Welcome back, everyone. Today on details of Carlson
show. Apple had a market cap of three
trillion dollars. A market cap of three trillion
dollars is pretty good, but it's not good enough.
According to Dan Ives, he's an analyst for apple and other tech
companies, he says that Apple will be at four trillion dollars
in market cap. In 2024.
Is he, correct? We're going to go through this
interview and I'll give you my full analysis on his Arguments,
for Apple hitting a four trillion dollar market cap.
Now, we also have some news about Microsoft, that isn't
quite as good. Microsoft says that it could
abandon the Activision deal. If the judge ends up delaying,
it Microsoft may end up losing this case if they lose the case,
they're going to have to pay Activision Blizzard will be
looking at the financials of Microsoft.
How does that three billion dollar payment?
Impact their cash flows? And then of course we have the
big news of this year. We're having a good month, we're
having a good year. We've had a monster Market rally
in 2023. That's quote.
Defied all expectations. Well, it shouldn't be defined
our Asians in this video, I'm going to explain why I believe
there's a high likelihood. The market will do well for the
next couple of years. There's a lot of good evidence
to show that this stock market can continue and of course it's
Friday. So we have the financial advice
from Tick Tock and this one. They're talking about how much
money you need to feel like you can retire and that you've made
it. So we're going to be going into
tick-tocks retirement advice. Now, the first thing that I want
to mention is if you're one of the new members to this channel,
we do things a little differently here.
And we have had a lot of new members recently.
In fact, when I look at the analytics, just over the past 28
days. So the past one month, we've had
something like 6,500. Do people join?
So, welcome all of you. I'm glad that you've decided to
join the channel. A couple things that I think are
worth mentioning. First of all, this is not a
Channel or you just talk about stocks in the news.
We do something different here where we actually show what
we're doing with our money. I know that that's a somewhat
unique concept, it's not something a lot of people.
End up doing. But I've shown what I've been
doing with my finances with my investments for four years now
publicly every single week you can follow along like following
a reality show. You can see exactly what I'm
doing. Every trade buy and sell with
transparency. The portfolio so far has gone up
in 92 thousand dollars over those past four years giving a
68 percent return beating out the S&P 500 by a little bit, but
I can't celebrate too early this year still in progress.
But this is the portfolio. It's a collection of high
quality businesses that I call Compounders, these companies are
exceptional they're the top of their class in their industry
and I consider the companies in this portfolio to be not just
good companies but I think they're the top 1% of the top
1%, these companies are orders of magnitude better than the
average company. They have assets, they have
monopolistic positions, they have cash flow profiles.
They have moats that are incredibly difficult for other
companies. To compete with a lot of these
companies, I consider to be outright monopolies.
So what I've been doing over the past couple of years, is
building a concentrated positions into these companies
once that I think will continue to compound for a long period of
time. Have incredibly long runways and
I continue to just buy more and more of mostly the same exact
companies over and over again. The goal of all of this is, of
course, to make money money through capital appreciation.
Money through dividends, the Dividends are cash.
Add into the account which are then reinvested back into the
portfolio. In the companies that I think,
will give me the highest return at the given time.
So I'm constantly in a Snowball Effect, reinvesting all the
dividends paid into the individual stocks that I think
present the best opportunity to look at which stocks present the
best opportunity. I use something called the dip
finder. It's one of the tools that shows
me how all the companies in my portfolio are trading over
different time lines so I can look at the 3-month the six
month and so on and we try to have a lot of fun while doing
this as well. But I think that Biggest thing
I'd like to point out here, the biggest point of emphasis is by
far the overall returns and transparency that I'm doing here
still to this date. The majority of content
creators, do not show their total performance since the
beginning of their portfolio, they show different snaps.
They might show different stocks here and there, they might show
their current Holdings and hide all the ones that they've
previously sold out of, but they don't show their total returns.
This is my total returns since starting the portfolio and I
We'll continue to show it every single week.
So having established that, let's go ahead and jump into
some news here. Now, the big headline news of
the day is that Apple hit a trillion dollar market cap.
