Well, we have a lot to get to today.
First of all, the stock markets in the red slightly, despite a
huge blowout in the jobs number. This is a highly anticipated
number because it shows what the US economy.
Just did in the previous month and in July the u.s. added
528,000 jobs. Now without context, that may
not sound that impressive. But the expectations, the
forecasts were for roughly half this amount.
So this was a massive blowout. I want to go into this number
further, The into the unemployment rate into default
rates to try to paint, what is more of an accurate picture of
how the US economy is doing? We also have news that Amazon
went on an additional shopping, spree Amazon continues to buy
things left and right. They bought a medical company
just like two weeks ago and now they're buying iRobot the maker
of the Roomba the little vacuum that goes around and bumps into
things and your dog plays with it and your kids sit on top of
it. That vacuum Amazon, just bought
it for Point seven billion dollars to expand their
ever-growing profile of In-House items.
And I want to go over this as someone that's a huge Amazon
Bowl. I actually own this company in a
growth portfolio. I have studied this company as
much as any other company that I own and I want to go over how I
think this will fit into their overall strategy.
Now, in addition to that, we also have a company that
struggling right now. It's called Warner Brother
Discovery. It's the combination of HBO and
HBO. No, Max and Discovery with their
reality shows, all trying to be put together into one service.
And this company just posted a horrific earnings report really
bad. It's down 15.8% on the day and
some of the numbers in this report, we're just staggering
like this. Net income looks a little bit
different than the previous month.
So we're going to be going over Warner Brothers, Discovery, and
trying to piece together. What's going on with this
company? So as always, we have a Jump
into in this episode. If you haven't already, make
sure to like the video. Subscribe to the channel That
helps boost it out and show it to other people.
Now, I also do something in addition to going over the news,
I track my own portfolio, it's called the passive income
account. The reason that I track this
publicly is because I feel like there's not a lot of
transparency in finance in general.
And when there's not transparency and people don't
share and discuss things, they become a little bit more
ignorant to it. So by showing what's going on
with my portfolio, how I perform my Ins and my losses.
I feel like that could potentially help out other
people. What I do at this portfolio is
invest in high-quality dividend-paying companies that I
consider to be more than just dividend payers.
I consider them to be Compounders which means they
have resilience. I can rely on them to earn
growing amounts of money in almost any Market environment.
And this has been put through the test over the past six
months. We just had earning season and I
recorded the amount of companies that I had in my portfolio.
And which ones beat their earnings And gave strong
forecast of the future and which ones missed their earnings or
gave week forecast, around 71% of my portfolio, beat their
revenue and their earnings projections and gave very strong
forecast. It would have been around 80%
but Microsoft missed on their earnings and revenue but they
did give strong forecast. So, we're actually doing better
than the rest of the market. In terms of this earnings
season, we still have a couple outliers though, a couple
companies that haven't reported yet Disney and Target So we'll
see how they do August 10th and August 17th but overall, I focus
on Compounders I focus on dividend payers and companies
that can grow their earnings grow, their revenue grow their
dividend over a long period of time and I've been trying to
reshape and reforge my portfolio to be as strong as possible
going forward. There's one tool that I use from
time to time that I developed called the dip finder.
This is part of qual trim. It's available to all Patron
members and it shows you how my companies are trading, or how
any companies that you're And are trading at any given time.
This is a technical way of looking at it called the price
versus the 200-day, simple moving average, which it
technically shows the price momentum of a stock how its
trading compared to the previous two hundred days.
And as you can see, there's some companies at over the past, 200
days are way underneath their average Target, which got
crushed with extra inventory, having to slash the cost of
different items having to make room for the back-to-school
sales. This company's down Big Year to
dates down around 30%. Luckily it's a very small
holding of mine. JP Morgan and tiro price are two
other companies that the price momentum has moved sharply and a
negative Direction and that's a given.
These companies are cyclicals their financials and they're
moving down and preparation for the big recession that we're
having right the big recession coming up.
Then on the other end of the spectrum, we have Vici.
This is one of my largest Holdings right next to Apple and
Microsoft and it's Up, 16 percent above its 200-day.
Moving average VG's performance has been nothing short of
spectacular. The company's up 14 percent
year-to-date not counting the Hefty dividend that it pays
another company that I'll mention that I think is
outperforming expectations to a large extent is Texas Roadhouse.
Who would have thought that a restaurant company in 2022 would
do this? Well, the company is facing all
sorts of problems with inflation commodity prices, high and labor
and were projected to go until Accession, or by many people's
estimates, were already in a recession.
