Welcome back everyone. Today on the Joseph Carlson
Show. This earnings season is coming
to a close and some of my companies, in fact some of my
biggest holdings, just recently reported earnings, one of them
being SP Global, which is up 7% today.
After their report, we also can't forget about Apple.
This stock was in the green today, but they just barely
reported earnings. Apple's also a large holding in
My Portfolio and it's one that I've been in for years.
I've been emphatical about this company and the value that it
presents to consumers and as an investment, and this has
routinely been one of the biggest winners in the
portfolio. Apple is a massive company with
lots of different numbers and different metrics to track.
So in this earnings report I'll be going over what I think are
the key metrics, the biggest things that I'm looking for.
And we also have some other news to get to.
The Target CEO went on to CNBC and he tried to explain the
company's underperformance and why the consumer is slowing down
in discretionary spending. He blames the overall economy
and consumer preferences, but there's a problem with the
Target CEO's excuse. There's a lot of contrary data
and I want to highlight why I see problems with his interview.
We also had an Apple event. It was the scary fast Apple
event where they talked about their Max and as you would
expect, Apple takes you underground to their awesome
offices that have incredibly cool lighting.
You have all these these really cool sets that they film from.
Well, Apple revealed at the very end of this event, something
that I think was the most important thing of the entire
event itself, and that was that the event was shot on an iPhone
and edited on a Mac. The whole event, this entire
thing was shot on an iPhone all along.
And this has actually spurred a lot of controversy.
And the controversy is the extra equipment they used.
A lot of people are saying that they use so much lighting and
they use so many different tools that it makes the iPhone part of
it not as impressive. Some people even go as far as
saying that this is wrong, that Apple's misrepresenting the
iphone's capabilities. So we'll be looking at this
controversy and how impressive this really is for Apple.
Now, that's not where the Internet drama ends.
We also have a debate raging on TikTok.
In this case, it's a list that some user came up with, that
these places are not OK to take a girl on the first date.
And we have the entire list right here.
It includes places like Cheesecake Factory, Applebee's
and Chili's. We have a lot of other
restaurants and then different activities that are listed up to
28 different events. Now there's a lot of opinions on
this. So we'll be settling this debate
once and for all. So we have a lot to get to.
Let's go ahead and jump right in.
Now, one thing I have to mention first, if you haven't tried out
the Patreon membership, today is the day to do it.
The Patreon gives you access to qualtrum.com, this website that
I built for stock fundamental analysis.
You can bring up any company like Google.
You can see all of the fundamentals.
You can blow up the revenue and see the compound annual growth
rate over longer periods of time.
You can zoom in to different time periods and see everything
visually. And it does show you an overview
of how the company's doing with all of its core fundamentals.
Qualtrum also comes with a list of tools.
For example, we have an advanced watch list.
It shows you the dip Finder. It'll tell you which companies
are currently on a dip, which ones are in a price surge.
It has a portfolio analysis tool that will show you a lot of
different metrics about your dividend growth, your portfolio
by sector and allocation, your win and loss based on your
holdings and so on. And it has a beautiful dark mode
for those of you that browse your stocks at night.
If you join today, you get the entire month for free.
That gives you time to try it out, and I think you'll love it.
There's a link to it in the PIN comment below.
Now let's go ahead and start off with Apple, which is a very
important holding to My Portfolio.
The company just reported earnings today and on the day it
was up 2% with the rest of the market.
And after this earnings report, the immediate reaction is a less
than 1% trade down. So it's pretty flattish on the
day. We have a minor trade down and
this is what I expected, an inline quarter.
We have all the major segments of Apple's business highlighted
here. And what I did was I highlighted
the parts that beat expectations in green, the parts that came
under expectations in red. The earnings per share was a
strong beat. The revenue was a beat.
The iPhone revenue was a beat. The Mac revenue came in under.
The iPad revenue was a beat. Wearables revenue was slightly
under. I'd say that's mostly in line to
a slight miss. The services revenue, which I
continue to believe is the most important part of this company
right now, that was a beat. And then the gross margins was
also a strong beat. So this wasn't perfect across
the board, but this was pretty good.
