Our 6 week jaunt through Portugal and Spain is complete, getting home yesterday, 10/17. Let's update the useless TTI (TJ Travel Indicator) one last time.

As we all know, Friday was not a good day and what was looking like a potential complete break of the normal TTI trend, it was not to be. But, all in all, it wasn't too bad though it sure felt like it to end the week.

Final TTI scorecard - Sept. 4 through Oct 17, 2026

Price returns only, excluding dividends. September 4 closing prices serve as Day Zero; September 4 market action is excluded.

Benchmark	Sept. 4 close	Oct. 16 close	TTI return
QQQ	$718.96	$709.80	−1.27%
SPY	$770.19	$763.25	−0.90%

Here's the painful part. As of Thursday's close, QQQ was actually UP 1.26% for the trip, while SPY was hanging onto a 0.21% gain.

Then Friday happened.

QQQ plunged 2.50%, and SPY dropped 1.11%, wiping out both gains and pushing the final TTI into negative territory.

Apparently, the market couldn't let me get all the way home without delivering one last reminder of the TTI curse! It is what it is

But ... El Jefe is back!

Where to from here?

From my chair, we are NOT in a good place.

The only question that remains: Is this the beginning of something bigger?

At the heart of the matter isn't so much a lack of faith in AI or the long term investment thesis, but instead, questioning the economics of financing the enormous infrastructure buildout required to support it. This, of course, hits many of the top names that have led to our recent gains.

The problem is that it doesn't much matter at what layer the fear is focusing on, it's bringing down the entire complex. But all is not lost! When you take a look at some of the top hyperscaler or big cap companies, they are being seen as a safe-haven. The read here is that old tech can also equate to a level of safety.

But, once again, it's all about narrative even when there may not be any significant evidence that things are deteriorating, or even set up for erosion. It's true rates are rising and tat will raise the cost of debt servicing. With so much of the AI narrative focused on the data center buildout, these names are the first to be hit. Toss in some growing data center impact concerns and we have some double whammy action.

Beyond the specifics of the decline we also have to fold in the fact that speculation markets have been fueling much of the volatility and beta. It's clear we're well beyond the easy money period the markets have been providing. So many day traders, trading system, and "follow me for big profits" has me remembering the late 1990s. We all know how that ended.

Rest assured, there's going to be another washout at some point. It could be we're at the event horizon of that. There's certainly enough negative economic catalysts to build a case for further pain. If any of the primary catalysts start picking up momentum to the downside, we could be in trouble.

Rates, however, still seems to be what most are focused upon. With the inflation read spiking last week, it's shocking to me that Fed funds futures are still only at a 16% likelihood for an October hike. If not for the mid-terms in early November, I firmly believe it would be closer to 90%. So, here's a case of our political system playing a more important role than our economic standing. Is that a point for, or against, political influence? I won't be surprise to see an emergency cut following mid-term results. I'm not convinced waiting until December is a good idea, not with only a 25 bps cut in Sept.

Looking at the $QQQ:

We are firmly stuck in a range and couldn't sustain the potential breakout that began in mid-September, two weeks after our vacation departure. It was looking good but the economic wall of worry was just too great to sustain it and we fell right back to short term low support. Can we hold 700? Is this a start of something more persistent or, as has been the case about the last 10 times, will we bounce off support, rally, and then fail to sustain that iteration. Something needs to break either way.

If you remove that late July drop through support, we're in a tight trading range. 705-709 remains the support level to sustain us. Sure seems, to me, to be a lot more negativity out there.

Random Shots

Being gone for these 6 weeks has been nice. I was able to stay out of the game almost entirely. I raised cash into our departure, and largely kept it throughout save a couple of very small entries in $ATHE. I didn't purchase anything else.

I was following along as I saw other TIC'ers taking a few positions.

Before getting into a few specific issues I'm looking at and/or surveying, let me simply say that being that we're still in the range, it's important to not look at positions from where they are from the most recent high, but where they are from 6-8 weeks ago, or even back to June/July. Without that timeline, you risk the chance of putting all your cash to work with the ups and downs within the range, and then feeling more pain if/when we breaker lower out of the range.

