Welcome back everyone. Today on the Joseph Carlson
Show, Barons releases their list of their ten favorite stocks for
2024. I'll be going over each one of
these stocks, their thesis, and giving a quick review.
Apple, shockingly, has pulled their Apple Watches from the
market. They're not selling them anymore
because of a patent dispute. This has caused the company
stock price to go down 1.2% on a Green Day.
We're going to be looking at this news and how it impacts
Apple. The CEO of Costco went on for an
interview. He gave insights into why Costco
is doing so well. What they have is their core
values as a company and what he sees in terms of future growth
for this company with the new CEO.
So we're going to be taking a look at this interview and then
we have some news from the regulatory environment.
The Adobe and Figma merger has been called off $20 billion.
Acquisition is ending because of regulatory scrutiny.
This environment has become more difficult for big acquisitions
like this. So we're going to be looking at
how this effects Adobe and other companies.
And then in the headline news we have the former Nicholas CEO,
Trevor Milton. Remember him?
The guy that pretended his truck was driving along the road when
really it was rolling down a hill?
Well, he is now facing sentencing for his conviction of
misleading investors. We're going to be looking at
what they're trying to seek in terms of sentencing and how this
will likely play out. So we have a lot to get to.
Let's go ahead and start off with a quick portfolio update.
This is my passive income portfolio.
It's my personal investment account that I share publicly
every single week. So you go to see transparently
how this does on a week by week basis.
If I make money, if I lose money and each individual stock as
well, I show the results of every single stock I invest in
and I run a very concentrated portfolio with only eleven
position. I'm buying compounding machines,
Companies that are incredibly powerful with their Moat and the
industries that they're in, they have pricing power.
They can raise prices above the rate of inflation every single
year. So these are economically
powerful, highly free cash flow, positive, fast growing
companies. Now I'm doing something a bit
different than what Barons is doing.
I hold these companies for a multi year basis.
In fact, as of today my average holding period for My Portfolio
is 30 months. 30 months is a decent amount of time.
For the history of this portfolio, 30 months is 3 times
as long as the average investor and it's around twice as long as
the average mutual fund. So the investment philosophy
here is very simple. I buy highly concentrated
positions into high quality companies and I hold them as
long as they stay high quality companies, I'll sell them if
their fundamentals start to erode.
So what I'm doing as an investor is quite a bit different than
what Barons is doing. What Barons does is they pick 10
stocks at the beginning of each year that they think will have a
particularly good year that year.
So every year it's starting with a completely clean slate.
They don't really care about holding companies on a multi
year basis. The Barron's 2023 portfolio has
so far returned 31% beating out the S&P 5 hundreds, 24.5%.
So their strategy has worked well in 2023.
In fact, the 31% returns that they have are very similar to
mine. I'm right around 31% as well.
So historically this strategy has worked for them.
Now let's go ahead and take a look at what their logic is
behind these selections. First up, they have Alibaba.
It is one of the cheapest tech oriented companies in the world
by a long shot. After dropping 18% in 2023,
Alibaba's US listed shares are trading for just eight times
projected earnings. Now we can check out Alibaba in
Qualtrum. This website, by the way, is
included as part of the Patreon membership, but we can see that
they're correct. It's currently down around 19.4%
year to date and the PE ratio is 7.42, super cheap for a company
that has this type of growth potential.
This is where investors are concerned about it being a value
trap. Keep in mind the Alibaba has
been a disaster of a holding for the past five years.
On a five year basis it's down 46%.
From its highs it's down around 80%.
So this company has really crushed value investors looking
to buy the discount for a long period of time.
They say with that decline, the stock at a recent $72 is back
where it stood following its 2014 initial public offering.
Despite A tenfold rise in revenue and a fivefold increase
in earnings, its market cap is less than 15% of its closest
American pair, which is Amazon.com.
Now this is where my view would diverge with Barron's.
I agree the company's cheap. I agree that it probably
deserves to be worth a bit more, But calling it basically
comparable to Amazon I think is a little bit misleading.
Amazon's cloud business is much bigger than Alibaba's.
Amazon's advertising business is much bigger.
And most importantly, Amazon resides in a country where the
government views private enterprise much more favorably.
So I understand the investment thesis here, but my biggest
concern for Alibaba is where the company's headquartered.
