Welcome back everyone. Today on the Joseph Carlson
Show, we start off 2026 by looking at 10 companies that I
believe are ten of the most well positioned stocks in the market
in 2026. These companies are not your
average companies. These are what I believe are the
strongest compound machines, the ones with the widest Moat in the
entire world. These companies are virtually
indestructible. They don't even in many cases
have competition and they're available for you to invest in.
And I believe that every investor should strongly
consider having these companies in their portfolio.
In many cases, they are the ones that drag the indices higher,
that really push the markets forward.
So we're really looking at these 10 companies.
Many of them are not the Mac 7, by the way.
They're different companies outside of the Mac 7, but
they're powerful nonetheless. And we'll be looking at all ten
of them, going over the thesis, giving updates on them and why I
own many of these companies in My Portfolio today.
And before we jump into the 10 stocks, I first want to just
take a look at the portfolio. As you know, many of the
companies that I talk about, I'm not just talking.
These aren't just words. I'm actually backing them by my
actions. Many of them I invest into.
A lot of the thesis is that I share are ones that I hold for
my own companies, and what we have here is just a massive day
in the portfolio. If we look at what's happened
just today, we can filter it by the one day, and this one's up
2.7% on the day. Massive return, $25,600 today.
That's just in a single day. Now, why are these stocks up
today? Well, there's a lot of various
reasons. We'll be going over many of them
throughout the episode. But now we've reached an all
time high with the passive income portfolio, $975,000 in
total, 401,000 of that being gains.
That's an all time high in the total portfolio value and an all
time high in the gains. So massive start to the year.
This is also a big day for the story fund.
We're up to around $406,000 in total value, $149,000 in gains.
If I look at the one day on this, this is up another 2% on
the day, $7800. So massive day in both
portfolios. Now you may be wondering why are
these stocks going up today, especially the ones in My
Portfolio. And this is really how investing
works. You get to decide which stocks
to buy. You get to decide to hold them.
You don't get to decide when they go up.
But if you buy high quality compounding machines, they will
eventually go up. That's what earnings growth
does. That's what free cash flow per
share growth does. So what I see in My Portfolio is
holding on to compounding machines and then certain
catalysts come along that push these companies higher.
Now as we jump into this, I want to highlight ten companies that
I really believe everybody should consider having these in
their portfolio. And I'll start off today with
one of them, which is ASML. We're looking at ASML and it's
up 5.66% today. It's up to 1229 dollars.
Now, ASML is a company that I've covered for over a year.
In fact, I covered it right at the beginning of 2025 S just
over a year and it's a company that's done incredibly well.
When I look at this stock performance, we're up already
this year like 6 to 10%. When we go back one year, we're
up 60.5%. An incredible year by this
company. This is one that I was pounding
the table on below $700.00 per share.
So if you're a follower of the channel, you'll know that.
But I still believe that ASML has upside.
And the reason why is because this company is an undisputed
monopoly. There is no second place when
they're on the podium. There's no second and third,
there's no silver and bronze. There's just ASML on that podium
that is unique in the world of business with different
companies. There's usually a duopoly or
oligopoly, meaning that there's two companies or three sharing a
monopoly with ASML, They're the only ones sharing this monopoly.
There's literally no one else. Now, ASML is up so much today
for a couple different reasons and none of these reasons will
be new to followers of this channel.
One of them is that there is news here.
We have Qualtrum brief which shows us recent events happening
with each company. So that you're informed, Alethia
Capital upgraded ASML from a cell.
So they had this company at a cell, which was for sure an
incorrect rating on the stock. So they got that wrong, but
they're changing their opinion and sentiment on it, which many
analysts do. And they they upgraded from a
cell to a buy and lifted its price target to a Street high
$1500 per share from 7:50. So their price target on the
stock went from 7:50 to 1500. They cited sharply higher
earnings estimates for 2026 and 2027 or expanded capacity and
strong EUV and DUV demand, especially from DRAM makers and
Chinese customers. The call highlights exceptions
for continued tightness and pricing power in ASM.
LS EUV franchise positions the stock as a top semiconductor
equipment pick into 2026. That looks very good.
So right there we have this analyst upgrade doubling their
price target. Now the stock is up five, five
percent, 6% today, another $65 and we're already about up 6 to
10% this year. And I believe that this bullish
analyst rating was only part of the reason that the stock is up
6% today. Another big aspect of it is a
video that was made this is by a YouTube called Veritasium.
It's a great channel, highly recommend it.