But yet, despite all of that, a restaurant company, a casual
dining restaurant is moving in a positive territory.
It has positive price momentum. Texas Roadhouse has been
performing really well, both in terms of price and fundamentals.
The company is zero percent year-to-date which doesn't sound
great, unless you compare it to the S&P 500, which is down, 15%
or the Q, which is down even more.
So, overall around half of the companies in my portfolio have
very positive. At a price momentum.
Half are currently in a dip but overall the earnings are very
strong 71% of them. Forecasted.
Very strong quarters next quarter.
So I feel comfortable moving forward in the way that I'm
invested and not paying attention to short-term
fluctuations. Now, if you want to see every
single one of these categories in the companies in them,
there's a link called dividend portfolio in the description
below. Now, moving on, the big news of
the day is the economic news. The u.s. added five hundred and
twenty eight thousand jobs in July.
Payroll returned a pandemic levels, unemployment rate fell
to 3.5%. So this is what this chart looks
like here. With the recovery in the jobs,
this has been a very rapid recovery in job gains over the
past couple of years faster than sense.
Post-world War Two. So it has been an incredibly
fast recovery. They say the unemployment rate
now is down to three point five percent.
We added 500 28,000 jobs which puts us just above pre-pandemic
levels. So, we finally went back to
before Endemic levels. Now, of course this isn't that
Trend but it's much better than expected and if you don't
compare this against the forecasts and the analysis and
expectations, it doesn't give it proper context but this is what
this last month looked like compared to forecast.
The actual estimates going into this month is that we were going
to gain 250,000 jobs. So we roughly doubled that
528,000 verse 250,000. This absolutely blew away the
forecasts and estimates from From the economists and
forecasters. And where did these jobs come
from the jobs gains were widespread last month employers
and Leisure and Hospitality added jobs at a solid clip as
restaurant and bars continue to recover payrolls.
Also grew and health care and professional and business
services, which included. Many white collar jobs.
So I see this shift in where the jobs are at right now.
I'm seeing a lot of tech companies actually do layoffs,
some are still hiring, but many companies like Robin Hood, many
of these big tech companies are Going down, they're hiring or
they're doing a layoffs. Meanwhile, Leisure and
Hospitality Healthcare are doing a lot of hiring right now.
So jobs are being lost in some areas but more hiring is going
on. In most cases, this is by
economic data is so difficult. And this is why economist's
aren't Filthy Rich by being able to easily predict the economy
and the stock market? A lot of this data is incredibly
difficult to piece together. We have a job market where we
gained nearly double what the estimates are.
That's a good thing. We have unemployment to almost
record lows 3.5%. That's also a good thing.
We have less people choosing to work, which is arguably a bad
thing. And we have two consecutive
quarters of GDP decline which is objectively a bad thing.
So you can try to make sense of all of this.
But I just don't think it's helpful.
In terms of investing, I would never base my investments off of
what the economy has done, or what, I think it's going to do.
I base it off of individual security analysis with my
companies and how I think their earnings will grow over the next
five years. Predicting the economy, I think
is a losing game. I don't think people are going
to be able to do that accurately and while I think this report is
good, it doesn't really say a lot of whether or not, we're in
a recession, we're going into recession.
If we are how bad it will be. And even if we are, and you can
accurately predict that what it will do to the stock market,
trying to predict all of those variables I think is literally
impossible. Now.
Moving on, we have some big news that Amazon's picking up Yet
another acquisition, they just bought a health care company a
couple weeks ago. Now they're buying iRobot the
maker of Roomba for one point seven billion dollars.
Now this seems like an easy acquisition for Amazon.
I think this will go through just fine but I want to go into
how I think this will play in their overall strategy.
The official statement here from Amazon's Hardware device, Chief
is quote over many years. The iRobot team has proven its
ability to reinvent. How people clean with products
that are incredibly practical and inventive.
Cleaning when and where customers want while avoiding
common obstacles in the home to automatically emptying and
collecting bins? Customers love iRobot products.
And I'm excited to work with the iRobot team to invent in ways
that make customers lives easier and more enjoyable.
Now, if we dive into this, a little deeper, we can see the
type of products that I Robot has.
They have a lot of these little pod robots, that drive around
your home, and try to clean and they've actually gotten better
and better. The first iterations of These
were very dumb and very clumsy. They would go over almost
anything that gets stuck all the time.
They had no way of mapping out locations in your home and now
the most recent iterations of them have become increasingly
complex sophisticated, and overall, a much better tool.
I have one of the newer roombas and they're pretty smart.
