Welcome everyone. We have a lot to get to in this
episode. A lot of exciting things to talk
about. First of all my portfolio, the
story fund here. This is a tech portfolio that I
started late 2020s early 2021 and it's just getting crushed.
So we're going to take a look at this.
I'll give you some thoughts on it.
The rest of the market though is not doing well today, so it's
not exactly unique to my portfolio.
We have the NASDAQ down, 3%, the Russell 2K down, three-point 38
percent, the S&P 500 down, 2% in the Dow Jones down 1.4 Or
percent, you can see on the S&P 500 right here, just across the
board. This tree map shows that there's
really only one category that's holding up.
Okay, well, you might count Healthcare in there so
Healthcare and consumer defensive they're holding up
okay today. Everything else is just getting
crushed. Big Tech included across the
board most of your portfolio's unless you have very specific
ones are not having a good time. Now we're gonna be discussing
this as well as Palin. Tears earnings report, I'll give
you my thoughts on it. We also have some interesting
Things to look at like this note from the CEO of uber to their
company. I think it's highly reflective
of the entire Market environment right now.
In fact, I think the single Uber note really summarizes it, so
we'll be going through that. And then we have some other
charts and graphs will be looking at that.
I think are very applicable to this market.
So as always, we have a lot to discuss.
Let's go ahead and Jump Right In.
Like I said, I have two portfolios.
The story fund is a tech center growth portfolio that I track
every single week and I Benchmark it against the S&P
500. It's Not all of my net worth.
They're all of my money. I have another portfolio called
the passive income account that I track on a different channel.
That is a dividend growth portfolio.
So on this one, my goal is to outperformed the S&P 500.
That's kind of the experiment that I'm running and I gave
myself until the end of 2025 that's when I want to beat it by
that point in time. Now, right now it's not going.
Well, this is a text centered growth portfolio where I focus
not just on growth at any cost but I'm trying to really An
emphasis on companies that are growing, but they also generate
enormous amounts of free cash flow.
So Amazon, Google Microsoft. You know, I have all of big Tech
in here. I'm basically all in on big Tech
as well as a few other companies like Salesforce Adobe Ali, Baba
Netflix. So I have a few other in there
that I have some big weightings but overall again this is a tech
girl portfolio. I'm focusing on High free cash
flow businesses that I think can stand on their own two legs,
even if the cost of capital and the interest rates in a Elation
run higher. I think these companies will do
well. So that's the reason that I
continue to stick with them despite the market selling
selling out of them like crazy. Now, right now, the portfolio is
being hit really hard. Just today, I'm down two point.
Eight, three percent this is moving around like crazy, it's
down 3%, 2%. You know it's trading every two
seconds but that's another $2600 just today.
And that's how it's been like the last you know, the last
month I'm down 25%, so thirty thousand dollars.
So the majority of losses have been just over the past 30 Is
but regardless overall we're now down 39 thousand dollars on this
portfolio. If I compare this against the
S&P 500 which I track every single deposit at the same time
periods. If I deposit money into my
portfolio? I act as if I put that same
money into the S&P 500. So as you can see, what the
story fun being the Blue Line, the S&P 500 being the red line,
the story front is actually been ahead of the S&P 500, the
majority of the time since the start.
It was beating it throughout 2020 and 2021 ever so.
Slightly, but at least keeping up with the S&P 500, and then a
dramatic change happen. Come November of twenty
Twenty-One so late 2021, we have a few major factors change,
first of all investors, decide that they no longer have any
tolerance for money-losing companies.
If your company is a money-losing company that has
profits in the future and and big ambitious promises and
dreams of the future investors don't care.
They want money right now, real money undiluted, free, cash,
flow, Companies today not in the future.
That's the first thing that happened in November of twenty
Twenty-One they have no longer investors, have no longer any
tolerance for money-losing companies and I'll show examples
of that in different things. Companies are doing right now to
radically try to become free cash flow positive.
But another thing happened, you looked at the fed.
The FED is Raising interest rates.
