Welcome everyone. It's time for a look at Amazon.
As I'm sure most of you have heard, they reported their q1
results. They were overall a
disappointment to the market. The market did not receive it.
Well, in fact, we have headlines like this from The Wall Street
Journal from the first page of the front page of the Wall
Street Journal that say Amazon posts.
Its first quarterly loss since 2015 as costs and the ribbon
steak way on results. These headlines look really bad.
We go even further just today they have another headline on
Amazon. They say that the flagship
online shopping business stalls. After Decades of growth Amazon's
basically done growing, right? That's the story that the market
is getting and because of this, we have the stock selling down
its down, twelve point five seven percent today.
That was after hours, after investors saw the earnings and
then, you know, over the past five days.
It's basically down just about that much about 12%.
So, as of right now, Amazon trades around 2,500 dollars a
share, that's after the 12%, drop its trading at 2500 and my
cost basis on my large position in Amazon.
I have an outside position which means I have more allocated to
it, than the, the index, the S&P 500.
My cost basis on that is around three thousand dollars per
share. So, I'm in the red on this
company right now, it's below my cost basis, my discounted cash
flow analysis. My some of the parts valuation
in the research that I've done on the company lead me to
believe that it's worth somewhere around the range of
forty eight hundred dollars per share.
That's what I think the fair value.
Value of Amazon is so it's trading at 2,500 dollars a
share, I think right now today, it's worth forty eight hundred
dollars a share. So there is a massive disconnect
between what the market sees the value in this company.
And what I see the value in this company.
Now, I understand it's difficult to say, hey, the market is
wrong. I'm right.
Right. My fair value estimates correct
in the markets, just getting this wrong, and sometimes that
can sound like you have hubris or you are, you know, you're
overly confident or what not. But what I look.
Is the market we're in right now?
For example, we can look at Google here.
Google is a great company. Most people agree, that Google
is undervalued, it's down 21%, from its recent highs YouTube.
Grew up 14% the ad business grew above 20%, the company just
announced seventy billion dollars in share BuyBacks, but
yet Google still trading down. No matter how good this company
does, the stock price is trading down from where it was.
Just a couple months ago, there is downward pressure on this
Market even companies that are doing incredible, Edible
adobe's. Another company.
That's a cash generating machine.
It has a strong moat. It has high amounts of free cash
flow. It doesn't dilute shareholders,
it does share BuyBacks this company's down 38% from ass all
time highs, just a couple months ago.
In November, it was trading above six hundred eighty eight
dollars, a share. The market doesn't like this
company, no matter the numbers that it's posting the market is
selling out of this company. Even Microsoft beating on the
top line beating on the bottom line, having an incredibly wide
moat this company has Azure growin, like a weed.
Scrolling 50% year-over-year yet.
The market doesn't really love it right now.
It's down. 17 percent from its November high.
Like we're seeing with all these companies, we can look at Apple
Apple beat on literally almost every part of their report.
They beat on their top line, they beat on their bottom line,
they sold more phones than they're supposed to.
They sold more services and they're supposed to, they sold
in every single category except for iPads, iPads was the only
category they didn't beat and the company's down 10 percent in
the month apples down. 10% Despite the fact they just
announced 90 billion dollars in share BuyBacks.
So I look at this and see that it doesn't really matter too
much the type of report you're putting up right now.
The market doesn't seem to be rewarding these companies.
Now I'm not showing this to make excuses for Amazon.
Their report in specific has its own issues that we'll talk about
in just a minute, but I am showing it just to give some
context, whether you're looking at apple or Microsoft or Google,
or adobe, or any real similar company in, that vein, most of
them have traded down over the past week.
There's just a lot of downward pressure right now.
Now Amazon's report had some specific Parts in it that I
think dragged it down even more. And I think that this was by far
the big thing that caused the 10% sell-off.
There's a couple things you could point at.
I think it was this this is their second quarter 20:22
guidance. Net sales are expected to be
between a hundred and sixteen billion and 121 billion or to
grow between three and seven percent.
So they're expected to grow somewhere around 11%.
And now they're saying three to seven percent.
So they're giving low Lowered guidance for next quarter and I
think that's the big reason that investors bailed on the company.
It looks like growth is slowing for Amazon.
They say this guidance anticipates, unfavorable impact
of approximately 200 basis points on foreign exchange
rates. So the foreign exchange rates is
something that does hurt Amazon right.
Now operating income loss is expected to be between 1 billion
and three billion compared with seven point seven billion in the
second quarter 2021, that was also below expectations.
They said this guidance assumes that Prime day occur.
Is in the third quarter of 2022. So that's something that I
didn't realize how big of an impact these one day, like
things like Prime Day and Christmas are on, on Amazon.
