1 00:00:00,080 --> 00:00:01,720 Welcome back everyone. Thanks for joining. 2 00:00:01,760 --> 00:00:04,200 This week is one of the busiest weeks in the market. 3 00:00:04,200 --> 00:00:06,560 In fact, in terms of earnings, this is it. 4 00:00:06,640 --> 00:00:08,640 This is like the Super Bowl of earnings. 5 00:00:08,920 --> 00:00:11,920 We have all of the big companies outside of Apple. 6 00:00:11,960 --> 00:00:17,240 We have Microsoft, Google, Visa, Amazon and Meta all reporting 7 00:00:17,320 --> 00:00:19,600 this week. And what I hope to do in this 8 00:00:19,600 --> 00:00:23,880 video is give some preview of the earnings, some insight and 9 00:00:23,880 --> 00:00:27,640 background into what I expect and some context into what these 10 00:00:27,640 --> 00:00:30,580 companies are doing Now. If we look at the full week 11 00:00:30,580 --> 00:00:34,020 ahead, it's very busy. It it's not much going on on 12 00:00:34,020 --> 00:00:35,660 Monday. That's why I record this video 13 00:00:35,660 --> 00:00:38,860 today is because on Mondays we have companies. 14 00:00:39,220 --> 00:00:41,100 Most of them, they're just not that meaningful. 15 00:00:41,260 --> 00:00:43,780 No offence, but none of these companies really move the needle 16 00:00:44,060 --> 00:00:46,940 when we get into Tuesday. That's where things get really 17 00:00:46,940 --> 00:00:49,540 explosive. We start off the day with 18 00:00:49,540 --> 00:00:52,020 Coca-Cola, Verizon reporting earnings. 19 00:00:52,020 --> 00:00:54,820 We have other companies like 3M and then we have Spotify as 20 00:00:54,820 --> 00:00:56,620 well. Now you'll notice that I've 21 00:00:56,620 --> 00:00:59,100 circled some of these in red and those are the ones that I'm 22 00:00:59,100 --> 00:01:00,860 going to be reviewing in this video. 23 00:01:00,860 --> 00:01:03,740 So we're going to be going over Coca-Cola, Verizon and Spotify. 24 00:01:03,940 --> 00:01:07,700 We'll also be looking Tuesday after close at Microsoft, 25 00:01:07,700 --> 00:01:11,740 Google, Snapchat and Visa. Now earnings Whisper in their 26 00:01:11,740 --> 00:01:14,740 calendar left out a couple companies, so I added them in. 27 00:01:15,140 --> 00:01:17,380 So these are ones that are reporting earnings tomorrow as 28 00:01:17,380 --> 00:01:19,460 well. We have Canadian Pacific and 29 00:01:19,460 --> 00:01:21,700 Vici. I added these in because both of 30 00:01:21,700 --> 00:01:24,060 these are companies that I own. I think they're important 31 00:01:24,060 --> 00:01:27,250 companies as well. Now we move on to Wednesday. 32 00:01:27,410 --> 00:01:30,010 Wednesday is a big day as well. We have Thermo Fisher 33 00:01:30,010 --> 00:01:32,970 Scientific, that's a very popular, high quality company. 34 00:01:32,970 --> 00:01:34,450 A lot of super investors are in it. 35 00:01:34,690 --> 00:01:37,010 That one's reporting earnings Wednesday, market open. 36 00:01:37,290 --> 00:01:39,370 Then we of course have Texas Roadhouse. 37 00:01:39,690 --> 00:01:41,410 That is one that I've been talking about for a while. 38 00:01:41,410 --> 00:01:43,210 I own a huge stake in Texas Roadhouse. 39 00:01:43,490 --> 00:01:44,690 They're reporting earnings as well. 40 00:01:45,130 --> 00:01:47,210 Then we move on to Wednesday after close. 41 00:01:47,290 --> 00:01:50,530 We have meta, they're reporting earnings, highly anticipated. 42 00:01:50,890 --> 00:01:53,930 We have Thursday. Thursday is the last big day of 43 00:01:53,930 --> 00:01:56,700 the week. We have MasterCard reporting 44 00:01:56,700 --> 00:01:59,580 earnings, so we have both Visa and MasterCard this week. 45 00:01:59,940 --> 00:02:02,260 We have a company that I haven't talked about a whole lot, but 46 00:02:02,260 --> 00:02:05,860 it's one that's being passed around on the the Fintwit and 47 00:02:05,860 --> 00:02:08,259 the Internet, which is Tractor Supply Company. 48 00:02:08,539 --> 00:02:10,699 It's a retailer. They're reporting earnings. 49 00:02:10,699 --> 00:02:14,220 Thursday market open, then Thursday market close. 50 00:02:14,220 --> 00:02:16,860 We have a huge holding of mine, which is Amazon. 51 00:02:17,100 --> 00:02:19,380 I'll be spending some time on this one, giving some thoughts 52 00:02:19,380 --> 00:02:20,660 into what's going to be happening. 53 00:02:21,310 --> 00:02:25,110 Then Thursday market close. We also have Chipotle, another 54 00:02:25,110 --> 00:02:28,190 company that I own. This is one of the the companies 55 00:02:28,190 --> 00:02:31,390 that Bill Ackman owns as well. So that's a full look ahead and 56 00:02:31,390 --> 00:02:33,710 we'll be going over again each of those that were circled in 57 00:02:33,710 --> 00:02:36,830 red to give context and insight into what's happening with these 58 00:02:36,830 --> 00:02:39,470 companies. Now I must mention before we 59 00:02:39,470 --> 00:02:42,230 even start off that I'm not just someone that talks about stocks. 60 00:02:42,470 --> 00:02:45,230 I actually invest in them. I have public holdings that I 61 00:02:45,230 --> 00:02:46,990 track every single week, week by week. 62 00:02:47,230 --> 00:02:49,830 So if you want to see how these portfolios do, I have two 63 00:02:49,830 --> 00:02:52,270 portfolios. The Story fund is one of them. 64 00:02:52,510 --> 00:02:55,630 This is a tech portfolio that I started more recently during 65 00:02:55,790 --> 00:02:59,990 2021, and I'm investing in a a very concentrated group of 66 00:02:59,990 --> 00:03:03,110 companies, 6 positions, $150,000. 67 00:03:03,350 --> 00:03:05,190 This is all my money. It's all real. 68 00:03:05,510 --> 00:03:07,990 I've invested in companies like Amazon and Netflix is my two 69 00:03:07,990 --> 00:03:10,590 biggest holdings. Netflix just reported earnings 70 00:03:10,590 --> 00:03:13,950 last week along with Tesla. Tesla's earnings were a little 71 00:03:13,950 --> 00:03:16,110 disappointing. That's a company that I I've 72 00:03:16,230 --> 00:03:19,490 avoided so far, but I am invested in Netflix and their 73 00:03:19,490 --> 00:03:21,970 earnings report was incredibly strong. 74 00:03:22,050 --> 00:03:24,370 It was there's no other way around it. 75 00:03:24,370 --> 00:03:27,210 It was an incredibly strong earnings report and I see more 76 00:03:27,690 --> 00:03:30,410 of a bright future for Netflix. So I'm going to have an update 77 00:03:30,490 --> 00:03:34,210 on Netflix and an in depth dive into that company's analysis 78 00:03:34,210 --> 00:03:37,930 tomorrow on this channel. Now the other portfolio I have 79 00:03:37,930 --> 00:03:40,730 is the passive income portfolio. I've been following this one for 80 00:03:40,730 --> 00:03:44,490 some time and again the goal here is to show transparency, 81 00:03:44,490 --> 00:03:47,210 show you what I'm investing in. You can follow week by week. 82 00:03:47,210 --> 00:03:50,170 I follow this one on my other YouTube channel, Joseph Carlson. 83 00:03:50,290 --> 00:03:52,050 And the goal of this one is largely the same. 84 00:03:52,050 --> 00:03:55,010 It's concentrated into a group of companies that I consider to 85 00:03:55,010 --> 00:03:57,650 be incredibly high quality companies, ones that are in the 86 00:03:57,650 --> 00:04:01,010 top 1% of the top 1%. I call them compounding 87 00:04:01,010 --> 00:04:04,450 machines, but they're companies that have extremely reliable 88 00:04:04,450 --> 00:04:06,290 earnings growth. They have very low debt. 89 00:04:06,290 --> 00:04:07,690 They have high barriers to entry. 90 00:04:08,010 --> 00:04:11,050 They're all around very difficult companies to compete 91 00:04:11,050 --> 00:04:14,420 with and they continually compound year after year after 92 00:04:14,420 --> 00:04:15,700 year. So when I talk about these 93 00:04:15,700 --> 00:04:18,220 upcoming earnings, I may hold positions in these companies. 94 00:04:18,220 --> 00:04:20,940 In fact, many of them I do. And I'm giving you my 95 00:04:20,940 --> 00:04:23,540 perspective on how I think this will turn out. 96 00:04:23,660 --> 00:04:26,260 Now we'll start off here right at the beginning Tuesday market 97 00:04:26,260 --> 00:04:29,060 opening, so tomorrow market opening, we have Coca-Cola 98 00:04:29,340 --> 00:04:31,540 reporting earnings before the bell. 99 00:04:32,420 --> 00:04:34,940 I like Coca-Cola. I think it's a solid holding. 100 00:04:35,100 --> 00:04:38,620 Warren Buffett I think does a, he's done the right decision in 101 00:04:38,620 --> 00:04:40,780 just buying this company and holding it long term. 102 00:04:41,370 --> 00:04:44,570 Now I also like with the management of Coca Cola's doing 103 00:04:44,770 --> 00:04:46,570 making their company more capital light. 104 00:04:46,890 --> 00:04:49,730 They're also bringing down debt. If we look at the long term debt 105 00:04:49,730 --> 00:04:53,010 trends, let me zoom zoom in on this over the past 10 years, 106 00:04:53,370 --> 00:04:55,170 let's just take a look at debt alone. 107 00:04:56,010 --> 00:04:59,410 Notice it's going down over time, the total debt and long 108 00:04:59,410 --> 00:05:01,770 term debts going down over time, which I like to see. 109 00:05:02,290 --> 00:05:04,250 I would be a little bit more concerned if it was just going 110 00:05:04,250 --> 00:05:07,730 up over time, but then we also have the cash increasing over 111 00:05:07,730 --> 00:05:10,740 the past 3/4. So debts going down, cash is 112 00:05:10,740 --> 00:05:13,060 increasing. I like what I see there with the 113 00:05:13,060 --> 00:05:15,820 balance sheet. I also like how the company's 114 00:05:15,820 --> 00:05:17,820 positioned. They have an extremely strong 115 00:05:17,820 --> 00:05:20,340 portfolio. Coca-Cola is a safe haven. 