A trillion dollars. 08 that was like a couple years ago they had
a trillion dollars now they hit a two trillion dollar market
cap. They doubled from a trillion 08,
that was was that a year ago two years ago that they had a two
trillion dollar market cap. Oh they hit three trillion
dollars. We're at the third trillion
dollar market cap for Apple seems like I'm having Shabu
here. I remember the first time that
Apple hit the 1 trillion dollar market cap.
I own the company. When it hit that market cap that
was after 2017, I can't remember precisely when, but I remember
owning the stock when they hit that trillion dollar market cap,
then they hit the two trillion and my thought was wow, that was
a lot easier than them hitting the first trillion, Apple really
cranked out the profit they increased, the cash flows
hitting that second trillion, and now her at the third
trillion dollar Market cap. Now, I've been an apple Fanboy.
I've been a fan of both the products of this company, the
services and the stock. I've been an enormous fan of
Apple stock for a long period of time.
This has been one of my earliest positions, I've continually
added to it, I've not sold any of this stock and I'm very glad
that I haven't because this has been a wonderful stock to own.
I'm currently up in total value over 100 percent.
So, I have a fifty five thousand dollar holding.
Now, I'm in the green by around 27,000 dollars.
But in actuality since the beginning, I would be up over
two hundred percent on this stock had I not continually
raise my cost basis by continually buying more of it.
So I've only added to this company over and over again, but
apples, one of these companies that no matter how big the
company grows, no matter how high the valuation is, it always
seems to outperform investors expectations in.
This is something that I think is notable, I think this is a
shortcoming of investors still to this day.
When Apple hit a trillion dollar market cap, a lot of people
thought that it's already the biggest company in the world,
there's no way it's going to outperform.
It has so many analysts covering the company.
It has so many people using the products.
How is there any Alpha to be had and a company?
So widely known by everyone. But this company that was
already the biggest in the world out performed, the S&P 500 by
five times, over the past, Years, it five, except the
performance of spy, it 3x, the performance of the QQQ.
So even comparing it to the NASDAQ.
It has completely destroyed the NASDAQ over the past five years
it's out performed almost every Super investor and hedge fund in
existence over the past five years and it's done.
So while being the biggest company in the world, almost the
entire time. Now, trying to explain this can
be difficult. Why is Apple continually Arming
expectations. Why are investors not pricing
this company? Appropriately?
It generates more cash, flows and expected.
It, generates more profits higher amounts of Revenue higher
returns and expected almost every single year.
So, I want to look at one analysis explanation of why this
stock is going from a three trillion dollar market cap to a
four trillion. Next year.
Dan Ives, please app will be a four trillion dollar company
next year. He's still bullish on it.
He still thinks it's underpriced and he has this explanation of
what investors are missing. So we're going to be looking at
this and I'll explain whether or not Dan Ives is correct.
I think this time it happens Dan in.
Do you think that the underlying fundamentals support that
valuation more at this time than they did in January of 2022?
Yeah, I think it's a historic day, not just for Cupertino but
for Tack and I think when you look at the story here, specific
on the services side, that's the key.
Part of the sum of the parts, I think.
Well, I the Bears. Miss and, you know, I don't
think it ends here. We believe this, the four
trillion dollar market cap by 2025 and at the end, the day
Apple continues to play chess While others are playing
checkers. Okay?
So he has the basis of his argument there.
The big thing that he highlighted that he says
investors, Miss is the services part of it, Apple's playing
chess, While others are playing checkers.
If we bring up Apple hair on qual trim which is a website
available to patreon members, we can take a look at what Dan Ives
is talking about. With apple, we have all the
metrics and valuation, and this is what most investors focus on.
They look at the valuation and they say the apples trading at a
25 PE. So it's expensive or cheap based
on that. They look at the free cash flow.
Yield three percent yield. It's expensive or cheap based on
that but we know that companies are much more complex than just
a yield or P/E ratio, determining the future cash flow
of the company is incredibly important in forming a full
valuation and when we look at what Dan Ives is, Talking about
this sum of the parts, we can bring that up on the revenue
chart. We have the revenue right hair
from Apple. This is quarter by quarter.
