1 00:00:00,160 --> 00:00:02,200 Welcome back everyone. In this episode we have a three 2 00:00:02,200 --> 00:00:03,960 parter. First of all, Disney just 3 00:00:03,960 --> 00:00:06,720 reported earnings and the stock is down 10%. 4 00:00:06,720 --> 00:00:09,080 On the day. We have the data, we have the 5 00:00:09,080 --> 00:00:10,320 numbers. We're going to be taking a look 6 00:00:10,320 --> 00:00:13,280 at what happened with Disney and why the stock is down. 7 00:00:13,680 --> 00:00:17,920 We also had Jim Cramer on CNBC Mad Money yesterday talking 8 00:00:17,920 --> 00:00:20,760 about none other than Texas Roadhouse. 9 00:00:21,000 --> 00:00:23,760 He did an entire segment on Texas Roadhouse. 10 00:00:24,160 --> 00:00:26,240 Now obviously I have some thoughts on this segment. 11 00:00:26,480 --> 00:00:28,840 I want to do a reaction. We'll be playing some clips from 12 00:00:28,840 --> 00:00:31,800 it and going through what Jim Cramer decided to highlight. 13 00:00:32,159 --> 00:00:35,080 And then finally, we have this Story fund, my secondary 14 00:00:35,080 --> 00:00:38,040 portfolio that we haven't done an update on for a while. 15 00:00:38,040 --> 00:00:40,480 So we're going to be looking at the Story Fund and seeing how my 16 00:00:40,480 --> 00:00:43,880 performance has been compared against the S&P 500. 17 00:00:44,200 --> 00:00:45,640 So we have a lot to get to in this episode. 18 00:00:45,640 --> 00:00:47,880 Let's go ahead and jump in. Now let's go ahead and start off 19 00:00:47,880 --> 00:00:49,960 with Disney. I'll go through the good and bad 20 00:00:49,960 --> 00:00:52,120 of this quarter. We can look at the earnings 21 00:00:52,120 --> 00:00:54,960 report here and look at the most important aspects of this 22 00:00:54,960 --> 00:00:57,400 previous quarter. The earnings per share was a 23 00:00:57,400 --> 00:00:58,760 beat. So that's a good thing. 24 00:00:58,960 --> 00:01:01,920 And they beat on their revenue or at least they came in line 25 00:01:01,920 --> 00:01:05,040 with their revenue expectations. So overall, the top and bottom 26 00:01:05,040 --> 00:01:07,880 line were good. They had a great quarter this 27 00:01:07,880 --> 00:01:09,800 last quarter. Another thing that I think is a 28 00:01:09,800 --> 00:01:13,400 good positive is they reiterated the $8 billion of free cash flow 29 00:01:13,760 --> 00:01:16,200 right here. They say they're going to have 8 30 00:01:16,200 --> 00:01:19,080 billion this year. Now like I pointed out before, 31 00:01:19,240 --> 00:01:23,840 if we look at Disney's free cash flow, $8 billion is right here. 32 00:01:24,160 --> 00:01:29,080 So this brings you back into the Marvel era, into the pre COVID 33 00:01:29,080 --> 00:01:31,400 era of them generating a lot of free cash flow. 34 00:01:31,760 --> 00:01:33,480 It'll be right there. That's good. 35 00:01:33,760 --> 00:01:36,960 This is good news for Disney. So as an investor in Disney, I 36 00:01:36,960 --> 00:01:40,120 would look at the $8 billion and be very happy that they say 37 00:01:40,120 --> 00:01:42,440 they're going to make that. I'd look at the earnings per 38 00:01:42,440 --> 00:01:45,040 share and revenue share and be happy about that. 39 00:01:45,200 --> 00:01:47,760 Another thing I think is important to track for Disney is 40 00:01:47,760 --> 00:01:50,760 the total subscribers and they give us an update this quarter. 41 00:01:51,080 --> 00:01:53,920 If we look at the most recent quarter here on Qualtrum, we can 42 00:01:53,920 --> 00:01:57,280 see the total number of subscribers per service, for 43 00:01:57,280 --> 00:02:00,480 example, with Disney plus domestic. 44 00:02:00,480 --> 00:02:02,400 So this is just like USA and Canada. 45 00:02:02,760 --> 00:02:08,560 Disney plus domestic had a nice bump up from 46.1 to 54,000,000. 46 00:02:08,960 --> 00:02:12,560 So they jumped up last quarter, which I think is a big positive. 47 00:02:12,880 --> 00:02:16,280 If we look at international, this bump down a little bit, so 48 00:02:16,280 --> 00:02:19,760 went from 65 to 62. They did a price increase. 49 00:02:19,760 --> 00:02:21,440 That's why they lost a few subscribers. 50 00:02:21,760 --> 00:02:24,320 So that's not a positive, but it's still not terrible. 51 00:02:24,720 --> 00:02:28,360 If we look at Hotstar, this is the least meaningful service 52 00:02:28,360 --> 00:02:30,880 because it doesn't make much money per subscriber. 53 00:02:31,160 --> 00:02:34,040 This went down a little bit from 38 million to 36. 54 00:02:34,360 --> 00:02:36,840 But again, Hotstar is not the most important thing. 55 00:02:37,080 --> 00:02:39,720 The Disney plus domestic is far more important. 56 00:02:40,080 --> 00:02:42,440 Then we look at Hulu and this actually gained a few 57 00:02:42,440 --> 00:02:47,760 subscribers from 49.7 to 50.2. So overall, I view this as 58 00:02:47,760 --> 00:02:49,520 positive. They're streaming. 59 00:02:49,520 --> 00:02:52,480 Subscribers are stabilizing and even gaining in their most 60 00:02:52,480 --> 00:02:55,240 important markets. When we break this down to the 61 00:02:55,240 --> 00:02:59,480 average revenue per subscriber, we can look at the Disney Plus 62 00:02:59,480 --> 00:03:02,200 domestic. This went down slightly, only 63 00:03:02,200 --> 00:03:06,320 $0.15, but Disney Plus domestic makes $8 per month. 64 00:03:06,720 --> 00:03:08,440 We look at Disney Plus international. 65 00:03:09,240 --> 00:03:10,960 This is why they lost subscribers. 66 00:03:11,240 --> 00:03:14,600 This went up big time from 5.9 to 6.6. 