116 00:05:20,620 --> 00:05:23,380 I think it has a decent free cash flow yield of 4%. 117 00:05:23,620 --> 00:05:26,900 It's not price too high. The one reason I don't own this 118 00:05:26,900 --> 00:05:31,260 company is when I when I do analysis on companies, I'm not 119 00:05:31,260 --> 00:05:34,180 just looking at if they're stable and if they're defensive. 120 00:05:34,510 --> 00:05:37,510 I'm also looking at how much they can grow their intrinsic 121 00:05:37,510 --> 00:05:40,590 value on a per share basis year after year. 122 00:05:40,830 --> 00:05:43,790 Meaning I'm searching for companies that on a per share 123 00:05:43,790 --> 00:05:47,550 basis are going to have higher free cash flows, earnings and 124 00:05:47,910 --> 00:05:49,670 revenue. They're going to have revenue 125 00:05:49,670 --> 00:05:53,070 per share, free cash flow per share, earnings per share, all 126 00:05:53,070 --> 00:05:55,470 of that's going to go up. The way that I measure that 127 00:05:55,470 --> 00:05:58,910 using qualtrum.com here is we can look at the free cash flow. 128 00:05:58,990 --> 00:06:01,710 This is going up, but then I also want to look at the free 129 00:06:01,710 --> 00:06:03,870 cash flow per share. I can look at that right here. 130 00:06:04,440 --> 00:06:07,200 The free cash flow per share is going up over time. 131 00:06:07,520 --> 00:06:10,040 That's a trend I like to see. But the rate that it's 132 00:06:10,040 --> 00:06:12,120 increasing is not as high as I would like. 133 00:06:12,480 --> 00:06:17,600 Over the past decade, it's only increased 2.35% annualized. 134 00:06:17,600 --> 00:06:22,160 So over a compound annual growth rate, 2.35% is not even 135 00:06:22,160 --> 00:06:24,800 inflation. So Coca-Cola is basically just 136 00:06:25,040 --> 00:06:27,760 staying stagnant with its free cash flow per share. 137 00:06:28,120 --> 00:06:31,150 For me that's not good enough. I want companies that are 138 00:06:31,150 --> 00:06:35,590 growing that free cash flow per share 10% or above for the next 139 00:06:35,590 --> 00:06:37,590 10 years. And I believe I can find those 140 00:06:37,590 --> 00:06:39,910 type of companies. We'll be looking at ones later 141 00:06:39,910 --> 00:06:42,390 in this this episode. So I think Coca Cola's earnings 142 00:06:42,390 --> 00:06:43,790 will be fine. In fact, I think they'll 143 00:06:43,790 --> 00:06:46,030 probably beat their earnings estimates, but it's still not a 144 00:06:46,030 --> 00:06:48,470 company that I find attractive to own right now. 145 00:06:48,950 --> 00:06:52,470 Now Next up, we have a company Verizon, which is reporting 146 00:06:52,470 --> 00:06:54,310 earnings Tuesday before market open. 147 00:06:54,310 --> 00:06:56,640 Let's go ahead and take a look at this and for the sake of 148 00:06:56,640 --> 00:07:01,120 time, all lump in AT&T as well for when they report earnings 149 00:07:01,120 --> 00:07:03,880 because most of my comments are going to be very similar for 150 00:07:03,880 --> 00:07:06,760 both of them. So we have Verizon here and I 151 00:07:06,760 --> 00:07:10,800 think investors could save a lot of time if they simply just 152 00:07:10,920 --> 00:07:15,400 didn't worry about Verizon or AT and TI see so many dividend 153 00:07:15,400 --> 00:07:19,360 investors and investors online on Twitter voting which is a 154 00:07:19,360 --> 00:07:23,910 better company, Verizon or AT&T. Is the yield good enough now to 155 00:07:23,910 --> 00:07:25,950 buy in. Is this company finally at a 156 00:07:25,950 --> 00:07:28,430 good place to buy? It's been on a down streak. 157 00:07:28,430 --> 00:07:31,670 Are we buying the dip? I think it's it's just time 158 00:07:31,670 --> 00:07:33,710 better spent moving on to different companies. 159 00:07:34,070 --> 00:07:36,030 Don't worry about Verizon or AT&T. 160 00:07:36,230 --> 00:07:38,270 Ignore them. Focus on better companies that 161 00:07:38,270 --> 00:07:40,750 are going to create more value for your future. 162 00:07:41,150 --> 00:07:45,230 These companies are value traps. I've been saying that for two 163 00:07:45,350 --> 00:07:48,910 years straight repeatedly. Every time I comment on them, I 164 00:07:48,910 --> 00:07:51,970 say their value traps. Even Warren Buffett gave up on 165 00:07:51,970 --> 00:07:54,210 the company. He sold it at a low because he 166 00:07:54,210 --> 00:07:57,210 knew it's a value trap. When you look at this one, it's 167 00:07:57,210 --> 00:08:00,490 it's down all year again. It's creating no value for 168 00:08:00,490 --> 00:08:04,210 shareholders 5 years straight. The company and the the 169 00:08:04,210 --> 00:08:06,290 competitive dynamics are not good. 170 00:08:06,810 --> 00:08:09,130 They're reliant on a lot of things they can't control. 171 00:08:09,410 --> 00:08:11,610 And then the balance sheet of these companies is one of the 172 00:08:11,610 --> 00:08:14,170 worst I've ever seen of any companies in the market. 173 00:08:14,490 --> 00:08:17,090 Right now. Both of them have excess of $100 174 00:08:17,090 --> 00:08:22,240 billion in long term debt, $100 billion in debt, and they have 175 00:08:22,240 --> 00:08:24,920 no cash, only like 1 or $2 billion. 176 00:08:25,280 --> 00:08:28,680 So if you took Google's balance sheet, flipped it upside down, 177 00:08:29,040 --> 00:08:30,240 that's what this would look like. 178 00:08:30,520 --> 00:08:32,880 Google has a ton of cash and no debt. 179 00:08:33,159 --> 00:08:35,240 This company has a ton of debt and no cash. 180 00:08:35,240 --> 00:08:37,960 It's literally the exact opposite of what I like to see. 181 00:08:37,960 --> 00:08:39,799 The reason this is so problematic is when these 182 00:08:39,799 --> 00:08:41,320 companies carry that amount of debt. 183 00:08:41,690 --> 00:08:43,570 When they have interest rates go up. 184 00:08:43,690 --> 00:08:46,650 Now the cost of capital is higher and their earnings go 185 00:08:46,650 --> 00:08:49,250 down because they're paying a higher interest rate on their 186 00:08:49,290 --> 00:08:52,450 newly renewed debt. These companies are not good 187 00:08:52,450 --> 00:08:54,130 investments. They're not going to be good 188 00:08:54,130 --> 00:08:56,250 investments if they drop another 5%. 189 00:08:56,650 --> 00:09:00,610 So this is in the category of a strong avoid. 190 00:09:00,890 --> 00:09:03,810 I would not invest in Verizon, I wouldn't invest in AT&T. 191 00:09:04,090 --> 00:09:06,370 If you own them. You're buying value traps and 192 00:09:06,370 --> 00:09:09,640 you're hoping you're hoping the future will magically look much 193 00:09:09,640 --> 00:09:12,600 different than the past than what these companies have done 194 00:09:12,600 --> 00:09:15,480 over the past 20 years. And I think the future is going 195 00:09:15,480 --> 00:09:18,680 to look very similar to the past for Verizon and AT&T. 196 00:09:19,360 --> 00:09:21,680 Now moving on from that, we have Spotify. 197 00:09:22,040 --> 00:09:25,000 Spotify is a company that I'm very interested in. 198 00:09:25,080 --> 00:09:27,720 This is one that I really, really love the product. 199 00:09:28,160 --> 00:09:30,920 I've actually owned Spotify stock for a short time. 200 00:09:30,920 --> 00:09:33,440 I think the company has tremendous amounts of potential. 201 00:09:33,880 --> 00:09:37,600 There's a couple things that make me really resistant to 202 00:09:37,600 --> 00:09:40,760 owning this company. One of them is that they're 203 00:09:40,760 --> 00:09:43,880 competing with all of big tech. So you have Apple and Apple 204 00:09:43,880 --> 00:09:46,120 Music. You have YouTube with YouTube 205 00:09:46,120 --> 00:09:50,120 Premium and YouTube Music. You have Amazon and Amazon 206 00:09:50,120 --> 00:09:53,880 Music, three big juggernauts, all competing with Spotify, and 207 00:09:53,880 --> 00:09:55,600 there's other competitors outside of that. 208 00:09:56,080 --> 00:09:58,760 It's also difficult because they don't own the rights to most of 209 00:09:58,760 --> 00:10:01,160 the music that's streamed. It's the music studios. 210 00:10:01,560 --> 00:10:04,320 So they're in a very difficult situation to have pricing power 211 00:10:04,560 --> 00:10:07,160 since pricing power is one of the key things I look for, for 212 00:10:07,160 --> 00:10:10,080 any holding Now it's just it doesn't fit in. 213 00:10:10,240 --> 00:10:13,200 This company doesn't fit in because it lacks pricing power. 214 00:10:13,400 --> 00:10:15,960 And I would say even more than pricing power, it's the fact 215 00:10:15,960 --> 00:10:18,840 that when they do raise prices, they're not able to keep the 216 00:10:18,840 --> 00:10:22,160 profits from raising prices. It goes to the music labels that 217 00:10:22,160 --> 00:10:24,640 makes it very difficult. That's why you see this company 218 00:10:24,640 --> 00:10:28,960 have continually it has EBITDA that's in the negative or barely 219 00:10:28,960 --> 00:10:31,620 in the positive. They can't seem to make money 220 00:10:31,620 --> 00:10:34,500 with any amount of users. And I think that's indicative in 221 00:10:34,500 --> 00:10:37,260 and of itself. If a company has half a billion 222 00:10:37,260 --> 00:10:40,580 users and can't generate meaningful amounts of profits, 223 00:10:41,020 --> 00:10:43,700 then when are they going to, when are they finally going to, 224 00:10:43,980 --> 00:10:46,900 when they get to 700 million, when they get to a billion 225 00:10:46,900 --> 00:10:48,620 active users? Are you going to have to wait 226 00:10:48,620 --> 00:10:52,100 another 15 years for them to finally make meaningful profits? 