They beat on the top and bottom line and in most segments of
their hardware. Most importantly, again, I
emphasize the service revenue. Everyone has their different
ways of analyzing Apple. But the way that I've looked at
this company all along is as a consumer, defensive company, an
entire circular ecosystem of products that once you start
getting in this ecosystem and you get the Apple Watch and the
Airpods and the iPads and the Macbooks, once you start getting
all of those devices, you start inevitably using the services,
the credit card and Apple Pay. I message FaceTime.
You'll probably start paying for iCloud for all of the photos
you're taking and on and on and on.
Apple sells service after service.
When you have all of this hardware on top of all of this
software, all integrated firmly together, it forms this very
strong ecosystem. That ecosystem is their Moat.
It's their competitive advantage.
It's their barriers to entry. The stronger the ecosystem is,
the stronger the investment case for Apple is and the more ways
they have to monetize users within that ecosystem.
We can go down and look at the total revenue of Apple and this
is what most investors are looking at.
Last quarter was slightly under where it was the quarter a year
ago. We have sales decline now if we
breakdown Apple by product category, we can see which part
of the company's in decline over the past year and what part's
growing. We can, for example, see how Mac
sales, specifically Mac sales are doing quarter by quarter.
We can see that during 2020, Apple certainly had some pull
forward in their Mac sales. Lots of people are getting
stimulus checks. Lots of businesses were getting
PPP loans. What do we think they all did
with those stimmy checks and with the PPP loans?
They bought Macbooks for their employees.
They bought them for their work at Home Office.
So we're seeing a decline in Mac sales over the past year.
That's a little bit expected. If we look at the wearables,
this is also grown during 2020, but it's been a bit more
resilient. The iPad shows a similar trend.
Lots of people started buying them around 2020 and it's mostly
held its own. It's slowing down a little bit
over the past quarter. The iPhone, their biggest device
has been their most resilient, growing in 2020, also growing in
2021 and holding strong into this quarter.
But more important than all is the services of the company.
These green bars here represent the highest margin portion of
Apple where they make money off of all the subscriptions they
sell, all the insurances and all the transactions that happen
through the Apple store. This is the tollbooth of Apple
that's well protected and insulated by their ecosystem.
We can see the growth of this overtime as well.
Back in 2018 the services were just over $10 billion, now
they're over 20 billion, so they've doubled over that time
period. The services in this most recent
quarter grew again to 22.31 billion, so a noticeable growth
over the previous year and the past quarter.
The rest of Apple's business is slightly cyclical.
The harbor sales come and go but the service revenue is far more
secular. This last quarter's earnings per
share would put the bar right around there.
So a nice improvement over the previous year, mostly due to
Apple being all to buy back a lot of their shares.
They said on this most recent earnings report that their
active install base has again reached an all new high across
all geographic segments and they attribute that to their
ecosystem and unparalleled customer loyalty.
I think they're being truthful in that people are in the Apple
ecosystem and they're not leaving.
During the September quarter, our business performance drove
double digit earnings per share growth and we returned nearly
$25 billion to shareholders while continuing to invest in
our long term growth plans. So a $25 billion dividend and
buy back in this quarter. I believe there's two main
takeaways in this latest Apple report.
The first thing is that the ecosystem is in good standing
and that should be music to the Apple shareholders heirs.
The ecosystem again is the most important part of the Moat of
the barriers to entry. As long as they can maintain
their ecosystem and grow that ecosystem, Apple shareholders
will reap the rewards and it's getting stronger by the day.
They're active install base of devices reached an all new high
and all geographies that is a very positive development in
terms of the Apple mode. The second thing is that the
most important segment of Apple, the highest margin portion of
Apple, the Apple services grew at 16% year over year.
So underneath the surface of the gloomy year over year decline in
revenue, you have a nice juicy business growing in double
digits, in fact, in the high teens.
Getting people in the ecosystem and keeping them happy there is
the way they'll profit in the future.
As long as Apple can continue to do that, which this report shows
they can, they'll continue to give good shareholder returns.
Now am I going out of my way to actively buy ale hair hand over
fist? No, I'm not right now.