Inflation is out of control. This concerns investors with
tech stocks. So tech stocks in general, start
to trade down significantly more Or than other companies like the
oil trade, the defensive, the Commodities, the pharmaceutical
companies tech stocks. In general, get hit worse than
the rest of the environment. And then we also have increased
fares of recession, because if that is Raising interest rates,
they're trying to thread this needle, they're trying to do the
soft landing, and that seems like it's going to be very
difficult to do. So between the FED raising
interest rates the chance of a recession and we have the issue
with the whole money-losing companies that no longer
investors. Want you see?
The diversion start to happen November of twenty Twenty-One
and my portfolio starts to trade down more than the S&P 500.
Now, don't get me wrong. It doesn't look that dramatic,
but the S&P 500 went from 25% in the green 22 percent.
So it's given up all of its gains, but my portfolio has
created down to 28% than the red.
And that's because of a lot of different companies.
I hold like Amazon and Netflix and and the rest of big Tech
they're not faring well right now.
Now, you might be wondering why is this story fund?
Why is this portfolio? Leo down, 28 percent, almost 30
percent. When I started it, late 2020,
shouldn't it be kind of flat or down?
Maybe like, five to ten percent. That's kind of true.
If you didn't take into account, when I actually built up, the
majority of this portfolio, when actually deposited the majority
of money and this is the unfortunate problem, right?
So I did, in fact, start this portfolio, the last two months
of 2020. I put in thirty seven thousand
dollars to kick it off. That was my initial deposit and
had I just Up there and didn't deposit any more money.
My performance would be pretty good.
It'd probably be like, you know, I'd be kind of flat right now.
I wouldn't be losing 30 thousand dollars, right.
So I'd be decent, I would have just preserve the amount of
money that I that I initially deposited.
Unfortunately, I was reading the same reports as everyone else.
Inflation was 78 percent and I have money sitting in savings.
Stinking you know I'm young and I'm going to guarantee to lose
eight percent of my money in one year, letting it sit in cash
with no interest rate. Right.
So that's just a guaranteed loss and I realized that I could lose
money in the market but at least I have a chance of upside,
right? And having a longer investment
time Horizon I just thought you know I'm going to risk it in the
market, take my money out of savings, put it in the in all
these different companies and I put fifty seven thousand dollars
in during the middle of 2020 during kind of the peak part of
the market. Really get the QQQ, the middle
of 2020, was kind of the highest part of the market.
So, this money right here, this 57,000, Is it was deposited in
2021 was in hindsight at like the worst time I was buying a
lot of these companies right before they started the tumble.
Now of course if I could go back in time I wouldn't have put this
additional fifty seven thousand dollars into the market during
2021. Right.
I wouldn't have bought at the high but that's the way things
work hindsight's 20/20. I had no clue what the markets
going to do in the future for all.
I know it could have gone up 30% to could have gone down 20%
nobody knows so that's the unfortunate problem with reality
you You can't see the future, you can't go back in time.
So I made a decision to take a lot of money out of savings.
Put it into the market, wasn't the right decision in hindsight
but that's where we are right now.
Now going forward, I'm going to be doing the same thing that
I've always done, which is to not, try to time the market, but
just invest through thick and thin continually keep dollar
cost averaging in. And I plan on doing that more
the second half of this year. I've already bought 33 thousand
dollars of stocks. This year I'll continue to buy
more and through 2023 and 2024 and so on and so Fourth because
this is a tough year so far. In fact, it's one of the worst
years on record. And I don't think every year is
going to be like this. So maybe it will be like this
for the next year or two but I don't think I'll be like this
for the next 10 years. I think eventually the market
will want to own these highly profitable, free cash flow
generated companies. And when they do, I'll already
have a significant stake and I think very low prices.
So even though right now losing this money, 38,000 dollars in
the red is not fun. I'd rather have the market go up
every single day and this can be, you know, it requires Has a
certain temperament a certain emotion to keep a level head and
not do anything rash. That's the challenge here, but
I'm not going to do that. I'm going to stick my plan.
Continue dollar cost averaging into these companies and we'll
see how this goes over the next few years.
We'll go through it together. So that's the update for now.
Let's go ahead and move on to some news.
Now, the first bit of news is not fun news for palantir,
investors pounder, plunges, 20% on week, Revenue guidance and an
earnings Miss. Now, I haven't gone over in
depth in this earnings report, but I did look at one part of
it, which is something that I always look at with this
earnings report. It is true that they had weak
Revenue guidance and that's a big No-No in this market.
