Apple just announced the biggest stock buyback program ever in
the history of the world, $110 billion dedicated to strictly
buybacks. That money that apples going to
spend on buybacks is more than the entire market cap of
Chipotle. They could buy the entire
company and have $30 billion to spare.
They could buy Airbnb, the whole company and still have 10
billion to spare. With this amount of money for
buybacks, Apple could buy Ulta Beauty five times over.
That is a big number, a number so big that it's hard for us to
even wrap our head around. Analysts are calling it an
astonishing number, but they're also saying that Apple may be
acknowledging that they are becoming a value stock the
returns money to shareholders rather than a high-powered grow
stock that needs its cash for research and development or
expansion. Is Apple no longer the company
they used to be? Has Apple reached the top of its
ingenuity, its innovation, and its growth?
Well, that's what we're going to be discussing in today's
episode. We'll be going over this recent
report, this massive buyback program, the huge stock price
boost that Apple's getting from this whether it's deserved or
not, and answering the important question of whether or not Apple
is done growing. Now.
Of course, it's been a busy week, and Apple wasn't the only
company that made news this week.
There's another, much smaller company that's a big position of
mine, Texas Roadhouse. The restaurant company just
reported earnings yesterday along with Apple.
Now, unfortunately, Texas Roadhouse is not in the position
to announce a $110 billion buyback program, but they did
have a great report nonetheless. This investment has been an
insanely good investment. Texas Roadhouse is crushing
almost everything else in the market at this point.
It's a company that's a small company.
It's only $10 billion. So relatively speaking to the
rest of the S&P 500, to the QQQ. This is a smaller company.
It's not even in the S&P 500, it's not in the QQQ.
Index holders don't own Texas Roadhouse, but their execution
and outperformance makes me believe that it's only a matter
of time until they're introduced into the indexes.
Something is happening here with this company.
The stock is appreciating quickly, but it's following
along with the fundamentals. We're going to be diving into
what's driving this stock higher, what's powering its
incredible share price and what I believe happened in this most
recent quarter. How is Texas Roadhouse doing in
2024? Now, of course, there's some
other companies that recently reported earnings.
We have MasterCard having a bit of a pullback.
Another company that recently reported earnings this week is
Moody's. This is another position in my
financial category. And then finally, I want to play
this clip from Sam Altman. This is going viral because it's
giving a lot of people some red flags.
So we'll see what's causing a few people to have red flags
with Sam Altman. So we have a lot of news to get
to. Let's go ahead and get started.
Now, as we jump into these earnings, it's important to
understand that I have significant investments in many
of these companies. The reason that I follow them so
intently, the reason that I follow them so closely, is
because a lot of my net worth, in fact most of my invested net
worth, is wrapped up into these individual stocks.
The reason that I choose individual stocks is no mystery.
I do so because I believe I can beat the S&P 500 / a long period
of time. Now there's debates on this
subject. Many people think that's nearly
impossible. They've been convinced that
nobody can beat the collection of 500 companies in the S&P 500,
but I don't believe it's impossible.
And so far, this portfolio has been doing really, really well
either way, whether or not you invest in the S&P 500 or you buy
the market or you buy the total stock market or the total world
market. Either way, you can follow my
results for free. If you subscribe to the channel,
I'll show you my total portfolio value.
I'll show you my all time gains and my returns over time of this
portfolio transparently on a weekly basis.
So you're going to see everything, whether it comes out
good or bad, whether I make money on certain positions or
lose money, I'll show both ways. Now this weekend earnings turned
out incredibly well. Every position I own and every
company had strong earnings across the board.
I have trouble finding weakness in how these companies are
performing. And Apple and Texas Roadhouse
are just the latest 2. The stock is up today around
6.7% and that's off of news like this.
And it's a beat on the top and bottom line for Apple plus the
largest buyback in corporate history.
Let me go over the numbers. First, EPS is a beat here at
$1.50, Three St. was looking for $1.50 revenue, a slight beat,
90.75 billion versus the 90.01 billion expected.
And As for that buyback, $110 billion like I.
As this reporter is talking, Apple stock price is climbing
further and further from 1% after hours to 2% after hours.
