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Welcome back everyone. 
Today on the Joseph Carlson 

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Show. 
The market continues to go up. 

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The passive income portfolio is 
doing well. 

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It's growing at a brisk pace. 
Just today we're up 1.72%. 

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We've gained nearly $15,000 and 
we're just getting started. 

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The Story Fund, my secondary 
portfolio, is also doing great. 

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It now has an all time gain of 
$141,000. 

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On the day, it's up 1.59%. 
And of course, with both of 

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these portfolios, we have 
extremely strong companies. 

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I call them compounding machines
or high quality companies or 

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they're just simply really good 
companies. 

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These high quality companies are
how we're getting these type of 

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gains. 
Companies like S&P Global, 

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MasterCard, Intuit, Moody's, 
Equifax are elite tear 

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companies. 
We have companies like Costco, 

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the best retailer on planet 
earth, booking holdings, high 

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margin platform companies with 
dominant moats. 

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And we even have a few sleeper 
picks, ones that are less 

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mainstream but are very dominant
in their category, Texas 

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Roadhouse being one of them. 
I invest in these companies that

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attract evaluations like we did 
with Apple years ago, making 

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$34,000 in gains on that 
company. 

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My original buys are up 3 to 4X 
from Apple alone. 

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We bought Microsoft heavily at 
$220 per share. 

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Now it's trading at 460. 
I take buying high quality 

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companies seriously. 
It's not just something that I 

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say is nice to do or good. 
Theoretically, I have extremely 

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high standards of the type of 
company that ends up in My 

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Portfolio now. 
The market has been up over the 

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past month or so as Trump has 
relinquished many of his tariff 

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demands and we're seeing more of
that today. 

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Just a few days ago, Trump 
threatened the EU with 50% 

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tariffs out of frustration from 
them being very slow to make a 

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deal. 
Representatives from the EU said

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that they will speed up the deal
making, but they need until at 

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least July 9th. 
So the tariff deadline is once 

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again delayed only a few days 
after making it. 

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This is the same thing we've 
seen a few Times Now with these 

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tariff deals. 
Now, as the market raises up 

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today, investors may believe 
that you missed the train, that 

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stocks are now a bit too 
expensive to deploy your cash. 

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And I personally believe that's 
the wrong take away. 

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There are stocks that are still 
attractively valued in this 

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market, and I'm going to 
highlight five of them in this 

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video today. 
Five companies that are both 

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extremely high quality. 
They are compounding machines, 

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and they are buys today based on
their risk adjusted returns. 

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We'll be going over all five of 
these quality companies and 

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discussing why they're buys 
today. 

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And we start this off by 
highlighting company #1 which is

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FICO currently going down 
another staggering 9% cent or 

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$155. 
Just today. 

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The stock price is now 
approaching $1500 per share, 

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which is notable because the 
stock entered this year at $2000

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per share, and then it got as 
high as $2200 per share. 

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Then within just a matter of 
days, the stock price is 

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plummeted. 
Roughly 1/3 of the value has 

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been chopped away just on recent
news. 

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And what is causing all of this 
concern with FICO shareholders? 

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Well, it's still this guy, Bill 
Pulte, the new Federal Housing 

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director. 
He was just recently sworn into 

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this position. 
And in many cases, like a new 

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CEO, he wants to make a dramatic
impact right out of the gates. 

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One of the first things he 
turned his attention to was the 

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closing costs on homes, 
specifically credit scoring from

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Housing Wire. 
Bill Poulte turns up the heat on

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FICO now. 
Now, all of this is new. 

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Some of this stuff was plans 
they had before he took this 

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position. 
But he's certainly putting gas 

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on the pedal. 
For example, with FICO 

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specifically, one of the things 
they mentioned here was turning 

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the system from a try merge to 
buy merge system. 

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He says we're actively looking 
at getting this done. 

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He secifically calls out FICO 
time and time again saying they 

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should make sure they're being 
as economic as possible. 

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And he says that I don't like 
some of the things I've heard in

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terms of cost. 
He's wagging his finger at FICO 

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for raising prices too 
aggressively. 

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Now we know the consequences of 
this. 

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If this system moves from 
Trimerge to buy merge, 

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mathematically that would erase 
1/3 of Fico's revenue, 

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specifically with their scoring 
business. 

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If we look at Fico's revenue 
overall, it's broken up into 

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these three different 
categories. 

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There's software, professional 
services and scoring. 

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Now, the professional services 
is a small amount. 

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If we take that away, roughly 
half of FICO is the scores, the 

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origination scoring is what's 
under pressure here. 

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Now again, theoretically, if you
were to move to a biomerge 

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system, that would theoretically
remove around 1/3 of this half 

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of revenue. 
And this half of revenue is much

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higher margin than the other 
half. 

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So this is a very lucrative 
portion of revenue. 

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So you may say, hey, Joseph, it 
makes sense that the stock is 

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down around 30% when you're 
proposing something that may 

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impact 30% of Fico's highly 
lucrative revenue. 

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All of these arguments make 
sense theoretically, but in 

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practicality, it's probably 
going to be a lot less impactful

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and FICO will likely end up a 
lot better than expected. 

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The first thing to consider is 
even if this is actually passed,

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it's unlikely that every 
mortgage broker will switch from

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Trimerge to by Merge. 
This is something that would 

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make it optional, but not 
mandatory, and there are reasons

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to argue that a lot of lenders 
wouldn't want to switch to Buy 

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Merge. 
The credit Bureau TransUnion 

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makes this exact point in an 
analysis that examines the 

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potential repercussions from 
switching from Trimerge to Buy 

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Merge. 
Transunion's analysis found that

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moving to a Buy Merge process 
could result in 2,000,000 

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consumers becoming ineligible 
for government sponsored 

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enterprise mortgages. 
Their ineligibility would be due

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to gaps that can exist among 
lenders when it comes to 

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reporting. 
Using only two credit scores 

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will often result in an 
incomplete or inaccurate picture

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being painted of a potential 
borrower, particularly if the 

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consumers most valuable set of 
credit data is in the one that's

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getting excluded. 
So the big point here is that 

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it's a bit like playing Russian 
roulette. 