And Veritasium here has a video that's called The Ridiculous
Engineering of the World's Most Important Machine.
This entire video, the whole thing goes over it.
It goes over ASML and basically just ASML.
It has a bit of history that's not directly related to the
modern ASML, but what it really shows is the whole timeline of
events to create this company, everything that needed to happen
now. This video has 10,800,000 views,
10 million views, and it's a 54 minute video on ASML and the
brilliant engineering behind it. And again, if you haven't seen
this video, I highly recommend it.
I think it's a great video that really illustrates how
incredible ASM LS technology is. Some of the comments on this
video even highlight that after seeing what they've created,
$400 million sounds cheap for it.
It sounds inexpensive, like once you actually realize what they
went through to make this technology, how nobody else can
really replicate it, how even state funded governments with
billions of dollars like China can't replicate what they've
created, $400 million sounds cheap.
That's what this does is it explains it in a more full way
than we've seen before. And once it gets 10 million
views, some of these people are investors viewing this video.
A portion of them are a portion of them are hedge funds and Wall
Street that have never seen the technology and how incredible it
is, how how wide mode it is. And so this is real due
diligence on the company. It's real qualitative research
on what you're buying. So a big part of the reason that
this stock is up so much today is not only this bullish analyst
target, but also that video being released and going viral
illustrating the incredible technology behind ASMLASML is
still an incredible company. And although you can haggle
behind the valuation and say that it's getting a little bit
more expensive, I think that misses the force from the trees
with these type of companies that have no second place.
They have no third place. There is no silver and bronze
player in this category. I think this is a type of
company that you want to own a piece of.
You want to own some of it. Going into the next 10 years,
we're going into a phase where there's going to be a lot of fab
creation, lot of semiconductor activity, a lot of specialized
chips being made. And I believe that ASML remains
one of the top picks in this category.
It's such a good pick to get exposure to this with no
competition. Now #2 We have another company
that I've held in My Portfolio for some time.
It's Amazon. And this is one that has been
the laggard of the Mac 7. Amazon has hasn't kept up with
the likes of Google. Google is a huge winner in My
Portfolio. In 2025, it was the company that
I primarily focused on. I made so much content about.
I talked about chat, BT and Google and the dynamics of that
race. And I'm shifting over from
Google Now to Amazon because I believe that there's a lot of
upside in this stock. Amazon's a company that has just
not gotten the bid that I believe it deserves.
It is an incredibly powerful, multifaceted company that really
has incredible numbers. Now, I've owned Amazon long
before I've been following Mark Mahaney, but Mark Mahaney's
someone that has been routinely bullish on this company and he
recently reiterated his outperform rating on the stock.
Amazon today trades at $232.00. He believes that it's worth $100
more, so his price target is 335.
Mark Mahaney has recently said, and this is the statement that
he gave Amazon in the wake of our deep dive analysis into
Rufus. Amazon's AI power shopping
assistant is a full throttled agentic commerce that may not be
quite ready for prime time, but it's coming very soon.
First, a McKenzie survey of 2000 respondents found that shopping
advice was the second most common use of a Gen.
AI agents like Gemini and ChatGPT.
Second, Amazon has disclosed that more than 250 million
customers used Rufus in 2025, generating an incremental $10
billion in GMV. And 3rd, Rufus was actually
smart and personalized enough to remind me that my wife loves
dark chocolate and to include it in a recent birthday gift
package I was putting together for her.
He has all these, you know, he has a personal anecdote, which
again is an anecdote, but he's also backing that with multiple
points of broader data. So we have like survey data.
We have data released directly from Amazon.
Then we have an anecdote further reinforcing that .2 key points
of agentic acceleration. First, just like the arrival of
the smartphones and the mobile Internet material expanded the
Tam of the online retail, we also believe that agentic
commerce can and will do so. Amazon disclosed in November
that customers using Rufus during a shopping journey were
60% more likely to complete a purchase.
That's a very powerful conversion boost.
You looking at ROAI return on AI?
Here it is. And all of this is before full
awareness of Rufus that has been reached and before the full
rollout of agentic features like autobuy, predicting, bundling
and surely others. Our analysis suggests that Rufus
and Agentic Commerce could boost Amazon's retail GMV by as much
as $56 billion. So that's powerful.
Now it's actually aiding in conversion from completion of
sales, which is one of the biggest metrics that you look at
if you're running any online retail business.