You have to have extremely strong earnings and extremely
strong guidance to have just a flat result, just to have the
market not trade down. So on this week, guidance and
earnings Miss, they're going to go down 20% but another thing I
look at with pound tear and I think what's caused a big issue
of the stock over the timeline of it because if we look at it
right now it's from its IPO it's down 16 percent.
So no investor in this one is in the green, unless they've time
to buy and sell properly. Unless they bought it IPO and
sold after its big run up, right?
If you just held it from IPO, you're in the red, just like you
are with so many other companies at this point.
But the big issue that I've always highlighted with
palantir, and the reason that I've stayed away from the stock
is, I'm putting a strong preference on companies that
don't dilute the shareholder to a huge extent.
When I look at this type of chart, and I see the shares
outstanding for palantir, increase this much over time.
Is concerning the shares outstanding went from one point
seven two billion in 2020. 1.72. Billion to two point zero two,
seven billion year over year with their latest quarterly
report year over year. They had 11%, share dilution,
you own, 11% less of the company because the shares outstanding
continue to increase. That is a problem for investors
and the market doesn't want anything to do with this and
it's true that they have some free cash flow growth.
So they are growing some free cash.
Hello, but when you factor in share dilution, it's not enough.
The market is not rewarding these type of companies anymore.
So palantir, unfortunately faces the same situation, so many
other companies do right now. They could get away with this
dilution maybe like a year or two ago.
Not today, today's markets, not rewarding, these type of
companies, they have to have undiluted free, cash flow
generation. They have to have real earnings.
If we look at the earnings reports I think they earn like
two cents or something, you know?
It's just it's not enough, right?
This company is earning barely any Any, any way that you look
at it? It's really not a cash flow
generative company. So that's kind of my quick take
on palantir right now. I have really no interest in
jumping in this company. I wish the investor sincerely
the best tenant. I hope that it turns around but
I think it's a difficult situation to be in.
Now, moving on the next news item is this email.
This note that the CEO of uber sent to his team and his company
I was very impressed by this email from the CEO.
I don't know too much about them.
I'm not. Invested in Uber.
The stock has been having a very difficult time this year, it's
down. 45%. So they're facing a lot of
pressures, and like many of these companies, like the pound
Tara's Spotify. Uber so on and so forth.
If they're not generating real profits, they're getting crushed
right now and the CEO of uber has his response.
And again, I think it really is the best response and summarizes
what's going on with the market. He says, after earnings, I spent
several days meeting investors in New York and Boston.
It's clear that the market is experiencing a Shift and we need
to react accordingly. There's a seismic shift going
on. My meetings were super
clarifying and I wanted to share some thoughts with all of you as
you read them, please bear in mind that while investors don't
run the company, they do own the company.
That's a CEO that I like his perspective, he's accurately
defining the relationship. Their investors do not run the
company but they own the company.
That's a CEO that understands the relationship of the
investors in the executives. He says they do own the company
and they've been trusted us with running it.
Well, we get to set the strategy and make the decisions, but we
need to do. So in a way that ultimately
serves our shareholders and their long-term interests and
then he goes on and outlines what investors are looking for
and I really think he knows it here in times of uncertainty
investors look for safety. They recognize that we are a
scaled leader in our categories, but they don't know how much
that's worth channeling Jerry Maguire.
We need to show them the money. We have made a ton of progress
in terms of profitability. Setting a target for five
billion and adjusted ibadah in 2024, but the goalposts have
change. Now it's about free, cash flow.
We can and should get there fast.
That's what he says. It's now about free cash flow.
There will be companies that will put their heads in the sand
and are slow to Pivot. The tough truth is that many of
them will not survive. So right there, that highlighted
portion he says that now it's about free cash flow now
obviously, it's Always been about free cash flow companies
have always been about earning cash flow in the Futures, but
instead of putting that cash flow, some point in the
long-term future investors. Want it now and I'm in that same
group, I've decided ultimately that, unless the company is
going to be free cash flow immediately in the future.
