1 00:00:00,000 --> 00:00:02,700 Microsoft just had their developer keynote and they 2 00:00:02,700 --> 00:00:06,000 announced a lot of new things, but there are three primary 3 00:00:06,000 --> 00:00:08,300 announcements that really put pressure on Microsoft 4 00:00:08,300 --> 00:00:09,800 competitor. The first one is Windows 5 00:00:09,800 --> 00:00:12,500 co-pilot, Microsoft is merging chat. 6 00:00:12,500 --> 00:00:16,700 TBT technology with the windows interface, then we have being 7 00:00:16,700 --> 00:00:18,600 cheap. ET so, like Google, they're 8 00:00:18,600 --> 00:00:20,700 merging AI with their being serviced. 9 00:00:20,800 --> 00:00:24,200 And then they announced Azure AI Studio, the integration of AI 10 00:00:24,200 --> 00:00:27,800 into their Azure service, which will put immense pressure on 11 00:00:27,800 --> 00:00:31,200 their competitors primarily a double U.s. so, Microsoft is 12 00:00:31,200 --> 00:00:34,400 going after numerous big Tech competitors and they're doing so 13 00:00:34,400 --> 00:00:36,700 at the same time and then we also have a news that one of the 14 00:00:36,708 --> 00:00:39,900 companies, I recently purchased into reported, its earnings in. 15 00:00:39,900 --> 00:00:42,700 It was subpar, in fact, investors didn't like the 16 00:00:42,700 --> 00:00:44,500 earnings of into it. And the stock is, currently 17 00:00:44,500 --> 00:00:47,300 traded down around six percent after earnings will be taking a 18 00:00:47,300 --> 00:00:49,500 look at their earnings and seeing how bad it really was. 19 00:00:49,600 --> 00:00:51,700 And then, we also have a report from The Wall Street Journal 20 00:00:51,700 --> 00:00:55,500 that stocks are buying back their own, shares at a torrid 21 00:00:55,500 --> 00:00:57,900 pace and it goes through and highlights, which stocks are 22 00:00:57,908 --> 00:01:01,300 doing the most BuyBacks and what this Quickly means for the stock 23 00:01:01,300 --> 00:01:03,000 market. So as always, we have a lot to 24 00:01:03,000 --> 00:01:05,200 get to in this episode. Let's go ahead and jump in now. 25 00:01:05,200 --> 00:01:08,300 Let's first start off with an update on my portfolio and 26 00:01:08,300 --> 00:01:10,700 specifically, one of the companies that I recently bought 27 00:01:10,700 --> 00:01:14,000 into that just reported earnings we have into it. 28 00:01:14,200 --> 00:01:17,700 I added into it as a concentrated core position into 29 00:01:17,700 --> 00:01:21,900 my portfolio last week and my previous video highlighted why I 30 00:01:21,900 --> 00:01:24,000 purchased the company. I went over the entire 31 00:01:24,000 --> 00:01:27,300 investment thesis and why I believe this company is a great 32 00:01:27,300 --> 00:01:30,900 investment over the next five to ten years Into it as I 33 00:01:30,900 --> 00:01:33,900 highlighted in the previous episode is a company that I 34 00:01:33,900 --> 00:01:37,000 consider to be a quality. Compounder, a company that has a 35 00:01:37,008 --> 00:01:40,700 franchise Suite of software that all has a wide mode and trench 36 00:01:40,700 --> 00:01:43,100 Mark position. Incredibly High barriers to 37 00:01:43,100 --> 00:01:46,600 entry gray economics in a long Runway of organic growth and 38 00:01:46,600 --> 00:01:50,600 pricing power over all I think into it is a fantastic company 39 00:01:50,800 --> 00:01:53,600 that doesn't get paid to quite as much because it's not a 40 00:01:53,600 --> 00:01:55,800 flashy tech company. So after going over the 41 00:01:55,800 --> 00:01:58,900 company's qualities and the fundamentals and evaluation 42 00:01:58,900 --> 00:02:00,400 based on its free cash. Yield. 43 00:02:00,400 --> 00:02:03,500 I decided to add it to the portfolio buying in twenty four 44 00:02:03,500 --> 00:02:08,000 thousand dollars over the past. Five days that makes up around a 45 00:02:08,000 --> 00:02:12,400 5% position. So my core positions around 10%, 46 00:02:12,500 --> 00:02:14,800 this one's currently about a half size position. 47 00:02:15,400 --> 00:02:18,800 Now into it recently reported earnings and it was a little bit 48 00:02:18,800 --> 00:02:22,100 underwhelming to investors. They did beat on their earnings 49 00:02:22,100 --> 00:02:25,300 per share, but they missed on their revenue guidance by a 50 00:02:25,300 --> 00:02:28,000 narrow Miss, so they nearly missed on their revenue. 51 00:02:28,200 --> 00:02:31,300 This caused a stock to sell down around 1% today, so it's trading 52 00:02:31,300 --> 00:02:34,200 down a little bit today. Now this is caused a lot of 53 00:02:34,208 --> 00:02:38,000 people to look at this and say. Well, Joseph bought into this 54 00:02:38,000 --> 00:02:41,500 company five days ago, and they reported earnings and the 55 00:02:41,500 --> 00:02:44,400 earnings were bad. Therefore, that makes this 56 00:02:44,400 --> 00:02:46,600 investment a terrible investment. 57 00:02:46,700 --> 00:02:49,500 It was an ill-conceived investment from the beginning 58 00:02:49,700 --> 00:02:52,800 because now it's sold off right after being bought into. 59 00:02:52,800 --> 00:02:54,300 And I want to address those claims. 60 00:02:54,300 --> 00:02:57,200 So, first of all, let's go ahead and just take a look at what's 61 00:02:57,200 --> 00:02:59,800 happened over the past five days, right? 