67 00:03:14,840 --> 00:03:17,720 So they did a big price increase that cost them some subscribers, 68 00:03:18,080 --> 00:03:20,600 but it makes their average revenue per subscriber go up. 69 00:03:20,600 --> 00:03:23,160 So it's a net benefit. Now like I said, with Disney 70 00:03:23,160 --> 00:03:28,760 plus Hotstar, they only make $0.70 per subscriber, $0.70 a 71 00:03:28,760 --> 00:03:31,000 month. So this is not a meaningful 72 00:03:31,000 --> 00:03:33,320 portion of the business. They're making pennies on these 73 00:03:33,320 --> 00:03:35,120 subscribers. If we look at this in 74 00:03:35,120 --> 00:03:39,200 comparison, this is what it looks like in the orange here in 75 00:03:39,200 --> 00:03:42,280 the yellow we have Disney Plus domestic and the blue we have 76 00:03:42,280 --> 00:03:45,800 international and then that sliver on top is Hotstar. 77 00:03:46,080 --> 00:03:48,640 So Hotstar is not a meaningful portion of revenue. 78 00:03:49,040 --> 00:03:51,080 And then we get to Hulu, which is massive. 79 00:03:51,440 --> 00:03:55,040 The average revenue per month for Hulu is $95 per month, but 80 00:03:55,040 --> 00:03:59,360 even Hulu did move up quarter over quarter from $93.00 to $95. 81 00:03:59,360 --> 00:04:01,200 So so far this quarter looks decent. 82 00:04:01,200 --> 00:04:03,280 The revenue is growing, the earnings per share is growing, 83 00:04:03,480 --> 00:04:06,200 the amount of subscribers in different regions is growing and 84 00:04:06,200 --> 00:04:09,120 the average revenue per subscribers even taking upwards, 85 00:04:09,400 --> 00:04:11,040 all the metrics look really good. 86 00:04:11,200 --> 00:04:13,920 And then on top of that, they reiterated their most important 87 00:04:13,920 --> 00:04:17,120 metric, the $8 billion of free cash flow this year. 88 00:04:17,560 --> 00:04:21,399 So I'm happy if I'm a Disney shareholder at this point, but 89 00:04:21,399 --> 00:04:24,280 there are some weaknesses here. They said that the theme parks 90 00:04:24,280 --> 00:04:26,600 would be flat in the June quarter when the analysts were 91 00:04:26,600 --> 00:04:29,160 projecting 12% gains year over year. 92 00:04:29,400 --> 00:04:31,480 So the analysts thought that there's going to be 12% 93 00:04:31,480 --> 00:04:33,960 operating income gains, but theme parks are going to be 94 00:04:33,960 --> 00:04:35,840 flat. That's where you get the 10% 95 00:04:35,840 --> 00:04:38,480 down. And then to add on to that, the 96 00:04:38,480 --> 00:04:42,440 CFO recently said just in an interview that there's some 97 00:04:42,440 --> 00:04:45,360 normalization of post COVID demand. 98 00:04:45,680 --> 00:04:48,480 The CFO is basically saying that now families have more 99 00:04:48,480 --> 00:04:51,680 opportunities to vacation elsewhere instead of visiting 100 00:04:51,680 --> 00:04:54,680 Disney Park and that's lowering their amount of demand and their 101 00:04:54,680 --> 00:04:57,160 pricing power. So instead of Disney Parks 102 00:04:57,160 --> 00:05:00,160 growing operating income double digits, it's going to be flat 103 00:05:00,480 --> 00:05:04,400 and that is where you get the 10% down, The disappointment on 104 00:05:04,400 --> 00:05:06,880 the forecast. Now even with this disappointing 105 00:05:06,880 --> 00:05:10,040 guidance on the parks, the stock should not be down 10% on this 106 00:05:10,040 --> 00:05:12,480 earnings. Disney had decent earnings. 107 00:05:12,480 --> 00:05:15,400 They beat most of their metrics and they still reiterated their 108 00:05:15,400 --> 00:05:18,400 most important metric, which is their free cash flow generation. 109 00:05:18,760 --> 00:05:21,920 So I think the stock should be next to flat on this earnings. 110 00:05:21,920 --> 00:05:24,600 Now moving on from Disney, we have to get into this next news. 111 00:05:24,600 --> 00:05:29,240 We had Jim Cramer from Mad Money do an episode where the primary 112 00:05:29,240 --> 00:05:32,360 thing he talked about was none other than Texas Roadhouse. 113 00:05:32,800 --> 00:05:35,720 Now of course, if you follow the channel, you'll know that I've 114 00:05:35,720 --> 00:05:38,720 owned Texas Roadhouse as a stock for years. 115 00:05:38,720 --> 00:05:41,960 I've owned this company and it's been one of my best investments. 116 00:05:41,960 --> 00:05:45,040 In fact, right now it's grown to my third largest position, 117 00:05:45,360 --> 00:05:50,880 $72,000 with $37,000 in gains. This has truly been a a terrific 118 00:05:50,880 --> 00:05:52,920 investment. Not only has it gained a lot in 119 00:05:52,920 --> 00:05:56,200 capital appreciation, but the company pays out a hefty yield. 120 00:05:56,200 --> 00:05:58,120 So I've been getting dividends at the same time. 121 00:05:58,280 --> 00:06:01,360 Now anytime a national news network covers a stock I own, I 122 00:06:01,360 --> 00:06:03,960 like to pay attention, but especially if it's a stock that 123 00:06:03,960 --> 00:06:06,680 doesn't get talked about too much, one like Texas Roadhouse. 124 00:06:07,080 --> 00:06:09,880 So I wanted to tune in and see what Jim Cramer had to say. 125 00:06:10,360 --> 00:06:12,360 We'll go ahead and just highlight a couple clips here. 126 00:06:12,800 --> 00:06:15,040 This is from last night. Spent a lot of time talking 127 00:06:15,040 --> 00:06:17,080 about restaurant earnings because we're seeing a big 128 00:06:17,080 --> 00:06:19,040 divide between the winners and losers and the group. 129 00:06:19,040 --> 00:06:20,760 It's pretty fascinating. But you know what? 130 00:06:20,760 --> 00:06:23,680 I never got around to the best restaurant quarter of all. 131 00:06:23,960 --> 00:06:28,200 Yes, Texas Roadhouse. That is true, what he says. 132 00:06:28,200 --> 00:06:30,880 The first thing he points out is that we're seeing a huge divide 133 00:06:30,880 --> 00:06:33,560 between the winners and losers. Absolutely true. 134 00:06:33,960 --> 00:06:36,280 This isn't a case where the entire industry is doing well. 135 00:06:36,720 --> 00:06:38,960 There's there's so many restaurants right now going out 136 00:06:38,960 --> 00:06:41,000 of business, right? There's the Red Lobster. 