Like within the next year, I'm not investing in it so I agree
with the Uber CEO hair investors.
Want free cash flow. Investing is always about cash
flow but the timeline of when you're going to get it is
closer. Er no investor wants to look at
free cash flow five to ten years in the future anymore.
So in my opinion, this Uber CEOs dead-on, he's perfectly accurate
investors, want free cash flow generative companies.
Today, companies that can prove that they can generate real
profits today not five years in the future, not 10 years in the
future, we're done with that environment and frankly with the
FED in the changes with the economy, I think this might last
for a prolonged period of time. So this is the reason why I've
looked at different companies that I used to hold early on in
this portfolio early. Only 21 and I've exit out of a
lot of these positions are no longer hold them and I have a
huge emphasis on companies that will generate meaningful free
cash flows over the next year. 2000 is one of the companies
that if you look at when it was founded, this company is not a
brand new, you know, young tech company.
It was founded in 2008, 14 years ago but yet twilio has never
generated any meaningful free cash flow.
Look at this chart over time. The last three quarters of free
cash flows - while they're diluting the shareholders.
The same time. So even though their revenue is
growing at paste and it's growing and it looks like a
beautiful chart here, I'm not going to be investing in this
company anymore. The only time I'll be investing
in it is if they can generate real undiluted, free cash flow.
If they can prove that they can grow that over time, as much as
I like the company, I'm no longer investing in them.
Unless it can generate real profits.
Another example we can look at is Spotify here.
Spotify was founded in 2006. So, the company is what Ten
years old, right? It's not a new platform, it's
not a new startup company. They really have no excuse
anymore to not be generating free cash flow to be a
profitable company. They've been around for a decade
and a half and still Spotify. Generates really no meaningful
free cash flow. It looks positive here like a
little bit. You know, these are 100 million,
72 million 41 million for a twenty billion dollar company.
Then you factor in dilution and they're deluding the shareholder
as well, when you factor in the dilution.
Ocean, the free cash flow is not meaningful.
The earnings of Spotify are basically non-existent.
So this company has had 16 years to generate a profit and then I
read tweets from the CEO that he doesn't address this problem at
all. He just says, we're going to
continue to scale the platform or not focused on profits and,
you know, down the road five or ten years.
We might focus on profits. So, as much as I like Spotify is
a product, I really do love the service.
I swapped Spotify for Facebook, I went back into Spock, I'm all
in on big Tech now because Facebook is trading at a 17 PE.
And this company, generates real money undiluted real money,
they're generating 8 plus billion dollars in free cash
flow per quarter and they're buying back their shares and
guess what? I don't even like Facebook, I
like, Spotify way more as a product.
I don't even use Facebook, right?
I use a little bit of an Instagram, but I really never
log on to Facebook. I don't really like the social
media aspect of people. Just arguing about politics and
petty little things. So Facebook's a company Me where
I don't even like, the product that much, but the numbers don't
lie, the company still growing, they're at a very cheap price
and their free cash flow generative.
So even though I like Spotify more than Facebook, I swap those
two Holdings to focus on a company that can generate
profits. Another one I'll mention is
palantir. Pounder was founded in 2003.
I don't think a lot of investors in this company realize how old
it is. This isn't some new startup tech
company just because IPO to a year ago the company was Founded
in 2003, that's when it started. It's been 19 years and they
really generate no profits, they reward their employees with
massive amounts of shares options, that's how they have
it. So they have no debt.
The company is not free, cash flow generative to any
meaningful extent. It's not profitable and the big
question for investors should be if you're invested in these
companies. When are they going to produce
real cash flows? Real money to return to the
shareholder. When are they going to stop?
Deluding shareholders, 2% 3%. At quarter-over-quarter 10% 11%
year-over-year. I think that's a question that a
lot of a lot of people are now asking themselves and hopefully
it's soon. Hopefully they'll generate real
money soon, but if they haven't done it in 19 years, do you
really think they're going to do it next year?
Is that the year? They're going to do it.
I don't know. Just something to ask now,
there's a couple more charts I want to show because I think
they're just incredible. This one is from Ben Carlson of
Twitter and it shows the top 20 companies in the S&P 500
year-to-date their year-to-date performance.