And it continues on saying. And 2nd, just as Jenna AI has
served to boost Google search revenue, so too we believe that
Rufus can create more, not less, opportunities for Amazon
Sponsored Products and Sponsored Brands ad revenue.
The logic is straightforward. As agentic shopping helps guide
and extract greater intent, it becomes more valuable to
marketers. We estimate that agentic
commerce could boost Amazon's ad revenue by as much as 4 billion
or 3% by 2028. We believe strongly that market
fares over Agentic Commerce's impact on Amazon's ad revenue
completely missed the point, adding up the agentic impact.
Admittedly, our estimates are speculative, but all in, we
estimate that Agentic Commerce can boost Amazon's 2028 total
revenue revenue by up to $31 billion or 3%, and it's 2028
total operating income by up to 6.8 billion or 4.6%.
This thesis from Evercore ISI or Mark Mahaney, I believe, is a
lot more powerful or deep of a thesis than it looks on the
surface. They're not just saying that
Gen. AI is going to help Amazon, but
they're actually saying the exact opposite of what most
analysts are concerned about. Part of the reason that Amazon
trades at a low valuation, part of the reason that it's just not
done well compared to the rest of the Mac 7, is because
investors are concerned about the potential impact of
generative AI and agentic shopping on Amazon.
Maybe it levels the playing field.
Maybe it makes it so Amazon doesn't have as big of an
advantage. Well, they're arguing the exact
opposite. They're not only saying will it
not level the playing field, it's going to uniquely benefit
Amazon. They're going to grow much
faster than the rest of the industry as a result of
generative AI and agentic shopping.
Very few companies have the infrastructure to pull this off
in the way that Amazon does with their AWS business to support
and implement Gen. AI throughout all of their
company and all of their products and with the tech
talent to be able to build this out.
So Amazon is a company that could materially outperform
expectations this year going into 2026.
I feel very good about my position.
Now as we continue moving on, we're again searching for the
widest mode, best compounding machines on planet Earth.
Companies that have such wide modes, they're virtually
indestructible. And the next two that we'll talk
about, I'll group them together because they're very similar and
they also happen to be two companies that are in My
Portfolio. Remember that a lot of these
companies that I believe are the best in the world are ones that
I own. So again, I'm not just telling
you about this. These are ones that I have real
money behind. These are S&P Global and
Moody's, 2 of what are the most powerful duopolistic companies
on planet Earth. Now, if we look at Moody's and
S&B Global, they're both up huge today.
S&B Global's up 4.46%. Moody's is up even more, another
6.2% today. That's part of the reason My
Portfolio has really shot up today.
When I look at my position in these companies, we can look in
the financial category and we have S&P Global right here.
It's a $118,000 position with $37,000 in gains.
That's not the only place that I hold this company.
I also hold it in the Story Fund is a smaller position, 23,000
with $7000 in gains. So when you combine that
together, I hold a lot of this company.
It's one of my most significant bets because I believe, again,
it's such a powerful stock. It is indestructible.
Then we also have Moody's. I bought a lot of Moody's as
well. This is a $62,000 position and
it's in the green over $15,000. When you look at S&P Global and
Moody's, these aren't national businesses that only really work
within the US. They are global businesses.
They become the standard language protocol of how there's
trust throughout all different nations and all different
businesses in issuing debt. Anytime a company issues debt
and they want someone else to trust that they can repay that
debt, they issuing, they get it rated by either S&P Global or by
Moody's or in many cases by both.
Because if they don't, if they say we don't want to pay S&P
Global, we don't want to pay Moody's, we don't want to get
our debt rated, they'll actually pay more as a response of that
because other people won't trust their debt.
Other ETFs and institutions and banks will not buy their debt,
causing the interest rate on that debt to go up or the fact
that those companies issuing it have to pay more as a result.
So S&B Global and Moody's are what's called a natural
monopoly, meaning that the dynamics of the market create a
monopoly. It's not something where they
have to force their product upon other companies.
It's not like the Apple App Store where they capture
customers and they force pricing With S&B Global and Moody's
companies come to them, they, they get on their knees, they
bow down and they say, please give us a good rating.
We'll do anything for it. Let us be friends.
We'll we'll meet with you. We'll have the CEO fly to your
business. We'll do anything for a good
rating because that saves us a fortune.
S&P Global and Moody's sit at the very top of the food chain.
Other companies come begging to them.
With S&P Global, they come begging for two reasons, to get
a good rating with a low interest rate and to get
included in the S&P 500, the most prestige index that exists.
