1 00:00:00,080 --> 00:00:02,640 Welcome back everyone today on the Joseph Carlson Show as 2 00:00:02,640 --> 00:00:05,000 companies like Google, major companies today. 3 00:00:05,000 --> 00:00:06,760 Trade off at the. Beginning of September, as they 4 00:00:06,760 --> 00:00:10,160 often do, we have Google hair down 2. .44. 5 00:00:10,160 --> 00:00:11,920 Percent. The company is now at a. 6 00:00:11,920 --> 00:00:15,040 Market cap of around. 2 1/2 trillion dollars, but we have 7 00:00:15,040 --> 00:00:17,320 reason to believe that Google could be worth much more in the 8 00:00:17,320 --> 00:00:19,240 very. Near future, in fact, just. 9 00:00:19,240 --> 00:00:22,400 Around a week ago, CNBC. Shared this graphic this. 10 00:00:22,400 --> 00:00:25,040 Breakdown of all the various businesses of Google. 11 00:00:25,360 --> 00:00:27,600 We know that Google's not just doing one thing, they have their 12 00:00:27,600 --> 00:00:30,080 hands in many different things, and those things are worth 13 00:00:30,080 --> 00:00:33,480 different amounts of money. CNBC mapped out what the average 14 00:00:33,480 --> 00:00:35,760 annual assessment is. For all of these various 15 00:00:35,760 --> 00:00:38,880 businesses. Each on a business level and the 16 00:00:38,880 --> 00:00:41,760 estimates from the analysts are much higher in aggregate than 17 00:00:41,760 --> 00:00:43,040 where. Google trades today. 18 00:00:43,040 --> 00:00:44,360 So we'll be going through each of these. 19 00:00:44,360 --> 00:00:46,960 Businesses from Google the. Average annual assessments for 20 00:00:46,960 --> 00:00:48,440 the business and breaking down what? 21 00:00:48,440 --> 00:00:51,240 The true value is today. To try to determine. 22 00:00:51,400 --> 00:00:54,160 What Google's actually worth now, of course. 23 00:00:54,160 --> 00:00:55,480 We have a lot of other news to get to in this. 24 00:00:55,480 --> 00:00:57,800 Episode, For example, the whole stock market's falling. 25 00:00:58,000 --> 00:01:00,600 This is common in September. We see it in the data. 26 00:01:00,880 --> 00:01:02,640 Why is September such? A bad month for. 27 00:01:02,640 --> 00:01:03,960 Stocks. Well, we can talk. 28 00:01:03,960 --> 00:01:05,840 About it, especially what investors should do in 29 00:01:05,840 --> 00:01:07,640 September. We have people like Jeremy 30 00:01:07,640 --> 00:01:10,360 Siegel that thinks that we should remain optimistic, even 31 00:01:10,360 --> 00:01:11,320 if we. Have a rough start. 32 00:01:11,320 --> 00:01:13,560 To this month. And then we also have news that 33 00:01:13,560 --> 00:01:16,680 Kraft Heinz is breaking up and this is bumming out Warren 34 00:01:16,680 --> 00:01:18,480 Buffett. He's spoken on the subject, 35 00:01:18,480 --> 00:01:21,240 saying that he's deeply disappointed in the separation. 36 00:01:21,560 --> 00:01:22,920 We'll be talking about. That as well. 37 00:01:23,080 --> 00:01:23,720 So like. Always. 38 00:01:23,720 --> 00:01:26,040 We have a ton to get to in this episode and we start things off 39 00:01:26,040 --> 00:01:27,760 with the. Breakdown of Google. 40 00:01:27,840 --> 00:01:29,720 Now before we jump into that, just a quick mention. 41 00:01:29,720 --> 00:01:32,360 It's the beginning of the month, which means if you join the 42 00:01:32,360 --> 00:01:34,520 Patreon today, you'll have the entire. 43 00:01:34,520 --> 00:01:36,960 Month as a free trial. So now's the time. 44 00:01:36,960 --> 00:01:38,600 Try it out. After the free trial. 45 00:01:38,600 --> 00:01:41,000 It's only 10 bucks a month and I think you'll love. 46 00:01:41,000 --> 00:01:42,480 It we have a lot of people that love it. 47 00:01:42,480 --> 00:01:44,440 We are. Past 10,000 members now and it's 48 00:01:44,440 --> 00:01:45,760 growing quickly. So try it. 49 00:01:45,760 --> 00:01:47,920 Out if you haven't. Now let's go ahead and talk a 50 00:01:47,920 --> 00:01:48,880 little bit. About Google here. 51 00:01:48,880 --> 00:01:51,000 First of all, Google. Is a main position in my. 52 00:01:51,000 --> 00:01:53,000 Portfolio, in fact it's. Steadily. 53 00:01:53,000 --> 00:01:55,360 Grown as a position. Overtime and in the passive 54 00:01:55,360 --> 00:01:58,000 income portfolio in. Particular Google's rather new 55 00:01:58,000 --> 00:02:00,760 position. It's around. 68. $1000 in total. 56 00:02:00,760 --> 00:02:02,960 Value with $10,000 of it being gains. 57 00:02:02,960 --> 00:02:06,480 Even after today's losses. When we look at it in the story 58 00:02:06,480 --> 00:02:07,760 fund. I can also bring that up and 59 00:02:07,760 --> 00:02:09,320 show you real quick I have a more. 60 00:02:09,320 --> 00:02:11,039 Google in this. Portfolio as well. 61 00:02:11,320 --> 00:02:13,880 The story fund is my smaller, more concentrated more. 62 00:02:13,880 --> 00:02:16,080 Aggressive growth focused portfolio. 63 00:02:16,520 --> 00:02:18,320 And Google has been here. For quite a while. 64 00:02:18,560 --> 00:02:21,560 So the gains are far more substantial in this one with a 65 00:02:21,560 --> 00:02:24,960 total position. Size of 45. 1021 thousand if 66 00:02:24,960 --> 00:02:26,920 that's gains. So this one has done a lot. 67 00:02:26,920 --> 00:02:28,640 Better. I've just owned it for longer. 68 00:02:28,640 --> 00:02:30,440 I bought it at. Really good times and Google. 