Welcome back everyone. Today on the Joseph Carlson Show
we're going to be taking a look at 10 deep value stocks.
These are ones that are a buy according to Baron's.
Now Baron's is a publication that does valuation and they do
analysis on all different stocks.
And one of the ones that they've recently picked was Google and
that turned out to be a very good pick.
So we're going to be looking at their 10 new picks, 10 stocks
that they believe are a great value.
Now I'll be giving you my reaction and my thoughts to them
seeing if they're right and we going over each one.
Now, of course, we have a lot of big news to get to.
For example, J Pal just lowered interest rates by 25 basis
points. He signaled for more to come.
How should investors react to this?
While I have my thoughts, we have a Waymo releasing safety
data that's incredible, showing that robotaxis are orders of
magnitude safer than humans. What does this mean for the
future of Waymo? And on the subject of Waymo,
they also partnered with Lyft, which is a bit shocking to Uber
investors. Now, Waymo's partnering with
both Lyft and Uber. What do we make of this?
And then we also have the comments section.
I'll be responding to some of your questions in the previous
episode. I'll be going over a number of
them. So we have all of that to get to
now. We kicked things off today by
looking at these 10 stocks that Barons outlines as deep value.
When we look back, one of the calls that they had last year,
in fact this was November of 2024, was Google.
They said the Alphabet stock could rise by 50%.
I read through their thesis and I largely agreed with it.
They said that it's a beautiful bargain compared to the rest of
the S&P 500, especially the top companies.
In fact, Alphabet at the time had a Ford earnings multiple of
19. Looking back when you compared
the multiple of Google right here at a 19 compared to Amazon
at a 34 or Apple at a 31, even Meta out of 22, Microsoft at a
31, NVIDIA out of 37, Tesla out of one O 6.
One of these companies was at a very low valuation and it was
Google the entire time. And they did like many of us.
Again, a sum of the parts analysis.
Alphabets pieces could be worth $260 per share, more than 50%
higher than Thursday's close. So at the stock price it was
trading at, they're saying Alphabet could be worth 260 per
share. That's why we're bullish on it.
It has a lot of downside protection.
It's trading at a low valuation. It has a lot of bearish things
already baked into the price, and it's a great company.
Now, when we bring up Alphabet, Don Qualtrum here, it's not
quite at 260 per share, but it's getting rather close.
It's at 2:50. So I would argue that this call
has largely been correct, I think in a short amount of time.
And I have to give credit to Barons.
They're one of the few media outlets, one of the few
analysts, people that were calling this out, saying that
Google was undervalued, while many professional analysts were
saying that it's it's done for, that Google's seen its best
days. Now, not every call that Barons
has made has worked out, of course, but they do make some
good calls from time to time. And I think that their thesis is
are worth looking at. So let's go ahead and take a
look at the number one here. That's a more recent one.
They say this infusion therapy leader is undervalued by the
stock option. Care Health is capitalizing on a
growing demand for at home alternative site medical
services. The companies the nations
largest provider of infusion therapies administrating often
complex medications at patients homes or at one of their more
than 170 ambulatory ambulatory clinics across the US.
This already seems like a complex company in healthcare
already. I I see a few red flags of why I
wouldn't buy this one, but we'll continue on.
They've also had a rise in profitability and margins and
they say the shares have been sitting flat since 2022.
Now when we get into the thesis of why this company is a buy,
it's a multi pronged thesis. They have a lot of different
reasons they believe this is a buy.
The first one is they say that right now what they're providing
care for is a growing market. An aging population with rising
incidence of chronic conditions is increasingly seeking the
comfort of convenience of AT care or care at home.
So this company specializes in care at home and more people are
preferring that than in hospital or in clinic care.
The infusion therapy market is projected to grow at an average
annual rate of 8.6% through 2030, according to industry
estimates. So this is a secular tailwind at
Care at Home. That is the first part of this
thesis. The second part of their thesis
is not only is this growing, but they're positioned uniquely to
capture a larger percentage of the market.
So this market's growing and they're going to grow on market
share. Option Care operates as both a
managed care company and a specialty pharmacy.
With its team of more than 5000 clinicians, it has vital parts
of the home care market and well positioned to capture market
share. While a set back the recent sell
off may have created an exciting entry point in the stock for
investors, the company has played down any long term
consequences, noting that no other therapy represents more
than 5% of its total revenue. Furthermore, only 12% of its
revenue was reimbursable through direct governmental programs in
2024, providing A cushion against further legislative
changes through a diversified private payer profile.
So they believe that these earnings are far more resilient
than what's currently being priced in.
And then Baron's final argument for this one is basically that
it's at a low valuation. When we look at option care here
and we look at the valuation, it trades at APE of 16 and a free
cash flow yield of 5.4. So if you're looking at this
one, overall, I think it's a solid thesis.
