Welcome back everyone. We have a lot to get to in this
episode. First of all, we have the
breaking news. This is something that I think
is breaking news but not surprising News until just
announced that they're slashing their dividend by over 65
percent. So this is a massive dividend /
from a company that has a huge history of paying a growing
dividend over Decades of time. Now this is news in and of
itself and this is disappointing and shocking to many investors.
But I think what's more disappointing than the fact that
they slash the dividend, is the fact that they were dishonest,
in my opinion. And I will show evidence to
support this opinion. I think Intel and specifically
the CEO Pat gelsinger was incredibly dishonest
disingenuous and deceiving. And the way that he talked about
Intel's dividend not even one month ago, one month ago.
He spoke about the dividend we're going to look back and
play the clip. And see what you think.
Because in my opinion, I can't stand this type of thing, the
way, that these type of companies and their CEOs, talk
to investors and say one thing and then quickly do the other, I
think needs to be called out. So I'm going to be calling it
out. In this video, we're going to be
looking at the tape, replaying it and going over it and we'll
see if you agree with me. Now, the other piece of news, we
had was a company, that's very important to me because it's a
massive holding of mine. Texas Roadhouse, just reported
earnings, and they missed on the top line and they missed.
On the bottom line. And I'll give you my updated
opinion on this company because right now it is a forty three
thousand dollar holding. So I'll be going over and
letting you know whether or not I'm taking gains or if I'm
letting this company run. Now we also have some news to
get to regarding meta. They just had breaking news that
they're announcing even more job Cuts after laying off 11,000
employees and other companies, like Amazon are also doing some
moves that are upsetting a lot of employees asking them to
return back to the This after seeing they could previously
work from home, I think this is a pretense of Amazon doing more
layoffs, so we'll be discussing that as well.
And then finally, we have the ongoing discussion of whether or
not the FED is going to Pivot Jeremy.
Siegel is someone who has staunchly said that he thinks
that interest rates are coming down this year and there's other
commentators, like, David Rubenstein, that are saying that
the FED pivot is nowhere to be found and the FED is not going
to lower interest rates in 2023. So, while all of this discussion
is going on, I'll be explaining NG why it's so important.
So we have a lot to get to a lot to cover in this episode before
we start off, after give a quick shout-out to today's sponsor of
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and Jump Right In what you're looking at here is a passive
income portfolio. If you're new to the channel,
which we've had many new members, I track this portfolio
every single week with transparency.
So you get to see my returns or my losses.
You get to see my buys and my cells, and you get to see how
the portfolio evolves and changes over time.
All of it is shared up front on this YouTube channel.
Now, before we jump into my portfolio and I go over any
changes, Making, I want to go to the headline news of the day,
which is the Intel just slash their dividend by 65 percent.
So, a massive dividend cut and this is one of the last
redeeming things about until yes, the company's going through
struggles. Yes, the company has many
competitors and it's losing market, share.
The company also has many operational risks, the company.
Recently, slashed a lot of the pay for both the executives and
the employees, the company has declining free cash flows.
It's going in the wrong direction, operationally but one
of the things that Intel had was that nice juicy 5% dividend
yield, it would pay you to wait. You could simply take your
dividend and wait out this storm and finally until is now saying
we're not even going to pay you to wait, at least not as much.
We're cutting down our dividend by over half.
Now, I understand that when a company is going through,
operational challenges, like Intel, it might be prudent.
To cut the dividend in some cases.
This is actually a positive thing.
It means the company's looking out for its long-term future and
this is ultimately a capital, allocation decision where the
company sing, We need the cash, we no longer can return this
cash back to shareholders and that's fine.
I have no problem with Intel slashing the dividend what I do.
Have a problem with is deception is going on TV and being
deceiving with your intense and what you actually plan on doing
what I want to do is go back to January 27th.
This was the day, the L had their earnings report and Pat
the CEO of Intel went on to CNBC the try to put a happy face on
the earnings report to try to highlight the bright side, but
one of the things that was brought up in this is again,
less than one month ago was the dividend, he was pressed on
whether or not the dividend was going to remain or whether it
was going to be slashed, I got to press you on the dividend
because I know a lot of folks want to know about this.
Looks like you did clear the deck in a way with your guidance
last night. Why didn't you just Say that you
might need to cut the dividend instead of changing the language
around it. Well, you know, we're always
going to look at the capital allocation priorities of the
company you know we should be a dividend payer and as Dave said
on the call last night, you know, we're committed to the
dividend and to a very competitive dividend position
but amongst all of the capital requirements.