62 00:03:00,000 --> 00:03:05,100 Out as a buying into into it, I am down less than 4% on this 63 00:03:05,100 --> 00:03:08,600 holding into its stock. Price is back to where it was 64 00:03:08,800 --> 00:03:11,700 five days ago and it's where it was about eight days ago and 12 65 00:03:11,700 --> 00:03:15,600 days ago, in fact into it, year-to-date is still up around 66 00:03:15,600 --> 00:03:20,100 8 percent and it's repeatedly traded around this much the jump 67 00:03:20,100 --> 00:03:23,500 from this point to. This point was 5%, the jump from 68 00:03:23,500 --> 00:03:27,300 this point to this point was 5%. Same from here to here, and here 69 00:03:27,300 --> 00:03:30,900 to here, and here to here, and here to here, Those are all five 70 00:03:30,900 --> 00:03:34,500 percent or more in fact so far year-to-date into it has had 71 00:03:34,500 --> 00:03:37,900 over six different times where it's traded above 5 percent in 72 00:03:37,900 --> 00:03:40,900 just a day or two. So volatility is something that 73 00:03:40,900 --> 00:03:44,300 is not rare for this company but even so I still see comments of 74 00:03:44,300 --> 00:03:47,200 people looking at the past week and saying that the company's 75 00:03:47,200 --> 00:03:49,300 gone down therefore it's a bad investment. 76 00:03:49,300 --> 00:03:51,300 So let me just address those comments which I think are 77 00:03:51,300 --> 00:03:54,000 frankly dangerous to any investor to address these 78 00:03:54,000 --> 00:03:55,400 comments. I want to highlight a couple 79 00:03:55,400 --> 00:03:57,500 facts here. The first fact that I want to 80 00:03:57,500 --> 00:04:01,000 highlight and these aren't really These are just facts. 81 00:04:01,300 --> 00:04:05,500 If you judge the performance of an investment on a five-day 82 00:04:05,500 --> 00:04:10,100 period, you are not an investor. I don't know what you are, but 83 00:04:10,100 --> 00:04:12,200 you're not an investor, you're not investing. 84 00:04:12,400 --> 00:04:14,100 You're not doing value, investing you're not doing 85 00:04:14,100 --> 00:04:16,200 growth investing. You're not doing any type of 86 00:04:16,200 --> 00:04:18,100 investing. If you're judging the 87 00:04:18,100 --> 00:04:21,100 performance of any company into it included, on a five-day 88 00:04:21,100 --> 00:04:24,700 period, Then You're a traitor, you're a gambler. 89 00:04:24,800 --> 00:04:27,700 You're, you're somebody that likes to base things off of 90 00:04:27,700 --> 00:04:29,700 market trading day in and day out. 91 00:04:30,100 --> 00:04:31,900 That's not the game that I'm playing here. 92 00:04:32,200 --> 00:04:35,000 The game that I'm playing is long term, fundamental driven 93 00:04:35,000 --> 00:04:37,300 investing investing. In companies, that, I believe 94 00:04:37,300 --> 00:04:40,600 the intrinsic value will grow over a five-year period. 95 00:04:41,000 --> 00:04:44,100 The second thing that I would point out, if you let a 96 00:04:44,100 --> 00:04:48,100 short-term market trading instruct, you, or inform you on 97 00:04:48,100 --> 00:04:51,800 value, you're also not an investor if you're looking at 98 00:04:51,800 --> 00:04:55,800 the price of a company and the fact that the price goes down, 99 00:04:56,100 --> 00:04:59,100 makes you feel like the investment was a bad investment 100 00:04:59,100 --> 00:05:01,800 or the fact that the Price goes up makes you feel like it was a 101 00:05:01,800 --> 00:05:04,100 good investment if that's the way that you're investing. 102 00:05:04,100 --> 00:05:06,400 Then what you're doing is looking for other Market. 103 00:05:06,400 --> 00:05:11,000 Participants to instruct you on the value of a company while the 104 00:05:11,000 --> 00:05:13,700 company went up in price, therefore the intrinsic value 105 00:05:13,700 --> 00:05:15,900 must have grown that's not necessarily. 106 00:05:15,900 --> 00:05:19,500 So if that was the case, we could go back to companies like 107 00:05:19,500 --> 00:05:21,400 fubo. We can look at the price chart 108 00:05:21,400 --> 00:05:25,300 here, look over the past five years and if you simply took the 109 00:05:25,300 --> 00:05:28,300 approach that the company was worth more money than during 110 00:05:28,300 --> 00:05:31,100 2020. Fuba was really worth $50 per 111 00:05:31,100 --> 00:05:33,900 share intrinsically. You'd have to believe that that 112 00:05:33,900 --> 00:05:36,400 was the true value of the company. 113 00:05:37,000 --> 00:05:40,200 Clearly that was not correct. Investors didn't know what 114 00:05:40,200 --> 00:05:43,700 they're doing and they got overly hyped and excited about a 115 00:05:43,700 --> 00:05:47,100 low quality company. Bidding it up to extremely high 116 00:05:47,100 --> 00:05:50,800 valuations, far above any level of fundamental or intrinsic, 117 00:05:50,800 --> 00:05:53,400 value fundamental value investors, do not look at 118 00:05:53,400 --> 00:05:56,600 short-term Market volatility, or the bids of other Market 119 00:05:56,600 --> 00:06:00,300 participants to instruct them on the intrinsic value of a Buddy, 120 00:06:00,300 --> 00:06:02,900 they recognize that. The valuation is based off of 121 00:06:02,900 --> 00:06:05,000 cash flow and future growth prospects. 122 00:06:05,000 --> 00:06:09,700 So if you let short-term market trading instruct, you and form 123 00:06:09,700 --> 00:06:13,400 you or educate you on the value of a company, you're not an 124 00:06:13,407 --> 00:06:16,000 investor, you're certainly not a fundamentally driven value 125 00:06:16,000 --> 00:06:18,000 investor. And then, finally, number three 126 00:06:18,000 --> 00:06:20,300 value. Investors judge an investment 127 00:06:20,300 --> 00:06:23,800 based on the fundamental and intrinsic value improvements, or 128 00:06:23,800 --> 00:06:25,800 declines, not the market trading. 129 00:06:25,800 --> 00:06:28,600 This is one of the hardest things for investors to do to 130 00:06:28,600 --> 00:06:31,600 disconnect from market trading and actually look at the 131 00:06:31,600 --> 00:06:33,500 intrinsic value drivers of a company. 