137 00:06:41,000 --> 00:06:42,800 There's all these different companies that are struggling. 138 00:06:43,080 --> 00:06:44,800 And then there's massive winners. 139 00:06:45,120 --> 00:06:48,840 Texas Roadhouse is the biggest winner by far in the restaurant 140 00:06:48,840 --> 00:06:52,400 category, and I don't believe that that's by random chance. 141 00:06:52,400 --> 00:06:54,000 If you look through the fundamentals and you study the 142 00:06:54,000 --> 00:06:55,800 business, there's reasons why they're winning. 143 00:06:56,760 --> 00:06:58,840 Which imported a beautiful quarter last Thursday night. 144 00:06:58,840 --> 00:07:02,880 They sent the stock up 3.6% on Friday and then another 2.5% 145 00:07:02,880 --> 00:07:03,960 today. That's a good one. 146 00:07:04,320 --> 00:07:05,600 Tonight. I want to put a spotlight on 147 00:07:05,600 --> 00:07:07,920 this one because Texas White House has delivered a series of 148 00:07:07,920 --> 00:07:10,320 great results despite being the full service base. 149 00:07:10,320 --> 00:07:13,080 At a time when quick serve outfits have generally been the 150 00:07:13,080 --> 00:07:15,320 winners. This thing's been roaring, 151 00:07:15,320 --> 00:07:19,640 though, climbing from less than $100 late last October to 167 152 00:07:19,640 --> 00:07:21,040 and change today. People don't talk about it 153 00:07:21,040 --> 00:07:22,520 because it's not in New York City, I guess. 154 00:07:22,520 --> 00:07:24,360 I don't know, so let me walk you through. 155 00:07:25,000 --> 00:07:27,680 He says people don't talk about it, Jim. 156 00:07:28,280 --> 00:07:31,320 I talk about it. I talk about Texas Roadhouse. 157 00:07:32,040 --> 00:07:34,160 You you got to subscribe to the channel, man, you're you're 158 00:07:34,160 --> 00:07:36,240 missing out here. We can have Jim Cramer as a 159 00:07:36,240 --> 00:07:38,200 subscriber. I'll get you some good stocks to 160 00:07:38,200 --> 00:07:41,560 follow, Jim, ones that your your viewers will enjoy owning. 161 00:07:42,320 --> 00:07:45,720 But I've been talking about Texas Roadhouse for years, 162 00:07:45,960 --> 00:07:47,680 literally years tweeting about it. 163 00:07:47,680 --> 00:07:49,400 In fact, I've had some viral tweets. 164 00:07:49,640 --> 00:07:52,600 One of them that I compared Texas Roadhouse to Google got 165 00:07:52,600 --> 00:07:54,320 viewed well over a million times. 166 00:07:54,920 --> 00:07:56,720 So this has been a stock I've talked about. 167 00:07:56,720 --> 00:08:00,720 In fact, one of the first videos I made on Texas Roadhouse was 168 00:08:00,880 --> 00:08:04,360 This was three years ago. Three years ago I made this 169 00:08:04,360 --> 00:08:06,880 video. Welcome everyone to Joseph 170 00:08:06,880 --> 00:08:09,120 Carlson. After hours in this video, I'm 171 00:08:09,400 --> 00:08:11,080 going to be talking about a company that I'm going to be 172 00:08:11,080 --> 00:08:13,120 buying this week. Quite a bit in fact. 173 00:08:13,120 --> 00:08:16,240 I plan on making it one of my core holdings in the passive 174 00:08:16,240 --> 00:08:18,880 income account. The company is called Texas 175 00:08:18,880 --> 00:08:21,280 Roadhouse. It is a restaurant and I'm going 176 00:08:21,280 --> 00:08:24,440 to go over why I'm picking this one over the other many options 177 00:08:24,760 --> 00:08:27,160 and why I'm buying restaurants at all, even though it's a 178 00:08:27,160 --> 00:08:30,880 highly competitive industry that offers very little motes. 179 00:08:31,920 --> 00:08:35,320 That was back three years ago and I've made numerous videos 180 00:08:35,320 --> 00:08:37,240 since that point. So it is true, Jim. 181 00:08:37,240 --> 00:08:39,679 Most people are not talking about Texas Roadhouse, but there 182 00:08:39,679 --> 00:08:43,000 is one person, one person that has been sounding the alarm for 183 00:08:43,000 --> 00:08:44,760 this stock for a number of years. 184 00:08:45,360 --> 00:08:46,960 What makes this story so compelling? 185 00:08:46,960 --> 00:08:50,120 Because it is textbook Texas Roadhouse is nearly 700 186 00:08:50,120 --> 00:08:54,840 locations with 45 locations for Bubba's 33 Think burgers, pizza, 187 00:08:54,840 --> 00:08:58,960 wings, beer, and 11 stores for its new fast casual concept 188 00:08:59,000 --> 00:09:01,600 Jaggers. The vast majority are company 189 00:09:01,600 --> 00:09:03,520 owned, giving them more control over everything from menu 190 00:09:03,520 --> 00:09:05,920 pricing to staff levels. That's kind of like Chipotle. 191 00:09:06,160 --> 00:09:08,560 They pay extremely generous bonuses for restaurant level 192 00:09:08,560 --> 00:09:10,000 managers to deliver good results. 193 00:09:10,360 --> 00:09:11,800 Put it all together in the stock spin. 194 00:09:11,920 --> 00:09:13,640 See how he keeps comparing it to Chipotle? 195 00:09:14,000 --> 00:09:16,280 They're wholly owned. They're they're staffed by the 196 00:09:16,280 --> 00:09:18,720 the company itself. Like Chipotle, There's 197 00:09:18,720 --> 00:09:20,280 similarities between these two companies. 198 00:09:20,280 --> 00:09:22,160 It's the reason that I've gone into Texas Roadhouse and 199 00:09:22,160 --> 00:09:24,360 Chipotle. They both are mostly wholly 200 00:09:24,360 --> 00:09:27,240 owned restaurants and they run a very similar playbook even 201 00:09:27,240 --> 00:09:29,080 though they're in different different segments of the 202 00:09:29,080 --> 00:09:31,720 industry. And a fabulous Post story ever 203 00:09:31,720 --> 00:09:34,000 since they came public way back in 2004. 