I realize Christmas is a big impact but Prime days, pretty
significant. They actually model the entire
revenue of the company differently, depending on the
day that Prime Day falls in. And since they moved it out of
second quarter into third quarter, they're modeling less
Revenue overall for the quarter. So that's pretty incredible.
This Prime day has such a huge impact, but I think at that
second quarter guidance was a big part of why the company had
the 10 to 12% drop. And I think it's why investors
are just looking at this company is kind of dead money, right.
We have this next quarter coming up it's going to be slow growth,
we're not going to get like any type of huge stock spike in the
next three months. And so a lot of investors that
are looking for gains tomorrow, they're looking to make gains
quickly. They know that Amazon is likely
considered dead money. Meaning it's just going to float
around in the same area for at least the next three months.
And if you're kind of impatient, if Want to get into a company
that's moving along and doing things right now.
You might bail out on Amazon, say look this company's dead
money. They're not really growing
quickly. They gave really soft, guidance
lower than expectations. I'm going to take my money out
of Amazon and move on to a different company.
And I think that's where investors get this, a little
wrong. These top-line estimates of the
three to seven percent Revenue growth.
I don't think is how you should measure growth with Amazon.
I really don't, and I think it's the same mistake that investors
make with apple. Apple has overall All very,
slow, top-line growth. They grew by nine percent last
quarter. It's not a fast growing company
but Apple has other profitable parts of their company.
Underneath that Top Line that are growing at a much quicker
pace. And likewise, when you look at
Amazon with this 3 to 7% growth, there's a lot of other parts of
the company that are growing much quicker.
So, let's go ahead and jump into this earnings report and take a
deeper look of what's going on. Alright, so here we are with the
Amazon earnings report and right off the bat, they have a bunch
of highlights that investors just hate to see they really
don't want to see this stuff at Stan, this Market this bearish
Market, this stuff might be allowed normally, in like a
bullish Market, where people are just concerned about optimism
and future. But when the concerned about
real cash flows right now, today this isn't the stuff they want
to see. For example most value investors
will look at the free cash flow line.
They'll see that it decreased to an outflow of 18 point six
billion for the trailing 12 months.
So that's not just this last quarter.
This is over the past 12 months, the past trailing gear but it's
it operating or a free cash flow.
So outflow of almost twenty billion dollars.
So over the past 12 months, they've lost almost 20 billion
dollars in. This is compared with an inflow
of twenty six point four billion for the trailing 12 months,
ending March 31st 2021. Now we can look at the free cash
flow history on quatrain sites. This website and tools available
to Patron members. If you want to try it out for
free, you can join the patreon. Let's go ahead and bring up the
free. Casual hair again.
Free cash flows. Amount of money in the amount of
money out. That's all no other context.
Doesn't show what the money is going to.
Going to be a creative for the company, what they're paying
for, doesn't, it doesn't even show you if they generated the
free cash flow by selling more shares.
Many companies have free cash flow.
That's just because there are diluting the shareholder or
they're selling Investments or they're selling factories or
something, right. All free cash flow does is tell
you money in Money out that quarter that year with no other
context. So you have to look at the
context of what they're doing with this, but Amazon has this
frustrating thing going on with their free cash flow line item.
We're in 17 when Amazon was like a quarter of the size they
currently, are they posted positive free cash flow, 6.4
billion dollars and then it's only gone up by multiple Stenson
to 17 billion in 2018, 19 or 21 billion in 2019.
And just in 2020, they posted twenty five point nine billion
in free cash flow. Now, you might say this is all
because of the stimulus, they're only a good company.
When there's stimulus, well, before the stimulus back in 19,
they posted 21 billion dollars of free cash flow as before any
stimulus is given out. So Amazon can post positive free
cash flow on a very consistent basis without a stimulus
environment and what we're seeing right now.
Last year in 2021, they posted - fourteen point seven billion
dollars in free cash flow. What's going on here?
Where is this money going? What are you doing with it,
right? This is a question that
investors have and then comparing that to the most
recent quarter they say that that At outflow has increased
from the 14 billion to 18 point six billion for the trailing 12
months. So their free cash flow is just
getting worse and worse. They're paying for a lot of
stuff. They're buying a lot of stuff
and they don't give a lot of transparency into where this
money's going. They don't have a big thing that
says, here's all this free cash flow on exactly where it's
going. You have to kind of dig and find
that out for yourself. But as of right now what we know
right now going through this report is they have a ton of
money almost 20 billion dollars in the last 12 months.
Just going out of the company, we don't really know what.
For and the year, prior to that, in 2020, was much better.
They had positive money coming in.
So it seems like things are moving in the wrong direction.
Now, we also have this glaring problem right here, the net
loss. So, this was what Wall Street
Journal highlighted on their big front page, right after the
earnings report, Amazon has the first loss in a decade.
