Welcome back. Everyone to the Joseph Carlson
show in this episode. It's time for a full portfolio,
overview. This is something that I like to
do quite frequently. I do these portfolio, updates
and overviews all the time because before I got into
Finance, before I got into Financial content creation, this
was one of my biggest complaints, everyone talked
about stocks, they talk about how great of investors they
were, they talk about how great they are with money, but they
wouldn't really show you exactly what they're doing with their
money. They Don't show you their full
returns where they're investing it.
What their portfolio looks like in a very transparent and
consistent way. So rather than being someone
that just complains I decided to be part of the solution showing
what I do with my finances every single week week after week
after week. Now I have two portfolios.
The big one is the dividend growth portfolio called the
passive income portfolio. That one's over four hundred
thousand dollars in value. It's doing really well, that
one's actually. It's Performing.
Well, I've been really happy with that one, but then we have
this story fund, a smaller portfolio currently at a value
of around 120,000. And this one is mostly focused
on tech companies and it has not been doing as well.
This is the one that we're going to be looking at.
In this video, the Holdings in this portfolio are Amazon
Netflix. Google Microsoft Adobe
Salesforce and Apple. So, there's seven in total, it's
a concentrated portfolio. I'll be going through each one
of them and giving a little highlight of why Why I'm still
holding these companies? So without further Ado, let's go
ahead and jump in. You're looking at the actual
portfolio here. This is straight from my
brokerage. So we're looking at the story
fund here, the seven positions and you can see, Amazon's atop
holding apples. The smallest holding in the
portfolio. You can also see the unrealized
losses and gains for each of these companies.
So most of them, I'm in the red currently, I started this
portfolio towards the beginning of 2021.
That's where I put in the majority of money.
I deposited a lot of Unfortunately, in 2021 the
market has not done well overall since then.
But it's starting to recover a little bit.
I Benchmark this portfolio against the S&P 500 and I do
this in a very accurate way. What I did was I actually made
it so that every single deposit I do, I made a spreadsheet that
tracks it time-weighted, as if I did the exact same deposit into
the S&P 500. So I basically created an
alternate reality had I invested my money in.
Spy, instead of the story fund at the same time on the same
day, this is what it would have looked like my performance.
If I invested in spy would have looked like this the red line
and my performance in reality investing in the story fund
looks like this the blue line. So right now we are
underperforming the alternate reality as if I invested in spy
but this is still ongoing. We're only a couple years in and
one thing I'll know is that we're starting to close the gap
a little bit. We were, we were down quite a
bit. We were afar ways away from Spy.
Now, we're getting a little bit closer here.
We're kind of in a closer distance.
Things can change really fast with individual companies, a
concentrated portfolio. It only takes a couple Holdings
in my portfolio to do really well to close this Gap, very,
very quickly. So right now we're down around
9% from the beginning. This is time-weighted again, and
yes, I'm p500. As of updated today is up three
point three, five percent. So we still have 12 or 13
percent Gap. Between my portfolio and the S&P
500. What I'll be doing is I'll be
tracking this spreadsheet and I'll be giving updates every
single week going into 2025 and 2026.
Now, of course outperforming, the S&P 500 is very difficult
and I'll be interesting to see how this plays out the way that
I plan on outperforming the S&P 500 with this portfolio is by
investing in what I consider to be compounding machines,
companies that can grow their intrinsic value year after year.
What I gauge to be intrinsic value, The biggest estimates are
the biggest things that I think factor into intrinsic value of
companies is there consistent Revenue.
They're consistent earnings per share and they're consistent
free cash flow per share. So I'm looking for companies
that can grow those three metrics.
They can grow Revenue, they can grow earnings per share and they
can grow especially the free cash flow per share.
I believe the free cash flow per share is the best gauge of the
intrinsic value of a company. So when I'm looking at the
company's I'm investing in, I'm selecting, Ones that I think
we'll have a lot of free cash flow per share growth over the
next five years. Let's go ahead and start off
looking at Amazon. Amazon is a company, I love the
company. Overall, I love the retail
business, I love the Amazon subscription, the Amazon Prime
service. I've had it for over 12 years.