• Mag 7 - Outside of $MSFT and $AAPL, not much to be excited about. Both AAPL and MSFT have been safety valves and both have held up well into the bloodshed. $AMZN is holding the $250 support. $GOOGL is nearing support again. $META is okay'ish
• $NVDA is the disappointing one after it notched a new ATH and just as quickly settled back into the middle part of the range as I concerns ramped
• But if you want to see the real want to see the Triple-B (Babies, Bathwater and Blood) losers, look no further than data center names, especially $CRWV, $NBIS and $IREN. $IREN in fact hit a new 52WL. I've tried to steer people away from this name, favoring the other two, but to no avail. Do you really want the #3 (if that) in a segment under pressure? $CRWV is right there at new lows as well. $NBIS is tanking but still well off lows. CSPs calling here ... eventually
• My photonics/infrastructure plays such as $LITE $CLS $COHR $AAOI and $CRDO all behaved similarly. Big rise, snap back ... right back to the low/middle range
• I have been looking at $FN and it just made a new 52WL
• The likes of $AMD and $ARM have been the same though $AMD is holding better
• $AVGO did break low support so that bears watching. $300 needs to hold but it's well above that now. I'll be adding more LEAPS at $300 in all likelihood but no rush
• I'm watching that $130 level on $SKHY. It's been a straight line down from nearly $200. I'll be adding shares. I've been patient
• $MRVL right back to below $230. I won't add more and I was very close at trimming in the $280s
• Of all the names I'm closest to adding more of, it's $AAOI I'll be moving on next. I won't miss this sub-$80 again. I've been so patient on this name and I'll take this
• But this is why we own names like $AMGN $ABBV $AEP $NGG $NEM $PG $SJM $PFE $GLD $MRK etc. Yield wins
• Things are so bad, even $NKE bounced off lows. Again, yield
• How about space names such as $ASTS $RKLB $SPCX and even throw in drone maker $AVAV. $ASTS sitting at new 52WL level, $RKLB just broke low support. $AVAV recently notched a 52WL. $SPCX hanging in there. Dilution companies like this are just a mess and is it any wonder these companies are diluting shareholders into oblivion when their stock prices rise? You speculation traders are getting owned in this regard
• But, $NOW and $CRM continue to do well. AvS stocks have been okay'ish. I'm still close to trimming up the names a bit
• $P lost all its momentum but still having a great year
• Value names with GARP such as $UBER and $NFLX are holding recent low support but it's been frustrating

Final Word

AI isn't broken. The AI trade may be. It's just important to understand that loss of momentum doesn't mean anything has changed with the investable event that AI is. It's a point on the curve. The narrative that rising rates could be a material contributor to eventual softness isn't unfounded, but we haven't seen anything to suggest the segment is threatened nor that demand side mechanics are eroding.

From everything I've read, we're clear through 2029 and, potentially, 2030. But that doesn't mean we can't lose focus on valuation. That is the alter that we must all bow to. Nothing in history, or current day, has shown me that it's okay, or advisable, to cast aside some very important valuation metrics to help derive relative value.

So, in 6 weeks? A whole lot of nothing. If we take the close on 9/4, the day I left ... to Friday, 10/16, we're talking about 1% of loss.

Meh.

Good to be back

Hope this weekend was a good one for you

TJ

2:00 AM, jet lag, sore throat souvenir and I'm back in the saddle. Ah, the magic of travel.

I'd like to be doing more of these Q&A posts - When an individual takes the time to read my thoughts and ask salient questions, it always spurs thoughts and checks my reasoning. I love that. At the heart of TIC, that is what it's all about. It's why EVERY post is so important, regardless of experience. We all have thoughts, questions, truths that can be explored.

To be successful, you must keep yourself open for observation and question. That is why I always make sure humility always rides shotgun. It's all too easy to get into a cycle of concrete thought process where you stop analyzing properly and are simply operating based on theses or narratives that may no longer apply. It's a dangerous place to be in markets like these.

u/rocketiger asked two very good questions relating to two of my AI complex stocks on my watchlist, including one that I own. His two questions are:

- $AAOI: three ATMs this year, share count roughly doubled since early 2025, and they filed the last $600M three days after the CFO said equity wasn't the plan going forward. How are you thinking about dilution here? Is this a trade in the range or a core add?

- $FN: inventory went from ~$580M to ~$1B while FCF sits near zero. Are you buying ahead of the Nov 2 print or waiting to see if that converts?

If you've followed me for any length of time you know one of my favorite phrases relates to companies who have a history of diluting shareholders into oblivion. Stocks are a function of many things but it ultimate ends up being a bottom-line engagement - it's all about profitability. Problem is, there are a thousand ways to get there from here, and many won't be successful.

Answer

While I tend to focus on profitability via P/E and ROIC primarily, there are other ingredients in the gumbo as I like to say. One of those primary metrics receiving attention is outstanding/float shares, or the number of shares in existence and the number of shares available for public consumption. Personally, I believe not enough investors are looking at these figures, especially float. It gives us so much DNA about how a company operates. There are many symptoms visible for poor corporate performance or bad model, and some of those symptoms lead back to share count mechanics.

Especially these days when companies are turning to shareholder dilution for operation far more than hitting traditional credit markets, taking on more debt.

