1 00:00:00,080 --> 00:00:02,280 Welcome back everyone today on the Joseph Carlson show, 2 00:00:02,560 --> 00:00:05,320 Barron's just released their list of their top ten stocks for 3 00:00:05,320 --> 00:00:07,800 2025. These are the different value 4 00:00:07,800 --> 00:00:10,680 companies that they highlight that they believe are set up for 5 00:00:10,680 --> 00:00:14,640 a particularly Goodyear in 2025. Some of those companies include 6 00:00:14,640 --> 00:00:17,840 companies like Alphabet and Uber, but we're going to be 7 00:00:17,840 --> 00:00:20,400 going over all ten of them. I'll be giving you my thoughts 8 00:00:20,520 --> 00:00:23,520 and how I would personally alter and improve this list to make it 9 00:00:23,520 --> 00:00:25,960 have even better performance. Now of course we have some other 10 00:00:25,960 --> 00:00:28,720 news to get to. Netflix had their live NFL games 11 00:00:28,720 --> 00:00:31,080 on Sunday. They put on a pretty big event. 12 00:00:31,280 --> 00:00:33,440 We'll be looking at whether or not this is going to impact 13 00:00:33,440 --> 00:00:36,120 Netflix going forward. We have the robo taxi battle 14 00:00:36,120 --> 00:00:39,440 heating up in 2025. Now this was dominated in the US 15 00:00:39,440 --> 00:00:43,200 by Waymo in 2024. Googles Waymo was the one making 16 00:00:43,200 --> 00:00:46,080 all of the headlines, but now we have some other companies 17 00:00:46,080 --> 00:00:49,080 entering into the market. We have Amazon Zoox, we have 18 00:00:49,080 --> 00:00:51,440 Uber and how they're going to fit into this and of course we 19 00:00:51,440 --> 00:00:53,280 have Tesla. We're going to be doing a bit of 20 00:00:53,280 --> 00:00:56,000 a breakdown of the robo taxi battle and then we have news 21 00:00:56,000 --> 00:00:59,880 that Microsoft is now simply forcing their customers to pay 22 00:01:00,160 --> 00:01:03,480 for their AI assistant, the copilot that Marc Benioff has 23 00:01:03,480 --> 00:01:06,640 been calling Clippy 2 point O Well, Microsoft has a new 24 00:01:06,640 --> 00:01:09,160 strategy for selling it. They're basically just saying, 25 00:01:09,160 --> 00:01:12,320 hey, you have to pay for this. We'll be discussing in this 26 00:01:12,320 --> 00:01:13,840 episode. So we have a lot to get to in 27 00:01:13,840 --> 00:01:15,520 this episode. Let's go ahead and jump in now. 28 00:01:15,520 --> 00:01:18,320 Let's go ahead and start off with the top 10 Baron stock 29 00:01:18,320 --> 00:01:21,720 picks in 2025. Just to preface this, they do 30 00:01:21,720 --> 00:01:24,680 this list every single year. They came out with a list of 10 31 00:01:24,680 --> 00:01:29,640 stocks to buy in 2024 and they didn't do so well in 2024. 32 00:01:29,960 --> 00:01:33,840 They had positive returns. In fact, it went up 11% overall 33 00:01:33,840 --> 00:01:36,840 with an equal weighted portfolio of their picks, but the market 34 00:01:36,840 --> 00:01:41,440 went up nearly 27%. So they did underperform by a an 35 00:01:41,440 --> 00:01:44,640 amount and they go through kind of giving some explanations of 36 00:01:44,640 --> 00:01:47,320 why they underperformed. Some of the companies had poor 37 00:01:47,320 --> 00:01:50,480 execution, they had some issues. So Barons is playing a little 38 00:01:50,480 --> 00:01:52,240 bit of catch up. They're coming off of a bad 39 00:01:52,240 --> 00:01:54,160 year. They want to improve their stock 40 00:01:54,160 --> 00:01:56,880 picking reputation. So they have a whole new list of 41 00:01:56,880 --> 00:01:59,800 stocks here. Now again, having said that, I'm 42 00:01:59,800 --> 00:02:02,400 going to be adding in how I believe this list could be 43 00:02:02,400 --> 00:02:05,280 improved for 2025. So I'll give you my thoughts as 44 00:02:05,280 --> 00:02:06,880 well. When we look at this, we have 45 00:02:06,880 --> 00:02:11,200 first of all, Alibaba. Alibaba may be the cheapest 46 00:02:11,200 --> 00:02:14,160 e-commerce cloud computing company investment in the world. 47 00:02:14,480 --> 00:02:18,480 The stock is at $89.00. It trades for just 10 times 48 00:02:18,480 --> 00:02:23,040 projected current year earnings, well below Amazon's 45 times. 49 00:02:23,560 --> 00:02:27,560 It also sits on $50 billion net of cash, or about 25% of its 50 00:02:27,560 --> 00:02:29,320 market value. So that's actually true. 51 00:02:29,320 --> 00:02:32,320 They sit on a lot of cash compared to their market value. 52 00:02:32,720 --> 00:02:36,280 In fact, right now Alibaba has that $50 billion in cash. 53 00:02:36,560 --> 00:02:38,920 It sound a little bit over the past couple of years as they've 54 00:02:38,920 --> 00:02:41,920 been shoveling it into buybacks, but they still have a lot of 55 00:02:41,920 --> 00:02:44,240 cash compared to the $200 billion market cap. 56 00:02:44,240 --> 00:02:46,400 Now, Baron tries to highlight what they believe the issues 57 00:02:46,400 --> 00:02:48,320 are. They say the problem is China's 58 00:02:48,320 --> 00:02:51,040 economic woes and government's material attitude toward the 59 00:02:51,040 --> 00:02:53,560 homegrown tech companies. I think that's accurate. 60 00:02:53,920 --> 00:02:56,360 China is very harsh towards their own companies. 61 00:02:56,600 --> 00:02:58,800 At least the government there does not give them a lot of 62 00:02:58,800 --> 00:03:00,560 slack. And in some cases, they'll give 63 00:03:00,560 --> 00:03:03,560 them huge penalties for doing anything that they don't want. 64 00:03:04,040 --> 00:03:06,720 Concerns about president-elect Donald Trump's, tough on China's 65 00:03:06,720 --> 00:03:09,760 stances and doubts about the effectiveness of the country's 66 00:03:09,760 --> 00:03:12,640 economic stimulus are also weighing on shares, which I've 67 00:03:12,640 --> 00:03:16,160 pulled back roughly from the $117.00 highs. 68 00:03:16,560 --> 00:03:20,760 So we have all these issues with Alibaba going on currently, and 69 00:03:20,760 --> 00:03:22,000 I agree with them for the most part. 70 00:03:22,160 --> 00:03:24,240 Barrett's highlights that the superstar hedge fund manager 71 00:03:24,240 --> 00:03:27,120 David Tepper has Alibaba as his largest holding. 72 00:03:27,360 --> 00:03:29,400 He trimmed a little bit last quarter, but it's still his 73 00:03:29,400 --> 00:03:31,800 largest holding. And they say that they believe 74 00:03:31,800 --> 00:03:34,560 the company knows that its stock is a bargain because they 75 00:03:34,560 --> 00:03:37,960 repurchased 7% in the 1st 3/4 of 2024. 76 00:03:38,240 --> 00:03:41,040 So they're aggressively buying back their stock, presumably 77 00:03:41,040 --> 00:03:44,720 buying back this big dip. Alibaba is cheap relative to its 78 00:03:44,720 --> 00:03:46,760 own history. It's cheap relative to its 79 00:03:46,760 --> 00:03:48,520 pairs. It's sitting on a ton of cash, 80 00:03:48,520 --> 00:03:51,080 and the headwinds are turning into tailwinds now, right? 81 00:03:51,080 --> 00:03:54,360 To begin with, I have a stock already I would change from this 82 00:03:54,360 --> 00:03:56,360 list. I don't agree with the Barron's 83 00:03:56,360 --> 00:03:58,680 pitch for Alibaba for a couple of reasons. 84 00:03:59,120 --> 00:04:01,600 First of all, it's true that the stock is cheap, but when we look 85 00:04:01,600 --> 00:04:04,480 at the performance of this company over a longer period of 86 00:04:04,480 --> 00:04:07,000 time, it paints a very grim picture. 87 00:04:07,400 --> 00:04:10,160 Look at Alibaba year to date, it's up 15%. 