227 00:10:52,660 --> 00:10:53,940 It's just too much of A waiting game. 228 00:10:53,940 --> 00:10:57,420 I want companies that can show and prove today that they're 229 00:10:57,420 --> 00:10:59,940 profitable and that they'll make even greater profits in the 230 00:10:59,940 --> 00:11:02,340 future. So Spotify is one that I think 231 00:11:02,340 --> 00:11:04,380 the earnings will be fine. If I had a guess, I think 232 00:11:04,380 --> 00:11:05,620 they'll actually exceed their earnings. 233 00:11:05,620 --> 00:11:07,260 They'll probably report decent growth. 234 00:11:07,620 --> 00:11:10,060 I think that this is the type of product that people can afford 235 00:11:10,060 --> 00:11:11,860 right now. People can't afford stuff that's 236 00:11:11,860 --> 00:11:15,020 financed right now, like solar systems, cars, and homes. 237 00:11:15,340 --> 00:11:17,740 But they can't afford things like Spotify that are a few 238 00:11:17,740 --> 00:11:19,180 bucks a month. They can afford things like 239 00:11:19,180 --> 00:11:21,140 Netflix. They can afford restaurants. 240 00:11:21,470 --> 00:11:24,030 So I think Spotify is going to be fine this quarterly report, 241 00:11:24,430 --> 00:11:26,710 but overall I'm still avoiding the company. 242 00:11:26,750 --> 00:11:29,710 Now moving on, we get into the big earnings reports Tuesday 243 00:11:29,710 --> 00:11:32,710 after market close. We have both Microsoft and 244 00:11:32,710 --> 00:11:35,310 Google reporting earnings. These are going to be ones that 245 00:11:35,310 --> 00:11:37,350 really dictate what direction the market goes. 246 00:11:37,710 --> 00:11:41,230 The investors that are concerned about the market or investor 247 00:11:41,230 --> 00:11:44,510 sentiment, they always look to big tech to save them. 248 00:11:44,510 --> 00:11:46,950 What is big tech going to do? So let's go ahead and take a 249 00:11:46,950 --> 00:11:48,590 look. Starting off with Microsoft. 250 00:11:48,630 --> 00:11:51,190 Again, I'll mention that I own a lot of Microsoft stock in my 251 00:11:51,190 --> 00:11:54,350 main portfolio. I've owned Microsoft since 2018. 252 00:11:54,750 --> 00:11:57,350 I bought heavily into the company when it dipped down to 253 00:11:57,350 --> 00:12:00,750 $220 per share. A lot of people said that was 254 00:12:00,750 --> 00:12:03,830 crazy. 2/20 was the fair value and I wasn't buying it 255 00:12:03,830 --> 00:12:06,910 undervalued. Here it is trading up to 330, a 256 00:12:06,910 --> 00:12:10,230 full $100. We're up $10,700 in the green on 257 00:12:10,230 --> 00:12:13,230 this portfolio. And then I also own even more 258 00:12:13,230 --> 00:12:17,830 Microsoft in the story fund. I also own another $16,000 of 259 00:12:17,830 --> 00:12:21,940 the company, $3800 in the green. On this one, Microsoft has been 260 00:12:21,940 --> 00:12:24,220 one of the easier stock picks in my opinion. 261 00:12:24,580 --> 00:12:28,380 The company is what I have called frequently the poster 262 00:12:28,380 --> 00:12:31,140 child for the perfect fundamentals in a company. 263 00:12:31,260 --> 00:12:33,980 I dare you to try to find a flaw with Microsoft's fundamentals. 264 00:12:34,180 --> 00:12:37,260 Go ahead, take a look, we can look at the revenue growth. 265 00:12:37,260 --> 00:12:40,340 It is flawless. It goes up over time on a very 266 00:12:40,340 --> 00:12:43,980 consistent basis and ever since the CEO Satya Nadella came in 267 00:12:43,980 --> 00:12:46,900 and made the company subscription based, cloud based, 268 00:12:47,380 --> 00:12:51,140 the revenue growth accelerated. In the past ten years it's gone 269 00:12:51,140 --> 00:12:56,460 up 11.73% per year. It's almost 12% per year at the 270 00:12:56,460 --> 00:13:01,220 company this current size. That is remarkable and in my 271 00:13:01,220 --> 00:13:03,220 opinion there's no reason it should slow down. 272 00:13:03,540 --> 00:13:06,220 People say Microsoft's so big, how can it keep growing? 273 00:13:06,460 --> 00:13:09,060 The world's very big and a lot of people need the tools that 274 00:13:09,060 --> 00:13:11,220 Microsoft offers. They have a lot of pricing 275 00:13:11,220 --> 00:13:12,900 power. So this revenue is going to 276 00:13:12,900 --> 00:13:16,650 continue growing I think above what investors have seen before 277 00:13:16,650 --> 00:13:19,290 with the company this size. We look at any of these 278 00:13:19,290 --> 00:13:20,890 fundamentals. We can look at the EBITDA, it 279 00:13:20,890 --> 00:13:24,090 follows right in line with the revenue, remarkable the growth 280 00:13:24,090 --> 00:13:26,330 of the EBITDA. We look at the free cash flow, 281 00:13:26,730 --> 00:13:29,650 again it follows right in line with the revenue growth. 282 00:13:29,650 --> 00:13:33,210 So all of the financial metrics move in line with the top line 283 00:13:33,210 --> 00:13:35,450 growth. You even have stock based comp. 284 00:13:35,850 --> 00:13:38,530 A lot of companies have bigger trouble with this like Google 285 00:13:38,530 --> 00:13:42,010 and Meta, not Microsoft. They have that under control. 286 00:13:42,370 --> 00:13:44,810 In fact if we zoom in here, we can probably see this clear. 287 00:13:44,890 --> 00:13:48,330 Now these blue bars right here are stock based comp, the orange 288 00:13:48,330 --> 00:13:51,170 is the free cash flow. So we can see that even as they 289 00:13:51,170 --> 00:13:53,770 grow their free cash flow, they're not diluting investors 290 00:13:53,890 --> 00:13:56,050 that much. There are a little bit they're 291 00:13:56,050 --> 00:13:58,570 paying some employees in stock based comp, which is fine. 292 00:13:58,570 --> 00:14:01,130 You want your employees to be incentivized, but you can see 293 00:14:01,130 --> 00:14:03,090 that Microsoft is doing this the right way. 294 00:14:03,090 --> 00:14:06,730 They're growing their cash flows far and above what their stock 295 00:14:06,730 --> 00:14:09,000 based comp is. That's a company that's actually 296 00:14:09,000 --> 00:14:11,120 returning cash back to a shareholder. 297 00:14:11,440 --> 00:14:13,440 If you want to see a company that doesn't do this, we can 298 00:14:13,440 --> 00:14:17,640 look at Unity for example. This is the polar opposite. 299 00:14:17,880 --> 00:14:20,640 If we look at the free cash flow against the stock based comp, 300 00:14:21,000 --> 00:14:23,720 notice how the stock based comp is much higher than any free 301 00:14:23,720 --> 00:14:26,760 cash flow, meaning this company's generating no cash for 302 00:14:26,760 --> 00:14:28,920 the investor. But that's not the case with 303 00:14:28,920 --> 00:14:31,560 Microsoft. Again, the the company has 304 00:14:31,560 --> 00:14:34,360 perfect fundamentals. You look at the net income that 305 00:14:34,360 --> 00:14:36,960 grows in line with the revenues. You look at the earnings per 306 00:14:36,960 --> 00:14:40,120 share almost perfectly consistent growing in line. 307 00:14:40,480 --> 00:14:43,440 You look at the cash and debt. They maintain more cash than 308 00:14:43,440 --> 00:14:46,000 debt even after buying Activision Blizzard. 309 00:14:46,160 --> 00:14:49,200 They're basically going to be balanced on their cash to debt 310 00:14:49,560 --> 00:14:52,120 and I think they'll quickly start to build back a cash 311 00:14:52,120 --> 00:14:54,080 balance. So in terms of Microsoft's 312 00:14:54,080 --> 00:14:58,400 fundamental direction, in my opinion, nothing has gone worse 313 00:14:58,400 --> 00:15:00,240 for Microsoft. There's no fundamental 314 00:15:00,240 --> 00:15:03,330 deterioration. Everything looks as good or 315 00:15:03,330 --> 00:15:06,450 better than it did three years ago or five years ago. 316 00:15:06,730 --> 00:15:10,290 The company's in as strong of a position it's ever been because 317 00:15:10,290 --> 00:15:11,930 of that. I'm not selling the company. 318 00:15:12,210 --> 00:15:14,650 I sell companies when their fundamentals look like they're 319 00:15:14,650 --> 00:15:17,130 worsening over time. But again, that's not the case 320 00:15:17,130 --> 00:15:19,450 here. The price has gone up a bit, so 321 00:15:19,450 --> 00:15:21,570 the valuation looks a little bit worse. 322 00:15:21,890 --> 00:15:24,010 So I'm not actively buying the company right now. 323 00:15:24,330 --> 00:15:28,250 If we look at the free cash flow yield and the PE ratio, we have 324 00:15:28,250 --> 00:15:30,850 it at a free cash flow yield of 2.4%. 325 00:15:31,010 --> 00:15:33,570 When we adjust out the stock based comp, that's a real free 326 00:15:33,570 --> 00:15:37,170 cash flow yield of 2%. So that's pretty low, that's a a 327 00:15:37,170 --> 00:15:43,250 pretty high valuation. the PE ratios at a 27 which is this is 328 00:15:43,250 --> 00:15:45,250 middle of the road from Microsoft right now. 329 00:15:45,250 --> 00:15:48,170 I don't consider Microsoft a still, but I also don't consider 330 00:15:48,170 --> 00:15:50,930 it grossly overpriced. I don't think it's in bubble 331 00:15:50,930 --> 00:15:54,210 territory. When it gets into the 35 to 40 332 00:15:54,210 --> 00:15:57,260 PE ratio, that's where it's concerning and I'd probably 333 00:15:57,260 --> 00:16:00,180 start trimming my holding, taking some gains, but we're not 334 00:16:00,180 --> 00:16:03,140 at that point right now. I think we're at a Microsoft 335 00:16:03,140 --> 00:16:07,180 that is around around intrinsic value, around it's fair value, 336 00:16:07,300 --> 00:16:09,180 not grossly undervalued or overvalued. 