When he mentions the gravity of this buyback, the size of it
Apple stock goes up even further.
That's the largest ever announced, that's according to
Birani Associates. And then a dividend is
increasing to $0.25 a share and just a couple of little segment
revenues here. Let's go over iPhone, a slight
miss of expectations at 45.96 billion, that's down better than
10% year over year. And then services, a slight beat
here, 23.9 billion, that's up nearly 14%.
And then As for China, I know that's a big question.
Going to hear sales in Greater China down 8%.
It doesn't seem to matter what the actual business lines are
doing. As investors digest the gravity
of this buyback, the amount that Apple spending the stock price
continued to gain by the 2nd, it's climbed up to an almost 7%
gain even though the stock price is racing up.
Not every investor is on board with this move, but I think
putting the size of this buyback in context is important here.
Apple owns the record for the largest buybacks over and over
and over again. This move of them announcing a
$110 billion buyback is actually not that revolutionary.
It's not anything new. It's business as usual for
Apple. While it is true that they just
announced the biggest buyback in history, it's also true that
they've announced a $90 billion buyback as recent as 2023 and in
2022. And in 2021 and going back to
2018, they had a $100 billion buyback.
Apple holds the record for the five largest buyback
announcements in the market. They hold all five positions.
Apple's the king of buybacks. They're like the Michael Phelps
of buybacks. It's what Apple does.
Being concerned that Apple likes doing a lot of buybacks is like
being concerned that Michael Phelps likes to swim, or that
Tiger Woods likes to play golf, or that Steph Curry likes taking
a lot of three-point shots. There's no cause of alarm that
Apple's doing a large buyback program.
This has been their strategy for well over a decade.
In fact, if we rewind time around 10 years, we can see the
start of this. In 2013, Apple had 26.49 billion
shares outstanding. This was the absolute peak of
their shares outstanding. For the prior decade, they had
only been issuing shares. Like many companies that were
getting up to scale, Apple had achieved enormous success
launching the iPhone in 2005, and they'd scaled up to huge
size all the way up to 2012. In 2012, they reached a breaking
point where Apple is generating enough cash that they could both
reinvest back into their business, creating new products,
new experiences, new services for customers, while returning
enormous amounts of cash to shareholders.
Apple has reduced their total float, which is a word for the
amount of shares outstanding in circulation.
They've reduced that amount by 41% over the past decade,
meaning that if you bought Apple here and you owned 1% of the
company outstanding, you would own roughly 1.8% if you held on
to it during this last decade. They've increased your equity in
the company by almost double over the past 10 years.
To achieve this accomplishment, illustrated on this one chart
right here, I think is a a big understatement by a lot of
people. I don't think people realize how
few companies can actually pull this off.
There's only a few of them in the market and some of them are
businesses you wouldn't expect. AutoZone loves buybacks even
more than Apple. It's one of the few companies
that has really pulled this lever.
AutoZone has reduced their shares outstanding by far more
than Apple, going from 150 million down to 17,000,000.
What I think is important to highlight is that Apple's
accomplished this feat of doing massive scale buybacks and
reducing their total float by 41% while reinvesting back into
their company aggressively. For example, if we also bring up
the two different indicators of reinvestment back into a
company, it can simply be defined as the CapEx of the
company and the research and development.
Those are the two biggest financial metrics to show how
much a company is reinvesting or at least building out new
facilities and new products. Well, if we look at just these
two different indicators that are representative of
reinvesting back into the company, we can go back to 2013.
This is when Apple started to buy back their stock right
there. The growth since 2013 has been
exponential spend on reinvestment back into their
stock. Now Apple best reinvests not by
having additional CapEx, but instead by having research and
development. If we look at that alone, it
paints the picture more clearly. Again, Apple started their
buyback program right here. Do you see any slowing down of
reinvestment into research and development after starting their
buyback program? Did it change their trajectory
at all? No, because Apple first reinvest
back into the company and then gives you buybacks on top of
that after they made all of the reinvestments that they can.