I think it's mostly fair valued. I think the stock has more
upside in it, but with the holding that I have already, I'm
not in a position where I want to go out and buy a lot more
Apple. I was buying the company at
$90.00 per share and 1:20, and if we do get a dip in the
company, I'll buy more of it. But as of right now I consider
Apple a hold. Now another huge company in My
Portfolio that recently reported earnings is S&P Global.
This company I've talked about routinely as being a compounder,
having a diversified set of businesses within its name, and
all of them are high quality businesses.
So I have high expectations for this company.
They recently reported earnings. They're U-7 on the day because
they beat expectations. Now, I'm not going to spend a
lot of time on this earnings result because I've gone over
and global in detail in numerous episodes, but I just want to
highlight a couple things here. First of all, the earnings per
share grew 10% year over year, strong growth in EPS and the
revenue increased 8%. We can look at this chart here
to get a breakdown of the different segments of the
business. The market intelligence grew 8%,
ratings grew 20%, Commodity insights 11%, mobility 10%, and
the indices portion 6%. Overall, in aggregate and
weighted by the business segments, that's 8% growth.
You can look at the margins of these businesses.
These are all high margin businesses diving into the
report even more. It's as boring as you would
expect. The CEO of the company
reiterated their previous guidance that they've reiterated
before that they've reiterated before.
They're very good at making projections and they've held
firm to those projections the entire year.
So there should be no surprises with S&P Global.
They're doing exactly what they said they would do earlier this
year. So the two companies that
reported today did really well. And overall I've had a great
earning season. I've avoided any type of
disaster with my companies. None of them have dropped 10 or
20% like you're seeing with a lot of other lower quality
companies. And I attribute this success and
earning season to the quality selection of the companies in
this portfolio. We can go through just some of
the numbers here. S&B Global grew by 8%,
MasterCard by 13%, Microsoft grew by 13%.
Apple's revenue was flat, but their net income grew by double
digits and the company's services are growing by 16%.
Texas Roadhouse grew by 14%, Chipotle by 11%.
Now, Costco hasn't given their official report yet, but they
released sales results every single month and they're
trending up like they always have.
VG grew its revenue by over 20% and it's AFFO per share by 11%.
Strong growth out of VG as well. Well, Canadian Pacific is
growing fast after the merger and Union Pacific is one of the
only companies that's struggling with revenue growth.
The railroads have been the slowest part of My Portfolio the
entire year, but being flat on them hasn't been too bad.
When I look at My Portfolio overall, having this
concentrated group of high quality companies has led to
really good results this earning season.
And I think if I stick with these type of companies, I'll
continue to see the games. Now moving on, we get to an
interview of the CEO of Target. He went on to CNBC to explain
what he believes are the problems that Target is facing.
Now keep in mind, during this time period Target's not having
a good year. The company is massively
underperforming the broader market.
It's down 26% year to date. The financial performance has
also looked pretty grim and during difficult times with
companies. What I like to see from the
management is leadership, true leadership, which is properly
identifying the problems the company's facing, even if the
company is at fault. If the company's underperforming
because of poor execution or self-made errors, then they
should identify that what we see here from the target CEOI
believe is something different. Meaning they're they're buying
less stuff, they're buying less stuff even within food and
beverage. Again, we look at overall retail
spending, just look at the top line.
You say, all right, a really healthy consumer and they are
spending. But even in food and beverage
categories over the last few quarters, the units, the number
of items they're buying has been declining.
So they're even tightening up their spending in those
categories. But in discretionary goods,
we've seen 7 consecutive quarters of both dollars and
units declining. So you're buying less apparel,
less items for your home, fewer toys.
You're seeing some of the pressure in those categories.
Now those cycles are going to change.
And you've been reporting about categories like toys seeing
pretty significant declines. He mentions that for seven
consecutive quarters, consumer discretionary spending has been
in decline. So consumers are no longer
spending on discretionary items at Target.
What I wanted to figure out was how much of this is overall
economics and how much of this is specific to Target.
We have some conflicting evidence here.
For example, the first day of Prime Day this year, the most
recent Prime Day just in July was a record for Amazon record
spending on Prime Day in 2023. Amazon mentions the top selling
deals on their Prime Day, the Fire TV Stick, Lanage, Lip Glowy
Bomb Airpods and the Bizzle Carpet Cleaner.