337 00:16:09,420 --> 00:16:11,380 So I don't expect to see anything incredible with 338 00:16:11,380 --> 00:16:14,060 Microsoft's earnings in my opinion is going to be mostly in 339 00:16:14,060 --> 00:16:17,500 line and I consider the company right now to simply be a hold. 340 00:16:17,580 --> 00:16:20,220 Now moving on, we also have Google reporting earnings at the 341 00:16:20,220 --> 00:16:22,320 same time. Now if we look at Google here in 342 00:16:22,320 --> 00:16:25,080 My Portfolio, this is again one that I've been bullish on 343 00:16:25,080 --> 00:16:26,800 repeatedly. It's a company that I've owned 344 00:16:26,800 --> 00:16:31,120 for a long period of time. I'm in the green by $6300 in the 345 00:16:31,120 --> 00:16:33,040 story funds. So this one's been a big winner. 346 00:16:33,360 --> 00:16:38,040 It's now a $33,000 position. A lot of people say, Joseph, 347 00:16:38,720 --> 00:16:42,120 you're critical of Google. You come out with videos 348 00:16:42,120 --> 00:16:44,640 criticizing them. Therefore, you must be bearish 349 00:16:44,640 --> 00:16:46,480 on the company or have something against it. 350 00:16:47,050 --> 00:16:48,570 I'm not bearish on Google at all. 351 00:16:48,570 --> 00:16:52,090 I don't own $33,000 worth of companies that I'm bearish on. 352 00:16:52,450 --> 00:16:55,410 So Google's a company that I'm overwhelmingly positive on. 353 00:16:55,410 --> 00:16:58,410 I really like the company. But being overwhelmingly bullish 354 00:16:58,410 --> 00:17:00,930 on the company doesn't mean I have to like everything about 355 00:17:00,930 --> 00:17:02,450 the stock. So let's go ahead and take a 356 00:17:02,450 --> 00:17:05,690 look at what I think is good and bad about Google right now. 357 00:17:05,690 --> 00:17:09,290 What I think is good about Google is the investment case is 358 00:17:09,290 --> 00:17:12,970 very simple and straightforward. You're buying a high quality 359 00:17:12,970 --> 00:17:16,819 company that has incredible diversified assets through 360 00:17:16,819 --> 00:17:20,260 Google Search, Bard, and the AI portion of it. 361 00:17:20,619 --> 00:17:24,300 They also have Android, so that's another big property. 362 00:17:24,300 --> 00:17:26,819 They have YouTube and they have Google Cloud. 363 00:17:27,180 --> 00:17:30,380 So you have 4 massive properties of which I think all of them are 364 00:17:30,380 --> 00:17:33,660 incredibly good, but I think Google Cloud is underrated right 365 00:17:33,660 --> 00:17:37,100 now and I think YouTube is an incredibly good property. 366 00:17:37,340 --> 00:17:40,740 When I look at media analysis, YouTube's something that has no 367 00:17:40,740 --> 00:17:43,020 competitor. I don't consider Twitch to be a 368 00:17:43,020 --> 00:17:46,180 competitor to YouTube or Tiktok. To be YouTube stands alone. 369 00:17:46,500 --> 00:17:49,500 So Google owns all of these incredible products. 370 00:17:49,500 --> 00:17:52,340 These franchises that are all growing and I think 371 00:17:52,460 --> 00:17:55,620 independently have very high intrinsic value that should go 372 00:17:55,620 --> 00:17:57,740 up over time. It's also a simple investment 373 00:17:57,740 --> 00:18:00,020 thesis because the company trades at a relatively 374 00:18:00,300 --> 00:18:05,980 undemanding PE ratio and 18 Ford PE, which is basically in line 375 00:18:05,980 --> 00:18:09,420 with the S&P 500 and it has a balance sheet that is like if 376 00:18:09,420 --> 00:18:12,420 you took Verizon's balance sheet, you flip that upside 377 00:18:12,420 --> 00:18:14,640 down. Here you have Google's Google 378 00:18:14,640 --> 00:18:18,520 has a balance sheet right now that has $118 billion in cash 379 00:18:18,960 --> 00:18:22,480 and $13 billion of long term debt, so around $100 billion of 380 00:18:22,480 --> 00:18:24,880 excess cash. So they have enough cash to do 381 00:18:24,880 --> 00:18:27,320 whatever they want, but in the meantime they can just earn 382 00:18:27,320 --> 00:18:29,600 interest on this cash. So that's a very simple 383 00:18:29,600 --> 00:18:31,840 investment thesis. It's a great company, has a 384 00:18:31,840 --> 00:18:35,000 great balance sheet, good growth prospects and trades at a low 385 00:18:35,000 --> 00:18:37,640 valuation. Now let's move on to some of the 386 00:18:37,640 --> 00:18:39,840 downside, some of the things that I think investors spend a 387 00:18:39,840 --> 00:18:42,000 little less time focusing on with Google. 388 00:18:42,520 --> 00:18:45,360 The real valuation of Google is more expensive than what most 389 00:18:45,360 --> 00:18:48,840 investors seem to believe and that is because of stock based 390 00:18:48,840 --> 00:18:51,560 comp. For example, the free cash flow 391 00:18:51,560 --> 00:18:54,720 yield before factoring in dilution through stock based 392 00:18:54,720 --> 00:18:58,760 comp is 4.06%. When you look at that, you 393 00:18:58,760 --> 00:19:02,160 think, wow, Google's really this company's really cheap. 394 00:19:02,160 --> 00:19:05,040 But then we look at the free cash flow yield adjusted for 395 00:19:05,040 --> 00:19:08,120 stock based comp, it's down to 2.85%. 396 00:19:08,790 --> 00:19:11,070 All of a sudden it doesn't look nearly as good. 397 00:19:11,270 --> 00:19:14,550 That's a 30% reduction in the amount of cash flow it's 398 00:19:14,550 --> 00:19:16,710 producing. To illustrate this more clearly, 399 00:19:16,710 --> 00:19:19,270 we can look at the free cash flow chart here again, you can 400 00:19:19,270 --> 00:19:23,550 see all of this on qualtrum.com. And let me take a look at the, 401 00:19:23,790 --> 00:19:26,470 we'll look at quarterly here. We'll bring up the free cash 402 00:19:26,470 --> 00:19:27,950 flow. This is what it looks like over 403 00:19:27,950 --> 00:19:30,110 time. Let's zoom into the past 10 404 00:19:30,110 --> 00:19:32,710 years to make this more clear and then we'll look at the free 405 00:19:32,710 --> 00:19:36,190 cash flow and stock based comp Boom. 406 00:19:36,270 --> 00:19:39,780 There you have it. Every quarter the stock based 407 00:19:39,780 --> 00:19:44,140 comp takes up roughly 30% of what they produce in free cash 408 00:19:44,140 --> 00:19:47,020 flow. Now again with Microsoft, this 409 00:19:47,020 --> 00:19:50,860 is more like 10 to 15%. It really wasn't that big, but 410 00:19:50,860 --> 00:19:55,020 with Google it's 30%. That's a significant chunk of 411 00:19:55,020 --> 00:19:57,660 the free cash flow being diluted away from the shareholder. 412 00:19:57,940 --> 00:20:01,900 And don't be mistaken, stock based comp may not be cash, but 413 00:20:01,900 --> 00:20:04,340 it dilutes away your ownership of the cash. 414 00:20:04,850 --> 00:20:07,410 Since money is fungible, it's the exact same thing. 415 00:20:07,570 --> 00:20:10,370 You're getting less of this cash because it's being diluted away. 416 00:20:10,930 --> 00:20:13,010 Now, this isn't a bear case for Google. 417 00:20:13,010 --> 00:20:15,890 I'm not arguing against the company, but I point this out 418 00:20:15,890 --> 00:20:18,730 only to point out that the company is not as cheap as it 419 00:20:18,730 --> 00:20:20,850 appears. Google's really trading at a 420 00:20:20,850 --> 00:20:25,010 2.85% free cash flow yield, and that makes it a little bit more 421 00:20:25,010 --> 00:20:27,890 fairly valued right now than what a lot of investors believe. 422 00:20:28,050 --> 00:20:30,730 So that's a downside of Google. The company's not quite as cheap 423 00:20:30,730 --> 00:20:33,060 as it first appears. Another thing that I think is a 424 00:20:33,060 --> 00:20:36,900 concern for Google shareholders is because this company is so 425 00:20:36,900 --> 00:20:40,740 big, so dominant, so powerful, makes so much money, and has 426 00:20:40,740 --> 00:20:44,340 such great market share with Google search, it has a constant 427 00:20:44,380 --> 00:20:47,540 target right on its back for every big government. 428 00:20:47,860 --> 00:20:50,900 Every government, including the US, wants a piece of the Google 429 00:20:50,900 --> 00:20:53,140 pie. The Justice Department sues 430 00:20:53,140 --> 00:20:56,180 Google for monopolizing digital advertising technologies. 431 00:20:56,500 --> 00:20:59,260 They want to break up the agreement that Google has with 432 00:20:59,260 --> 00:21:01,300 being the default on every Apple device. 433 00:21:01,780 --> 00:21:04,260 They want to, they want to break up Google, make it less 434 00:21:04,260 --> 00:21:07,820 profitable, do everything they can to try to break down this 435 00:21:07,820 --> 00:21:09,900 giant. We have other lawsuits always 436 00:21:09,900 --> 00:21:11,780 happening through Europe all the time. 437 00:21:11,780 --> 00:21:14,420 Google's getting fined for one thing or another and then we 438 00:21:14,420 --> 00:21:16,620 even have news. Just today, Google faces new 439 00:21:16,620 --> 00:21:19,660 antitrust probe in Japan. So they're being targeted for 440 00:21:19,660 --> 00:21:22,100 being anti competitive in Japan as well. 441 00:21:22,180 --> 00:21:24,260 And this is something that's going to be never ending. 442 00:21:24,420 --> 00:21:26,460 Google is a monopolistic company. 443 00:21:26,660 --> 00:21:28,740 It's going to be pushed around by the government because 444 00:21:28,740 --> 00:21:31,140 they're really one of the only ones that can compete with 445 00:21:31,140 --> 00:21:32,980 Google. So overall, even with the recent 446 00:21:32,980 --> 00:21:35,540 rise in Google stock price, I still think the company's worth 447 00:21:35,540 --> 00:21:37,060 owning. I certainly don't think it's 448 00:21:37,060 --> 00:21:40,060 overvalued or a bad one to have in the portfolio. 