Welcome back, everyone, it's time for a portfolio update will
be looking at every single position in the story fund and
the changes that I've made, I've made some minor changes to
reposition my portfolio with the goal of catching up and
outperforming the S&P 500 by the end of 2025 that is the goal and
so far I'm in a tough situation where down around 13% below spy.
So my portfolios, that blue line, the S&P 500 is the red.
Line and ever since that late December sell-off in Tech and
high growth multiples, high price to sales, companies, and
all the, the money, all the capital moving into into
Commodities and to oil companies and to Consumer defensives,
right? Like the Kroger's type of
stocks, since that transition is happen, this portfolios just
struggled, this was a factor rotation, the factors that were
rotated was out of growth out of potential upside into defense
This that's what the market did. And ever since that's taken
place, my portfolio has trailed the S&P 500 ranging from around
7% to 15% somewhere in there. And even though this looks, you
know it looks difficult like I have a lot of ground to make up.
The truth is 13% can be made up in a very short amount of time.
So I still remain very optimistic that with this
portfolio right now. I have a decent chance of
catching up and surpassing spy. You look at it just to Dam up
1.3 1% This thing can really move in either direction
quickly, and if you look throughout history, there's some
times where I've made up 10% in like, you know, just a couple
months, right? A month or two.
So the fact that we have until the end of 2025, I think gives
me enough time to be able to make up ground here.
But let's go ahead and look at the portfolio.
Now, like I said, this is a gross centered aggressive
portfolio with what I consider to be world-class companies that
I think have the potential to have massive returns to have
massive amounts of Free cash flow.
They are companies that I think are very difficult to compete
with companies that are very difficult to uproot their
position of being a leader. And I'm looking for these
companies to buy them on dips, to buy them an opportune times,
but over the past six months, it's been very difficult.
A lot of these companies have been knocked down, so I'm
excited to go through this. We're going to look at every
single holding, I'll share my thoughts on them as well as some
recent changes. I did to reposition this
portfolio. So first off, let's go through
some recent changes here. I sold out of three positions.
Two of them are tiny positions that I just kind of sold the
remainder of it. And then one of them was a very
large position that I exited. And this might look like a big
change in my portfolio, but this actually isn't as big of a
change as it seems. So let's go ahead and go through
it. The first company that I finally
just exited my position entirely was Facebook and luckily enough,
I exited this one at a decent profit, I made around 460
dollars on it and the reason that I actually Made money with
Facebook is before the huge sell-off in it.
I saw news that Mark Zuckerberg was going into the metaverse and
that was his initial focus. And you know, he did a lot of
plans that I wasn't really a fan of I didn't really love all
these metaverse plans. I didn't get it, I didn't
understand it, maybe I'm behind the curve but I took a lot of my
profits at that time, right then and then Facebook had its
enormous like 30% plunge. So luckily, I I sold most of my
position before. That happened.
That's the only reason that I'm in the green because the
remainder of that position has been a losing position.
Now, in terms of Facebook. Right now, I actually think that
it's probably undervalued. I think it's a good company.
I think if you're heavy on Facebook, you'll be just fine.
So don't take me selling 400 bucks of it as an indication,
that the company is going to do terribly.
I basically wanted to just get rid of the very small positions
and move that into the ones that I have as bigger positions as my
higher conviction. So, I sold out of the remaining
four hundred and seventy dollars of my portfolio.
Around half a percent. So not a big change there.
The next one that I sold completely out of which was also
like a point three percent position at this point was
atlassian. And I sold this one at a pretty
significant profit so I did lock in a lot of gains on this one
and if we bring up the chart here of atlassian, you'll see
the over the year, the stock price quickly doubled, it went
up into territory that I simply could not justify the valuation
of it. So I thought, you know, I'm
going to lock in a lot of gains on this one and so 80% of my
Ian. That's what I did.
It turned out to be a good move because atlassian soon came down
in price. And now that I have around $1400
of gains in that one, I decided to just exit the position until
I really want to go back into it heavily.