132 00:06:33,700 --> 00:06:37,100 It's so difficult to do because we have these numbers glaring in 133 00:06:37,100 --> 00:06:39,400 our face. All the time, we have the Dow 134 00:06:39,400 --> 00:06:42,300 Jones and the NASDAQ and the S&P 500. 135 00:06:42,400 --> 00:06:44,700 When these go down, other companies, go down. 136 00:06:44,700 --> 00:06:48,500 In some cases more, we have the numbers, the quote, price, every 137 00:06:48,500 --> 00:06:52,100 single day, every hour of every company on every Financial 138 00:06:52,100 --> 00:06:54,500 Service. And in many cases, it's very 139 00:06:54,500 --> 00:06:57,500 difficult to disconnect from this mentally, but as 140 00:06:57,500 --> 00:07:00,300 fundamentally driven value investors that Thing that you're 141 00:07:00,300 --> 00:07:03,600 required to do, you have to disconnect from the market 142 00:07:03,600 --> 00:07:05,200 trading? When I look at the value of n to 143 00:07:05,200 --> 00:07:08,200 it or any other company, I judge it based on the fundamental 144 00:07:08,200 --> 00:07:10,200 Direction and developments of the company. 145 00:07:10,200 --> 00:07:13,100 And when we judge this company in particular on its fundamental 146 00:07:13,100 --> 00:07:16,300 developments, we have them right here, based on last quarter, the 147 00:07:16,300 --> 00:07:20,200 revenue grew 7% year-over-year, That's against very tough comps, 148 00:07:20,400 --> 00:07:24,200 the operating income grew 16 percent year-over-year, the 149 00:07:24,200 --> 00:07:25,900 earnings per share on a gaap basis. 150 00:07:25,900 --> 00:07:29,300 Grew 18% year-over-year, all three core parts of the growth 151 00:07:29,300 --> 00:07:30,900 profile. I love this company are going 152 00:07:30,900 --> 00:07:33,300 along quite nicely. The intrinsic value has 153 00:07:33,300 --> 00:07:35,300 increased for into it. Not decreased. 154 00:07:35,400 --> 00:07:37,900 They also said in the earnings call that they're raising their 155 00:07:37,900 --> 00:07:41,100 full-year guidance for operating income revenue and earnings per 156 00:07:41,100 --> 00:07:43,200 share. So they're not guiding down 157 00:07:43,200 --> 00:07:45,400 there actually guiding up. And in terms of short-term 158 00:07:45,400 --> 00:07:48,300 market trading, this is something that I really do not 159 00:07:48,300 --> 00:07:52,200 concern myself with at all. I'm so used to this, I've done 160 00:07:52,200 --> 00:07:55,200 this for long enough, and I've seen this so many times that I 161 00:07:55,200 --> 00:07:58,100 know better by now, every single one of my companies and 162 00:07:58,100 --> 00:07:59,700 especially the best buys that I've done. 163 00:07:59,900 --> 00:08:03,000 And have had quarters where they sell off immediately after the 164 00:08:03,000 --> 00:08:05,100 quarter. I've owned Apple for over five 165 00:08:05,100 --> 00:08:07,000 years. This company has had so many 166 00:08:07,000 --> 00:08:11,300 cases where it sells off 5% 10%, or as a twenty percent dip, its 167 00:08:11,300 --> 00:08:13,100 countless the amount of times that's happened. 168 00:08:13,200 --> 00:08:16,400 Microsoft is another company that I started to load up into 169 00:08:16,600 --> 00:08:19,600 and the company traded down Satya Nadella sold out of the 170 00:08:19,600 --> 00:08:21,800 company. The stock price went down and I 171 00:08:21,808 --> 00:08:24,400 ended up in the red around five thousand dollars. 172 00:08:24,800 --> 00:08:27,400 What I had to do which was difficult to do. 173 00:08:27,400 --> 00:08:31,000 With Microsoft was ignore all the Comets of people saying it 174 00:08:31,000 --> 00:08:34,900 was overvalued and just wait and waiting-maid that five thousand 175 00:08:34,900 --> 00:08:38,400 dollars in the red turned to 7,500 dollars in the green 176 00:08:38,700 --> 00:08:40,600 because Microsoft is a great company. 177 00:08:40,900 --> 00:08:43,799 It is a compounder and when you wait long enough with 178 00:08:43,799 --> 00:08:46,600 Compounders they work their way back into the green. 179 00:08:46,700 --> 00:08:49,600 VG, was a company that I first bought into and it went heavily 180 00:08:49,600 --> 00:08:51,500 in the red. This is a company that I was 181 00:08:51,500 --> 00:08:55,000 openly mocked for buying because it was overvalued and it went 182 00:08:55,000 --> 00:08:56,600 into the red right after I bought it. 183 00:08:56,700 --> 00:08:58,800 And I received a number of critical comments after buying 184 00:08:58,800 --> 00:09:01,300 into this one. Simply waiting brought this one 185 00:09:01,300 --> 00:09:04,000 back into the green, the same story for Texas Roadhouse. 186 00:09:04,000 --> 00:09:06,900 This company went into the red immediately after buying it. 187 00:09:06,900 --> 00:09:09,700 The same thing with Starbucks, I bought Starbucks at $90 per 188 00:09:09,700 --> 00:09:12,800 share, and it went all the way down to 70 dollars per share, 189 00:09:12,800 --> 00:09:15,900 based off of Labor, concerns and unionization. 190 00:09:15,900 --> 00:09:19,300 What I had to do with these Holdings to turn them from 191 00:09:19,300 --> 00:09:24,800 losses into gains was simply ignore the critics and wait with 192 00:09:24,800 --> 00:09:27,100 Quality Companies. It doesn't take much. 193 00:09:27,400 --> 00:09:30,400 It just takes what Peter Lynch calls having a Um, stomach, 194 00:09:30,600 --> 00:09:33,900 avoiding the temptation to sell out of Quality Companies and 195 00:09:33,900 --> 00:09:38,300 simply waiting waiting in both cases, turn both of these losers 196 00:09:38,300 --> 00:09:41,000 back into winners. Some terms of into it having the 197 00:09:41,000 --> 00:09:44,000 quarter trade down a little bit after earnings does not concern 198 00:09:44,000 --> 00:09:47,800 me and if this concerns you that's fine you should buy an 199 00:09:47,800 --> 00:09:52,300 ETF because in almost every case every company you buy they're 200 00:09:52,300 --> 00:09:55,100 going to have time periods where they trade down after earnings 201 00:09:55,400 --> 00:09:58,300 that just comes along with individual investing but overall 202 00:09:58,300 --> 00:09:59,700 I'm happy with the report I think. 