449 00:21:40,340 --> 00:21:43,660 And I have no reason to believe in this earnings report that 450 00:21:43,660 --> 00:21:47,180 Google's will be disappointing. Maybe it will, maybe the ad 451 00:21:47,180 --> 00:21:50,140 market overall slowed down, but I don't see that. 452 00:21:50,140 --> 00:21:53,140 I still see a lot of consumer spending, a lot of digital 453 00:21:53,140 --> 00:21:55,300 advertising. I think that Google Cloud is 454 00:21:55,300 --> 00:21:58,140 going to be growing above schedule and I think that 455 00:21:58,140 --> 00:22:00,220 YouTube might even re accelerate growth. 456 00:22:00,340 --> 00:22:02,500 YouTube seems to be doing well recently. 457 00:22:02,900 --> 00:22:05,460 So in terms of Google, it's another one that I feel very 458 00:22:05,460 --> 00:22:07,060 good about going into this earnings report. 459 00:22:07,060 --> 00:22:09,300 I look forward to it. Next up, we have Snapchat 460 00:22:09,300 --> 00:22:11,660 reporting earnings after market close on Tuesday. 461 00:22:11,660 --> 00:22:13,580 Let's go ahead and take a look at Snapchat. 462 00:22:13,940 --> 00:22:16,140 What I'll say about this company is that it's one that has 463 00:22:16,140 --> 00:22:19,300 returned no value over its lifetime to investors. 464 00:22:19,460 --> 00:22:23,580 In fact, it's actively destroyed value while paying the employees 465 00:22:23,580 --> 00:22:27,710 and especially the executives enormous amounts in stock based 466 00:22:27,710 --> 00:22:30,270 comp. This right there, the $2 billion 467 00:22:30,630 --> 00:22:32,110 that goes to the owner of the company. 468 00:22:32,430 --> 00:22:36,350 So he's buying mansions right now while his shareholders 469 00:22:36,350 --> 00:22:38,630 suffer and get nothing in return. 470 00:22:38,950 --> 00:22:42,110 That's the relationship that happens with Snapchat. 471 00:22:42,470 --> 00:22:45,470 Unfortunately, a lot of the public market works this way. 472 00:22:45,790 --> 00:22:47,510 There's people that are taken advantage of. 473 00:22:47,790 --> 00:22:49,950 I think that's what's happened in this case. 474 00:22:50,350 --> 00:22:52,430 So Snapchat's not a company that I would own. 475 00:22:52,590 --> 00:22:54,110 I don't think the product's that good. 476 00:22:54,310 --> 00:22:56,310 I don't think they're in that great of a competitive shape. 477 00:22:56,870 --> 00:23:01,670 This is one that has routinely dipped 1520% after earnings. 478 00:23:01,830 --> 00:23:04,950 Sometimes it will spike up 10%. Either way, I don't think it's 479 00:23:04,950 --> 00:23:07,270 worth owning, not one that I'm going to be interested in. 480 00:23:07,350 --> 00:23:10,750 Now moving on from Snapchat, we have Visa and I'll lump in 481 00:23:10,750 --> 00:23:13,550 MasterCard as well, which is reporting earnings on Thursday 482 00:23:13,870 --> 00:23:16,270 into this discussion because I think they're virtually the 483 00:23:16,270 --> 00:23:18,270 same. Both of them are a duopoly in 484 00:23:18,270 --> 00:23:21,750 credit payments and I don't own any Visa, but I do own a bunch 485 00:23:21,750 --> 00:23:24,110 of MasterCard. I chose MasterCard because it 486 00:23:24,110 --> 00:23:27,270 has more significant market share gain over the past ten 487 00:23:27,270 --> 00:23:30,510 years in Europe than Visa. MasterCard is executing. 488 00:23:30,790 --> 00:23:34,790 They're out executing Visa in Europe and I like to see those 489 00:23:34,790 --> 00:23:36,990 trends. But either way, I think both of 490 00:23:36,990 --> 00:23:39,670 them are worth owning. These companies are in a class 491 00:23:39,670 --> 00:23:41,950 of their own. They have some metrics that no 492 00:23:41,950 --> 00:23:44,270 other company has none on a planet earth. 493 00:23:44,270 --> 00:23:48,270 I really can't find any company that has such a consistently 494 00:23:48,270 --> 00:23:51,190 high cash flow generation. We can look at some of the 495 00:23:51,190 --> 00:23:53,510 metrics here. Let me focus in on one of them 496 00:23:53,510 --> 00:23:55,830 here, the profit margins of the company. 497 00:23:56,390 --> 00:24:01,310 Look at the profit margin in 2020, 244.6%. 498 00:24:01,870 --> 00:24:04,590 Go on call, trim and search basically any other company 499 00:24:04,590 --> 00:24:07,710 besides MasterCard and Visa and try to find one that has 500 00:24:07,710 --> 00:24:12,310 consistently above a 35% profit margin that is near impossible 501 00:24:12,310 --> 00:24:14,680 to find. From their revenue, their 502 00:24:14,680 --> 00:24:18,400 revenue generation to their free cash flow, around half of 503 00:24:18,400 --> 00:24:20,240 revenue is turned into free cash flow. 504 00:24:20,560 --> 00:24:23,320 And then while they're able to accomplish that, you can see 505 00:24:23,320 --> 00:24:26,240 that they have almost no dilution at the same time. 506 00:24:26,960 --> 00:24:31,080 So they're converting all of their revenue into at least half 507 00:24:31,080 --> 00:24:34,080 of it into free cash flow and then they're not diluting the 508 00:24:34,080 --> 00:24:36,000 investor at all during that process. 509 00:24:36,000 --> 00:24:39,440 And then what's even more incredible is they do buybacks 510 00:24:39,440 --> 00:24:42,680 at the same time, making their free cash flow per share grow at 511 00:24:42,680 --> 00:24:45,760 a ridiculous rate. With MasterCard, it's grown at 512 00:24:45,760 --> 00:24:50,080 17% over the past five years. That's incredible. 513 00:24:50,320 --> 00:24:54,040 This company really has some of the the best metrics I've ever 514 00:24:54,040 --> 00:24:56,920 seen in a company. In the past decade, it's grown 515 00:24:56,920 --> 00:25:01,400 at 17% free cash flow per share. So when I was looking at 516 00:25:01,400 --> 00:25:04,480 Coca-Cola, I was saying that I wanted to find companies that 517 00:25:04,480 --> 00:25:07,840 are growing that per share intrinsic value at a faster 518 00:25:07,840 --> 00:25:09,240 rate. This is it. 519 00:25:09,520 --> 00:25:12,360 This is a company growing per share intrinsic value at a 520 00:25:12,360 --> 00:25:17,170 faster rate, growing per share value 17% per year and they 521 00:25:17,170 --> 00:25:19,770 continue doing that in virtually any market. 522 00:25:20,130 --> 00:25:23,050 That is incredible. So what I see here with Visa, 523 00:25:23,050 --> 00:25:26,930 MasterCard are two companies that I never worry about the 524 00:25:26,930 --> 00:25:29,770 upcoming earnings report. I would worry about something 525 00:25:29,770 --> 00:25:31,730 fundamentally risking the business. 526 00:25:32,050 --> 00:25:36,570 So some competitor like Apple Pay or or PayPal or something 527 00:25:36,930 --> 00:25:38,930 and I don't see that in the horizon. 528 00:25:39,320 --> 00:25:41,960 I don't consider crypto to be a credible threat at all. 529 00:25:42,200 --> 00:25:43,800 I don't think the Apple Pay is a threat. 530 00:25:44,200 --> 00:25:46,000 And these companies are still expanding. 531 00:25:46,000 --> 00:25:48,320 They're still on the move. In fact, there's a recent Wall 532 00:25:48,320 --> 00:25:52,120 Street Journal article that they are expanding into Africa and 533 00:25:52,120 --> 00:25:55,280 they want to get a a little bit of that mobile payment money 534 00:25:55,280 --> 00:25:57,920 from Africa and offer their services there as well. 535 00:25:58,400 --> 00:26:00,600 And I think they will. They have such a good product 536 00:26:00,840 --> 00:26:03,760 that I think the people in Africa will love using 537 00:26:03,760 --> 00:26:07,280 MasterCard and Visa's brand recognition, their security, 538 00:26:07,280 --> 00:26:10,240 their insurance, the same way that people in the US love it. 539 00:26:10,880 --> 00:26:13,720 So these are companies that I really think their earnings 540 00:26:13,720 --> 00:26:16,480 report is going to be fine. I could see Visa, MasterCard 541 00:26:16,480 --> 00:26:18,640 both outperforming. I think that people are pulling 542 00:26:18,640 --> 00:26:22,200 back on big ticket items, cars, solar panels, homes. 543 00:26:22,520 --> 00:26:25,040 I don't think they're pulling back on small ticket items, 544 00:26:25,280 --> 00:26:29,060 going out to eat, buying stuff on Amazon, paying for Spotify 545 00:26:29,060 --> 00:26:31,660 and Netflix, all of that stuff they're doing through credit 546 00:26:31,660 --> 00:26:33,780 cards and I think that's going to continue Now. 547 00:26:33,780 --> 00:26:35,820 We're still on Tuesday after market close. 548 00:26:35,820 --> 00:26:38,700 We also have Canadian Pacific and Vici's earnings release. 549 00:26:38,700 --> 00:26:40,820 Let's go ahead and take a look at Canadian Pacificare. 550 00:26:41,060 --> 00:26:42,820 This is one that I own in the portfolio. 551 00:26:42,820 --> 00:26:46,300 It's been flat all year and it's a railroad company. 552 00:26:46,300 --> 00:26:48,540 It's growing its free cash flow at a very fast speed. 553 00:26:48,540 --> 00:26:51,900 We can see that over time growing revenue slowly and 554 00:26:51,900 --> 00:26:55,540 steadily like railroads do. I think there's one thing that 555 00:26:56,030 --> 00:26:59,510 is a pretty positive thing for Canadian Pacific and that is 556 00:26:59,510 --> 00:27:03,070 that 2 super investors that I respect a lot, both have 557 00:27:03,070 --> 00:27:04,870 significant stakes in this company. 558 00:27:05,230 --> 00:27:07,790 One of them is Chris Hone, the other is Bill Ackman. 559 00:27:08,310 --> 00:27:10,510 Now these investors, they don't talk with each other. 