And so I sold out of $334 of just the remaining position.
Again, I think I'll asking is a great company.
This isn't an indication by me that I'm bearish on the company.
I'm simply trimming those very small.
You know, point three percent positions, point five percent
positions, Now those are the two smallest positions in my
portfolio by far. The next holding that I sold is
a very significant position. It was the large twenty one
thousand dollar ETF igv and I sold this one at a four thousand
dollar loss. So this one actually locked in a
loss. Now this might look bad because
you might think I'm selling at a loss, but let me explain what I
did with this money because it's actually not as big of a change.
As it looks. I GV has three Top Holdings that
make up a large percentage of this ETF.
Those top Holdings are Microsoft Salesforce, and Adobe, they make
up a huge chunk of this ETF. Now, what I did with this money
from the proceeds of the sale is I bought Microsoft Salesforce
and Adobe with a large chunk of this sale.
And then the rest I put into Amazon because I did some
back-testing and check this out, a portfolio, that's an even
split of Microsoft Adobe in Salesforce Paired the igv
performs very similarly, in fact, they go up at the same
times. They go down at the same times,
they have a very close correlation to each other but
Microsoft Adobe in Salesforce have historically over any time
period perform slightly better. So the way that I look at this
is almost like a you know a lateral change I sold out of an
ETF that holds these three companies as major positions in
to just those three companies. And in the process, this has an
immediate tax benefit the The gains that I've incurred for my
recent sales, which I have made gains.
From my recent sales, are going to incur a tax burden by selling
out of igv at a loss and realizing that four thousand
dollar loss, I can use that to reduce my capital gains burdened
by the end of this year, assuming I lock and more
companies at a gain. And in the meantime, I'm not
really selling out of these positions because I'm just
moving them out of an ETF into individual Holdings.
So, even though this is a lateral change, I have an
immediate tax benefit and in my Opinion.
I think there's a decent chance that the three companies,
Microsoft Adobe and Salesforce will continue to perform very
well against IG V, the mixture of those three companies plus
the other companies mixed in. So I think it's a good change.
I think I'll have tax benefits from it.
It's really not as big of a change as it seems on paper, but
that is the last change that I made to my portfolio.
Now that we've gone over those changes.
Let's go ahead and take a look at my portfolio as it stands
right now again it's at a hundred and seventeen, thousand
dollars of value with Dollars in the red, which is down around
six percent. So it's in the red, it's not
where I want it to be but this has been a pretty tough past six
months. Now, let me go ahead and just
kind of give an overview of where we are, the big change
that I've been making or the big thing that I've been doing to.
Reposition. My portfolio is I've grown a
higher conviction in Amazon, a much higher conviction in this
company, I've been reading everything about it, I've been
studying the company I've been looking at a lot of analysis on
it. And when I Can all the options
of different companies to invest in right now.
I feel like there's a ton of value in Amazon, and I know it
has the high P/E ratio, right? The 50 plus PE ratio.
But if you really do a deep dive into this company, and you
realize the assets that they own, it makes more sense in
context. I think the earnings potential
for Amazon are enormous. And I actually think that right
now, it's one of the deeper value companies in the market,
in terms of its ability to pay dividends, do share BuyBacks.
Be highly profitable and show Ridiculous amounts of free cash
flow in the, in the brief future.
I think it will be within the next couple of years.
So Amazon's a company that I've been continually adding to this
position, buying more and more of this stock, as it floats
around its current stock price. I bought it when it's below.
2700, I bought it. When it's above 3,400, I'll keep
buying it. Anywhere within those ranges,
anytime its trading around three thousand dollars, I'll continue
to buy this stock because in my opinion, I think even on a
conservative estimate. It's worth around 4,500.
So Amazon has grown to a very large holding in this portfolio
right now, it makes up around 40 percent of the portfolio.
That's right. 40% in to Amazon. And to put this in perspective,
I took a hit on Netflix, right? This one went down quite a bit.
In fact, a lot of my losses are from Netflix.
