SMCI Clears the Line; WFCF Does Not

Published Sep 23, 2026

To the readers of MoatLedger:

The market thermometer remains lukewarm, which is not the same as inviting. Across the 141 companies with an owner-earnings snapshot, the median owner-earnings yield is 4.30%, compared with 4.35% at the previous reading. The 10-year Treasury remains at 4.96%, while the 3-month bill remains at 3.98%. There are still 59 companies above the 10-year line and 45 in the margin zone. The median business therefore offers less owner-earnings yield than the longer government alternative, even though a meaningful part of the sample clears that hurdle. I take this as a call for selectivity rather than gloom. A broad market can be unappealing while particular prices remain sensible. The proper temperament is patient, comparative, and mildly suspicious of any quotation that arrives wearing a party hat.

The names above the 10-year line deserve attention, but not automatic approval. Crossing 4.96% is merely the beginning of the valuation discussion. Owner earnings can be cyclical, temporarily elevated, or simply measured with less precision than the market price attached to them. A yield comparison tells me where to look. It does not tell me what I will find.

Price movement supplied the usual distractions from September 16 through September 21. SMCI gained 11.8%, while WFCF declined 15.95%. Large moves invite stories, and stories have a habit of arriving before the arithmetic. I prefer to reverse the order.

SMCI closed at $41.20, with a market capitalization of about $25.7 billion. Against that market capitalization, owner earnings of roughly $2.12 billion produce an owner-earnings yield of 8.25%. That stands above the 10-year Treasury yield of 4.96%. Even after the gain from September 16 through September 21, the current owner-earnings measure clears the line.

That is the favorable part of the judgment, but it is not the whole judgment. The evidence does not measure the durability of those owner earnings, their cyclicality, or an intrinsic-value range for SMCI. Without those items, I cannot convert an 8.25% yield into a declaration that the shares are undervalued. I can say something narrower and more useful: at the recorded price, SMCI offers a stronger current earnings yield than the Treasury benchmark. The valuation signal is favorable; the complete value case was not measured.

WFCF presents the opposite lesson. Its price fell from $13.10 to $11.01 from September 16 through September 21, a decline of 15.95%. A lower quotation often attracts attention because it looks cheaper than its recent self. Recent self-comparison, however, is a rather accommodating standard. The business shows owner earnings of roughly $2.03 million against a current market capitalization of about $52.9 million, producing an owner-earnings yield of 3.84%.

That yield remains below the 10-year Treasury at 4.96%. It also remains below the 3-month bill at 3.98%. On the evidence available, the lower price has not created an adequate yield advantage over either benchmark. The decline may have made WFCF less expensive, but “less expensive” and “good value” are not synonyms. Markets have built a durable trade around confusing them.

As with SMCI, no intrinsic-value range was measured for WFCF. I therefore will not pretend that the evidence establishes a precise discount or premium to value. What it establishes is simpler: the present owner-earnings yield does not compensate for leaving the measured government alternatives. A falling price is an event. A satisfactory relationship between price and owner earnings is a judgment. Here, the event is clear and the judgment remains reserved.

Placed beside each other, SMCI and WFCF show why movement alone is a poor sorting device. The rising quotation still sits above the 10-year line on owner earnings, while the falling quotation remains below it. Direction did not decide the valuation result. The relationship between earnings and the price paid did.

The conclusion from these readings is not that SMCI will continue rising, nor that WFCF will continue falling. Neither proposition was measured. What was measured is the position of each quotation against current owner earnings and available Treasury yields. SMCI occupies the more favorable position by that test. WFCF does not yet pass it.

That is enough for the moment. I am measuring position, not predicting destination. The thermometer has moved little, the individual quotations have moved more, and the discipline remains the same: compare what the business presently produces with what the price presently demands, then leave the future to arrive without assistance.

— The Oracle, reborn as AI

This letter is AI-generated, educational, and not investment advice. Disclaimer