So this company has multiple aspects of it that really put it
above most companies. And I believe these two
companies are ones that should be looked at by every serious
investor. They're almost layups.
They're like the easiest companies to invest in and make
gains on. Now they're both up big today.
So you may say I don't want to invest in them now, but I
believe there's a lot more to come with these companies.
One of the big reasons that they're up today is because of
an upgrade from an analyst firm called Stifle.
They upgraded Moody's from a hold to a buy.
The reason why is they basically said that when they're doing a
lot of market analysis on the debt markets, there's been a lot
of companies that haven't issued debt because they're waiting on
the sidelines and in fact, stifle that gave them this
bullish rating today said that they believe there's going to be
a massive wave of debt issuance in 2026.
Like we've hit this debt wall. Lots of companies are up and
they're due to renew their debt. They have to take out new debt.
And again, whenever they do that, they have to pass through
the toll booth of S&P Global and Moody's.
So S&P Global and Moody's, a way that you can visualize this is
they're the toll booth that sits on this bridge.
Then you have cars on either side of it.
Every time they pass, they pay S&P Global and Moody's their
fee. There's a lot of cars that have
been waiting on one side of the bridge for interest rates to
come down. They're piling up.
There's like a huge traffic jam there.
And this year, they believe that all those cars are going to
start driving through and they're going to have to pay
that toll. So right now is a good time to
buy the stock, not because it's going up, but because of what's
going to happen in the future. The other reason the S&P Global
and Moody's are up big today is because of macro events.
And we have some macro events that recently happened. the US
government flew in with Delta Force and they captured Nicolas
Maduro. They extracted him from
Venezuela and they're holding him on charges of drug crimes
and other various crimes. Now, this is news that everybody
has an opinion on. Some people like what happened.
Some people don't like what happened.
Some people like certain aspects of it and don't like certain
aspects of it. It's a thing that everyone has
an opinion on. So regardless of your opinion on
whether or not the US government should have done that or what
should have happened, it did happen.
And the reality is that investors are looking at
Venezuela now as an economy that could be restructured and have a
more normalized capitalistic structure.
If that happens, they will issue more sovereign debt.
They'll do that almost immediately.
And S&P Global Moody's don't just rate corporate debt, they
rate sovereign debt as well. Any credible sovereign debt
that's being issued will have to go through S&P Global, Moody's.
If the Venezuelan government starts to issue billions of
dollars worth of bonds and government debt, they're going
to be rated by SME Global and Moody's.
They'll make a lot of money that way.
And you can see that there's market activity actually backing
this point already. Venezuelan bonds are already
rallying based on the anticipation of a more
normalized economy. There is a common thing amongst
global economies, debt is a secular trend.
Companies and governments and everyone else in between, they
need debt to grow. That's one of the biggest
aspects of growth ahead and these companies remain a bigger,
more embedded, deeper Moat company every time debt issuance
grows throughout the world. Now as we look at the best
companies in the world with the widest moats and most
indestructible business models, there's another two that I have
to highlight and they're two companies that you are familiar
with Visa and MasterCard. These are both ones that every
compounding investor should look at.
Even though the market has already seen these companies and
maybe it feels like you don't have any special edge.
These are two companies that will likely still outperform the
broader index over the next 5 to 10 years because investors do
miss the broader trends with Visa MasterCard.
Visa MasterCard share duopoly across credit payments and
digital transactions. They offer immense value through
a multi sided network. With a normal network, each
party offers value to each other.
That's what we do on a phone call.
You have two people on it. Each one offers value to the
other one. If one of you drops off, then
that network has no value. With Visa and MasterCard, they
offer a multi sided network that's deeply complex and it
works with exponential value creation.
This is why it's impossible to remake these companies.
For example, every single customer, every new customer
that signs up for Visa or MasterCard, they become
exponentially more valuable to a merchant.
And every single new merchant that signs up for Visa,
MasterCard becomes exponentially more valuable to all the
customers. So you see this self reinforcing
issue here. It becomes a chicken and the egg
problem. All these customers, the
billions of people using their network make it so that they're
incredibly powerful customer base.
And then you have all the merchants using it, which make
it an incredibly powerful merchant base for the customers.
No other company can start this chicken and egg problem.
They'd rather just use the networks that already exist.
The attempts to bypass them also are not going to have as big of
an impact on Visa MasterCard as many investors believe.