204 00:09:34,240 --> 00:09:37,280 But nobody talks about it for me. 205 00:09:37,880 --> 00:09:41,400 I've been talking about it, Jim. I have subscribe to the channel. 206 00:09:41,560 --> 00:09:43,760 You'll get some. You'll get some good stocks. 207 00:09:43,760 --> 00:09:45,720 I'll I'll hook you up with some good stocks. 208 00:09:46,360 --> 00:09:48,520 Hey, the most impressive thing about Texas Roadhouse is that 209 00:09:48,520 --> 00:09:49,920 the stock's been a juggernaut lately. 210 00:09:50,120 --> 00:09:52,280 Even as most full service change, they've struggled. 211 00:09:52,640 --> 00:09:53,840 How do they do it? OK, simple. 212 00:09:53,960 --> 00:09:57,240 Texas Roadhouse has figured out how to offer high quality food, 213 00:09:57,440 --> 00:09:59,680 including steaks at reasonable prices. 214 00:09:59,880 --> 00:10:02,360 Claim one of the most compelling value proposition for consumers 215 00:10:02,360 --> 00:10:04,280 in the whole full service dining category. 216 00:10:04,960 --> 00:10:07,320 He nails it. That's the investment thesis. 217 00:10:07,760 --> 00:10:10,600 Go to different restaurants, go go to Chili's and any Darden 218 00:10:10,600 --> 00:10:13,160 restaurant. Go, go to LongHorn Steakhouse, 219 00:10:13,480 --> 00:10:16,600 you know go to anyone and compared to Texas Roadhouse and 220 00:10:16,600 --> 00:10:20,120 you'll know that the value proposition is a lot better. 221 00:10:20,120 --> 00:10:23,080 With Texas Roadhouse, they have figured out how to offer steaks, 222 00:10:23,240 --> 00:10:25,760 good ones that they will cook right or they'll re cook them 223 00:10:25,760 --> 00:10:28,120 for you. And they do that cheap. 224 00:10:28,200 --> 00:10:30,800 It's relatively cheap. It's it's a a place that the 225 00:10:30,800 --> 00:10:33,600 average person can take their family to and not feel like 226 00:10:33,600 --> 00:10:36,000 they're getting robbed. That is a great value 227 00:10:36,000 --> 00:10:38,280 proposition. And as Jim goes on to highlight, 228 00:10:38,280 --> 00:10:40,480 this value proposition is even compared to places like 229 00:10:40,480 --> 00:10:43,000 McDonald's. Now we know that lowering cost 230 00:10:43,000 --> 00:10:45,760 consumers are pretty cash crapped right right now and this 231 00:10:45,760 --> 00:10:48,000 earnings season we found out that the restaurants that can do 232 00:10:48,000 --> 00:10:50,600 well are the ones that give people a good meal at a good 233 00:10:50,600 --> 00:10:52,560 price. That's a common thread we've 234 00:10:52,600 --> 00:10:55,800 seen from some of the strongest reports like Domino's Pizza or 235 00:10:55,800 --> 00:10:59,600 Breaker International Wing stop others that raise prices too 236 00:10:59,600 --> 00:11:01,640 aggressively without clear value proposition. 237 00:11:01,640 --> 00:11:04,840 Here I'm including McDonald's and yes, Starbucks are now 238 00:11:04,840 --> 00:11:06,920 suffering from traffic to clients as customers over their 239 00:11:06,920 --> 00:11:08,480 feet. This one exception to this 240 00:11:08,480 --> 00:11:10,880 theme, though? It's just Chipotle which has 241 00:11:10,880 --> 00:11:13,120 raised prices aggressively, particularly in California, 242 00:11:13,120 --> 00:11:15,480 because of that minimum wage issue, yet has seen no 243 00:11:15,480 --> 00:11:19,520 deterioration demand at all. He highlights that the only 244 00:11:19,520 --> 00:11:23,240 other company aside from Texas Roadhouse that has raised prices 245 00:11:23,240 --> 00:11:26,680 aggressively and not seen a decline in traffic is Chipotle, 246 00:11:26,760 --> 00:11:29,720 which happens to be my only other restaurant stock I own. 247 00:11:30,120 --> 00:11:32,920 So again, you can see that this is just random luck, that these 248 00:11:32,920 --> 00:11:35,840 two companies are doing well. But I argue that if you study 249 00:11:35,840 --> 00:11:38,160 the companies, you'll be able to differentiate between the ones 250 00:11:38,160 --> 00:11:40,880 that are likely to do well and the ones that are likely to do 251 00:11:40,880 --> 00:11:43,560 poorly. Texas Roadhouse and Chipotle 252 00:11:43,560 --> 00:11:46,280 both offer a better value proposition for the customer 253 00:11:46,600 --> 00:11:49,160 than almost any other restaurant, and that's why 254 00:11:49,160 --> 00:11:51,440 they're excelling right now. But even though they're similar, 255 00:11:51,440 --> 00:11:53,120 they still have some notable differences. 256 00:11:54,280 --> 00:11:56,200 Wow. Now Texas Roadhouse, on the 257 00:11:56,200 --> 00:11:58,560 other hand, has followed the more typical blueprint for what 258 00:11:58,560 --> 00:12:00,280 works. The stock actually bottom late 259 00:12:00,280 --> 00:12:02,440 October, after the company reported a big Ernie's miss, 260 00:12:02,640 --> 00:12:04,760 their third Ernie's missed in four quarters. 