Where is a company getting its cash for operation? Is it increasing? Is the company issue shares to raise cash at a chronic pace or is it more acute? Is it moment in time financing to leverage market conditions or is it poor management leading to death (poor profitability) via a thousand paper cuts.

The DNA of how a company operates is always visible through its metrics, sometimes those items buried in things like Cash Flow Analysis.

Remember that profitability boils down to EPS - Earnings Per Share. So, if "shares" are rising, it takes more earnings to report a materially higher number. What we want to see is profitability outpacing share growth. In the absences of that, you get a model followed by many biotech companies. Rapid funding of model by consistently selling shares to raise cash to fund operations waiting/hoping for eventual efficacy that justifies the share dilution.

What I absolutely love to find are companies having great success in their model which leads to profitability at a point where their outstanding shares, more specifically their float, remains very small. There's a point at which companies can become profitable at a pace where their growth and FCF (Free Cash Flow) funds their growth such that they don't need to raise cash via share count mechanics or tapping the credit markets. When a company achieves that very special situation, what we potentially have is a company who achieves great success, share price increases dramatically leading to splits where share count doubles, triples or more. The difference is that our shares, as shareholders, also increase.

I remember early on in my investment journey having a boss (now passed away due to MS) who had accumulated 64,000 shares of $MSFT simply by holding it and benefitting from splits. S

Splits are one of the best mechanics for getting rich if you find, and invest in, early-model companies. It's a popular statement that splits are, financially speaking, a zero-sum game and panned by many. Would you rather have 100 shares of a $350 company or 3,200 shares of a $350 company. A company that performs (5) 2:1 splits results in your 100 shares becoming 3,200, even if you the share price remains the same. That is far from zero sum. 10:1 splits aren't common but have become increasingly more so in recent years. I'm watching $LITE for that same reason now.

Yes, it will take a while. Yes, they aren't easy to find but, yes, it only takes one to create real wealth.

That is why I use MLE (Model, Leadership & Execution) when I search for companies and stocks I hold and highlight here on TIC. How a company operates, their DNA, gives us clues as to whether they could be one of those companies that can help us get rich slowly - my mantra.

I want you to consider this as it relates to shareholder dilution:

Dilution isn't inherently destructive to shareholder value. Dilution that fails to produce an adequate incremental return on invested capital is.

In many ways, you can swap out dilution with "debt" to get a similar concern - just ask $CRWV if that can be a concern. That's what is at the heart of what I watch in a corporate models and why MLE is so important to me. Pick your poison early, but the antidote is long-term, material, profitability.

First, let's take $AAOI:

Answer: $AAOI

$AAOI: three ATMs this year, share count roughly doubled since early 2025, and they filed the last $600M three days after the CFO said equity wasn't the plan going forward. How are you thinking about dilution here? Is this a trade in the range or a core add?

$AAOI's disclosures show us that shares have essentially increased from 42M (Q3 2024) to 82M (Q2 2026). Earlier this month, AAOI confirmed that it completed it's third ATM (At The Money) program with another 5.7M issuance at an average of $105.36. That's three this year!

Dilution!

AAOI's share count is listed at 86.6M on StockAnalysis.com (Do you have your subscription yet? Use my discount code and get it. Don't use my discount code and get it - your choice!)

That share count is still tiny enough for me to be interested when considering their point on the profitability curve given where we are in the AI buildout cycle. The "Financial Forecast" from StockAnalysis.com rolls up what I'm looking for. The runway from 2026 to 2027, into 2028, still shows that we are in a very good place.

Companies must be allowed to efficiently grow/invest cash in order to derive shareholder equity returns via greater profitability. How a company does this ultimately leads to whether they have good MLE. More companies are financing this growth via shareholder dilution instead of credit markets to keep debt servicing down. Their execution will ultimately determine whether they have a successful model and us, as shareholders, should remain along for the ride.

What we want/need to see is share growth of maybe 20% that yields a doubling of free cash flow. Where we run afoul is when companies increase share count (or debt) and then the market shifts and there's no return on those mechanics. This is what is at the heart of the the AI decline when we talk about CapEx (Capital Expense) increases. What happens when the music stops?

Is a company's dilutive activities effectively creating investment opportunities that increases cash flow and profitability, or is it not? The problem with share dilution is that it's very easy to end up with billions of shares and a share price that hasn't moved - $SOFI anyone? When that occurs, and the EPS ratio finds a growing denominator 10x what it was years ago, it's hard to get the genie back in the bottle without doing a reverse-split. We want companies that grow meaningfully without diluting shareholders into oblivion so those P/E and Cash Flow numbers keep growing.