88 00:04:10,440 --> 00:04:12,560 We zoom out one year, it's up 13%. 89 00:04:12,880 --> 00:04:15,640 We zoom out five years, it's down 60%. 90 00:04:16,000 --> 00:04:18,920 And then we even go back an entire decade and we're down 91 00:04:18,920 --> 00:04:24,120 18%, almost 19% in 10 years. Now it's gone through bouts of 92 00:04:24,120 --> 00:04:26,600 decent performance, so we've had some time periods where it 93 00:04:26,600 --> 00:04:30,000 looked like it's doing well, only to get Ushed back down. 94 00:04:30,440 --> 00:04:32,680 And again, this is an entire decade. 95 00:04:32,960 --> 00:04:36,480 When a stock goes through a decade of negative returns, it 96 00:04:36,480 --> 00:04:38,720 means that there's something else going on with the business. 97 00:04:39,200 --> 00:04:42,640 Either it was so incredibly overvalued to begin with, or the 98 00:04:42,640 --> 00:04:45,280 business is not executing. When we look at Alibaba and any 99 00:04:45,280 --> 00:04:47,760 of the fundamentals, I see a business that's actually slowing 100 00:04:47,760 --> 00:04:50,840 down and growing very slowly. Right now, the revenue is 101 00:04:50,840 --> 00:04:54,360 growing 5% year over year. So not only does Alibaba have 102 00:04:54,360 --> 00:04:57,720 all the uncertainties that exist with operating out of China, but 103 00:04:57,720 --> 00:05:00,560 it also is simply just not performing that well when we 104 00:05:00,560 --> 00:05:02,160 compare it to the likes of Amazon. 105 00:05:02,440 --> 00:05:05,360 Amazon is a stock that, yes, it trades at a higher starting 106 00:05:05,360 --> 00:05:08,280 valuation. It has a much higher PE ratio, 107 00:05:08,640 --> 00:05:10,560 but Amazon is a much better company. 108 00:05:10,840 --> 00:05:14,080 We zoom out over anytime period. Amazon has had superior 109 00:05:14,080 --> 00:05:17,280 performance the entire time. And although past performance is 110 00:05:17,280 --> 00:05:20,200 not an indicator of future performance, it does help gauge 111 00:05:20,200 --> 00:05:23,680 this company is growing, and the growth is much faster. 112 00:05:23,720 --> 00:05:26,800 Amazon's growing its revenue at over double the rate of Alibaba. 113 00:05:27,080 --> 00:05:30,000 Amazon has a much bigger cloud business that's growing much 114 00:05:30,000 --> 00:05:33,440 faster that has higher margins. So #1 Barron's has Alibaba. 115 00:05:33,520 --> 00:05:35,320 I would choose Amazon. Now, let's go ahead and take a 116 00:05:35,320 --> 00:05:38,280 look at #2 and #2 they have Google. 117 00:05:38,320 --> 00:05:40,720 They say here the Alphabet operates the world's dominant 118 00:05:40,720 --> 00:05:43,800 search engine, but the company is under a cloud due to the 119 00:05:43,800 --> 00:05:47,320 artificial intelligence driven competitive challenges and the 120 00:05:47,320 --> 00:05:49,000 government's efforts to break it up. 121 00:05:49,480 --> 00:05:51,200 I think those are the two biggest things. 122 00:05:51,360 --> 00:05:54,080 The search engine is under a lot of stress right now. 123 00:05:54,080 --> 00:05:55,640 There's a lot of people concerned about it. 124 00:05:56,000 --> 00:05:58,000 And of course, the government breakup doesn't help. 125 00:05:58,080 --> 00:06:01,240 As Barron's argued in a recent cover story, Alphabet should be 126 00:06:01,240 --> 00:06:03,840 able to fend off competitive and regulatory challenges. 127 00:06:03,960 --> 00:06:07,440 The stock's around $195. It's the cheapest of the mag 7 128 00:06:07,680 --> 00:06:11,400 trading at 21 times projected 2025 earnings. 129 00:06:11,440 --> 00:06:13,760 They also go into detail and argue the sum of the parts 130 00:06:13,760 --> 00:06:15,720 valuation here. That's something that they did 131 00:06:15,720 --> 00:06:17,760 in their outline. The company also looks 132 00:06:17,760 --> 00:06:20,480 inexpensive based on these sum of the parts, which includes 133 00:06:20,480 --> 00:06:22,960 search, YouTube, cloud computing, and the Android 134 00:06:22,960 --> 00:06:25,480 operating system. It also has its other bets, 135 00:06:25,480 --> 00:06:29,040 mainly Waymo, a leader in autonomous driving that has robo 136 00:06:29,040 --> 00:06:31,640 taxis operating in four cities. We think of it as a high 137 00:06:31,640 --> 00:06:33,880 multiple tech stock that isn't priced like 1. 138 00:06:33,920 --> 00:06:37,120 So stock #2 is Google, and this is one that I would keep. 139 00:06:37,160 --> 00:06:39,280 It's a company that I've been buying recently. 140 00:06:39,600 --> 00:06:42,480 I bought it at around 170 just a month or two ago. 141 00:06:42,480 --> 00:06:45,600 Now I have a lot of exposure to Google, around $100,000 of this 142 00:06:45,600 --> 00:06:47,920 stock combined. But I'm OK keeping it there 143 00:06:47,920 --> 00:06:50,920 because the companies at such a low evaluation and it's a high 144 00:06:50,920 --> 00:06:53,400 quality company. This does happen from time to 145 00:06:53,400 --> 00:06:56,400 time when this quality of a company can become disconnected. 146 00:06:56,480 --> 00:06:59,640 So #2 is Google. I would keep and #3 barons picks 147 00:06:59,640 --> 00:07:02,000 ASML. Few companies are more critical 148 00:07:02,000 --> 00:07:04,440 to the semiconductor industry than ASML. 149 00:07:04,920 --> 00:07:07,400 The Netherlands based company makes specialized lithography 150 00:07:07,400 --> 00:07:10,520 machines that allow production of high performance chips used 151 00:07:10,520 --> 00:07:13,880 in smartphones, PCs, data centers and which cost around 152 00:07:13,880 --> 00:07:17,960 $200 million or more. Now Barron's may be using a 153 00:07:17,960 --> 00:07:19,560 little bit of old information here. 154 00:07:19,640 --> 00:07:22,960 The machines are now costing around $400 million or more, 155 00:07:23,240 --> 00:07:26,800 more like $450 million or more in 20-30. 156 00:07:26,800 --> 00:07:30,640 The pricing also looks absurd. They're going to be $500 million 157 00:07:30,640 --> 00:07:34,000 plus, so they have a lot of pricing power with these 158 00:07:34,000 --> 00:07:36,720 machines because nobody else has accomplished what they've 159 00:07:36,720 --> 00:07:38,680 accomplished. ASML has virtually no 160 00:07:38,680 --> 00:07:42,680 competition with its high end EUV machines, which uses extreme 161 00:07:42,680 --> 00:07:45,280 ultraviolet light. And that's made Europe's number 162 00:07:45,280 --> 00:07:48,440 two big tech company behind only Germany's SAP. 163 00:07:49,200 --> 00:07:52,520 So this is one of the biggest companies in Europe. 164 00:07:52,840 --> 00:07:55,960 They make this incredible expensive machine that plays 165 00:07:55,960 --> 00:07:59,320 this small but critical role in the creation of semiconductors 166 00:07:59,320 --> 00:08:00,880 and chips. Not the current price of 167 00:08:00,880 --> 00:08:03,840 $715.00. That trades at 28 times the 168 00:08:03,880 --> 00:08:08,040 estimates for 2025, which are currently $25 a share. 169 00:08:08,400 --> 00:08:11,400 They say that it looks appealing after the stock has dropped 20% 170 00:08:11,640 --> 00:08:15,320 in October following its cut to its 2025 revenue guidance. 171 00:08:15,680 --> 00:08:20,800 Now importantly, ASML cut revenue guidance in 2025 S the 172 00:08:20,800 --> 00:08:23,120 stock sold off because we're not going to earn as much revenue 173 00:08:23,120 --> 00:08:26,280 next year. But in 20-30, they have 174 00:08:26,280 --> 00:08:28,680 forecasts going all the way out to the end of the decade. 