The earnings are growing. It does generate free cash flow.
The revenue's growing steadily. It does look like a market
that's needed over time, so this is one that I don't think is
such a bad pick. Now the things they don't
highlight is it does have quite a bit of debt, probably from the
acquisition, and the company is just a bit more volatile.
It's more volatile because of the industry that it works in.
I'm unlikely to buy an investment like this just
because it works in the healthcare industry and it's not
one that I typically venture into, but I do find this one
interesting. Now the next Deep Valley stock
the Barons picks is Twilio. They say that Twilio stock got
hit after earnings. It's still a software winner.
Now they highlight around 8 different bullish points on the
stock. We're going to go through each
one of them. First of all, they say that
Twilio hasn't missed sales expectations and at least 20
consecutive quarters, according to FactSet.
So they're taking a look at the history of the company, the
consistency of beating their revenue expectations, and they
reference FactSet as the data to do that.
Now, instead of having a FactSet membership, you don't need to
have that. Qualtrim is $10 a month, a lot
less than FactSet. And you can see the exact same
thing. Blue means that they beat their
quarterly expectations. In fact, we can show the
estimates on each one of these. So every single quarter going
back to Q4 of 2020, they've beat.
You can see the history there. And even on earnings per share,
which Barron's doesn't mention, they've only missed one time, Q2
of 2022. So they're, they're making a
good point here. This is a company that largely
lives up to expectations. Twilio charges a fee of a few
cents per communication. While this reduces cost
certainty for the customers, it also allows Twilio to boost
revenue as use expands. So it's a consumption based
model. Many businesses worldwide are
still in the early stages of adopting tools to more
efficiently communicate, making for substantial growth potential
for Twilio's products. Total spend on the service can
reach 119 billion globally by 2028 and continue growing from
there according to the management estimates provided.
And it's investor day in January, so the opportunity is
massive. Now, one thing that I don't like
about this model, this consumption based model, is that
while they only charge a few cents per communication, the
customers that use them at some point can get so big that they
stop using Twilio. They say, you know what, we can
build out our own communication API and platform.
We can do that internally and we save a lot of margin because we
don't have to pay Twilio this few cents per communication.
An example of a company that's done that is Uber.
They're once a big customer of Twilio.
They got too big and then they ditched Twilio entirely by
building up their own internal communication.
So I think that this one has a problem here where it's true
that their customers can grow and the use case expands, but if
they grow too big, they can simply build their own version
of a Twilio instead of using them.
And then finally, Barons ends again with the argument that
it's simply at a low valuation. And again, I have to agree with
him on the valuation. The company trades at a 21 PE
ratio. It trades at a free cash flow
yield of 4.5%, but stock based comp eats a lot into that cash
flow. Overall, that's the case for
Twilio. This is one that I'd feel very
nervous going into only because I think the margins do have a
limited upside. The company does have to do all
of its business telecom providers and they take a lot of
the margins as well as when you look at the company with a 2122
E ratio, I'd rather just buy Google out of 25.
To me, that's a safer bet than Twilio.
Now in #3 we have U-Haul. They say buy U-Haul stock shares
could make AU turn as earnings rise.
U Haul's market share and moving is well over 50%.
Its truck fleets total nearly 200,000 vehicles plus some
137,000 trailers. They can be hooked up to private
vehicles. Customers can rent U-Haul
equipment from more than 23,000 U-Haul rental locations in all
50 States and Canada, putting 90% of US population within 5
miles of AU Haul facility. You're relying on network
effects here. The fact that this company is
already so big makes it already an easy logistical pick.
They also argue that profits should rise as U-Haul works
through the depreciation of trucks purchased several years
ago. So they're going through a
depreciation cycle right now. One of the hidden gems of this
company is profits also should get a boost as newer self
storage facilities fill up. So U-Haul has just looked at as
transporting stuff, but U-Haul has added about 10% annually to
its storage footprint. An interesting thesis from
Barron's, but U Haul's a pass for me now.
Next up, we have a company that is in the beauty category.
We have Elf Beauty. They say it's defying the rest
of the cosmetic business by the stock.
Now they have multiple bullish points on this company.
The first one is that this company is different than the
competitors. ELF, however, stands out from
its competitors. It's reaching its cohort of
customers the right way by marketing on social media,
selling online, and selling in select retail locations,
enabling it to take market share and grow faster than the
industry. The fact that it's still
relatively small should help it grow faster than its larger
pairs, particularly as it expands globally.
It's position is a steep discounter in the beauty
business, gives it wiggle room to increase prices to protect
its profit margins from tariff costs and still be a discounter.
So the big thing with elf Beauty, the positioning of this
company is they're offering products that are almost every
bit as good as the more expensive counterparts, but
they're just orders of magnitude cheaper.
Elf Beauty is the value discounted trusted brand.