We look at that very carefully over time and per the last
conversation, strategic capital. Capital offsets near term
adjustments, as well as the continuing healthy dividend that
we present to our shareholders. He did a lot of that CEO,
mumbo-jumbo? If you didn't, really understand
what he said, or if it seemed like you said a lot without
saying, much at all. That's because he did.
He didn't actually answer the question directly.
That's my first take away. He's trying to obfuscate the
issue and not really give an answer at all.
But what he said there is that the dividend is healthy.
Did you catch that? He literally referred to the
Dividend as being healthy, as well as the continuing healthy
dividend. That we now, I don't know about
you, but when I co refers to a dividend as being healthy, you
basically take that to mean that it's not going to be cut by over
65 percent within a one month, period.
That's what a healthy dividend is.
It's one where you're looking at the future of the company.
You're looking at, its current Financial State.
And from what everything you see right now, you would have no
reason to chop the dividend in half, but Harry is less than
Thirty days ago, referring to the dividend as healthy.
And then without any changes in the company over this time
period without any unforeseen events, he goes back against his
word and since this answer was so unclear to begin with he gets
pressed even further and he doubles down right.
I guess what does that healthy dividend mean?
Pat you mentioned earlier that you wanted to be transparent.
So are the folks that took that wording competitive dividend,
you just said that again, can they, are they wrong to
interpret that as a potential cut?
The host here is doing a fantastic job saying, you want
to be transparent, what is this healthy dividend mean?
And listen to how he pushes back.
Well, you know, we just reaffirmed our dividend payment
for this last quarter and we did that on the earnings call.
Yesterday, obviously, important, topic, that we'll continue
discussing in the meet, at leadership team and with the
board of directors, but we do believe this, competitive
healthy dividend, you know, something a company of our size.
Scale should be presenting to our shareholders.
He says healthy another two times, so he's referred to the
dividend as healthy three different times on January 27th
of this year, less than 30 days ago.
And here we have news that that healthy dividend is being cut by
65%. Now I don't know what you would
quantify as a lie, but in my book, this is pretty close the
lying. You didn't just change his mind.
What he described on tv, less than a month ago, was not
accurate the dividend. Not healthy.
Anyone that looked at the financials after last quarter
knew that the dividend wasn't healthy.
And this isn't me saying this in hindsight, in fact, I came out
with a patreon exclusive episode, January 27th, the same
exact day that this CEO went on to CNBC and described his
dividend as healthy three separate times.
I made an exclusive episode that same day saying this.
They might not even be able to pay their divin.
I think there's a good chance by the end of this year, they'll
cut the dividend. I really, I think there's a
decent chance of that. The CEO went on to CNBC and
tried to explain himself. He, he's trying to put a happy
face on it, but the the problems are brutal.
So this wasn't something that was difficult to see anyone
looking at the financials knows that this dividend wasn't
healthy, but to the unwitting investor that's listening to the
executives of the company. Give a report about how the
company's doing. I think they were lied to and
that's very frustrating if you're an Intel investor.
Now in, Of what you do in this situation.
This is a situation that's very difficult Intel's down 58
percent over the past two years. The company has been a massive
value trap. This is a type of company that
I've mentioned that I've avoided many times because I consider to
have many operational risks that other Industries, don't have
Intel's, a company that requires a tremendous amount of capex,
every single year, they're dumping billions and billions of
dollars in the capex. The numbers are extremely Mmmmm.
Not only do they have Capital expenditures, they have research
and development. They have to hire top talent to
compete with Nvidia, AMD and all the other well-capitalized,
competitors that eats into an enormous amount of their
revenue. And all of this has a risk,
maybe they do a lot of research and development and they're
still in second place. Maybe they do a lot of capex for
contracts that don't really work out in the future.
All of this expense has risk and this is a company where the
risks are not paying off the revenues down.
Where it was ten years ago, it's had an incredible decline over
the past year, the free cash flows - over the past year and
the dividend, the one bright spot of the companies now being
cut down to 12 cents. So on this chart, the dividends
going to go down to right around there that will be their next
dividend. Payment doesn't look like such a
fun company to be invested in any more in terms of what to do
right now. It's difficult to say maybe the
worst is already priced in. I think that's the best that you
can hope for it's not. Selling off dramatically after
this news, which I think is a good thing.
But in my opinion, I still consider these type of companies
too risky. So as far as I'm concerned, I'm
not going to be adding Intel to the portfolio.
Anytime soon, I don't find anything about this company
attractive and I especially do not invest in companies where
the CEOs are not transparent and they're not forthcoming to
investors about their intentions.