This is a big position I bought into at the wrong time and it
took a huge dip because they're their subscriber gains came in
way underneath, what was expected?
And so this one, I took a big hit on but even with Netflix not
performing well over the next three years I could still
outperform spy. Even with Ali Baba not
performing well over the next three years.
I could still outperform spy. It could still happen.
Even with Spotify not performing.
Well over the next three years, I could still outperform spy
now, if Amazon doesn't perform well over the next three years,
I'm not outperforming spy that is just the message here.
I can survive if Netflix doesn't perform well, if Ali Baba
doesn't perform well and if Spotify doesn't, but I can't
survive against the S&P 500, if Amazon doesn't, because this
just makes up too big of a position.
I can't recover if Amazon dips 50% and never recovers.
If that situation plays out, I've lost the S&P 500 will win.
Now, I don't think that situation will play out.
Now, if we look at Amazon, I just want to go over a couple
things here real quick. If you want a bigger Deep dive,
there is a playlist on my channel.
Channel of three hours of content in depth research, that
go into different parts of Amazon, overall, big Tech, and
valuation goes over the marketplace and how under under
earning it is currently with its potential and it goes over AWS
and the future growth of that company.
So, I would recommend if you're interested or baffled of why I'm
buying so much Amazon. I would watch that playlist.
It's just in the playlist part of this channel.
Now Amazon's an interesting company because a lot of people
don't really realize the Types of businesses.
They actually have and what they make money with.
For example, many people don't know.
The Amazon is in the advertising business.
That's right. They are an ad business like
Facebook like Google. In fact, Amazon makes more from
advertising then YouTube. So if you're investing in Google
because YouTube is growing and you think that ads are good
thing and YouTube's going to benefit from that realize that
Amazon makes more money from their Marketplace ads than
YouTube and they're growing at a Faster Pace.
That's something that a lot of people don't realize, that's
just one part of their business. Now, the next thing that I'd
mentioned is last, we heard in April of 2021 Jeff, Bezos said
that Amazon Prime topped, 200 million members to put that in
perspective. Netflix has 222 million members,
Costco has 67 million members, so 200 million members is a lot,
and Amazon has one of the highest.
In fact, it actually is one of the only companies that beats
out Costco. In terms of retention rate and
customer satisfaction. Basically a lot of people view
their Amazon Prime membership is like a utility bill.
They just pay it they don't even know what they're paying.
They're going to pay it, no matter what like they have.
No thought of ever canceling. It that's how sticky this type
of membership is when I see this type of business, I think that
it's very difficult for another company to uproot this or
disrupt this. I think it will just continue to
grow. The next thing that I'd point
out about Amazon is the way that they work, they always go for
scale first. First then profitability and you
can see this pattern over and over again.
They've done the same thing with AWS.
They've done it with their Marketplace.
They're doing it with their Prime Membership.
They're going for scale, they're going for huge amounts of
customers, and then they start to turn the wheels on how to
monetize, we saw what their Market Place, just over the past
four years. Then make this ad business out
of nowhere, that's now surpassing YouTube.
Well, now, you can see the Amazon is really bolstering
their spend on their Amazon Prime video library.
They're competing. With Netflix directly.
Amazon, spent thirteen billion dollars on Prime Prime video
this year. Netflix, spent 17 billion.
So Amazon is catching up to Netflix in spend on their video
library. Now, there's differences between
Amazon and Netflix and I know this as a Netflix.
Investor Amazon has many ways that they can benefit from their
Prime video and ways that Netflix can't, for example, when
squid game came out, one of the top-selling items where those
values Vans shoes that all of them war with their suit.
This was a squid game show, but Vans benefited and Amazon
benefited because they sold those Vans shoes.
Everybody went online, they bought the Van shoes and that
was Amazon benefiting from from Netflix has content.
Now, Netflix is trying to create a shop where they can sell that
stuff, you know, in and of itself and try to create that
ecosystem. But Amazon has an advantage
here. If they create content that's
very popular, that feature is intriguing.
Intriguing clothing or different things.