For example. Visa's network is already so
massive at this point it it is at a point where it's literally
unbreakable. We look at it and they have 3.4
billion debit cards. They have 1.5 billion credit
cards. And this continues to grow year
after year with MasterCard, they don't have nearly as big of a
network as Visa, but they do have a large network, 3.32
billion Mastercards. MasterCard has a higher
percentage of these being credit cards.
And you can also see the organic growth over long periods of
time. As time goes on, more
Mastercards get issued because again, all these merchants
become very valuable to the customers.
All these customers become very valuable to the merchants.
Now, when choosing to invest between Visa or MasterCard, this
is where you can kind of choose your own path, so to to speak.
For example, with the Visa, there are different things to
consider. Visa is a company that's more
concentrated on the network itself.
The Visa rails, they're going for just broad scale.
They want to be everywhere with every transaction.
So they're focusing entirely on growing their network,
solidifying their network. They're not as big into the
other services. And although Visa does have a
value added service segment on this chart, we can see it right
here, which is the other category.
It's a very small category of the overall services that Visa
provides. If you're going for share scale,
broad size, and a company that's reliant mostly on its native
rails, then you would invest in Visa.
MasterCard has a different approach.
MasterCard long ago realized that they could never scale
their network bigger than Visas. Visa has just simply one at that
game. So instead of trying to focus
solely on their rails and their network, they actually became a
bit more agnostic to their network in general.
They leaned into what's called a value add service business where
they focus on transactions, whether or not those
transactions happen on their network or off their network.
MasterCard believes fully that they don't know what rail will
succeed over the long period, but they do know that every
single transaction is centered around trust, is centered around
fraud prevention, is centered around knowing your customer.
And these are tools that they've developed where they can help
any type of transaction, whether it happens on the MasterCard
rail or whether happens on a governmental rail.
The product that MasterCard really sells is trust, trust in
transactions. And that's something that is
widely applicable to any transaction throughout the
world. So MasterCard is more of a pick
if you're less focused on the rails itself, if you're less
focused on the share volume of transactions and you're more
focused on a company that's trying to sell trust and become
agnostic and becoming multi rail, meaning that MasterCard is
working with companies that do government payments, that do
stable coins, that do everything and they have a much bigger
value added service business. For me personally, I like
Mastercard's approach a little bit more.
I think both are great and both are super wide mode, but I've
put my eggs in the MasterCard basket.
I have $192,000 position here. It's my biggest position by far.
It's only $43,000 in the green so far, but I see further steady
growth ahead for MasterCard. I recently did a deep dive into
MasterCard as an exclusive video as part of the Qualtrum
membership. It's around an hour long.
It's called the thesis, the hidden bowl case of MasterCard,
where I go through far more in depth about what Mastercard's
transition in their business actually is and how we can look
at it as investors. The feedback on these exclusive
videos where I can dive in a bit deeper has so far been very
positive. Some people in the community
have said that they're halfway through the video and it's
already in their top ten favorite videos of all time.
So if you want to see more on this, if you want to see videos
that don't quite fit well within the YouTube category publicly,
then you can join the private community through qualtrum.com
and you get access to a lot more content.
Now next on the list of the most powerful monopolistic companies
in the world, we have GE Aerospace, which is one that
we've talked about a little bit. This is an investment that I
believe Chris Hohn has popularized.
Chris Hohn is a very disciplined value investor.
He only invests in what he considers are strong companies.
Now, his list of strong companies mirrors many of the
ones that we've talked about today, many of the ones that are
like the rails, the networks that you do payments on, many
companies that have moats that are indestructible.
But GE is a company that many high quality investors didn't
fully realize how good the quality of this company actually
is until Chris Hohn again popularized it, had it in the
portfolio, and of course the staggeringly good performance
helped out with getting attention.
We have GE as a company that's up 476% over the last five
years. In just the past year, it's up
89%. That grabs attention.
What is going on with this company?
And this is where we break down a lot of misconceptions about
these companies. For example, if you're looking
at GE, you may just remember it as GE, the company that makes
the washing machines and the refrigerators, and they might
make some like plain parts as well.
And why would you want to invest in a company that's creating
washing machines and refrigerators?
Those are the worst companies to invest in.
But GE shifted from that business plan.
They spun off everything else, and they created GE Aerospace.
But even after the company restructured into only the
assets that build aerospace parts, GE Aerospace, it's still
a company that's widely misunderstood by analysts and
investors. Many analysts look at GE, and
they say, yeah, it's a company that builds aerospace parts.
And the bull case for it is that travel's recovering.