Now moving on to their number two pick is a company that I
fully agree with and I'm fully invested in.
Alphabet could be the best bet amongst the Magnificent 7.
It's expected to grow as fast as Microsoft, with its earnings
forecast to be up 15%, and it's three times as quickly as
Apple's 5% growth. So Alphabet's expected to grow
faster than Microsoft and Apple. Yet its stock trades for just 20
times earnings, a discount to both Microsoft and Apple's 30
times, despite gaining 50% this year.
Right now, Alphabet stock is trading lower because of a lot
of potential threats. Investors have been worried
about the slowing growth in Alphabet's cloud computing
division, the threat that artificial intelligence poses on
the search business, and antitrust scrutiny.
And this is absolutely true. I agree with their assessment
here, but I also agree with their statement here that this
looks manageable. I think a lot of these concerns
come and go over the years. When you study the history of
companies and you look back, there's almost always something
that seems very real and very concerning.
And one of the most difficult things with good companies is
staying invested in them, not getting scared out of them.
As for antitrust issues, they may not go anywhere, and
Alphabet might be worth more broken up anyway.
Now I think that this looks at one part of this a little bit
favorably. We know the Alphabet just lost a
case against Epic, so these antitrust issues are going
somewhere. We know that the loss to Epic
Games is going to hurt Alphabet's bottom line with
their App Store revenue. They're going to have less
revenue be transacted through their payment processor.
So that's something that's going to gradually eat away at their
bottom line. But they're still going to
outgrow that loss in revenue. Google's a company that despite
all the headline risk and regulatory risk, I still view it
very favorably, Esecially because a company is trading at
such a low E ratio and a high free cash flow yield.
Even adjusting out their stock based com, the valuation is low
and they own some incredibly good assets with their search,
cloud and YouTube business. So Alphabet's a company that I
agree with Barrons on. Next up we have Barrack's gold.
Gold mining stocks haven't been able to keep up with gold
prices, but this year may be the year that changes for Barrick.
Gold gold miners are thought of as leverage plays on the metal,
yet Barrack's shares are up just 3% this year while gold is up
more than 10%. Barrack has several things going
for it. The company has some of the
world's best mines in spots like Nevada and the Dominican
Republic, and it's the top gold producer in Africa.
It aims to boost its unique output, mostly gold and some
copper, by 30% by the end of the decade.
Barrick Gold seems like an OK bet, but it's not the type of
company I'd like in My Portfolio.
Even though it trades at a low valuation, I would rate this
company as highly unpredictable. We can look at the stock price
over the past five years. It's all over the place,
bouncing up and down with high amounts of volatility only
returning 37% over the last half of a decade.
In the past ten years, it's also only returned 7%, again
highlighting the extreme volatility of this company.
And if we look at any type of chart of their financial
history, you can see the highly cyclical nature of gold
companies. They go up and down and I think
it's very difficult to predict. In my opinion, I'd rather buy
the company that's selling gold bars and making $100 million in
revenue in a single quarter. I'd rather just buy Costco.
So Barrick Gold for me is one that I'd skip.
And #4 we have Berkshire Hathaway.
It's interesting to see that one show up on the list.
They see the case for Berkshire starts with the CEO Buffett of
what he calls a Fort Knox balance sheet with over $150
billion in cash, or about 20% of the company's market value.
Earnings are growing too with Berkshire's after tax operating
profits up nearly 20% so far in 2023.
They could also hit $40 billion in operating profits this year
powered by high interest income on Berkshire's cash and strong
insurance underwriting results, helped by a turn around at
GEICO. Berkshire's equity portfolio led
by Apple is also having a great year and this is one that I
fully agree with. I think that Berkshire is doing
great. They are basically
indestructible with the amount of cash that they have.
Their revenue continues to go up on a steady trend quarter over
quarter, year over year. It's truly remarkable how much
cash flow this company produces. Berkshire is a powerhouse
company and it's likely still going to outperform the market
over the next couple of years. Now #5, we have Bio N Tech.
It's a COVID-19 vaccine maker that's been crushed this year.
Unlike so many cash burning biotechs, Bio N Tech is expected
to remain profitable in 2024 and the company's oncology focused
pipeline could prove more promising than some investors
believe. Bio N Tech has oodles of cash,
more than 18 billion, that's nearly 3/4 of its current market
value and $25 billion. Investors effectively are paying
just $7 billion for its COVID franchise and drug pipeline.