203 00:09:59,800 --> 00:10:02,300 Into its doing a great job and they addressed a lot of the 204 00:10:02,300 --> 00:10:05,000 concerns that investors have as well about upcoming 205 00:10:05,000 --> 00:10:07,000 developments. One of the biggest concerns that 206 00:10:07,000 --> 00:10:10,300 investors had about into it. One of the things I heard the 207 00:10:10,300 --> 00:10:13,700 most was, the recent news that the FED is coming out with free 208 00:10:13,700 --> 00:10:16,500 tax filing software, and the concern is that a government 209 00:10:16,500 --> 00:10:19,200 provided free tax. Filing software is going to 210 00:10:19,200 --> 00:10:21,600 impact into it by taking customers. 211 00:10:21,900 --> 00:10:24,600 Here's what they had to say on the earnings call, if you look 212 00:10:24,600 --> 00:10:28,500 at the last four years, plus there were several entrants big 213 00:10:28,500 --> 00:10:30,700 entrance into the free. E tax software. 214 00:10:31,000 --> 00:10:34,400 One was Credit Karma before we acquired them where they have 215 00:10:34,400 --> 00:10:38,500 100 million plus customers, a trusted platform, and they 216 00:10:38,500 --> 00:10:41,400 entered into the market, providing free tax software with 217 00:10:41,400 --> 00:10:45,000 sort of a very little no impact. So, that's the first thing they 218 00:10:45,000 --> 00:10:47,100 highlight here. Credit Karma, one of the 219 00:10:47,108 --> 00:10:50,700 companies they now own previously had a free tax filing 220 00:10:50,700 --> 00:10:54,900 software, competitor to into it. And it had almost no traction. 221 00:10:55,000 --> 00:10:58,000 They said the point is that free tax software is already 222 00:10:58,000 --> 00:11:01,700 available has been available. Every customer and the awareness 223 00:11:01,700 --> 00:11:04,700 is extremely high. And so, to have another sort of 224 00:11:04,700 --> 00:11:08,200 free tax software that's available is really immaterial 225 00:11:08,200 --> 00:11:09,500 in the way that we think about it. 226 00:11:09,800 --> 00:11:13,000 And I'll remind you by the way, it's actually not free. 227 00:11:13,000 --> 00:11:15,800 This is going to cost taxpayers billions of dollars and so it's 228 00:11:15,800 --> 00:11:17,600 really not free. So they're pointing out that the 229 00:11:17,600 --> 00:11:19,900 government developing, this product is not going to be free 230 00:11:19,900 --> 00:11:22,400 because it costs taxpayer money. Now, another thing I wanted to 231 00:11:22,400 --> 00:11:24,800 highlight as part of the Strategic execution, this 232 00:11:24,800 --> 00:11:27,800 company's doing something that I think is very significant, they 233 00:11:27,800 --> 00:11:30,100 say that their desktop ecosystem, Revenue. 234 00:11:30,100 --> 00:11:34,600 Grew 16 percent and desktop, Enterprise Revenue grew 20% so 235 00:11:34,600 --> 00:11:37,800 into it has a whole portion of their customer base that is 236 00:11:37,800 --> 00:11:41,800 using desktop applications and they mentioned that we are over 237 00:11:41,800 --> 00:11:45,300 halfway through a three-year transition to a subscription 238 00:11:45,300 --> 00:11:49,300 model for our desktop Accounting Solutions making this Revenue 239 00:11:49,300 --> 00:11:52,000 more predictable. We also raise our desktop prices 240 00:11:52,000 --> 00:11:55,200 for several products last September to price for Value. 241 00:11:55,800 --> 00:11:59,000 So what I believe they're doing here is they're trying to shift 242 00:11:59,000 --> 00:12:03,200 all of their Top users over to the online SAS solution where 243 00:12:03,200 --> 00:12:06,100 they have more of a reoccurring revenue and more predictable 244 00:12:06,100 --> 00:12:07,900 pricing power. This is the same exact 245 00:12:07,900 --> 00:12:11,000 transition that adobe did 10 years ago and we can look at the 246 00:12:11,000 --> 00:12:13,700 impact that this transition had on adobe's business. 247 00:12:14,000 --> 00:12:18,700 The revenue for example of adobe was basically flat for about six 248 00:12:18,700 --> 00:12:21,800 or seven years from 2007 to 2014. 249 00:12:22,100 --> 00:12:26,100 This is precisely when they shifted from desktop to a SAS 250 00:12:26,100 --> 00:12:30,100 model, the revenue suddenly exploded growing at A rapid 251 00:12:30,100 --> 00:12:33,000 race. An adobe was a legacy business 252 00:12:33,000 --> 00:12:36,000 that had been around for decades before this pivotal Point, 253 00:12:36,000 --> 00:12:41,200 transitioning from desktop to SAS model online with constant 254 00:12:41,200 --> 00:12:44,600 updates and reoccurring Revenue, really helped out this company. 255 00:12:44,600 --> 00:12:47,000 You can see the same type of things in the cash flows, 256 00:12:47,000 --> 00:12:51,000 basically flat for about six or seven years and then it 257 00:12:51,000 --> 00:12:53,100 exploded. As soon as they switched over to 258 00:12:53,100 --> 00:12:57,100 the SAS model away from desktop into it right now, is in the 259 00:12:57,100 --> 00:12:59,400 transition of switching their users. 260 00:12:59,800 --> 00:13:03,100 From desktop to the SAS model. And this is for their biggest 261 00:13:03,100 --> 00:13:06,400 part of their franchise for QuickBooks and TurboTax, they 262 00:13:06,400 --> 00:13:08,400 said looking ahead. We expect continued strong 263 00:13:08,400 --> 00:13:12,100 desktop, ecosystem Revenue over the next quarter as we complete. 