At this point, they actually do a very good job of cleaning
where they should clean sticking to certain parts of the house
with no physical barriers, and they avoid most of the obstacles
of toys and things left. The floor in terms of
capability, market, share and brand name, iRobot is by far.
The biggest player in this industry.
They own the robot cleaning category.
So, Amazon just went for the biggest the most well-known.
And by far the best in the category, I Robot is the leader
here. The latest iterations of these
robots actually, do a physical map of your home, you don't have
to map it out. The robot, does it for you?
The first time, it goes around at bumps around to the outside
of the walls and then it knows. Typically where it is relative
to the rest of your home. So you can command the robot to
go to a specific room, down a hallway or two different parts
of your home and it will find its way there and only work in
that specific room. So Amazon is now going to have
maps of literally, millions of people's homes which is an
interesting thought. They're going to be able to map
out people's houses and their floor plans, Amazon will be able
to gather a lot of data from this company and help integrate
that into their other offerings and further integrate it To
their ecosystem. And I think overall that is the
endgame here. It's the ecosystem.
Big tech companies, love their ecosystem.
All of them. Have one.
Apple has, I believe the strongest ecosystem, but Amazon
has a pretty strong one as well. And it's part of their Alexa
smart home ecosystem. We all know the speakers but
they also are doing this with TVs with the fire TVs and the
fire sticks with their cameras, with their lighting with the
smart thermostats. And now with your vacuum
products that's going to be, A part of this ecosystem.
So I think this is one more move of Amazon to expand their
ecosystem and smart products and make all of these work together.
They can make all of this stuff work unified.
It gives people more incentive to buy something already in this
ecosystem, then something outside of it.
Now, looking at the fundamentals of this company, as an
individual company or individual stock, because I Robot is a
publicly traded company, it doesn't look very strong.
It's a week company overall because it's a newer one, and
its goal is to grow Revenue, which is what they've done.
They've grown their revenue around triple since 2014, the
other metrics are so, so not the strongest company, but that's
not. Why, Amazon's purchasing it.
They're doing it for strategic reasons to include it as part of
their vast ecosystem offering. So I think this is a great
acquisition for Amazon. It's not an overly expensive
company. It's one that's growing quickly.
They have high quality products that I think people will
continue to purchase and it will expand Amazon's ecosystem
because, you know, you're gonna be able to control these robots
with your Alexa device. And Amazon's going to iterate
and incorporate different integrated features.
Now, moving on I have to talk about Warner Bros Discovery.
This is a stock I'm asked about frequently and they just
reported their Q2 earnings which were a bit messy to say, the
least it's down 15% after the earnings report because a big
problems they're facing. So before we jump into this, I
just have to go quick shout-out to today's sponsor of this
video, which is FDX. U.s., there's a link in the pin
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Warner Brothers Discovery. They just reported their
earnings and it was very messy. They say that they are Row a big
loss on content and merger costs and zest.
Laughs here he was the guy that was supposed to make this
business great and so far what he's done on this most recent
earnings, call is blame the previous management and the
previous estimates. He threw all of the blame onto
everyone else and what they did setting, this whole thing up, he
sang, this isn't my fault. This is a problem with the
estimates beforehand. Now, I have the actual earnings
report here and I just want to highlight a couple things on it.
First of all, they're Revenue decreased by 1 percent taking
out foreign exchange so they had a revenue decline.
The net loss available to Warner Brothers Discovery was 3.4 18
billion 3 billion 418 million dollars of a net loss that
includes a 2 billion dollar amortization of intangibles, a 1
billion dollar restructuring and other charges and 983 million of
transaction and integration expenses lat It's of expenses
added in a single quarter, causing this company, to have a
massive net loss to give this a visual of how bad this actually
looks. We can take a look at this on
the chart here, by pull this up, just take a look at how bad this
loss, is this quarter 3.4 billion dollars of net income
loss in a single quarter. And the biggest problem, they're
finding now. Which seems to be a surprise for
this company is free. Cash flow problems.
The cash provided by operating activities increased to 1
billion and reported free cash flow increased.
You 789 million. So they're saying look we have
free cash flow, 789 million and the impression this type of
writing leaves to investors is that they're highly free cash
flow productive. And that's not really the case
because when you're looking at free cash flow, you have to
consider what is creating those free.
Cash flows, is it actual money being taken in from the company?
Or is it just dilution? And the problem was saying that
they made all of this free cash flow.
Last quarter is, it doesn't incorporate the amount of shares
outstanding. If the shares outstanding went
from in 2021, 589 million to two point two eight six billion.