I've been a subscriber of Amazon Prime.
I like the Prime video library. I like all, they're all the
things they offer with the prime service.
I like AWS as a developer. I have an appreciation for How
powerful AWS is. And then, of course, they have
the ads business, which I think is a pretty spectacular business
to Amazon developed, basically out of nowhere, just off of
their website. So, Amazon's a company that
keeps coming up with Incredible businesses that I don't believe
are fully appreciated by the market by that.
I mean, the company's undervalued, it's literally not
being appreciated by market participants.
We can look at the story of the price.
It was creating for around $80 in And 18.
It went up to $180 in 2021 and 2020 and it hung around this
period for a long period of time.
I was buying the company right here.
I bought the company after it dipped and I bought the company
after it dipped again, I haven't given up on Amazon because I
think the company is much stronger today than it was five
years ago. I believe that the main drivers
of intrinsic value which is the retail business, the Amazon
Prime subscription, the advertising business and AWS.
All of those business lines are substantially, bigger more
economically powerful than they were five years ago.
So, so right now we're in a situation where the price has
gone down over the past three years while the intrinsic value
drivers. The ads business Prime service
AWS have all increased. The reason that investors are
selling out of this company is because of the free cash flow.
The free cash flow has been put into the - because of me.
Massive Investments. Amazon is done.
Remember that free cash flow is the cash from operations -
Capital expenditures. So you have to subtract Capital
expenditures will Amazon spent a lot of money on capex over the
past two years to double their fulfillment Network.
In fact, I've looked at the charts of the amount of
warehouses they have and this is what it looks like over time.
This is what their actual amount of warehouses.
Looks like the growth of it. It goes along this period.
And then in 2020, the amount of warehouses goes like this.
They doubled the amount of warehouses the entire company.
Has they doubled that amount in literally a one year period from
the entire amount they had over the past 20 years.
So obviously when they make that radical of an investment it
throws the amount of capex way into the sky and amount of free
cash flow through the floor. That's what we're seeing here.
In my opinion. I think that these are good
Investments. I think the Amazon will have a
positive Roi on them. So, what I expect to see and
this is where It gets a little bit more into predictions but
what I'm expecting to see is a large, influx of positive free
cash flow. I don't know exactly when this
is going to happen I can't say specifically which quarters it's
going to happen. I think over the next couple of
years we could see forty fifty sixty billion dollars of free
cash flow from Amazon per year and see that grow.
If that happened. I think there would be immense
upside for the company. Another problem with Amazon is
the cost of the company. They've had a lot.
Employees at their hiring. They've up the pay, they've up
the benefits. You can see these stock-based
compensation accelerating up to 19 billion dollars.
That's been a problem for the company, and Amazon is currently
addressing that. They've done multiple rounds of
layoffs, they're doing cost-cutting, they're cutting
down entire departments. I've heard from employees of
Amazon that they're focused on that a lot.
They're making every aspect of their business more efficient.
So I think that's going to be another driver value over the
upcoming years. Now, another thing I'll mention
is the these analysts notes that we're getting a lot of analysts
are now seeing over 50% upside for Amazon.
In this note for Morgan Stanley, they say the incremental AWS
headcount reductions should help protect AWS ebit through the
near-term macro and optimization driven deceleration.
Indeed are a wsq to 2023 and full year 23 E B margins Rise by
100 basis points. 50 basis points now, at 21 percent to 22
percent respectively. So they're saying that the
Margins are going to increase on AWS because of the lower head
count, they're going to reduce the amount of employees and have
the same Revenue. They also increase their
projections for 2024, the margins on that as well, they
say are 23 and 24. E, b Rises as incremental
headcount cut speaks to the levers.
Amazon has to pull to Scaly bit in addition to continue to
fulfillment and shipping cost per unit improvements from
Leverage and overbuild. So Amazon did overbuild.
They built to Any warehouses, they over estimated their demand
and they're trying to grow into that.
But that is something they can fix.