They can link that potentially with their Marketplace and have
crossover sales directly. They could say, Hey you like
this show? Here is the shoes that they wear
in this show. Hairs that jacket that
everyone's talking about that they were in the show right
there on the marketplace, right next to the video.
Basically, Amazon has a lot of ways to be able to monetize
their content on Prime Video in the future that I think other
companies can try to do. They can try to mimic it, but it
won't be as successful as Amazon because they have a massive
infrastructure Market Place built directly into their
streaming service. All of it is linked and that
gives them an inherent advantage.
And then, of course, I can't forget to mention AWS, it's
grown to a 71 billion dollar run rate.
It is a massive company in and of itself.
It has around 40% margins, the Tailwind show that this thing
will grow for the next at least ten plus years.
And I think that most analysts aren't understating its
potential growth. So when I look at Amazon, some
people might think Joseph this is you know risky to have 40
percent of your portfolio. And one company, I don't really
think it's as risky as a lot of people think, because I've you
Amazon, not as just one company, but I view it as a huge
advertising business with their Marketplace ads, making up 20 to
30 billion dollars. I view it as a Prime
subscription video business, that has 200 million plus
subscribers. That's like Costco, you know,
and Netflix and then I view it as AWS which has a 71 billion
dollar run rate. It's in web hosting almost an
indestructible business model. I view it as a lot of Different
companies, linked together under one company, kind of like a tech
version of Berkshire Hathaway. Now, if we look at the
fundamentals using qualtrics insights, this is a website
that's available. As part of the patreon, we can
get an idea of how the numbers look for Amazon.
It's currently out of one point. Five seven billion dollar market
cap or trillion dollar market cap.
Rather it has a PE ratio of 54. So that's the part that deters a
lot of investors again. I think the Amazon games, the
bottom line, they don't spend a lot of their cash flow to the
bottom line. They just throw it in.
Other projects and reinvestments.
I think if they wanted to, they could bring this down
drastically. I really think so.
I think overnight, they could Amazon is a Growth Company.
Some people say, the growth is slowing.
Consider the fact that from 2022, 2021, Amazon added more
general merchandise value than what Target revenues in an
entire year. So just in one year of
incremental increases Amazon added, a full Target worth of
general merchandise value. That's How much they added just
last year. So the company is growing in one
year, they grew a targets worth of growth.
The ibadah shows steady growth as well.
Now here's an interesting thing, Amazon's free cash flow again.
This is a one and a half trillion dollar company it was
growing. Its free cash flow steadily.
Like a company of this size should and then in 2021 during
one of their highest growth years, the free cash flow went
into the - by fourteen billion dollars so it from positive 26
billion to negative 14 billion. So A lot of investors are like
what's going on here, right? Cash flow is the amount of money
they're taking in - their Capital expenditures and it's
what's left behind that. So Amazon must have done a lot
of capex. A lot of spending in 2021 to
throw this number into the - and of course we know that they
hired hundreds and hundreds of thousands of new employees.
They open up every single year hundreds of warehouses, they
throw more money into spending on different projects that you
know there's so many of them we don't have time to talk about
all of them. So we don't have the specifics
of every single program. They spent their money on a
2021. But what we do know is they
spent a fortune. They spent a fortune on capex,
in my opinion, it's very unlikely for them to continue
this level of spend throwing their free cash flow perpetually
into the - I think that's very unlikely.
I plan on seeing this number swing back upwards in the coming
years so that's the free cash flow.
The net income has grown over time.
This number is thrown off a little bit by the ribbon steak.
It should be lower than it actually is.
Because the river and steak affected the net income and the
earnings per share. And then if we switch over to
quarterly, the debts pretty low, at forty eight point seven for
the cash, currently continues to climb at 96 billion dollars.
So they have a lot of money, they don't pay a dividend and
their shares outstanding Are Climbing.
Over time, albeit, not by that much.
They're just paying their employees.
It's a minor amount of dilution they just announced 10 billion
dollars a share BuyBacks and that is a miniscule amount for
this company ten billion dollars of BuyBacks.