So that's basically the investment case with this
company. The market cap is currently $24
billion. And if we look at their cash and
debt, they have almost no debt with $16 billion in cash.
So this company could do a lot with that cash balance,
including aggressive buybacks, buying back the shares, raising
their earnings per share. Now, I never invest in
pharmaceutical companies. Again, I believe they're too
volatile. They're not compounders.
They have too much regulatory risk.
But I think that in that realm, this is a pretty good bet.
They have such an incredible balance sheet that it brings a
lot of stability to the company. Number six, we have an oil
company with Chevron. Some of the Sheen came off
Chevron in 2023, but the company remains one of the best run big
energy companies in the world. There's analysts saying that
Chevron trades at a 15% discount to its average cash flow
multiple and should have a total yield, dividends plus buy back
of around 12%. A combined 12% yield is massive.
So I can see why this is attracting value investors.
This is another example of the type of investing strategy I
don't do. It is true that oil could have
some huge run in 2024. I don't doubt that that's a
possibility. But even with these cheap
valuation metrics, when we look at the overall history of the
company, it's down big time in the one year.
It's only up 39% over the past five years.
In the past decade it's up 21%, not including the dividends.
So this is another company that you cannot count on the compound
year after year buying the dip on a volatile company can work
and maybe it will in 2024 for barons.
But I think overall it's again far too unpredictable.
In #7 we have Hertz. Hertz high profile move into
electric vehicles has proven a bust, but the stock looks cheap
enough to be a winner in 2024. Now they say.
To put it simply, Hertz big bet on E VS about 11% of its fleet
against an estimated 2% for its rivals went bad.
Repair cost for its Tesla heavy fleet are high and Hertz is
getting less than it had projected when the cars are sold
due to deep price cuts. Customers aren't keen on the
cars either due to charging and range issues, so this isn't a
jab at Tesla, but this is just the reality.
Hertz did this big partnership with Tesla vehicles and it has
not worked out with the business.
As we know, Tesla has done a ton of price cuts throughout the
year on their vehicles that's devalued, all the ones that were
previously purchased. And then they also have a lot of
customers that probably aren't familiar with EVs.
They probably have issues with the charging and we know that
Teslas do have very expensive repair costs.
OA lot of this stacked U together to be a bad move for
Hertz. Now they mentioned that this
industry, the rental car industry, is an oligopoly with
over 90% of the US market controlled by enterprises Avis
and Hertz. And even with cuts in their
earnings estimates, Hertz trades at 8.6 times Ford earnings.
There's analysts saying that Hertz is overwhelmingly
attractive for patient investors.
This is a very compelling investment thesis.
This is one I actually like. Now, granted, I'll never invest
in car companies. I'm not investing in Tesla, I'm
not investing in Ford, I'm not investing in Rivian.
I'm not investing in any car company and I'm unlikely to
invest in Hertz or any other company that directly deals with
them. I think the auto industry has a
lot of those traits that I don't like to see in companies.
The cyclicality and the unpredictability.
When we take a quick glance at the fundamentals of this
company, we can see that the revenue is not growing at a
steady clip. It's basically flat.
The free cash flows look decent if the graph was flipped upside
down, but unfortunately they lose in cash flows every single
year and even their balance sheet doesn't look good with a
lot of leverage in the business. The only thing that I do find
attractive about Hertz is the oligopoly position.
I like companies that are in monopolies, but there are some
monopolies that are much better than others.
Monopolies in the airlines or in the car rental industry are not
monopolies I want to own. So this one for me is a pass.
Now this next one is very interesting.
They say Madison Square Garden is pick #8.
MSG Sports owns two of the most valuable professional teams in
their sports the New York Knicks and the Rangers.
According to estimates, the Knicks and Rangers are worth 7.4
billion and 2.4 billion respectively.
But the companies current market value is just 4.2 billion plus
some 300 million in net debt. It is worth less than half of
that. The stock now trades at 173 and
it's below where it stood five years ago.
So what Barons has done here with their Madison Square Garden
pick is called a sum of the parts valuation.
Some of the parts means you break down all the various parts
of a company and you independently value each aspect
of the company. Then you arrive at a full
valuation and compare it with a market cap.
If your sum of the parts is worth more than the market cap,
you can say then that the company's undervalued.
