people is declining at a precipitous rate." (08:40)

    • Warns these could face a "slow death" like newspapers did in the 2000s.

SaaS, Labor, and AI Disruption Nuance

• AI not only threatens to overwrite platforms, but could shrink their addressable markets through lower headcounts.

• Software companies traditionally price "per seat"; their growth is thus tied to white-collar employment.

• Josh:

  "Corporations are going to have a lower headcount. Therefore, even if we don't get disrupted, our SaaS product... will be selling to companies that don’t employ as many people." (10:20)

• New advances: AI-driven software that "self-improves" after being deployed, creating stickier products and new kinds of winners, but no one "has all the answers right now."

Memorable Quotes:

• "Anyone that thinks they have all the answers right now, you’re talking to an insane person." — Josh (12:26)

When Does This Turn into a Buying Opportunity?

• Early buyers might still be too early—they warn it's easy to catch a falling knife.
• Ben:

  "You don't have to try to catch every bottom. That's the way I feel about this one." (14:03)

Netflix: The Journey from Growth Stock to Mature Giant

[14:10 – 18:38]

Netflix’s Growing Pains

• The company is transitioning from high-growth to value, with expected growth rates dropping from 16% to 12%.
• A recent Warner Bros. acquisition introduces risk: labor, union, and integration challenges.
  • Josh:

    “There's a lot of execution risk here. There's a lot of political risk, a lot of labor risk.” (15:26)

  • Josh sold 85% of his Netflix position as soon as the merger news hit.

The New Rivalry: Netflix vs. YouTube

• With the "streaming wars" largely over, the threat now comes from YouTube, whose scale is powered by Alphabet's massive resources and a unique model (user-generated content, lower content costs).

  • Ben:

    "YouTube doesn't have to invest in content. They're not paying for that slop video that's being created." (17:26)

• Netflix is leveraging acquisitions and exclusive content to rear up for a new type of competition.

Notable Moment ([18:38]):

• The hosts joke about what would happen if their podcast ended up on Netflix/HBO ("Michael wasn't highbrow enough... we would have had to get rid of him.").

Trailing Stops: Trading vs. Investing

[19:24 – 28:06]

The Role of Stop Losses

• Listener question about best practices using trailing stops—how to set them, and are they better for volatility or stability?

• Core Message:

  • Trailing stops are for trades, not long-term investments.
    • Josh:

      "If you're trading, you have to use stops. What else are you going to do?" (20:31) "If you make an investment, the short-term drop is a reason to buy more, not sell." (20:26)

• Technical Approach:

  • Stops should factor in a stock’s volatility and technical levels (support/resistance).
  • Risks: "Algos" can "hunt" tight stops on volatile days; gaps can invalidate stops by converting them to market orders well below the set price.
    • Josh:

      "If the algos hunt your stop because you set it too close, and you get pulled out... you placed your stop incorrectly." (21:59)

Real-Life Example

• Describes a winning trade in Devon Energy, continually moving the stop up as the stock rose—eventually transitions from a trade to considering it a long-term investment.
• Be flexible: sometimes what starts as a trade becomes an investment if broader trends emerge.
• Josh:

  "I want you guys to understand, for a stock the size of Exxon to make the move that it’s just made... something bigger is going on here." (25:10)

Memorable:

• "Trading is doctrinaire, up to a point. Then you need to be fluid as things change." (25:20)

The Housing Market Crisis: History & Roadblocks to Reform

[28:36 – 38:14]

Audience-Generated Policy Ideas

• Question: Would "portable mortgages" or first-time homebuyer programs help with affordability?
• Hosts' Take:
  • Most proposed solutions (like 0% loans, mortgage carryovers) just pull demand forward, don't address the core problem of affordability and supply.
    • Ben:

      "None of them solve the affordability crisis. None of them come close to making houses cheaper to own." (29:05)

Historical Context — The GI Bill’s Legacy

• The GI Bill post-WWII fundamentally created the U.S. middle class by backing home loans and incentivizing construction—a rare, transformative government policy.