One and a half trillion dollar company not a lot.
So I really don't take that into account overall Amazon.
In my opinion, again, I think this company has so much
profitability potential in the near term and the near future.
I think we could see enormous amounts of free cash flow.
So I'm very bullish on it. I think that these metrics will
look funny in hindsight, but time will tell.
That's a company that I have 40 percent of my portfolio in.
Now next up we have Netflix, one of my favorite companies
obviously. But so far this one has been a
terrible stock. Tone.
I have it as 15% of my portfolio, I'm down 9600 dollars
and the current value is 18,000 dollars.
So this is one where the story for Netflix basically is that
the, the street investors in it were expecting a certain amount
of subscriber growth for this quarter.
They're expecting Netflix to say that they're going to grow five
million subscribers, Netflix said that they're expecting two
million and when you give half or less than half of the
expected growth in a forecast that stock tends to fall and
unfortunately, I was part of that false I've lost some money
so far with Netflix, but I remain bullish on this company.
In fact, after it fell in price, I bought more of the company on
the dip, or at least, hopefully, the dip, and then Bill Ackman
entered into the position as well.
And here we are, we're still invested in Netflix.
Now, as of right now, Netflix has a forward P/E ratio of 30:2,
so it's not way up there in the astronomically High area.
It's come down a little bit more to reality in 32, but it's still
an elevated PE. So there's still high.
Stations of this firm. And I think that Netflix has a
decent chance of really proving that they're deserving of this
higher multiple. Keep in mind that even though
the projections were below, what the street wanted the stock is
still doing well. Look at the revenue growth, this
is a growing firm and it's growing very quickly.
That's a good thing for investors in Netflix.
The ibadah also looks really good, the free cash flow.
We look over annually here. This paints a little bit
different of a picture. The big concern for Netflix has
historically been Losing money, they're losing money.
They're going to be swamped by debt.
They're never going to be profitable.
Their business model. Doesn't allow them to ever be
free cash, flow generative clearly, they've proven the
Skeptics wrong there. They lost money in 2017. 2018,
2019, then they turn positive in 2020.
Now, 2020 was unique and that reversed slightly back to barely
in the - 130 million dollars in 2021.
But Netflix has reiterated many times, they are going to be free
cash, flow positive. Positive from here on out in
2022. This should be a positive
number. So we'll be looking for that to
be positive in the future and that's the whole idea of buying
these companies. Every company that I'm doing
research on, I'm looking for how they're going to be a massive
free cash flow generative machine.
That's what I'm looking for. So I'm buying Amazon, I might be
buying all these companies with these great stories and
different aspects. But really, at the end of the
day, I want a company that can do a lot of this.
A lot of cash flow I think Netflix will get there.
I think they're on the verge of turning that corner and going
from a money-losing company to a free cash, flow generative
company. They've leveraged debt with low
interest rates for a long time, to grow their library and to
grow their subscriber base. And now they're turning that
corner. So whenever I do analysis on any
of these companies, I'm wanting the free cash flow.
That's the big thing that I'm looking for because that's what
funds paying down debt. Doing share, BuyBacks growing,
the cash balance, growing the earnings.
Paying dividends right? All of that comes from the free
cash flow. So this metric right here is
Paramount it's incredibly important.
Now let's go ahead and move on the net income.
It's growing over time. Netflix has always had a very
quickly growing net income. If we look at the, let's move
over to quarterly. If we look at the debt here,
Netflix has a reduction in their debt over the last five quarters
because they're becoming more free cash flow generative.
Now they have fourteen point six nine billion dollars of debt
their cash. Gone down a little bit.
They have six billion dollars of cash right now and then if we
look at the earnings per share, this is pretty interesting.
This Paints the picture of when a company that's been leveraging
debt and growing and trying to reach scale finally reaches
scale. See how much their earnings
exploded late 2017 and they've climbed very rapidly if we move
over to annually here. I think this paints a clear
picture. Look at this growth in EPS.