Now I like some of the parts valuations, but I also think
there needs to be the caveat that companies aren't some of
the parts. They are an entire company.
They are combined with all of their assets.
So everything boils down to a couple true metrics, The amount
of cash flow the overall company generates, the amount of
earnings the overall company generates, and the consistency
and growth of those metrics. Now they argue that when you do
this sum of the parts valuation, that makes the company too
cheap. Even after factoring in the
quote Dolan discount, a reference to the controlling
Dolan family, the market is assigning a pretty punitive
Dolan discount to these trophy assets.
So they're arguing that the reason the company trades at
such a cheap valuation is because this one private family
owns such a massive portion of the company.
They basically control the future.
It's not really controlled by the shareholders, but even
though it exists as a red flag, the company still may be
undervalued. They say that the company is
worth up to $300.00 per share today.
He says the company should sell a minority stake in the Knicks
and Rangers, buy back a lot of stock, and pay a regular
dividend. The ultimate payoff would be a
sale of the entire company, and there probably isn't much
downside given the discount to the asset value.
So they view Madison Square Garden as being deeply
undervalued because of this qualitative problem with the
ownership structure. But even after factoring that
in, they believe the company's worth $300.00 which is roughly
double the price it currently trades at and because of the
deep value that it trades at already, they don't believe
there's a lot of long term downside.
Of course this doesn't meet my characteristics for an
investment, but based on the value oriented investments
they're doing, I think this is one of the best.
The company does have prized assets that are worth a lot of
money and if they found any way to break out that value or sell
it off, investors are going to make a lot of money in this
company. And #9, we have PepsiCo.
I sold PepsiCo late last year and early this year.
I really liked the company. I think PepsiCo is a genuine
compounder, a great company, a strong franchise of brands, and
I think it's going to do well in the long term.
The ozempic effect and flagging investor interest in traditional
consumer staples have weighed on PepsiCo stock this year, but the
impact of the weight loss drugs on Pepsico's snack food and
beverage franchise will likely be minimal.
Though named for a soft drink, Pepsi has the best in class
snack food franchise in Frito Lay, maker of Doritos, Cheetos
and lay potato chips. Frito Lay generated more than
half the company's profits, making Pepsi less dependent on
sugary soda than Coca-Cola. They believe the fear of
Ozempic's a little bit overblown and the company's going to have
a great year next year. And like I mentioned here,
PepsiCo is a great company. They say quote Pepsi is one of
the most durable businesses in our coverage.
Durable meaning they have a long standing Moat and a great growth
path ahead with Pepsi trading at its twenty PE ratio, almost 3%
free cash flow yield paying a 3% dividend.
I do think that this is a company that might have a decent
2024 and has relatively little downside.
I don't own the stock right now, but this is a pick that I can
get behind. I like PepsiCo for 2024 and #10.
We have U-Haul Holdings. They say that there are few
businesses with a stronger competitive position than U-Haul
Holdings, which dominates the Do it yourself moving business with
its nationwide fleet of trucks. This is a company that I have
not looked into much and I didn't realize their dominance.
U Haul's rivals, including Penske and Budget, are a
fraction of its size. It's the ultimate network effect
business given its 23,000 locations around the US and
Canada and nearly 200,000 rental trucks.
The $12 billion company has steadily built a sizable self
storage business that now ranks third in the industry and it
could be worth 8 billion alone based on comparable companies.
I'm a bit surprised to hear that.
But when I think about it, almost everybody that I know
that moves does use U-Haul. Those are the ones that I always
see and I did not realize how big their self storage business
is, but that's incredible that it could be valued alone at $8
billion. I like the fact that the company
has a monopoly on the moving business and I like the fact
that they're building out this self storage business.
Those are two very profitable businesses.
So in terms of U-Haul Holdings so far, I like what I see when
we look over all 10 picks from Barron's.
I like what they're doing with the strategy that they've
outlined. They are buying some of the
better picks when it comes to value oriented investing,
meaning buying companies that are at low PE ratios, high free
cash flow yields. These companies for the most
part have been crushed in 2023 and are looking for a good 2024.
Now I will say again that this is not my investing strategy.