175 00:08:29,200 --> 00:08:30,400 They didn't cut revenue estimates. 176 00:08:30,560 --> 00:08:33,120 A way to think about ASML is it's like they're a toll booth 177 00:08:33,120 --> 00:08:36,200 on a toll bridge and everyone needs to pay when they cross 178 00:08:36,200 --> 00:08:38,679 that bridge. Some cars are just waiting to 179 00:08:38,679 --> 00:08:41,640 cross the bridge a little bit later in the day than earlier. 180 00:08:41,880 --> 00:08:45,160 So although they're not making as much revenue in 2025, they 181 00:08:45,160 --> 00:08:48,400 should more than make up for that in 2026 or 2027. 182 00:08:48,720 --> 00:08:51,920 The demand over short time cycles is cyclical, but in the 183 00:08:51,920 --> 00:08:54,640 long run, they'll earn that revenue one way or another. 184 00:08:54,720 --> 00:08:57,800 Now again, ASML is a company that provides a lot of guidance 185 00:08:57,800 --> 00:09:00,960 on their future outlook going all the way out to 20-30 with 186 00:09:00,960 --> 00:09:04,120 both revenue and margins. The company sees lithography 187 00:09:04,120 --> 00:09:08,840 spending rising 10 to 20% annual rate through 2030, hitting about 188 00:09:08,840 --> 00:09:13,040 55 billion at the midpoint of a recent forecast, up from 32 189 00:09:13,040 --> 00:09:16,560 billion this year. So they're growing from 32 190 00:09:16,560 --> 00:09:20,080 billion this year to 50 billion, 55 billion in 20-30. 191 00:09:20,120 --> 00:09:23,120 Another analyst points out that ultimately, ASML's monopolistic 192 00:09:23,120 --> 00:09:25,680 position and alignment with powerful secular trends 193 00:09:25,960 --> 00:09:28,600 positions it as a cornerstone investment in these 194 00:09:28,600 --> 00:09:30,320 semiconductor conductor supply chain. 195 00:09:30,320 --> 00:09:33,000 This is one that I agree with. I would not change this for a 196 00:09:33,000 --> 00:09:35,840 different company. ASML is in a position to do 197 00:09:35,840 --> 00:09:38,120 really well over the next 5 or 6 years. 198 00:09:38,120 --> 00:09:40,120 Investors are quick to get bored with stocks. 199 00:09:40,120 --> 00:09:41,960 If they don't think it's going to have performance for one 200 00:09:41,960 --> 00:09:44,480 year, they'll dump the stock. That's what a lot of investors 201 00:09:44,480 --> 00:09:45,880 in Wall Street are doing right now. 202 00:09:46,400 --> 00:09:49,000 But once they get back on board with this stock, it could jump 203 00:09:49,000 --> 00:09:51,600 up 50%. And #4 we have Berkshire 204 00:09:51,600 --> 00:09:54,000 Hathaway Co. Warren Buffett has made a few 205 00:09:54,000 --> 00:09:56,320 mistakes this year. He slashed Berkshire's Apple 206 00:09:56,320 --> 00:10:00,280 stake by 2/3 and left some $30 billion on the table while 207 00:10:00,280 --> 00:10:03,240 incurring a big tax bill. Now, they phrase that in a very 208 00:10:03,240 --> 00:10:04,960 negative way. I actually don't think that was 209 00:10:04,960 --> 00:10:07,880 such a big mistake. Everything you can analyze in 210 00:10:07,880 --> 00:10:10,520 hindsight. But all the gains this year, 211 00:10:10,520 --> 00:10:14,160 virtually all of them came from Apple simply having multiple 212 00:10:14,160 --> 00:10:18,040 expansion. So it went from A29 4PE ratio to 213 00:10:18,040 --> 00:10:20,160 a 35. Warren Buffett likes holding 214 00:10:20,160 --> 00:10:22,600 assets that create intrinsic value growth through revenue 215 00:10:22,600 --> 00:10:25,760 margins, free cash flow. They can return that cash back 216 00:10:25,760 --> 00:10:28,400 through buybacks and dividends. Now, as you can see over the 217 00:10:28,400 --> 00:10:32,160 past 10 years, Apple's revenue in just the past couple of years 218 00:10:32,160 --> 00:10:36,160 has been completely flat. So it makes sense to me why he's 219 00:10:36,160 --> 00:10:38,200 selling it. You can say that's a mistake 220 00:10:38,200 --> 00:10:41,400 because the stock has gone up. But even in hindsight, when I 221 00:10:41,400 --> 00:10:44,240 judge that decision, I don't think it was such a big mistake. 222 00:10:44,320 --> 00:10:47,240 I think the bigger mistake that Warren Buffett made is simply 223 00:10:47,240 --> 00:10:49,440 selling Apple and then putting that money in cash. 224 00:10:49,720 --> 00:10:52,560 There has to be some better place to put that money, but 225 00:10:52,560 --> 00:10:55,880 he's holding it in Treasuries. He also invested little into 226 00:10:55,880 --> 00:10:58,800 stocks in the past two years. The key man risk of Warren 227 00:10:58,800 --> 00:11:02,440 Buffett is growing with Buffett having turned 94 years old. 228 00:11:02,440 --> 00:11:05,160 They mentioned that with 310 billion dollars of cash than 229 00:11:05,160 --> 00:11:08,000 most of any U.S. company, Berkshire may be the most 230 00:11:08,000 --> 00:11:11,560 defensive mega cap stock. If stocks tumble, Buffett might 231 00:11:11,560 --> 00:11:14,840 even put up a big chunk of that cash to work in the stock market 232 00:11:15,040 --> 00:11:18,080 and potentially land an elephant size acquisition that he has 233 00:11:18,080 --> 00:11:21,040 long sought for. So he has a massive amount of 234 00:11:21,040 --> 00:11:22,680 cash at Berkshire right now as well. 235 00:11:22,760 --> 00:11:24,920 Now this might be a surprise because I'm a big fan of Warren 236 00:11:24,920 --> 00:11:27,440 Buffett's investing philosophy. I've modeled a lot of my 237 00:11:27,440 --> 00:11:30,840 philosophy after it, but this is not one that I agree with. 238 00:11:30,840 --> 00:11:33,240 I would swap Berkshire for a different company. 239 00:11:33,840 --> 00:11:35,080 And there's a couple reasons why. 240 00:11:35,080 --> 00:11:38,240 They do highlight the risk that Warren Buffett is 94 years old. 241 00:11:38,600 --> 00:11:42,680 Knowing his own age, he's hired multiple lieutenants to work 242 00:11:42,680 --> 00:11:44,560 underneath him. They bought stocks like 243 00:11:44,560 --> 00:11:47,160 Paramount Global. That was a value trap. 244 00:11:47,400 --> 00:11:50,040 Warren Buffett had to defend the purchase, and he basically said 245 00:11:50,040 --> 00:11:52,560 it didn't make sense to him. And with that, you have these 246 00:11:52,560 --> 00:11:56,440 lieutenants that may have to take over with $310 billion of 247 00:11:56,440 --> 00:11:58,360 cash. That's a lot of money that 248 00:11:58,360 --> 00:12:01,840 they're going to put to work. So this would have been better 249 00:12:01,840 --> 00:12:04,960 done if Warren Buffett picked out a purchase, bought another 250 00:12:04,960 --> 00:12:07,720 stock like Apple. Another thing that this points 251 00:12:07,720 --> 00:12:10,920 out is that there is the potential to land an elephant 252 00:12:10,920 --> 00:12:15,040 size acquisition, but I don't really buy that because that 253 00:12:15,040 --> 00:12:18,640 potential has always existed throughout 2021 and 2022. 254 00:12:18,880 --> 00:12:21,560 Berkshire also had a lot of cash during those time periods. 255 00:12:21,960 --> 00:12:23,800 They didn't buy anything during those dips. 256 00:12:24,200 --> 00:12:26,440 They didn't buy Amazon when it was $80.00 per share. 257 00:12:26,440 --> 00:12:28,880 They didn't buy Netflix when it was $200 per share. 258 00:12:28,880 --> 00:12:31,560 They didn't buy Meta or any company on these dips. 259 00:12:31,760 --> 00:12:33,400 They could have. They have more cash now, but 260 00:12:33,400 --> 00:12:36,320 they had a lot of cash then and they also didn't buy anything 261 00:12:36,320 --> 00:12:38,320 during the March sell off in 2020. 