We see it all the way going back from 1985 when it was just a
device maker making iPods. I remember buying one of the
first iPods and then the iPod Shuffle.
I got one of the beefy iPods that had the spinner wheel and
had like 40 gigs of memory. I thought it was amazing.
Then of course they came out with the phone, a game-changer,
the stock price dropped The revenue continued to grow over
the past. Couple of decades, apples
Revenue has been explosive, has continued to grow and this is
again what most investors are focused on.
They look at overall Revenue, growth rates apples, Revenue has
grown at 10 percent over the past 10 years.
Why? I know a lot of companies
growing their revenue faster than 10%, that doesn't sound
that good but these numbers again, don't share the full
story. There's a little bit deeper
context, we can look at if we go to the The product segments are
we get to the sum of the parts? Let's cross out some of the
older product divisions and make this a little bit cleaner.
Here we have the sum of the parts of apples Revenue so these
are all the exact same total revenue but now we see them
broken up by different categories.
In this we can take a look at what Dan Ives is talking about.
You says that investors are missing the services.
Apple is not a hardware company anymore.
They are a device install. So they do have a large part of
their revenue, that's hardware. But the services is by far the
most important part of their story and has been the most
important part of their story for a long period of time.
If we cross out the services, we see the growth over all of the
revenue. This is the slower growing part
of the revenue. They just need to maintain their
install base. They don't really need to grow
this all that much, so it's growing with inflation and small
price increases, but this isn't a booming part of apples
business. When we look at the services and
we cross out everything else, we see the explosive growth of
services doubling since 2018. And while this part of the
business is growing. The margins are much higher
while Apple's total margins around 40%, the services are
easily 60% plus so much higher margin.
Portion of the business is growing at a faster rate.
This is also lifting the entire company and this is no small.
Has Apple Services did 21 billion dollars last quarter
that is astronomical. So right off the bat, just the
first 10 seconds of what Dan Ives has to say.
I think he nailed it. I think so far.
His analysis of Apple is spot-on, but he has more to say
about the company. They what do you call it?
Something there that the Bears have complained that there's I
guess there's not something that it's all been incremental.
There hasn't been any Quantum Leap in in Apple's product mix
and that and but that hasn't stopped that you can see it
right there. I mean that obviously has a lot
to do with momentum and the narrow advance that we've seen
in the NASDAQ, obviously, but Apple has hit on a lot of
cylinders just You know, it didn't go from an eight cylinder
to a 12 cylinder. It's just got a really good
eight. Cylinders sure.
I think, when investors are missing in my opinion, the ones
that have bet against apple is it's a golden install base.
We're done by 1.2 billion, iPhones, 2 billion iOS devices.
And the hall theme. Tactician cook has Led Apple
through all the challenges from a supply chain to other issues.
And you have 25% of the install base is not upgrade their iPhone
4 plus years and that's why this is just starting on Some of the
parts into what I believe is really just almost a middle
Innings. He goes on saying, that another
thing that investors are missing is the golden install base.
I believe this is another correct take from Dan eyes.
I think he has this spot on. Apple has the golden install
base. The install base is the number
of devices that consumers have they have over a billion devices
out there actively being used by consumers.
So we have a ton of people. Let's say 1 billion.
Devices. It might not be that much.
It might be a little bit more. It's, it's a little bit
difficult because a lot of Apple users have more than one device.
But either way, we have this massive current install base.
All the people that use Apple devices all the install base
there, in part of this ecosystem.
There's a lot of coverage about the ecosystem.
There's tech review channels that go into how Apple makes it
very difficult to leave their install base to leave their
ecosystem. Once you've become part of it,
In it. You've used iMessage, you've
signed up for the Apple card. You have the Apple savings
account. You have the Apple notes app.
You have all your photos uploaded to Apple photos.