In essence, what Barron's is doing is sacrificing quality and
predictability for valuation. That's a trade off I have
decided I'm no longer making. I'm much more in line with
Buffett's thinking of it's better to buy a wonderful
company at a fair price than a fair company at a wonderful
price. As for me, I'm going to continue
trying to find those wonderful companies at fair prices.
Now moving on, we have to mention Costco yet another time.
I know we've been talking about Costco a lot recently, but the
stock is up another 3% today after being up 3% a day ago.
It's incredible the run this stock has gone on.
It's now getting close to $700.00 per share.
Costco's valuation has expanded up to a 42 Ford PE ratio.
Costco is now up nearly 50% year to date.
This is an incredible run with a huge breakout at the end of the
year. Now, I'm not sure the reason
that Costco's up over 3% today. Maybe investors are excited
about the special dividend. Maybe it's the Santa Claus
Rally, or maybe it's because the CEO went on to CNBC and talked
about the company. Let's go ahead and dive into
that interview and see if he says anything revealing.
The first thing that he's asked about is the culture of Costco
and how this company became the most profitable physical
retailer and the one that pays their employees the most.
Well, you know, that's been the culture of the company since the
day one, the first day that we opened up our first building.
And you know, you're only as good as everybody around you.
We don't want to turn a lot of employees.
People deserve to have good wages and good benefits.
And as I said, we're not a margin business.
We just want to sell a lot of stuff and that's what we do.
I can't explain about everybody else.
I can only say that it works for Costco.
That's the way we run our business.
That's the way we'll always run our business and it seems to
work for us. He defines the incredibly
complex and sophisticated and nuanced business model of Costco
very clearly as we like to sell a lot of stuff and that's worked
out well for us. I think that summarizes the
business model really well. Costco does sell a lot of stuff.
The next thing Craig mentions is obviously he's not going to be
the CEO for much longer. They have a replacement and he
mentions where this replacement came from.
In terms of Ron, Ron's been with the company for 40 plus years.
He's been in every position in the company.
He's ran real estate, he's ran buying, he's ran operations,
he's been president the last two years.
He will take the company further in the future.
Now he highlights the experience there, which that is great in
and of itself, but more importantly to the future of
Costco is the culture of the company and the focus on the
long term. A lot of companies are way more
focused on the short term. In fact, a lot of companies
would hire an outside executive that would be some corporate
suit that would come in, look at the financials of Costco and
look at all the ways that they could squeeze out more money
from the customers that immediately start raising the
prices on the membership that immediately start charging more
for their merchandise for their services.
They would bump up the earnings in the short term and hit huge
earnings per share numbers so that they can get their bonuses
and over their tenure. They'll make a lot of money by
hitting short term metrics, hire after five years and go along
their way and not have to worry about the long term consequences
that they set the company on. That is the worst case scenario
for a company like Costco, having someone come in short
term, raise prices, bump up profitability, make a lot of
money and leave because it sets the company on a different
culture. The fact that Costco is able to
hire within people that have been at the company for 40 years
and know all of the core values sets them up for long term
success. The new CEO knows the business
inside and out. He knows that it's a low margin
business where everything they do is to offer the most value to
the customer, keeping margins low, keeping prices low, keeping
customers satisfied. And that inverse thinking of not
focusing on short term quarterly metrics is what leads to a
highly profitable company in the long run.
OI see Costcos deep bench of talented individuals that have
been with the company for a long period of time has a huge
advantage of Costco over many other corporations in America
now. He's also asked about some of
the seemingly random things that Costco sells like their gold
bars that they sold $100 million worth.
Where does Costco come up with these ideas?
Is it AI? Yeah, I wouldn't use.
To go too far on artificial intelligence with us, we just we
have creative buyers. Yes, you can see we sold a lot
of gold. We've got a great buying group.
We always want to make ourselves separate ourselves and be a
little bit different from everybody else.
That's why you pay a membership and we always turn merchandise.
We're always looking for something exciting that we can
create a value for. As you know, at one time we had
caskets, we sold all sorts of great crazy things and it seems
to work for us. I think he's spot.
On here, a lot of people visit Costco every week or every month
because they want to see what new crazy things Costco has.
And a lot of the merchandise that Costco gets is designed
specifically for Costco by their suppliers and manufacturers.
They cultivate these great relationships that are long
standing and the manufacturers love creating Costco items.
The next thing he mentions is the stock price of the company.
You know we. Do well for the company.