69 00:02:30,440 --> 00:02:32,920 Has helped this portfolio. Outperform Now when we're 70 00:02:32,920 --> 00:02:34,880 looking at Google and the valuation of the company, it's. 71 00:02:34,880 --> 00:02:38,160 Important to address specific. Concerns and the trading 72 00:02:38,160 --> 00:02:40,680 patterns of this stock Google has been. 73 00:02:40,680 --> 00:02:44,240 Underperforming its pairs for. Quite some time, in fact, even 74 00:02:44,240 --> 00:02:47,680 today, the valuation. Multiples are far below Meta. 75 00:02:48,040 --> 00:02:50,720 They're below Microsoft. They're below Apple. 76 00:02:50,880 --> 00:02:52,560 They're below virtually every other big. 77 00:02:52,560 --> 00:02:55,680 Tech company around it. Google's by far the cheapest 1. 78 00:02:55,920 --> 00:02:58,160 And part of the reason is because of the concerns that 79 00:02:58,160 --> 00:03:00,320 have centered around this company in. 80 00:03:00,320 --> 00:03:04,160 Particular the transformation with AI information gathering. 81 00:03:04,240 --> 00:03:05,600 And this was the big problem with. 82 00:03:05,600 --> 00:03:08,000 Google the fact that. There's new ways to gather 83 00:03:08,000 --> 00:03:10,280 information. Many people have made huge 84 00:03:10,280 --> 00:03:12,720 claims that this is going to dramatically challenge Google. 85 00:03:12,960 --> 00:03:15,240 That it's a big disruptive risk that it's. 86 00:03:15,240 --> 00:03:17,360 Changing the ways. That people interact with Google 87 00:03:17,360 --> 00:03:19,520 search. And it might lower the margins. 88 00:03:19,520 --> 00:03:21,800 Of the company or make the company worse overall. 89 00:03:22,480 --> 00:03:24,640 But what we've seen over time, and what I've become 90 00:03:24,640 --> 00:03:27,560 increasingly convinced of, is that it's not being. 91 00:03:27,560 --> 00:03:29,800 Disrupted Google search is. Simply not being. 92 00:03:29,800 --> 00:03:31,320 Disrupted in the. Way that we. 93 00:03:31,320 --> 00:03:33,640 Thought it might be in fact the data. 94 00:03:33,640 --> 00:03:36,240 That's come in. Quarter after quarter after 95 00:03:36,240 --> 00:03:38,360 quarter after quarter. Show that. 96 00:03:38,360 --> 00:03:40,440 Google search is actually. Growing Google's. 97 00:03:40,440 --> 00:03:42,840 Also done a very good job. Adapting with the times. 98 00:03:42,840 --> 00:03:45,240 With the threat of. Chachi, PT and Grok and many. 99 00:03:45,240 --> 00:03:47,880 Other AI searches. Google implemented something. 100 00:03:47,880 --> 00:03:50,560 Called AI Mode AI. Mode is the benefits of. 101 00:03:50,560 --> 00:03:53,160 Both worlds. It has LLM technology. 102 00:03:53,360 --> 00:03:55,040 As well as relevant search information. 103 00:03:55,040 --> 00:03:57,880 It's always up to date. It works almost instantly. 104 00:03:58,240 --> 00:04:00,520 It's a really new technology in Google search. 105 00:04:00,840 --> 00:04:02,680 And users love it. AI mode is being. 106 00:04:02,680 --> 00:04:04,880 Used everywhere now. And on top of that, Google has 107 00:04:04,880 --> 00:04:07,720 the more dedicated Gemini for longer, more complex 108 00:04:07,720 --> 00:04:10,440 conversations. So Google has adapted to this 109 00:04:10,440 --> 00:04:12,720 new challenge, to this new. Disruptive threat. 110 00:04:13,280 --> 00:04:15,520 They showed that a technology that could have potentially 111 00:04:15,520 --> 00:04:17,880 disrupted. Them actually grew their market. 112 00:04:17,880 --> 00:04:20,240 Share and speed up the. Growth of Google search. 113 00:04:20,320 --> 00:04:23,040 Now with that challenge behind us, and some people don't think 114 00:04:23,040 --> 00:04:25,040 it's behind us, they still think Google's going to be. 115 00:04:25,040 --> 00:04:28,800 Disrupted by AI, but there's fewer and fewer of those people. 116 00:04:29,040 --> 00:04:31,160 Now most. People realize that artificial. 117 00:04:31,160 --> 00:04:33,640 Intelligence is going to. Benefit Google overall. 118 00:04:33,880 --> 00:04:35,640 And that the search business is not becoming. 119 00:04:35,640 --> 00:04:38,680 Disrupted like people thought it's just evolving over. 120 00:04:38,680 --> 00:04:41,720 Time. Now with that said, where does 121 00:04:41,720 --> 00:04:43,640 that leave? Us What is Google stock 122 00:04:43,640 --> 00:04:46,280 actually? Worth if we assume no major 123 00:04:46,280 --> 00:04:48,560 disruptions to Google. Search well. 124 00:04:48,560 --> 00:04:50,280 That's a more complex question because we. 125 00:04:50,280 --> 00:04:52,560 Look at Google. And this company has many 126 00:04:52,560 --> 00:04:55,520 various business lines when you break it down by revenue. 127 00:04:55,600 --> 00:04:57,920 You have Google search. You have YouTube. 128 00:04:58,000 --> 00:05:00,760 Ads and this is a little bit complicated. 129 00:05:00,760 --> 00:05:02,960 Because YouTube ads. Does not include YouTube 130 00:05:02,960 --> 00:05:05,760 Premium. Which they have over. 120 131 00:05:05,760 --> 00:05:08,760 million premium subscribers. So YouTube also is. 132 00:05:08,760 --> 00:05:10,800 Bigger than just this portion shows. 133 00:05:11,240 --> 00:05:14,000 Then you have Google network. You have subscription which. 134 00:05:14,000 --> 00:05:16,560 Includes things like Google One and YouTube Premium. 135 00:05:17,000 --> 00:05:19,400 You have Google Cloud. Which is a a monster of a 136 00:05:19,400 --> 00:05:20,320 business. Then you have. 137 00:05:20,320 --> 00:05:23,360 Other bets which? Could be renamed Waymo because 138 00:05:23,360 --> 00:05:26,680 the most significant. Other bet by now by far is 139 00:05:26,680 --> 00:05:28,680 Waymo. When we look at Google in their. 