Oct 17, 2026 · 30 min
Value investors find bargains as rates and AI unsettle markets
MGM and VICI: Finding Value in the Las Vegas Selloff | Value Options Podcast
The discussion tests whether investors can exploit beaten-down quality and cyclical stocks without accurately forecasting rates, inflation, or AI’s next turn.
- 1Rising rates and stretched valuations have hit small, value, and cyclical stocks harder than the market’s profitable leaders.
- 2AI demand may prove durable, but competition, custom chips, and faster model improvement could disrupt today’s apparent winners.
- 3MGM and other beaten-down dividend, utility, real estate, and consumer stocks may offer long-term value despite weak sentiment.
Don't miss
MGM serves as the episode’s clearest investment case study, connecting valuation and casino prospects to broader consumer weakness and market fear.
The brief
Tobias Carlisle and Tim Travis open against a difficult backdrop: rising long-term rates have pressured small, micro-cap, value, and cyclical stocks while valuations remain elevated elsewhere.
The hosts question whether Micron and other AI-linked companies reflect a durable secular shift or another capital-spending cycle, especially as hyperscalers build competing chips.
MGM becomes the practical case study, with its valuation, free cash flow, Macau exposure, and planned Japanese casino development set against weakening consumer finances.
The conversation links inflation, housing affordability, geopolitics, and historical rate cycles, while warning that bond yields and macro outcomes remain difficult to forecast.
The closing argument favors patience over prediction: beaten-down dividend payers, utilities, real estate, Pepsi, and McDonald’s may offer value before market extremes normalize.
What was said on this episode
35 statements · 16 positive · 15 negative · 2 mixed · 2 neutral
Business values are currently detached from stock prices
“business values, I feel like are very detached from stock prices right now”
Listen at 1:40
Rising long-term rates pressure small, micro-cap, value, and cyclical stocks
“long run rates seem to be just continually jacking up. And that increase impacts the businesses of small and micro and value cyclical stocks”
Listen at 3:02
Small and cyclical stocks recover first and fastest after downturns
“They also recover first and fastest on the other side”
Listen at 3:26
Highly profitable companies trading at eleven times book value are expensive
“11 times the book value is pretty stretched”
Listen at 5:23
Competition among AI products may limit providers’ pricing power
“what is the pricing power of the business?”
Listen at 9:33
Hyperscaler stocks remain reasonably valued
“the hyperscalers are still decent values”
Listen at 10:24
Meta was significantly undervalued for a period
“meta was dirt cheap for a while”
Listen at 10:28
Meta’s Muse strategy appears likely to continue improving
“it seems like it's going to keep getting better”
Listen at 10:39
AI companies are currently ahead of their near-term business integration
“we're going to see the same thing with these companies. I think they're a little bit ahead of themselves in the short instance.”
Listen at 12:28
Higher debt costs likely undermined the proposed MGM acquisition
“I think debt costs, you know, to finance the acquisition probably got a little overwhelming”
Listen at 13:58
MGM stock was trading around $28
“that stock's trading at like 28 and change right now”
Listen at 14:15
MGM generates substantial free cash flow
“MGM generates a ton of free cash flow”
Listen at 14:48
Las Vegas casino-related stocks have fallen sharply
“I think you look at those. I mean, Vegas stuff's gotten crushed.”
Listen at 15:26
VICI offers a fully occupied real estate investment trust
“you're buying a real estate investment trust with 100% occupancy”
Listen at 15:40
VICI trades at ten times cash flow and yields an increasing eight-percent dividend
“you're buying it at 10 times cash flow. And you're getting an 8% dividend that's gone up.”
Listen at 15:57
VICI is substantially undervalued
“to me, that's such an obvious undervaluation”
Listen at 16:17
VICI stock could rise to $28 if buybacks are announced
“I think you see that stock trade up to 28 again”
Listen at 16:30
The war in Ukraine is likely to persist without a near-term solution
“it's just a a total quagmire that that is going to last and there's no solution that's going to make things better”
Listen at 17:37
Housing prices remain too high to make purchasing economically sensible
“housing prices just haven't dropped to a level where it makes a lot of sense yet”
Listen at 18:35
Despite poor CPI data, ten-year yields fell and bonds rallied
“the CPI was so bad today and the 10 years actually, the yield's gone down. Bonds have actually rallied a little bit today.”
Listen at 19:02
Micron may appear cheap but not after normalizing cyclical earnings
“it might tell you why micron looks cheap when it may not, in fact, be cheap if you normalise those earnings”
Listen at 20:03
Hyperscalers are developing their own chips
“all of the hyperscalers are building their own chips now”
Listen at 20:26
Hyperscalers’ custom chips use less energy than alternatives
“they utilize less energy. And so they're more energy efficient.”
Listen at 20:37
Many users may choose cheaper, older AI models for routine needs
“there'll be people who just use an older version off the shelf don't pay much for it does most of the stuff you need”
Listen at 22:15
Only a small group will need and pay for cutting-edge AI
“it's the people who just a handful of people need the really bleeding edge stuff and they're probably going to pay for it”
Listen at 22:21
AI providers may struggle to earn substantial profits
“hard for a business to make a whole lot of money with that”
Listen at 22:29
Google displaced Yahoo as the leading search company
“Yahoo is the top dog, right? And then... Google started just eating them up.”
Listen at 23:00
Losing AI market leadership would reduce companies’ capital access and spending
“you're not going to be able to raise capital at the same levels. You're not going to be able to spend at the same level”
Listen at 23:34
Dividend stocks, utilities, real estate, Pepsi, and McDonald’s offer long-term opportunities
“I think there's real opportunity there for the long-term investor”
Listen at 26:42
Approximately 80% of stocks have declined more than 10%
“I think 80 percent of stocks are down over 10 percent”
Listen at 27:03
MSDL trades at approximately 67% of stated value
“it's trading at like 67 cents on the dollar”
Listen at 27:46
MSDL’s price implies defaults worse than Great Recession or Depression levels
“the amount of defaults are far beyond a great recession, depression scenario, and that's priced into the stock”
Listen at 28:29
MSDL offers approximately a 13% yield
“you get like a 13% yield”
Listen at 28:50
MSDL and similar investments would perform well over five years
“I'm very, very confident in how that would look”
Listen at 29:16
Current market extremes will largely reverse within eighteen months
“I'm sure 18 months time will look back and a lot of this will have been reverted, normalized”
Listen at 29:29
Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.
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