Wow, the company has a first net loss.
A net loss of 3.8 billion for the first quarter.
Now keep in mind to add some context here that includes a
paper loss of their investment in Riven of seven point six
billion dollars. So Amazon invested in this
company revision and the stock price went through the moon at
went to a bubble territory and Amazon had a record, this net
income gain of like billions of dollars because rivi and was
valued at a hundred billion dollars.
Then the bubble popped rivi and came back down in price.
And now Amazon has to record that as a loss from last quarter
seven point six billion dollars, But they really didn't lose any
money on this company. They're still in the green
overall in it and if you exclude, the seven point, six
billion dollar loss the Amazon took on from the ribbon steak,
the actually made about four billion dollars this quarter.
So their net income line would have been positive for billion
dollars. And the Wall Street Journal
wouldn't have been able to run that that scary headline.
Amazon is losing money. A net income loss for the first
time in a decade, right? That is caused because of the
ribbon steak. Now, having said that the
operating income, Um, doesn't include the riveting stake and
that was still only three point seven billion dollars compared
with eight point nine billion for the last year.
So, even excluding for the ribbon steak.
It still doesn't look pretty. They're operating income
decreased by over half year over year down to 3.7 billion.
So that's what we know so far. And I think this is where most
investors kind of stopped their their research, they read some
of the top line information, they look at the next quarter's
forecast. They're looking at these numbers
and seeing that growth is slowing down.
They're moving Prime day. I'm Q2 Q3 it looks like it's
going to be another slow or dead quarter and then they're looking
at the cash flows and they're seeing cash flows.
Moving out of the company doesn't seem like it's stopping
anytime real soon and it just seems like there's better
opportunities and I totally understand if investors see it
that way. But I want to go and dive a
little bit deeper into this report because I think there's
some things that are very very important to highlight that.
I think most investors are missing.
First of all they do give a ray of Hope with their capex spend.
We know that Amazon is Been spending a fortune to build out
all their infrastructure in their delivery Network and
that's where a lot of those billions of dollars of outflows
over the past 12 months have gone.
But they say today as we're no longer chasing physical or
Staffing capacity, they're no longer Staffing up.
That's a huge expense for Amazon.
All those bonuses, they're doing hiring hundreds.
Literally hundreds of thousands of people, they're no longer
doing that. They say our team are squarely
focused on improving productivity and cost efficient.
Is throughout our fulfillment Network.
And Amazon has made multiple statements like this throughout
their earnings call as well saying that they're, they're
going to basically cut back on capex and focus more on
efficiencies and profitability. That's exactly what a lot of
investors are looking at Amazon. Not just spending endless
amounts of money on growth but actually trying to become a
little bit more lean and efficient and having some of
that Revenue some of that cash flow stick around.
So what we're looking at right now is I think one of the most
important parts of this earnings report Which is an actual
breakdown of all the individual parts of Amazon's business.
If you just look at the Top Line, growth just the overall
Revenue, everything will be overshadowed by their first
party retail business. And that is specifically the
lowest margin part of Amazon, that's where they subsidize a
lot of their stuff just to sell more, to make it so that their,
their online store has a complete selection.
There's a lot of services that Amazon has that are much higher
margin that get overshadowed by that top line revenue growth.
So if you just look at the Wall Street, Headlines, you'll see
the Amazons growth is slowing down.
This will actually show you the growth of the individual parts
of the business. So if we look at this, the first
item here that biggest part of Amazon's revenue is their online
stores. Their first party seller, and
they do a monstrous amount of Revenue.
But again, this is the lowest margin part of their company.
It's extremely low margins. So even though the numbers are
enormous and it makes that Revenue figure look, look like
it's slowing overall. This isn't the most important
part of the company in terms of operating.
Eating margins. It went from from sixty six
billion last quarter to 51 billion.
So it's slow down and on a year-over-year basis.
It went from fifty two point nine billion, 250 1.1, so slow
down by around three percent, see how to deceleration in their
first party business. Now let's move on to different
parts of their business. They have physical stores.
This includes Whole Foods, and Amazon Fresh, and Amazon, go and
all the new different store, concepts are opening up this
grew at 17%. That's pretty decent growth.
High teen double-digit growth. We have third-party sellers.
This is the services. So this is where Amazon doesn't
record the entire sale as Revenue.
Just the part where they make money.
So this is much higher much, higher margin than the first
party business third-party, sellers Group by 7%.
That's steady growth, even with a lot of headwinds.
Even with a lot of consumer issues, the high margin part of
the business grew by 7% year-over-year.
Now moving on, we have the next item here which is another ER
service-oriented business, which is their subscription services.
This is another high-margin important part of their business
and it doesn't just mean Amazon, Prime membership.
