1 00:00:00,040 --> 00:00:02,760 You know, I was trying to wait until Friday to summarize the 2 00:00:02,800 --> 00:00:06,000 earnings week and go over them, but then Microsoft and Meta 3 00:00:06,000 --> 00:00:08,360 reported and it's just too good to wait. 4 00:00:08,360 --> 00:00:10,840 I can't wait until tomorrow. We have to talk about these two 5 00:00:10,840 --> 00:00:13,800 companies. Microsoft and Meta's report, 6 00:00:14,200 --> 00:00:17,280 they were just incredible. Incredible doesn't even describe 7 00:00:17,280 --> 00:00:18,840 it. These weren't just solid 8 00:00:18,840 --> 00:00:21,360 reports. These were step changes in the 9 00:00:21,360 --> 00:00:24,920 direction of the businesses. Meta posted again their 10 00:00:24,920 --> 00:00:27,240 astronomical beats on the top and bottom line. 11 00:00:27,640 --> 00:00:30,720 It's at the point now where it's like the Breaking Bad meme. 12 00:00:30,760 --> 00:00:32,479 You can't keep getting away with this. 13 00:00:32,759 --> 00:00:34,720 Well, Mark Zuckerberg keeps doing it. 14 00:00:34,880 --> 00:00:38,520 Every single earnings quarter he seems to post groundbreaking 15 00:00:38,520 --> 00:00:40,680 earnings results way above expectations. 16 00:00:41,000 --> 00:00:42,800 And now Meta is at all time highs. 17 00:00:42,840 --> 00:00:46,040 Then we have Microsoft with Satya Nadella posting numbers 18 00:00:46,360 --> 00:00:49,240 that are unthinkable. These are literally unthinkable 19 00:00:49,240 --> 00:00:52,640 numbers just a couple years ago. And here we have them growing 20 00:00:52,640 --> 00:00:57,040 cloud faster and faster. The AI revolution is real and 21 00:00:57,040 --> 00:00:59,080 these companies are showing it, and we're going to be going 22 00:00:59,080 --> 00:01:00,960 through all of it. I can't wait to jump into this 23 00:01:00,960 --> 00:01:03,440 report, look over the numbers and the commentary. 24 00:01:03,680 --> 00:01:06,360 We had time to look over the earnings calls and really dig in 25 00:01:06,360 --> 00:01:08,360 and see what's going on. And we have a few other 26 00:01:08,360 --> 00:01:10,080 companies I have to throw in today. 27 00:01:10,080 --> 00:01:12,800 S&P Global, my largest holding, or at least one of them, 28 00:01:13,080 --> 00:01:15,160 reported earnings today. It was pretty good. 29 00:01:15,160 --> 00:01:17,760 We'll be talking about it. We have FICO, which is on its 30 00:01:17,760 --> 00:01:20,400 long trend downwards. Fico's being decimated. 31 00:01:20,560 --> 00:01:23,920 It's down below $1500 per share. I'll be sharing the clip of the 32 00:01:23,920 --> 00:01:26,800 CEO addressing one of the problems that company's facing. 33 00:01:27,040 --> 00:01:29,920 And then we have MasterCard and Spotify, two other ones we'll be 34 00:01:29,920 --> 00:01:32,960 talking about briefly as well. So we have a lot to jump into. 35 00:01:33,440 --> 00:01:35,760 First of all, let's go ahead and jump into Microsoft. 36 00:01:36,040 --> 00:01:39,080 We have this one here, and just at a quick glance, it's up 4 37 00:01:39,080 --> 00:01:40,560 1/2%. Now. 38 00:01:40,600 --> 00:01:42,800 There is some fade going on here. 39 00:01:42,800 --> 00:01:46,960 It was originally up like 8%. We faded down to 4 1/2%. 40 00:01:46,960 --> 00:01:49,840 It's moderating a little bit, but I think that Microsoft 41 00:01:49,960 --> 00:01:54,080 deserves to be up 4 1/2% at least after this report. 42 00:01:54,480 --> 00:01:58,560 And that is with knowing that this company trades at a 35 Ford 43 00:01:58,560 --> 00:02:00,720 PE. So it's already an expensive 44 00:02:00,720 --> 00:02:02,960 company. My opinion, it deserves to be 45 00:02:02,960 --> 00:02:05,080 expensive. It deserves to be more expensive 46 00:02:05,080 --> 00:02:08,160 than it is today. This is, I'll go over it, but 47 00:02:08,160 --> 00:02:10,280 this is an incredible, incredible report. 48 00:02:10,600 --> 00:02:13,360 When we look at Microsoft in terms of my position and 49 00:02:13,360 --> 00:02:16,440 ownership of this company, I've been bullish on Microsoft for a 50 00:02:16,440 --> 00:02:19,080 long period of time. And, and just as a side note, we 51 00:02:19,080 --> 00:02:21,360 reached record highs in the portfolio today. 