262 00:12:38,720 --> 00:12:42,160 So there's two huge sell offs in the market over the past five 263 00:12:42,160 --> 00:12:44,680 years and Berkshire has leaned into neither one of them. 264 00:12:44,960 --> 00:12:47,600 They haven't bought any significant stake in any company 265 00:12:47,800 --> 00:12:49,200 during either of those sell offs. 266 00:12:49,600 --> 00:12:53,000 Those are opportunities for them to exercise value investing to 267 00:12:53,000 --> 00:12:55,040 buy the dip. And I didn't see it happen with 268 00:12:55,040 --> 00:12:57,840 Berkshire. And #4 I would swap this company 269 00:12:57,960 --> 00:13:00,040 for Netflix. I think the Netflix has more 270 00:13:00,040 --> 00:13:02,880 predictable performance in the future for a couple of reasons. 271 00:13:03,240 --> 00:13:06,080 It trades at a higher valuation, but it's growing its earnings at 272 00:13:06,080 --> 00:13:09,360 a much faster pace. So even though it's at a 38 Ford 273 00:13:09,360 --> 00:13:12,680 PE ratio, Netflix has been growing its earnings at 20 to 274 00:13:12,680 --> 00:13:15,400 30% per year. Their free cash flow has seen 275 00:13:15,400 --> 00:13:17,680 explosive growth over the past couple of years. 276 00:13:18,080 --> 00:13:21,680 They still trade at a decent valuation and overall Netflix I 277 00:13:21,680 --> 00:13:24,160 believe is set up really good for 2025. 278 00:13:24,320 --> 00:13:26,840 I believe they're likely gaining a lot of subscribers this month 279 00:13:26,840 --> 00:13:30,680 with Squid Game, NFL games, live events, the Jake Paul event. 280 00:13:30,880 --> 00:13:34,000 I think the Q4 of 2024 is going to be a really good quarter for 281 00:13:34,000 --> 00:13:36,240 Netflix. So I could see Netflix even 282 00:13:36,240 --> 00:13:40,200 having incredible performance in 2024 going up nearly double. 283 00:13:40,520 --> 00:13:43,360 I think it could have another great year in 2025. 284 00:13:43,360 --> 00:13:45,880 Even the argument that Berkshire would be a great company in a 285 00:13:45,880 --> 00:13:48,920 downturn if the market went down, I believe that Netflix 286 00:13:48,920 --> 00:13:51,000 would also be a very defensive stock. 287 00:13:51,200 --> 00:13:54,720 The subscriber count is very sticky in recessions or 288 00:13:54,720 --> 00:13:56,800 downturns. Netflix continues to grow its 289 00:13:56,800 --> 00:13:58,800 market share. So for number 4, I'd swap 290 00:13:58,800 --> 00:14:02,840 Berkshire Hathaway for Netflix and #5 Barron's picks Citigroup. 291 00:14:03,160 --> 00:14:06,120 Citigroup looks ready for a revival after a series of 292 00:14:06,120 --> 00:14:09,360 restructuring actions taken by the CEO Jane Frazier. 293 00:14:09,360 --> 00:14:12,280 They focused the bank on five divisions while exiting consumer 294 00:14:12,280 --> 00:14:15,880 markets in 14 countries. City's returns remain anemic, 295 00:14:15,880 --> 00:14:19,240 but Wells Fargo banking analyst Mike Mayo sees the company 296 00:14:19,240 --> 00:14:22,160 hitting its financial targets and boosting its return on 297 00:14:22,160 --> 00:14:27,680 tangible equity to 11% to 12% in 2026 from 7% currently. 298 00:14:27,800 --> 00:14:30,240 And they have it as their top financial pick for 2025. 299 00:14:30,240 --> 00:14:31,840 They say no other bank comes close. 300 00:14:31,840 --> 00:14:36,000 Citi now gets 80% of its revenue from three top tier businesses, 301 00:14:36,320 --> 00:14:39,560 a global service operation which includes #1 international 302 00:14:39,560 --> 00:14:41,880 payment business for a corporation and a top three 303 00:14:41,880 --> 00:14:44,560 credit card company. The knock on Citi is that it's a 304 00:14:44,560 --> 00:14:47,760 perpetual underperformer. Mayo says that things are 305 00:14:47,760 --> 00:14:50,280 changing, changing. He sees $10 a share in earnings 306 00:14:50,280 --> 00:14:54,800 in 2026, up from a projected $7.00 in 2025, and he believes 307 00:14:54,800 --> 00:14:56,640 the stock can double over the next three years. 308 00:14:56,760 --> 00:14:59,320 This is another one that I would change for a different company. 309 00:14:59,320 --> 00:15:01,800 I wouldn't be putting my money in Citibank hoping for a turn 310 00:15:01,800 --> 00:15:03,520 around. It's true that they highlight 311 00:15:03,520 --> 00:15:06,240 some of the upside here, and most of it has to do with 312 00:15:06,240 --> 00:15:08,320 valuation. But if you get in the habit of 313 00:15:08,320 --> 00:15:11,760 buying stocks purely out of valuation without considering 314 00:15:11,760 --> 00:15:14,480 the greater landscape, then I think you're going to have a lot 315 00:15:14,480 --> 00:15:16,880 of underperformance. Now, again, the valuation is 316 00:15:16,880 --> 00:15:19,480 intriguing. It trades set a .65 price to 317 00:15:19,480 --> 00:15:22,320 book, which is cheap. Even if it went to A1, you'd see 318 00:15:22,320 --> 00:15:24,160 a lot of upside. It's a lot of multiple 319 00:15:24,160 --> 00:15:26,640 expansion. The downside is, is that 320 00:15:26,640 --> 00:15:29,160 companies like Citibank I think are being competed with with 321 00:15:29,160 --> 00:15:32,800 many other fintech companies that didn't exist 10 years ago. 322 00:15:33,040 --> 00:15:35,480 Now you have companies like Sofi, you have companies like 323 00:15:35,480 --> 00:15:38,320 Ally Financial, and that creates more pressure for growth for 324 00:15:38,320 --> 00:15:40,840 this company. So even though there could be 325 00:15:40,840 --> 00:15:43,520 the potential for a big swing, another Goodyear from this 326 00:15:43,520 --> 00:15:46,560 company, I would rather swap this for one that I think is far 327 00:15:46,560 --> 00:15:49,400 more predictable, like one that I own, which is Salesforce. 328 00:15:49,800 --> 00:15:52,520 Salesforce trades at a higher valuation, so you don't have the 329 00:15:52,920 --> 00:15:56,320 potential for just massive multiple expansion, but you 330 00:15:56,320 --> 00:15:58,400 don't need to have multiple expansion for this company to 331 00:15:58,400 --> 00:16:00,560 grow. They're growing their revenue so 332 00:16:00,560 --> 00:16:03,480 quickly and consistently, and they're growing their margins so 333 00:16:03,480 --> 00:16:06,760 quickly that the company's free cash flow is exploding to the 334 00:16:06,760 --> 00:16:09,040 upside. So for #5 with Citigroup, I 335 00:16:09,040 --> 00:16:10,880 would change that one for Salesforce. 336 00:16:10,880 --> 00:16:13,200 And number six, we have another value company. 337 00:16:13,200 --> 00:16:17,400 This one's called Everest Group. At just 6 * 2025 earnings, 338 00:16:17,640 --> 00:16:21,160 Everest Group is one of the cheapest stocks in the S&P 500. 339 00:16:21,400 --> 00:16:23,880 That kind of valuation is often associated with troubled 340 00:16:23,880 --> 00:16:27,880 companies, but Everest is the 4th largest global reinsurer 341 00:16:28,080 --> 00:16:30,840 with high returns and impressive growth in recent years. 342 00:16:30,880 --> 00:16:34,120 The company aims to generate 17% annual shareholder returns 343 00:16:34,120 --> 00:16:36,640 through 2026. If it can achieve that, the 344 00:16:36,640 --> 00:16:39,600 stock could be up 50% over the next two years. 