140 00:05:28,680 --> 00:05:32,440 Total value it's already. At a decent valuation, but when 141 00:05:32,440 --> 00:05:33,880 we break. This up by different. 142 00:05:33,880 --> 00:05:35,840 Businesses that Google owns if you're looking at. 143 00:05:35,840 --> 00:05:38,560 It as alphabet. A conglomerate of unified 144 00:05:38,560 --> 00:05:41,560 businesses, it's even cheaper, and that's where we get into 145 00:05:41,560 --> 00:05:43,400 this. Chart here this graphic. 146 00:05:43,400 --> 00:05:46,560 Showing all the various. Businesses of Google we have. 147 00:05:46,600 --> 00:05:49,800 Search DeepMind and TPU. We have Google Cloud. 148 00:05:49,800 --> 00:05:52,200 YouTube, Waymo and Network. We have all. 149 00:05:52,200 --> 00:05:54,800 These various businesses with their numbers underneath of what 150 00:05:54,800 --> 00:05:56,640 the analysts think they're worth. 151 00:05:57,160 --> 00:05:59,600 So they've averaged out all. The analysts, they've attached 152 00:05:59,600 --> 00:06:01,880 the numbers and that. Is combined valuation of. 153 00:06:01,880 --> 00:06:04,440 Google, when we look at this business by business, we can 154 00:06:04,440 --> 00:06:06,640 just take a look at what the analysts think of the Business 155 00:06:06,640 --> 00:06:08,920 Today, for example, with Google. Search. 156 00:06:09,000 --> 00:06:13,640 Alone, just the search business, they have a price tag of 1.2. $5 157 00:06:13,680 --> 00:06:16,440 trillion. So the analysts believe that 158 00:06:16,440 --> 00:06:18,840 search alone justifies half the market. 159 00:06:18,840 --> 00:06:21,680 Cap of Google today. Then we get into DeepMind and 160 00:06:21,680 --> 00:06:23,880 TPU. Now this is an interesting way 161 00:06:23,880 --> 00:06:26,360 to break it up, but the analysts believe. 162 00:06:26,840 --> 00:06:28,720 That this part of Google which used to be a. 163 00:06:28,720 --> 00:06:31,760 Cost centre pouring money into. Artificial. 164 00:06:31,760 --> 00:06:34,800 Intelligence in their models. Now it's no longer a cost 165 00:06:34,800 --> 00:06:37,280 centre. DeepMind is making a fortune. 166 00:06:37,280 --> 00:06:38,960 They're licensing all this technology. 167 00:06:39,200 --> 00:06:41,080 You can see that. The tokens being used. 168 00:06:41,080 --> 00:06:42,880 For all these. Different models like Gemini 169 00:06:43,200 --> 00:06:46,400 being used more and more. Google has a 1000 different ways 170 00:06:46,400 --> 00:06:48,560 to monetize this, so DeepMind is a. 171 00:06:48,560 --> 00:06:50,520 Huge part of. Google, it's a it's a massive 172 00:06:50,520 --> 00:06:51,640 part. They have some of the leading 173 00:06:51,640 --> 00:06:55,360 models with distribution for it and then you have TP us. 174 00:06:55,800 --> 00:06:58,200 Which are Google's proprietary chips that they developed. 175 00:06:58,560 --> 00:07:01,280 To help manage all of this, to make it so they're not so 176 00:07:01,280 --> 00:07:03,960 reliant on NVIDIA. When you combine both of those 177 00:07:03,960 --> 00:07:06,880 together, the analysts are saying that it's worth almost 178 00:07:06,880 --> 00:07:12,120 900 billion dollars, 897 billion in terms of the average analysts 179 00:07:12,120 --> 00:07:13,680 estimates. Then we add in Google. 180 00:07:13,680 --> 00:07:16,960 Cloud, they say that this is worth 5. 172. 181 00:07:16,960 --> 00:07:19,760 Billion dollars currently. We add in YouTube. 182 00:07:20,200 --> 00:07:21,840 YouTube. They're estimating to be worth 183 00:07:21,920 --> 00:07:25,680 400 and. $46 billion. Then we add in Waymo. 184 00:07:26,040 --> 00:07:29,840 With Waymo, they're giving it a valuation of $173 billion. 185 00:07:29,840 --> 00:07:31,480 And then the analysts believe that the network. 186 00:07:31,480 --> 00:07:34,280 Business is worth 138 billion. Now what does? 187 00:07:34,280 --> 00:07:36,560 This look like if we add together all these numbers and. 188 00:07:36,560 --> 00:07:38,320 See what it amounts to? Well, I went. 189 00:07:38,320 --> 00:07:40,920 Ahead and did that for you we have all the very assessments 190 00:07:40,920 --> 00:07:43,080 right here from the. Analysts all the different 191 00:07:43,080 --> 00:07:47,400 businesses and it adds to 3.476 trillion. 192 00:07:47,400 --> 00:07:48,560 Dollars. So if you take. 193 00:07:48,560 --> 00:07:50,840 All the average analyst estimates, you combine them. 194 00:07:50,840 --> 00:07:53,560 Together they overall. Believe that the company is 195 00:07:53,560 --> 00:07:55,760 being undervalued by a full trillion. 196 00:07:55,760 --> 00:07:57,800 Dollars. And that means that if you were 197 00:07:57,800 --> 00:07:59,560 to add that trillion dollars to the market. 198 00:07:59,560 --> 00:08:02,640 Cap that would be a 40. Percent increase over today's. 199 00:08:02,640 --> 00:08:04,640 Price. That's what the analysts. 200 00:08:04,640 --> 00:08:06,360 Believe. Now we're going to take. 201 00:08:06,360 --> 00:08:07,680 A look at what I believe I believe. 202 00:08:07,680 --> 00:08:09,280 We can do even better than the average. 203 00:08:09,280 --> 00:08:11,400 Analyst and we start off with Google search. 204 00:08:11,400 --> 00:08:14,640 This is where the analyst had it at 1.25 trillion. 