261 00:12:04,760 --> 00:12:07,120 Not good. But Texas White House rallied in 262 00:12:07,120 --> 00:12:09,240 response because Wall Street was focused on their terrific 263 00:12:09,240 --> 00:12:11,400 revenue momentum. In late October, they delivered 264 00:12:11,400 --> 00:12:13,800 8.2% Same store sales Quote. Wall Street's only looking for 265 00:12:13,800 --> 00:12:16,880 7.5%, even as the rest of the industry was starting to lose 266 00:12:16,880 --> 00:12:20,560 steam on the traffic. At least Texas Roadhouse never 267 00:12:20,640 --> 00:12:22,640 did. To put it another way, last year 268 00:12:22,640 --> 00:12:24,080 the restaurants were still dealing with plenty of 269 00:12:24,080 --> 00:12:27,000 inflationary cost pressures, and many decided to raise prices in 270 00:12:27,000 --> 00:12:28,480 order to pass those customers on to you. 271 00:12:29,160 --> 00:12:31,960 Texas Roadhouse didn't take some price, but they were much more 272 00:12:31,960 --> 00:12:34,080 measured with the price hikes because they were. 273 00:12:34,720 --> 00:12:37,080 That's accurate. So a lot of restaurants, when 274 00:12:37,080 --> 00:12:39,720 they do price hikes, they're doing these crazy price hikes 275 00:12:39,720 --> 00:12:42,320 where they redo their menu and all of a sudden you're kind of 276 00:12:42,320 --> 00:12:44,840 shell shocked when you come in and it's just so much more 277 00:12:44,840 --> 00:12:46,960 expensive. And the way that Texas Roadhouse 278 00:12:46,960 --> 00:12:50,920 does it is so much smarter. They raise prices 2% at a time. 279 00:12:51,640 --> 00:12:55,200 Now if you go to get a family meal one day and then you go 280 00:12:55,200 --> 00:12:58,960 back like two months later and it's 2% more expensive, are you 281 00:12:58,960 --> 00:13:00,200 really going to notice a difference? 282 00:13:00,680 --> 00:13:02,320 No, most people don't notice a difference. 283 00:13:02,480 --> 00:13:05,040 So when they're implementing these 2% price increases like 284 00:13:05,040 --> 00:13:07,960 every eight months, that's a much better pricing strategy 285 00:13:07,960 --> 00:13:10,080 than what a lot of other restaurants are doing where 286 00:13:10,080 --> 00:13:12,800 they're increasing prices by 10% or 15%. 287 00:13:13,200 --> 00:13:16,640 So the strategy that they do to implement this is far better 288 00:13:16,640 --> 00:13:19,680 than their competitors. Really care about giving people 289 00:13:19,680 --> 00:13:22,160 good value for their money. That decision hurt their 290 00:13:22,160 --> 00:13:25,640 earnings in 2023, but the strong same store sales showed that the 291 00:13:25,640 --> 00:13:27,840 customers liked it. They they had a little more 292 00:13:27,840 --> 00:13:30,840 vision ever since the stock bottom late October, the 293 00:13:30,840 --> 00:13:32,760 companies reported two more quarters, one in February and 294 00:13:32,760 --> 00:13:34,840 one last Thursday. And on both occasions they made 295 00:13:34,840 --> 00:13:37,720 real progress from getting costs under control while continuing 296 00:13:37,720 --> 00:13:39,640 to deliver fantastic same store sales. 297 00:13:39,920 --> 00:13:41,880 In short, it's all coming together for this Texas 298 00:13:41,880 --> 00:13:43,480 Roadhouse. Now they didn't raise prices 299 00:13:43,480 --> 00:13:46,040 aggressively when the rest of the industry was doing that and 300 00:13:46,040 --> 00:13:48,240 now the customer basis is rewarding them for it. 301 00:13:48,320 --> 00:13:51,600 Doesn't this make sense right? They didn't raise the prices. 302 00:13:51,600 --> 00:13:53,640 People went there. The other guys raised prices. 303 00:13:53,640 --> 00:13:56,080 They stopped going to them when Texas Roadhouse. 304 00:13:57,200 --> 00:13:59,080 It's funny. I mean, I agree with everything 305 00:13:59,080 --> 00:14:01,600 he's saying here. Texas Roadhouse didn't raise 306 00:14:01,600 --> 00:14:04,040 prices, but they just took all the customers of other 307 00:14:04,040 --> 00:14:07,680 restaurants their their traffic levels went up an incredible 308 00:14:07,680 --> 00:14:09,440 amount. They had an increase in foot 309 00:14:09,440 --> 00:14:12,360 traffic and because they're so good at turning over tables, 310 00:14:12,360 --> 00:14:13,800 they they clean those tables fast. 311 00:14:13,800 --> 00:14:16,320 They have a good staff that they can get people in and out 312 00:14:16,320 --> 00:14:19,080 quickly, which means that they can they can turn a lot of 313 00:14:19,080 --> 00:14:21,400 tables in a night. They can make a lot more money 314 00:14:21,400 --> 00:14:23,760 with the same prices by having more traffic. 315 00:14:24,240 --> 00:14:28,040 Important, in February it had a 10.1% comp restaurant sales with 316 00:14:28,320 --> 00:14:31,600 that's incredible for the full year with more than half of that 317 00:14:31,600 --> 00:14:35,040 increase coming from traffic improvements, more people when 318 00:14:35,040 --> 00:14:37,480 you add in the company steadying your new store growth. 319 00:14:37,480 --> 00:14:40,800 Their total revenue grew 15.4% last year And for all the hand 320 00:14:40,800 --> 00:14:43,040 wringing about the earnings misses, Texas right now still 321 00:14:43,040 --> 00:14:46,200 saw its earnings per share grow by 14.3% last year. 322 00:14:46,600 --> 00:14:49,480 Management's initial guidance for 2024 included calls for 323 00:14:49,480 --> 00:14:53,440 positive same store sales growth and store weak growth of roughly 324 00:14:53,440 --> 00:14:55,600 8%. Store weak growth is a quirky 325 00:14:55,600 --> 00:14:57,440 metric that accounts for new locations. 326 00:14:57,640 --> 00:15:00,360 At the same time, they talked about mid single digit commodity 327 00:15:00,360 --> 00:15:02,400 cost inflation and labor inflation. 328 00:15:02,400 --> 00:15:04,960 Put it all together and the stock jumped 10% in response. 329 00:15:04,960 --> 00:15:08,440 The numbers were just that good. Fast forward to last Thursday 330 00:15:08,440 --> 00:15:10,680 night, Texas Roadhouse reported yet another blowout. 331 00:15:10,880 --> 00:15:13,280 This time they had 8.4%. Same for sales growth. 332 00:15:13,440 --> 00:15:16,120 Wall Street was looking for 7.8, some of the best comps we've 333 00:15:16,120 --> 00:15:19,000 seen from the many major restaurant chain this earnings 334 00:15:19,000 --> 00:15:23,520 season. CEO Jeremy. 