345 00:16:39,960 --> 00:16:43,240 If shares continue to languish, Everest could get taken over 346 00:16:43,360 --> 00:16:45,800 given its low valuation. This is another attempt for 347 00:16:45,800 --> 00:16:48,520 barons to buy a company that has potential upside through 348 00:16:48,520 --> 00:16:51,120 multiple expansion. That can happen. 349 00:16:51,120 --> 00:16:53,920 If the outlook changes for a company, you can get that 350 00:16:53,920 --> 00:16:56,400 multiple expansion. Oi see what they're trying to do 351 00:16:56,400 --> 00:16:59,480 here, but the industries they're doing it in, I think are very 352 00:16:59,480 --> 00:17:01,840 risky. This is one of those situations 353 00:17:01,840 --> 00:17:03,560 where I think it's basically a coin flip. 354 00:17:03,880 --> 00:17:06,319 And although they highlight some of the risks, they don't 355 00:17:06,319 --> 00:17:08,839 highlight nearly all of them. This is a company that, when you 356 00:17:08,839 --> 00:17:10,680 look at what it's actually dealing with, it has an 357 00:17:10,680 --> 00:17:12,920 extensive list of challenges it's facing. 358 00:17:13,119 --> 00:17:16,760 We highlight this in Qualtrim with the AI investment risks. 359 00:17:16,800 --> 00:17:19,359 The recent natural catastrophes, including Hurricane Milton and 360 00:17:19,359 --> 00:17:22,359 Helen, resulted in substantial losses that are likely to impact 361 00:17:22,359 --> 00:17:25,240 the company's financial results, with losses from Milton alone 362 00:17:25,240 --> 00:17:27,920 projected to be between 300 and 400 million. 363 00:17:28,200 --> 00:17:31,400 So on this assessment, they picked the low side, 300 364 00:17:31,400 --> 00:17:34,520 million, but it could be upwards to $400 million. 365 00:17:34,560 --> 00:17:37,440 It highlights here that the cost of legal claims and frequency of 366 00:17:37,440 --> 00:17:40,320 legal claims is increasing. That's an added expense for the 367 00:17:40,320 --> 00:17:42,000 company. They have high expenses right 368 00:17:42,000 --> 00:17:45,000 now amid their reinvestment phase, competitive pressures and 369 00:17:45,000 --> 00:17:47,880 casualty and property markets. They go through listing off 370 00:17:47,880 --> 00:17:49,280 that. They're not the only game in 371 00:17:49,280 --> 00:17:51,320 town for this industry. And then of course, there's 372 00:17:51,320 --> 00:17:53,080 regulatory and geopolitical risk. 373 00:17:53,160 --> 00:17:55,440 When I look at this one, I think it's really risky. 374 00:17:55,480 --> 00:17:58,240 You're counting on investors to get back on board this company 375 00:17:58,480 --> 00:18:02,040 that faces numerous challenges. And I'd rather swap this one for 376 00:18:02,040 --> 00:18:05,320 a company that has a very clear and bright future with a very 377 00:18:05,320 --> 00:18:09,000 predictable path going forward. I would swap number six for S&P 378 00:18:09,000 --> 00:18:10,520 Global. It's another company that I 379 00:18:10,520 --> 00:18:12,080 hold. It's one of my largest holdings. 380 00:18:12,600 --> 00:18:15,040 It trades at a reasonable valuation, especially paired 381 00:18:15,040 --> 00:18:18,320 against the market above a 3% free cash flow yield, and it's 382 00:18:18,320 --> 00:18:19,840 growing. It's free cash flow per share 383 00:18:19,840 --> 00:18:23,000 and should grow it even further in the future as more and more 384 00:18:23,000 --> 00:18:25,680 debt is being renewed. The free cash flow per share 385 00:18:25,680 --> 00:18:30,000 over the trailing 12 months was $16.00 for a company that's $500 386 00:18:30,000 --> 00:18:31,840 per share. So that's what you're buying 387 00:18:31,840 --> 00:18:35,840 when you get this company $16.00 of cash flow for $500 a share. 388 00:18:36,200 --> 00:18:38,120 And then it's also going up over time. 389 00:18:38,480 --> 00:18:40,760 If we look at the free cash flow per share, that's what it looks 390 00:18:40,760 --> 00:18:42,840 like. This should step up at at least 391 00:18:42,840 --> 00:18:45,520 15% per year. So number six, Barons chooses 392 00:18:45,520 --> 00:18:47,880 Everest Group. I would swap that for S&P Global 393 00:18:47,880 --> 00:18:51,040 and #7 they pick Louis Vuitton. The world's richest have never 394 00:18:51,040 --> 00:18:53,080 been wealthier. But Louis Vuitton, the top 395 00:18:53,080 --> 00:18:55,840 luxury goods company, hasn't been able to capitalize. 396 00:18:56,080 --> 00:18:59,240 Its sales were flat in the first nine months of the year, hurt by 397 00:18:59,240 --> 00:19:01,960 weakness in China, its most important market. 398 00:19:02,120 --> 00:19:05,080 Louis Vuitton has more than six dozen brands or mansions. 399 00:19:05,320 --> 00:19:08,520 They operate all these different incredibly valuable brands. 400 00:19:08,520 --> 00:19:10,040 They really do have a good collection of them. 401 00:19:10,080 --> 00:19:12,760 Fashion and leather goods dominate the company, which 402 00:19:12,760 --> 00:19:15,160 doesn't skimp on quality and rarely discounts. 403 00:19:15,320 --> 00:19:18,680 I do agree with this pick. I think that Louis Vuitton is a 404 00:19:18,680 --> 00:19:21,080 great pick. It's a great company, very high 405 00:19:21,080 --> 00:19:22,960 quality. It's trading at a reasonable 406 00:19:22,960 --> 00:19:24,960 valuation. They have high margins, They 407 00:19:24,960 --> 00:19:27,800 have diversified brands, and I believe they take great efforts 408 00:19:27,800 --> 00:19:29,480 to protect the quality of their brand. 409 00:19:29,480 --> 00:19:31,280 They never sacrifice on brand value. 410 00:19:31,280 --> 00:19:34,600 So this is one that I can get behind and #8 Baron chooses 411 00:19:34,600 --> 00:19:38,360 Moderna. Moderna stock down 50% this year 412 00:19:38,360 --> 00:19:41,800 to $43 per share. It's one of the worst performers 413 00:19:41,840 --> 00:19:44,560 in the market. So this is another one where 414 00:19:44,560 --> 00:19:46,840 they're buying the dip. They're going into the very 415 00:19:46,840 --> 00:19:49,520 cheap value stocks, looking for a rebound. 416 00:19:49,800 --> 00:19:52,560 Shares have been hammered by disappointing code vaccine 417 00:19:52,560 --> 00:19:56,080 sales, the company's heavy losses and estimated $9 a share 418 00:19:56,080 --> 00:20:00,480 for 2024, and management's move to push out the year a projected 419 00:20:00,480 --> 00:20:03,800 profitability until 2028 from 2026. 420 00:20:04,360 --> 00:20:06,520 So far, they're not selling this pic that well. 421 00:20:06,520 --> 00:20:08,720 They're highlighting all the issues and these seem like 422 00:20:08,720 --> 00:20:11,480 significant issues. But unlike most biotechs, 423 00:20:11,480 --> 00:20:14,520 Moderna has sizeable revenue of around $3 billion annually. 424 00:20:14,560 --> 00:20:17,200 It also has a diverse pipeline, including cancer treatments in 425 00:20:17,200 --> 00:20:20,760 conjunction with Merck and respiratory vaccines like flu, 426 00:20:20,760 --> 00:20:23,560 COVID combinations. It also is expected to be 427 00:20:23,560 --> 00:20:26,320 sitting on $9 billion of net cash by the end of the year, 428 00:20:26,720 --> 00:20:29,680 equal to just over half the company's market value of 16 429 00:20:29,680 --> 00:20:32,160 billion. So this is another similar to 430 00:20:32,160 --> 00:20:35,880 Alibaba, where the company has so much money in cash and makes 431 00:20:35,880 --> 00:20:39,320 up like half their market cap. That's a really odd situation to 432 00:20:39,320 --> 00:20:40,840 be in. I believe this is one of the 433 00:20:40,840 --> 00:20:43,960 weaker picks from Barons. There's a chance it could surge 434 00:20:43,960 --> 00:20:47,280 up 50% or double. But this is again, a situation 435 00:20:47,280 --> 00:20:49,680 where I believe Barons is basically rolling the dice. 436 00:20:49,680 --> 00:20:52,520 They're just flipping a coin hoping that the stock will have 437 00:20:52,520 --> 00:20:55,680 an epic recovery When Moderna faces a number of challenges and 438 00:20:55,680 --> 00:20:58,080 won't even be profitable for another couple of years. 