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Some of your credit information 
may be uniquely accounted for on

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one of the three credit bureaus.
If you just pull two of the 

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three, you may get incomplete 
credit data. 

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And in some cases this could 
mean a more expensive interest 

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rate on your loan, making it so 
it's significantly more 

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expensive than had you just 
pulled all three credit ratings.

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They say. 
Additionally, 600,000 new 

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mortgage borrowers per year 
could end up paying more in 

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interest under the Buy merge 
than they would have otherwise. 

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With the Tri merge information 
being used, this could cost 

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consumers around $6600 in 
additional interest over the 

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life of the mortgages. 
Now that's a particular note 

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here because pulling that third 
credit report probably costs 

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around $10. 
They go on to say that under the

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Buy merge, the first time 
homebuyers who have thin files, 

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are new to credit could become 
unscorable, or if they are 

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scored at all, could be charged 
a higher interest rate than they

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would otherwise. 
Just one missing trade line that

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may result from using one less 
credit report could dramatically

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impact eligibility and monthly 
payments. 

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Now he's not exaggerating with 
this. 

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If you have a credit card that's
only matched in one of the 

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credit reports that gets 
excluded. 

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That credit card where you've 
paid off your credit debt may 

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make the difference of you being
able to get into a home or not 

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having one. 
Long term credit card being paid

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off continually and reported in 
one of the credit bureaus 

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dramatically lowered our 
interest rate. 

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He says ultimately, the decision
to only use two credit reports 

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could make all the difference in
whether an interested home buyer

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is able to buy a home or not. 
So we have the case where many 

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customers may actually pay more 
by excluding that third credit 

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rating if that third credit 
rating is containing any credit 

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history that's beneficial to 
you. 

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So again, this is like playing a
bit of Russian roulette. 

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You don't know if you're getting
the best score because you don't

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have a complete credit history. 
In addition to holding credit 

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worthy borrowers out of the 
market, a by merge could have 

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the reverse effect on otherwise 
ineligible borrowers, 

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potentially increasing default 
risk. 

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Incomplete information could 
also lead to consumers paying 

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less interest than their true 
risk merits. 

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The goal of scoring people's 
credit is to see the ability 

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they have to pay back on that 
loan. 

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If you do not get an accurate 
picture, the customers either 

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paying them more than they 
should or less than they should.

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The bank is either taking on too
little of risk and overcharging 

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people or they're taking on too 
much risk and undercharging. 

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Either way, it's a less 
functional and less efficiently 

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priced system. 
So right now the stock is down 

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30% on roughly 1/3 of half of 
the revenue. 

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And even that third of half of 
Fico's revenue is still up for 

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debate and likely not going to 
go down by a complete 1/3. 

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There are going to be many 
lenders that require the Tri 

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merge system that they still 
want all three credit reports, 

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many individuals that'll also 
want all three credit reports if

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they're excluded from a home. 
So the damage here may not be as

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extreme as it first seems. 
Now you may also mention that 

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this report is from one of the 
credit bureaus that benefits 

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from having the Tri merge 
system, which is correct. 

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They're trying to protect their 
business. 

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But the people launching these 
attacks specifically against 

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FICO are also people trying to 
protect their business. 

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There are large lobbyist groups 
specifically from brokerages. 

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Bill Pulte's on X reposting 
different posts from actual 

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lobbyist. 
In fact, this one right here 

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that he retweeted is from the 
Broker Action Collation, which 

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is a large lobbyist group for 
brokerages. 

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Now this document goes over how 
FICO specifically with its 

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credit closing costs have gone 
up tremendously over time, and 

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they point out promptly how much
FICO has raised prices. 

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They say the average cost was 
$14.50 in 2023. 

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In 2024 and 2025, it's $80.00 
with the unregulated cost from a

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single credit report, which has 
up to two persons. 

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So this is basically like a two 
person report. 

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And that's a price increase of 
up to 700%. 

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And they are lobbying a call to 
action for Congress, the FTC, 

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the FHFA, the CFPB, any entity 
that can to take these costs 

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down to make it so that the FICO
score is cheaper. 

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Bill Poulte has stepped in 
saying thanks for the input. 

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Still not happy with FICO. 
We should be making some 

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decisions on all related items 
in the next one to three weeks. 

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So he's directly responding to 
these lobbyist groups saying 

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that he's going to do exactly 
what they want and try to take 

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down FICO. 
And since FICO is getting such 

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focus from Bill Polte, I thought
I would reply and just ask him a

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few questions now. 
He posted this about an hour 

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ago. 
I just replied to it saying, Hey

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Mr. Polte, do you mind 
explaining how Fico's pricing is

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a bigger and more pressing 
concern to homebuyers than the 

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mortgage broker fees or realtor 
commissions? 

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For reference, you would need 
approximately 180 FICO pull 

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requests to equal the fees of 
one mortgage broker transaction.

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You'd need to pull your FICO 
score 600 times to equal a 

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single realtor Commission on a 
sale. 

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Other than the significant 
amount of lobbying that brokers 

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and Realtors do, what reason do 
you have to focus on FICO more 

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than these other costs? 
And I gave him a nice table of 

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the relative expense of these 
different parties. 

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We have FICO here, which the 
average pulls around $40. 

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So you pay $40 to get your 
credit from all three credit 

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bureaus. 
The Trimerge system. 

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Now, if we assume we're buying a
$400,000 home, $40 compared to 

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that $400,000 home is about 
0.01% of the total sale. 

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So you're paying 0.01. 
The mortgage broker group, which

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is largely the group responsible
for putting all this pressure on

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FICO, saying that Fico's raised 
prices, that it's out of 

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control, that consumers are 
paying too much. 

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They make an estimated $3600 to 
$7200 per home sale. 

