Byte # 57: When Great Companies Go on Sale

Hello and Welcome Everyone,

Volatility creates opportunity and today’s pullback is exactly the kind of environment where long‑term investors can upgrade portfolio quality. In that spirit, I’m highlighting three companies that stand out as compelling long‑term additions. These are great companies to own over the long term, and I’m sharing my thesis on why I believe they deserve a place in a portfolio.

Before we begin, a quick disclaimer: this is not a recommendation to buy or sell. Rather, it is an opportunity to revisit the original thesis and stress-test whether it still holds up.

Stock No.1 – Microsoft (MSFT)

Microsoft is trading around $373, close to the market multiple, despite Azure’s growth reaccelerating to ~40% and the company continuing to operate with one of the widest moats in software and cloud. For a business that has historically commanded a premium valuation, this reset makes the long‑term setup more interesting.

The core tension is straightforward: AI‑driven capex vs. long‑term moat expansion. Microsoft plans to deploy roughly $190B in fiscal 2026 to build out AI infrastructure, and the bear case argues that this spending could compress margins before monetization fully catches up. Investors are also debating whether AI will reshape software pricing power and usage patterns in ways that pressure economics. That uncertainty has been enough to pull the multiple down.

But the more constructive interpretation is that Microsoft is playing offense, not defense. The company is using its balance sheet and scale to deepen its competitive position across cloud, enterprise software, and AI. Azure remains the world’s No. 2 cloud platform behind AWS, and Microsoft’s installed base creates powerful network effects across Office, Windows, GitHub, Dynamics, and security. The heavy AI investment is less about protecting share and more about extending it and it’s also why AI infrastructure suppliers across semis, optics, and data‑center equipment continue to see strong demand.

For long‑term investors, the combination of a lower multiple, durable growth, and a strategically expanding moat makes Microsoft attractive on weakness. Dollar‑cost averaging remains a sensible way to build exposure to a business that compounds value across cycles.

Stock No. 2 – Intuitive Surgical (ISRG)

Intuitive Surgical remains one of the strongest buy‑on‑weakness names in healthcare. Even though I initiated my position early around $540, the long‑term thesis hasn’t changed: this is not a med‑tech company, it’s a category‑defining surgical platform with a moat that widens as procedure volume grows. The balance sheet is pristine with $4.5B in cash, no long‑term debt and profitability remains exceptional, with a 17.2% ROE and a 26.7% free‑cash‑flow margin.

The bear case is almost entirely about valuation. With a P/E in the high 40s, ISRG gets punished whenever quarterly results don’t clear a high bar. But that framing misses the structural advantage: robotic surgery adoption is still early, the installed base continues to expand, and recurring revenue now 86% of total revenue and growing 23% year over year provides stability that most med‑tech peers can’t match.

Where the story gets even more compelling is data. Intuitive has one of the largest, most proprietary surgical datasets in the world, and every procedure strengthens that advantage. As AI becomes more embedded in training, guidance, and clinical decision support, this dataset becomes a flywheel competitors simply can’t replicate. That’s why the “Google of surgical data” analogy resonates - the moat isn’t just hardware; it’s the learning loop behind it.

For me, that combination of platform economics, recurring revenue, and an irreplaceable data asset makes ISRG a classic long‑term compounder. I’d rather average into a world‑class business on dips than try to time perfection in a company that continues to execute at a category‑leading level.

Stock No 3 – Amphenol (APH)

Amphenol remains one of the most compelling long‑term ways to invest in electrification and AI infrastructure. Since I first discussed the stock in Byte #52, shares have moved from about $128 to $158.70, after briefly touching a YTD high of $168.75. Even after that run, the long‑term thesis remains intact.

Amphenol sits at the center of two powerful secular trends: the modernization of the electrical grid and the AI‑driven expansion of data‑center capacity. Whether it’s high‑speed fiber, power delivery, or mission‑critical connectors inside servers and networking equipment, Amphenol provides the components that keep these systems running. The CommScope CCS acquisition further strengthens its fiber‑optic and data‑center capabilities, addressing one of the few bear concerns around optics exposure.

Financially, the company continues to execute at a best‑in‑class level. With a 36.8% ROE, a 17.9% free‑cash‑flow margin, and a disciplined balance sheet, Amphenol has compounded revenue and earnings at an ~18.5% CAGR over the past five years. Customer stickiness and high switching costs give the company pricing power, while its ability to introduce new designs as older products commoditize helps sustain margins.

A big part of this consistency comes from management. Amphenol has a long track record of disciplined capital allocation, steady operational execution, and high‑return reinvestment including a proven playbook of small, accretive tuck‑in acquisitions. This quiet but reliable leadership is a key reason the company has compounded value across multiple cycles.

For investors seeking a durable compounder with exposure to electrification and AI infrastructure, Amphenol remains a high‑quality long‑term holding.

With this, I rest my investment thesis on these three very different and great companies.

Despite operating in very different industries, Microsoft, Intuitive Surgical, and Amphenol share the traits that matter most: wide moats, strong balance sheets, recurring revenue, and exposure to long‑duration growth themes. Volatility doesn’t change their fundamentals …it just improves the math for long‑term investors. These are the kinds of businesses I want to own more of when the market gives me the chance.

I’m very curious to hear how you view these ideas, and whether you share the same bullish view that I do.

Have a wonderful evening, and I’ll see you next week.

Keep Investing Smarter 😊

Pooja