That's not all. This is it includes like the
ring doorbell. Those subscriptions and includes
their their fitness watches Kindle Amazon music, so on and
so forth, all that various stuff, they bundle all those
different subscription Services together and they give you a
total number and I can't stress this enough.
The number over I was only eight point, four billion.
Last quarter, seems like a small number, especially compared to
the 51 billion. They did in Top Line or in their
online stores. So if you just compare these
numbers 1 to 1, then it looks like this one is more important.
But again the margins on the subscription services are
dramatically higher. So even though they pull in less
Revenue, they keep far more of it and it's more profitable part
of the company. If I was looking at Apple and
doing analysis on Apple, which I've done, I look at the service
parts of the business. As the most meaningful part of
growth, how much is applicant to grow, their apple music and
Apple TV and their Apple Cloud. Are they going to move to a
hardware as a service, right? That service part of the
business is way more meaningful than if Apple grows their top
line revenue by five or ten percent.
That's great. But the part that you want to
grow the most is the most high margin part of the company.
So when I look at Amazon, I try to apply that same thinking, the
top line revenue is heavily affected by this number here,
from Online store but the subscription services are
growing pretty quickly. It grew by 11% year-over-year.
That's double digit growth for the subscription service and
then that's not the only high-margin part of the business
advertising is incredibly high margin.
It's actually probably more high margin than their AWS business
and their advertising last quarter was seven point eight
seven billion dollars that is a 23% growth year over year.
So the advertising portion of Amazon where they sell ads on
their IMDb TV or their free V, they sell ads on, you know,
amazon.com, the sponsored listings where they're selling
ads, they're growing faster than Google, which is an ad business
that's been their business. All along this 23% growth is
faster than Google and it's double the rate of growth that
YouTube just posted at like 14 percent.
So just shy of double that is very fast growth in their
advertising business. And again, this is Edible a high
margin so the high margin parts of this company.
The 3rd party seller grew at 7% the subscription Services Group
by 11% the advertising so far has grown by 23%.
Those are the high margin Parts, the low margin part shrunk by
3%. Now, moving on, after that, we
have the biggest part of the company.
I think the most meaningful part, which is AWS, Amazon's web
services. Everyone knows that this is a
good part of the company. It's highly debated.
What it's currently worth, though?
What I can see is an AWS continues to grow At a very
steady Pace last quarter, they recorded growth of 37 percent 37
percent slower than Google Cloud Pro, that's correct.
Slower than Microsoft Azure, but it's already much bigger.
It's a much bigger service. So they're, they're growing at a
bigger size still at 37%. I think that's pretty decent in
my opinion. The only one that could catch up
and possibly beat them is Microsoft.
I think they're the only one capable of doing that.
I still think it's unlikely. But if they do, so what I own
about as much, Microsoft stock is, I do Amazon.
I am so bullish on cloud overall, that's why I own
Amazon, Microsoft and Google S, 3 of my biggest biggest Holdings
by far. Now, this is what most people
looked at. Again, just the 37 percent
growth in AWS which in and of itself is just tremendous.
AWS did eighteen point four billion dollars in Revenue last
quarter. That is pretty incredible.
Now, to give this more context, we can look at this nice chart
here, provided by Alex Morse. Twitter, he puts together all
these nice charts and this one is the AWS run rate revenues,
which is how much they Revenue last quarter times 4.
So you just look at how much conservatively they would make
over the next year and this shows that plotted out quarter
by quarter, you can see visualized her AWS is growth.
It is pretty tremendous. This is a growth part of Amazon
and last quarter at grew Again by 37 percent.
Now that will decelerate a little bit, it'll go back to,
you know, 35 percent or 30 percent.
Didn't the high 20s but it will continue to grow.
And even though this Top Line growth from AWS is impressive,
there's more parts of this that are more impressive.
So most investors are focused on that Top Line growth of AWS and
they compared that to Microsoft Azure that compared to Google
Cloud. But I think another thing that
investors are mostly forgetting about with this Top Line number
is profitability, AWS is very, very profitable and the margins
of it, they said went from 29%. Percent to 35 percent.
Now they have 35 percent margins last quarter on AWS, Google
cloud is growing faster but it's still not profitable, the
margins are increasing for Google Cloud.
I think it's a good investment but AWS is not only growing at a
very fast pace, but it's already a massive company and it has 35
percent margins. Now, one last thing that I think
is well worth mentioning on the subject of AWS is in the Q&A
section at the tail end of the call.
The Highlight something important here in this Back to
an accounting rule, that happened in 2018, they made this
new rule that publicly traded companies have to disclose, it
was a disclosure rule that they have to disclose their long-term
commitment. So any commitment that's longer
than one year, they have to disclose the amount and what
it's for and that revealed some information about AWS because
AWS has a lot of customers that have long-term commitments to
get different guarantees and different reductions in price.