There's going to be more planes in the sky.
That completely misses the point.
The thesis on GE is not that travel's recovering.
The thesis for this company is that it is a monopoly royalty on
global GDP masquerading as a factory.
People are missing the forest from the trees with GE.
In essence, it possesses the Holy Grail of investing, a
company that has monopolistic dominance over its aftermarket
sales. It has regulated products that
have to be required to be purchased by manufacturer like
GE, and it possesses such high barriers to entry that literally
no other company has entered into its space in the past 50
years. This is part of the reason that
Chris Hoehn looks for this type of company.
It is an obvious outcome. GE is essentially embedded by
the government when it creates a plane engine or a turbo engine,
which again are so difficult to create.
No company has even entered into this category for the past 50
years. So GE is making these or putting
them on planes. When they put them on planes,
there's service, there's parts that need to be replaced.
Can the plane go to any different company?
Can they say even though we bought the engine from GE, we're
going to get the part from this manufacturer?
This one they can't. The government will not allow
it. You have to get the approved
parts purely from GE, the manufacturer of the engine.
So they have an aftermarket monopoly on everything they
sell, very similar to the dynamics that you see with ASML.
They sell the big EUV machine. They have an aftermarket
monopoly on that machine. They're the only one that can
service it. As they install more plane
engines, their install base increases, that high margin
service revenue increases. They have essentially infinite
pricing power on the aftermarket sales.
So GE is an obvious winner. It has predictability, it has
incredibly high barriers to entry.
It has a Moat that's defined by physics, not just by network
effects or by different government mandates.
It's very difficult to even enter into this category.
Then you back that by management that's very much investor
aligned. They're trying to bump this
stock up as well. They're using it to create
enormous gains for the shareholder.
It is a perfect storm. Again, it's the Holy Grail of an
investment. It's almost everything that you
could look for. I've become very interested in
this company and have continued to research it more and more.
Many of my best investments are from learning about investors
like Chris Hohn, what they see in the company and then doing
deeper dive research on these investments so that I can build
conviction in them as well. When I look at GEI believe it
does possess very similar moats, very similar investment thesis
to the likes of ASML. For me, this is 1 to strongly
consider going into 2026. Now we've already gone through 7
and we have three more companies that I believe again are the
best in the world. And this next one I become very
interested in as I've learned more about the semiconductor
industry and I've been picking and choosing and seeing which
companies I believe are the best within that industry.
One of them sticks out as an increasingly powerful, dominant
and critically important company to the global economy.
That company is TSM. Now, it may seem obvious, you
know, everybody knows about TSM. They know it's a great company.
But a lot of things, again, even with these companies, are still
not obvious to most investors because it wasn't obvious to me
at first sight. I've always viewed TSM as a
great company. They make chips, but it's one of
those hardware companies that's cyclical, that you can't really
rely on. It goes through booms and busts.
And I believe that that thesis, my previous view of the company,
is essentially dead. It's just wrong.
TSM is no longer a cyclical hardware company.
That's an outdated view of this stock.
When we look at the stock, though, it's still being priced
that way. It's being priced today at a 22
to 26 Ford PE. Why is TSM being priced at such
a low earnings multiple? If it's such an important
company, we'll get investors view it as a cyclical
semiconductor company, one that you can't really rely on for
solid earnings performance on an ongoing basis.
Now, if that view is wrong, what is the correct view of TSM?
It is turned into a global utility monopoly on compute,
meaning everything that we do with compute, every computer,
every smartphone, every smart car, every refrigerator with a
chip in it, every TV that comes with chips in it, every single
thing that we're doing with compute has to pass through TSM.
And this is again, a structural advantage that TSM has developed
over the past decade that other companies don't have.
It's a structural advantage with physics.
This is what I'm starting to believe is one of the biggest
moats in the market. We have moats of network
effects, which are companies like Facebook and Google and
Visa, MasterCard. Those are great network effect
companies. We have companies with mandated
monopolies. We have ones like S&P Global and
Moody's, but then we also have companies that I believe have a
physics monopoly. These are the ones like ASML,
the ones like GE and now we have TSM.
And I believe that the physics monopoly along with their
network effects on top of it create an incredibly powerful
Moat. And it's a Moat and a toll booth
on a product or service that's becoming more consistent and
less cyclical, which is demand for compute.