On the company's earnings call, they highlighted that they're
partnering with Dollar General. Most of those are first time
buyers of elf Beauty, so they're actually expanding their
customer positioning. They're also aggressively
advertising on Tiktok where it's reaching younger shoppers.
And the company spent just over $78 million some marketing and
digital investments in the second quarter, up about 5% year
over year. So their marketing spend is
super targeted, a really good marketing campaign from this
company. This is another company that
consistently beats its expectations.
Management, which usually provides conservative revenue
guidance and then beats analyst sales estimates, was confident
enough to forecast a second quarter rate above 9% net sales
growth that they they delivered on in Q1.
So they're aggressively raising their sales assumptions and even
on top of that, they have a history of being conservative.
Now overall, I like this thesis. I don't see too much wrong with
it. One of the the points about elf
beauty is it's simply in the beauty category, which I've seen
companies like Estee Lauder, which used to be, they used to
be doing really well, all of a sudden they get decimated.
So this is a very volatile industry.
Things can change rapidly. If you look at the stock price
over the past five years with elf beauty, you'll see how
volatile it really is. So be careful before you jump
into this one. Now next we have a company that
I can't say I've ever heard of it's called Innodata.
It's making AI models smarter by the stock.
Now Barron's published this September 3rd, 2025.
If we look at the stock price at September 3rd, 2025 right there
9/03/2025, it was 36 dollars. Look at what happened after they
published it, unless you bought it right then, now it's up to
$66 now. Regardless, even though we may
have missed out on just some really spectacular gains in a
short amount of time, almost a doubling, I'll go ahead and just
read through some of the more bullish points here and
summarize them real quick. Now they say that they're
playing coy to avoid naming its specific customers, but In O
Data notes that five of the Magnificent 7 Tech leaders are
using its services. Businesses from its biggest
customers have increased from the initial 8 million contract
in 2023 to 135 million annualized revenue run rate,
validating in Odata's AI capabilities.
Now they outline what this company actually does and why
these bigger companies are finding its products so
attractive. They say that the core business
idea is simple. In Odata cleans up inaccurate,
incomplete or relevant data. Combining proprietary technology
platforms with over 6000 expert consultants to annotate and
validate information for various AI applications.
This Human in the Loop framework provides specialized services
such as fine tuning and preference optimization to teach
large language models to control their tone, avoid biases, and
ultimately reduce errors. So they're basically combining
their AI product with a ton of consultants to really validate
this data in a in a human infused way.
And that that type of mixture is making them rather unique in
this category. And they highlight that the need
for this type of validation of data is only going to grow
dramatically, exponentially. They say the category of
applications can autonomously initiate and carry out complex
tasks with minimal human input. Ino Data sees this as a new
generation of AI, unlocking the full value of large language
models, creating new use cases, including robotics for a range
of industries. So as all these applications and
use cases grow, so will the need for NONO Data's capabilities of
validating and cleaning up this data.
So we may have missed out a little bit on that one, but we
have another one here. Luckily for our attention.
This one they say is a stock pick.
They've already, they've already picked, it's up 67%, and they're
now telling us to continue buying it, hold it for more
games. Now, what does Verdiv do?
Why is this company so attractive?
Well, it's simply the products they make.
They make power and cooling equipment for companies and
communities. Communications manufacturing,
which is basically all the big techs.
They're all building out their data centers.
This company specializes in cooling equipment.
So as long as we're building out data centre capacity, as long as
we need this cooling equipment, this company is going to be
very, very relevant. Another thing they highlight
that I also like looking at for companies is how consistently
they beat or miss on earnings. They say that it would be no
surprise if Verdiff to beat expectations in the coming
quarters. The company has surpassed
analyst estimates for the top and bottom line in all of the
past six quarters. It has beaten earnings per share
forecast for the past ten quarters.
I've seen companies that have longer streaks in this, many of
them like Adobe or Visa or MasterCard, but I'd say in this
category having 6 to 10 quarters is a pretty good streak.
Now finally, another bullish point for this company is margin
expansion. Management has forecasted
adjusted operating margins of 20% for the third quarter
compared to 18.5 in the second quarter.
As a company makes its supply chain more efficient.
I do like the thesis on this one.
I think you'd probably be better served just buying big tech.
You can buy all these little fish that grow alongside big
tech, or you can just buy big tech itself.
In most cases, I believe investors have a better risk
reward buying big tech. Now we get to stock 7.
This is another one that they believe is a buy.
It's called Aptive and their main thesis for this is actually
that it's being broken up beneath this automotive
business. They have a much better higher
margin safety and software business.
When you look at the numbers, the safety and software business
had sales that were a lot better, EBITDA margins that are
like double. It has potential to reach
outside of the customer base in the auto business, and so this
is really where they're detaching a much lower quality
business from a much higher quality. 1.
