Double-Digit Growth in a Supposed Slowdown

Happy Friday!

One of my favorite Warren Buffett quotes is “Time is the friend of the wonderful company.” Below are updates on the companies we own post earnings. Conclusion = great results = wonderful companies.

The week was bumpy as investors digested major mega cap earnings CAPEX hangover. Listen to our podcast to listen to our thoughts there. We got election headlines around NYC’s mayoral race, and the Supreme Court’s ruling on tariffs and a potential government shutdown continuation (or not).

Beyond the noise, company results remain strong, guidance trends are healthy, and macro signals show a mix of future growth indicators alongside normalization in current data.

So what do we make of this…

Here is the summary if you want just that:

• Only 14% say AI instead of hiring…

• Fiverr, First Watch, Paycom, Clear, Legal Zoom = double digit growth

• Bearish sentiment remains…

• Market up 100% of time after shutdown ends

So the market remains uneasy about the consumer, with weakness concentrated in areas most exposed to everyday spending. I have been talking about this for a while. These areas need a catalyst, and we laid those out couple weeks back. They are flat out cheap.

Mass-market retailers like Walmart, Target, and Costco have struggled since mid-year highs, signaling pressure on discretionary budgets and softer lower-income demand. Full-service restaurants continue to pull back while private credit is rolling over again after renewed default concerns and tighter liquidity.

Now credit card data isn’t bad. So why is everyone so concerned… We are seeing some areas do well, and some not. That seems normal to me, but in aggregate spending remains…

This view has shown up in markets. Look at the lack of 52 week highs.

Some are saying that jobs market or economy is getting hit by AI. In theory, that sounds plausible. I’m trying to build every agent imaginable, but in practice, these things break often and still need hand-holding. Simple, repetitive tasks can be automated well, but once complexity enters the picture, reliability drops fast.

This data shows that out of 1,597 corporations surveyed, only 14% are reducing headcount due to AI, while 68% are using it to enhance productivity and 55% to augment existing roles. In other words, most companies see AI as an accelerator, not a replacement.

Then there’s government shutdown concerns. It seems we are closer than not from something happening… If and when, markets like it. Up 88% and 100% of the 6 months out.

Now, how about this. The top panel highlights how spreads over banks’ cost of funds are no longer rising, a sign that financial stress in lending markets is easing. ie loan officers are are NOT requiring wider spreads, and bottom chart shows that demand for loans is increasing. A good signal overall

Now back to markets… Pessimism remains. Red shows that bearish sentiment is nowhere near complacency. This is why when you look above at other readings, consumer and other macro parts of markets remain fragile an ripe for re-rating.

NOW if you look at companies we own, you are not seeing economic weakness, quite the opposite. Or they are creating their own demand, which is even more impressive.

Clear Secure growing its enterprise identity business, but also their travel business is seeing continued growth.

LegalZoom is also showing accelerated growth, impressive given its exposure to business formation, one of the most macro-sensitive areas. Despite broader economic caution, the company continues to post double-digit gains. That suggests small business creation remains resilient and confidence among entrepreneurs is holding up. That sounds counter to everything you hear.

Then there is Fiverr, which has been a thorn. Fiverr is quasi jobs market, which is why the weakness over the last 3-4 months specifically after making 52 week high. Yet, they saw people spending $1,000 or more growing 20%, and $200+ buyers on platform grow double digits and record profits. These are healthy dynamics and I had nice convo with management this week.

Or take First Watch, growing +20% with industry-best comparable sales of +7.1%. It’s completely bucking the broader macro narrative. While most consumer-facing names are talking slowdown, they’re seeing strong traffic, pricing power, and brand momentum that defies the trend.

So what do we make of all this? Rate cuts are underway, tax refunds will start flowing over the next three months, and forward indicators point to job growth slightly reaccelerating. Together, that sets up a supportive backdrop for macro-sensitive names, the areas that have lagged most this year to finally catch a bid.

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About Avory & Co.

Investing where the world is headed. 

Avory specializes in high-conviction equity strategies, emphasizing Secular Growth and Transformation Stories driven by exceptional teams. Data guides decisions. We cater to high net worth investors, family offices, and institutional investors. Note: This information doesn't constitute a recommendation to buy or sell any mentioned securities. Avory is based in Miami, Florida with clients all across the globe.

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Disclaimer: Not a recommendation to purchase or sell any securities mentioned. This is for educational purposes only.