Welcome back everyone today on the Joseph Carlson Show.
My Portfolio is back to all time highs, reaching a value of
728,000 in total, with 241,000 of that being gains.
I own a concentrated portfolio of carefully selected stocks,
most of which are doing quite well this year.
In the financial category, my largest holding, S&P Global's up
14% year to date. MasterCard is up 11%, Intuit is
up 9% and Moody's is up 23%. In my tech category, Microsoft
is up 13%. Salesforce is is up 3% and
Apple's up over 20%. In the consumer category has
been one of my biggest winners of the year, which is Costco.
This company is up currently 33.7% year to date.
So Costco has been a massive outperformer and the gains have
really come in for this company. Now, we also have a new holding
booking holdings, which we'll go into later, but the performance
of this one's basically flat so far.
In the restaurant category, we have another massive winner.
This is the stock that has gone up the most this year aside from
Chipotle, which I sold out of. So Chipotle I sold, I locked in
the gains. Texas Roadhouse is my next best
performing stock this year and it's currently up 45% year to
date. Now in the real estate category,
I only have one holding. This one has had a bit of a
recovery over the past month. VICI has underperformed so far
this year, but there's reason to be bullish on this stock.
And then finally in the railroads, we have another
underperformer which is Canadian Pacific.
This company is flat year to date.
Overall, the performance of this portfolio has been strong with
every company either flat or moving up into the green.
Every company has been growing their earnings and free cash
flow per share. And with the portfolio moving up
again to all time highs, I think it's time to look at the
valuation and the investment case of each company and go over
three different companies that I'm actively buying.
So we'll be reviewing all of that in today's episode.
Now we also have some news to get into.
This story from Disney is one of the most absurd, ridiculous,
unreal things that Disney has done.
They're trying to throw out a lawsuit of a wrongful death in
one of their parks because the plaintiff agreed to Disney Plus
streaming services terms and conditions.
That's right, The Associated Press is saying that the
wrongful death suit against Disney serves as a warning to
consumers when clicking. I agree.
We'll be looking at the details of this case, looking at
Disney's defense, and seeing why this is unlikely to hold up in
court. Now we also know that Bill
Ackman is a little happy today because his arch nemesis Carl
Icahn has reportedly agreed to pay $2,000,000 to settle an SEC
investigation for not having proper closures with the amount
of money he owed different parties.
We'll be looking into what crime Carl Icahn specifically
committed and how his business has been faring over the past
year. Now finally, we also have news
that Bloomberg is reporting MasterCard is planning to cut 3%
of its staff worldwide. So MasterCard is cutting down on
staff. A lot of people have been
posting on Twitter, posting online that this isn't good for
the company. It shows that things must be
slowing down for MasterCard. We'll be giving some proper
context here with the amount of employees MasterCard has hired,
how fast the growth rate has been, and what this actually
means for the company. So we have a lot to get to.
Let's go ahead and jump in. Before I go into the three that
I'm buying, I want to go into one of the ones I'm currently
trimming. And yes, that stock I'm trimming
currently is still Apple. Apple historically has been one
of the largest holdings in My Portfolio, but now it's
currently one of the smallest. In fact, Apple is the second to
smallest holding in My Portfolio, the current value of
which is 35, $1400.00 with 31,600 in the green.
Apple has been a massive winner for the past five years, but I
don't believe Apple will have the same success over the next
five years. The valuation is much higher
than it was five years ago, so the starting point for the stock
requires even greater growth than the past five years to
obtain the same results it had previously.
But not only is the valuation starting much higher, but the
growth is expected to be much slower.
The total revenue of Apple has been at a standstill for the
past two years. You can see the enormous spike
in growth in Apple. During COVID.
There was a big amount of pull forward in demand, and then you
see the flattening of demand where Apple is having a tough
time growing at all. The exuberance in the stock
price of Apple is primarily due to their AI story.
Investors are now buying into the idea that Apple's going to
be a massive AI win and that will encourage a new massive
upgrade cycle for their phones. The problem is, even if Apple
does have a great upgrade cycle, a lot of that upgrade cycle is
already being priced into the stock.
And this is something that the analyst Craig Moffett pointed
out when they introduced their coverage of Apple.
What's been interesting to us as we we have have dug into this
over the last few months is. Once the.