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Now that is .9 to 1.8%. 
Again, that's around 180 times 

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what FICO charges. 
So you have the relative groups 

230
00:11:39,960 --> 00:11:40,800
here. 
Then of course, you have the 

231
00:11:40,800 --> 00:11:45,680
realtor commissions, so you have
that 6% or $24,000 compared to 

232
00:11:45,680 --> 00:11:49,400
the $40.00 of the FICO score. 
Then you have additional closing

233
00:11:49,400 --> 00:11:52,360
costs of eight to $15,000, 
that's 2 to 4%. 

234
00:11:52,640 --> 00:11:54,920
Again, you compare that to the 
FICO score. 

235
00:11:55,360 --> 00:11:58,000
But out of all the things that 
he's focusing on that are 

236
00:11:58,240 --> 00:12:01,960
difficult for people to afford 
when buying a new home, it's not

237
00:12:01,960 --> 00:12:05,120
the mortgage broker fees, it's 
not the Commission fees, it's 

238
00:12:05,120 --> 00:12:08,880
not the closing cost that are 
all based on a percentage of the

239
00:12:08,880 --> 00:12:11,560
home sale. 
So they scale indefinitely with 

240
00:12:11,560 --> 00:12:15,640
the price of the home. 
It's the $40 FICO score, 

241
00:12:15,880 --> 00:12:19,240
something that no borrower has 
ever concerned themselves with 

242
00:12:19,560 --> 00:12:21,600
or ever worried about. 
And if you even want to go into 

243
00:12:21,600 --> 00:12:24,440
more detail, this actually is 
better for FICO than it appears 

244
00:12:24,440 --> 00:12:28,400
here because the estimated 
dollar amount here, that $40 is 

245
00:12:28,400 --> 00:12:31,600
including the cost from the 
credit bureaus and FICO. 

246
00:12:31,800 --> 00:12:34,880
So Fico's only a portion of that
$40. 

247
00:12:34,880 --> 00:12:37,880
They're not the entire cost. 
So FICO probably makes up more 

248
00:12:37,880 --> 00:12:41,360
around 5:00 to $10 per pole, not
$40.00. 

249
00:12:41,360 --> 00:12:43,720
So the reason that this is laid 
out is because anybody looking 

250
00:12:43,720 --> 00:12:46,560
over the total cost of buying a 
home and anybody that's been 

251
00:12:46,560 --> 00:12:50,480
through this process, the least 
of your concerns is the $10 FICO

252
00:12:50,480 --> 00:12:52,400
score. 
Nobody even cares about that. 

253
00:12:52,400 --> 00:12:55,680
Nobody even notices it. 
But you do notice paying the 

254
00:12:55,680 --> 00:12:59,440
mortgage brokers $7000. 
You do notice the closing costs 

255
00:12:59,440 --> 00:13:02,880
and the realtor commissions. 
Those are real expenses that are

256
00:13:02,880 --> 00:13:05,200
big chunks of the overall 
transaction. 

257
00:13:05,200 --> 00:13:08,120
Now, again, I replied to his 
post with this question. 

258
00:13:08,360 --> 00:13:10,480
We'll see whether or not he 
acknowledges it, but I'm not 

259
00:13:10,480 --> 00:13:13,000
going to hold my breath. 
In reality, he doesn't have to 

260
00:13:13,120 --> 00:13:15,640
respond to my post, he doesn't 
have to make any type of 

261
00:13:15,640 --> 00:13:19,240
justification whatsoever. 
Most politicians and people in 

262
00:13:19,240 --> 00:13:23,360
public office do what's best and
most popular what their lobbyist

263
00:13:23,360 --> 00:13:26,440
and peers want them to do. 
Having a logical standpoint 

264
00:13:26,440 --> 00:13:28,360
comes secondary. 
And there's also the fact that 

265
00:13:28,360 --> 00:13:30,880
FICO has brought some of this 
upon itself. 

266
00:13:31,200 --> 00:13:34,280
You can't lay the blame on 
everyone else when FICO has 

267
00:13:34,280 --> 00:13:38,520
exercised extreme pricing power 
over just a few short years. 

268
00:13:38,880 --> 00:13:41,560
This is one of the concerns I 
expressed about this company 

269
00:13:41,640 --> 00:13:44,880
years ago, that if you become in
a dominant position and you 

270
00:13:44,920 --> 00:13:48,360
exercise no restraint with your 
pricing power, if you push 

271
00:13:48,360 --> 00:13:51,760
prices up too aggressively, too 
fast without any care to 

272
00:13:51,760 --> 00:13:54,760
different businesses or 
consumers, it will raise 

273
00:13:54,800 --> 00:13:58,040
regulatory scrutiny. 
And that's exactly what FICO did

274
00:13:58,160 --> 00:14:01,360
back in March of 2024. 
I was looking over all these 

275
00:14:01,360 --> 00:14:04,280
different companies and I said 
that I think my next buy is 

276
00:14:04,280 --> 00:14:06,400
going to be Moody's. 
I'm thinking of buying it in 

277
00:14:06,400 --> 00:14:09,480
$10,000 increments more of ADCA 
into the position. 

278
00:14:09,800 --> 00:14:13,000
I've reviewed FICO. 
I think the East is too high and

279
00:14:13,000 --> 00:14:16,200
I don't really love how much 
they depend on insane pricing 

280
00:14:16,200 --> 00:14:20,720
power to lift the stock further.
Moody's PE is high, but only 

281
00:14:20,720 --> 00:14:23,720
because the stock has a huge 
slowdown in credit which should 

282
00:14:23,720 --> 00:14:26,760
pick up over the next five years
a lot, specifically if interest 

283
00:14:26,760 --> 00:14:29,320
rates go back down. 
The analytics business is 

284
00:14:29,320 --> 00:14:30,880
awesome. 
Super high retention, 

285
00:14:30,880 --> 00:14:34,200
subscription income, and a ton 
of proprietary credit data that 

286
00:14:34,200 --> 00:14:36,440
they own now. 
As of this comment that I left, 

287
00:14:36,440 --> 00:14:39,160
FICO has gone up more than 
Moody's stock, so I would have 

288
00:14:39,160 --> 00:14:41,920
had better returns if I bought 
FICO instead of Moody's. 