So a company might sign up and say, look, we love AWS.
We're going to build our company on it, we want a three or four
year contract for like a 20% discount, right?
Just hypothetically, that type of thing, happens all the time.
So you have these commitments, many of them are longer than one
year and this new accounting rule back in 2018 made it so
that every company has to reveal and disclose what those
commitments are. Now, in this question, they say
that it's an increase of AWS customers making long-term
commitments. So again, this doesn't count any
customer this month over month or Contract within one year's
length, this is just one year, plus they say at the March
period ended, we had eighty eight point nine billion balance
for that. That's the current commitments
Beyond one year so that's up around 68 percent year over year
and the weighted average ranking kind of in life term is three
point eight years. So AWS has this guaranteed
revenue of at least eighty eight point nine billion with an
average life span of three point eight years and on top of that,
The growth in their long-term commitments year over year was
up 68%. This is something people glanced
over, they don't even look at this.
This is like the bookings for the company, their long-term
commitments. And they have, you know, if you
break these commitments to companies have to pay.
So it's also has customer lock in.
So AWS has this continual growing forward Revenue stream
right now. That's eighty eight point, nine
billion, that's up 68 percent year over year, they're locking
in more and more customers for longer and longer durations.
And they're moving up this commitment to a bigger and
bigger number. What I want to do is actually
look at this number and see how it progresses over time.
Because I think I think next quarter it could be over a
hundred billion. So that's what I would point out
on AWS. I think the business is stronger
than investors, are giving it credit for the margins are
improving. The growth rate is incredibly
healthy, the amount of bookings and commitments.
For the future is growing at a very rapid Pace 68 percent year,
over year. Now, on the other category, I'm
not really even sure what this includes, but it's 600. 61
million dollars and it grew at 26 percent.
So it's a small part of the company.
So again, when I look over all the different various aspects of
Amazon, and then I look at the headlines in the narrative, that
Amazon is no longer growing and the growth is basically
stagnated. I don't necessarily agree with
that. It's true that the online retail
portion, the low-margin part of the business is Contracting and
we see the GDP numbers, right? Consumers are probably spending
Less on online retail. And if they are spending money,
they're going out and doing more experiential stuff.
But we look at the services part of this Beneath the high margin
part of the company. We have the 3rd party seller
Services. That's high margin that gret 7%,
the subscription services that great 11% the advertising
Services grew faster than Google and almost double the rate of
YouTube at 23%, we have AWS growing at 37%, these are all
growing at a pretty steady Pace far more than the stagnant
company that the median, the headlines would have you
believe. And if you add up, the total
revenue of these service part of the company and the non server,
Sparked Services now, make up 52 percent of total revenues.
So, now, over 50% of Amazon is service-based revenue.
So when I look over this earnings report and try to dig
down on it, I, you know, I'm biased.
I I own a lot of Amazon stock. I love the company.
I have a big investment in it. I think this company is heavily
undervalued and will be worth much more in three or four years
when Market sentiment changes from the very bearish bearish
sentiment that it's in. And so I didn't see this as
quite as bad as most investors, Now, that's my take on.
I realize a lot of people disagree.
They think that Amazon is heavily overvalued.
And if you think that, then that's fine, don't invest in it.
I'm not, you know, I'm not telling anyone to invest in
Amazon, I'm just showing you what I'm doing with my money,
but when I look at Amazon, what I see is the top line revenue
growth being shaky and the low-margin retail business
Contracting a bit because of GDP.
I also see that they're AWS business, highly profitable wide
moat, very difficult to compete with Grew up 37%, the margins,
improved on it, by 29 percent to 35 percent the backlog.
The commitments went up 68 percent to eighty nine billion.
That's a massive increase in one year plus commitments, that free
cash flow, the big red number, right.
The 18 billion dollars of cash out flows over the trailing 12
months. I look at that.
And I say, well, we don't really know what that's going to write.
We know that they did a ton of capex.
They bought more warehouses. They doubled their delivery
network. Over the last But they also just
did things like by MGM. That was an eight point five
billion dollar deal that closed last quarter.
So that's eight point five billion of that, 18 billion
almost half of it. So Amazon isn't just wasting
money, they're buying valuable assets.
Like MGM to prop up their, their value proposition and Amazon
Prime and take more market. Share their advertising, grew by
23%, which is faster than Google and almost double the rate of
YouTube's at growth. And that has a lot of Growth
ahead of it, my opinion, they have the Freeview Channel which
is going to compete with Roku Originals.
It's one of those free little apps.
We're going to be putting a lot of content on it and I see a lot
of future growth just in their advertising business and their
subscription Services Group by 11% their physical store growth
was 17% there. Third-party sellers were seven
percent. So overall, I look at this and I
really don't see it as as bad as the media's portrayal it.