To me, that is a huge red flag. Now, moving on, there is one
company in my portfolio that just recently reported Earnings
everybody knows about it. That's been following my
channel. I've been talking about this
stock regularly over the past year.
It is Texas, Roadhouse. The company restaurant has been
doing very well operationally. It's performed excellently.
They've grown sales, they've grown their net income.
They've grown free cash flow. They've opened up more locations
and the performance of the company has matched the
performance of the stock. It's broadly out performed, the
rest of the market. And right now I'm up around
9,000 $500. Now, Texas Roadhouse recently
released their last earnings report of Q4 of 2022, and it was
a top and bottom miss. That is the headline news during
the earnings report and that caused an immediate 5% sell-off
in the stock. So, after hours, it was dumped
five or six percent and then the very next morning it was up six
percent. So it was this one time after
hours, dip, that was immediately bought up and now it's back up
to almost all time highs. Now I'm not surprised Was bought
up immediately after the sell-off because this earnings
report even though on the surface, it was a top and bottom
line Miss. I don't think it was bad at all.
I think overall it was a very good earnings report if we look
at what Texas Roadhouse does here in their earnings report,
the first thing they do is they highlight a twenty percent
dividend increase. Keep in mind, Home Depot, just
increased, there's by 10% people call that a monstrous dividend
increase, this is 20%. This is a monstrous dividend
increase. This is at three to four times,
the average of the dividend payers in the S&P 500, and how
is Texas Roadhouse able to do this.
They're able to do this because their cash flows are growing
around 15 to 20 percent per year over the past 10 years.
They've raised a dividend by over 16 percent per year.
So I'm incredibly happy to see this company continue to reward.
Its shareholders, not only is this extra cash and this makes
it. So every quarter, I'm earning
$225 in dividends, I think. Bigger thing that I like about
this is that it shows the company is still a company
centered around rewarding the investor, they actually care
about the investor. They don't use this money to go
off and do little pet projects, do little things like rewarding
the CEOs with extravagantly, huge compensation packages,
know, they direct that money back to the shareholders that
have kept with them. So I love the see this news from
Texas Roadhouse. What else do I like to see the
company grew total revenues by 12%, their earnings per share
group. By 17.4% 17% growth is fast. 12
percent Revenue growth is fast, operationally the company's
doing excellent. Comparable, restaurant sales are
up 7% year-over-year the average weekly sales of the restaurants
are 130,000 last year. It was 120 restaurant.
Margins are down a little bit and this is the reason that they
missed their earnings report, but this is not a structural
issue with the company. This has nothing to do with
their fundamentals. This is all because of commodity
and Action and beef prices, which Texas Roadhouse has said
that this has happened, many times throughout their history
and they don't Factor it into their decisions at all, because
commodity prices go up and they go down beef prices, go up, and
they go down. And so since this is not a
structural issue with a company or its operations, they don't
Factor it in, they do factor in labor inflation.
So that is a structural challenge of the company and
they factor that in to their pricing, the earnings per share.
There are up a lot and then they opened up.
Can new company restaurants in the quarter.
They even updated us on the 2023 Outlook.
And one of the interesting things that this company pointed
out sales of already increased by 15.8 percent this year over
last year 15.8% already, they were asked on the earnings call
why our sales increasing so much at your restaurants.
And they basically said, we don't know, we're just
executing, well, we serve good food, we have good prices and
sales continue to go up. But they can't really nail it.
Down to any one thing sales, continue to go up like crazy.
The company also expects to open up another 25 to 30 locations,
some more restaurants, and more sales per restaurant.
So, as of right now, even though this company has done really
well, I have no reason to lock in gains or be concerned about
losing my gains that I have. I think if anything this company
will continue to compound while into the future.
So as of now, I'm not selling a single share and in terms of my
other hole Earnings. I'm not doing any selling as
well over the past week since my last video, I haven't done any
sales. I'm just hanging on to my
Compounders and adding to the positions that drop the most.
For example, the company that I recently purchased just a bit
more of was Union Pacific. It's down a little bit around,
10% below my cost basis. And as this company continues to
sell off, I'll just add slightly more to the position.
Now, moving on, we have a rumor that was released today by The
Washington Post that meta is going to be doing.
Another round of job Cuts, if you missed the first round, they
laid off 11,000 employees. And now there's rumors.
There's tweets that have confirmed that they're planning
on doing another round of layoffs, in my opinion.
I think these rumors are true. I think that meta will lay off
more employees. The reason why is because
they've been hinting at this over and over again.