Shares are trading for around $83 right now and they believe
the shares will hit around $100, about up 25% from recent levels.
The biggest risk is that investors continue to view boat
spin offs as a car as car companies, which would cause the
stock to fall back to $70, about 15% below today's close.
So when we look at this right now, if investors keep viewing
both of these companies as car companies, it's not a good deal.
But they shouldn't. If one of them has software
margins and it's largely driven off of software, it should get
re rated higher. I like this one from Barron's.
I think that it's worth looking at to see the software that
they're providing, the growth potential of it.
I have no interest in the automotive part of it now #8
deep value pick by Barron's is a paunch, a pawn store, pawn shop,
jewelry, electronics, tools, cash, America pawn.
So you have like lawn mowers here, riding lawn mower.
These look, everything is used. Of course you have bicycles, you
know, all this equipment, and of course they have electronics on
the inside. This isn't typically the type of
company that I buy. These usually aren't ultra wide
mode, you know, incredible companies.
But again, we're focused on deep value here.
So let's go ahead and just take a look at the case.
The first major point that they outline is that the company has
massive scale with more than 3300 retail locations.
The Fort Worth, TX based company is the largest pawn store
operated in the in the US and Mexico.
This market leading position was built over 3 decades through
roll up strategies of acquiring smaller players.
So in the pawn wars, this company's won there.
While everything's been going on, we've been focusing on big
tech. There's been a pawn store, a
pawn store war, and this one is completely dominated.
They're the biggest in the US and Mexico, and they've been
doing this by acquiring smaller players over and over again.
These tuck in acquisitions. Now, when looking at the
business model of this, it's actually very intriguing.
They do more than just just selling stuff at a pawn shop,
they say. There's no doubt that what we
are seeing with customers given our unique value proposition of
offering small dollar loans and quick hassle free transactions
that take 15 minutes or less. All loans are non recourse and
don't involve credit checks or credit reporting.
So this company is also a mini bank, a mini bank for people
that don't want to go through the hassle providing
documentation, providing bank statements and, you know,
providing your income verification.
If you want a small loan, you can get one at this pawn shop.
They say that the idea is simple.
The customer brings in a personal item of value, perhaps
a watch on their wrist, an old necklace or a used laptop with a
regulated framework. A pawnbroker appraises the item
and offers a small collateral backed loan, providing cash
instantly. So you go to a bank and you want
to get a loan. They're going to have, you're
going to provide all your financials.
You're going to be legally obligated that they're all
correct that you know you can't get any loan off of false
pretenses. You're going to have to all this
paperwork, they're going to look into it.
That's a lot of hassle and typically there's a lot of fees
associated with it. You go to this pawn store, you
can literally use anything that can be sold for collateral and
they immediately appraise it and just give you money.
That's it, no hassle, no documentation, you're just
putting something up. They give you cash.
What a niche that they've carved out here.
This form of micro lending generates 2 powerful revenue
streams. Customers can either repay the
loan with interest to reclaim their item at an annual
percentage rate that can exceed 200%.
That's crazy. But again, these are very small
loans. Like if you're loaning $50, you
know you're not going to be incentivized with a 7% interest
rate. Or they can forfeit the item
with no penalty, allowing first cash to offer the merchandise
for resale. So you can just take the money
and then they've done a trade and they're happy with that
trade if you're happy with that trade.
The model is especially lucrative for jewelry, with gold
and silver prices at historic highs.
The greater customer borrowing power drives more store traffic
and yields higher value inventory, while the company's
ability to monetize forfeited items becomes even more
profitable. Now finally, like we see with
many of these, they end this bull thesis by saying that the
valuation is compelling and it's a important part of the
investment thesis. Shares are trading at a forward
price to earnings ratio of approximately 17 based on 2025
earnings estimates. The multiples that drop back to
14 based on 2026 forecast. This valuation looks like a
still as a stock has historically traded at earnings
multiples of 23 over the past decade.
So right now it's at a uniquely low valuation.
I really like this thesis. This is by far my favorite that
I've seen out of any of these, which is unsuspecting.
Every once in a while we're looking at all these high
quality network effect, subscription based companies.
But sometimes when you look at some of the more unexpecting
ones, the the companies you know, a little more offbeat like
Texas Roadhouse, I've made a lot of money on that one.
You, you find companies that they just do a couple things
right. They've carved out a beautiful
niche for themselves. They've added on really unique
services like this micro lending that only they can perform with
their scale. And you have a wonderful
business here. I wouldn't be surprised if this
one compounds for a long period of time now #9 we have a thesis
almost entirely reliant on one guy, his name is Brad Jacobs.
Jacobs, who has a net worth of $16.9 billion according to
Bloomberg, isn't a household name.