289
00:14:42,200 --> 00:14:45,120
But the concern here that I 
listed is still relevant. 

290
00:14:45,160 --> 00:14:49,280
I don't really love how they 
depend on insane pricing or to 

291
00:14:49,280 --> 00:14:52,200
lift the stock further. 
In a comment even before that 

292
00:14:52,200 --> 00:14:54,800
one, I said, you know, I was 
listening to Warren Buffett and 

293
00:14:54,800 --> 00:14:57,880
Charlie argue against Valiant 
and it reminded me a bit of 

294
00:14:57,880 --> 00:14:59,720
FICO. 
Buffett basically said that 

295
00:14:59,720 --> 00:15:03,600
buying exclusive rights over a 
drug and jacking up price is not

296
00:15:03,600 --> 00:15:06,400
a good business strategy and 
will lead to regulatory and 

297
00:15:06,400 --> 00:15:09,440
public backlash. 
Now, I'm not saying that Fico's 

298
00:15:09,440 --> 00:15:11,880
exactly like Valiant, and 
obviously there's a big 

299
00:15:11,880 --> 00:15:14,640
difference between buying 
exclusive drugs that are life 

300
00:15:14,640 --> 00:15:17,240
savings and running mortgage 
credit ratings. 

301
00:15:17,400 --> 00:15:20,280
But the fact remains that they 
rely high on this insane pricing

302
00:15:20,280 --> 00:15:23,720
power, which does attract 
regulatory and public backlash. 

303
00:15:23,760 --> 00:15:26,160
And we're seeing that regulatory
backlash now. 

304
00:15:26,160 --> 00:15:27,840
So there's two ways to look at 
FICO. 

305
00:15:27,840 --> 00:15:30,600
One of them is that it's an 
exceptional company in an elite 

306
00:15:30,600 --> 00:15:34,600
category of high margin, 0 cost 
of replication of its scores. 

307
00:15:34,920 --> 00:15:38,200
It is deeply embedded in our 
financial systems, and the 

308
00:15:38,200 --> 00:15:42,200
product is very difficult to 
replace and avoid making it so 

309
00:15:42,200 --> 00:15:44,440
that it has substantial pricing 
power. 

310
00:15:44,560 --> 00:15:47,160
The other side of this is that 
this is a company that's simply 

311
00:15:47,400 --> 00:15:50,320
too good for its own good. 
It's a company that's pushed on 

312
00:15:50,320 --> 00:15:54,320
the pricing pedal so hard that 
now it's getting laser focus 

313
00:15:54,320 --> 00:15:57,160
from regulators. 
So the story of FICO has become 

314
00:15:57,160 --> 00:16:00,920
less clear, less predictable. 
If I have to pick a side today, 

315
00:16:00,920 --> 00:16:04,520
my guess is that FICO will still
be an exceptional investment, 

316
00:16:04,520 --> 00:16:07,080
especially after this 30% trade 
down. 

317
00:16:07,120 --> 00:16:09,560
This doubt gives you an 
opportunity to enter into a 

318
00:16:09,560 --> 00:16:13,560
position on an exceptional 
company when one regulator's 

319
00:16:13,600 --> 00:16:16,280
targeting the company. 
And in most similar cases with 

320
00:16:16,280 --> 00:16:19,760
companies of this quality, now 
is a good time to buy now as we 

321
00:16:19,760 --> 00:16:22,720
look through more high quality 
companies to buy today. 

322
00:16:22,720 --> 00:16:25,160
Another one that I'm going to 
continue to mention because I 

323
00:16:25,160 --> 00:16:29,440
still believe this stock is high
quality, undervalued and less 

324
00:16:29,440 --> 00:16:31,760
appreciated than most other high
quality companies. 

325
00:16:31,880 --> 00:16:34,080
It's Salesforce. 
This is a company that I have 

326
00:16:34,080 --> 00:16:37,640
$62,000 invested in. 
I'm currently basically flat on 

327
00:16:37,640 --> 00:16:41,560
it, only up $500. 
Salesforce trades at 277 today, 

328
00:16:41,800 --> 00:16:44,800
and it's come down from around 
3:30 just a few months ago. 

329
00:16:44,920 --> 00:16:47,400
Now, Salesforce is actually in 
the green today, but this 

330
00:16:47,400 --> 00:16:50,280
morning the stock was in the red
because they announced another 

331
00:16:50,280 --> 00:16:52,320
acquisition. 
And if you're Salesforce 

332
00:16:52,320 --> 00:16:55,480
investor, you know that 
acquisitions aren't the thing 

333
00:16:55,480 --> 00:16:57,520
that investors want Salesforce 
to do. 

334
00:16:57,600 --> 00:17:00,560
After all, Salesforce has spent 
some of the most money on 

335
00:17:00,560 --> 00:17:04,880
acquisitions, buying companies 
like Tableau and Slack for 10s 

336
00:17:04,880 --> 00:17:08,000
of billions of dollars, massive 
amounts of money spent. 

337
00:17:08,240 --> 00:17:11,359
In many cases, investors believe
they dramatically overpaid for 

338
00:17:11,359 --> 00:17:13,920
these companies, hampering their
future returns. 

339
00:17:14,280 --> 00:17:17,119
So as soon as investors heard 
that Salesforce was acquiring 

340
00:17:17,119 --> 00:17:20,359
another company, they sold, and 
that was the morning sale of the

341
00:17:20,359 --> 00:17:22,760
company. 
But then investors dug into the 

342
00:17:22,760 --> 00:17:25,240
deal and now it's moved back 
into the green. 

343
00:17:25,520 --> 00:17:28,359
Because once you actually dig 
into this deal, it's a lot 

344
00:17:28,359 --> 00:17:30,880
better than previous deals that 
Salesforce has done. 