560 00:27:10,590 --> 00:27:12,990 They're not sharing research amongst each other. 561 00:27:12,990 --> 00:27:15,190 They both independently come to the same conclusion, that 562 00:27:15,190 --> 00:27:18,190 Canadian Pacific is a high quality company that the merger 563 00:27:18,190 --> 00:27:22,390 will have significant synergies. Canadian Pacific recently merged 564 00:27:22,390 --> 00:27:25,270 with Kansas City Southern and they're saying that it's going 565 00:27:25,270 --> 00:27:29,350 to increase their capacity for freight, their convenience for 566 00:27:29,350 --> 00:27:33,510 customers, their pricing power and ultimately lead to per share 567 00:27:33,510 --> 00:27:35,910 out performance, which of course is what we want. 568 00:27:35,990 --> 00:27:38,710 And I think with this earnings report, we're going to see more 569 00:27:38,710 --> 00:27:42,110 per share earnings growth at a very decent pace. 570 00:27:42,350 --> 00:27:44,910 So as we see the company grow its earnings, we're going to see 571 00:27:44,910 --> 00:27:46,710 the stock price catch up over time. 572 00:27:47,350 --> 00:27:50,790 Now Vici's another company that's lesser known, but I 573 00:27:50,790 --> 00:27:52,950 invest in it. It's a big holding of mine. 574 00:27:53,150 --> 00:27:56,430 Vici's looked at as a little bit of a substitute for the 10 year 575 00:27:56,430 --> 00:27:58,950 treasury. As a 10 year treasury goes up 576 00:27:58,950 --> 00:28:02,470 and yield Vici goes down because the opportunity cost becomes 577 00:28:02,470 --> 00:28:05,310 greater. But over time, I think Vici's 578 00:28:05,310 --> 00:28:08,270 creating enough intrinsic value that it's going to grow either 579 00:28:08,270 --> 00:28:10,990 way, no matter what direction the 10 year treasury goes. 580 00:28:11,270 --> 00:28:14,630 I think Vici will ultimately, over the course of 10 years, 581 00:28:14,980 --> 00:28:16,780 create a lot of value for shareholders. 582 00:28:16,940 --> 00:28:19,260 So this is 1 where I am excited about the earnings report. 583 00:28:19,260 --> 00:28:22,340 I expect another quarter of 100% rent collection. 584 00:28:22,780 --> 00:28:25,380 And I think the company's latest acquisition with Bolero 585 00:28:25,380 --> 00:28:27,700 Properties was a good one. And I'll have more on that 586 00:28:27,700 --> 00:28:30,140 acquisition in a future episode. Now moving on, we get to 587 00:28:30,140 --> 00:28:32,060 Wednesday where we have a couple big earnings reports. 588 00:28:32,300 --> 00:28:34,500 One of them is Thermo Fisher Scientific. 589 00:28:34,500 --> 00:28:36,940 This is one that I believe Terry Smith owns. 590 00:28:37,180 --> 00:28:39,020 We also have Chris Hohn owning this one. 591 00:28:39,020 --> 00:28:42,060 So a couple of the Super investors like this stock and I 592 00:28:42,060 --> 00:28:45,490 think I can see the reasons why. It's a medical device company 593 00:28:45,490 --> 00:28:49,330 that has products that need to be purchased by hospital and 594 00:28:49,330 --> 00:28:51,370 medical staff no matter what the conditions are. 595 00:28:51,650 --> 00:28:56,130 So they sell a product that is necessary at all times, which is 596 00:28:56,130 --> 00:28:58,450 a good thing. The stock has been struggling 597 00:28:58,450 --> 00:28:59,930 this year. So there's some investors that 598 00:28:59,930 --> 00:29:04,150 may be looking at this as a good time to enter, but over time 599 00:29:04,150 --> 00:29:07,230 it's a a good compounder company that's done terrific over the 600 00:29:07,230 --> 00:29:09,310 past decade. Now, even though I avoid medical 601 00:29:09,310 --> 00:29:13,030 companies for the most part, I do like TMOI think this one's a 602 00:29:13,030 --> 00:29:15,510 decent one. What I'm concerned about with 603 00:29:15,510 --> 00:29:18,150 these companies is always the chance of lawsuit. 604 00:29:18,310 --> 00:29:20,870 They can really cripple a medical company. 605 00:29:21,150 --> 00:29:23,910 So if you're selling a bunch of devices and then it turns out 606 00:29:23,910 --> 00:29:27,110 that you presented something inaccurate or the device has 607 00:29:27,110 --> 00:29:30,510 some flaw, this happens a lot of the times with pharmaceutical 608 00:29:30,510 --> 00:29:32,480 companies. There's some tests that come out 609 00:29:32,480 --> 00:29:36,560 that show that a a pill has a problem that wasn't previously 610 00:29:36,560 --> 00:29:39,480 discovered and then the pharmaceutical companies on the 611 00:29:39,480 --> 00:29:42,520 hook for it, they have to pay out billions of dollars because 612 00:29:42,520 --> 00:29:45,200 of some big lawsuit. I think there's a chance of that 613 00:29:45,200 --> 00:29:47,840 happening with TMO. But as long as things are smooth 614 00:29:47,840 --> 00:29:49,880 sailing with it, I think this one's going to have fine 615 00:29:49,880 --> 00:29:51,800 earnings. Now, a company that I am 616 00:29:51,800 --> 00:29:55,160 invested in is Texas Roadhouse, This restaurant here also 617 00:29:55,160 --> 00:29:58,000 reporting earnings on Wednesday. Right now, I think Texas 618 00:29:58,000 --> 00:29:59,800 Roadhouse is at a decent valuation. 619 00:30:00,160 --> 00:30:02,960 It has good growth prospects and I think the company's going to 620 00:30:02,960 --> 00:30:05,480 have good earnings. I say that knowing that they're 621 00:30:05,480 --> 00:30:09,200 supposed to be a recession and a slowdown in consumer spending. 622 00:30:09,520 --> 00:30:12,880 But what I see are people that are still willing to spend on 623 00:30:12,880 --> 00:30:15,400 small experiences. Going out to a restaurant, 624 00:30:15,400 --> 00:30:18,440 paying $50.00 for the family to eat a bunch of steaks and have a 625 00:30:18,440 --> 00:30:21,120 nice evening on a weekend is something that I think most 626 00:30:21,120 --> 00:30:22,600 people are still willing to afford. 627 00:30:23,000 --> 00:30:25,040 So I look at Texas Roadhouse's revenue growth. 628 00:30:25,240 --> 00:30:27,880 I think it's going to be mostly in line, maybe a bit above. 629 00:30:28,350 --> 00:30:31,670 I think they'll generate decent free cash flow this year and I 630 00:30:31,670 --> 00:30:32,710 think their earnings will be good. 631 00:30:33,470 --> 00:30:35,590 I could be wrong. I wouldn't bet on this. 632 00:30:35,590 --> 00:30:37,550 I can't see the future. Maybe it will be a huge 633 00:30:37,550 --> 00:30:40,950 disappointment. But what I see is a company that 634 00:30:40,950 --> 00:30:43,670 most people can afford. They still offer a great value 635 00:30:43,670 --> 00:30:46,510 proposition when I continue to not be concerned at all about 636 00:30:46,510 --> 00:30:48,790 the future of this company. Now moving on, we get to 637 00:30:48,790 --> 00:30:51,510 Wednesday after market close where we have the highly 638 00:30:51,510 --> 00:30:53,990 anticipated meta earnings report. 639 00:30:54,530 --> 00:30:57,770 Now before we jump into my analysis on meta, I have some 640 00:30:57,770 --> 00:31:01,770 misinformation that I want to clear up about myself and some 641 00:31:01,770 --> 00:31:04,570 trading that I've done. Some people on the Internet have 642 00:31:04,570 --> 00:31:10,410 spread a rumour that I sold meta at rock bottom that Joseph sold 643 00:31:10,410 --> 00:31:12,850 meta right at the bottom of the big dip. 644 00:31:13,010 --> 00:31:14,930 Let's go ahead and take a look at the timeline here. 645 00:31:15,170 --> 00:31:19,010 Meta over the past five years traded down dramatically, and at 646 00:31:19,010 --> 00:31:23,750 one point it almost got to $80.00 per share right there at 647 00:31:23,750 --> 00:31:25,710 the rock bottom. Now, during that time period, 648 00:31:25,710 --> 00:31:28,430 the very rock bottom of meta, I came out with a video called The 649 00:31:28,430 --> 00:31:32,870 Hard Truth About Meta, and that video was basically an essay 650 00:31:32,870 --> 00:31:36,390 going over everything that Mark Zuckerberg did wrong over the 651 00:31:36,390 --> 00:31:40,310 past year to crush the stock price, including him talking 652 00:31:40,310 --> 00:31:43,950 incessantly about a metaverse, something that investors weren't 653 00:31:44,030 --> 00:31:46,550 interested in at all. Now, a lot of people seem to 654 00:31:46,550 --> 00:31:49,190 have assumed that since I released a video showing 655 00:31:49,190 --> 00:31:52,560 everything that Meta was doing wrong that I must have sold the 656 00:31:52,560 --> 00:31:55,720 stock right at that point, right at the low when I released the 657 00:31:55,720 --> 00:31:57,520 video. The problem is, that's not 658 00:31:57,520 --> 00:31:59,600 accurate at all. I didn't own meta when I 659 00:31:59,600 --> 00:32:02,000 released the video. I had to own Meta for months 660 00:32:02,000 --> 00:32:07,000 before releasing that video. In fact, I sold meta right here. 661 00:32:07,120 --> 00:32:12,960 October 27th, 2021, I released a video called Warning to Facebook 662 00:32:12,960 --> 00:32:16,400 Investors where I went over how I was incredibly nervous about 663 00:32:16,400 --> 00:32:18,200 Mark Zuckerberg's talk of the Metaverse. 664 00:32:18,560 --> 00:32:20,920 I thought he was very disconnected with Wall Street. 665 00:32:21,240 --> 00:32:24,360 The analyst seemed to hate everything he was saying and I 666 00:32:24,360 --> 00:32:27,040 sold out of the stock right here at a profit. 667 00:32:27,560 --> 00:32:30,320 The stock continued to sell off like crazy. 