The, the, the, the strategy around AI and the contextual
awareness strategy was built in. It was largely confirmatory for
the market that has real value. But certain risks like the one
you point out, the, the risk to the Google tag, as it's called,
the revenues for search was was largely brushed off by the
market. And So what we highlight in this
report is that and a number of other risks that I would say,
look, don't, don't change the fact that we are relatively
bullish about the AI strategy. But that there are a lot of
issues that that, that make it difficult to see how the stock
meaningfully outperforms not just the the broader market, but
in particular it's, it's core, the rest of the Magnificent 7
that to which it is so often compared.
So I likewise, I'm not bearish on Apple.
I don't believe the stock is going to go down.
But I agree that at this point it's difficult to see how Apple
meaningfully outperforms the rest of the Magnificent 7.
There's other companies that I think have a higher chance of
outperforming. There's three companies in
particular that I believe have a good chance of outperforming and
I've put a significant amount of money behind each of these.
The first one is in the consumer category.
Booking Holdings is a company that I believe could
significantly outerform, and I've bought a large osition into
this company over just the past two months.
Now it's traded up and down. I've bought it high and low to
average out my buys over the past couple of months.
Right now, the holding is flat. We are down $70.00 on a $46,000
position, so it's down .22%. This is trading around by the
minute, ebbing and flowing from green to red.
Booking Holdings is the dominant online travel agency.
It has significant demand for restaurants, hotels, and taxis.
So this company's a partner with a lot of other companies and
they stand as a digital platform that has a large concentrated
leadership, a position in this industry.
Now some people are concerned about the potential of going
into recession. At some point we will enter into
a recession and when we go into recessions, some people will
cancel their vacations. That happens every single time.
Most of the customers that use Booking Holdings make above
$80,000 per year. Their income is more resilient.
They're actually less affected by recessions than people think.
So this company still can do well and be profitable during a
recession. And overall, recessions are
temporary. Recessions are short term in
nature and over the fullness of time they make little difference
in businesses like Booking. Revenue has been climbing
steadily for this company at a rate above 15% per year.
Even in the most recent quarter, the gross bookings by merchant
and agency, the amount of revenue this company is making
by their bookings has reached an all time high, which means now
more people are planning vacations than anytime in
history. And this isn't just because of
an increase in prices. This isn't just price
increasing. We also have volume increasing.
The amount of room nights sold has also increased to an all
time high. I'm betting on booking because
it's a strong consistent generator of free cash flow.
Looking at the chart over time, it shows a very consistent
grower. The only time this company's
really been materially affected is by the pandemic, but that's
because travel was restricted by a one time event unlikely to
repeat itself and they did not have to take on debt to fund
themselves through the pandemic. Now the free cash flow is
reaching an all time high. When we adjust this by the of
free cash flow per share, it shows even steadier growth
because the company does significant share buybacks.
One share of Booking generates $218 of free cash flow over the
course of a year. So I've put some money behind
this holding. It's now flat.
We get to see what direction it trades over the next couple of
years. I don't judge my buys on how
they do in the first year. That's too short of a time
period, but I will be judging this holding over the next four
to five years. The second holding that I'm
still buying into is Salesforce. I haven't forgotten about this
company and even though I'm in the red on this company and it
traded down after their most recent quarter, I'm still very
bullish on Salesforce. It's currently a $56,000
position with $3000 in the red. I believe that Salesforce was
unfairly sold off after the most recent quarter.
The company's fundamental performance was great.
They did exactly what they told investors they were going to do.
They told investors that they're going to focus on efficiency,
they're going to focus on profits, and they're going to
focus strong on free cash flow. That's exactly what they told
investors a couple quarters ago. And sales force delivered on
those promises. The stock price after the
quarter had an abrupt fall. It went from $278 per share down
to 218. So we had this huge fall in
stock price and slowly it's recovered over the past quarter,
but I don't believe the stock deserved to trade down at all.
Salesforce put up strong revenue growth.
It grew 11% year over year on a trailing 12 month basis.
Every segment of the business is growing the sales cloud,
service, cloud platform, marketing integration and
analytics. The most confusing part of this
report was why investors were disappointed after they reported
the numbers they did in their free cash flow.
If we look at their free cash flow on a trailing 12 month
basis, this is the picture it paints.
You can see a very strong consistent growth and free cash
flow over the past 10 years. Now, a lot of people point out
that Salesforce does a lot of stock based COM.
So a lot of this free cash flow is eaten up by dilution, but you
can even see with the stock based comp that that's trending
in the right direction. The stock based comp has
actually gone down since 2022 as the free cash flow has exploded
to the upside. If we look at the free cash flow
per share, it shows this trend, the rapid growth and free cash
flow per share in the most recent quarter.