You have so many different things that Apple has done to
keep you in part of their ecosystem, that it's nearly
impossible to leave this install base and go to a competitor like
Android. It becomes burdensome ownerís,
something that you don't want to do.
So, the install base is a golden install base of high income
consumers, a lot of discretionary Money to spend on
services and that's what apple is a master at taking this
golden install base and monetizing them through the
sales of all of these services with apple.
Everything is the ecosystem. That's the moat.
That's the value proposition. That's the intrinsic value
driver. That's the story of Apple.
That is the investment thesis, wrapped up in one word, its
ecosystem, if the ecosystem is not existent for Apple, if it
gets torn apart or destroyed, I would say My full position and
apple. If the ecosystem remains intact,
if it grows stronger, I maintain my position and apple.
It's all reliant on the ecosystem.
So, I think this is another correct take from Dan eyes.
I think he's spot on here. As long as Apple can maintain
their masterfully designed ecosystem.
They'll find ways to monetize it.
They'll find ways to grow their free cash flow.
So overall I agree with Dan Ives on as analysis here.
I think that this has been an amazing Buy in.
Plain sight, the ecosystem has Has been underrated by investors
contain Lee discounted the strength of it over the past
five years. Investors that recognized the
power of the ecosystem early on reaped the rewards and one of
those investors a pretty good one.
I think his name was Warren. Buffett you recognize that
ecosystem a long time period ago, he bought 30 billion
dollars of the company and I think his Equity stake now is
somewhere around 170 billion dollars he's beat out.
Everyone else. Buffett Remains the Out.
Now, of course, we can't forget about Microsoft.
This is another pretty good company.
That's on a good streak. This year, I have a holding in
this company 55,000 dollars, similar to Apple but not quite
as much gains. This one's up.
Twelve thousand dollars. Microsoft has a couple bad
pieces of news coming out. Just in the past day or two.
The news is that Microsoft says it could abandon the Activision,
Blizzard deal. If the judge delays, it they say
the first day of the week long hearing that could determine the
outcome of Microsoft 70 billion dollar acquisition.
Addition of the video game, giant Activision Blizzard opened
Thursday with a promise from Microsoft, if a federal judge
grants an injunction that would delay, the deals closing,
Microsoft could abandon the deal altogether.
So they wanted to let the judge know that the if you even delay
this deal then we're probably going to we're probably gonna
scrap it at that point. Microsoft's lawyer said quote,
this is going to decide whether or not the deal goes forward.
She said that if this case were to be delayed or lost here,
Would be quote, a three-year administrative nightmare.
So even though Microsoft could perpetually fund, a lawsuit
forever, they really could afford to hire the best lawyers
forever, that wouldn't be the best thing for the shareholders.
This company wants the cash to go to shareholders.
So they don't want to have an ongoing years long nightmare of
a court case here. Microsoft is always having to
weigh what is best for shareholders to continue
fighting this or to let it go. Now, I personally think this is
a bit of a shame. I realize that Microsoft is a
very large corporation so people naturally have a bias against
the company. They see, big bad Microsoft,
they see that they want to buy another big company and they
think that that should be blocked.
A big company, shouldn't buy another big company but
Microsoft is not the biggest player in gaming.
And in console gaming, in fact, Sony is much bigger than
Microsoft. In terms of consoles, Sony has
around double the market. Share of Microsoft.
Sony is the Monopoly when it comes to Console gaming.
So Sony's arguing, that Microsoft is the Monopoly while.
Ironically Sony's the Monopoly Sony's arguing, that Microsoft
will be exclusive, while ironically, Sony has more
exclusive titles in Microsoft, Sony's arguing, that Microsoft
will be anti-competitive, while ironically Sony has far more
anti competitive when it comes to gaming.
One example of that is Microsoft wants to put the Activision
Blizzard games on the Nintendo switch.
Sony does not. Want that because it would cause
greater competition. So in this case, every bit of
data points to Microsoft being L2 by Activision Blizzard, it
doesn't restrict competition. It increases competition,
Microsoft has gone so far to even guarantee ten years of not
making any of their titles exclusive and that still has not
been enough to push this through.