This is pretty impressive. Even if you're not a Netflix
investor you have Admit that this earnings per share growth
is impressive in 2021. They had $11 of earnings $11.24.
When I was doing my analysis on Netflix and my discounted cash
flows and research on the company.
I came to the estimation that they will have $33 of eps in
2026. So in 2025, by my goal, by by
the end of 2025, to beat the S&P 500, I think that Netflix will
have a four deep Us of $33 that seems aggressive but I think
that they can do it. And on a 27, Ford PE ratio, for
example, that is $890 per share. So that's my estimate.
I think that Netflix will be worth around 800 to 900 dollars
in 2025, based on a thirty three dollars per share earnings in
2026. Now there's some variables maybe
they'll trade at a lower PE than 27, but in my opinion, I think a
27 is a pretty decent multiple on a company.
If it has Chained to grow for the next five years.
And it really has hundreds of millions of subscribers.
So that's my valuation on the company, their shares
outstanding have been going up, but it's decelerating.
And in fact, we look over at quarterly hair, their shares
have basically topped out and this should start to go down
because they announced share BuyBacks.
So again they are becoming free cash flow generative.
That's the big thing. I'm looking for every one of
these Investments, I think Netflix will have enough free
cash flow to start doing, share BuyBacks to start improving
their What she and improving the standing of their company
reducing risk in it. And that's the reason that I'm
investing in this company. Now, after Netflix, just shy of
Netflix, we have Google at a 14.7% waiting, so around the
same size as Netflix now, nobody's strangers to Google, so
I won't go over. Just the basics of the company
but if we look at the fundamentals here, Google's
basically on paper like almost the perfect fundamental company
almost as close as Microsoft, right?
Except it's a lot cheaper than Microsoft on paper so it has
nearly Early perfect fundamentals and it's trading at
a very reasonable PE ratio a 23. That's the story with the
company. You're buying an incredibly high
quality company that has multiple monopolies, that
continues to grow faster than many smaller companies that has
a perfect balance sheet with 140 billion dollars in cash and only
twelve billion dollars in debt. So they're not at risk of any
kind of default or anything happening to it, their earnings
per share grew rapidly in 2020, which is kind of a concern
because Certainly some pull forward, so it's not going to be
growing this rapidly in the future, but even at very
conservative estimates, they're going to continue to grow and
like I pointed out I'm investing in free cash flow looking for
highly profitable, free cash, flow generative companies,
they'll be able to use all of this money to continually pay
dividends or do share BuyBacks, and in the case of Google, they
throw and a share buyback. So they are completely
eliminating. Their share count over time and
it's pretty dramatic. They've gone from 694 m.
Million to 662 million and the course of two and a half years
that is a dramatic level of share buyback.
So, the bowl case for Google is extremely simple.
It's an incredibly powerful well-established Monopoly that's
trading at a 22 PE ratio. Now, moving on, we have
Microsoft just under Google with a 9.1% waiting which is ten
thousand seven hundred dollars. Now if we bring up Microsoft
hair, much like Google, it has Flawless fundamentals.
I mean, it's just fundamentally almost the perfect company.
If we look at any of them, Tricks are the revenue is
growing steadily. It's in fact growing almost
perfectly. It looks like it's made up.
We have the E better hair. That's growing.
Dramatically free cash. Flow growth is exceptional.
Look at this free cash flow in 2020. 156 billion dollars from
2020 which was 45 Microsoft is growing their free cash flow way
faster than analysts expect. So if you think analysts can
easily do analysis on, big companies like Microsoft,
they've been wrong time and time again on the free cash flow.
It continues to be Beat analyst, expectations.
You look at the net income, that's growing like crazy.
The debts declining over time, they have way more cash than
debt. They're growing their dividend
over a long period of time. Never they don't have a chance
of canceling, the dividend and the shares outstanding is
declining as they do rapid share BuyBacks.
So again, the fundamentally perfect company.