205 00:08:14,640 --> 00:08:16,880 Dollars, and this is. Going to be one that I don't. 206 00:08:16,880 --> 00:08:18,720 Disagree with so I'm going to. Copy in the same. 207 00:08:18,720 --> 00:08:21,080 Number here I think. That you could, you can move it 208 00:08:21,080 --> 00:08:23,040 up or down a little bit, but when you look at the numbers. 209 00:08:23,040 --> 00:08:25,760 This is pretty straightforward. Google search is massive. 210 00:08:25,760 --> 00:08:26,760 It does make up. Around. 211 00:08:26,760 --> 00:08:29,080 Half of the total revenue of Google. 212 00:08:29,280 --> 00:08:31,640 But also more than the operating income because it's so. 213 00:08:31,640 --> 00:08:34,760 Profitable. Then we have DeepMind and TPU. 214 00:08:35,400 --> 00:08:38,400 This is another category. Where I'm going to agree. 215 00:08:38,400 --> 00:08:40,600 With the analysts, it's very. Clear that Google. 216 00:08:40,600 --> 00:08:43,320 Has a massively valuable. Property here with all their 217 00:08:43,320 --> 00:08:46,040 Gemini models. And their TP us they've been 218 00:08:46,040 --> 00:08:48,040 able to out compete and gain new clients. 219 00:08:48,040 --> 00:08:51,120 Because of their TP, us, their processing power, the lower 220 00:08:51,120 --> 00:08:52,680 cost. Of running all their models 221 00:08:52,840 --> 00:08:54,800 while still being. Profitable for Google. 222 00:08:55,160 --> 00:08:56,960 So they have a lot of ways to monetize. 223 00:08:56,960 --> 00:08:58,760 This for this. One, I'm just going to keep the 224 00:08:58,760 --> 00:09:01,560 analysts estimates then we get. To Google Cloud. 225 00:09:02,120 --> 00:09:04,440 This is 1 where they. Have it at 5:00. 170. $2 226 00:09:04,440 --> 00:09:06,720 billion. And I think this is a low 227 00:09:06,720 --> 00:09:08,800 estimate now having a business in and of. 228 00:09:08,800 --> 00:09:11,400 Itself at this. Scale growing this quickly. 229 00:09:11,720 --> 00:09:14,480 Is already a big win. Even if the margins don't look 230 00:09:14,480 --> 00:09:17,040 good, even if it's not profitable, having a business 231 00:09:17,040 --> 00:09:20,400 grow this quickly is a huge thing in and of itself, but at 232 00:09:20,400 --> 00:09:22,800 the same time it's growing that. Quickly the operating. 233 00:09:22,800 --> 00:09:25,280 Margins are also. Ticking up very quickly. 234 00:09:25,280 --> 00:09:26,920 So this. Is growing super fast. 235 00:09:26,920 --> 00:09:31,120 But it's also now at a 20.7% operating margin, which is just 236 00:09:31,120 --> 00:09:33,640 incredible. And this is not the ceiling. 237 00:09:33,640 --> 00:09:36,000 I believe that's going to happen over the next five years. 238 00:09:36,000 --> 00:09:39,040 And that's why I'm going to put. Google Cloud as worth. 700 and. 239 00:09:39,040 --> 00:09:41,280 $50 billion today. So I believe there's even more 240 00:09:41,280 --> 00:09:43,280 upside with Google Cloud. Now next we get to. 241 00:09:43,280 --> 00:09:47,040 YouTube The average annual assessment for YouTube was $446 242 00:09:47,040 --> 00:09:48,720 billion. And I believe. 243 00:09:48,720 --> 00:09:50,760 That's a little low. What I would give as a 244 00:09:50,760 --> 00:09:54,640 comparison here is Netflix. Netflix is a company that I'm 245 00:09:54,640 --> 00:09:57,520 incredibly bullish on. I think it has an incredible 246 00:09:57,720 --> 00:09:59,040 fundamentals. It has a huge. 247 00:09:59,040 --> 00:10:01,680 Total addressable market. It's going to continue growing, 248 00:10:01,680 --> 00:10:04,360 gaining subscribers, having operating leverage. 249 00:10:04,640 --> 00:10:07,080 Being in digital media is one of the best. 250 00:10:07,080 --> 00:10:08,520 Categories that. You can be in. 251 00:10:08,880 --> 00:10:10,880 So this is a company that I think is incredibly well 252 00:10:10,880 --> 00:10:12,720 positioned for the future. I think it's. 253 00:10:12,720 --> 00:10:15,400 Appropriately valued today. And Netflix currently. 254 00:10:15,400 --> 00:10:21,560 Trades at A5. $113 billion market cap, so around $60 255 00:10:21,560 --> 00:10:24,000 billion more than what? YouTube's currently at. 256 00:10:24,520 --> 00:10:26,720 They think that Netflix. Is worth that much more than 257 00:10:26,720 --> 00:10:28,760 YouTube today? Well, there's a couple different 258 00:10:28,760 --> 00:10:30,800 things you could highlight here. First of all, Netflix. 259 00:10:30,800 --> 00:10:33,560 Likely has better profitability and cost structure than. 260 00:10:33,560 --> 00:10:34,320 YouTube. YouTube. 261 00:10:34,320 --> 00:10:37,520 Has to pay their ad revenue, 50% of it to the creators. 262 00:10:37,840 --> 00:10:39,600 So anytime a video makes more. Views. 263 00:10:39,600 --> 00:10:40,880 The creators make more. Money. 264 00:10:41,080 --> 00:10:44,680 It scales indefinitely that way. Netflix doesn't have that issue. 265 00:10:44,680 --> 00:10:47,680 They pay for their. Content upfront once and then no 266 00:10:47,680 --> 00:10:49,120 matter how much money they make from it, they. 267 00:10:49,120 --> 00:10:50,560 Keep all the profits. But while. 268 00:10:50,560 --> 00:10:52,560 Netflix is more profitable and has better. 269 00:10:52,560 --> 00:10:55,600 Operating leverage than YouTube. YouTube is bigger. 270 00:10:55,880 --> 00:10:57,800 YouTube is gaining. More market share. 