345
00:17:31,000 --> 00:17:33,240
First of all, we can look at the
company that Salesforce is 

346
00:17:33,240 --> 00:17:34,520
buying. 
They announced here that they're

347
00:17:34,520 --> 00:17:37,480
buying Informatica. 
When we bring up Informatica and

348
00:17:37,480 --> 00:17:40,160
look at what they actually do, 
it makes a lot more sense of why

349
00:17:40,160 --> 00:17:41,720
Salesforce is buying the 
company. 

350
00:17:41,760 --> 00:17:45,080
Its core offerings include data 
integration, data quality, 

351
00:17:45,080 --> 00:17:48,720
master data management, metadata
management, and data governance,

352
00:17:49,040 --> 00:17:51,760
primarily delivered through a 
subscription based revenue. 

353
00:17:51,760 --> 00:17:54,360
Salesforce advertises this, 
saying that the planned 

354
00:17:54,360 --> 00:17:56,720
acquisition will enhance 
Salesforce's Trusted Data 

355
00:17:56,720 --> 00:17:59,280
foundation, critical for 
deploying powerful and 

356
00:17:59,280 --> 00:18:01,920
responsible agentic AI. 
They highlight three different 

357
00:18:01,920 --> 00:18:03,600
categories that this company 
will improve. 

358
00:18:03,920 --> 00:18:06,600
Data transparency. 
Informatica's Advanced 

359
00:18:06,600 --> 00:18:09,760
Integration Catalog and Lineage 
tools show where data comes 

360
00:18:09,760 --> 00:18:12,400
from, how it has changed, and 
how it's used. 

361
00:18:12,640 --> 00:18:16,360
Crucial for audibility and 
regulatory compliance data. 

362
00:18:16,360 --> 00:18:19,800
Understanding Informatica's rich
metadata combined with Sales 

363
00:18:19,800 --> 00:18:23,440
Forces Unified data model will 
empower AI agents to interpret, 

364
00:18:23,440 --> 00:18:27,080
connect and act on enterprise 
data with meaningful context. 

365
00:18:27,400 --> 00:18:31,480
And then data governance built 
in MDM, data quality controls 

366
00:18:31,480 --> 00:18:34,880
and policy management ensure 
that all data driving AI is 

367
00:18:34,880 --> 00:18:37,720
standardized, accurate, 
consistent and secure. 

368
00:18:37,720 --> 00:18:40,680
Marc Benioff says that together 
Salesforce and Informatica will 

369
00:18:40,680 --> 00:18:43,520
create the most complete agent 
ready data platform in the 

370
00:18:43,520 --> 00:18:45,800
industry. 
Salesforce has need for this 

371
00:18:45,800 --> 00:18:47,640
product. 
This has been a weak point of 

372
00:18:47,640 --> 00:18:50,960
the company and it solves that 
weak point and they compare it 

373
00:18:50,960 --> 00:18:52,680
with their new agentic 
technology. 

374
00:18:52,720 --> 00:18:54,880
So this isn't a simple bolt on 
acquisition. 

375
00:18:54,880 --> 00:18:57,560
It's one that can be integrated 
into what Salesforce is already 

376
00:18:57,560 --> 00:18:59,520
doing. 
But more to the point, when we 

377
00:18:59,520 --> 00:19:02,080
look at the type of transactions
that Salesforce has done 

378
00:19:02,400 --> 00:19:04,960
historically, they've been some 
of the most overpriced, 

379
00:19:05,040 --> 00:19:08,200
expensive acquisitions in the 
history of any company. 

380
00:19:08,280 --> 00:19:11,320
So it does raise some eyebrows 
of scrutiny when they're back to

381
00:19:11,320 --> 00:19:14,000
doing acquisitions. 
But the point that I'd like to 

382
00:19:14,000 --> 00:19:17,520
raise is that in this case, it 
looks like Salesforce is being 

383
00:19:17,520 --> 00:19:20,400
far more disciplined with what 
they're paying for these 

384
00:19:20,400 --> 00:19:22,720
companies. 
Salesforce agreed to pay $8 

385
00:19:22,720 --> 00:19:26,240
billion for the company based on
the $8 billion in their last 

386
00:19:26,240 --> 00:19:28,720
quarterly free cash flow over 
the trailing 12 months. 

387
00:19:29,000 --> 00:19:32,200
That puts the deal out of 5% 
free cash flow yield, which is 

388
00:19:32,200 --> 00:19:35,080
pretty good, but they also run a
lot of stock based comp. 

389
00:19:35,320 --> 00:19:37,760
When you adjust out the stock 
based comp, that puts the deal 

390
00:19:37,760 --> 00:19:40,320
still at a 2% free cash flow 
yield. 

391
00:19:40,640 --> 00:19:43,920
Not quite as attractive, but it 
looks better, especially noting 

392
00:19:43,920 --> 00:19:46,400
that the free cash flow is 
growing while the stock based 

393
00:19:46,400 --> 00:19:49,040
comp is declining. 
On an earnings basis, this 

394
00:19:49,040 --> 00:19:52,000
company is not even trading at a
24 PE. 

395
00:19:52,080 --> 00:19:54,800
So this company doesn't look 
that expensive either by the 

396
00:19:54,800 --> 00:19:58,640
free cash flow yield or the PE 
ratio or the price to sales. 

397
00:19:58,880 --> 00:20:02,120
And that's likely why investors 
are reacting positively today. 

398
00:20:02,200 --> 00:20:05,160
Typically when you see a large 
company like Salesforce buying a

399
00:20:05,160 --> 00:20:07,600
much smaller company, the 
smaller company will be in the 

400
00:20:07,600 --> 00:20:09,560
green and the larger one will be
in the red. 

401
00:20:09,760 --> 00:20:11,600
But in this case both are in the
green. 