But maybe he should be. The 69 year old founded United
Waste Systems, now a part of Waste Management, United Rentals
and the logistics firm XPO Now. United Rentals, which Jacobs ran
from 1997 to 2007, and XPO, where he was the CEO from 2011
to 2022 and remains executive chairman, have continued to
thrive. Shares of United Rentals are up
more than 400% over the past five years, more than
quadrupling the S&P 500's gains over the same time frame, and
XPO has surged nearly 340%. Investors are now banking on
QXO. So this new company being the
next big Jacob success story. Now these type of bets where
you're relying on one key person to execute again, even though
they have a robust history, I think that they can be good
cases, but I just make it a smaller portion of a portfolio.
I don't necessarily love the key man risk.
I'd rather buy a company that has a much longer, more proven
history, a much bigger Moat than one that's so dependent on a
specific person like Brad Jacobs.
Now finally we get to their 10th pick and this is deep value
stocks, so we're not looking at the most high flying ones here.
In this case, we have a meat Packer and the stock is a
quality buy at a discounted price.
So we have a quality meat Packer here.
Let's go ahead and just take a look at the thesis.
The first thing that they outline, which I like, is that
this is the biggest scaled player in the category.
Whenever I'm looking at a company to buy, I like to know
where they sit in the the food chain, whether they're at the
top of it. They're the biggest and the most
dominant. In this case, they say JBS is
the number one producer of beef and poultry globally and #2 of
pork. Now despite being the largest,
most scaled player, JBS is also cheap relative to its
competitors. The stock fetch is just seven
times projected 2025 earnings of 1.92 a share.
So this company truly has deep value. 7 times earnings.
Not only is this company valued at a sizable discount to its
competitors like Tyson, and that's a a gap that will likely
close over time. Another part of the story is the
prospects of solid growth as JBS embarks upon a five year plan to
spend 1 billion annually on expansion, including AUS sausage
plant and expanded American pork facilities.
So they're cheaper than their peers and they're growing over
the next five years. I think it's a fair thesis for
this company. I don't like this as much as the
Pond store. If I was going to pick between
those two, I would pick that Pond store over this one because
of the diversification of the business and I believe it has
less CapEx needs. This one seems fine, but this is
typically not the type of category I'd go into.
Overall, I like the thesis for these 10 companies and I think a
lot of these companies will likely outperform the market.
Now let's go to move on and get to some news here.
Of course, we have the big news of the day.
The Federal Reserve today finally officially approved the
quarter point interest rate cut. Now this is not a shock because
it was priced into the market already around 90%.
So if you're asking, Joseph, why even when they lower interest
rates, did the stock market not go up 5% because this was
already baked in. Investors were ahead of this.
They signaled that they're doing this.
So it wasn't much of a surprise. Now, the thing that we're
looking for is what they signal for the future.
So what do they plan on doing over the next couple of
quarters? The Federal Reserve on Wednesday
approved a widely anticipated rate cut and signaled that two
more are on the way before the end of the year as concerns
intensified over the US labor market.
This is the big news. Not only did they just lower
interest rates today, but they have two more cuts happening
before the end of the year. So we are on officially a track
of lowering interest rates. Even though this is expected.
It's good for the market. It's good that the market gets
what it expects, and it's good that interest rates will
continue going down. If you look at what interest
rates do they affect the price of money, the price that you can
get money at. For example, everything that
requires a loan becomes cheaper when interest rates go down.
And inversely, holding cash becomes more expensive in terms
of opportunity cost because as interest rates go down, you
can't earn as much interest on cash, which means a lot of
investors, as interest rates go down, realize they're not
earning their 5 or 6% on cash, They're only earning 2%.
And now they have to put their money into cash flowing assets
like stocks, bonds, and real estate to actually get a return,
meaning that those type of investments, equities typically
go up as a result. So this is good news overall for
the market. It's also good news for the
housing market. It's not good for people holding
a lot of cash and it should be good for job growth in the
future. Moving on, we get to the safety
impact report that Waymo just released.
Of course, Waymo is Google's robotaxi network, and they
compare Waymo drivers to humans. When you look at the numbers
here, the data is staggering. It is so overwhelming that it's
not even close. Waymo's are dramatically,
dramatically more safe than humans.
The overall crash reduction for fewer serious injuries or worse
crashes was 91%. Now in terms of fewer airbag
deployment, those type of crashes, 79% reduction.
We're talking reduction here. These are massive.
Reducing airbag deployments by 79% is incredible.
Now, these numbers are so significant that if you were to
extrapolate them, that if everybody switched from human
driven vehicles and they they switched to Waymos, which had
around the same safety record, which is a process that's slowly
happening right now. But if that hypothetically were
to occur and we use this type of math, that means that out of all
the ways that humans die, if you have a pie of 100% of all the
various ways that humans die, this would eliminate around 9%
of the ways that humans die. So you get you get rid of an
entire chunk of the way that humans die, which means that our
life expectancy as it as humans would go up dramatically as a
result. So the numbers are incredible.