So I think it will be a shame if this deal doesn't go through.
Now, there is an outcome, that's also not good.
If the deal doesn't go through Through with Microsoft, not only
did they have to pay all these lawyer fees and they have to pay
for all the expense of trying to do this deal.
But there is a breakup fee, Microsoft agreed to pay
Activision Blizzard three billion dollars.
If the deal doesn't go through, if we look at how this impacts
their free, cash flows, we can take a look here.
This was the free cash flow and 2022.
It was sixty five billion dollars.
So paying Activision. Blizzard three billion dollars
would bring Microsoft's Revenue. Would bring Mike.
Our sauce free cash flow down to this red line.
It be right around there. That is a decent chunk of cash.
Even for a company, as big as Microsoft so they have a pretty
hefty fee to pay hair. Will this overall impact the
long-term story of Microsoft, does it turn the company from a
by to a cell? Not at all?
It's not going to affect the long-term.
I think over the long term story, this is like a speeding
ticket, but three billion dollars is a pretty pricey
speeding ticket even for a company like Microsoft for those
You who are in the Arbitrage play and currently own
Activision Blizzard. That's like a consolation prize.
If you don't get Microsoft buying the company here, at
least you get infused with a lot of cash.
So they'll have a big boost to their balance sheet, which will
make the company worth a little bit more.
So you have currently around a sixty five billion dollar market
cap tack on another three billion to that that will help
out if this merger doesn't happen.
But when it comes right down to it, this is the reason that I
didn't end up doing that merger Arbitrage.
Play, I heavily considered it. I thought that Microsoft has the
better Case by far. I think they had the better
Court arguments, I think the data is on their side.
But when it comes down to it, a judge is one person making a
judgment call and they can decide whatever they want and
they can rationalize and justify it based on any various data,
they want to nitpick. So a judge really is hard to
determine and because of the unpredictability of an Arbitrage
play, like this, I decided to pass it this time.
The other piece of news that I do think is noteworthy and
something that should be taken into account for investors is
the market rally this year. It has been exceptional across
the board. The indices have gone higher The
Wall Street Journal says that the 2023 rally has defied all
expectations. If we look at the actual
performance here, the S&P 500 is up around 15 percent.
The Dow Jones is up around 4 percent.
So across the board of very good rally and this is especially
incredible because there's a lot of people that were sewing.
Fair that were spreading spreading concern about
different issues left and right. It was almost difficult to find
people that were level-headed. They had a steady tone and said
to stay fully invested in the market, and not concern yourself
with all these various things going on.
For example, one of the big things that happened earlier
this year, was the banking crisis, the regional Banks going
bankrupt. Remember that?
Remember how the market was supposed to crash?
After that? What happened with the banking
crisis is seems to have just Come and gone.
We had the US, default, remember that, how the u.s. wasn't going
to up the debt limit? How there is an argument in
Congress? Do you know how many videos I
made about the US, default? Exactly, zero that interested me
to know amount. The reason why is because that
always ends up the exact, same politicians, both argue to get
stuff that they want packed into the bill and the US continues to
go forward, and it doesn't affect the stock market.
I've been around long enough to see that story play out over And
over again. And the same thing with the
banking crisis. This is something that I was not
concerned about. I stayed fully invested during
this time period, the u.s. moves on from crisis, is like this
over and over again, even when they do have a material impact
like covid, or even the Great Recession, eventually the market
recovers that has been the story since the beginning.
Now, there's a lot of people that unfortunately bought into
all the fair and doom spread around all of these news
stories. And there's a lot of people
sitting on The sidelines right now, the Wall Street Journal
notes, that ultimately, those who stayed out of the market
this year. And fair of another sell-off,
missed out on a robust gain, can you imagine missing out on this
performance? This year?
If I had missed out on this year, I would have missed out on
sixty, eight thousand dollars in gained so far, 17 percent
returns an enormous run for this portfolio.
This is the reason it is critical to not try to time the
market, the stay invested all the time.
All of these people in the industry are always trying to.