It trades at a slightly higher PE ratio than Google, which I
think makes sense a little bit. You might consider Microsoft and
Google on even terms and they should trade The exact same PE
ratio, I don't necessarily believe so Google is in the
advertisement business, which I think is a little bit more
volatile than Microsoft's. Microsoft's is in a lot of
subscription businesses which are not volatile at all.
So I think investors are slightly giving a premium to
Microsoft which I think is warranted.
So Microsoft right now I think is under undervalued.
I think the company should be trading mid-30s, multiple that's
what I think this company deserves, but that's just my
opinion. I think Microsoft is
undervalued, and I think that this company will outperform the
broader Market from now until the end of 2025.
Now after Microsoft, we have Ali Baba at a 5.3 percent holding.
I'm not going to go into this one because I've recently made
so much content about it. So if you want to see Ali, Baba
just gone view, one of the previous videos, but I haven't
sold any of this company. My last purchase of it was in
October of 2021. So I haven't been buying it.
I haven't been focusing on it anymore.
I'm just kind of holding this company and seeing how it plays
out. It's 5% of my portfolio, so it's
still a decent. Amount.
And in my opinion, there's still a decent chance.
This one will make a comeback and I know everyone hates it
right now. Everyone disagrees with that.
Charlie Munger apparently sold. 50% of the holding in my
opinion. I think that skeptical.
I think Charlie Munger, this is just my guess, but I think he's
just as bullish on Ali, Baba as ever.
But regardless there's just so much layered - news on this
company that I don't see it. Moving up in the short term.
I think it's going to be it's going to have its stock price
suppressed in the short term but over the next five years Years,
things, may change. Now, next up, we have Salesforce
many Microsoft making up five percent of the portfolio.
This is a great company that the market sold off with all the
other tech companies. So they kind of just sold this
one off in the bucket of the text sell-off.
And I think it's a little bit, undeserving, because Salesforce
is, it's a very high quality company.
It's not like most Cloud companies.
We look at the fundamentals here.
The big thing that we're looking for again is a growing free,
cash flow. We look at Salesforce and what
Sure. Does this paint, this is growing
free, cash flow and 2019. They had 2.8 billion in 2020.
They had 3.7 billion in 2021, they had four point six five
billion. This number is growing steadily.
That's the main thing that I'm focusing on is I'm building
positions and firms that I think will have this free cash flow
growth for over a decade. Just continual expansion of
their free cash flow. Now, Salesforce has leverage
cheap debt to buy things like slack.
They leverage sheep debt to grow Ow, but they do not need it to
grow. They are very much free cash
flow generative. They have 11 million dollars of
cash on the balance sheet. Right now, they are doing some
dilution as they're paying their developers that way, but I
suspect in the future, they'll be a very free cash flow
generative company even more so than now, they'll pay down the
debt and they'll be doing aggressive, share BuyBacks.
I really see that in the future sales force.
So in my opinion, I think this company is a steal right now.
I'm excited to have it in my portfolio.
I think it will outperformed the S&P 500.
Now after that, we have Adobe At a 4.7 waiting.
That's $5500. This company has all the things
that I just mentioned that I look for it has a massively
growing free cash flow. You can see the trends over
time, the company has everything you look for growing revenues
ibadah free cash flow, net income, very stable and low
debt, it's not an indebted company at all.
In fact, they have more cash than debt currently.
They don't currently pay a dividend, but they're growing
their earnings per share at a pretty substantial rate.
You don't see EPS growth like this, that often that is when
they switched over to To the subscription model.
And then, of course they are actually doing aggressive share
buyback. So they have enough free cash
flow to basically engineer their earnings for the long-term
future and my opinion. Adobe doesn't have that many
real competitors. I've looked at this space and
there's some applications that compete with some parts of the
company but no company really. Competes with all of adobe just
doesn't exist. So I see this company as as
outperforming, the S&P 500, the broader index, and I also see it
as a very risk kind of off-balance.
Like I think the company is going to be very difficult to
disrupt, so that's another one that I'm excited to have in my
portfolio. Now, we're moving to the next
two. Smallest ones, which are Apple
and Spotify. Apple.
I have so much content on this one.