• Josh:

  "It literally did. It created a middle class where people owned their own homes and... enriched my grandfather’s generation." (30:35)

• Points out the policy's darker side: Black veterans were excluded, missing out on generational housing wealth.

Modern Barriers

• Population aging, lack of turnover, retirees holding onto multiple homes, and zoning limitations are all compounding the supply crunch.
• Multifamily construction lags far behind demand, and even where units are being built, they're more often rentals (equity goes to large landlords, not individuals).
• Josh:

  "People are living forever... they’re not moving away." (37:04)

Career Paths for Advisors: Two Imperfect Options

[38:31 – 46:57]

The Scenario

• Young, aspiring planner choosing between:
  1. Joining a virtual RIA for training with a path to lead advisor.
  2. Joining a solo advisor practice as a successor, with uncertain succession promised in 3–5 years.

The Realities of Succession

• Succession plans are notoriously unreliable; written commitments can change at the principal's whim.

  • Josh:

    "You have no idea how hard it is for people to let go... It's not a physically demanding job. People can do it for a really long time. And the clients aren't pushing their advisor to execute the succession plan." (40:17)

• Virtual RIAs (tech-focused, platform-based) can have high turnover, may not offer true mentorship or meaningful learning for new planners.

• His advice:

  • Seek out a firm committed to patient, thorough training, where you can genuinely practice your craft and build your own client base.
  • Don't fixate on just "two options" — there are many potential career paths.

Memorable Quotes

• "Do you have any colleagues that know anything, or are you just talking by yourself all day?" — Josh, re: virtual RIAs (43:45)
• "Of all things you could do... those two options might be like 8 and 9." (45:14)
• "Sometimes we have to learn what not to do." — Ben (46:53)
• "For God’s sake, don’t do what I did." — Josh's caution (46:57)

Quickfire Takeaways & Memorable Moments

• On Software Stocks:

  • Don’t generalize; not all are equal in the face of AI disruption.
  • Investors may be too early—even "right" calls can be prematurely painful.
  • Companies with tangible, asset-heavy business models are favored in this new paradigm ("Halo Stocks").

• On Netflix:

  • Facing a plateau as it matures; risks abound with new M&A.
  • The streaming war is over—now it's a platform war, with YouTube as the real foe.

• On Trailing Stops:

  • Great for traders, less so for investors.
  • Understand the technicals, volatility, and the psychological pitfalls (e.g., getting prematurely stopped out).

• On Housing Solutions:

  • Most policy ideas boost demand without addressing supply—underlying affordability issues remain.
  • Historical context (GI Bill) shows profound policy can shape generations, but beware of unintended consequences and exclusion.

• For Young Advisors:

  • Don’t get locked into false choices.
  • Real opportunity comes from places that want to invest in developing you—not just use you for succession or “platform” numbers.

Episode Quote Highlights

• "Anyone that thinks they have all the answers right now, you’re talking to an insane person." (Josh, 12:26)
• "We fetishized these asset-light business models... and this year that paradigm has been flipped on its head after 15 years." (Josh, 07:02)
• "Do you have any colleagues that know anything, or are you just talking by yourself all day?" (Josh, 43:45)
• "For God’s sake, don’t do what I did." (Josh, 46:57)

Notable Timestamps

• [02:00] – Discussion begins on crashing software stocks and long-term prospects
• [07:02] – Shift from “asset-light” to “heavy asset” investing discussed
• [14:10] – Netflix’s transition and Warner Bros. acquisition risks
• [19:24] – Trailing stops explained: trading vs. investing
• [28:36] – Housing policy, GI Bill, affordability hurdles
• [38:31] – Career advice for young financial advisors

For listeners (and potential investors/advisors) seeking thoughtful, reality-based market guidance, this episode delivers both sober warnings and practical frameworks, all with the show's trademark humor and candidness.