Companies can reduce the amount of head count, especially in
warehouses, they simply stop hiring people and natural
turnover will reduce headcount. So Morgan Stanley sees a Target
price. Now of $150, which represents a
52% upside. Now my average price on Amazon
is 134. So if Amazon traded up to 150,
I'd be heavily in the green at that point.
Probably 12, 15 thousand dollars.
So it'd be a big winner at that point.
So things can change quickly Amazon's a big loser for me
right now. I think holding on to this
company over the next couple of years, I'm optimistic that it
will be a big winner. Next up, we have Netflix.
This is a company that has actually recovered a lot.
I'm now down 24% on the stock. At one point, this thing was
down around, 50% it recovered. It went up 100%.
Now I'm down twenty four percent, which is minus eight
thousand dollars. Let's go ahead and take a look
at Netflix here. This one has a lot of news
that's upsetting customers the password.
Sharing problem is something that's upset.
A lot of people but as an investor you have to look at
this both ways I can't just look at if customers are upset, I
have to look at if this is impacting, the company in a
negative way. While there's many reports that
people are canceling Netflix and they're outraged, there's also a
lot of data to show that people still love Netflix, they still
love the content, and many of them are signing up for their
own plans. We can look at a couple Anna.
It's reports here. This one is from, let's take a
look here. This one's from Wells, Fargo.
We have a Wells Fargo analysts saying, quote, while much has
been written about a vodka, the ad supported video on demand.
That's the new plan from Netflix.
Paid sharing is arguably the bigger near term earnings
opportunity. Given some 100 million Global
page, shares, 30 million domestically.
There's a lot of people sharing accounts, a lot to 100 million
households are sharing accounts and while forecasting page Thing
is tough Wall. Street.
Consensus is at 15 million. Net adds this year, quote paid
sharing alone, could be more than 20 million in our base
case. So they believe that there is
substantial upside with the paid sharing, meaning that out of all
the people being cut off. Not all of them are just going
to go without Netflix forever. They're going to want Netflix so
they're going to eventually sign back up for it.
Maybe on a cheaper plan, maybe they'll do the seven dollar a
month, add to your plan, either way, they're expecting an All 20
million signups through the paid sharing.
Now we have another report here. This one is from Bank of
America, so we had Wells Fargo. Now we have Bank of America
commenting on Netflix analyst Jessica Reef who reiterated her
by rating and per share price, target of 410 for Netflix cited,
an unnamed third party data source.
That shows a company will add subscribers in North America.
At significantly stronger rates than the 100,000 Wall Street is
expecting, so this is what wall Street's looking for a hundred
thousand net additions. They say specifically, the data
source has indicated that net ads will be greater than 500,000
in the US and Canada as gross ads and Canada, have accelerated
materially. Now, this is a little bit
surprising what I've seen in YouTube videos and outraged.
Outraged viewers of Netflix, is that Canada overall is done with
Netflix. They're quitting the platform,
they're canceling, the service because they were able to share
before. Now they're not sharing any more
so Canada is. Be done with Netflix's what I've
been hearing but then we have third-party data sources.
That are saying that Canada is actually signing up for Netflix,
there's more subscribers there than there was previously.
Of course, this isn't confirmed. I would not go out and buy a
Netflix specifically because of this rumor.
But this is an alternate data source.
This is an analyst, from Bank of America sing that these numbers
should be strong based on the analytics they're looking at.
They also noted that password turn Crackdown in Canada has
gone. Well, Again this is the opposite
of everything that social media would lead you to believe which
bodes well for the eventual launch in the u.s. even if it
doesn't boost the company's first, quarter Revenue that much
the indication of much stronger than anticipated.
Sub data in Canada is encouraging.
Sign that Netflix recent Crackdown on password sharing is
driving a new Subs to the service analysts noted.
So here we have a lot of conflicting data about Netflix.
We have a lot of social media outrage on them cracking down on
password sharing but then the actual Third party analytics
show that people are signing up for their own accounts.
So how is this going to impact the stock?
We're just going to have to wait and see but overall this isn't a
main reason I'm invested in Netflix.
It has nothing to do with password sharing, what's going
to happen next quarter. That's not the reason I bought
this company. I consider Netflix to be a
long-term. Compounder a company that will
grow its earnings and free cash flow substantially over the next
10 years. Media companies like Netflix and
Disney and Paramount and MBC they last forever.