And it backs up this point that robotaxi is a future and Waymo
is well on its way, partnering and offering different
strategies. They also had another piece of
news here, not related to safety, but related to their
expansion plans, which I think was a bit of a shock for Uber
investors. Lyft shares pop on Waymo deal to
bring robotaxi to Nashville next year.
So Waymo's doing the strategy, which I think is really good for
Waymo, but not good for Uber. They're now partnering with
multiple ridesharing competitors.
This is a situation that also feels like Waymo is just the one
in control here. For example, if we look at the
stock today for each of these companies, with this
announcement that Waymo's partnering with Lyft, of course,
Uber stock is down 5%. We have a note here.
The most meaningful development in the past 24 hours is Alphabet
Waymo partnering with Lyft to launch Robotaxi in Nashville in
2026, expanding Waymo's reach beyond its active deployments
with Uber in Atlanta and Austin. Investors read this as rising
competitive pressure on Uber's autonomy road map, which weighed
on Uber shares intraday. Now, if we look at Lyft for the
very same reason this partnership, it's up 13%.
Now Waymo with Google can impact the stock price dramatically for
each of these companies, but neither of these companies can
impact the stock price of Google.
Google is the one that's overall in control here.
Who they partner with, which one they choose is the dominant
question and that goes to show that they're the ones that own
this technology that is going to be the future very soon.
Now moving on, we get to the comments section of my previous
episode. I went through and looked at
some of your questions and I'll go ahead and answer them here.
We have from Joseph Gruder I believe says with regards to
quarterly versus semi annual, would you approve of going to
monthly reports then it seems your position is that more
frequent equals more better. Now if you missed it, my last
episode I talked about President Trump's effort to get the the
filings to be on instead of a quarterly basis.
He wants to move them to a semi annual basis every six months.
I said that I'm in disagreement of that.
I think they should stay quarterly and I have a lot of
reasons for that. But some investors think that by
going to semi annual every six months, that means companies are
less regulatory burden, they can focus on the long term and it
will improve performance. Now I'll go ahead and finish
your question here. You say I'm not trying to be
ridiculous, I'm genuinely curious.
Initially, I like the idea of going to semi annual because I
do believe that quarterly thinking is detrimental to long
term planning. But you have pulled me back from
a bit with your statements. However, I think your closing
statement comparing the US stock performance to euro stocks is
evidence is a little silly as the primary driver of the
difference is reporting frequency instead of culture
regulation of financial markets. So let me go ahead and address
this. First of all, Joseph here, I
agree with your last statement. I do think that the reporting
difference is a very minor thing.
I don't even think it's probably, you know, on the radar
of a big thing between the Two's performance.
So I agree that probably wasn't the best point to bring up in
the last episode. The only, the only point I was
making is the only benchmark we have comparing quarterly
reporting to semi annual is the US and Europe.
That's all we have. And the US market has dominated
the Europe market for a long period of time.
So the point here is like the evidence doesn't really show
anything else. In fact, the UK finally they,
they did the same thing. They had quarterly reporting and
then they moved it to semi annual.
For a lot of companies, there's no evidence that shows it really
improves anything. None.
People can try to find it, They can try to nitpick and sift
through it. There's just none.
It's all just people's thoughts that it should improve it.
And the, the whole thought here is, is like you said, you
believe that quarterly thinking is detrimental to long term
planning. So let me let me just point
something out here. Quarterly reporting does not
mean quarterly thinking. A company can give disclosures,
disclosures of what they're doing and still have a very long
term perspective. Those two things are possible.
In fact they're very possible. I give weekly reporting on My
Portfolio and my investment thoughts.
Does that mean I'm operating on a weekly basis?
I'm like buying and selling everything on a weekly basis.
No, I'm being transparent. I'm, I'm disclosing what I'm
doing on a weekly basis, even though my average holding period
for my stocks is over five years.
So I think very, very long term, I'm thinking in terms of five,
1020 years and then I disclose things on a frequent basis.
So this conflation that because a company has to give a
quarterly report, therefore they have to think about things and
you know, the objective of the quarter I think is, is totally
false. There's many companies in the US
that make huge long term commitments.
Look at Costco, look at Amazon, look at Walmart, look at all
these companies, they're doing massive CapEx investments,
they're building out infrastructure, they're
reinvesting at levels that we've never seen before.
They're all long term focused with quarterly reporting.
And in your your hypothetical here, if you even said would you
approve going to monthly reports, then yes, I think
that'd be fine. In fact, some companies you say
this ironically like it sounds preposterous to go to monthly
reporting. Costco does that.
Costco already reports their sales every single month.
Every single month. Go look at it.
You can look at every single month sales report.
That brings down the volatility of the stock.
It makes it less reliant on the quarterly reports.
It gives investors an idea of what the revenue is.