So when we see these analysts make these claims or make these
judgments that Apple may be acknowledging that they're
becoming a value stock that just returns money to shareholders
instead of putting the cash needed for R&D and expansion.
What is this Based on? What number does this claim come
from? Apple's doing the exact same
thing they've been doing for the better part of a decade.
They're investing back into their company aggressively and
you see that showing up in the numbers.
There's very few companies on planet Earth that spend more
money on research and development than Apple.
Apple is spending a fortune on research and development.
So no, I don't believe that's correct.
I don't believe this is an indication that Apple's spending
less on growth and expansion and research and development.
I believe it's a continuing sign of a company doing the same
thing it always has. It's returning its enormous
amount of excess cash back to shareholders.
One of the big challenges that Apple has, a greater challenge
than any other company on planet Earth, is they make too much
money. Apple's the most consistently
profitable company in the world, and at the pace they're going,
they're making more than $100 billion of cash flow per year.
Apple's net income last quarter was $23.6 billion, and that's
roughly the same amount of free cash flow they generate.
A company that has $160 billion in cash and is generating an
additional $25 billion in net income every quarter has a
problem of too much cash. And the way that they've chosen
to solve this problem is through the most tax efficient capital
allocation policy possible, which is returning the huge
majority of it through buybacks. The other thing I'd like to
highlight, and I think this Third Point is also important,
is that Apple's not even doing something unique to just Apple.
Many companies are copying Apple's blueprint, Google being
one of them. If we go down further on this
list, we can see the series of Google buyback announcements.
Google announced a $70 billion buyback in 20/24/2023 and 20/22.
They're seemingly doing this every single year.
If we look at this buyback in proportion to Google's
economics, it's revealing. How much money has Google made
for the past three years? Well, last year they made around
$70 billion. The year before that, they made
$60 billion. And then the year prior to that,
in 2021, Google made around $70 billion.
So for the past three years, Google made around $70 billion
each year. And then for the past three
years, they announced the buyback program for around $70
billion each year. Now, when Google does this,
nobody freaks out. The market doesn't get super
excited. Investors don't think that this
is the end of Google and they've reached the top, and that
they're no longer investing in their future.
Nobody's reaching that conclusion when Google's doing
the exact same thing as Apple, only on a smaller scale.
Apple is investing roughly 100% of its free cash flow into
buybacks, and it can do that because it has $160 billion in
cash. So they can do that for a number
of years. And Google likewise is investing
roughly 100% of their free cash flow into buybacks.
Because Google likewise has excess cash, they have around
$100 billion in excess cash. Both of these companies are
doing the same thing. The only reason that Apple's
buyback is bigger than Google's is because Apple makes more
money than Google. If Google is making as much
money as Apple, they would also announce a $110 billion buyback
program. So if Apple's over, if this is
the end of Apple and their innovation and their product
development and the future growth of the company because
they announced a large buyback program, then that should also
mean that it's the end of Google that this company's over, that
they're no longer investing. They're no longer creating new
products because they also announced a large buyback
program. In either case, these
assessments are wrong. The analysts going on CNBC
saying that this is an indication of a value stock are
wrong. It's an indication that these
stocks make a fortune. They simply make too much money.
And the biggest take away is that Apple makes more money than
any other company. Warren Buffett chooses to invest
in stocks that have high amounts of predictable free cash flow.
So it's no wonder that he has Apple as 50% of his portfolio.
Now finally, we move on to this recent quarter with Apple.
What actually happened this quarter?
We can dive into some of the numbers here.
First of all, one of the recent updates we did on Qualtrim is we
introduced something called KPIs.
We have a nice little pink badge there to denote that this is a
KPI chart. KPI means Key Performance
Indicator. It's just a nice term to define
something that is something you want to track that's unique to
this specific stock, to this specific company.
It's different for every different company.
For example, with Apple, we have the revenue by segment and this
is something I always like to look at well, we can look at the
growth of these different segment lines over time if we
filter just the iPhone. I think that the growth here is
the biggest concern for investors.
There's really no reason to buy a new iPhone.
I have the iPhone 15 Pro and this thing has such a nice
processor, such a nice screen, so much battery life.