402
00:20:11,640 --> 00:20:14,160
So I believe overall this is. 
Is a well disciplined 

403
00:20:14,160 --> 00:20:16,800
transaction by Salesforce 
showing that they're still 

404
00:20:16,800 --> 00:20:19,080
focusing on profits? 
Now the last thing I'll mention 

405
00:20:19,080 --> 00:20:21,560
with Salesforce is this 
company's reporting earnings 

406
00:20:21,800 --> 00:20:23,160
tomorrow. 
We're going to see some 

407
00:20:23,160 --> 00:20:25,720
fireworks tomorrow as the stock 
trades up or down. 

408
00:20:26,080 --> 00:20:28,960
If the stock goes down, that's 
not a concern for me. 

409
00:20:29,200 --> 00:20:31,400
Salesforce is a very volatile 
company. 

410
00:20:31,600 --> 00:20:34,240
It trades up and down after 
earnings in many cases. 

411
00:20:34,400 --> 00:20:37,080
Right now, Salesforce still 
trades at a cheap price and I 

412
00:20:37,080 --> 00:20:40,040
expect this company to work its 
way back to 3:30 now. 

413
00:20:40,040 --> 00:20:43,840
Next up, we have ASML, which is 
up $22.00 today, 3, 1%. 

414
00:20:44,080 --> 00:20:47,040
It's always discouraging to want
to buy a company when it's 

415
00:20:47,040 --> 00:20:49,320
already gone up and you feel 
like you may have missed the 

416
00:20:49,320 --> 00:20:51,760
best timing on it. 
That's not the way to look at 

417
00:20:51,760 --> 00:20:53,720
stocks. 
Companies are not fixed 

418
00:20:53,720 --> 00:20:55,160
entities. 
They're organic. 

419
00:20:55,160 --> 00:20:56,920
They grow, they evolve over 
time. 

420
00:20:57,240 --> 00:21:01,080
Even though ASML is up 3% today,
the company continues to make 

421
00:21:01,080 --> 00:21:04,040
substantial progress in 
technological innovation and in 

422
00:21:04,040 --> 00:21:06,400
the massive lead they have in 
EUV technology. 

423
00:21:06,480 --> 00:21:09,160
It's nearly impossible for a 
human to actually comprehend the

424
00:21:09,160 --> 00:21:11,280
technology that goes behind 
these machines. 

425
00:21:11,640 --> 00:21:15,840
ASML is doing some where nobody 
else so far can even figure out 

426
00:21:15,840 --> 00:21:18,440
what they're doing. 
They are the sole producer of 

427
00:21:18,440 --> 00:21:22,200
extreme ultraviolet lithography 
machines or the EUV machines. 

428
00:21:22,480 --> 00:21:27,160
Their latest device, this new 
EUV model is called the High NA 

429
00:21:27,480 --> 00:21:31,000
or high Numerical Aperture 
machine, and it costs $400 

430
00:21:31,000 --> 00:21:33,720
million. 
Now this new model, the high NA 

431
00:21:33,720 --> 00:21:36,160
machines, they have larger lens 
openings. 

432
00:21:36,160 --> 00:21:39,680
In the previous EUV machines. 
The EUV light is created by 

433
00:21:39,680 --> 00:21:43,200
firing lasers at molten tin 
droplets in a vacuum. 

434
00:21:43,520 --> 00:21:47,440
The EUV light has a wavelength 
of 13.5 nanometers. 

435
00:21:47,800 --> 00:21:49,920
Now specialized mirrors from 
Zeiss. 

436
00:21:49,920 --> 00:21:52,960
This is a German company that 
makes mirrors so flat you could 

437
00:21:52,960 --> 00:21:55,040
spread them over the entire 
country of Germany. 

438
00:21:55,400 --> 00:21:58,240
And the biggest imperfection 
will be less than a millimeter. 

439
00:21:58,480 --> 00:22:00,440
That shows how precise these 
mirrors are. 

440
00:22:00,600 --> 00:22:02,840
They are used to direct the EUV 
light. 

441
00:22:03,160 --> 00:22:06,080
This nearly perfect mirror is a 
key ingredient to this. 

442
00:22:06,160 --> 00:22:09,840
So SML already has a monopoly on
the EUV machines, but now 

443
00:22:09,840 --> 00:22:12,840
they're upping the ante, 
furthering the technology with 

444
00:22:12,840 --> 00:22:16,760
these high aperture or open lens
technology that can produce 

445
00:22:16,760 --> 00:22:19,720
things even smaller. 
That's the whole point is making

446
00:22:19,720 --> 00:22:22,720
it as small as possible. 
It's also significantly reduced 

447
00:22:22,720 --> 00:22:26,000
the energy needed per wafer 
exposure for the machines since 

448
00:22:26,000 --> 00:22:28,040
2018. 
So they're not only doing the 

449
00:22:28,040 --> 00:22:30,680
same thing, but they're doing it
in an energy efficient way. 

450
00:22:30,840 --> 00:22:34,640
And as they're releasing this 
new technology, ASML is off to 

451
00:22:34,640 --> 00:22:38,760
the races, working on the next 
generation machines, Hyper NA, 

452
00:22:39,080 --> 00:22:41,360
going another step past the high
NA. 

453
00:22:41,400 --> 00:22:44,520
Even when they beat their best 
and there's no second place, 

454
00:22:44,880 --> 00:22:48,000
they decide to run even faster 
and they need to do that. 

455
00:22:48,320 --> 00:22:50,760
If you talk to employees from 
FML, they'll tell you that they 

456
00:22:50,760 --> 00:22:54,600
have 10 or 20 year plans. 
That's how they can forecast 

457
00:22:54,600 --> 00:22:56,880
their operating income and 
revenue so far out. 

458
00:22:57,120 --> 00:23:00,040
They already know what they're 
going to be working on five to 

459
00:23:00,040 --> 00:23:03,560
10 years from now to keep the 
lead from any competitor, to 

460
00:23:03,560 --> 00:23:07,120
make it so that any competitor 
is literally a decade behind. 