We're going to continue to reward our shareholders, reward
our employees and as you can tell the stock is also
appreciated relatively well over the last actually four years.
Since then we went public I think in, I want to say
19851986. So we've grown compounded about
1718% a year. So the stock's done well.
We continue to generate a lot of cash.
We, we don't do a lot with our cash other than open up more
Costcos and give it back to our shareholders.
So that's the way we run the business and to the extent that
if we can reward our shareholders, we will continue
to do so. He again talks.
About this in a leisurely fashion like this is easy to
accomplish. A 17% compound annual growth
rate for over 40 years is insanely impressive.
This is one of the best performing companies in the
world over the past 40 years. So Costco has a recipe that
works. And most importantly, he
mentions that they're keeping that recipe.
Notice how he says we just open up new warehouses and return the
excess cash back to the shareholders.
Their predictable use of cash flow going into their core
business is what sustains their incredibly high returns over a
long period of time. Costco has one of the most
consistently high returns on capital employed of any company
I do analysis on. The stock price is up like crazy
over the past month, so maybe we'll have a bit of a pullback.
I'm sure we will at some point, but this is one that I'm going
to hang on to. Moving on.
We have some big news about Apple.
This is one of my larger holdings and one of my biggest
gainers with $27,000 in gains. Apple is down a little bit today
because the company announced that it is no longer selling its
Apple Watch. They had a pull the Apple Watch
from the market because of a dispute.
The Wall Street Journal reports that Apple is halting sales of
the smart watch in the coming days as a company prepares to
comply with AUS import ban stemming from Federal Trade
ruling over blood oxygen sensors on some versions of the device.
The October ruling gave the Biden administration 60 days to
review the decision, in which the US International Trade
Commission found that Apple violated patents in most new
models of the Apple Watch since 2020.
That seems a little surprising for a company like Apple.
This is one that would carefully inspect every existing patent
before they release any device, so I was a little bit surprised
to read that they violated patents.
The patent dispute is between Apple and Massimo, and it's been
thorny over the past few years. Massimo is well known for its
Pulse oximeter. Massimo filed 2 separate cases,
one with the US District Court and Central District of
California, and a second with the ITC, claiming that Apple
infringed on its pulse oximetry tech.
This particular import ban is the result of the latter.
I've highlighted many times that the reason I don't invest in
pharmaceutical companies is because of the regulatory
environment. It's incredibly difficult to
bring a new drug to market. It's incredibly risky with the
amount of lawsuits or recalls that can happen with
pharmaceutical companies. So it makes sense that as Apple
ventures into healthcare, they're going to run into these
regulatory disputes. I don't believe this is a long
term problem for the stock. This seems like a temporary
issue now. We also got some breaking news
that Adobe and Figma call off their $20 billion acquisition
because of regulatory scrutiny. When I look at this, there's two
ways to interpret it. The first one is the view that
this deal was overpriced to begin with and Adobe is better
off not doing it, instead returning that $20 billion to
investors. I think that's one take and I do
believe that that's probably better in the short term.
But in my long term view of Adobe, I think it was better
that they own Figma. What it does when they own Figma
is they both get the extra revenue and the earnings that
Figma is generating as a profitable company.
But more importantly, they rule out a major competitor.
Figma is growing like a weed. The company is taking over
design studios and Adobe is having too much trouble
competing with them. So even in the case that it
seems like an expensive acquisition, we've known
repeatedly throughout history that acquisitions look expensive
in the short term. And in many cases they turn out
to be wonderful acquisitions. You can look at the case of
Instagram or YouTube or many other companies that these big
tech companies have paid billions of dollars for.
So I view this overall as a negative for the long term of
Adobe. I think they're now set to face
a very real competitor with Figma.
Now finally, we have Trevor Milton receiving sentencing.
Today, a judge sentenced Trevor Milton to four years in prison
for defrauding investors in Nikola.
Now, right off the bat, my initial reaction without reading
any more of this, that seems a bit light.
Four years in prison for the level of fraud that he
committed, I was expecting. In fact, my prediction was going
to be somewhere in the range of 7 to 8 years.
That's what I was expecting. So he got roughly half of what I
thought he would get. Now he's 41 years old.
He was convicted on several fraud charges.
Last year. Witness testified that he lied
to ordinary investors about nearly every aspect of Nikola.