439 00:20:58,240 --> 00:21:01,000 I'd rather buy another stock that's already profitable, has 440 00:21:01,000 --> 00:21:03,720 its business figured out, has great growth prospects with 441 00:21:03,720 --> 00:21:06,520 little disruption company like Texas Roadhouse. 442 00:21:06,800 --> 00:21:09,000 This is one that I've owned in My Portfolio for a number of 443 00:21:09,000 --> 00:21:11,960 years. It's done phenomenal in 2024, up 444 00:21:11,960 --> 00:21:14,920 53%, not counting the dividends it pays. 445 00:21:15,320 --> 00:21:19,680 I think it's positioned well to go up another 2030% in 2025. 446 00:21:19,960 --> 00:21:21,720 I'd not be shocked if that's the outcome. 447 00:21:21,840 --> 00:21:24,960 So #8 with Moderna, I don't agree with Barron's. 448 00:21:24,960 --> 00:21:26,640 I think it's a really risky pick. 449 00:21:26,800 --> 00:21:29,400 I'd rather pick something like Texas Roadhouse that I think is 450 00:21:29,400 --> 00:21:32,440 more predictable. And #9 we have SLB. 451 00:21:32,760 --> 00:21:35,680 The oil and gas industry is likely to supply a big chunk of 452 00:21:35,680 --> 00:21:38,640 the world's energy needs for the remainder of the century, and 453 00:21:38,640 --> 00:21:42,920 SLB will be there to service it. SLB is the leader in the field 454 00:21:43,160 --> 00:21:46,360 with operations in more than 100 countries and it's depressed 455 00:21:46,360 --> 00:21:48,240 shares don't reflect it's profitability. 456 00:21:48,280 --> 00:21:51,040 The century old SLB has a strong corporate culture and it's 457 00:21:51,040 --> 00:21:53,680 viewed as the Exxon Mobil of the service industry. 458 00:21:53,800 --> 00:21:57,000 SLB has a fast growing high margin digital business that 459 00:21:57,000 --> 00:21:59,840 uses cloud computing to help energy companies gain 460 00:21:59,840 --> 00:22:02,600 operational efficiencies. Even though I think it's a 461 00:22:02,600 --> 00:22:05,000 little bit risky, probably riskier than what I would 462 00:22:05,000 --> 00:22:08,200 personally buy, I think there's enough upside in this stock and 463 00:22:08,200 --> 00:22:10,640 I like the fact that they're diversifying into this high 464 00:22:10,640 --> 00:22:13,480 margin stream of revenue. Anytime you see a stock that's 465 00:22:13,480 --> 00:22:16,840 raising margins year after year, it's almost impossible to see 466 00:22:16,840 --> 00:22:19,680 the price go down. You never see prices going down 467 00:22:19,680 --> 00:22:22,000 on a stock as the margins are getting higher and higher. 468 00:22:22,480 --> 00:22:25,360 So this one, I do believe has a very solid catalyst going into 469 00:22:25,360 --> 00:22:30,080 2025 in #10 Barron's picks Uber. Uber stock has fallen 30% from 470 00:22:30,080 --> 00:22:34,160 its October peak to a recent $62.00 per share as investors 471 00:22:34,160 --> 00:22:37,920 worry about the robo taxis that may bypass the Uber network 472 00:22:38,200 --> 00:22:41,520 after Alphabet unit Waymo, a leader in autonomous driving, 473 00:22:41,840 --> 00:22:44,160 said it would launch its autonomous vehicles in Miami in 474 00:22:44,160 --> 00:22:48,080 2026 without a mobility partner. So that was something that 475 00:22:48,080 --> 00:22:51,320 really took the stock down was Waymo had an agreement with 476 00:22:51,360 --> 00:22:53,040 Uber. They're working with them, but 477 00:22:53,040 --> 00:22:55,880 then they said they're launching in a new city and they didn't 478 00:22:55,880 --> 00:22:58,600 mention Uber at all. So they say that they're going 479 00:22:58,600 --> 00:23:02,400 it alone and it brings into question the future of Uber. 480 00:23:02,880 --> 00:23:06,560 Now the concerns seem overblown. Uber remains the dominant ride 481 00:23:06,560 --> 00:23:09,840 hailing and food delivery service with over 150 million 482 00:23:09,840 --> 00:23:12,280 users. I'll put a caveat in that, or at 483 00:23:12,280 --> 00:23:14,960 least a correction here. Baron says that they are the 484 00:23:15,000 --> 00:23:18,320 dominant food delivery service. That's not correct. 485 00:23:19,000 --> 00:23:21,920 DoorDash has a much bigger market share of food delivery 486 00:23:21,920 --> 00:23:24,600 than Uber, but they are the dominant overall. 487 00:23:24,600 --> 00:23:27,280 If you're to group them together, they're the dominant 488 00:23:27,920 --> 00:23:30,800 service where you can get anything done, whether it's food 489 00:23:30,800 --> 00:23:32,680 delivery, grocery or ride hailing. 490 00:23:32,680 --> 00:23:36,440 Combined with over 150 million users providing robotaxi 491 00:23:36,440 --> 00:23:39,680 operations access to huge customer base, Uber argues that 492 00:23:39,680 --> 00:23:43,480 aggregating autonomous and human drivers on its platform offers a 493 00:23:43,480 --> 00:23:46,480 powerful combination that will benefit users by boosting 494 00:23:46,480 --> 00:23:48,800 reliability. With Uber being the number 10th 495 00:23:48,800 --> 00:23:50,680 pick. This is one that I also agree 496 00:23:50,680 --> 00:23:52,240 with Barron's. I wouldn't swap this for a 497 00:23:52,240 --> 00:23:54,440 different company. I think that Uber has a very 498 00:23:54,440 --> 00:23:57,360 strong case to be made, and I say that being invested with 499 00:23:57,360 --> 00:24:00,600 Google, knowing that Waymo's doing a great job rolling out to 500 00:24:00,600 --> 00:24:03,480 more cities, as well as there's Tesla that has full self 501 00:24:03,480 --> 00:24:05,200 driving. That's incredibly impressive. 502 00:24:05,560 --> 00:24:08,560 And those do present potential threats to Uber. 503 00:24:08,920 --> 00:24:12,000 But I think that most likely Uber will survive and even 504 00:24:12,000 --> 00:24:14,000 thrive. They make the argument that Uber 505 00:24:14,000 --> 00:24:18,440 is more strong together with human drivers and robo taxis 506 00:24:18,440 --> 00:24:21,760 combined, it has a more complete offering because robo taxis are 507 00:24:21,760 --> 00:24:26,080 good for most things. They can drive on on cities and 508 00:24:26,080 --> 00:24:29,480 known areas, but they're not great for every situation, like 509 00:24:29,480 --> 00:24:32,160 picking people up at certain airport terminals and different 510 00:24:32,160 --> 00:24:34,200 things like that. They have to have specific 511 00:24:34,200 --> 00:24:36,480 training for that, and it's easier said than done. 512 00:24:36,680 --> 00:24:39,960 Humans can figure out those niche situations very easily. 513 00:24:40,040 --> 00:24:42,840 And this leads us off to this entire debate of the robotaxi 514 00:24:42,840 --> 00:24:44,960 battle. Right now, we have Waymo pulling 515 00:24:44,960 --> 00:24:47,200 ahead, launching more and more cities. 516 00:24:47,280 --> 00:24:50,480 And then we have Tesla, which unveiled its robotaxi concept. 517 00:24:50,800 --> 00:24:54,440 So far it's still a concept, but they have immediate plans within 518 00:24:54,440 --> 00:24:58,440 2025 to have their first robotaxi cars on the road. 519 00:24:58,560 --> 00:25:01,880 There's other companies like Amazon that have Zooks that's 520 00:25:01,880 --> 00:25:03,680 this interesting looking vehicle. 