461
00:23:07,200 --> 00:23:10,280
So when we're looking at FML, 
we're looking at a stock 30% 

462
00:23:10,280 --> 00:23:13,160
below its all time highs, 
trading at a historically low 

463
00:23:13,160 --> 00:23:16,680
valuation in terms of free cash 
flow and the Ford PE ratio. 

464
00:23:16,840 --> 00:23:19,800
It's a company that has an 
unparalleled technological mode.

465
00:23:20,000 --> 00:23:22,880
They're the only ones doing 
these devices and they continue 

466
00:23:22,880 --> 00:23:24,600
to iterate. 
They continue to press on the 

467
00:23:24,600 --> 00:23:27,080
gas pedal and move the 
technology further in the 

468
00:23:27,080 --> 00:23:29,360
future. 
I expect this stock over the 

469
00:23:29,360 --> 00:23:31,760
next couple of years to be well 
above $1000. 

470
00:23:31,760 --> 00:23:35,120
Now Next up, we have another key
in My Portfolio, a stock that is

471
00:23:35,120 --> 00:23:37,760
still undervalued today, 
incredibly high quality. 

472
00:23:37,920 --> 00:23:39,920
And even though it's getting 
further recognized by the 

473
00:23:39,920 --> 00:23:41,960
market, this one still has a 
ways to go. 

474
00:23:42,160 --> 00:23:45,440
The company's Amazon, if we look
at the story fund, Amazon is a 

475
00:23:45,440 --> 00:23:50,080
significant holding. 
The total size is $124,000, 

476
00:23:50,320 --> 00:23:52,920
thirty, 1600 of that being 
gains. 

477
00:23:53,280 --> 00:23:57,040
Now if we look at this, Netflix 
is a bigger position, but that 

478
00:23:57,040 --> 00:23:59,520
is because Netflix grew into a 
bigger position. 

479
00:23:59,840 --> 00:24:02,240
Netflix has been an incredible 
investment. 

480
00:24:02,240 --> 00:24:05,760
It's gone up so much, but I've 
actually put more money into 

481
00:24:05,760 --> 00:24:08,120
Amazon. 
I've invested heavily into this 

482
00:24:08,120 --> 00:24:10,920
one because I continue to 
believe that we're going to see 

483
00:24:10,920 --> 00:24:14,160
substantial gains in the future.
The opportunities that Jassy 

484
00:24:14,160 --> 00:24:16,040
highlights for Amazon are 
immense. 

485
00:24:16,040 --> 00:24:19,000
This company's not just one 
that's a retail company or one 

486
00:24:19,000 --> 00:24:21,160
where you get your packages in a
couple days. 

487
00:24:21,480 --> 00:24:24,200
It is a digital technology 
company with a huge amount of 

488
00:24:24,200 --> 00:24:26,960
advertising, a huge amount of 
subscription services. 

489
00:24:27,440 --> 00:24:30,400
AWS makes up a gigantic portion 
of the overall revenue. 

490
00:24:30,680 --> 00:24:33,680
Then you have the other bets 
like Project Kuiper and Zoox. 

491
00:24:33,720 --> 00:24:35,400
They're going to have robo taxi 
soon. 

492
00:24:35,680 --> 00:24:38,640
It's another company that's in 
every important vertical but 

493
00:24:38,640 --> 00:24:41,800
doesn't get much credit for it 
because right now investors are 

494
00:24:41,800 --> 00:24:44,520
seeing the cash flows go down. 
Meanwhile, the earnings per 

495
00:24:44,520 --> 00:24:47,280
share of the company, which are 
accounted for differently but 

496
00:24:47,280 --> 00:24:50,040
still represent earnings power 
of the company, continue to 

497
00:24:50,040 --> 00:24:51,960
grow. 
The company's underlying 

498
00:24:51,960 --> 00:24:54,160
earnings power have grown 
significantly. 

499
00:24:54,280 --> 00:24:57,880
I believe that Amazon could 
easily earn $80 billion of free 

500
00:24:57,880 --> 00:25:01,280
cash flow in a year if they 
chose to, but they just consider

501
00:25:01,280 --> 00:25:04,680
the opportunities today too big.
So Amazon is a company that's 

502
00:25:04,680 --> 00:25:06,960
powerful, dominant, continually 
growing. 

503
00:25:07,160 --> 00:25:09,960
It's defeated every bear thesis 
over the past couple of years, 

504
00:25:10,360 --> 00:25:13,600
it trades at a lower PE ratio 
compared to its earnings growth,

505
00:25:13,920 --> 00:25:17,200
and the underlying power of its 
cash flows have increased 

506
00:25:17,200 --> 00:25:19,520
significantly. 
Right now, the stock is easily 

507
00:25:19,520 --> 00:25:21,760
worth 260. 
Now the 5th and final one we'll 

508
00:25:21,760 --> 00:25:24,560
mention here is Google. 
You guessed it, it's a company 

509
00:25:24,560 --> 00:25:27,920
that I can't leave out because 
it is both very high quality and

510
00:25:27,920 --> 00:25:29,880
the stock is trading at a 
discount. 

511
00:25:29,880 --> 00:25:33,640
For all the concerns facing this
company now, I've gone over many

512
00:25:33,640 --> 00:25:37,680
times and discussed the LLM 
threat, the AI threat, how 

513
00:25:37,680 --> 00:25:40,320
Google's responding to it. 
I'm sure we'll discuss set in 

514
00:25:40,320 --> 00:25:43,400
the future, but I want to focus 
on a different point in this 

515
00:25:43,400 --> 00:25:45,720
analysis. 
When we look at Google, I just 

516
00:25:45,720 --> 00:25:48,480
want to take a quick look at 
some of the fundamentals and 

517
00:25:48,480 --> 00:25:51,560
compare them with a company 
trading at a much higher 

518
00:25:51,560 --> 00:25:54,280
valuation. 
I want to compare Google with 

519
00:25:54,280 --> 00:25:58,160
Apple. 
The Ford PE of Google is 19, The

520
00:25:58,160 --> 00:26:03,560
Ford PE of Apple is 27 1/2. 
So Apple trades at a valuation 

521
00:26:03,560 --> 00:26:07,000
on an earnings basis that's 
roughly 35% more expensive than 

522
00:26:07,000 --> 00:26:09,160
Google today. 
Apple investors are pricing the 

523
00:26:09,160 --> 00:26:12,840
company's earnings either more 
predictable or faster growing or

524
00:26:12,840 --> 00:26:15,640
a combination of the both. 
When we look at cash flows, 

525
00:26:15,840 --> 00:26:18,240
Google's cash flows are priced 
at 3 1/2%. 