Generations, hundreds of years. I think that Netflix will be
around for 50 plus years, so it's one that I'm happy to
dollar cost average. In another big thing, I'm
looking at here is while Netflix historically has been a
money-losing free, cash flow negative company.
They've had the influx, the influx of positive free cash
flow. If I break this down annually,
this is what it looks like. Again - free cash flow for years
prior and then all of a sudden they have the rapid influx and
positive free cash flow. That represents operating
leverage and scalability, the company's exercising, strong
operating leverage, that's where we seeing free cash, flows of
1.6 billion dollars in 2022. And I'll mention that that's
much higher than the stock based compensation as well.
So, this is a free cash flow generative company this year in
2023. They're expecting to double this
from one. It's six to three billion
dollars in free cash flow. That is an immense growth rate
in free cash flow and the free cash flow per share of the
company. So I'm looking at Netflix as a
profitable company highly profitable that's going to be a
cash generative machine that can pay dividends in Dubai backs and
I'll be around for 100 years. That's the reason that I'm
invested in the company. Now, let's go ahead and move on.
Let's go ahead and take a look at Google here for me.
The investment thesis, really hasn't changed much at all for
Google. The company has a PE ratio of 17
.8, it's around the same as the market average.
The company is a substantially better company than the market
average. It has a massive cash balance
that they can use any time. There's really no risk of ever
going bankrupt because they have 100 billion dollars in cash.
On top of that they have a free cash flow yield of four point
three seven percent. So it's just a phenomenal
company, a wide moat service based company with multiple
growing aspects of it. I think investors are sleeping
on Google Cloud, one of the main value drivers.
Of the company, we're going to see Google Cloud.
Probably become profitable this year.
If we see that, I think they'll be a major tail when for the
company. The biggest complaint about
Google that investors have is the undisciplined cost structure
of the company. They spend a lot of money on
random things and investors don't like hiring 50 different
masseuses at their locations, right?
Things like that. They have a lot of stock-based
compensation. That's a little bit dilute of to
the free cash flow. But these are things that Google
can work on. They can solve these aren't
unfixable problems and Google is doing that by reducing the
amount of head count focusing on cost structure.
So, for me, Google simple, I think the company is
undervalued. It's a wide moat company that
has multiple growth levers, especially with Google cloud.
And I don't believe that Microsoft is going to take
enough market share to have a meaningful impact on Google's
future. So as of now, I remain just as
bullish is on day one at buying Google.
I think the company is widely undervalued.
Next up, we have Microsoft this Me, I'm in the green on, it's
actually outperform the market since buying it and this is one
that I'd say relative to the rest of the market is performed
really good and it's not one that I would be buying right now
because I think there's better deals.
I think Google's a better deal. I think Amazon's a better deal,
Microsoft is an incredibly high quality company.
I said this often when I look at Microsoft's fundamentals on qual
trim. It's almost comical.
How good they are. It's like the poster child of
the perfect fundamentals in a P'nay, the revenue.
Always grows the ibadah, grows the free, cash flow gross, and
net income goes up the earnings per share.
Goes up. The balance sheet has a ton of
cash. The dividend growth is
remarkable and long-standing. The shares outstanding
continually go down, showing the company's doing a lot of
BuyBacks. They have their expenses under
control and of course they have very high Returns on Capital
employed. This is through and through a
compounder and then all of the businesses there in are
incredibly wide moat businesses, they're in a lot of growth here.
Is there in video Is there an Azure Cloud hosting the second
competitor to AWS? They have all their Suite of
business software which they're implementing all the AI
Technologies in. I think the company is
incredible, it has a ton of growth ahead of it.
Having said that, when I'm looking at opportunities and
what I think is currently the best value, my portfolio.
Microsoft is now trading below a three percent free, cash flow
yield. So it's priced at a price point
where there's not as much margin of error.