It's basically the perfect phone, and these phones are now
lasting longer and longer. It's true that the battery
decays over time, but you can swap out the battery for like
$100. So iPhones are lasting longer
and longer, and that's a little bit of a concern for Apple, even
though they price them higher. It means that people can hold on
to their phones for multiple years.
You can buy a phone in 2020 and you don't need one in 2023.
You could wait all the way until 2025 to get a new one.
That's great for consumers and it's nice to have devices that
last for multiple years, but it is making it more difficult for
Apple. They're having a harder time
creating new reasons for you to upgrade your new phone.
When we move down this list, we get into the Max.
Mac revenue was 7.17 billion last year.
This year it was 7.45, so it barely grew.
You have barely any movement in Mac revenue. iPads declined year
over year from 6.67 billion down to 5.56.
When we look at the wearables and home accessories, this again
is another decline year over year.
Last year it was 8.76 billion, this year it's 7.91.
Right now, the only part of Apple that is steadily and
consistently growing is the service portion of the business.
And if we look at this in comparison to their total
revenue, it's a minority of their total revenue, but it's
still a significant portion. So looking at this overall, it
shows the continued trend of most things being mostly flat
for Apple and the services continuing to grow.
When I look overall at this quarter, I was pleasantly
surprised because I had very low expectations.
I wasn't going into this one expecting Apple to have some
massive beat. I thought that most lines of
business would be down. So the fact that they are able
to pull this off, they have such an enormous buyback program to
actually grow services was a positive thing.
Another thing that Apple tried to mention on the earnings call
is of course their pivot degenerative AI.
Apple's taking the approach of not doing large language models.
What they're doing instead is making their devices support
artificial intelligence and generative AI with their newer
chips. So that's going to be a huge
improvement for Apple. That's another potential growth
path. Another thing they mentioned on
the earnings call was the Vision Pro headset.
And this is where you can try to decipher what they said.
They didn't give out hard numbers, but they basically said
that half of the Fortune 100 companies have purchased Vision
Pro headsets. To me that doesn't say much.
So did they purchase one or two or did they purchase 1000?
We still really have no insight on that.
And as far as I can tell right now, anecdotally from what I
see, I don't see the Vision Pro being this grand success right
now. It seems like it's very limited
with the amount of customers that have it.
But overall right now, even with these doubts, the buyback
program alone was enough to lift Apple share.
Now moving on, we get to Texas Roadhouse, which is a company
that has just been astonishing to me.
There's not many companies that I've ever owned that I've been
this pleased with the investment and the performance and the
continuing operations of the company.
Texas Roadhouse is now a $71,000 position in My Portfolio with
35,600 of that bean gains. So this company's over a double
since purchasing it in my current portfolio.
Texas Roadhouse has gained so much value.
It is now my third largest position, just behind S&P Global
and MasterCard. It is a bigger position than
Microsoft, Costco and Intuit. And again, I didn't size it to
be this big of a position. I bought into it and just let it
grow. It's the same reason that
Costco's such a large position. I have not been buying Costco
anytime recently. Costco's just grown into a large
company, so My Portfolio in many cases, and the portfolio
allocation is a result of just letting these companies grow
organically. After making my initial buys,
even after going up 33% year to date, Texas Roadhouse has gone
up an additional 3% after earnings because of how good
these earnings were. Now I got to be honest here,
when we were going into this earnings report, I was slightly
concerned. I was a little concerned because
I saw the massacre that happened to Starbucks.
Starbucks was just destroyed. The earnings report was so bad
across the board. I I I went through that earnings
report and that's one where I had a really tough time finding
a silver lining. Starbucks is down 21% year to
date and they got blindsided by this bad report.
So when I was looking at Starbucks, I realized that Texas
Roadhouse is a very different business with a very different
value proposition. So I was crossing my fingers
that there wasn't going to be any overlap, that Starbucks
wasn't any great indicator of the overall economy or consumer,
but Starbucks just had Starbucks problems.
And that turned out to be the case.
Texas Roadhouse is not Starbucks, and it's a company
that I believe offers a better value proposition to customers
than Starbucks. It's also a company that I
believe has less competition than Starbucks.
