Fundstrat
Fundstrat's Tom Lee: The Early Lessons That Shaped My Framework (Part 1)
10/6/2025, 8:01:17 PM
Economic Summary
- Wireless adoption exploded from ~34 million global cell phones in the early 1990s to penetration exceeding 100%, creating hidden asset value in spectrum and subscriber lifetime value that supported equity valuations even without current profits (example: AT&T/T).
- Credit markets provided leading signals: distressed bond prices (e.g., trading below 80) often indicated imminent bankruptcy, while bond price recoveries that weren't yet reflected in equities created tactical long opportunities.
- The 1996–2000 fiber/Internet buildout generated a sustained, retail-fueled market rally driven by margin and momentum, followed by a collapse that lowered infrastructure costs and seeded winners among high-margin internet businesses like EBAY and EXPE.
- Government spectrum auctions monetized previously lottery-awarded licenses; spectrum scarcity and millimeter-wave assets rose in value, exemplified by STRAIGHT PATH being acquired by AT&T after a large appreciation.
Bullish
- Owning spectrum has proved highly profitable over time, with secondary trades delivering double-digit annualized returns.
- Recoveries in bond prices often precede equity recoveries, creating tactical stock buying opportunities.
- Low capital costs for fiber after the bust enabled high-margin internet winners like EBAY and EXPE.
- Wireless adoption and subscriber lifetime value create durable franchise value beyond near-term profits.
Bearish
- Overbuilding (fiber/3G) led to severe price deflation and bankruptcies.
- Heavy margin debt and retail-driven momentum can create bubbles that reverse sharply.
- Large spectrum auction costs can bankrupt or strain incumbent players.
Bullish tickers
STRAIGHT PATHTEBAYEXPE
T
Bullish
Strategic buyer of spectrum assets (acquired Straight Path), underscoring the long-term value of spectrum.
Bearish
Spectrum auction costs and competitive pressures can strain incumbents.
STRAIGHT PATH
2 price targets
3240
Bullish
Owned millimeter-wave spectrum valuable for 5G, leading to an acquisition with outsized returns.
Bearish
Small spectrum plays can be highly volatile despite eventual strategic value.
EBAY
Bullish
Benefitted from post-bubble low fiber costs enabling high-margin Internet business models.
Bearish
Growth depended on abundant cheap infrastructure; exposure to infrastructure cost swings.
EXPE
Bullish
A beneficiary of lower transport and provisioning costs after the telecom reset, enabling strong margins.
Bearish
Like other internet winners, sensitive to infrastructure and consumer demand cycles.
People mentioned
Tom