264 00:13:12,100 --> 00:13:14,000 The remaining part of the three-year transition. 265 00:13:14,300 --> 00:13:17,500 We will continue to build out our online ecosystem and help 266 00:13:17,500 --> 00:13:20,800 our desktop customers migrate seamlessly to our online 267 00:13:20,800 --> 00:13:24,100 offering when they're ready. We continue to expect the online 268 00:13:24,100 --> 00:13:27,300 ecosystem, to be our growth Catalyst, long term. 269 00:13:27,700 --> 00:13:29,600 So that is where their major focus is. 270 00:13:29,700 --> 00:13:32,600 Is the long-term growth of their online ecosystem. 271 00:13:32,600 --> 00:13:35,500 And here we have into a midst that transition, currently, I 272 00:13:35,500 --> 00:13:38,200 think this will be a long-term growth driver for the company. 273 00:13:38,200 --> 00:13:40,900 So what I saw as a company that still executing on their plan 274 00:13:40,900 --> 00:13:43,100 growing, their earnings per share growing their revenue 275 00:13:43,100 --> 00:13:46,300 growing their operating income and transitioning their clients 276 00:13:46,300 --> 00:13:49,700 from Legacy desktop over to SAS solution overall. 277 00:13:49,700 --> 00:13:52,600 I think the future is very bright for into it now. 278 00:13:52,600 --> 00:13:56,200 Not everyone, shares in my enthusiasm for the success of 279 00:13:56,200 --> 00:13:58,800 into it. In fact, a lot of people seem to 280 00:13:58,800 --> 00:14:01,700 really hate this Company part of the feedback I received in the 281 00:14:01,700 --> 00:14:05,300 last episode. Is that into it bad? 282 00:14:05,500 --> 00:14:09,100 That's the the feedback I received into it is bad. 283 00:14:09,200 --> 00:14:11,700 Here's one of the comments on the last video with all due 284 00:14:11,700 --> 00:14:15,700 respect, I hope into it goes out of business. 84 thumbs up. 285 00:14:15,900 --> 00:14:19,600 Lots of people do not like into it because they deal with taxes 286 00:14:19,700 --> 00:14:21,400 and worse. Yet into it. 287 00:14:21,400 --> 00:14:24,400 Lobbies the government, they spend millions of dollars 288 00:14:24,400 --> 00:14:27,100 lobbying the government, they Lobby, the government. 289 00:14:27,100 --> 00:14:30,300 As they sit there, all the board of directors in the Executives 290 00:14:30,300 --> 00:14:33,800 of into it, they sit there conspiring together in the dimly 291 00:14:33,800 --> 00:14:37,500 lit, rooms only lit by the light of their cigar and they talked 292 00:14:37,500 --> 00:14:41,200 about how they're going to make the tax system, further complex, 293 00:14:41,400 --> 00:14:43,300 so that they can have the solution. 294 00:14:43,600 --> 00:14:46,700 It's like creating a problem that they have the antidote to. 295 00:14:46,800 --> 00:14:48,900 This is a big conspiracy of into it and why. 296 00:14:48,900 --> 00:14:51,800 So many people seemingly hated now we just address this for a 297 00:14:51,800 --> 00:14:54,000 second here. First of all it is true that 298 00:14:54,000 --> 00:14:57,300 into it does lopping they spend around two million dollars per 299 00:14:57,300 --> 00:15:00,700 year on lobbying which is pretty Run-of-the-mill. 300 00:15:00,700 --> 00:15:04,000 Virtually every large company, especially tech companies Lobby 301 00:15:04,000 --> 00:15:06,800 for their own benefit. Every single one of them Google 302 00:15:06,800 --> 00:15:09,700 spent over twenty million dollars in lobbying last year 303 00:15:09,900 --> 00:15:12,100 over 10 times. The amount that into it, did 304 00:15:12,100 --> 00:15:15,200 every large company in the u.s. spends lobbying to inform and 305 00:15:15,200 --> 00:15:17,700 help direct policy that they think will be beneficial to both 306 00:15:17,700 --> 00:15:21,200 people and their shareholders into it is being blamed by some 307 00:15:21,200 --> 00:15:24,700 people for making the tax system complex. 308 00:15:25,000 --> 00:15:27,400 And to that. I just have a hard time keeping 309 00:15:27,400 --> 00:15:29,300 a straight face when I read those comments. 310 00:15:29,700 --> 00:15:35,300 Do you think that two million dollars of lobbying to million 311 00:15:35,300 --> 00:15:37,400 is, what's causing the US tax system? 312 00:15:37,400 --> 00:15:40,000 And all of federal taxes to be complex? 313 00:15:40,400 --> 00:15:44,700 Is that really the stance you're taking into it is the cause of 314 00:15:44,700 --> 00:15:48,100 the entire United States government, having a complex tax 315 00:15:48,100 --> 00:15:50,800 system, I'm sorry to be the buzzkill if you actually believe 316 00:15:50,800 --> 00:15:52,600 that. But that's not the reason why 317 00:15:52,900 --> 00:15:56,600 our tax system has been far complex far before into it had 318 00:15:56,600 --> 00:15:59,200 anything to do with it. Into it takes an incredibly 319 00:15:59,200 --> 00:16:01,700 complex. Tax system and boils it down to 320 00:16:01,700 --> 00:16:04,700 a very easy to use interface so that their customers can 321 00:16:04,700 --> 00:16:07,700 actually navigate a problem. The government has created long 322 00:16:07,700 --> 00:16:10,300 ago, a second thing that I'll mention is virtually every 323 00:16:10,300 --> 00:16:14,300 company that I've ever invested in is evil for one reason or 324 00:16:14,300 --> 00:16:17,200 another. I always get the same response. 325 00:16:17,400 --> 00:16:22,200 This company is bad, bad bad for XYZ reasons, SMP Global. 326 00:16:22,400 --> 00:16:24,800 Well I can invest in that company, look what they did back 327 00:16:24,800 --> 00:16:28,200 in 2007, they got all the ratings wrong on the mortgage 328 00:16:28,200 --> 00:16:31,100 crisis and they caused a huge. Huge economic crisis. 