271 00:10:58,040 --> 00:10:58,840 When we look. At the data. 272 00:10:58,840 --> 00:11:01,040 Here we can see. The market share of all these 273 00:11:01,040 --> 00:11:03,960 streaming services over. Time and the only one out of 274 00:11:03,960 --> 00:11:07,880 this list that continues to gain like a compound machine year. 275 00:11:07,880 --> 00:11:10,240 After year, After year. Is that one on the? 276 00:11:10,240 --> 00:11:13,800 Very bottom that black. Line on the bottom that is 277 00:11:13,880 --> 00:11:17,640 YouTube you can see it go from 8% to 9. 278 00:11:17,640 --> 00:11:21,880 Percent market share to 10%. To 11% to 12. 279 00:11:21,880 --> 00:11:25,320 Percent to 13%. While almost having no 280 00:11:25,320 --> 00:11:28,240 seasonality, not giving up. Market share there's. 281 00:11:28,240 --> 00:11:29,920 Almost no months that are really bad. 282 00:11:29,920 --> 00:11:31,800 For for. YouTube the other. 283 00:11:31,800 --> 00:11:34,240 Streaming services are highly. Seasonal, they have a. 284 00:11:34,240 --> 00:11:37,400 Little bit cyclicality, they give up market share, they gain 285 00:11:37,400 --> 00:11:40,240 it back and. Even Netflix is dominant as it 286 00:11:40,240 --> 00:11:42,600 is and as good of cost. Structure as it has. 287 00:11:43,000 --> 00:11:44,920 Has not been growing a market. Share as fast as. 288 00:11:44,920 --> 00:11:47,840 YouTube YouTube is the only standout 1 here. 289 00:11:48,080 --> 00:11:50,280 That is really. Destroying everyone else. 290 00:11:50,280 --> 00:11:52,720 YouTube is something that people are just watching more and more. 291 00:11:53,000 --> 00:11:54,520 There's more high quality content. 292 00:11:54,800 --> 00:11:56,840 And now they're getting. Into sports rights as well. 293 00:11:57,200 --> 00:11:58,920 So when I look at. YouTube I have every. 294 00:11:58,920 --> 00:12:00,840 Reason to. Believe that overall it. 295 00:12:00,840 --> 00:12:03,720 Should be comped to Netflix and I believe I could put a. 296 00:12:03,720 --> 00:12:05,760 Valuation today of five. 110 billion. 297 00:12:05,760 --> 00:12:07,040 Dollars. Now, of course, we have. 298 00:12:07,040 --> 00:12:08,440 Waymo we. Don't want to leave that out. 299 00:12:08,480 --> 00:12:11,560 The analysts have 173. Billion dollars for Waymo. 300 00:12:12,040 --> 00:12:14,600 So the valuation of Waymo at 173. 301 00:12:14,920 --> 00:12:16,320 Is pretty good it. Shows that waymo's. 302 00:12:16,320 --> 00:12:18,720 Actually, a big part of. Google Now it's actually 303 00:12:18,720 --> 00:12:20,760 meaningful. It's showing up on earnings 304 00:12:20,760 --> 00:12:23,400 calls even though it's not. Really a creative. 305 00:12:23,400 --> 00:12:25,080 To the company, it's not. Profitable. 306 00:12:25,080 --> 00:12:26,760 It's not generating. A ton of revenue. 307 00:12:27,080 --> 00:12:29,200 Waymo's kind of. Proving a path today. 308 00:12:29,320 --> 00:12:30,720 It's showing that it's successful. 309 00:12:31,240 --> 00:12:34,800 And again, I believe that this estimate is low when we look at 310 00:12:34,800 --> 00:12:36,960 the best comparison you can come up with today. 311 00:12:37,400 --> 00:12:40,240 It's likely Tesla. Tesla's a company that trades 312 00:12:40,240 --> 00:12:44,040 off the promise, the promise of a robotaxi network. 313 00:12:44,160 --> 00:12:47,480 And even though Tesla hasn't succeeded in having a robotaxi. 314 00:12:47,480 --> 00:12:50,360 Network without a driver or an employee in the vehicle at all. 315 00:12:50,360 --> 00:12:53,760 Times It's still kind of In this testing beta phase, the 316 00:12:53,760 --> 00:12:56,240 company's trading at a trillion. Dollar market cap today. 317 00:12:56,640 --> 00:12:59,760 Most of that, in fact, I'd say around half of that is only 318 00:12:59,760 --> 00:13:02,920 justified by their promises of a robotaxi network. 319 00:13:03,480 --> 00:13:06,640 So you have around $500 billion out of a trillion. 320 00:13:07,280 --> 00:13:09,880 That's just based on the. Robotaxi network, at least. 321 00:13:09,880 --> 00:13:11,800 Because a humanoid. Robot stuff is way. 322 00:13:11,800 --> 00:13:14,360 Out in the future, The thing that's right around the corner 323 00:13:14,360 --> 00:13:15,920 for. Tesla is the robotaxi. 324 00:13:15,920 --> 00:13:17,600 Network. So there's a bit of a disconnect 325 00:13:17,600 --> 00:13:19,360 here. Tesla stock is trading at 326 00:13:19,360 --> 00:13:22,840 extremely high valuations on the promises of doing mostly what 327 00:13:22,840 --> 00:13:25,520 Waymo's already accomplished, which is having a successful, 328 00:13:25,520 --> 00:13:28,200 proven robotaxi network that is rapidly expanding. 329 00:13:28,200 --> 00:13:31,440 Across the globe. When we look at Waymo, however, 330 00:13:31,920 --> 00:13:33,440 it's not really being factored into. 331 00:13:33,440 --> 00:13:36,440 Google stock today at. All investors are getting no 332 00:13:36,440 --> 00:13:38,480 credit for it, but even the annual. 333 00:13:38,480 --> 00:13:40,760 Assessments are rather low if Tesla's. 334 00:13:40,760 --> 00:13:42,440 Trading at the valuation it is today. 335 00:13:42,440 --> 00:13:43,960 Based off of that. Expectation. 336 00:13:44,280 --> 00:13:45,800 I think that Waymo should be trading. 337 00:13:45,800 --> 00:13:48,720 Closer to $300 billion, I think. I think that's. 338 00:13:48,720 --> 00:13:50,920 What it's worth today, like you look at the. 339 00:13:50,920 --> 00:13:53,080 Robotaxi Network. The success they've had. 340 00:13:53,400 --> 00:13:56,360 They've done 10 million rides. The data is very public. 341 00:13:56,360 --> 00:13:58,400 It's incredibly safe. They don't have to have 342 00:13:58,400 --> 00:13:59,880 employees in the passenger seats. 