8.4 Same store sales 335 00:15:23,520 --> 00:15:26,000 growth is just incredible for a restaurant right now. 336 00:15:26,280 --> 00:15:28,680 A lot of places would love to just keep it flat. 337 00:15:29,440 --> 00:15:32,240 Starbucks, McDonald's, they're struggling to just keep theirs 338 00:15:32,240 --> 00:15:34,320 flat. And Texas Roadhouse is growing 339 00:15:34,360 --> 00:15:39,280 8.4%, guiding for the high single digits this year. 340 00:15:39,680 --> 00:15:43,040 Incredible stuff by them. Oregon noted that strong traffic 341 00:15:43,040 --> 00:15:44,640 trends continue to drive sales growth. 342 00:15:44,880 --> 00:15:47,280 Crucially, Texas warehouse modest price increases have 343 00:15:47,280 --> 00:15:50,800 taken effect just as some of the cost inflation is fading away. 344 00:15:51,040 --> 00:15:55,000 The restaurant market came in 17.4%, up 150 basis points year 345 00:15:55,000 --> 00:15:57,800 over year and 50 basis points above what the analysts 346 00:15:57,800 --> 00:15:59,320 expected. That's sensational. 347 00:16:00,000 --> 00:16:03,200 Even better Texas Rentals gave us some bullish outlook, bullish 348 00:16:03,240 --> 00:16:05,720 updates on the full year. First Magic disclosed this 349 00:16:05,720 --> 00:16:07,600 through the first five weeks of the current quarter, same store 350 00:16:07,600 --> 00:16:10,440 sales were up 9.3%. So you got a meaningful 351 00:16:10,440 --> 00:16:12,360 acceleration versus the first quarter. 352 00:16:12,480 --> 00:16:14,720 For the full year, they also lowered their commodity 353 00:16:14,720 --> 00:16:18,160 inflation cutting from 5% to 3%. What a story. 354 00:16:18,880 --> 00:16:20,320 So. He's right. 355 00:16:20,320 --> 00:16:22,120 Right. As right as their price 356 00:16:22,120 --> 00:16:25,200 increases really took effect, a lot of their input costs went 357 00:16:25,200 --> 00:16:26,720 down. So their margins are going up at 358 00:16:26,720 --> 00:16:29,720 the same time. And on Texas Roadhouse's 359 00:16:29,720 --> 00:16:32,160 earnings call, they always say that they never price things 360 00:16:32,400 --> 00:16:35,240 based on their input costs. They know that those fluctuate 361 00:16:35,240 --> 00:16:37,080 up and down over time. They think that they're just 362 00:16:37,080 --> 00:16:40,560 cyclical expenses. So they pricings based on their 363 00:16:40,840 --> 00:16:44,440 their employee and their pay, not based on input costs and 364 00:16:44,440 --> 00:16:47,400 commodity costs. Better recap. 365 00:16:47,400 --> 00:16:50,920 Texas, right Else looks on, looks on traffic, looks on track 366 00:16:50,920 --> 00:16:52,960 to deliver. I would say much better than 367 00:16:52,960 --> 00:16:55,280 expected same store sales and while the cost inflation will 368 00:16:55,280 --> 00:16:57,840 likely be lower than expected, that's such a combination. 369 00:16:58,080 --> 00:17:00,600 It's ideal and it's why the stocks rallied so strongly in 370 00:17:00,600 --> 00:17:03,200 response to the latest quarter. Now the comps, well CEO Jerry 371 00:17:03,200 --> 00:17:05,960 Morgan put things pretty simple. He said, quote, our strong 372 00:17:05,960 --> 00:17:08,599 results continue to reflect our operator's commitment to the 373 00:17:08,680 --> 00:17:11,920 consistency and quality of the food, the hospitality they 374 00:17:11,920 --> 00:17:16,240 provide and our everyday value. The the benefit of our long term 375 00:17:16,240 --> 00:17:19,599 approach to the business and our focus on always prioritizing the 376 00:17:19,599 --> 00:17:24,280 guest experience is evident in the record sales margin dollars 377 00:17:24,280 --> 00:17:25,800 and net income for the first quarter. 378 00:17:25,800 --> 00:17:27,560 End Quote. See, this is a great story. 379 00:17:27,560 --> 00:17:29,080 This is how it's supposed to work. 380 00:17:29,320 --> 00:17:31,960 You don't take the price, you don't gouge the people, you end 381 00:17:31,960 --> 00:17:34,800 up getting more people to come, You can take price a little bit 382 00:17:34,800 --> 00:17:37,840 and then the costs go down. This is what business is about. 383 00:17:38,120 --> 00:17:40,720 So despite the fact that Texas Red House operates in one of the 384 00:17:40,720 --> 00:17:43,280 more challenged sub sectors of the restaurant industry, the 385 00:17:43,280 --> 00:17:45,960 full service base, I think it deserves to be in the upper 386 00:17:45,960 --> 00:17:47,920 echelon restaurant stocks right now. 387 00:17:48,120 --> 00:17:50,040 This has been a long, great growth story. 388 00:17:50,040 --> 00:17:52,240 But right now, in particular, Texas Red House is killed. 389 00:17:52,480 --> 00:17:57,200 Here's where he goes on to kind of give his his recommendation 390 00:17:57,200 --> 00:17:59,840 for the stock. Because they never drove the 391 00:17:59,840 --> 00:18:02,080 customer base away with aggressive price increases, as 392 00:18:02,080 --> 00:18:05,560 we know some have, making them a rarity in the restaurant space, 393 00:18:05,680 --> 00:18:08,000 one that can clean up now. The cost pressures are fading 394 00:18:08,000 --> 00:18:09,400 away. Of course, after the latest one, 395 00:18:09,400 --> 00:18:11,920 the stocks are up 37% year to date, and up here, it's quite 396 00:18:11,920 --> 00:18:14,120 expensive, 28 times this year's earnings estimate. 397 00:18:14,320 --> 00:18:17,160 But I like it. Bottom line, if you buy Texas 398 00:18:17,160 --> 00:18:20,160 Roadhouse stock at these levels, you're chasing it, I admit. 399 00:18:20,400 --> 00:18:22,320 So I think maybe it would be great if you were patient. 400 00:18:22,480 --> 00:18:24,920 Maybe the stock cools off a little before you start a 401 00:18:24,920 --> 00:18:27,160 position. But if you can't resist it after 402 00:18:27,160 --> 00:18:28,280 what I just told you, you know what? 403 00:18:28,520 --> 00:18:32,040 You got my blessing because this is 1 terrific story. 