Now, having said that, let's go ahead and look at the damage to
the portfolio. We know that Amazon is down like
12% today, Major holding of mine, so I'm down.
Thirty thousand dollars overall and I have a ninety seven
thousand four hundred in value by just flip to the one day
here, it's down. Six thousand dollars.
Five point nine percent which is kind of sad because the day
before, Amazon's or the day of Amazon's earnings report, I was
up five thousand dollars and then Amazon, tanked 12% or
whatever. So, I'm back down to where I was
the day before. Now, if we look at this just
today, it's down five thousand seven hundred dollars.
Google's down 1.6, 4%, Microsoft's down 2% Sit down,
1.45% Ali, Baba's up. I don't know what's going on
there, but it's up, 500 bucks 9.5% and then Salesforce in
Adobe and apple. All of these companies are
moving down right now. The market does not like this
portfolio, Amazon included. And that doesn't necessarily
surprised me. We have GDP, turning - we have
interest rates Rising. We have a lot of talk of
recession coming up, and people run for the exits from tech
companies. When that happens.
Now, I have the choice of either.
Staying invested in these companies that I think are
undervalued and I think they'll have very good five-year returns
or going into the very defensive companies.
I realize, I could go on to Clorox and oil companies and you
know, pile into Costco and all the defensive companies, but I
just don't think that's the best.
Move to go. Where everybody's going right
now. Everyone seeking safety in other
companies, besides these ones and I'm just going to stay put,
I'm going to stay put in these companies and continue to dollar
cost average in. Now, when we look at these
returns the money, wait. It looks a little odd.
Let me go ahead and go to the earnings page here.
This might make it a little bit easier to see, I'm down 34800
with my current Holdings. So my current Holdings are
actually down more than my portfolio.
Overall, with my actual realized gain or loss.
I've realized about five thousand dollars in gain.
So, all of my losses right now, literally, 100% of my losses are
unrealised, and so far, the selling I've done with this
portfolio, has been at a net gain.
So if we look at this on a holding by holding Sis.
We have the top holding which is Amazon, My Average share price
is 3072 and I'm down 18 percent. As of right now, which is eight
thousand two hundred dollars. Now, Amazon is down around 30
percent from its all-time highs. I'm down 18 percent and I
wouldn't be surprised in this market if it continues to just
kind of Trail off and, and trade down for a while, I think it is
likely the Amazon will be kind of dead money for the next next
quarter. So, if you're looking for a
quick gains or you're not willing to be patient with
Amazon, then it's probably not a good company to hang around
with, but I haven't changed my thoughts on Amazon to me this
earnings report was not nearly as bad as the market reaction.
Google's down also over 20 percent from its all-time highs.
I'm down 1.9 5% now. So I've entered back into the
red even on Google another company that I think is very
undervalued. I think that Google is probably
just a cleaner, kind of safer bet than Amazon.
There's less moving Parts there in profit mode.
They've already shifted. Two prophets in just returning
money through share BuyBacks. So I think this will be less
volatile going forward. But even with Google, I'm now
entering into the red, Microsoft was another one that I was
heavily in the green. It's given up a lot of its
gains. It's down about 15 16 percent
from its all-time highs and I'm only in the green by 3% Netflix.
Of course is the the one that hit my portfolio the hardest.
This one has been disastrous. The company seems to be
contracting. I continue to hold it because I
think there's a decent chance that the damage is already.
Priced in. But this one by far has been the
most damaging part of the portfolio.
I'm down seventeen thousand dollars which is 62% Ali.
Baba's down 43%. It went down quite a bit to 40%,
then to 50% down. Now it's back to 43% and
honestly it's kind of floated around this territory of me
being down 40% for like three or four months I don't think it's
really gone too far so I think there's a chance we've kind of
leveled out with it but Ali Baba's one that I'm going to
continue to hold over the next Five years, I think there's a
chance. This one will continue to grow.
And if anything actually moves in the positive for a change
with the US and China and relationship, I think this one
could see some upside so I'm not giving up on Ali Baba, as of
now. Now moving on we even have
Salesforce. This is a great company and I'm
down 12% on it. $776 we have Adobe another highly profitable,
free cash flow generative company.
That doesn't dilute its shareholders.
It buys back his shares and it's down nine.
Point eight one percent. These two companies are down
over 40% from their all-time highs.
It's an incredible sell-off on what I think.
Are two of the best assets in the market.
We have apple, obviously, like the best company in the world.
I'm up 23% on this, which is, you know, $897 and even this one
has given up a lot of its gains as of recent the earnings report
on Apple. I literally thought was as
perfect as it gets. They beat on everything Top
Line, bottom line, they impress on growth and press on Revenue.