329 00:16:31,300 --> 00:16:34,700 That's all their fault. This company's bad MasterCard, 330 00:16:34,800 --> 00:16:37,800 this company's monopolistic, they run a duopoly with Visa. 331 00:16:38,000 --> 00:16:40,900 They leech off of the American system, getting a revenue share 332 00:16:40,900 --> 00:16:44,200 of every single transaction. And they hurt small, businesses, 333 00:16:44,300 --> 00:16:47,300 Microsoft is so big and powerful that they just spread out into 334 00:16:47,300 --> 00:16:49,000 every single category of product. 335 00:16:49,000 --> 00:16:51,500 And their, this unmitigated monopolistic company. 336 00:16:51,800 --> 00:16:54,800 They've exercised so much power over so many industries that 337 00:16:54,800 --> 00:16:56,900 they're virtually Unstoppable. At this point. 338 00:16:56,900 --> 00:16:59,800 This company's bad for society because of how big and how Much 339 00:16:59,800 --> 00:17:03,700 control, they have apple charges developers, 15 percent, or 30 340 00:17:03,700 --> 00:17:07,000 percent of their take, and every transaction of the Apple store. 341 00:17:07,000 --> 00:17:10,000 That's an unfair Monopoly, apples bad, and the real estate 342 00:17:10,000 --> 00:17:13,200 category VT owns a lot of gambling real estate and as we 343 00:17:13,200 --> 00:17:16,099 know gambling's a bad addiction and causes lots of problems. 344 00:17:16,200 --> 00:17:19,099 VG's, bad in the restaurant category, Texas Roadhouse is 345 00:17:19,099 --> 00:17:20,700 contributing to global warming Starbucks. 346 00:17:20,700 --> 00:17:23,200 As a union Buster, it's bad to go against unions in 347 00:17:23,200 --> 00:17:25,400 Industrials. There's no industry that treats 348 00:17:25,400 --> 00:17:28,099 their employees worse than railroads railroads treat their 349 00:17:28,099 --> 00:17:29,400 employees. Horrible. 350 00:17:29,600 --> 00:17:32,100 The railroads are bad in the consumer category. 351 00:17:32,100 --> 00:17:35,300 Costco shut, things down during covid and made people wear masks 352 00:17:35,300 --> 00:17:37,600 Pepsi's causing obesity and making people die. 353 00:17:37,600 --> 00:17:40,800 Early Nike has child, labor and Estee Lauder does business in 354 00:17:40,800 --> 00:17:43,600 China, for one reason, or another, all of these companies 355 00:17:43,600 --> 00:17:45,800 are bad as well. So let me be clear on this when 356 00:17:45,800 --> 00:17:49,500 I'm doing analysis on companies, my goal is not to try to figure 357 00:17:49,500 --> 00:17:52,600 out the best way. The world should be ran, and try 358 00:17:52,600 --> 00:17:56,100 to project my own morality or thoughts on to these companies. 359 00:17:56,100 --> 00:17:59,500 What I'm doing as an investor is making investments in already. 360 00:17:59,700 --> 00:18:02,700 Established companies and then I'm modeling out what I believe 361 00:18:02,700 --> 00:18:05,500 will be the likely probable outcome over the future 362 00:18:05,700 --> 00:18:08,100 companies that I think will likely have a great deal of 363 00:18:08,100 --> 00:18:11,400 success and I'm making large concentrated positions into 364 00:18:11,400 --> 00:18:14,000 those companies. This has nothing to do with me. 365 00:18:14,000 --> 00:18:16,900 Trying to judge morality, trying to say how I think these 366 00:18:16,900 --> 00:18:20,500 companies should be or things overall should operate. 367 00:18:20,600 --> 00:18:23,200 This is what I believe, the reality is in the world, we live 368 00:18:23,200 --> 00:18:24,900 in. So if you think that into, it's 369 00:18:24,900 --> 00:18:28,000 a bad company, that's fine. You can have that Viewpoint. 370 00:18:28,000 --> 00:18:29,500 I personally think that you're wrong. 371 00:18:29,600 --> 00:18:30,800 Young. But in terms of my actual 372 00:18:30,800 --> 00:18:32,700 investing, it doesn't make a difference. 373 00:18:32,800 --> 00:18:36,100 Now, moving on, we have some major news which was Microsoft's 374 00:18:36,100 --> 00:18:39,200 keynote and they announced three big advancements in AI that I 375 00:18:39,200 --> 00:18:42,800 believe will be impactful to both Microsoft and their largest 376 00:18:42,800 --> 00:18:44,900 competitors. The first one is the merging of 377 00:18:44,900 --> 00:18:48,100 AI and two windows. Next, we are bringing the 378 00:18:48,100 --> 00:18:58,500 copilot to the biggest canvas of all windows, you're going to 379 00:18:58,500 --> 00:19:01,200 hear a lot from Panos tomorrow about it. 380 00:19:01,200 --> 00:19:06,000 But I think that this is going to make every user, a power user 381 00:19:06,000 --> 00:19:07,400 of Windows. Let's roll the video. 382 00:19:07,700 --> 00:19:10,600 It shows a panel off to the right of Windows where it pops 383 00:19:10,600 --> 00:19:14,300 out and then it's basically chat GPT right on your desktop. 384 00:19:14,500 --> 00:19:17,500 I see Microsoft taking a note from Apple. 385 00:19:17,800 --> 00:19:19,800 Apple likes to do this with their devices. 386 00:19:19,800 --> 00:19:21,800 They put their products right in the Forefront. 387 00:19:21,800 --> 00:19:25,500 They default their own products and Microsoft is doing this with 388 00:19:25,500 --> 00:19:27,000 Windows. Defaulting. 389 00:19:27,000 --> 00:19:30,600 Copilot is a very, very Apple like move. 390 00:19:30,900 --> 00:19:35,600 And I actually believe that this integration of AI into Windows. 