343 00:14:00,240 --> 00:14:03,440 They're accomplishing this. Waymo's actually doing it ahead 344 00:14:03,440 --> 00:14:06,000 of everyone else. When I look at Waymo, I'm going 345 00:14:06,000 --> 00:14:07,080 to give. It a valuation. 346 00:14:07,440 --> 00:14:09,760 Of 250. I think that's appropriate, even 347 00:14:09,760 --> 00:14:11,400 conservative. For what it really is worth 348 00:14:11,400 --> 00:14:13,080 today. And then finally we get to 349 00:14:13,080 --> 00:14:16,400 network which they have an estimate of 130. $8 billion. 350 00:14:16,720 --> 00:14:18,320 For that one, I'm just. Going to use their. 351 00:14:18,320 --> 00:14:20,480 Estimate when I get done with mine. 352 00:14:20,800 --> 00:14:25,080 It's closer to 3. Point $8 trillion, so I'm even 353 00:14:25,080 --> 00:14:27,240 above. Where the analyst estimates are 354 00:14:27,240 --> 00:14:30,280 at 3.47. I'm at 3.8 from where? 355 00:14:30,280 --> 00:14:33,840 Google stock sits today at 2 point. 4-6 trillion to the 356 00:14:33,840 --> 00:14:37,160 three. .8 trillion. That is A50. 2% increase. 357 00:14:37,160 --> 00:14:38,680 So there's my thoughts on the subject. 358 00:14:38,680 --> 00:14:40,480 I think that Google is currently over a. 359 00:14:40,480 --> 00:14:42,280 Trillion dollars undervalued today. 360 00:14:42,280 --> 00:14:44,600 And I think it's going to go up to those valuations overtime. 361 00:14:45,080 --> 00:14:48,040 It'll just take time for the bearish sentiment, the overall 362 00:14:48,200 --> 00:14:51,960 troubled Google to fade away for it to get better treatment in 363 00:14:51,960 --> 00:14:54,200 the market better. Sentiment, which typically 364 00:14:54,200 --> 00:14:55,840 happens. Quarter after quarter and? 365 00:14:56,160 --> 00:14:57,680 I think it's going to happen in this case. 366 00:14:57,680 --> 00:14:59,400 We'll just have to be patient and wait. 367 00:15:00,000 --> 00:15:02,600 Now moving on, we get. To some news here we have first 368 00:15:02,600 --> 00:15:04,800 of. All the news that September. 369 00:15:04,800 --> 00:15:07,560 Is usually just a bad. Month in the market, so I don't 370 00:15:07,560 --> 00:15:10,440 want to start things off with a big bummer, but we have the. 371 00:15:10,440 --> 00:15:13,600 Opening day of September and it's terrible stocks. 372 00:15:13,600 --> 00:15:15,680 Are down like crazy. You can look at your favorite 373 00:15:15,680 --> 00:15:17,840 stocks, many of them are down 3 or 4%. 374 00:15:18,360 --> 00:15:20,960 And you might ask why? And that's a question that 375 00:15:20,960 --> 00:15:22,400 everybody. Tries to answer. 376 00:15:22,720 --> 00:15:24,840 But there's just no good explanation. 377 00:15:25,200 --> 00:15:28,040 There's psychological factors that people have tried to. 378 00:15:28,040 --> 00:15:31,240 Point to to. Try to explain why September's 379 00:15:31,240 --> 00:15:32,120 such a. Bad month. 380 00:15:32,520 --> 00:15:35,440 But overall, people. Don't really know, we just know 381 00:15:35,440 --> 00:15:38,640 that it's typically a bad month. Take a look at this chart. 382 00:15:38,960 --> 00:15:40,920 The S&P 500. Average monthly. 383 00:15:40,920 --> 00:15:44,960 Return since 1928. Most of the time it's great. 384 00:15:45,040 --> 00:15:49,160 September's the one month that on average is -1%. 385 00:15:49,680 --> 00:15:53,480 It's almost incredible. It's incredibly specific and 386 00:15:53,480 --> 00:15:57,440 it's incredibly consistent. Isn't that just interesting? 387 00:15:57,440 --> 00:15:59,360 There's one month out. Of the year where the market 388 00:15:59,360 --> 00:16:01,360 just does terrible every single year. 389 00:16:02,080 --> 00:16:04,400 At this point, it's. Like a self fulfilling prophecy 390 00:16:04,600 --> 00:16:06,720 they believe the psychological aspect is part of. 391 00:16:06,720 --> 00:16:09,120 It people expect. September to be bad? 392 00:16:09,120 --> 00:16:10,720 They talk about September being bad. 393 00:16:11,040 --> 00:16:12,720 And. Therefore it self fulfills. 394 00:16:12,720 --> 00:16:15,800 And makes it bad. There's other thoughts you can 395 00:16:15,800 --> 00:16:17,160 point. To like tax. 396 00:16:17,160 --> 00:16:19,280 Planning there's September quarterly. 397 00:16:19,280 --> 00:16:22,480 Tax payments due on September 15th, so that can affect 398 00:16:22,480 --> 00:16:24,920 businesses as well. But overall, we don't. 399 00:16:24,920 --> 00:16:26,160 Really know. We just have the. 400 00:16:26,160 --> 00:16:28,720 Data now one individual that says to remain optimistic. 401 00:16:28,720 --> 00:16:30,800 Even though we're in September. Is Jeremy Siegel. 402 00:16:31,040 --> 00:16:35,280 Historically really the worst, worst month of the of the year. 403 00:16:36,240 --> 00:16:39,320 Listen, you know, certainly we could have a pullback. 404 00:16:39,400 --> 00:16:44,160 I mean, I still think the, the bull trends are intact. 405 00:16:45,040 --> 00:16:48,640 I know you guys mentioned the Wall Street Journal article this 406 00:16:48,640 --> 00:16:51,800 morning about all time high. So I, I, I took it out and read 407 00:16:51,800 --> 00:16:55,840 it and it said, Oh yeah, it's all time high relative to sales. 