There's many food companies, but there's not many food companies
that have the same recipe and operations and formula and
branding as Texas Roadhouse. Now if we look at the earnings
report, there's a couple important things to highlight
for this company. First of all, of course, we have
the revenue growth and the earnings per share growth that
we look at for every company and these numbers are impressive.
In the last quarter, Texas Roadhouse grew its revenue by
12.5%. So double digit revenue growth.
They grew their diluted earnings per share by 31.4%.
What these numbers should prove is that you don't need to have a
large language model to have good returns.
You don't need to be a leading technology company and have a
huge research and development budget to have good returns.
The way companies get good returns is by having earnings
growth and free cash flow per share growth.
And Texas Roadhouse has both of those at a faster clip than the
majority of companies in the S&P 500.
Now if we look at Texas Roadhouse and we want to put
these numbers in context with recent quarters and see the
overall growth of this company, we have some other cool KPI
charts specific to Texas Roadhouse.
We have, for example, the number of restaurants.
And this is where people, I think, have the wrong idea of
what this company is. Texas Roadhouse is a company
that owns multiple brands. They own a company called
Bubba's 33, They own a company called Jaggers, and they even do
some franchising. So there's wholly owned Texas
Roadhouses and then there's a number of franchised ones and
franchised Jaggers. So this is a company that has a
few different parts to it, but the majority of it started with
company wholly owned Texas Roadhouses.
These are the ones that the company opens every single
quarter and the ones that they operate themselves.
You can see this number growing steadily over time.
Back in 2011, at the end of the first quarter in 2011, they had
276 Texas Roadhouse locations and that's grown over time.
Every single quarter you see the slow and steady growth.
They're always opening up more locations.
In the most recent quarter, they ended the quarter with 591
locations. Then in 2014, they started a
brand called Bubba's 33. This is more of like a Bar and
Grill concept. It's performed really well.
All of these get really high expected returns each time they
open one, but because the company hasn't been around as
long, it doesn't have quite as much brand value.
It doesn't have as high of returns as a Texas Roadhouse
location. So if we look at both of these
compared to each other, you can see that they focus more on
their company owned Texas Roadhouses than they do their
Bubba's 33. Again, along the way they're
always experimenting, opening up new concepts and one thing
they've wanted to go into is QSR quick service restaurant, things
like Chipotle, McDonald's, those type of restaurants, they open
up their own brand called Jagger's.
This is something where they've worked on this concept all the
way. Back in 2013 they had one
Jaggers open, they kept it the one and then they opened up a
second one in 2015 and they've worked on revising the concept.
They don't want to expand unless they get the concept perfect to
where they're getting the high expected returns they want.
So they kept this at 2 restaurants.
From 2015 to 20/20/2020, they opened up three.
In 2021 they opened up another one.
And then in 2024, they now operate 8 of them.
They're learning from these restaurants, they're learning
the QSR business. But Texas Roadhouse has a great
team. They know how to revise
restaurant concepts. They know about processes and
processes at scale. They know about incentives and
ownership structures. They know about creating long
term value. So they're trying to take the
learnings that they have from operating their company owned
Texas Roadhouse restaurants and take those learnings and
implement them into a QSR concept, which is Jaggers.
So right now, if you look at this chart, Jaggers barely shows
up. You can barely see it because
it's so small, but represents great potential.
If Texas Roadhouse becomes convinced that they can scale
this quickly and earn high returns, you could see these
numbers shoot up exponentially quarter by quarter.
The strategy that they've taken with Jaggers is 1 where they
don't want to just own Jaggers in and of itself.
This is where they want to get into a franchise model and we
have right here them starting to work with different franchise
operators just in 2023 and in 2024.
You can see right here a few franchise Jaggers opening up.
So they have one in 2023. The franchise owners opened up
another one in 2022 and then they just recently opened up
their third one. Again, these are small in
comparison to the rest of the business.
This isn't a huge revenue line. In fact, it's not meaningful.
But Texas Roadhouse views this as an additional growth path for
the company. As their restaurants meet more
scale and saturate the market further, they want to have
different ways to offer value to customers.