Because they gave a little bit of soft guidance for next
quarter saying that they're going to have some, some issues
with manufacturing similar to Amazon, they gave soft guidance
and the stock still traded in the red.
After hours, I could not believe that Apple gave the perfect
report announced ninety billion dollars and share BuyBacks.
A company. Still goes in the red.
Now, after Apple, we have Spotify.
This is one that the market has completely given up on down 65%.
It's going to be trading at a one price to sales soon the
Company is really difficult to hold, because they continue to
do share dilution, do not posting real free cash flow.
They need to find a way to become profitable and I think
that's very difficult. So this one I'm not as
optimistic on as is Amazon or Google or Microsoft.
It's a much smaller position and I haven't continue to add to
Spotify. I want to see if there's really
positive developments before putting any more money into this
position. Now, if we compare the S&P, 500
to the story fund, which I've been doing for over a year now,
and I'm A continue to do this all the way through 2025.
The goal is to outperformed, the S&P 500 by the end of 2025.
So, at the end of 20 25, I want to have this blue line, be above
the red line. Now, it's gone through a journey
here. We've gone through some High
Times and through some low times right now.
We're definitely through a lot of time the sell-off here or
rather the dramatic drop in the story.
Fun. Right here is actually not
mostly due to Amazon. It's mostly due to To Netflix.
So we have the Netflix drop right here and that continued to
sell off. This is where the majority of
this is and then Amazon took me down a little bit further, it
was five thousand dollars which is roughly five percent.
Now, the S&P 500 has actually gone down a bit, so it's down to
six point nine percent. And the story fund now is down,
- 21%. Now, most people look at this
chart and probably think there's no way to come back from this.
I'm down 26% from the S&P 500, right?
That's an insurmountable lead. That the S&P 500 has over the
next three or four years, I don't think that's the case at
all. I look at the market right now
and it's rewarding a lot of companies in the S&P 500 that I
think are getting to the point of being highly overvalued.
A lot of consumer, defensive companies are trading at higher
valuations than tech companies, and I don't think that that's
going to go on forever. Another thing that I look at is,
although this fall looks really dramatic.
It's a dramatic fall and performance here, if you go back
to just right here, the performance was minus 10. 8% and
within one month. In fact, two weeks later, I was
at positive 3 percent. So I did a 10 percent gain in
two weeks, we have other times in the portfolio.
Like right here, I was at 4.5 high percent and I went up to
24% in gains in a one month period, That's a 20% performance
difference. In one month, if we look at
another example right here, as that point 78 percent and
performance. So not even 1% and I went all
the way up to 27 percent within a 40 day period.
So, a little bit over a month, we jumped up over 25 percent.
So even though I'm trailing the S&P 500 right now, we've had
this big drop, I've seen multiple times where things can
change very quickly for the positive as well.
And just to be clear, the company's I'm buying right now
have no momentum. They all have negative momentum
their trading down further, and further and further.
And I'm never going to be able to time the negative momentum
right at the bottom. This is not something that's
going to happen. If you want quick immediate
gains then you have to buy companies with positive
momentum. Item.
Go buy your oil trade. Go by Costco.
Right now those companies have positive momentum.
They've been moving upwards. They're the ones to get into
right now but I'm not looking at.
What's going to have the positive momentum to get a nice
bump this month, what I'm looking for, a companies that
are being sold off because of fear that I think will be worth
more in the next five years and I really think the Amazons one
of them. And on that note, I want to
highlight a couple other things with my other portfolio.
This is a dividend portfolio, but I want to highlight a couple
companies that I bought that I I had a very similar experience
with when I originally purchased Apple which has gone up 18
thousand five hundred dollars in value, its outperformed, the S&P
500 to a large extent. When I first purchased this
company you can go back and look at the comments.
I received a year ago go ahead and take a look at those
comments. My first video when I said I was
purchasing twenty thousand dollars of Apple - comment.
After - Comet Joseph you don't know what you're doing.
Invest in the S&P, 500 by the index.
Apple's overvalued Buffett, bought it at a lower price on
and on and on. And on the Comets were very,
very intense. There's lots of people that were
highly critical and many of those comets still exist today
criticizing the Apple by. And I've noticed that similar
Trend any time I do a by of a company, a big buy into it.
If the stock doesn't immediately go up right afterwards, then it
was a bad buy if it goes down in the next month because it has
downward momentum, it was a bad buy and I'm not doing a good
job, buying that. Benny, I've noticed that same
thing over and over again. I've seen it with Costco with
Disney, with Home, Depot with Nike with Target, even though
most of the companies that I'm buying are doing very well
actually, they're performing, well, Costco is one of them that
I bought a year ago. And at the time I received so
many comments that was overvalued the valuation was
more for Costco than it was for Walmart.