The first thing that they did was they gave a lot of employees
very poor performance reviews which if they're doing that,
they're kind of saying look, you're going to be in the
crosshairs. For future layoffs, giving a
bunch of people poor performance reviews and then Mark
Zuckerberg. Also on his social media said
that this is going to be the year of efficiency for meta.
And so I do think there's going to be more layoffs with meta,
but I don't think that meta is going to be the only big tech
company that announces another round of layoffs.
I think we're going to see the same thing from Google and I
think we're going to see the same thing from Amazon, all
three of these companies over hired to a dramatic extent.
And now they're in a tough situation of need.
Get rid of employees while also not crushing morale.
Amazon recently, just said that, there are now mandating that
employees come in for three days per week.
So you have to come back in the office for three days a week
which made a lot of employees very upset and concerned because
they set up their life to work from home.
A lot of them don't even live close to an office.
So this is a dramatic change to a lot of the employees working
at Amazon. In my opinion.
I see this as another precursor. Other pretense to potential
layoffs. Amazon is basically saying look
if you don't want to come back to the office and you want to
just quit or work somewhere else.
We're okay with that right now. We are Ghibli have too many
employees so if I was working at Amazon as a work from home
employee, I wouldn't be as concerned about returning to the
office as I would, another potential round of layoffs that
would actually be the greater concern for me.
Now moving on we have the continued debate, this heavily
debated Checked over the FED pivot.
This is very important to investors of all kinds.
The FED pivot means that the Federal Reserve stops raising
interest rates, because the economy becomes so weak, and
inflation goes down so quickly, that instead of raising interest
rates, they need to cut rates and rates start to come down by
the end of 2020. 3, that would be the great fed pivot that
would be a positive thing for the equity markets.
But this is the most debated topic and financial media as of
Now and we have people like Jeremy Siegel that are firmly in
the camp that the Federal Reserve has raised interest
rates too much too quick. It's having a Stranglehold on
the economy. We're going to see economic
weakness in the future which will cause the FED to lower
interest rates. So Jeremy Siegel thinks we're
going to have that fed pivot. The jobs report came in double
what was expected. And now you see, Jeremy Siegel
taken aback, a little everyone's talking, you knows, I listen, I
will admit, I was shocked by the strength of the Very payrolls,
but by the time, the March 22nd 23rd meeting comes along.
We're going to have the February payrolls.
In fact, you know, October 8th, we're gonna have the jolts
report that's going to be really important on October 10th.
We're gonna have the February employment report, very
important if we see a big slow down there, I think German POW
wants to go 25. However, I will say, Say if it's
as strong as we got in January. Yeah, 50 is, is definitely on
the table. Now Jeremy Siegel is changing
his tone a little bit. He's saying that if we have
another report like January, he's not going to just raise
interest rates by 25 basis points.
He's going to raise it by 50 basis points which would be the
opposite of what investors want. Now someone else on the other
side of this is David Rubenstein who says that, he doesn't think
there's going to be a Fed pivot at all and he explains why I
think the market is finally recognizing that inflation is
not going. Way the FED is Resolute.
They made they made it clear several times recently, that
they really want to get the rate down to, and place right down
the 2%, not 3%. And therefore, I think the
market takes the FED very seriously, but that doesn't mean
we're going to have a hard Landing or so-called recession.
It just too early for anybody really know where that's going
to have where that's going to happen or not.
The market is finally starting to understand that inflation is
not going away and the FEDS not going to be lowering interest
rates. And there we have the endless.
Aunt and battle over, what the FED is going to do next?
Now, a lot of this may seem inconsequential as an investor,
if you're investing in, let's say Home Depot or Lowe's or
Johnson & Johnson, or if you're investing in any great dividend
company or even growth companies, but what the FED does
has a massive impact on the valuations of every company in
your portfolio. In fact, it may have the biggest
impact on the valuations of them here.
We're looking at the 10-year treasury, the 10-year,
treasuries, yielding 3.89. Six percent right now.
So let's call it 3.9%. This is a much higher yield than
where this treasury was only one year ago.
In fact, just a couple years ago, it was less than 1%.
So, it's gone from less than one percent to almost 4% in.
This is what's been causing a lot of havoc and Chaos in the
market. I think right now, a lot of
investors have sort of an understanding of how the 10-year
treasury Works in correlation to stocks.
But I'd like to clarify this and make it a little bit more easy
to understand. For new investors.
So I wanted to put up this graphic here to describe.
Clearly how interest rates impact your company's
valuations. And what I'm referring to here
is interest rates being gravity. Warren Buffett famously said
that interest rates are like gravity for every other
investment, including the stock market.