Guess what the next blow up is going to be.
If this year has shown anything, it is that it's difficult to
predict which headline-grabbing event will wind up.
Having a lasting impact on the market returns.
That is exactly correct. This has been said before, but
I'll say it again. You could have the entire
release of the Wall Street Journal headlines from here
until the end of 2023, and even knowing exactly what headline
news is going to happen for the next six months.
Would not be able to guess where the markets going to end.
They do not correlate with each other.
Sometimes they end up being inversely correlated.
So is this Market rally defying? All expectations.
I think it's an incredible rally but it hasn't defied, all
expectations and I do believe. There's reason to believe that
the market rally will continue. We have news of the greatest
wealth transfer in history. We have news that baby boomer
generation has an enormous amount of stored wealth more
than they're going to be able to use within their lifetime.
There's going to be a large windfall of inheritance
specifically with Millennials year after year, for the next 30
Years, Millennials will inherit more and more money.
This is going to be a massive windfall of spending and
something that should continue to propel the markets.
So in my opinion, I think investors would still be better
served today. Focusing on high quality
companies, that can persevere during different environments
than trying to predict exactly when Doom and Gloom will strike
and how bad it will be. Now, of course, it's Friday.
So we looked Tick-Tock for our financial advice.
Here is Two Guys. These are two young looking guys
that are discussing when they'll finally make it with money and
how much money you need to have to be happy.
You said, once you have 20 million dollars, like you can
have everything unless you want to buy a jet or a yacht like
your set. But for me I'm like a burn
through 20 million and like, dude, I could spend 20 million
before you could say 20 million. Like and I even think like a
hundred millions, not a lot. Let me just pause it right
there. He just said that he could spend
time. 20 million before you can even say 20 million.
What are these guys talking about?
What are they spending twenty million dollars on and he said
that he could burn through a hundred million dollars.
I think that they're I take it back, the market has gone to
high there needs to be a bear Market.
There needs to be some type of implosion everything.
I just said, I take it all back. We still have this going on in
the market today like I burn through 20 million and like,
dude, I could spend 20 million before you could.
A 20 million like and I even think like, a hundred millions
not a lot. How was 100 million not a lot?
What does that even mean? 100 million is what it's more
than what the average American, which the average American is
incredibly, Rich has tons of luxuries, it's more than what
they earn in 50 average. Life times.
A hundred million dollars is a ton of money.
I know, like, would you buy an 80 million dollar debt?
Let's say, you know, you get the point where, what are you manage
it? Are you ever going to stop like
at what amount of money are you? To be like okay I'm gonna chill
out. I'm gonna be like retire, like
chose my kids, never never never know.
Alright they're ambitious I guess these kids look like
they're like 17 years old and they're talking about growing up
numbers and and talking about how they're never going to be
satisfied when you get in the workforce and you actually earn
a decent living, you save up money.
There comes a time where you actually want to stop working
especially if you're not enjoying your job more than you
enjoy leisure time. I've actually had this
discussion With a friend, a long time ago, we were discussing the
amounts that we would fill pretty set in stone of filling,
like we've made it feeling like we have enough money to retire
and do what we want. And the number that we came
around to as around four million dollars, that was it?
Four million was what we consider to be a decent point to
achieve as a lifetime goal of saving and investing anything
beyond that. Would be incredibly good, but
for Millions enough that you can just with dividends earn over a
hundred thousand dollars per Per year, earning 100,000 dollars
per year, passively is a very luxurious retirement, you can do
a lot with that. You can travel, you can see the
world. You don't need to buy a private
jet, you can fly in a plane and where some are pods it's going
to work out fine doing it that way.
So, we have a bit of a disconnect here, my goal is more
in the range of four million dollars.
I think that's a pretty good amount of money.
Hopefully, I'll get there someday.
I'll share it with you along the way if I ever do.
But saying that a hundred million dollars is not a lot of
money is completely insane. Once again kicked Hawk has done
it with the unexpected Financial advice, that's the episode for
today. I hope you enjoyed and I'll see
you in the next one.