391 00:19:36,000 --> 00:19:38,300 I think it pressures. Apple, apple has a great 392 00:19:38,300 --> 00:19:41,200 ecosystem, they have a great operating system, I think that 393 00:19:41,200 --> 00:19:43,800 users really like it, but it doesn't have a deep level of a, 394 00:19:43,800 --> 00:19:47,100 I already integrated into it. If Windows starts coming in with 395 00:19:47,100 --> 00:19:50,400 these huge Integrations, I think it's going to put pressure on an 396 00:19:50,400 --> 00:19:54,500 Apple to, at least match the capability of Microsoft, which 397 00:19:54,500 --> 00:19:57,100 may be difficult to do. We'll see how Apple response 398 00:19:57,100 --> 00:19:59,500 later this year, but they are already doing this. 399 00:19:59,600 --> 00:20:00,500 This. Now the next thing that 400 00:20:00,500 --> 00:20:04,800 Microsoft is doing is merging chat GPT AI technology into 401 00:20:04,800 --> 00:20:06,800 being searched. This isn't a surprise. 402 00:20:06,800 --> 00:20:09,400 It's something we knew that they were doing before but they're 403 00:20:09,400 --> 00:20:11,900 really not taking any half-measures here, they're 404 00:20:11,900 --> 00:20:14,300 doing a fully-fledged integration. 405 00:20:16,000 --> 00:20:21,800 Your Chad GPT is the most sort of fast growing consumer app 406 00:20:21,800 --> 00:20:25,800 we've ever seen. And searched, grounding is very 407 00:20:25,800 --> 00:20:28,400 key feature, right? So that all the information is 408 00:20:28,400 --> 00:20:32,800 current and grounded by what you have from the crawl and the 409 00:20:32,800 --> 00:20:34,600 index. And so, it's fantastic to see 410 00:20:34,600 --> 00:20:38,400 that we previously. Chechi PT was based on models 411 00:20:38,400 --> 00:20:41,600 that were static models. It wasn't hooked up to search. 412 00:20:41,600 --> 00:20:44,500 Now, chat GPT will have the power of live search, which will 413 00:20:44,500 --> 00:20:46,800 make it man. Civ lie, more powerful excited 414 00:20:46,800 --> 00:20:49,700 to be able to is going to launch in chat, GPD Place immediately 415 00:20:49,700 --> 00:20:51,600 and quickly coming even to the free tier. 416 00:20:52,200 --> 00:20:55,800 And very, this is just the start of what we plan to do with our 417 00:20:55,808 --> 00:21:00,000 partners and open a.i. to bring the best of being to the chat 418 00:21:00,000 --> 00:21:02,700 gpg experience. Now, of course, this Market is 419 00:21:02,700 --> 00:21:05,200 currently owned by Google. They have the leading market 420 00:21:05,200 --> 00:21:09,200 share and most analysts expect Google to continue with their 421 00:21:09,200 --> 00:21:12,900 massive market share lead. So right now, most investors are 422 00:21:12,900 --> 00:21:16,400 not really underwriting that Microsoft is Take massive market 423 00:21:16,400 --> 00:21:20,000 share from Google, but there's always a chance that they can 424 00:21:20,000 --> 00:21:22,900 actually make some gains. If they're pushing this hard, 425 00:21:22,900 --> 00:21:27,900 making chat, GPT and being this good, they do have a chance at 426 00:21:27,900 --> 00:21:30,500 really competing with Google. But Sasha wasn't done there. 427 00:21:30,500 --> 00:21:33,100 He announced dead. Another big integration of AI 428 00:21:33,100 --> 00:21:36,900 into existing Microsoft Technology this time into Azure. 429 00:21:36,900 --> 00:21:41,300 Of course, when we talk about the AI platform and the copilot 430 00:21:41,300 --> 00:21:45,000 stack, the next thing for us which is really exciting. 431 00:21:45,200 --> 00:21:50,300 Ting is AI Studio. This is the full lifecycle 432 00:21:50,700 --> 00:21:54,700 toolchain for you to be able to build your intelligent AI apps 433 00:21:55,000 --> 00:21:59,100 and your co-pilots everything from being able to train your 434 00:21:59,100 --> 00:22:04,000 own models, to be able to then ground whether its opening II or 435 00:22:04,000 --> 00:22:08,400 any open source model. With data of that you bring 436 00:22:08,400 --> 00:22:13,900 built-in Vector indexing in Azure search built-in support 437 00:22:13,900 --> 00:22:16,800 for rag or Rich. Will augment degeneration, 438 00:22:16,800 --> 00:22:22,000 support built-in support for prompt engineering but prompt 439 00:22:22,000 --> 00:22:26,800 flow and orchestration. And of course built-in support 440 00:22:26,800 --> 00:22:31,000 for perhaps the most important feature, which is AI safety. 441 00:22:31,100 --> 00:22:34,700 Now Azure has its full on AI studio with a variety of 442 00:22:34,700 --> 00:22:37,800 features built into it. The developers can build upon 443 00:22:38,100 --> 00:22:42,400 very similar to Amazon's AWS into a I move that they made and 444 00:22:42,400 --> 00:22:45,100 in this we have Microsoft again putting massive pressure on 445 00:22:45,200 --> 00:22:47,900 Another big tech company this time, Amazon. 446 00:22:48,100 --> 00:22:50,200 Now I'm not saying that Microsoft is going to destroy 447 00:22:50,200 --> 00:22:53,300 Apple or Google or Amazon. I don't believe that will 448 00:22:53,300 --> 00:22:55,800 happen. But we do see, here is Microsoft 449 00:22:55,800 --> 00:22:59,600 continually being incredibly aggressively competitive with. 450 00:22:59,600 --> 00:23:03,200 Even their biggest peers. Microsoft doesn't stay in their 451 00:23:03,200 --> 00:23:05,600 Lane. They continually move out of 452 00:23:05,600 --> 00:23:08,900 their Lane into competitors categories and incrementally 453 00:23:08,900 --> 00:23:11,500 shave away market share. They're doing that with desktop 454 00:23:11,500 --> 00:23:13,100 OS. They're doing that with search 455 00:23:13,100 --> 00:23:15,100 and they're doing that with Cloud Microsoft. 