This is true. He intentionally deceived the
investor by lying about nearly every aspect of the company,
Milton said. The company's 0 emission Truck
prototype was drivable when it wasn't.
He said Nikola was equipped to produce the necessary hydrogen
to power the trucks when it wasn't, and he boasted that the
company had a long list of sales orders, many to companies that
didn't exist. They don't mention it in this
little list here, but his most ridiculous con was setting up an
entire promo of one of the trucks driving when it really
wasn't. So why was he given such a small
sentence? Only four years?
For these crimes, sentencing and fraud cases can depend heavily
on how much financial loss a defendant caused.
In Milton's case, U.S. District Judge Edgardo Ramos was
sorting through three very different calculations, as well
as philosophical questions about how long is appropriate for
first time offenders to spend behind bars.
Prosecutors pegged the total loss caused by Milton at more
than 660 million, which under federal sentencing guidelines
could mean 60 years in prison. They conceded that 60 years was
too long, but pushed for 11 years, akin to what Theronos
founder Elizabeth Holm received a year ago for a deception about
the blood testing company's technology.
In the case of Holmes, I actually thought 11 years was
appropriate. I didn't think it was way
overboard, putting her in jail for 20 years or 30 years because
of what she did. But it also wasn't a slap on the
hand where it's two or three years plus you get off early
with good behavior. So 11 years seemed fair for
Elizabeth Holmes. Four years for Milton so far
does not seem fair. So the prosecutors pegged the
total loss by Milton at over $600 million.
But the probation officials estimated that Milton caused 125
million in losses, substantially less by the probation officials,
the amount Nicola paid to settle an investigation by the Security
and Exchange Commission while neither confirming nor denying
wrongdoing. That still translates under the
sentencing guidelines, to 17 1/2 years, though they also
recommended 11 years. So the prosecutors and the
probation officials both recommended 11 year sentencing
and in either case the guidelines were much more so.
This is way below the recommended amount.
Milton's lawyers, in keeping with their go big spirit of
their client, said $0.00 was a more reasonable number and asked
the judge for no prison time at all.
I think Milton's defense team, his lawyers should be ashamed of
themselves. Do they have no integrity
whatsoever? I realize that lawyers goals are
to protect their clients and Milton does deserve an honest
defense. But standing there next to this
convicted criminal that intentionally duped investors
and saying that he did $0.00 in damage and he deserves no prison
time at all. Literally no punishment
whatsoever. Not even a slap on the hand for
intentionally deceiving investors.
That is shameful from these defense attorneys.
The fact that they can stand there and say that with a
straight face is ridiculous. The defense attorney said that
there is not a shred of evidence from the trial or from Trevor's
personal life that he was motivated by spite, nastiness,
ill will or cruelty. Trevor Milton built himself a
mega mansion worth $32 million. He was getting rich by tricking
other people. That is fraud.
This is again another ridiculous statement from the defense
attorneys. Trevor Milton may not have been
motivated by spite or nastiness or cruelty, but he was certainly
motivated by monies, like many criminals are.
He was motivated by having an enormous mansion and hundreds of
millions of dollars, and he got that money by tricking people.
That is called fraud. That is a crime.
They are suggesting with a straight face, that he should
face no penalty for such behavior.
Now, Milton's lawyers also argued that media coverage for
his trial, including the Wall Street Journal podcast series,
will punish Trevor for the rest of his life.
In that one part, they are accurate.
He's received a lot of bad publicity.
His name is tarnished. His life is never going to be
the same. Everyone that searches his name,
all of his children, his family, everyone that knows him will
know him. For a con man, someone that took
money from someone else, and that's something that he's not
going to be able to repair himself.
There's a lot of information to take in with every case, and I
think that the judge put honest effort into breaking this down
and coming up to an appropriate sentencing.
But I agree that this is a bit on the low side.
I think he should have got 7 plus years.
Sentencing him for four years for this shows that you can try
to calm people. You can try to become an
overnight billionaire and if you get caught you only spend a few
years in jail. And I don't believe that's the
message we want to send to others now.
That's going to be it for this episode I hope you enjoyed.
If you want to see more exclusive content, you can check
out the Patreon and the pin comment below.
If you want to try out Qualtrum, you can do so with a free trial.
It is included with the Patreon membership.
Other than that, I'll see you in the next one.