And I don't think there's much room for upside multiple
expansion. I think over time, Microsoft is
a company that can trade above a 30 PE ratio, but you don't
really want to bank on that. That's not something I really
want to bet on. So right now I'm not selling
Microsoft. I'm going to hold it in the
portfolio but I'm simply not buying it right now.
I'm going to let Microsoft run, I think the company's great but
I'm not adding to the position at this point in time after
Microsoft we have Adobe I really like Adobe this It just amazes
me what this company can do. First of all, I'm basically flat
on the company so I own around ten thousand dollars of it and
I'm down 1.7% $170. Let's go ahead and bring up
adobe here and let me talk about what impresses me the most about
this company in this holding and the way that they've managed to
company. First of all, I think Adobe
right now is undervalued. I'd rather by Adobe and I have
bought this company more recently than Microsoft.
For example, the free cash flow yield is higher at a four point
one six. Scent free cash flow yield.
The stock based composite not unreasonable and the forward
P/E, ratios only 22 a 22 for PE ratio for company that has a
moat as wide as adobe's. And a recurring Revenue stream,
almost all of their revenue is subscription-based with a very
high reoccurring Revenue stream, the growth of the company's
astronomical. You look at these charts and
there's not many companies like it, the growth in ibadah, the
growth and free cash flow. We've seen it all their free
cash. Per share growth, which is what
I said is my biggest, focus is 20 percent.
Compounded over the past decade 20 percent over 10 year period,
this company knows how to grow free cash flow per share.
And then you might think that adobe has a lot of competition.
They have companies taking over. Well, one of them are trying to
buy, which is figma, which I hope the deal goes through.
I think it would be a great addition to their product Suite.
If not, I'm going to remain invested in Adobe what they're
building specifically with. Firefly.
I don't consider myself too easily impressed.
And I think that this is incredibly impressive, I am
blown away by the Technologies. This companies developing an AI
Adobe did not contract. They didn't use the API of a
different company. They didn't just by a different
company, to, to build this product, they built this from
the ground up. It's not a thin veneer Firefly
is 100% owned by Adobe, and this is where you can create images
out of text prompts. And then you can do crazy
amounts of editing of the images after you create them.
It shows all these little changes.
You can make like, you can change the lighthouse here with
a click of a button. You can add more, add an
underwater city. It says and it just builds it
right there. The image creation is just
incredible what they're doing with type facing is also just
incredible. So adobe's this company that's
fast-growing has a durable competitive Advantage.
I think the companies developing amazing tools with firefly being
the recent one. Overall, I'm excited to hold
this company. I don't see any real problems
with Adobe moving on. We have Salesforce.
This is a company that I previously had a lot more gripes
with especially the management of the company.
It was doing the low interest rate environment phenomenon of
wasting money casual spending lots of pet projects, lots of
big events for the investors and the CEO had reports of hanging
out with celebrities having them on the payroll.
Lots of things that I didn't really want to see for a company
that had been Gurgling now the CEO did what Mark Zuckerberg
did. He did a massive pivot in the
direction. He was taking the company
instead of focusing on the metaverse and fun pet projects.
He decided to focus on efficiency.
So what I would describe Marc benioff doing is a copycat
version of Mark, Zuckerberg, a pivot to efficiency and that
pivot has worked out. Well, if you can see this, this
is the year to date. Performance of Salesforce, it's
up 48 percent. Some massive recovery in the
share price of this company. I'll be over the last five
years. It still has Room to Grow, but
Salesforce is a compound. It's a company that does have a
lot of quality metrics. One of them, being the revenue
of the company, it grows substantially, the free cash
flow of the company. Grow substantially, the big flaw
with the free cash flow. Is that a lot of it?
Approximately 50% is eaten up by the stock based compensation.
So they need to grow the free cash flow but they're also
growing. The stock-based compensation
lockstep, either way, the free cash flow per share is still
growing being at an attractive rate.
And again, the big Focus here for Salesforce going forward is
efficiency. Meaning raising the margins
cutting down on wasteful spending and making the company
more profitable. They are doing this at a rapid
speed, the margins at their guiding for this year are the
margins that people were predicting 5 to 10 years from
now. So Marc benioff to his credit.
And I've been highly critical of him of the past to his credit.