456 00:23:15,300 --> 00:23:17,500 He needs to be great at taking market share in different 457 00:23:17,500 --> 00:23:19,600 categories. Now, in terms of valuation, 458 00:23:19,800 --> 00:23:22,200 Microsoft has had an incredible run. 459 00:23:22,200 --> 00:23:26,000 Its up 32 percent year-to-date. I believe there's a lot of 460 00:23:26,000 --> 00:23:29,900 enthusiasm being priced into the stock now with all of the AI 461 00:23:29,900 --> 00:23:32,200 news. So I think we have a lot of AI, 462 00:23:32,200 --> 00:23:34,800 enthusiasm into this free cash flow yield. 463 00:23:34,900 --> 00:23:38,200 I think it's a little bit of excitement currently right now. 464 00:23:38,200 --> 00:23:40,400 I'm holding the stock, but I am not buying it. 465 00:23:40,400 --> 00:23:42,100 So right now, it just remains a hold. 466 00:23:42,200 --> 00:23:44,200 Now, moving on, we have another piece of news that I wanted to 467 00:23:44,200 --> 00:23:46,300 dive into it. A report from The Wall Street 468 00:23:46,300 --> 00:23:48,700 Journal on BuyBacks. And it says that they're, 469 00:23:48,800 --> 00:23:52,700 they're happening at a torrid pace and I wanted to address 470 00:23:52,700 --> 00:23:56,500 this because I feel like so often BuyBacks are misunderstood 471 00:23:56,500 --> 00:23:59,300 by investors, they're misunderstood by Congress and 472 00:23:59,300 --> 00:24:01,900 they're often highlighted in a very negative light. 473 00:24:02,300 --> 00:24:05,500 Now, we have news here that companies in the Russell, 3000, 474 00:24:05,500 --> 00:24:09,300 have unveiled plans to buy back more than 600 billion shares 475 00:24:09,300 --> 00:24:13,200 this year, in line with last year's record Pace last year, 476 00:24:13,200 --> 00:24:17,500 BuyBacks amounted to one Point two seven trillion of share 477 00:24:17,500 --> 00:24:19,800 repurchases. And there is a completed one 478 00:24:19,800 --> 00:24:22,900 point zero five trillion and Buybacks in 2022. 479 00:24:23,100 --> 00:24:26,200 So over a trillion and BuyBacks and you can see that right here 480 00:24:26,400 --> 00:24:30,500 a record year in 2022. We're on track to possibly beat 481 00:24:30,500 --> 00:24:34,300 that in 2023. So massive amounts of BuyBacks 482 00:24:34,300 --> 00:24:36,100 and this always draws a lot of attention. 483 00:24:36,400 --> 00:24:39,200 Why aren't these companies investing in future growth, or 484 00:24:39,200 --> 00:24:41,600 so on and so forth. Let me show an illustration of 485 00:24:41,600 --> 00:24:44,900 what a buyback actually. Is we have right here in the top 486 00:24:44,900 --> 00:24:47,900 left Left a company represented by this stick figure. 487 00:24:48,100 --> 00:24:49,900 This stick figure is the company. 488 00:24:49,900 --> 00:24:53,000 The person that started a company, and they run a publicly 489 00:24:53,000 --> 00:24:56,300 traded company. The company chooses to do a 490 00:24:56,300 --> 00:24:58,800 buyback. Well, we have two different 491 00:24:58,800 --> 00:25:00,300 shareholders. Let's say that we have 492 00:25:00,300 --> 00:25:03,600 shareholder one right here, and then we have shareholder to 493 00:25:03,600 --> 00:25:06,100 right here. Shareholder to doesn't want to 494 00:25:06,100 --> 00:25:09,000 have a stake in this company anymore. 495 00:25:09,400 --> 00:25:12,500 So what does he do? He sells his shares back to the 496 00:25:12,500 --> 00:25:15,100 company. The company bought back shares. 497 00:25:15,200 --> 00:25:17,300 From shareholder to so shareholder. 498 00:25:17,300 --> 00:25:20,300 To is out. He has his cash moved on, it's 499 00:25:20,300 --> 00:25:22,300 doing other things now. Now, since there's less 500 00:25:22,300 --> 00:25:25,500 shareholders shareholder, one has a bigger proportion 501 00:25:25,500 --> 00:25:28,300 ownership of the company and enjoys a bigger portion of the 502 00:25:28,300 --> 00:25:31,400 profits and in this exchange of a buyback. 503 00:25:31,400 --> 00:25:34,300 Nobody was harmed. There are no victims, it is a 504 00:25:34,300 --> 00:25:37,400 mutual transaction amongst investors in a Company. 505 00:25:37,600 --> 00:25:40,500 The company is simply trading shares from some of its 506 00:25:40,500 --> 00:25:43,500 investors who are choosing to exit out of the company and sell 507 00:25:43,500 --> 00:25:46,200 their position further and Creasing, the stake of the 508 00:25:46,200 --> 00:25:49,100 existing investors. There are no victims in the 509 00:25:49,100 --> 00:25:52,000 process of a buyback BuyBacks. Also have a lot of benefits. 510 00:25:52,300 --> 00:25:55,600 For example, when a company's price goes down, and investors 511 00:25:55,600 --> 00:25:58,300 are looking to sell. It's nice for the company, to be 512 00:25:58,300 --> 00:26:01,600 able to scoop back up, those shares at lower prices with 513 00:26:01,600 --> 00:26:04,800 Intuit trading down today, for example, this is a company that 514 00:26:04,800 --> 00:26:08,000 likes to do a lot of BuyBacks. So as the stock price trades 515 00:26:08,000 --> 00:26:11,700 down into it, will buy back the shares from investors, looking 516 00:26:11,700 --> 00:26:15,400 to sell further, increasing the steak that I have in into it 517 00:26:15,400 --> 00:26:17,400 without me, buying any additional shares. 518 00:26:17,400 --> 00:26:19,900 So we look at news like this, that BuyBacks are at record 519 00:26:19,900 --> 00:26:21,600 high. Don't let the media convince 520 00:26:21,600 --> 00:26:23,100 you. That that's an alarming thing or 521 00:26:23,100 --> 00:26:25,300 something. That's inherently bad and most 522 00:26:25,300 --> 00:26:28,000 cases it's not a bad thing. Now, that's all the update for 523 00:26:28,000 --> 00:26:30,000 this episode. I'll have more content out later 524 00:26:30,000 --> 00:26:32,400 this week, so make sure you're subscribed and I'll see you in 525 00:26:32,400 --> 00:26:33,000 the next one.