Now, they don't report every financial every quarter because
that's just a lot of paperwork. But they do show you what they
made in revenue every single quarter.
So Costco is showing you every month what the revenue is.
Does that make the management of Costco super short term
thinking? No, they're one of the long, the
most long term thinking companies in the market and they
show the revenue every month. And more to the point, in fact,
one point that I didn't bring up in the last episode on this of I
think it's a mistake to move from quarterly to semi annual is
when you buy a company, when you buy equity in it, you are
literally part owner of that company.
Now, you may just think that that's not important, that you
don't respect the right to shareholders, that you're just a
shareholder, but you don't deserve any rights.
You know, you don't really own the company like people that
have more invested do. I don't feel that way.
If you worked for money, if you've gone to work, you saved
up money. That's your labor that you saved
up. And if you buy equity in a
business, you are part shareholder.
You have the right to know what's going on with your
company. They they should show you what's
happening with your business, that you're part owner.
I feel like the relationship there is very important.
You have the right to have transparent and frequent updates
from the business to know what's going on with your investment.
Your money's in that business. Your money's at risk in that
business. Why should they go six months of
time without giving you any insight into what your business
is doing? If you owned a pizza shop or you
owned a little rental apartment, would you like not being able to
know whether you're collecting rent for six months or if the
pizza shop is having troubles for six months?
It's a long time to did not know anything about your company and
that's what they're suggesting here.
So even though we're we're small time shareholders, we only own a
little sliver of these companies.
We're shareholders nonetheless and we deserve to know.
It shouldn't just be the executives who in many cases
don't own much of the company themselves.
They shouldn't be the only ones that knows what's going on with
the business. So if I had to pick between 2
directions going more frequent or less frequent, I would pick
more frequent. And I believe that the right of
transparency of investors and owners of the business, it
exceeds the the burden of regulatory burden.
It exceeds the the questions that people have of the long
term planning. And I don't believe those
objections anyway. So when I look at this again, I
think the solution here is if regulatory burden is a problem,
we should come up with better technology to be able to make
these quarterly reports more seamless, more frequent and
easier. We shouldn't remove a huge, a
huge right of the shareholder to actually know what's going on
with their business. Let's go to move on to another
one here. Let's take a look at this
question. Joseph, you bought more Google,
Equifax and Amazon. Did you consider buying the dip
in Microsoft? I haven't seen much of A dip in
Microsoft. When I look at this one, I see
it at $500 per share. To me, that's not like a huge
dip. It doesn't attract me.
Microsoft trades at a much higher valuation.
My evaluation that I do analysis on at each of these companies,
Microsoft is wonderful. So I haven't sold it, but I
think it trades at a much higher valuation.
Let's go ahead and move on to the next one here.
Intuit is trading at the same price it was a year ago.
Will you be loading some shares coming ahead?
When I look at Intuit, I'm very pleased with what's going on in
terms of the fundamentals of the company.
The only thing that gives me pause on this one, it's
evaluation. Intuit, even though it's grown
earnings, the valuation is a bit higher than most companies.
And one of the things that I'm concerned about is if Intuit
starts to get the treatment of the dreaded software company,
investors start to view it as a software company like Adobe or
Salesforce. That could be bad news for
Intuit. Right now it is a software
company, but they're doing so well that investors still can't
deny how well it's doing. So right now with all of that,
I'm at a hold. That's what I'm doing with
Intuit. I'm holding the stock.
Let's go ahead and zoom into this one.
There is no thesis for Open Door.
All I heard is that they have a large Tam.
So what? They lost a ton of money because
their algo isn't good enough and couldn't scale.
Pure speculation. Well, in Walt in K Walter, I
mostly agree with you Now I thought the previous episode on
open Door was an interesting one.
If you haven't seen it, it goes over an investor and open door
and how the stock is talked about is the next 100 bagger.
It's a really interesting story that I thought was worth
sharing. But it is true that almost all
of the the thesis of open Door is potential, just potential and
just the total addressable market.
And you can play this game with almost any type of business.
For example, I can open up if we're talking about Tam or total
addressable market. I could open up a pizza shop and
say I have a trillion dollar Tam.
Look at all the restaurants in the nation.
If I only get 1% of that Tam, I'm $100 billion business.
So that doesn't mean much. If you're just, if you just have
one pizza shop and you say the Tam is huge, that doesn't mean
much. You have to show evidence that
over a long period of time you can scale, you can compete, you
can take market share from that Tam.
As good as Open Door might be in this category, homes are very,
very unique. Every single one of them.
Every home has a different yard, a different lot, different
interior, a different view, different blemishes.
Trying to scale that with software is going to be a
significant challenge. I don't know if Open Door can do
it. Maybe they can.
That potential is going to. It's well priced into the stock
today. Let's go to move on to another
one here. I think that Cynthian Cynthia, I
believe, says, are you selling Netflix?