He pivoted hard to profitability and he's doing Faster than
investors are expecting. So I think he needs credit where
credit is due. He made this pivot very quickly
and the stock is reacting as a response to it.
We have reports here from Fortune.
Another interview with him. Marc benioff says that he can
juggle empathy Cost Cuts and layoffs.
As he doubles down on efficiency at Salesforce taken straight
from Mark Zuckerberg Marc, benioff is learning from
Zuckerberg focusing on profits. It's what I like to see.
At the end of the day, the profits and cash.
Flows are what? You own of the company.
So in terms of sales force, I have a lot of renewed enthusiasm
in this company. The direction the Management's
going, the direction, the company's going, I think is a
fantastic Direction. Finally, we have apple one of
the other companies that I'm actually in the green on by
decent amount by 27% apples. A company I have in both
portfolios and it's my biggest winner by far, I've been buying
this company since 2017. Now, the first thing I want to
mention with apple before, even looking at the metrics of the
company, is this news right here, we're seeing lots of
Ports. Again, and lots of rumors and
talk about Apple potentially buying Disney.
This rumor that continues on year after year.
I just hate it. I hate the idea of Apple.
Buying Disney, I realized the math checks out, because Apple
has hundreds of millions of dollars in cash.
They could easily by Disney. It would be it'd be something
they could afford and then in a couple of years that have their
cash balance right back up. So Apple could theoretically,
they could mathematically by Disney, but the analysts saying
that this would be a good idea are A Fool's Apple would
instantly be wrapped up in multiple lawsuits from the
government, from anti-competitive Clauses from
the doj that have all of that, bad press of them being this big
monopolistic business that swallowing up other beloved
companies like Disney. That's not a good look for apple
on top of all of the political and PR nightmare that would
cause apples also accompanied that successful precisely
because they're not buying other big companies.
They've never done that in the past.
And the last type of company Apple should buy is a
Operationally complex business like Disney Disney is a complex
company, they operate Parks, retail, cruise ships Broadway
Blockbuster films, they have a whole Sports division, with ESPN
and linear cable, and streaming, all of a sudden app would find
itself having to manage multiple business lines.
Some of which they've never managed before.
And that would be a total nightmare for the company.
They had increased the complexity without increasing
the value of the company that much apple can build out.
Similar things to Disney without having to buy Disney, they can
build out their own streaming Library, they're doing that
successfully, they can build out their own retail business.
They've done that successfully with their their, their own
devices. So Apple doesn't need Disney and
they should not by Disney. If Apple tried to buy Disney, I
would sell my holding an apple. That's how strongly I feel
against this news. So that's the first thing that I
wanted a dress. I think that some analysts don't
think through things Beyond some simple math.
Even the calculations of how that would be a Of don't check
out. I've looked through the actual
math on it. Now.
Other than that, apples a high-quality compounder, we've
looked at the fundamentals in this.
They're growing their free cash flow, their free cash flow per
share at an incredibly fast rate.
They've also done well, this year as investors had renewed
enthusiasm and tech companies, their revenue continues to grow.
It might flatten out for a year or two, but I don't think the
growth is over from Apple. There's a lot of ways to Apples
growing without having to buy companies like Disney.
The first one is the Apple watch.
It's Coming a Genuine Health Care device.
If they get glucose monitoring which there's rumors that
they're getting closer to that, that will be a game changer for
the Apple watch outside of that they're growing in the fintech
category. The Wall Street Journal just
came out with a report that they're making Banks nervous
with how big of a network Apple. Pay is the Apple wallet is a
growth path for apple. Apple has credit cards.
They also just introduced a buy, now pay later service.
This is consolidating finance onto the Apple platform away
from the banks. So apple is still growing in
lots of different ways. On top of that, they still sit
atop their busy Bridge with their toll booth, which is the
Apple Store and the service growth has been incredible for
Apple over the past five years. So as of now, I'm still holding
on the Apple. I'm not selling any of it.
I'm just holding it because I still see a lot of positive
things happening for the company.
So that's the portfolio. Overall, every single company.
That's the update for now. Let me know what you think, and
I'll see you in the next one.