Only six of them are in the green year-to-date six of the
top 20 companies. So if your companies are being
sold off, you're not alone. The majority of them.
Are we have Berkshire in the green?
So the Warren Buffett oil companies are going up Johnson &
Johnson's, barely in the green at 3.8%.
We have Walmart hanging in there at 4.1%.
ExxonMobil up, 51% the oil trade is going strong, Chevron up 47%
and Eli Lilly and Company up. 7.9%.
Those are the top ones that are in the green.
Now, if we look at this, just in terms of big Tech with Tesla
included their down, an average of 25% just here today.
So, all a big Tech across the board is selling off.
Apple included even Microsoft, but especially Amazon and Tesla,
and Google. They're selling off like crazy.
Then we also have Facebook hair down, 40 percent year-to-date.
So Facebook has been completely crushed, so across the board
even the the different PE ratios, these companies are
getting hit. If you're having Your portfolio
get crashed right now. Again you're not alone most
people unless you're heavily in the consumer defensive and oil
companies. Most people are going to have
their portfolios getting crushed over the past couple of months.
So I think this is the big takeaway.
This graph shows a very wide sample size of different time.
Periods through all different Market cycles and your returns
based on length and time that you invest in the stock market,
okay? And what it clearly illustrates
is the longer that you have your money in the market, the
probabilities of of making money, go up significantly to
nearly 100%, but in the short term in the daily basis, if
you're trading, like, Wall Street, you're putting money in
day by day focused on CNBC, right?
If you're looking at the different apps that show you
what's going on today or if you're looking at CNBC TV, if
you're looking at the Wall Street Journal, if you're paying
attention to day trader accounts on Twitter, that's where
everyone here is. Playing Wall Street plays daily,
they look at the stock market on a daily basis.
And if you're looking at this territory, On a day by day
basis, you have a 56% chance of making money slightly ahead of a
coin flip. So you may as well go to Vegas.
Go to something like the slot machines have a 50% chance of
making money or losing money and play that.
You only have slightly better odds in the stock market and
that's by virtue of companies being economic machines, that
generate profits over time and typically they go up.
So, the odds are slightly better than gambling when you're
playing the stock market daily and this is where the huge
majority. E of people are focused with
their time and attention and energy.
I see this in my comments section as well.
Everybody says, that any company I buy that goes down the next
day, that that was a bad investment.
That's literally a lot of comments that I receive now.
This was a bad investment because last month, it was a
higher price that is a day-to-day Focus as an investor.
And again if you're focused on The Daily you have a 56% chance
of making money, a 44 percent chance of losing it.
That is a huge problem. Bility of losing money on a
daily basis. Now, if you extend this to only
one year your chances of making money, go up significantly over
a year time period since 1928 to 2021 you had a 75% chance of
making money, three out of four. It's still a gamble.
You still have a 25% chance of losing money but at least your
odds are increased. At least, historically, looking
significantly from 56%, the 75%. Now, extend that to five years
again the odds of making money, go up significantly from Five
percent to eighty eight percent then we get to the 10-year
territory the odds of making money.
When investing in the market, for a 10-year period is 95%.
Meaning the out of many 10-year long periods.
There's only been a 5% chance that you actually lose money.
You had invest right at the peak of the.com, bubble, to lose
money, you know, over a 10-year period.
So, very unlikely, I would say very unlikely, especially if
your dollar cost averaging and continually buying.
Now, if you increase that to a 20-year, Period.
Your odds of making money. Historically speaking go to
100%, there is literally never been a period of time between
1928 and 2021 or any investor has lost money buying the market
over a 20-year period. Never not once, and especially
over 30 years and 40 yards, the odds even go down further
because even though we might see this sometime in the future,
it's very unlikely for 30 years. So the idea of this is to not
focus on the daily even though we Talk about it and we share
thoughts on it every single day to not invest that way, hold
these companies long-term hold the indexes long term if you're
invested in an ETF and it's going down every day.
Just hang on your odds. Go up significantly of making
money every single time period from one year to five year to 10
year to 20 year, it goes up and up and up till you get to 100%
historically speaking 100% chance of making money.
So that's all for now, best of luck to all of you, and I'll see
you in the next one.