404 00:18:33,000 --> 00:18:35,120 There you go. There's Jim Cramer's take on 405 00:18:35,120 --> 00:18:37,720 Texas Roadhouse. Now, first of all, I agree with 406 00:18:37,720 --> 00:18:40,160 almost everything he said. Aside for the fact that nobody's 407 00:18:40,160 --> 00:18:42,360 talking about it, there has been one person talking about it. 408 00:18:42,360 --> 00:18:45,200 But everything else he said about the company, I agree with. 409 00:18:45,200 --> 00:18:47,520 It's great. The company's executed great. 410 00:18:47,760 --> 00:18:50,040 They've been careful with their pricing power. 411 00:18:50,320 --> 00:18:53,040 They've stolen a lot of traffic from other restaurants, as I 412 00:18:53,040 --> 00:18:55,240 assume they would. They're consolidating a lot of 413 00:18:55,240 --> 00:18:58,480 traffic into their stores and the numbers across the board 414 00:18:58,480 --> 00:19:00,560 look great. A lot of people say that this 415 00:19:00,560 --> 00:19:05,080 type of thing is random luck or it's just, you know, you can't 416 00:19:05,080 --> 00:19:07,840 pick these type of stocks. But you can if you look at the 417 00:19:07,840 --> 00:19:10,640 fundamentals, if you look at the numbers, the reason that I chose 418 00:19:10,640 --> 00:19:16,000 Texas Roadhouse over all the other competitors, over Chili's, 419 00:19:16,240 --> 00:19:20,000 over, you know, Olive Garden over Cheesecake Factory, over 420 00:19:20,000 --> 00:19:22,440 all these other stocks is because of the fundamentals. 421 00:19:22,560 --> 00:19:25,240 It has more consistent revenue growth, more consistent free 422 00:19:25,240 --> 00:19:28,360 cash flow generation, has no long term debt, has more 423 00:19:28,360 --> 00:19:31,040 consistent earnings growth. It was more reliable during the 424 00:19:31,040 --> 00:19:34,320 Great Recession and the management's better managed and 425 00:19:34,320 --> 00:19:36,920 better operated than the other restaurants because they have 426 00:19:36,920 --> 00:19:39,640 better incentives for their operators on a per restaurant 427 00:19:39,640 --> 00:19:41,960 basis. So there's a reason that Texas 428 00:19:41,960 --> 00:19:45,800 Roadhouse has outperformed other restaurants and that's not based 429 00:19:45,800 --> 00:19:47,640 on luck. But another thing that I'd like 430 00:19:47,640 --> 00:19:52,720 to highlight is that by the time Jim Cramer catches up to this 431 00:19:52,720 --> 00:19:55,520 and catches wind of these stocks, you'll notice that 432 00:19:55,520 --> 00:19:59,080 something's already occurred. By the time CNBC is talking 433 00:19:59,080 --> 00:20:02,280 about this stock, it's one of the best performing companies in 434 00:20:02,280 --> 00:20:05,760 the market year to date. It's up 40% currently year to 435 00:20:05,760 --> 00:20:09,640 date, not counting dividends. So it's on a huge, monstrous 436 00:20:09,640 --> 00:20:11,240 role. It's on a huge streak. 437 00:20:11,440 --> 00:20:14,280 In the past six months, it's up 61%. 438 00:20:14,880 --> 00:20:17,080 Past five years, it's up to 105%. 439 00:20:17,320 --> 00:20:20,160 Plus the company again has paid quarterly dividends that are not 440 00:20:20,160 --> 00:20:22,120 small dividends. So I think that's the biggest 441 00:20:22,120 --> 00:20:25,120 take away here is even though everything Jim Cramer said is 442 00:20:25,120 --> 00:20:27,440 correct, I think the stock is great. 443 00:20:27,640 --> 00:20:31,600 He's highlighting it at possibly one of the worst times when the 444 00:20:31,600 --> 00:20:34,120 stock just went through an epic run. 445 00:20:34,360 --> 00:20:36,360 That's when they decide to shine a light on it. 446 00:20:36,800 --> 00:20:40,480 So if you're following the mainstream network CNBC, this is 447 00:20:40,480 --> 00:20:43,200 what's going to occur after stock already goes through an 448 00:20:43,200 --> 00:20:45,480 epic run upwards. Then they're going to shine 449 00:20:45,480 --> 00:20:47,480 light on it and people will chase the stock. 450 00:20:47,480 --> 00:20:49,080 At that point. If you want to have market 451 00:20:49,080 --> 00:20:51,360 beating performance in the stocks, it's not the best idea 452 00:20:51,360 --> 00:20:53,960 to chase them when they just recently surged to all time 453 00:20:53,960 --> 00:20:55,880 highs. It's better to buy them when 454 00:20:55,880 --> 00:20:58,760 there's weakness, when no one else is talking about them, when 455 00:20:58,760 --> 00:21:02,440 they're not being highlighted on CNBCI bought Texas Roadhouse 456 00:21:02,440 --> 00:21:05,880 when it was $70.00 per share. Nobody else really talked about 457 00:21:05,880 --> 00:21:08,240 this stock. It had no positive sentiment. 458 00:21:08,600 --> 00:21:11,280 And that's the time to pile into companies that don't have 459 00:21:11,280 --> 00:21:14,480 positive sentiment but have incredibly strong fundamentals. 460 00:21:14,560 --> 00:21:16,800 Now moving on from that, it's been a while since we've done an 461 00:21:16,800 --> 00:21:19,640 update on the Story Fund. If you're not aware, I have two 462 00:21:19,640 --> 00:21:22,280 portfolios. The primary one, the largest 463 00:21:22,280 --> 00:21:25,280 one, is called the passive income portfolio, and then I 464 00:21:25,280 --> 00:21:28,120 have a secondary portfolio here called the Story Fund. 465 00:21:28,560 --> 00:21:32,240 Now this one's smaller, but it has a specific reason for 466 00:21:32,240 --> 00:21:34,280 creating it. The reason I created the Story 467 00:21:34,280 --> 00:21:38,240 Fund was with the express goal of competing with the S&P 500. 468 00:21:38,560 --> 00:21:43,320 My goal is to beat the S&P 500 / a five year period, so from 469 00:21:43,480 --> 00:21:46,640 early 2021 until the end of 2025. 