521 00:25:03,840 --> 00:25:07,440 Amazon will invest through very thick and thin circumstances to 522 00:25:07,440 --> 00:25:09,840 make something work. So if they believe there is a 523 00:25:09,840 --> 00:25:13,960 growth path for Zooks, they'll continue to invest at a loss for 524 00:25:13,960 --> 00:25:17,080 any amount of time necessary. And in fact, Zooks should be on 525 00:25:17,080 --> 00:25:20,600 the road in Vegas in 2025. So we have all of these robotaxi 526 00:25:20,600 --> 00:25:22,560 companies coming after Uber's market share. 527 00:25:23,000 --> 00:25:25,200 Now, there's a lot of different opinions on this. 528 00:25:25,200 --> 00:25:27,800 I'd say different cohorts of lines of thought. 529 00:25:27,960 --> 00:25:29,720 One of them is in the Tesla camp. 530 00:25:29,840 --> 00:25:32,240 If you're a hardened Tesla investor, with that as the 531 00:25:32,240 --> 00:25:34,800 majority of your portfolio, you're probably under the 532 00:25:34,800 --> 00:25:38,120 impression that Tesla will launch their full self driving 533 00:25:38,520 --> 00:25:41,080 robotaxi network and within a year they'll have them 534 00:25:41,120 --> 00:25:43,320 everywhere. They'll just be cruising across 535 00:25:43,320 --> 00:25:45,040 the roads. Everyone will be using the 536 00:25:45,040 --> 00:25:49,160 robotaxi network from Tesla. While that seems good in theory, 537 00:25:49,160 --> 00:25:52,560 there's certain challenges. Robo taxis are actually very 538 00:25:52,560 --> 00:25:55,320 localized. Getting licensing in every 539 00:25:55,320 --> 00:25:58,520 single state is an issue. And then within every single 540 00:25:58,520 --> 00:26:02,720 state there's local licenses. That's very difficult to operate 541 00:26:02,760 --> 00:26:06,760 in every single municipality. the US is a collection of cities 542 00:26:06,760 --> 00:26:09,560 that all have different rules and regulations, like how to 543 00:26:09,560 --> 00:26:13,840 deal with airports and freeways, different specific local 544 00:26:13,840 --> 00:26:16,880 geographic restrictions. Tesla's going to have to figure 545 00:26:16,880 --> 00:26:20,160 out and map out every single one of those little novel localities 546 00:26:20,160 --> 00:26:23,080 and restrictions and rules, and that's very difficult. 547 00:26:23,320 --> 00:26:26,720 That's the same challenge that Zillow tried to face when they 548 00:26:26,720 --> 00:26:29,280 tried to roll their business out to a home flipping business 549 00:26:29,280 --> 00:26:31,520 across the US. They found out that this 550 00:26:31,520 --> 00:26:35,680 business is highly localized, that real estate in one state is 551 00:26:35,680 --> 00:26:39,000 very different than another. And with robo taxis, it's very 552 00:26:39,000 --> 00:26:41,720 much the same. It is very different from one 553 00:26:41,720 --> 00:26:43,960 state to another, one city to another. 554 00:26:44,360 --> 00:26:46,640 So Uber already has all of that figured out. 555 00:26:47,000 --> 00:26:50,000 Tesla's going to have to expand and figure that out as well. 556 00:26:50,360 --> 00:26:52,520 And they have other limiting factors as well. 557 00:26:52,880 --> 00:26:56,360 Creating a robo taxi network requires immense CapEx 558 00:26:56,360 --> 00:26:57,960 investment in building the vehicles. 559 00:26:58,440 --> 00:27:00,800 Tesla is going to have to manufacture each and everyone of 560 00:27:00,800 --> 00:27:04,600 these vehicles, scaling them U building all of them, launching 561 00:27:04,600 --> 00:27:07,920 them, maintaining all of them, doing all the repairs, finding 562 00:27:07,920 --> 00:27:09,840 parking for all of them to charge at night. 563 00:27:10,080 --> 00:27:13,040 Doing all of this is going to require a lot of capax. 564 00:27:13,400 --> 00:27:15,440 That's going to be another big limiting factor. 565 00:27:15,760 --> 00:27:18,200 So while all of this is happening, figuring out all of 566 00:27:18,200 --> 00:27:21,000 these rules, scaling up, creating a network, Uber's 567 00:27:21,000 --> 00:27:23,440 already off to the races. They're making money every 568 00:27:23,440 --> 00:27:25,800 single month that this is happening, and they can still 569 00:27:25,800 --> 00:27:28,040 remain highly competitive with their service. 570 00:27:28,320 --> 00:27:31,080 If they partner a little bit with Waymo, a little bit with 571 00:27:31,080 --> 00:27:34,280 Zooks, maybe some other car company comes into play, they'll 572 00:27:34,280 --> 00:27:36,520 be able to partner with multiple companies to complete their 573 00:27:36,520 --> 00:27:37,960 service. So while there's a lot of 574 00:27:37,960 --> 00:27:41,080 different thought processes here, I think the most likely is 575 00:27:41,080 --> 00:27:42,560 that Uber is going to turn out fine. 576 00:27:42,840 --> 00:27:45,600 And I like this pick. Now, going on, we have the news 577 00:27:45,600 --> 00:27:49,280 that Netflix had a rough time with the Jake Paul Mike Tyson 578 00:27:49,280 --> 00:27:51,400 fight. The numbers that viewed that 579 00:27:51,400 --> 00:27:54,040 fight were around three times their highest estimate. 580 00:27:54,440 --> 00:27:57,920 So they grossly underestimated how many viewers the Mike Tyson 581 00:27:57,920 --> 00:28:00,440 fight was going to get. And it seemed like Netflix 582 00:28:00,440 --> 00:28:03,720 learned their lesson. They had a high confidence going 583 00:28:03,720 --> 00:28:07,400 into the double NFL game on Sunday, and it seemed like they 584 00:28:07,400 --> 00:28:09,480 figured it out. Netflix got through the day 585 00:28:09,480 --> 00:28:11,680 without any major blunders or glitches. 586 00:28:11,880 --> 00:28:14,160 And that's exactly what Netflix had to do. 587 00:28:14,200 --> 00:28:16,000 This was a critical day for Netflix. 588 00:28:16,160 --> 00:28:20,720 If they screwed up streaming two NFL games on Christmas Day, that 589 00:28:20,720 --> 00:28:24,160 would be almost unforgivable. The NFL would have a serious 590 00:28:24,160 --> 00:28:26,520 problem with Netflix. They would question their 591 00:28:26,520 --> 00:28:28,160 partnership with them in the future. 592 00:28:28,520 --> 00:28:30,160 They would wonder if they're going to be a good partner to 593 00:28:30,160 --> 00:28:33,200 represent their brand. The NFL would be concerned about 594 00:28:33,200 --> 00:28:37,360 hemorrhaging viewers from Netflix's NFL stream to the NBA. 595 00:28:37,840 --> 00:28:41,120 So the fact that Netflix pulled this off, they got the errors 596 00:28:41,120 --> 00:28:44,920 corrected for the vast majority of people, 99%, they had a very 597 00:28:44,920 --> 00:28:48,000 high definition crispy stream. It looked great overall. 598 00:28:48,080 --> 00:28:50,400 Now, there's other implications for what this means for Netflix 599 00:28:50,400 --> 00:28:52,440 stock. We have Tom Rogers commenting on 600 00:28:52,680 --> 00:28:54,800 how this could lead to a lot of subscriber growth. 