408 00:16:55,840 --> 00:16:59,640 Well, I thought we, you know, value stocks on earnings, not 409 00:16:59,640 --> 00:17:03,880 sales and we're way, you know, below any all time high in terms 410 00:17:03,880 --> 00:17:07,400 of earnings. Not that it's not an expensive 411 00:17:07,400 --> 00:17:11,400 market, but once you take out and even that article admitted 412 00:17:11,400 --> 00:17:14,720 once you take out the mag 7, you know, we're only, you know, 413 00:17:14,720 --> 00:17:17,760 slightly above a longer term medium. 414 00:17:17,760 --> 00:17:19,560 So. He points out a couple really 415 00:17:19,560 --> 00:17:22,319 important things there. 1st of. All the people saying that the 416 00:17:22,319 --> 00:17:24,599 market's super expensive. Like this Wall Street Journal? 417 00:17:24,599 --> 00:17:27,440 Article that they're referencing points out that it's based on. 418 00:17:27,480 --> 00:17:30,320 Price to sales. Which is the the net revenue of 419 00:17:30,320 --> 00:17:32,480 the company you're. Dividing that by the market cap 420 00:17:32,480 --> 00:17:33,640 to get the price to. Sales. 421 00:17:34,040 --> 00:17:36,400 In that case, it's not a profitability metric. 422 00:17:36,880 --> 00:17:41,240 It's a revenue proxy, but it's not a profitability metric, 423 00:17:41,560 --> 00:17:44,400 price to earnings. Is a profitability metric, so. 424 00:17:44,600 --> 00:17:47,000 When you're looking at. PE ratios, that's typically what 425 00:17:47,000 --> 00:17:48,200 we've. Used to. 426 00:17:48,200 --> 00:17:50,160 Determine whether or not the stock market is. 427 00:17:50,160 --> 00:17:52,120 Expensive. We look at the price of the 428 00:17:52,120 --> 00:17:54,160 stock. Market compared to its earnings. 429 00:17:54,640 --> 00:17:58,040 Now we're doing that with sales because it sounds more dramatic 430 00:17:58,600 --> 00:17:59,800 when you compare the stock market to. 431 00:17:59,800 --> 00:18:01,680 The price of sales. It looks more expensive than the 432 00:18:01,680 --> 00:18:04,080 PE ratio and the reason why is simple. 433 00:18:04,160 --> 00:18:06,360 Overtime companies are becoming higher. 434 00:18:06,360 --> 00:18:08,600 Margin, we have a lot better. Companies. 435 00:18:08,600 --> 00:18:10,120 More profitable ones. That have. 436 00:18:10,120 --> 00:18:12,240 Higher margins leading this stock market. 437 00:18:12,240 --> 00:18:14,440 So we have this combination of. Companies that are trading at 438 00:18:14,440 --> 00:18:16,920 higher price to sales but lower PE ratios. 439 00:18:17,040 --> 00:18:19,240 We mock people when they look at sales. 440 00:18:19,240 --> 00:18:20,520 We say that's not the real number. 441 00:18:20,520 --> 00:18:22,360 You're right. If we're looking at earnings, 442 00:18:22,360 --> 00:18:24,680 that seems like the much more important number to bear out. 443 00:18:24,680 --> 00:18:28,520 And the biggest companies you're talking about, the Mag 7 are, 444 00:18:28,680 --> 00:18:32,080 are the richest in terms of of price to sales probably too 445 00:18:32,080 --> 00:18:34,600 because of all the potential. Now there is a. 446 00:18:34,600 --> 00:18:36,560 Solid use case for price to sales. 447 00:18:36,560 --> 00:18:38,560 It does. Become useful when a company's 448 00:18:38,560 --> 00:18:39,920 not. Focused on profits. 449 00:18:39,960 --> 00:18:42,360 So if you have a company that's in a transformation. 450 00:18:42,360 --> 00:18:44,120 It's exercising operating leverage. 451 00:18:44,320 --> 00:18:46,640 It's going for land grab. They're solely focused on 452 00:18:46,640 --> 00:18:48,520 revenue. Then of course that company 453 00:18:48,520 --> 00:18:51,800 should be priced on price to sales, not profitability. 454 00:18:52,160 --> 00:18:55,280 Once a company becomes more profitable, more mature, then 455 00:18:55,280 --> 00:18:56,760 you move on to price to earnings. 456 00:18:57,160 --> 00:18:59,280 But overall, when you're looking at markets and the overall. 457 00:18:59,280 --> 00:19:01,600 Price of a market. It should probably be based. 458 00:19:01,680 --> 00:19:04,960 On earnings, not sales. Because the margins of those 459 00:19:04,960 --> 00:19:09,400 companies are so high, margins of digital tech companies have 460 00:19:09,440 --> 00:19:12,440 always been the highest. So if they're predominant, 461 00:19:12,440 --> 00:19:15,920 you're, you're going to get a result such as this. 462 00:19:15,920 --> 00:19:18,880 And I don't, you know, I, I think that's built into tech. 463 00:19:19,040 --> 00:19:23,040 Tech has very, very high margins because of the way accounting 464 00:19:23,040 --> 00:19:26,680 goes and the way the, you know, globalization and how you can 465 00:19:26,680 --> 00:19:30,120 replicate virtually no cost. All you need is those customers 466 00:19:30,120 --> 00:19:32,320 to come. So it's a very different sort of 467 00:19:32,320 --> 00:19:34,960 a thing than, you know, looking back at a steel company or an 468 00:19:34,960 --> 00:19:38,280 auto company and you know, to put them all together I think 469 00:19:38,280 --> 00:19:39,920 gives a misleading look at the market. 470 00:19:40,080 --> 00:19:42,160 We have the best companies in the world. 471 00:19:42,320 --> 00:19:44,240 Growing. Quickly They're incredibly 472 00:19:44,240 --> 00:19:47,360 profitable, they have robust balance sheets and even looking 473 00:19:47,360 --> 00:19:49,800 at historical terms, the market's not overly expensive. 474 00:19:49,800 --> 00:19:52,840 Today, the Bears have. Simply just lost. 475 00:19:53,200 --> 00:19:54,520 They've lost this. Battle. 