So they for x amount of shares outstanding, this is where the
free cash flow came from. We can even see this more clear
on qual trim. For example, if we pull up the
shares outstanding graph, you can see the dramatic increase in
shares, it going up by roughly four times the amount and then
if we pull up the free cash flow graph here, this is what they're
saying they're doing so great. Look, everyone.
We made a lot of free cash flow last quarter.
It's right there in line with previous quarters.
That's not really accurate because if we filter this by the
amount of free cash flow on a per share basis, it's down to 35
cents which is much lower than previous quarters.
It was a decline from the most recent quarter and a comparative
to the history of the company. It's nothing spectacular.
So that's the biggest problem. I see this companies facing cash
flow problems. And in the meantime, they have
large outstanding amounts of debt and people like to talk
about how much debt Netflix has take a look at Warner Brothers,
discoveries debt chart. It went from thirteen point six
billion two quarters ago to the most recent quarter being 51.3 9
billion. Let's go ahead and compare this
to Netflix. Netflix has talked about as a
company that's highly indebted. Netflix has way more cash with
5.8 billion dollars in cash. And they only have fourteen
point two three billion dollars in debt, so they have roughly a
third to a fourth, the amount of debt that Warner Brothers,
Discovery has These discoveries facing worse, cash flow issues,
and projected on top of very high fixed costs with their
large amounts of debt and Rich Green Field tries to explain how
this is working out for them. I think, in this case, a little
bit of this is sort of like that movie Apollo 13, right?
We're like, you know, Houston, we've had a problem and I think
if you're zsasz love right now, you're going, you know, you're
looking at AT&T and you sort of have like, oh my God, I can't
believe I bought based on these projections.
I mean John Stanky D, 18 T looks like a Genius.
Because discoveries now, Warner Brothers.
Discovery is now blaming sort of the AT&T projections as
unreliable. Not to mention the overall
macroeconomic environment. And so what they're effectively
doing Joe is there scrambling to figure out because cash flow is
coming in Far Below expectations.
They've got a lot of debt so they're sort of finding new ways
to generate dollars. You mentioned and ad-supported
streaming service something maybe like a Pluto or a to be
TV. They're probably looking at
doing. Very big licensing deal with
Amazon and going back into Amazon Channel.
Something we talked about why they left Amazon channels on
CNBC, probably nine months ago, all of this is true.
They're looking at potentially having an ad-supported Terror.
They're also looking at partnering with Amazon to have
it included with Amazon because Amazon can get customers and
drive, traffic to HBO, another word I would exchange from
looking is scrambling, Warner Brothers.
Discovery is scrambling right now.
They're scrambling for options to solve a big problem.
They have Which is no clear Direction and strategy.
They're looking at licensing catalog to Netflix and Amazon
like they're just looking at how do they find dollars anyway
possible right now? Because they're coming in with a
2 billion dollar shortfall in 2023 ebitda versus what they
thought back in February. So I think that's driving a lot
of the changes that you heard about last night, hbm, Max and
Discovery, plus create a massive combined library and the
strategy right now is to somehow combine.
These Companies together into one service which would require
a rebranding. Their people talking about them
potentially losing the HBO Max branding, which I think would be
a mistake given how much they've tried to work to create this
brand. If I was going to combined
Discovery, plus with HBO Max, I would just make it HBL Max and
have discovered be part of it. I think people would learn that
over time because I think that HBO Max brand is more powerful
than Discovery has more subscribers.
It's a bigger known brand. They spent an enormous amount
marketing and growing that brand, and I think it would be a
mistake to ditch it. So, right now, their official
plan is to combine these Services together to Rebrand it.
Somehow we don't have Clarity into what that's going to mean,
and then to try to grow it to 130 million paying subscribers
by 2025 in this highly competitive market.
So, my opinion, when I compare Warner Brothers Discovery to
Disney and Netflix, I like Disney and Netflix more, and for
a couple reasons, one of them. As I think that Her.
Brother's Discovery is in a state of panic.
They're in a state of disarray, they're trying to piece together
a strategy on the Fly. And I don't like investing in
companies that don't have a very clear strategy that's been
thawed out in a highly competitive market.
Like this one, I think they're in a very dangerous situation to
be in. And as good as their content is
with all of these great assets, like Discovery Plus in the
Warner media assets, it still has a cost to it.
Those assets cost a lot, they have an enormous amount.
Out of debt. That's not a great thing to have
on the balance sheet when you don't have a very clean strategy
going forward right now. I'd rather own Disney or Netflix
or even Paramount plus that's all the news for now.
I hope you enjoyed the episode. If you did, make sure to
subscribe to the Channel with the Bell notification on, and
I'll see you in the next one.