470 00:21:47,240 --> 00:21:49,480 And it's just a friendly competition. 471 00:21:49,520 --> 00:21:52,600 A lot of people say the S&P 500 is impossible to beat. 472 00:21:52,840 --> 00:21:55,560 It's super difficult to beat. So I thought it would be a fun 473 00:21:55,560 --> 00:21:59,720 competition to go against the S&P 500 and track it publicly 474 00:22:00,000 --> 00:22:02,360 every single week. That's what you can follow along 475 00:22:02,360 --> 00:22:05,120 and see whether I win or lose. Now, my strategy in 476 00:22:05,120 --> 00:22:08,400 outperforming the S&P 500 has been to concentrate into 477 00:22:08,400 --> 00:22:10,880 incredibly high quality companies that I believe have a 478 00:22:10,880 --> 00:22:13,640 very limited downside and ample upside. 479 00:22:13,960 --> 00:22:16,680 Companies that have huge scalability, companies that have 480 00:22:16,720 --> 00:22:19,440 an enormous amount of operating leverage, companies that have 481 00:22:19,440 --> 00:22:21,560 moats that I believe are insurmountable. 482 00:22:21,800 --> 00:22:25,120 I want zero chance of losing against the S&P 500. 483 00:22:25,320 --> 00:22:27,600 So I've concentrated into companies that I think have 484 00:22:27,600 --> 00:22:31,320 incredibly small chance of failure and huge chance of 485 00:22:31,320 --> 00:22:33,720 success. Three of the positions that make 486 00:22:33,720 --> 00:22:37,560 up this portfolio are cloud companies, and that's not by 487 00:22:37,560 --> 00:22:40,000 random chance. You have Microsoft with 488 00:22:40,000 --> 00:22:43,520 Microsoft Azure, you have Google with Google Cloud Pro, and then 489 00:22:43,520 --> 00:22:46,840 you have the biggest one, Amazon, of course, with AWS. 490 00:22:47,320 --> 00:22:50,480 The reason that I concentrated into public cloud is because I 491 00:22:50,480 --> 00:22:52,840 believe those companies are easy winners. 492 00:22:53,040 --> 00:22:55,160 They're going to continue to win with the cloud. 493 00:22:55,480 --> 00:22:58,160 The other segments of their businesses are amazing, but the 494 00:22:58,160 --> 00:23:00,480 cloud is the primary driver of intrinsic value. 495 00:23:00,880 --> 00:23:05,440 Amazon makes up 35% of the portfolio, Google makes up 20%, 496 00:23:05,640 --> 00:23:08,240 Microsoft makes up roughly 9 1/2%. 497 00:23:08,600 --> 00:23:12,200 So that's a huge portion of it. Then we have Netflix is another 498 00:23:12,560 --> 00:23:16,560 kind of outside bet that I've really leaned into 30% of the 499 00:23:16,560 --> 00:23:19,800 portfolios in Netflix because I believe the company is going to 500 00:23:19,800 --> 00:23:21,920 be a large scale streaming winner. 501 00:23:22,200 --> 00:23:24,880 I believe that the industry is consolidating and I believe the 502 00:23:24,880 --> 00:23:26,360 economics are going to show through. 503 00:23:26,560 --> 00:23:29,800 We've already seen this company generate a lot of free cash 504 00:23:29,800 --> 00:23:33,840 flow, $7 billion in one year and I think that's just the 505 00:23:33,840 --> 00:23:36,240 beginning. The operating leverage inherent 506 00:23:36,240 --> 00:23:39,760 in Netflix is massive and I still believe the Street is way 507 00:23:39,760 --> 00:23:43,040 off in their estimates for it. So Netflix is another company 508 00:23:43,040 --> 00:23:44,680 that I think will continue to be a winner. 509 00:23:45,080 --> 00:23:50,200 Now this portfolio has really crushed it year to date so far 510 00:23:50,200 --> 00:23:52,600 in 2024. It's just done amazing. 511 00:23:52,880 --> 00:23:55,800 To put this in perspective, if we filter by year to date, the 512 00:23:55,800 --> 00:24:01,040 money weighted returns are 19.47%, so 19 1/2%. 513 00:24:01,360 --> 00:24:06,160 If we compare that against the S&P 500, SPY is up 9.5 and then 514 00:24:06,160 --> 00:24:11,680 the QQQ is up 9.42. So this year we've done double 515 00:24:11,840 --> 00:24:16,600 the S&P 500 and the QQQ and that leads us to the out performance 516 00:24:16,680 --> 00:24:21,640 so far in 2023 is where we made the big comeback. 517 00:24:22,040 --> 00:24:26,200 My portfolio's in blue, the S&P 500 here is in red, and you can 518 00:24:26,200 --> 00:24:29,760 see the Story fund catching up against SPY in 2023. 519 00:24:30,200 --> 00:24:33,600 That's because companies like Amazon and Google and Netflix 520 00:24:33,920 --> 00:24:37,680 and all of them had enormous growth in 2023. 521 00:24:38,240 --> 00:24:42,720 But then even in 2024, we have this big spike right there 522 00:24:43,240 --> 00:24:46,160 that's Amazon's earnings. Amazon went up after earnings 523 00:24:46,160 --> 00:24:47,640 that caused the portfolio to go up. 524 00:24:48,280 --> 00:24:50,840 Netflix has recovered after its drop in earnings. 525 00:24:51,120 --> 00:24:56,240 And so the portfolio now is at a gain of 42.6% against the S&P 526 00:24:56,240 --> 00:25:00,920 500 at 31%. So we have an 11% lead over SPY. 527 00:25:00,920 --> 00:25:04,680 And again, this is going to go on until the end of 2025. 528 00:25:05,360 --> 00:25:08,160 S so far so good. We're in the lead. 529 00:25:08,240 --> 00:25:10,440 In fact, we're gaining a bigger and bigger advantage. 530 00:25:10,840 --> 00:25:14,440 I think that advantage is going to widen over time, and the hope 531 00:25:14,440 --> 00:25:18,120 is that I don't barely beat Spy, but I beat it by a large margin. 532 00:25:18,560 --> 00:25:21,520 But either way, time will tell. I can't see the future. 533 00:25:21,640 --> 00:25:23,720 So if you want to see how this turns out, just TuneIn. 534 00:25:23,800 --> 00:25:25,600 I'll show you the progress every single week. 535 00:25:25,920 --> 00:25:27,760 That's all for this time. See you in the next one.