Meaning that as interest rates, increase over time, the stock
market goes down over time, it has more weight and pressure on
everything, and a lot of people don't And why interest rates are
gravity. So, here we are.
Let me go ahead and give the example of the 10-year treasury.
Let's say the 10-year treasuries at a one percent yield right
now. One percent yield for the
10-year treasury. Well, if you're looking at
potential investment opportunities, you might look at
your stock portfolio and then you may glance at bonds, what
can you buy the 10-year treasury for to put this in perspective
and make it easier to compare. Let's compare it in terms of
price to earnings. So if you're looking at
different companies, Open. He's in you're trying to
evaluate whether or not they're expensive.
You look at the forward P/E ratio.
How much earnings will they have over the next 12 months?
If you look at a 10-year treasury, that's yielding, one
percent you would be paying 100 times next 12 months earnings
that's expensive. Anyone investing in the stock
market knows that a company trading at 100.
P/E ratio is expensive and implied in that expense, as a
lot of future growth. Well, in the case of the 10-year
treasury, there's no growth. It's He's at that 1% for the
full 10 years. Imagine buying a company trading
at a 100 PE ratio that's not going to grow its earnings for
the next 10 years. That is how unappealing
treasuries have been at that one percent range, they're just not
an option, nobody really wants to buy them.
The only reason that you would have any money in treasuries is
if you're just storing cash that's the only conceivable
reason the alternative Investments which have been
stocks over the past 10 years. Well they look really attractive
by comparison. You could buy stocks that are
trading on average around a 17, forward P/E 17s, a lot cheaper
than 100 and you get the added benefit that stocks have
earnings growth. So it's a much better deal.
And this is why the stock market has done so well over the past
decade, but the situation is starting to change.
For example, let's just take the hypothetical that.
Now, the 10-year treasury goes up to 1.5 percent because the
FED is Raising interest rates. Well, now, the forward P/E is 37
still expensive, but not quite as astronomical.
Let's go ahead and just assume the 10-year treasury goes up to
2%. Now, the forward price to
earnings of the 10-year. Treasury is 50 still pretty
pricey stocks are probably a better option.
Now let's go ahead and assume it goes up to 2.5 percent.
Well, the PE goes down to 40. It's looking a little better,
but still at this point I'd rather take my luck with stocks
the 10-year treasury goes to 3 percent.
Now, the forward P/E is 33 some Investors might start buying a
10-year treasury at this point. Getting that three percent yield
if it goes to 3.5% the price to earnings is 28, that looks
pretty reasonable. There's many stocks trading at
that same price. Now the 10-year treasury, again,
doesn't have any earnings growth, but it also doesn't have
any risk stocks have risk. So a lot of more conservative
investors are saying, I'd rather take the 3.5%.
Well, let's say it goes to four percent right around where it is
today, that is a price to earnings of 25.
That's not Reasonable especially when it's risk free.
And if you take this logic and extend, it just a little further
into what could be the near future.
If it goes to 5%, you're paying a multiple of 20 times next
year's earnings if the 10-year treasury, went to eight percent.
It would be a more attractive investment than the broader
Market. You're paying a lower multiple
and you're getting the added benefit of taking on no real
risk. So when you look at this
overall, this is the reason that Warren Buffett refers to
interest rates as being Ava t as the 10-year treasury moves up in
its yield, the relative valuation and relative
attractiveness of equity, Investments of taking risk and
stocks. It becomes relatively speaking
less attractive and since we live in a world of Relativity
where every investor has different options of what to
invest their money in, this has a huge impact on what stocks are
worth. You look at the opportunity cost
of every investment you make. So I can't say what direction,
the 10-year treasury is going. It's very difficult to say, and
there's many, Opinions on the subject.
But just note the reason this is argued so much is because it has
a dramatic impact on your portfolio and your Investments,
but as of right now with the options, I have what the 10-year
treasury at near 4%. I still consider my portfolio of
companies far more attractive and the reason being is I'm
expecting a dramatically higher return than a 4% return over the
next 10 years. I think I can get above a 10%
return. So for that even though the four
percent Has no risk. I'd still rather risk it in the
equity markets, in pursuit of a much higher return.
So that's all for this episode. I hope you enjoyed the update
and just on a side note, I appreciate everyone that tuned
into my most recent episode on the Joseph, Carlson after-hours
channel. The one about the super
investors, got one hundred and six thousand views and the
feedback that I've received for this episode is incredibly
positive. A lot of people enjoyed it.
So if you haven't check this one out, I'd recommend going and
watching it. I think it's a lot of fun, but
that's all for this episode. I'll see you.
In the next one. In the next one.