For example, what Costco is out performed, the other companies
that people listed, and it's outperformed the S&P 500 over
that time. And I think the best example of
this The best example of receiving a lot of criticism,
right after buying a big position in a new company was
Vici. I was extremely excited about
this company, I made in-depth research on it, I made multiple
45 minute videos on it. I was even so excited about this
company that I actually interviewed the CEO.
That's how much I like this company.
Big real estate company every single valuation metric of it.
Led me to believe that was heavily undervalued.
It was great unique properties, that are hard to replicate it.
Paid a hefty. Dividend and I bought this
company at around thirty dollars per share in the stock price
just went down, went down to 29 when down to 28, when down to 27
and it went down for a month after month after month.
Right after I bought it the comments I received were Joseph
put 30,000 dollars into this company.
Now, he's in the red and I'm so glad I didn't follow Joseph into
this by. He doesn't know what he's doing
the whole stock market's up, and Joseph doesn't know what he's
doing. In fact, let me go ahead and
just highlight one of those comments.
Let me go ahead and throw. One of the comments, this is
from five months ago. Let me go ahead and put this one
on the screen and again, you can look at any of the, the old
videos on VG when I was first buying this company and see the
criticism and the comet similar to this because this is not a
unique. One Adele said Vici was a
mistake, I'm glad I didn't get a board Joseph's hype train.
He's been bending over backwards.
For months, to try to justify his bullish stance on this
company. The entire Market is up and be
cheese down and it has six thumbs up, 10 replies, many
people saying the same thing. So glad I didn't follow him into
it, you know, he's your whatever, he should have just
bought the S&P 500, those type of comments.
Well since my purchase in Vici and since that comment was left
VG, has closed their acquisition deal with MGP, investors have
become more bullish on the company.
Exactly. Like I anticipated they would
with this type of catalyst going forward, the company's it's now
in the green. It's outperformed.
The S&P 500 is outperformed the QQQ by a large extent and all
this is taken is for me to wait longer than a couple months.
Just to wait a little bit to give it time for the company to
actually do its thing and for the story to play out.
So I sure it's you the example of Vici as well as other
examples, just to highlight that this is not anything new to me.
Anytime I buy a company right away, all receive a lot of
people criticizing the purchase for XYZ reason.
Either will be overvalued like my purchase of a Costco and
apple which have both been Market beating returns or the
company is just a bad company. Now, it's change gears, like my
purchase a Starbucks, it's gone down a little bit.
I'm the criticism is, especially intense.
If when I buy the company, it falls in price upon buying it.
Right. It continues to go on a downward
Trend because I didn't time the bottom with my purchase.
I'll receive a lot of criticism and with the purchase of Amazon
and this last quarter, you're going to see the exact same
thing. The truth is that most investors
are very short-term focused whether they like to admit it or
not the price of the company dictates their sentiment.
Because Amazon went down in price I think the company is
bad, if they didn't have the price change in the mix, they
probably look at these results and think that they're pretty
decent, but because the price went down, the company must be
doing poorly. This is the exact same attitude.
I saw with my VG purchase, I purchased Vici for an
undervalued price at $30, a share.
And the stock went down to 29 to 28 and 27 because the stock
price went down with literally. No, fundamental changes.
People became bearish on the company.
Sentiment move lower and that caused a lot of people to leave
these comments. That Vici was a terrible
purchase which now it's outperformed, the S&P 500, and
the qqq's since purchasing it. So when I look at Amazon, I know
I'll receive the same things. A stock has moved down since
purchasing it, my average cost basis.
Right now is 3000 a share, but I still remain just as bullish as
I used to be. This hasn't changed my opinion
or my thesis on the company at all.
I still think it's worth forty eight hundred dollars a share.
So that's how I view this. I think the fundamental
developments of Pretty positive overall.
And I still believe, I still believe that over the next five
years by the end of 2025, I think Amazon will outperformed
the S&P 500. Those are my thoughts, there's
no guarantee things could go wrong with it.
But even now, after looking, at this most recent report, I still
believe that now having said that I have no clue of where
it's going to trade in the next three months.
So as I'm giving these week-by-week, portfolio updates,
I don't know where Amazon's going to be next week.
It'll probably have more negative momentum.
Maybe trade down a little bit further.
I don't know. I'm not a short-term Trader, I'm
not looking at technicals, I'm looking at fundamental
valuation. And even though I have a strong
belief will be worth a lot more in five years have no clue, it's
going to be in the next three months.
So that's my thoughts on this earnings report doesn't change.
My thoughts at all the price. Moving down doesn't change my
sentiment to the - a doll in the company.
I still remain bullish on it, but that's all for now.
I hope you enjoyed the little update and I'll see you in the
next one.