526
00:26:18,480 --> 00:26:21,200
That's 2.5% when you're just for
stock based comp. 

527
00:26:21,600 --> 00:26:25,680
We have Apple today. 
That's again 3.3 percent, 2.8% 

528
00:26:25,680 --> 00:26:28,640
when you're just for stock based
comp, very similarly be priced 

529
00:26:28,760 --> 00:26:30,880
and free cash flow. 
When we look at what's going on 

530
00:26:30,880 --> 00:26:33,680
with Google just over the past 
couple of years, we'll zoom into

531
00:26:33,680 --> 00:26:36,480
just the past five years. 
So they've over doubled their 

532
00:26:36,480 --> 00:26:39,240
revenue in the past five years 
since 2020. 

533
00:26:39,680 --> 00:26:42,680
And not only that, in the past 
year alone they've grown their 

534
00:26:42,680 --> 00:26:45,440
revenue by 13%. 
We can go to Apple and look at 

535
00:26:45,440 --> 00:26:48,320
the exact same data. 
We can zoom into the past five 

536
00:26:48,320 --> 00:26:51,920
years and you'll notice that the
revenue has not doubled over the

537
00:26:51,920 --> 00:26:53,920
past five years. 
In the past one year, it grew 

538
00:26:53,920 --> 00:26:57,000
4.91%. 
Now the reason that Google's 

539
00:26:57,000 --> 00:27:00,480
being priced the way it is with 
the Super low PE ratio below the

540
00:27:00,480 --> 00:27:04,800
market, way below companies like
Apple is on the premise that the

541
00:27:04,800 --> 00:27:07,800
company may potentially be 
disrupted in the future. 

542
00:27:07,880 --> 00:27:09,840
That the company will have a 
difficult time dealing with 

543
00:27:09,840 --> 00:27:13,080
artificial intelligence, LLMS 
and the new way that people are 

544
00:27:13,080 --> 00:27:15,680
consuming information and the 
overall that could cause 

545
00:27:15,680 --> 00:27:19,920
Google's growth to slow down. 
Now, another way of looking at 

546
00:27:19,920 --> 00:27:24,440
that is that if Google's growth 
actually slowed down, it would 

547
00:27:24,440 --> 00:27:27,480
look like Apple's. 
Apple's a company where their 

548
00:27:27,480 --> 00:27:31,440
growth has slowed down. 
In fact, I would argue that if 

549
00:27:31,440 --> 00:27:34,720
Google's revenue looked like 
Apple's today, people would say 

550
00:27:34,720 --> 00:27:38,160
that Google's already disrupted,
the company's already gone 

551
00:27:38,160 --> 00:27:40,080
through challenges. 
And look, it's showing up in the

552
00:27:40,080 --> 00:27:41,760
numbers. 
They're not growing anymore. 

553
00:27:42,080 --> 00:27:43,600
That's what investors would be 
saying. 

554
00:27:43,720 --> 00:27:46,320
But Apple's already at that 
point, and the company's still 

555
00:27:46,320 --> 00:27:48,200
trading at a much higher 
valuation. 

556
00:27:48,200 --> 00:27:50,040
And this isn't just with 
revenue. 

557
00:27:50,040 --> 00:27:53,360
In the past year, Google has 
grown its free cash flow by 8%. 

558
00:27:53,360 --> 00:27:55,560
Apple's free cash flow went down
by 3%. 

559
00:27:55,560 --> 00:27:59,160
Google grew its earnings per 
share at a staggering 37% in the

560
00:27:59,160 --> 00:28:01,040
past year. 
Apple's earnings per share 

561
00:28:01,040 --> 00:28:03,920
declined by a fraction of a 
percent last year. 

562
00:28:03,960 --> 00:28:06,960
Google's EBITDA went up 39% last
year. 

563
00:28:07,000 --> 00:28:09,920
And Apple's EBITDA went up 6% 
last year. 

564
00:28:09,920 --> 00:28:13,080
In every way possible. 
Google's growing much faster 

565
00:28:13,080 --> 00:28:15,480
than Apple. 
And if Google matched Apple's 

566
00:28:15,480 --> 00:28:17,760
growth rate, people would be 
saying that the stock is 

567
00:28:17,760 --> 00:28:20,120
disrupted. 
It's already price for failure 

568
00:28:20,120 --> 00:28:22,800
when the company's succeeding, 
the company is being discounted 

569
00:28:22,800 --> 00:28:25,160
for perceived risks that other 
companies don't have. 

570
00:28:25,560 --> 00:28:28,520
And if the narrative changes at 
all, as the company continues to

571
00:28:28,520 --> 00:28:31,000
prove that they're adapting, 
they're growing, they're making 

572
00:28:31,000 --> 00:28:33,920
new tools and implementing AI 
into everything they're doing, 

573
00:28:34,360 --> 00:28:36,680
as that narrative changes and 
the fundamentals continue to 

574
00:28:36,680 --> 00:28:39,360
grow, this one could be 
dramatically undervalued. 

575
00:28:39,680 --> 00:28:43,640
I could still see Google moving 
up to $220, making investors 

576
00:28:43,640 --> 00:28:44,920
today a lot of money. 
Now. 

577
00:28:45,280 --> 00:28:46,640
That's going to be it for this 
episode. 

578
00:28:46,880 --> 00:28:48,720
Hope you enjoyed. 
See you in the next one.