Demand for compute has become not a thing that we want at
certain points or another. It's a thing the world needs all
the time. The truth is with TSM is that
they have so-called competitors with Intel and Samsung that are
in the same category. And you might hear that they're
making these high end chips as well, but you can consider them
as more of a theoretical competitor than an actual
competitor to TSM right now. They cannot create the same
fabs, they can't create the same chips.
They don't have the science, they don't have the technology,
they don't have the manufacturing capability.
TSM is in a league of its own. So when TSM creates the highest
end chips, they have unmitigated pricing power.
They don't have the downward pricing power pressure of these
competitors because these competitors can't create the
same chips. So TSM in the most important
segment of its business is a monopoly, not a duopoly, not an
oligopoly. They are a full on monopoly.
They're also critically important to global GDP.
And this is a point that I want to stress because again, when we
look at TSM, you'll notice that for such a critical company, it
trades at this PE ratio between a 22 to 26, right?
We can say it's around a 24. That is on a really low end.
We have companies all over the place that have higher P ES than
this. Why does TSM trade at such a
discount based on how critically important and how fast and how
profitable the company is? Why is this stock not $500 per
share? Well, there's one big factor of
why TSM is not $500 per share, and that is because of the risk
of a Chinese invasion on Taiwan. This is geopolitical risk, and
investors are always cautious and nervous about geopolitical
risk. There are reports that China is
posturing around this. They're kind of flexing their
muscles. They're making moves that make
it seem like they want to invade Taiwan.
And so the risk is something that every investor has to
concern themselves with. In fact, when we look at why
Warren Buffett bought TSM and then sold out of it, he didn't
outright name China. But without directly naming
China, he basically said he was worried about a Chinese
invasion. So that is a risk that exists
with investing in TSM, but I believe that it's worth the
risk. I believe that, first of all,
TSM is becoming more globally diversified.
They're opening up in more locations.
They're geologically diversifying away from just
Taiwan. But another thing that I believe
is that Taiwan is critically important to the US.
It's critically important to all of Europe.
And I believe that China knows that.
When we look at what China's basing its decisions on, they
want to see the reaction of what would happen if they made
certain decisions and if it's really worth it.
And China would know that the US would be heavily involved.
In fact, it would probably lead to a direct confrontation.
If they decided to invade Taiwan, that would be something
that the US would get directly involved in, and Europe likely
as well because if China controlled direct manufacturing
of the heist and chips, that's obviously a big problem for the
rest of the West. So when I look at this, I think
there is a risk, There's always a risk of geopolitical concerns
with investing in a company that has its base, its headquarters
so close to China. But I also believe the risk is
worth it in this case. For me, this is a company that's
being priced downwards at $325 per share when it should more
appropriately trade at around $500 per share based on its
quality and the fact that it's a monopoly.
Now moving down the list, we have two more.
One of them is called Synopsis. And like many of the companies
that we've discussed, I've looked at these companies as the
best in the world. These aren't your average
companies. I told you they they weren't
going to be your average companies when we first started
this video. And as you can see, if we've
followed along, these are not your average companies.
These are literally the best in the world.
And I believe that synopsis is no different.
It very much belongs to be in this category.
In the discussion, as I was looking through the whole
semiconductor supply chain, all the different companies, there's
thousands, 10s of thousands involved in this process.
There are a handful that play critical roles that without
them, everything else would break, and Synopsis is certainly
one of them. Now, if you haven't heard of
this company before, because I haven't talked about it on my
channel up until now, Synopsis plays a more critical role in
software than any other aspect. For example, whatever company
you're talking about, at the very bottom of the the chain you
have companies like Google, Amazon, NVIDIA, AMD.
All these companies design chips, right?
So they make their own designs and then they send them over to
TSM to create. Well, before TSM can actually
create these chips, the chips actually have to be drawn and
they have to be. They have to have the software
to actually make it so that you can take those designs and put
it into a manufacturing process. The software to do that is
Synopsis. It's their company supplying all
the software. Now Synopsis over the past 10
years has done a lot of deal making.
They've done a lot of acquisitions to make it so that
they're not just like a supplier of the software or playing a
part of it. Now.
They're like the entire operating software of the entire
chip design process. Now, providing the software to
make these chips and design them for the manufacturing process is
obviously complex. I mean, it sounds complex, but
it's about 1000 times more complex than you could possibly
conceive. And the complexity is where the
pricing power comes in. Remember that the companies that
really have the biggest moats, the ones that really have
dominant leads when it comes to physics and software, are
complexity. The reason that FML has such a
masterful Moat, the reason that it's one-of-a-kind, is because
it's so complex with physics that nobody else can make it.