I'm not selling Netflix. I still hold every share.
I haven't sold. I can't even remember the last
time I sold Netflix. I, I, I don't remember, I think
I've ever sold Netflix before, but I certainly haven't sold it
in years. And I still hold every share of
the company. It's too good of a company to
sell today, even though it's at a higher valuation, even though
it could trade down in the short term.
Let's go to comet #7 Kong says what makes Equifax superior to
TransUnion and Experian. The big thing that I would look
at if you're looking at these three companies is look at the
workforce verification or workforce solutions within
Equifax. They have a unique business
which TransUnion and Experian have a bit of, but it's just not
nearly as scaled, which is verifying your customer.
So not all three of these are are credit bureaus.
They give you a credit report, but Equifax is by far the most
scaled with the work number. The work number is a product
where if you want to know someone's background, you get
their their income, you get where they've worked before, you
get what roles they've had. You want to verify their
identity. Verifying someone's identity, a
big part of that is verifying their work history.
So Equifax has this additional product which is growing
substantially. In fact, I would not buy Equifax
without the work number. They didn't have that product as
part of the company. I would not find this company
nearly as interesting. So that's why I don't find
TransUnion and Experian is interesting.
That's why I do find Equifax as superior.
Let's go ahead and go to another one here.
OK, We have a dual question. Captain Mongol says on dual, any
concern with the high PE ratio? I agree with everyone that it
seems to be beating beating it down and besides profit taking,
what am I missing? It continues to grow sales, add
more paid users, has had expanding product and growing
free cash flow. What am I missing?
Where is the bottom? Sure.
First of all Duolingo is not like a beaten down value stock.
It's a high flying like fast growing company.
I believe that the reasons it's being beaten down is by this
series of news of AI translation tools.
Like the Airpods, the Metaglasses, there's going to be
lots of ways to translate language in the future, lots of
devices that do it seamlessly. So if you believe that having
more abundant use of AI translation tools is going to
eradicate the the will and the motivation for people to ever
learn a different language, then Duolingo is in trouble.
That's one of the concerns. Another concern is a social
media backlash. We're still trying to figure out
how much that's affecting the company.
So you have that additional bearish concern and then you
have the concern of the valuation.
Now Duolingo trades at like a 70 PE ratio, but it needs to be
said that they also grew earnings 70%.
So they're nearly doubling earnings every single year.
These are these are massive growth.
It's highly profitable, great cost structure, huge amount of
operating leverage and there's a lot of things they can do to
increase their margins over time.
So I'm not as concerned about the PE ratio.
What I'm concerned about is over the next three years, Duolingo
continues to grow their free cash flow, their user base.
I think they have a great product with chess.
I know that chess.com is well liked by chess users.
So they'll, they'll recoil at the idea of another product
coming into the market. But I think it's a good thing
even for usersofchess.com cause Duolingo will bring in people
that have never played chess, never played it.
I wasn't big into chess. I played it a couple times
growing up. But I've been doing the Duolingo
chess course and it's really fun for beginners.
They try to get you to a 15,500 ELO.
It's just mostly for beginners right now.
But you can play against one of the characters and they're going
to have player versus player soon and competitions and
Duolingo. So I think it's going to expand
the category. They already surpassed a million
daily users in chess. And chess is massive.
There's approximately 600 million people that play chess.
So Duolingo is going to expand this pie.
This is outside of language translation.
So I think there's a lot of upside to the stock.
You know, it's it's extremely volatile, but I continue to hold
it today. Let's go ahead and go to the
next one here. Is it too late to get into
Google at these prices? I do not believe so.
I have over $140,000 in Google. I've bought over 80,000 of it
recently. It's been a recent company that
I've really aggressively overall increased my my waiting in
because I continue to be incrementally more bullish on
it. I was bullish on the stock four
months ago. I'm more bullish on it today.
The price has come up to reflect some of that, but I think over
the long term there's more to go.
Consider that Google owns Waymo. Consider that they own YouTube.
I think YouTube is likely to double over the next five years
in value. They own Google Cloud, which I
believe is likely to double in value over the next five years.
Then they own all their subscriptions.
YouTube's building out a match, a massive subscription business
with YouTube Premium. They have over 100 million
subscribers. And then of course, you get into
their other subscription businesses.
You have the Google One, which has millions of users, and then
you have the entire search business and Gemini, all of it
puts together to an incredible company.
So I think that things look really good for Google.
All of this with a valuation of a 25 multiple.
So I think that of course, you could have bought Google a
couple months ago. That would have been the time.
And if you buy it today, don't be shocked or saddened if we get
some profit taking in a a short trade down.
But in the long term, the next 5 to 10 years, I think Google's in
a great position. Now that's going to be all the
questions for today. I hope you enjoyed today's
episode and have a good week.