601 00:28:54,800 --> 00:28:56,440 He thinks that might be the biggest take away. 602 00:28:56,640 --> 00:29:00,520 While Netflix presumably entered into this deal to help its 603 00:29:00,520 --> 00:29:04,080 nascent advertising business business, and it looks like they 604 00:29:04,080 --> 00:29:07,400 did a hell of a job selling advertising here, it was chock 605 00:29:07,400 --> 00:29:13,600 full of of ads. Less emphasized was would this 606 00:29:13,600 --> 00:29:18,920 be a big sign up day for new Netflix subscribers as the Paul 607 00:29:18,920 --> 00:29:23,520 Tyson fight ended up being. I think it will be a banner day 608 00:29:23,520 --> 00:29:27,720 for for signups there. Now Mike Tyson and Jake Paul had 609 00:29:27,800 --> 00:29:31,080 global international appeal with Mike Tyson being such a huge 610 00:29:31,080 --> 00:29:33,920 figure across the world. The NFL is mostly within the US, 611 00:29:33,920 --> 00:29:36,920 but most people that watch the NFL are used to paying a little 612 00:29:36,920 --> 00:29:38,400 bit of money to watch some games. 613 00:29:38,720 --> 00:29:41,720 In fact, they usually pay for big packages and cable TV 614 00:29:41,720 --> 00:29:43,960 services. So the proposition of just 615 00:29:43,960 --> 00:29:47,760 signing up for a $7.00 a month Netflix account to watch 2 games 616 00:29:47,760 --> 00:29:51,760 on Christmas Day seems easy. Seems like something easily 617 00:29:51,760 --> 00:29:54,600 doable. And then during the game Netflix 618 00:29:54,600 --> 00:29:57,400 use that as an opportunity to say hey, if you're a new sign 619 00:29:57,400 --> 00:29:59,880 up, stick around. They showed off their massive 620 00:29:59,880 --> 00:30:02,760 library and catalogue of shows. So Netflix should not only gain 621 00:30:02,760 --> 00:30:05,360 a lot of subscribers on Christmas Day, but many of them 622 00:30:05,360 --> 00:30:07,880 are going to stick around because Netflix has a massive 623 00:30:07,880 --> 00:30:09,960 library of content. I think in the next earnings 624 00:30:09,960 --> 00:30:12,520 report, Netflix will say that this was a massive success. 625 00:30:12,880 --> 00:30:15,720 They fix the technical issues, they prove that they can be a 626 00:30:15,760 --> 00:30:18,760 major sports streamer, offer great displays, great 627 00:30:18,760 --> 00:30:20,600 transitions, a great halftime show. 628 00:30:20,840 --> 00:30:23,960 They had around double the normal cameras of an NFL game to 629 00:30:23,960 --> 00:30:25,880 get different on the field angles and make the viewing 630 00:30:25,880 --> 00:30:27,240 experience a little bit enhanced. 631 00:30:27,640 --> 00:30:30,840 It seems like Netflix is really pivoting to have these type of 632 00:30:30,840 --> 00:30:32,760 major events become a more frequent thing. 633 00:30:32,800 --> 00:30:36,360 This is just rumors, but across the MMA forms, there's a lot of 634 00:30:36,360 --> 00:30:39,200 buzz that Netflix is now going to be at the bidding table for 635 00:30:39,200 --> 00:30:42,080 UFC. Now, if I had a guess, I don't 636 00:30:42,080 --> 00:30:45,120 think that Netflix would go for all of UFC to have exclusive 637 00:30:45,120 --> 00:30:48,040 rights, but I think they will try to get a couple of the 638 00:30:48,040 --> 00:30:51,600 biggest matches to have as live events on certain promotional 639 00:30:51,600 --> 00:30:54,000 days. They'll just sprinkle in all 640 00:30:54,000 --> 00:30:56,880 these big live events on top of their normal library. 641 00:30:57,120 --> 00:30:59,200 And I think that's an excellent strategy going forward. 642 00:30:59,200 --> 00:31:01,720 Now we finally get to this article, which the headline of 643 00:31:01,720 --> 00:31:05,480 it just it just made me laugh. I, I look at this and Microsoft 644 00:31:05,480 --> 00:31:09,000 is forcing its AI assistant on people and making them pay. 645 00:31:09,800 --> 00:31:13,240 It's, it seems a a little out there as a headline, but when 646 00:31:13,240 --> 00:31:15,520 you read about it, this is actually kind of what Microsoft 647 00:31:15,520 --> 00:31:17,880 is doing. Microsoft is trying a new 648 00:31:17,880 --> 00:31:20,600 approach to build excitement for its artificial intelligence 649 00:31:20,600 --> 00:31:23,880 assistant, Copilot. Give it to customers whether 650 00:31:23,880 --> 00:31:26,280 they want it or not. The tech company recently had a 651 00:31:26,280 --> 00:31:28,600 copilot to its consumer subscription service for 652 00:31:28,600 --> 00:31:32,880 software including Word, Excel and PowerPoint in Australia and 653 00:31:32,880 --> 00:31:34,920 several other South Asian countries. 654 00:31:35,120 --> 00:31:37,880 Along with the AI feature, it raised prices for everyone who 655 00:31:37,880 --> 00:31:40,480 uses the service. So it's not like Microsoft had a 656 00:31:40,480 --> 00:31:43,760 separate product called Copilot, which they somehow forced 657 00:31:43,760 --> 00:31:46,440 customers to pay with. They can't legally do that. 658 00:31:46,640 --> 00:31:49,120 So what they did instead was they just bundled it along with 659 00:31:49,120 --> 00:31:51,360 their other products, and then they raised the prices. 660 00:31:51,720 --> 00:31:54,520 They're not directly saying that they're forcing you to pay for 661 00:31:54,520 --> 00:31:56,640 Copilot, but that's the assumption here. 662 00:31:56,760 --> 00:31:59,080 And a lot of users don't like Copilot. 663 00:31:59,080 --> 00:32:01,560 Marc Benioff, the CEO of Salesforce, has referred to 664 00:32:01,560 --> 00:32:06,480 Copilot as Clippy 2 Point O, an annoying assistant that doesn't 665 00:32:06,480 --> 00:32:08,520 really help you. It's something that Microsoft 666 00:32:08,520 --> 00:32:10,000 had in their products a long time ago. 667 00:32:10,280 --> 00:32:12,360 He's saying that that has resurfaced in the form of 668 00:32:12,360 --> 00:32:14,960 Copilot. Now he's a big competitor, so 669 00:32:14,960 --> 00:32:18,040 he's kind of bashing one of his competitors, but it seems like 670 00:32:18,040 --> 00:32:21,080 he may be on to something here. Users are saying that this is 671 00:32:21,160 --> 00:32:24,560 irritating to me as a user. Other people, they say, are 672 00:32:24,560 --> 00:32:27,000 mentioning that it it reminds them of Clippy. 673 00:32:27,320 --> 00:32:29,560 Now, I don't know if they've watched the interviews with Marc 674 00:32:29,560 --> 00:32:32,160 Benioff or if they're independently coming to the same 675 00:32:32,160 --> 00:32:35,200 conclusion, but literal customers of Microsoft are 676 00:32:35,200 --> 00:32:38,280 comparing Copilot to Clippy, which is not something I want to 677 00:32:38,280 --> 00:32:41,200 see as an investor in Microsoft. Now, even though Microsoft can 678 00:32:41,200 --> 00:32:43,040 do this, I don't think it's right strategy. 679 00:32:43,040 --> 00:32:45,440 They're forcing their customers to pay for this additional 680 00:32:45,440 --> 00:32:48,120 product and in some cases annoying the customer. 681 00:32:48,440 --> 00:32:51,240 It also invites regulation. I know the EU is going to be 682 00:32:51,240 --> 00:32:54,320 looking at this and the abuse of the bundling that's going on 683 00:32:54,320 --> 00:32:56,920 here. So it has multiple issues and I 684 00:32:56,920 --> 00:32:59,440 like the strategy that Salesforce is doing where they 685 00:32:59,440 --> 00:33:01,560 have their current set of customers and they try to sell 686 00:33:01,560 --> 00:33:04,680 them these new additional services as Ala carte 687 00:33:04,680 --> 00:33:07,800 independent additional add-ons. They're not just forcing their 688 00:33:07,800 --> 00:33:10,560 customers to use agent force. So we'll see how this turns out, 689 00:33:10,560 --> 00:33:12,120 but I think they're going to get a lot of pushback. 690 00:33:12,120 --> 00:33:13,400 That's going to be it for this episode. 691 00:33:13,480 --> 00:33:14,200 See you in the next one.