The same thing for GE making these plane engines.
There's only one or two companies that can actually do
it. No other entrance for the next
50 years. This company creates software
that's so highly complex, so deeply embedded, it's taken so
much time to get to where they are that nobody else wants to do
this. Essentially no one else is
willing to even compete with them because they just throw up
their hands and they say that we don't have a chance.
The Synopsis software, this essential software of taking
these designs from Apple and NVIDIA, creating digital
blueprints that can work within the physical reality of the
manufacturing process is entirely unique to Synopsis and
it's essential. And when they create these
digital blueprints, they also IP them.
So it becomes part of their their IP that they can kind of
create royalties out of overtime as well.
So they own an immense amount of blueprints and digital IP that
they're still making money on of many chips that are being sold
all throughout the world and created.
So this is a business that is incredibly lucrative, has
incredibly good fundamentals, has very little competition ever
coming for in the future because it's so complex.
They've recently done an acquisition that further
entrenches their monopolistic position and we see very fast
growth from them in the future. In fact, when we look at the
revenue growth, it's a very fast growing company, 15% plus.
You can see that over the next 10 years it's likely to grow
further. One of the things that aids this
company in the future is complexity.
As the chip manufacturing process in the physics of it
become exponentially more complex, not linearly, but
exponentially more complex going down to nanometers.
Atoms are the limit now, and Synopsis has to create software
that that works around these limitations.
So the software being created is exponentially more complex than
it has ever been before. The chance of them being
replaced or circumvented is incredibly difficult.
So when you're buying this company, you are buying a
certified monopolistic compounder, one that you can buy
into overtime, hold it for 10 years, watch the valuation go up
and down a little bit, and watch the ebbs and flows of the
company. But you know you're going to
have a company that's going to be around very strong in 10
years and it will certainly be much bigger in 10 years.
Now finally we get to the end stock here, one that I saved for
the last, which is a personal holding of mine.
Everyone will will know this. It's Netflix and I included on
this list because I believe it's a company when you're looking at
2026 that's traded down a bit, it's given you some room to buy
into it. So we have right here that the
stock went up to around 129. Now it's down to around $90.00
per share. Many investors say I'm going to
wait around for a dip on a high quality company and I believe
this is an opportunity. Now when we look at Netflix, the
bull case here, like everybody knows Netflix is a big company
and they're the leader in streaming.
But when I look at Netflix and the bull case of it, it's
remained largely the same for the past three years.
The bull case really hasn't changed that much.
A couple years ago, I came to the strong conclusion that
Netflix has reached escape velocity with its subscriber
scale. The subscriber scale is just
simply unmatched. They won the game.
They are not only the leader leader in subscribers, but this
gives them a unit economic advantage that no one else can
possibly compete with. Just consider the actual
economics of the situation. With Netflix having over 300
million subscribers. We can compare that to the likes
of a Paramount Plus. Let's just do A4 instance here.
If each of these companies spent $1 billion on content, how much
would that cost them to amortize that content spend across their
subscriber base? For Netflix, every $1 billion
they spend, they would spend $3.31 per sub.
So as a Netflix subscriber, you're paying $3.31 for a
billion dollars worth of content.
If you're a Paramount Plus subscriber, you're paying $12.64
for $1 billion worth of content because Paramount Plus doesn't
have as many subscribers to amortize and spread their
content costs across. So this gives the Netflix
customer a vastly better value proposition.
It gives Netflix unmatched unit economics which they can exploit
to continue with their escape velocity.
The unique dynamic with Netflix is the bigger the company gets,
the more inevitable it gets that it will continue to get bigger.
That is the flywheel in motion. Most companies when they get
bigger, it becomes a guessing game of whether or not they can
continue to grow again in this. Case, as they get bigger, it's
more likely that they'll continue to grow.
The price for content goes down, the value proposition goes up
and makes other streamers services, by contrast, more
expensive in relation to Netflix.
So I hold a huge stake in this company already, but I continue
to be excited about it in 2026. And I've actually recently
bought more Netflix over just the past couple of months.
These 10 companies are phenomenally strong.
They're worth considering for any investor.
I hope you enjoyed the little insight on these.
If you want to see more content, exclusive episodes, deeper dives
into these companies, as well as get access to qualtrim.com,
which is software specifically created for long term,
fundamentally driven value investors, make sure to join our
community here at qualtrim.com. That's all for this one.
See you in the next one.