These items sound very discretionary and if you go
through the rest of the items, most of these I would categorize
as discretionary. So Amazon doesn't seem to be
having the same issue with discretionary spending.
We also had Netflix gaining 9,000,000 subscribers.
Spotify reached an all time high as well and their subscriber
base. Consumers seem to be spending on
these subscriptions. I could also name off companies
like Starbucks. It's up 10% after earnings
today. Is Starbucks discretionary?
Do people really need Starbucks? I consider it sort of
discretionary, but it seems like they're doing just fine.
I believe what we're seeing here is really important.
We're having it revealed which companies are really
discretionary and which ones aren't, what products customers
will give up and which ones they won't.
We get to see that clearly illustrated over the next six
months. Now moving on, we have a
controversy brewing, a debate over the shot on iPhone of the
Apple scary fast event. Now, if you're out of the loop,
Apple just recently had an Apple event like they normally do, and
it looks like it's professionally shot.
In fact, during the event, no one was the wiser.
No one had any idea that the entire event was filmed by an
iPhone. And the reason why is because it
looks professionally produced. It looks indistinguishable from
any other Apple event. Now of course, the big secret
here, the reason this looks so good and indistinguishable, is
because of all the other stuff that Apple does to help out the
production. They have a giant balancing
gimbal to make everything look smooth.
And of course, they have incredibly expensive and amazing
lighting. The combination of set design,
the gimbal and the lighting create an amazing production
where it looks studio quality, even filmed on an iPhone.
So some people are trying to discredit or at least downplay
the effect of the iPhone filming it because it had so much other
equipment. In reality, Apple has always
used expensive production design and everything they've done.
The fact that they were able to swap out a big professional
camera with the iPhone and make it so nobody can notice until
after the event, that is impressive.
And even the people that are haters trying to downplay it
have to believe that that's impressive, that you cannot tell
this was filmed by an iPhone. This proves that phone cameras
are so good and with proper lighting, with a little bit of
set design you can make a professional looking production
with a phone camera. Now, finally, we move on to
another debate raging right now. It's in the cultural zeitgeist.
It's the debate raging on Twitter and on Tiktok.
And it's over. This list that someone came up
with somewhere of different events or different places.
But you cannot take someone on your first date.
And I have the complete list right here.
So let's go ahead and go through this list.
We have The Cheesecake Factory. Can't take a date there.
Applebee's. Chili's.
Chipotle. Olive Garden, The movies, Your
house. Any fast food chain.
So any fast food chain is off limits.
Buffalo Wild Wings. Wingstop.
Red Lobster. A buffet.
IHOP. Denny's.
The gym. Church.
Starbucks. Coffee.
Dates. Ice cream.
Family functions. Movie nights, Somewhere that
requires a long drive, bowling, nightclubs, hookah bar, a bar
for just drinks, the Waffle House and sport events.
That is all 28 places apparently that you can't take a date.
Now when I look over this, the answer that's left the obvious
place that you can still take a date on the first date is Texas
Roadhouse. It wasn't on the list.
Technically it was not on the list, so I'm going to throw in
Texas Roadhouse there. Apparently that's OK to take a
date on your first date. Now, in all seriousness, when I
see this type of list passed around, the idea that a girl
would not be willing to go to The Cheesecake Factory on a
first date to me is insane. That's crazy.
The one thing that I think that that would serve useful as is if
I was going to take a girl on a first date and she refused to go
to The Cheesecake Factory because that wasn't up to her
standards, that would be very informative.
I would have gained a lot of new information.
The information that I gained there is that this is not a
person I want to be dating. Now some of these I do agree
with. Fast food chains are probably
not a good idea for a first date.
Your house is also probably not a good idea.
Going to church on a first date's a little much.
Going to the gym is really weird.
Going to family functions could wait until a second or third day
at least. So some of these I do agree
with. But overall this list is
ridiculous and the most ridiculous one I believe is The
Cheesecake Factory. I say this is someone who has
been married for 10 years strong.
If a girl doesn't want to go on a date to The Cheesecake Factory
because it's not up to her standards, I think that's a
major red flag I would avoid. That's all for this episode.
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