668 00:32:30,520 --> 00:32:33,720 It went down like 50%. I bought a little bit back right 669 00:32:33,720 --> 00:32:36,760 here and then immediately sold a week later and then it's sense 670 00:32:36,760 --> 00:32:39,440 traded down to $80.00 per share. That's where I released this 671 00:32:39,440 --> 00:32:42,000 video and it's traded back up to this point. 672 00:32:42,000 --> 00:32:44,920 Meta today still does not trade at the price that I sold in 673 00:32:44,920 --> 00:32:47,170 2021. Now again, this is a bit of 674 00:32:47,170 --> 00:32:51,330 misinformation passed around and I consider that my fault for not 675 00:32:51,450 --> 00:32:55,250 illustrating this clearly. Right now I don't own any meta. 676 00:32:55,410 --> 00:32:58,690 I haven't owned the company for nearly two years so it's a stock 677 00:32:58,690 --> 00:33:02,210 that I've just been outside of, but my overall trading history 678 00:33:02,210 --> 00:33:06,370 with meta is positive. I made around $1500 on the stock 679 00:33:06,530 --> 00:33:09,690 as a small position. So looking at the company going 680 00:33:09,690 --> 00:33:12,900 forward, I'm actually very optimistic about Meta because I 681 00:33:12,900 --> 00:33:17,580 think the ads market similar to Google, Microsoft and Amazon, I 682 00:33:17,580 --> 00:33:20,380 think it's very strong. There's still people wanting to 683 00:33:20,380 --> 00:33:23,140 buy small ticket items that are advertising based. 684 00:33:23,380 --> 00:33:26,500 Meta has done a great job growing Instagram, growing all 685 00:33:26,500 --> 00:33:28,860 of their properties. I don't think they're taking 686 00:33:28,860 --> 00:33:31,820 really any market share from Twitter. 687 00:33:31,820 --> 00:33:34,900 So I think that the meta threads has been a little bit of a 688 00:33:34,900 --> 00:33:37,460 disappointment, but I believe the company has enough good core 689 00:33:37,460 --> 00:33:41,400 products to push it forward. Where I get nervous with meta is 690 00:33:41,400 --> 00:33:44,080 the valuation of the company's another one that's a little bit 691 00:33:44,080 --> 00:33:46,240 deceiving. It looks right now like the 692 00:33:46,240 --> 00:33:50,160 valuation is at a 3% free cash flow yield, but the stock based 693 00:33:50,160 --> 00:33:53,160 comp is an incredible impact on this company. 694 00:33:53,280 --> 00:33:56,920 See how the purple lines go up roughly half of the free cash 695 00:33:56,920 --> 00:33:59,560 flow that's generated. That's not good. 696 00:33:59,560 --> 00:34:01,200 That's not something that I want to see. 697 00:34:01,480 --> 00:34:04,520 A lot of people have criticized this for Salesforce and I think 698 00:34:04,520 --> 00:34:06,480 that meta deserves equal criticism. 699 00:34:06,860 --> 00:34:09,860 Even after the year of efficiency from Mark Zuckerberg, 700 00:34:10,179 --> 00:34:12,500 it still seems like the company's not all that 701 00:34:12,500 --> 00:34:15,300 efficient. They are generating a lot of 702 00:34:15,300 --> 00:34:19,380 free cash flow, but also a ton of stock based comp and it 703 00:34:19,380 --> 00:34:21,780 doesn't seem like it's changing anytime soon. 704 00:34:21,780 --> 00:34:23,980 The stock comp packages continue to rise. 705 00:34:23,980 --> 00:34:27,260 I think Med is a fine bet, but personally I like Google more. 706 00:34:27,340 --> 00:34:29,420 I like the properties that Google owns more. 707 00:34:29,420 --> 00:34:32,860 I like their free cash flow and their stock based comp situation 708 00:34:32,860 --> 00:34:34,460 more. I like their balance sheet a 709 00:34:34,460 --> 00:34:36,420 little bit more. I just think Google's in a 710 00:34:36,420 --> 00:34:38,500 better position overall. So that's my choice. 711 00:34:38,500 --> 00:34:40,179 That's where the majority of my money goes. 712 00:34:40,380 --> 00:34:42,380 But I don't blame anyone for owning meta. 713 00:34:42,380 --> 00:34:45,699 Now moving on to Thursday before market open, we have MasterCard 714 00:34:45,699 --> 00:34:47,820 and Tractor Supply Company. We've already gone over 715 00:34:47,820 --> 00:34:50,100 MasterCard. So let's take a look at Tractor 716 00:34:50,100 --> 00:34:52,300 Supply Company. This may be one that you're 717 00:34:52,300 --> 00:34:54,219 unfamiliar with. I have not talked about this 718 00:34:54,219 --> 00:34:58,380 company before and at first glance it sounds like a company. 719 00:34:58,380 --> 00:35:01,260 If you're not familiar with Tractor Supply Company, this is 720 00:35:01,340 --> 00:35:05,080 a retailer. So you go to retail location and 721 00:35:05,080 --> 00:35:09,520 then they sell stuff mostly for rural areas, things like this, 722 00:35:09,520 --> 00:35:14,880 boots, power generators, flashlights, a lot of tools feed 723 00:35:14,880 --> 00:35:18,840 for chickens and and you know you have safes and outdoor stuff 724 00:35:18,840 --> 00:35:20,160 here. You might have 4 Wheelers and 725 00:35:20,160 --> 00:35:22,520 sheds, just lots of different stuff like that. 726 00:35:22,520 --> 00:35:25,800 It's kind of a Home Depot but for more outdoorsy areas. 727 00:35:26,080 --> 00:35:29,520 So that's what the company does. It's an outdoor style retailer 728 00:35:29,800 --> 00:35:31,320 and I think it's an interesting one. 729 00:35:31,810 --> 00:35:34,530 Now it does have good fundamentals growing overtime 730 00:35:34,530 --> 00:35:37,530 like we've seen with a lot of these retailers and this all 731 00:35:37,530 --> 00:35:40,210 seems really good. Where my concern comes in with 732 00:35:40,210 --> 00:35:44,370 this company is that it will have the Dollar General effect. 733 00:35:44,810 --> 00:35:47,330 If you haven't paid attention to what happened with Dollar 734 00:35:47,330 --> 00:35:50,130 General, this is a company that I've covered before. 735 00:35:50,290 --> 00:35:53,050 It seemed like it was doing incredibly well for a long 736 00:35:53,050 --> 00:35:55,930 period of time. And then suddenly it went down 737 00:35:56,050 --> 00:36:00,510 50 plus percent because it mismanaged its inventory. 738 00:36:00,510 --> 00:36:04,310 It had margins go down, sales slowed, everything seemed to 739 00:36:04,310 --> 00:36:07,870 collapse in a single year. So 50% of the gains gone in a 740 00:36:07,870 --> 00:36:10,110 single year. And if I'm being honest with 741 00:36:10,110 --> 00:36:13,230 myself, I did not see this coming with Dollar General. 742 00:36:13,230 --> 00:36:15,030 It's not something that I ever saw coming. 743 00:36:15,630 --> 00:36:17,510 I'm lucky that I didn't own the stock. 744 00:36:17,510 --> 00:36:21,110 I've never owned Dollar General, but it makes me take a step back 745 00:36:21,110 --> 00:36:25,270 and realize that with these small retailers, Tsco, the 746 00:36:25,270 --> 00:36:28,940 Tractor Supply Company, Dollar General and all these other 747 00:36:28,940 --> 00:36:32,460 smaller retailers, it's very difficult to see upcoming 748 00:36:32,460 --> 00:36:34,980 threats to them. So even though I think this one 749 00:36:34,980 --> 00:36:37,420 will continue to do well, there's lots of data supporting 750 00:36:37,420 --> 00:36:39,020 that. It's what I don't know that 751 00:36:39,020 --> 00:36:41,260 concerns me. I feel like there's hidden 752 00:36:41,260 --> 00:36:44,460 threats with retailers with how competitive the industry is. 753 00:36:44,900 --> 00:36:48,700 And unless they have some type of incredible Moat or something 754 00:36:48,700 --> 00:36:52,260 that is outside of the retail business to keep people shopping 755 00:36:52,260 --> 00:36:54,060 there, I think it's very difficult. 756 00:36:54,460 --> 00:36:56,860 Right now, I only own 2 retailers. 757 00:36:56,860 --> 00:37:00,140 One is Costco, which has that subscription model, and the 758 00:37:00,140 --> 00:37:03,420 other is Amazon, which also has the subscription model. 759 00:37:03,820 --> 00:37:06,540 So Tractor Supply Companies, one that I think is interesting, but 760 00:37:06,540 --> 00:37:09,380 for the reason that it's a retailer and I don't know what I 761 00:37:09,380 --> 00:37:11,740 don't know about the company, It's one that I'm going to be 762 00:37:11,740 --> 00:37:13,580 avoiding. Now moving on, we get to the 763 00:37:13,580 --> 00:37:16,940 final big company of the week, which is Amazon. 764 00:37:16,940 --> 00:37:19,700 Amazon is the most significant bet in the story fund. 765 00:37:20,070 --> 00:37:23,910 I have around 1/3 of the entire story fund in this company alone 766 00:37:24,110 --> 00:37:27,830 with $53,800 as the current holding. 767 00:37:28,110 --> 00:37:31,150 I'm around $4000 in the red. So just a hair in the red. 768 00:37:31,470 --> 00:37:33,510 This one's been in the green, it's been in the red. 769 00:37:33,510 --> 00:37:36,150 It's a more volatile stock like Netflix. 770 00:37:36,550 --> 00:37:39,790 But I still believe in the long term intrinsic value drivers of 771 00:37:39,790 --> 00:37:42,230 Amazon. Those long term intrinsic value 772 00:37:42,230 --> 00:37:45,910 drivers are the retail business, especially the third party 773 00:37:45,910 --> 00:37:48,810 retail business where they have sellers selling on their 774 00:37:48,810 --> 00:37:51,330 platform. They charge fees along the way. 775 00:37:51,530 --> 00:37:54,570 Those fees are very high margin and that's a nice high margin 776 00:37:54,570 --> 00:37:58,170 business for Amazon. You also have the Amazon Prime 777 00:37:58,170 --> 00:38:00,730 subscription that's like the Costco model. 778 00:38:00,970 --> 00:38:02,410 That's of course very high margin. 779 00:38:02,410 --> 00:38:04,650 There's not much to maintain a Prime subscription. 