This was a massive spike over the previous quarter.
So investors were selling out of this stock as they were growing
their free cash flow per share by 62 percent year over year.
Now to me, on a simple observation, when a company's
growing it's free cash flow per share by 62% year over year,
typically that means the stock should move up, unless of course
the company is dramatically overpriced and Salesforce is not
dramatically overpriced. In fact, right now the company
trades at a 26 Ford PE ratio, which is very low to moderate
for company growing this quickly.
And it trades at a free cash flow yield of 3.3%, which is
much higher than most companies growing this quickly.
So by the metrics, Salesforce is not an overvalued company.
The only argument to make that this company isn't a good buy is
if it's going to go into decline.
So if you believe that Salesforce is a company of the
past, it's antiquated technology and it's going to be disrupted
by competitors, then of course this company is not a buy.
But I don't believe that's the case for this company.
Even though this is now the only company that I'm in the red on,
it's still one that I'm bullish on.
And I think given enough time, it's only a matter of time until
Salesforce goes back into the green.
Now, the third company that I'm buying is Intuit.
Intuit had a fantastic 2023. The stock price raised up
dramatically. If we look at the past five
years, we can see the stock price racing up all of 2023.
I bought into it at a decent point.
I got a good deal on it and the stock price raised up
immediately. Intuit was the fastest company
I've ever had $10,000 in gains in.
But as you can see, after 2023, the stock price has settled down
a little bit. I realize that Intuit's a more
volatile stock. It trades around more
aggressively than most companies, so a lot of investors
are wary about buying this one. But based on my research, I
think Intuit will still outperform the market by a large
extent over the next 5 to 10 years.
Intuit's about as solid as it gets all around.
For a tech company, the company has incredibly strong revenue
growth, quality of the revenues getting stronger as the majority
of it moves from one time purchases to ongoing
subscriptions. They're continually moving more
and more customers from their desktop applications to their
web applications where they can apply more continual updates and
have more of the product strategy that Adobe has shown
over the past decade. The free cash flow growth of
Intuit is one of the most impressive lines that I've seen
growing continually every single year.
When you put this on a free cash flow per share basis, it looks
even stronger as they've done significant buybacks.
The company has grown its free cash flow per share by 19% year
over year and over the past five years it's averaged 15% and
into. It's another one that's
extremely volatile around earnings.
So I wouldn't be surprised if they give some metric or some
number that investors don't like causing the stock to sell off.
We've seen that before, even as recent as just last quarter into
it dropped a full $100 per share after giving their last
quarterly report. So this type of volatility is
something you need to expect going into this holding, but I
don't concern myself with that. I pay attention to the free cash
flow growth of the company. So I'm trimming a little Apple.
I'm buying into booking Salesforce and into it three
companies that I believe have a strong predictability of beating
the market. I'll never know fully what's
going to happen with any company, but sticking to an
investing strategy with the diversified portfolio, all with
very strong companies eliminates most of the risks and sets it up
for a high probability of success.
So I'll continue to follow this and give you updates as we see
what happens. Now moving on, we get to a story
that's more and more frustrating and aggravating the more that
you read and learn about it. And the story reveals the dark
and ugly side of Disney. The story is about a lawsuit by
the family of the New York woman who died after eating at a
restaurant in Disney Springs and outdoor dining, shopping and
entertainment complex in Florida owned by Disney.
The Tang Swan family says in a lawsuit that the 42 year old New
York Dr. had a fatal allergic reaction after eating at an
Irish pub in Disney Springs. The lawsuit claims that Tang
Swan and her husband Jeffrey Piccolo and his mother decided
to eat at the Raglan Rd. in October 23rd because it was
billed on Disney's website as having allergen free food.
The suit alleges that Tank Swan informed the server numerous
times that she had severe allergies to nuts and dairy
products. Nuts and dairy products are the
most common allergies for foods. They say that they didn't just
mention this once or even twice to the server.
They mentioned it numerous times.
They even told them to go check with the chefs to make sure and
absolutely verify that it didn't have these foods and what they
were serving, and the waiter guaranteed that it didn't have
those foods. About 45 minutes after finishing
their dinner, Tung Swan had difficulty breathing while out
shopping, collapsed, and died at the hospital.
According to the lawsuit, the medical examiner determined that
she died as a result of having anaphylaxis due to elevated
levels of nut and dairy in her system.