476 00:19:54,520 --> 00:19:56,120 They don't have a solid bear case. 477 00:19:56,120 --> 00:19:58,080 And I believe there's a very good chance that the selling in 478 00:19:58,080 --> 00:19:59,280 September. Is short lived. 479 00:19:59,320 --> 00:20:02,920 Now finally we get to the news that Kraft Heinz is breaking up. 480 00:20:02,920 --> 00:20:05,440 They're splitting up their company and Warren Buffett, 481 00:20:05,440 --> 00:20:07,400 who's a major shareholder in Kraft Heinz. 482 00:20:07,400 --> 00:20:10,040 In fact, the. Largest shareholder is not happy 483 00:20:10,040 --> 00:20:11,480 about it. When we look at the way that 484 00:20:11,480 --> 00:20:13,960 they're doing this, Warren Buffett right now. 485 00:20:14,000 --> 00:20:18,000 Berkshire. Is a 27.5% stakeholder in the 486 00:20:18,000 --> 00:20:20,000 company. Warren Buffett is the one that 487 00:20:20,000 --> 00:20:23,400 masterminded the combination of these two companies 10 years. 488 00:20:23,400 --> 00:20:25,240 Ago So Warren Buffett. 'S not happy about. 489 00:20:25,240 --> 00:20:27,280 This after he expressed. His discontent? 490 00:20:27,560 --> 00:20:29,160 The stock. Fell another 5%. 491 00:20:29,680 --> 00:20:31,600 Buffett told CNB CS Becky Quick on. 492 00:20:31,600 --> 00:20:33,400 Tuesday that the merger. Didn't turn out. 493 00:20:33,400 --> 00:20:36,240 To be a brilliant idea. But he does not think that 494 00:20:36,240 --> 00:20:38,520 taking the company. Apart will fix its problems. 495 00:20:38,520 --> 00:20:40,320 They're also not happy about the fact that. 496 00:20:40,320 --> 00:20:42,120 Kraft Heinz didn't even ask their opinion. 497 00:20:42,200 --> 00:20:45,120 They own over 1/4 of the company, almost a third. 498 00:20:45,400 --> 00:20:47,080 And Kraft Heinz management did this. 499 00:20:47,080 --> 00:20:49,720 Without even asking their. Opinion without asking for a 500 00:20:49,720 --> 00:20:51,040 shareholder. Vote or. 501 00:20:51,040 --> 00:20:53,000 Any type of input. Now this is going to be one of 502 00:20:53,000 --> 00:20:54,640 the cases. Where I actually disagree with 503 00:20:54,640 --> 00:20:57,040 Buffett. I think that this separation is 504 00:20:57,040 --> 00:21:00,720 likely good for Kraft Heinz, and it also shows why you shouldn't. 505 00:21:00,720 --> 00:21:03,040 Follow Buffett into every single trade. 506 00:21:03,080 --> 00:21:04,760 A lot of people get very excited when Berkshire. 507 00:21:04,760 --> 00:21:07,600 Buys any company, but there's a couple of them that have not 508 00:21:07,600 --> 00:21:09,640 done great. Kraft Heinz is one of them. 509 00:21:10,040 --> 00:21:11,640 That over the past decade, it just. 510 00:21:11,640 --> 00:21:14,440 Really has not done well. It's down. 63%. 511 00:21:14,760 --> 00:21:17,040 It's been a massive. Loser in the portfolio? 512 00:21:17,360 --> 00:21:19,800 And that's driven. Largely by no growth. 513 00:21:20,200 --> 00:21:22,520 That's the biggest. Problem this company faces. 514 00:21:22,880 --> 00:21:26,840 Kraft Heinz has been the same company at the same size, at the 515 00:21:26,840 --> 00:21:28,800 same saturation and. Scale for a. 516 00:21:28,800 --> 00:21:32,440 Decade and you've seen the. The growth trajectory here. 517 00:21:32,800 --> 00:21:34,760 It's nowhere in fact. If you adjust. 518 00:21:34,760 --> 00:21:37,200 This for inflation. Kraft Heinz is losing market 519 00:21:37,200 --> 00:21:38,560 share and shrinking. Over time. 520 00:21:38,560 --> 00:21:41,200 And I believe the management has good reason to want to split up 521 00:21:41,200 --> 00:21:43,960 the company. Having a company do so much, 522 00:21:43,960 --> 00:21:46,240 have this massive conglomerate control so many. 523 00:21:46,240 --> 00:21:48,440 Different properties is relatively. 524 00:21:48,440 --> 00:21:51,440 Complex and makes the logistics and the marketing. 525 00:21:51,680 --> 00:21:53,640 And all the efforts behind it? Very difficult. 526 00:21:54,200 --> 00:21:56,000 If they split it up into two different portions, which 527 00:21:56,000 --> 00:21:57,560 they're. Doing and they're making one 528 00:21:57,560 --> 00:21:59,800 portion a slower growing portion the other. 529 00:21:59,800 --> 00:22:02,120 Portion that the actual growing. Part of the company. 530 00:22:02,440 --> 00:22:04,480 A separate company that makes it so that you. 531 00:22:04,480 --> 00:22:06,640 Can have more streamlined. Marketing so that you can 532 00:22:06,640 --> 00:22:08,240 actually make acquisitions that move the. 533 00:22:08,240 --> 00:22:10,920 Needle for these different. Businesses and it allows. 534 00:22:10,920 --> 00:22:12,800 Investors to. Pick and choose which company 535 00:22:12,800 --> 00:22:15,640 they want to invest in, a non growing mature portion or a 536 00:22:15,640 --> 00:22:17,200 faster growing younger. Portion. 537 00:22:17,440 --> 00:22:20,360 Investors can now choose so even though I don't think that this 538 00:22:20,440 --> 00:22:21,720 fixes. The problems. 539 00:22:22,120 --> 00:22:23,800 I do think it's a different approach than what's been 540 00:22:23,800 --> 00:22:26,600 happening over the past decade that hasn't been working. 541 00:22:26,720 --> 00:22:29,160 But in any case, management probably should have got Warren. 542 00:22:29,160 --> 00:22:31,560 Buffett's approval, seeing as he's such a big shareholder, 543 00:22:31,560 --> 00:22:32,840 that's going to be for this episode. 544 00:22:32,840 --> 00:22:34,480 Hope you enjoyed, see you in the next one.