780 00:38:05,050 --> 00:38:09,410 Then of course you have the AWS business that is another large 781 00:38:09,410 --> 00:38:11,570 portion of Amazon's intrinsic value driver. 782 00:38:11,850 --> 00:38:13,450 I only see that growing overtime. 783 00:38:13,970 --> 00:38:16,890 From a developer perspective, Amazon has an incredible 784 00:38:16,890 --> 00:38:19,730 offering with AWS, basically everything you need to build 785 00:38:19,730 --> 00:38:22,090 your company. And then of course they have the 786 00:38:22,090 --> 00:38:25,330 ads business that they layer upon the retail business. 787 00:38:25,690 --> 00:38:29,890 So with owning Twitch and owning all of the retail shopping, I 788 00:38:29,890 --> 00:38:33,370 believe that Amazon has the best ads business of any big tech 789 00:38:33,370 --> 00:38:35,090 company. It's better than Google's. 790 00:38:35,090 --> 00:38:37,530 It's better than Netflix. It's better than Microsoft's, 791 00:38:37,530 --> 00:38:40,670 better than Apple's. How targeted their ads are are 792 00:38:40,670 --> 00:38:42,550 incredible. So we know that Amazon has these 793 00:38:42,550 --> 00:38:45,230 great core intrinsic value drivers of the ad business. 794 00:38:45,230 --> 00:38:49,590 Prime, AWS and the third party sales, all of those are core 795 00:38:49,590 --> 00:38:51,750 intrinsic value drivers. They're growing every single 796 00:38:51,750 --> 00:38:54,310 year. But this has been masked by the 797 00:38:54,310 --> 00:38:56,110 amount of CapEx the company has done. 798 00:38:56,390 --> 00:39:00,630 If we go to the expenses and we look at the CapEx, it is really 799 00:39:00,630 --> 00:39:02,030 incredible how much they've done. 800 00:39:02,070 --> 00:39:05,310 This is on a quarterly basis. Now take a look at what's 801 00:39:05,310 --> 00:39:08,320 happening here. The CapEx is actually going 802 00:39:08,320 --> 00:39:10,960 down. This was the investment cycle 803 00:39:11,040 --> 00:39:13,800 right there from Amazon. They doubled their fulfilment 804 00:39:13,800 --> 00:39:17,080 network in a single year. That caused an enormous amount 805 00:39:17,080 --> 00:39:21,560 of lagging CapEx to pay for all of their new vans, to pay for 806 00:39:21,560 --> 00:39:24,360 all their warehouses and tooling and equipment for every 807 00:39:24,360 --> 00:39:26,440 warehouse. That's super expensive. 808 00:39:26,960 --> 00:39:29,800 But now they've done it, they paid for most of it and we're 809 00:39:29,800 --> 00:39:32,480 seeing the CapEx go down every single quarter. 810 00:39:33,030 --> 00:39:35,670 Jassy, the CEO has said that he's getting costs under 811 00:39:35,670 --> 00:39:38,110 control, that he can make the company profitable. 812 00:39:38,390 --> 00:39:42,110 He's been tasked with that as the executive and investors are 813 00:39:42,110 --> 00:39:45,270 very unnerved by this. They're very concerned about 814 00:39:45,270 --> 00:39:47,070 Jassy and his ability to do this. 815 00:39:47,430 --> 00:39:50,470 But Jassy has been with the company almost as long as Jeff 816 00:39:50,470 --> 00:39:53,430 Bezos. Jassy has made AWS what it is 817 00:39:53,430 --> 00:39:56,110 today, which is the Holy Grail of Amazon. 818 00:39:56,510 --> 00:40:00,400 So a lot of people are are doubting the CEO that's tasked 819 00:40:00,400 --> 00:40:03,200 with making this company profitable, getting CapEx and 820 00:40:03,200 --> 00:40:06,200 cost under control. And I don't doubt him, I think 821 00:40:06,200 --> 00:40:08,560 he's going to be able to do it. What I believe we're going to 822 00:40:08,560 --> 00:40:13,240 see over the next couple of years with Amazon is explosive 823 00:40:13,240 --> 00:40:16,640 free cash flow growth through a combination of all their 824 00:40:16,640 --> 00:40:19,680 intrinsic value components of the business, the Prime 825 00:40:19,680 --> 00:40:23,680 membership, the third party sales, the ADS business and AWS 826 00:40:23,680 --> 00:40:29,480 all growing and the combination of a reduction in CapEx expense. 827 00:40:29,840 --> 00:40:32,600 I think we're going to continue to see the CapEx go down 828 00:40:32,880 --> 00:40:36,760 proportionate to revenue, which will cause a lot of a lot of 829 00:40:36,760 --> 00:40:39,240 free cash flow growth, a lot of operating leverage in the 830 00:40:39,240 --> 00:40:41,680 business. So right now, things look a 831 00:40:41,680 --> 00:40:44,960 little messy with Amazon. Investors want more clarity. 832 00:40:45,200 --> 00:40:48,320 They want it to look more like Microsoft or Google, but 833 00:40:48,320 --> 00:40:51,120 Amazon's a business that has far more operating leverage. 834 00:40:51,720 --> 00:40:54,760 It's a little bit more difficult to read and I think that it has 835 00:40:54,760 --> 00:40:57,800 more chance for our performance because it's so difficult to 836 00:40:57,800 --> 00:41:00,440 gauge. But my bet is, and again, I 837 00:41:00,440 --> 00:41:03,560 could be wrong, this is my bet. I think Amazon's going to have 838 00:41:03,560 --> 00:41:06,720 incredibly explosive free cash flow over the next couple of 839 00:41:06,720 --> 00:41:09,960 years and I believe it could start this year. 840 00:41:10,240 --> 00:41:13,320 We already had last quarter be a great quarter, way above 841 00:41:13,320 --> 00:41:15,480 expectations. The quarter before that they 842 00:41:15,480 --> 00:41:17,800 generated $12 billion in free cash flow. 843 00:41:18,320 --> 00:41:20,440 And going into the holiday season, I think they're going to 844 00:41:20,440 --> 00:41:24,340 have a very good results. We saw more recently that even 845 00:41:24,340 --> 00:41:27,260 as the economy slows down and we're hearing all of these 846 00:41:27,260 --> 00:41:31,500 people predict recessions that Amazon's Prime Day was the 847 00:41:31,500 --> 00:41:34,940 biggest Prime Day launch ever in the company's history. 848 00:41:35,300 --> 00:41:38,460 So Amazon's telling you a different story in terms of 849 00:41:38,460 --> 00:41:42,220 their company than what a lot of analysts and a lot of economists 850 00:41:42,220 --> 00:41:44,820 are trying to tell you. And I believe Amazon more than 851 00:41:44,820 --> 00:41:46,740 The Economist. So I think this earnings report 852 00:41:46,740 --> 00:41:48,780 is going to be really good. I look forward to it. 853 00:41:49,160 --> 00:41:51,400 I'd be surprised if it was super underwhelming. 854 00:41:51,400 --> 00:41:53,520 There's always a chance it will be underwhelming and that will 855 00:41:53,520 --> 00:41:55,680 be a bummer, but I think it will be good. 856 00:41:56,160 --> 00:41:58,320 Now, last but not least, we have Chipotle. 857 00:41:58,360 --> 00:42:00,960 This is another company that I hold on My Portfolio now in 858 00:42:00,960 --> 00:42:02,960 terms of Chipotle. I'm going to make the same 859 00:42:02,960 --> 00:42:05,360 prediction I've made for the better part of two years. 860 00:42:05,760 --> 00:42:09,280 I think companies like Chipotle, Starbucks, Texas Roadhouse, 861 00:42:09,280 --> 00:42:11,760 McDonald's. I think that these companies 862 00:42:11,760 --> 00:42:14,640 have done really well for the past two years and I think 863 00:42:14,640 --> 00:42:16,600 they're going to continue to do really well. 864 00:42:17,080 --> 00:42:19,750 I think people are addicted. They can't give up the 865 00:42:19,750 --> 00:42:23,470 convenience and the ease of getting a tasty meal that takes 866 00:42:23,470 --> 00:42:25,550 2 minutes to get. They don't want to spend the 867 00:42:25,550 --> 00:42:28,790 time cooking at home and collecting all the ingredients 868 00:42:28,790 --> 00:42:31,590 from grocery stores, which in many cases is equally as 869 00:42:31,590 --> 00:42:33,710 expensive. So a lot of times they're going 870 00:42:33,710 --> 00:42:36,550 to favor the convenience of something like Chipotle. 871 00:42:37,030 --> 00:42:39,430 So I think that even though these companies have done really 872 00:42:39,430 --> 00:42:41,950 well, I think they're going to continue to do really well. 873 00:42:42,270 --> 00:42:46,030 And again, Chipotle's 8 dollars, $10 a meal. 874 00:42:46,530 --> 00:42:48,930 You go to McDonald's, you pay 5 or 6 bucks a meal. 875 00:42:49,210 --> 00:42:52,010 You go to Texas Roadhouse, you pay 12 to $15 a meal. 876 00:42:52,290 --> 00:42:55,730 These are small ticket items. I believe right now the type of 877 00:42:55,730 --> 00:42:58,610 things that are going to get hurt are what Steve Eisman 878 00:42:58,610 --> 00:43:03,010 points out, cars, mortgages, things that require financing 879 00:43:03,050 --> 00:43:05,810 and interacting with a bank. I think customers will continue 880 00:43:05,810 --> 00:43:07,970 to go to Chipotle. So when I look at these upcoming 881 00:43:07,970 --> 00:43:10,370 earnings, I'm not concerned about Chipotle. 882 00:43:10,370 --> 00:43:13,130 I think it will be fine. I'd be far more concerned with 883 00:43:13,130 --> 00:43:15,850 the upcoming earnings of Ford that's reporting on the same 884 00:43:15,850 --> 00:43:17,330 day. So that's a look at the full 885 00:43:17,330 --> 00:43:19,170 week ahead. I hope you enjoyed this 886 00:43:19,170 --> 00:43:20,730 overview. If you like this type of 887 00:43:20,730 --> 00:43:22,570 content, make sure to subscribe to the channel. 888 00:43:22,940 --> 00:43:24,780 And if you want to see more additional content, check out 889 00:43:24,780 --> 00:43:26,820 the Patreon. There's more exclusive episodes 890 00:43:27,060 --> 00:43:28,900 every single week. That's all for now. 891 00:43:28,900 --> 00:43:29,740 See you in the next one.