Now, of course, after this happened, Disney released a
statement saying that this is an unfortunate event and should
have been avoided and that they will compensate the victims for
any liability that they had. Just kidding, Disney didn't
release such a statement. In fact, Disney released the
opposite statement. Disney said that they didn't
want to take any responsibility whatsoever.
Disney said in a statement this week that they were deeply
saddened by the families lost, but stressed that the Irish pub,
which also is being sued, is neither owned nor operated by
the company. Now this Irish pub is in the
Disney park, so it's literally in their park when you go in and
experience Disney World. But now Disney's saying that we
have nothing to do with him, we don't run it, we don't operate
it, we're not liable at all. So that's their excuse, and
that's one excuse being used for Disney to avoid liability here.
Obviously they should vet who's in their park and they should
share some liability, but that's a whole different argument in
and of itself. The really infuriating part of
this lawsuit is Disney's arguing that Piccolo, the husband in
this case, had agreed to settle any lawsuit against Disney out
of court and through arbitration when he signed up for a one
month free trial of Disney Plus back in 2019.
Now, on a side note, he also signed up for Disney Plus on a
PlayStation. So the husband of the victim
back in 2019 signed up for Disney Plus on a PlayStation and
they're using those terms of service as an agreement that
they can't sue because of the wrongful death of their wife in
the park. That's correct.
You're hearing this correctly. The first page of the subscriber
agreement states in all capital letters that any dispute between
you and us, except for small claims, is subject to class
action waiver and must be resolved by an individual
binding arbitration. That's what you're signing up
for when you sign Disney Plus. Now, if you think it's
outrageous that signing an agreement for a streaming
service means that you can't sue for wrongful death in a park
four years later, then of course you're correct.
And that's the exact same thing that the lawyers are saying for
Piccolo. They've slammed Disney, calling
it preposterous, saying it's on the borderline of being surreal.
They say that it's quote, fatally flawed for numerous
independent reasons. The lawyers are aghast that
Disney would even propose this as a defense.
I realize there's a lot of hardcore Disney fans, and in
some cases they'll even try to spin this in defense of Disney,
but there's really no defense here.
This is just despicable behavior by the company.
The fact that they're using a terms of service agreement from
a streaming service in 2019 on a PlayStation to try to say that
you can't sue when they fed you food that killed you in your
park? That is beyond absurd and
frankly, Disney should be ashamed and embarrassed by this
attempted defense. And one more thing, just on a
side note of the story, it wasn't even Tung Swan that
signed up for Disney Plus. So the person that was actually
victimized wasn't the one that actually agreed to the terms of
service. We get to see what happens with
this case over the upcoming years, but if the judge has any
sense, they'll throw out this defence.
Now we get to the story of Carl Icahn running into more trouble.
We know that a couple years ago, Hindenburg Research released a
report showing that Carl Icahn may be doing some dubious things
with his financials. Carl Icahn's company agreed to
to pay $2,000,000 to settle civil charges from the
Securities and Exchange Commission that he failed to
disclose extensive borrowing against the company's shares.
The settlement is modest in the damage done to his company
compared to the short seller report.
Since that report, shares of the company are down 68%.
It slashed its dividend by half and was forced to renegotiate
terms of his loan. Now, he hasn't omitted any
wrong. This is something that they do
when they settle. They settle and say, we'll pay
this much if we can get this case behind us, but we're not
going to admit any fault. And Carl Icahn has said, quote,
we are glad to put this matter behind us and we'll continue to
focus on operating the business for the benefit of the
unitholders. Overall, this individual fine.
It's not a big deal for Carl Icahn.
The bigger deal is the damage done to his company over the
past year and a half. And if there's one person that's
been happy to read this article, it's been Bill Ackman.
Now, moving on, we finally get to the news that MasterCard is
cutting back on 3% of its workforce.
In a lot of cases, this can mean trouble for the company.
It's symbolic of a slowdown, but that's not the case here with
MasterCard. We can first look at their
reasons for doing these cuts. They say, quote, as these
changes are made, we plan on redeploying resources into
growth areas. These changes will reinforce our
strategy and competitive advantage to drive a long term
growth diversifier revenue streams and differentiate our
product and solutions. The employee count of MasterCard
has been growing steadily over time.
In fact, firing 1000 employees wouldn't even put the company
back a single year. From 2022 to 2023, they hired an
additional 3000 employees. So this is not an indication
that Mastercard's slowing down. They're still hiring people like
crazy. If anything, this is a slight
moderate. In their hiring.
Now that's going to be it for this episode.
If you want to see more exclusive content and get access
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Other than that, I'll see you in the next one.