And if they can get this concept right, which I believe they can,
you can see this become a meaningful portion of the
business over time. During this time period of Texas
Roadhouse having their own restaurants, they also have
franchise owned operations and they do this strategically.
If we break out just the franchise Texas Roadhouse
locations, you'll see that it's not growing as fast.
In some cases, the numbers even go down.
They went down in 2016 and in 2021 and a little bit in 2020.
The reason that they go down is not because the franchise owners
struggle, it's not because these locations are shutting down.
It's because Texas Roadhouse likes to buy some of their
franchise operators out and own those companies outright.
O what the company does strategically here is they use
their franchise locations as a OOL to pick different companies
to acquire fully and that's a strategy that I think has very
high returns. They can look over all the
franchise oerators, see the ones that have the best operations
and purchase and pluck those companies specifically out of
the pool. But overall, when we look at the
restaurant locations over time, we see the same trend going.
The company is growing over and over again every single quarter
and I don't believe it's going to slow down anytime soon.
On top of the growth of their total locations now getting
close to 800 locations, they're also growing the size of their
location. New locations are bigger than
older ones. They're doing bump outs on older
ones, They're redoing the kitchen and making to go orders
on the older ones as well. So they're constantly enhancing
the older locations as they're growing the total number.
The other most important KPI that we look at specific to
restaurants is their comparable restaurant sales.
They highlight this as the first bullet point on their report
because sales increasing per location is a key indicator for
how this company's doing and we can look at this and give it
context on a greater scale here. Now this isn't the total average
volume per year of the restaurant.
This is their total weekly sales.
That's the way that they define it, total weekly sales.
So if we look at this on a quarterly basis back in 2011,
their weekly sales was around 73,000.
It goes up and down based on the quarter, whether it's a longer
quarter or a shorter one, whether it's the holiday season
or not. But you can see it growing
steadily overtime from 70,000 to 80 to 90 to 100,000.
And then we had the COVID quarters.
The COVID quarters, it dropped from around 102,000 to 41,000.
At the same time, during that first COVID quarter, the To Go
sales went up dramatically. They doubled their normal
average up to 54,000. We'll revisit those to go orders
in a second. But we look at the rapid
recovery in weekly sales, It went all the way back up to
where it was prior to COVID in early 2021.
So we had a very rapid recovery and investors that bought the
dip here did really well in Q1 of 2023.
Their average weekly sales was $148,000.
That is incredible, but they still beat it this first quarter
159,000 setting an all time record weekly sales for the
company. It's hard to look at this and
see that there is any trouble at all with Texas Roadhouse.
They're not only opening up additional locations every
single quarter, but they're also increasing the amount of weekly
sales every single quarter as well.
Now one thing that Texas Roadhouse is getting much better
at is their to go orders and this is where the numbers look a
little off. We have this first one here and
this is unusually high because they are basically only
accepting to go orders in early 2021.
During that quarter they had 54,000.
It started to normalize in 2022. That's where it hit the low, but
over the last two years, it started to increase again at an
accelerated pace, more and more percentage of their customers
are ordering to go. This year there was 20,800
weekly. So it's improving year over
year. We're back to a growth
trajectory where previously it was going down from all the pull
forward from the pandemic. And they mentioned on their
call, they're getting better and better at the technology.
They have the app making it very easy to order for to go and they
have a special pickup station and a digital kitchen that's
specific to to go orders and they're seeing more repeat
orders from the same customers. So we see these number of
restaurants grow. We see the average weekly sales
rise and that translates into the overall revenue of the
company, 12.5% revenue growth reaching a record high.
The free cash flow also reached a record high this quarter,
$165,000,000. That's an increase of 35% year
over year. The net income was up 31% and
the earnings per share was up 32%.
They've maintained 0 long term debt on their balance sheet and
they've grown their cash balance from around 100 million to 213
million. And finally, on the earnings
call, when they're asked about the value proposition to
customers and whether prices are getting to them, Texas Roadhouse
said that after their last price increase of 3%, they actually
saw an increase in traffic trends.