If you want to see my bull case in apple, go watch any of the
videos on both my channels about apples.
So I've gone over extensively, the bull case on Apple.
I won't go over that right now. Spotify is one.
That is just tough. I'll be honest.
This one's a tough one to hold. Let's go ahead and look at the
The numbers of Spotify, the company trades at a price to
sales of two point seven, two point seven.
So investors don't expect much out of Spotify.
This is a bottom of the barrel price to sales and they're
basically saying this company will never really be profitable
in the future, and I think that there's valid Arguments for
that. So even though Spotify has
continually grown its Revenue, a lot of the revenue is eaten up
by the music labels. So, a lot of it goes to that
they are starting to grow podcast which is Higher margin
business. So there is some light at the
end of the tunnel. The problem is, they're facing
off against big Tech. They're facing off against
YouTube and YouTube premium. With YouTube music, they're
facing off against Amazon, and Amazon music with Audible, and
all of their podcasts are buying and they're facing off with
apple, with apple music, and apple podcasts.
And the honest truth here is all those companies are so
profitable with their other businesses that they could price
their music service at zero, they could have them Isaac
service perpetually be free and still be fine as a company, just
to attract customers Spotify, can't do that.
So I look at the potential pricing power that Spotify has.
And I don't think that it's anywhere close to as much as
Netflix because Netflix has a lot of unique content, you can't
get anywhere else, like the next season, a stranger things.
Spotify really doesn't have that much unique content at this
point. I think that Spotify is a
company that does potentially have a good future.
The are generating some free cash flow but what spot Really
needs to do is grow their creator Community, they need to
make it, so people can discover podcast, they can discover new
creators, and they can grow that Creator Community the same way
that YouTube has. And unless they're able to do
that and get tons of craters on, with tons of kind of exclusive
content on Spotify, the same way that YouTube has done it on
their platform. I think this company will
continue to struggle. So that's the reason that
Spotify is not a company that I've been continually adding to.
I've been adding new money into Amazon and Netflix and Google.
And Salesforce and Adobe, I have not been adding it to Spotify.
I put my initial investment in this so far, it hasn't turned
out. Well, I'm going to let this one
ride and see how it goes, over the next five years and see if
there's any real developments that I like.
But right now, the timeline is just too long in the company,
too far out for the prophets, I'm looking at companies that
can generate profits and real free cash flow.
A little bit quicker. I think a Netflix is one of
them. Obviously, Adobe is, and
Salesforce is with Spotify, the prophets are just way out in the
future. And I'm a little bit impatient
so that one, I'm not selling but I'm just holding in my
portfolio. So that's a portfolio as of now,
we have nine Holdings overall, the top three positions, Amazon
Netflix and Google make up around 55 percent of the
portfolio combined, and then the last six make up the other 45%.
So that's the breakdown. And again, my main focus with
every one of these companies, when I'm doing analysis, what
I'm looking for are, which companies are going to be able
to leverage their their platforms or Or their, their
Marketplace, to be able to generate significant upside and
their free cash flow. That is a major Focus that I'm
that I'm focusing on now, especially moving into higher
interest rate environments. I think these companies will do
very well and the companies that I think will actually surprised
to the upside with the amount of free cash flow.
They'll generate I think are these ones that I have the
biggest waiting to Amazon Netflix, Google and Microsoft.
These companies already generate a lot of free cash flow while
all but Netflix does. But I think that they'll
surprise to the upside I think Netflix And Amazon will generate
an incredible amount of free cash flow in the future.
So that's the major focus of the portfolio.
I think these companies are very hard to disrupt and unroot and
compete against. I think they'll be around in ten
years even though some of them haven't worked out.
If a few of these bets do work out over the next four or five
years which I expect they will. I have a very good chance of
actually catching up to the S&P, 500 and surpassing it.
So don't count me out yet. I still think I have a chance in
this, and if you want to see how this turns out, Out.
I'll be tracking this every single week week by week, so,
just make sure you subscribed. We can look at this together.
That's all for now. I'll see you next time.