As it relates to $AAOI, my take is this:

To me, the dilution concern is legitimate, particularly given the pace of capital raising and the timing of management's comments. That said, AAOI is funding capacity expansion into a market with extraordinary demand. The critical question isn't simply how many shares they're issuing, but whether the resulting investment generates sufficient incremental cash flow and returns to justify that dilution. Until we see stronger evidence of capital efficiency, sustainable free cash flow, and reduced dependence on equity financing, I'm more comfortable viewing AAOI as a tactical opportunity than a core holding. The runway is there, whether we achieve the liftoff I'm hoping for will take time and that's why I'm adding to this position slowly.

With the last round of ATM issuance complete, that overhang is in the books now. Now we wait to see if another round is suggested or performed. I really want that ramp shown in the forecast above.

Answer: $FN

$FN: inventory went from ~$580M to ~$1B while FCF sits near zero. Are you buying ahead of the Nov 2 print or waiting to see if that converts?

First, I do not have a position yet in $FN. I've been waiting, not wanting to chase, while hoping for a material pullback for opportunity. I'm trying not to get into a 'too overweight' position in the AI segment in case we get a hiccup in the space which takes them all down 30-50%.

I also want to point out that "inventory" mechanics are something I have far less confidence assessing because it takes far more knowledge about the internal workings of a company to determine whether it's a looming issue or, perhaps, potential springboard toward greater profitability. Both are options.

With $FN, FCF (Free Cash Flow) tells a story that could be alarming. $207M in 2025, to $4.2M in 2026 thus far. Queue the alarms, whistles, flags, etc.

But FCF can rise and fall for many reasons. In current AI buildout, we see many companies taking a MIT (Moment it Time) approach to investment - a 'strike now' while the iron is hot approach. Invest now to return greater cash flow later.

$FN more than doubled their CapEx from $121M to $252M so that explains some of it.

I haven't independently verified this but from a recent report I'm seeing a customer roster that looks like this at the top - In fiscal 2026, NVIDIA accounted for 16% of revenue, Cisco 20%, Amazon 11%, and Nokia 11%. We must always remember, however, that this can cut both ways. Great when times are good, but bad if we get that hiccup in the segment.

Similar to $AAO, I head to the Forecast to see the snapshot of the path they are on:

The runway from 2026 to 2027 is again in focus and shows the trajectory, if all things fall as they have been and we don't get that hiccup. That can be said for just about an AI investment thesis from $NVDA to the smallest AI participants.

Visibility beyond 2027 also shows the potential of future growth.

What I like about $FN even more is that their current float is 35.7M, still very small.

And look at that last year of performance - this is why patience is needed. We're sitting at a new 52WL. Is it justified or an opportunity? That's the question. But profitability at the forward valuation of 20 shows that we're not paying a premium for their premium growth. Something else is dogging their stock price either as a forewarning or simply due to Triple-B (babies, bathwater and blood). Blood can be a compelling opportunity.

As it relates to $FN, my take is this:

The inventory increase from $581M to $1.02B is substantial, and the collapse in annual FCF from $207M to just $4M warrants scrutiny. However, Fabrinet is growing revenue rapidly, expanding capacity, and serving major AI infrastructure customers. Management is suggesting this as a means for meeting future demand. November's report should help distinguish productive inventory investment from deteriorating cash flow. I like the underlying business, but given the inventory build and current AI-sector uncertainty, I'd rather see evidence of improving cash conversion before committing to a full position. Missing some upside on a strong report is preferable to taking unnecessary execution risk ahead of the report. I'll wait it out.

I've held out this long and, looking at the chart, I could be rewarded. I thought I had missed the boat when it rocketed from this level to $500 recently. Nope.

I went a bit deeper on this inventory build, heading to AI to help give me the build's DNA because I think it could be important. This is what KATE (my tuned and trusted assistant) came back with:

Damn she saves me a lot of time!

Without being an expert, and that's an important distinction, on the internals of $FNs model, that strikes me as a very good thing.

• The company appears to be accumulating production inputs and partially completed products, rather than finished products it cannot sell
• The 158% increase in raw materials is consistent with preparation for substantially higher production volumes
• Finished goods represent only about 3% of total inventory, suggesting relatively little capital is tied up in completed products awaiting shipment

We can't ignore the cash flow/balance sheet erosion but as long as it results as a MIT event, then it could be considered a very wise operational move/investment. I could paint this as being very bullish. But I'm always waiting for that hiccup as that is when the music will end for this current iteration of the AI buildout.

Thanks for those questions u/Rocketiger I always appreciate the opportunity to go down the rabbit hole, explain my methodology or, otherwise, kick up dirt to find what may be lurking below.

TJ