More and more people coming to the restaurant because even
though they're increasing prices slowly, other places are
increasing prices much faster, making their relative value
proposition better and better. So overall, when I look at the
stock, I think this is about as solid of an earnings report as
you can get and that's why the stock continues to sail higher
after already being up this much.
Now finally, we get to MasterCard.
This is another large position in My Portfolio.
This quarter, MasterCard came in a little bit weaker than
expected. I mean they they did fine.
It was mostly business as usual, but they did predict that things
were going to slow down a little bit for them and that did 'cause
investors some alarm that the CFO says shouldn't really 'cause
alarm. The reason for the slowdown is
simply because outside of the US is growing really quickly.
It's a large portion of Mastercard's revenue and the US
dollar is becoming stronger. So when you have that foreign
exchange, when you have that currency conversion, it simply
makes it so that they lose one to two percentage points in
earnings. The most important takeaways
that I see are the similar things they're saying at
MasterCard that they said with Visa, we continue to see good
solid consumer health and consumer spending trends.
And this is true globally around the globe.
People are spending money, the MasterCard doesn't really care
what they spend money on. It makes no difference for them.
They even say quote, so for $1.00 spending taking place at a
restaurant or $1.00 spending taking place at a value store
generates the same revenue for us.
That's the incredible thing about Mastercard's business
model. You don't have to predict which
company will do well, You just have to predict that people will
spend more money digitally with cards in the future.
And I think that's a very safe prediction.
So far nothing has changed with my thesis in MasterCard.
Another stock in My Portfolio worth noting is Moody's.
This is a brand new investment of mine.
It's roughly flat, down slightly since purchasing in, but they
just had their earnings report and overall it was really
strong. The company beat their estimates
both on the top and bottom line. The revenue grew to $1.79
billion, which is a 21% increase.
The free cash flow came in at around $775 million.
Now there's different ways you can adjust this free cash flow.
Moody's adjusted themselves down to around 695,000,000.
Net income was up 15%. Earnings per share were up 15%
as well. Moody's adjust this down to
around 13% earnings per share growth and they are paying down
debt quickly, which I like to see.
Last quarter, just quarter over quarter, they paid down around
$700 million worth of debt. So I like seeing that go down.
I think it's good capital allocation strategy and while
they paid down debt, they had additional cash.
There's not too much to say about this report.
It was strong all around, every financial metrics looking strong
and their core businesses, both Moody's Analytics and the credit
rating business are both on track.
That about wraps up the earnings reports this week and overall it
was a great week for My Portfolio.
Now one last thing I must mention.
Sam Altman of Open AI recently went on an interview and like
many of these tech billionaire big people that have blown up in
this category, he says a lot of things.
He says a lot of things and some of them are very grandiose.
But some of these strike me as not just grandiose or dreaming,
but they strike me as as almost a red flag, something I feel
like I have to be cautious of when looking at people like
this. For example, here's one of the
things he said during this interview.
Whether we burn 500 million a year or 5 billion or 50 billion
a year, I don't care. I genuinely don't.
As long as we can, I think, stay on a trajectory where eventually
we create way more value for society than that.
And as long as we can figure out a way to pay the bills like
we're making AGI, it's going to be expensive.
It's totally worth it. Now I get it.
He wants to create AGI. He's very focused on his goal.
That's a good thing. But the indifference he has
towards the magnitude of money between $100 million or 5
billion or 50 billion is a little bit alarming.
It's almost like he treats capital as this endless thing
that money just sprouts on trees, grows indefinitely, and
you'll never have trouble ever receiving funding for his goals
and his dreams of creating AGI. And not only is he not concerned
about receiving funding, but he also doesn't seem to care.
He seems entirely indifferent, even clarifying that he
genuinely, genuinely doesn't care. 5 billion or 50 billion a
year, I don't care. I genuinely don't.
Five billion? 50 billion?
Who cares? I don't know.
At least for me, when I watch this type of thing and I see
people talking about this type of money in real context, saying
they don't care, that raises a red flag.
So I hope that Sacha or anybody working with them is careful
about that, that he does not seem to respect or care about
burning investors capital. Now that'll be all for this
episode. If you want to see more content
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