52 00:02:21,520 --> 00:02:25,960 We're finally up to 911 thousand, $363,000 in gains, 53 00:02:26,240 --> 00:02:29,880 record highs mostly due to MasterCard, Microsoft and S&P 54 00:02:29,880 --> 00:02:32,040 Global. But if we look specifically at 55 00:02:32,040 --> 00:02:35,640 Microsoft, we can see this position in this passive income 56 00:02:35,640 --> 00:02:41,440 portfolio. It's an $87,000 position, 44,700 57 00:02:41,440 --> 00:02:44,480 of that being gains. So the performance weighted 58 00:02:44,480 --> 00:02:48,320 return is 2 and a 250%. That's because I've owned it for 59 00:02:48,320 --> 00:02:51,800 years and on a performance internal return it's been really 60 00:02:51,800 --> 00:02:54,280 high returns. I've added more to the holding 61 00:02:54,280 --> 00:02:58,840 recently at a price of around 23240 and it's since doubled 62 00:02:59,000 --> 00:03:01,840 over, doubled since then. So this one overall, even with 63 00:03:01,840 --> 00:03:04,560 my most recent additions has doubled in price. 64 00:03:04,920 --> 00:03:07,040 And that's just in the passive income portfolio. 65 00:03:07,040 --> 00:03:10,840 If we look at the story fund, my secondary portfolio, this one is 66 00:03:10,840 --> 00:03:14,720 now at all time highs as well. So both portfolios record highs 67 00:03:14,720 --> 00:03:16,720 today. Love seeing this type of thing. 68 00:03:16,720 --> 00:03:19,880 It's what we should see in bull markets and Microsoft has played 69 00:03:19,880 --> 00:03:21,840 a key role. This one is again another 70 00:03:21,840 --> 00:03:25,760 $27,000 position, 14,000 of that being gains. 71 00:03:26,280 --> 00:03:28,280 So it's another one in both portfolios. 72 00:03:28,280 --> 00:03:31,600 It it's wild the returns that I've had with this company and 73 00:03:31,600 --> 00:03:34,200 it's really incredible because Microsoft has always been one of 74 00:03:34,200 --> 00:03:37,040 the biggest, one of the most known companies, but it's still 75 00:03:37,040 --> 00:03:40,360 been one of the best risk reward companies in the market. 76 00:03:40,400 --> 00:03:42,920 If we look at the combined portfolio here and the 77 00:03:42,920 --> 00:03:46,280 unrealized gains from this stock, keep in mind this does 78 00:03:46,280 --> 00:03:48,880 not count dividends. So this is the gains without 79 00:03:48,880 --> 00:03:54,640 dividends is $56,700 in Microsoft, just an incredible, 80 00:03:54,640 --> 00:03:57,360 incredible performer. Now it's the fourth largest 81 00:03:57,360 --> 00:03:59,680 holding in the portfolio, making up roughly 9%. 82 00:03:59,680 --> 00:04:02,240 Now again, if we look at this most recent report of Microsoft, 83 00:04:02,240 --> 00:04:04,000 what did this company do this so special? 84 00:04:04,360 --> 00:04:06,960 You're not really going to see it in just the revenue segment 85 00:04:06,960 --> 00:04:08,880 chart. You see a little bit of it. 86 00:04:08,880 --> 00:04:11,880 The company's growing 15% year over year. 87 00:04:12,000 --> 00:04:16,600 Now already when we look at Microsoft, 15% revenue growth is 88 00:04:16,600 --> 00:04:19,480 already good. That's good growth for a company 89 00:04:19,680 --> 00:04:22,160 this size. We're talking about a $4 90 00:04:22,160 --> 00:04:25,680 trillion company growing revenue 15% year over year. 91 00:04:26,000 --> 00:04:29,440 That's already incredible. That beats out a lot of smaller 92 00:04:29,440 --> 00:04:31,760 startup companies. But then you look at what is 93 00:04:31,760 --> 00:04:34,440 actually growing in the company. We have the Qualtrim summary of 94 00:04:34,440 --> 00:04:37,880 the earnings transcript, and we have here Microsoft Cloud and AI 95 00:04:37,880 --> 00:04:41,080 scale. Microsoft Cloud annual revenue 96 00:04:41,080 --> 00:04:46,680 surpassed 168 billion, up 23%, driven by rapid innovation and 97 00:04:46,680 --> 00:04:49,400 adoption of AI products. Now, here's where Microsoft gets 98 00:04:49,400 --> 00:04:52,960 a little bit confusing. There's Microsoft Cloud and then 99 00:04:52,960 --> 00:04:55,560 there's Azure, and those are two different things. 100 00:04:55,600 --> 00:04:58,680 A lot of people kind of intermingle those or they use 101 00:04:58,680 --> 00:05:00,840 them interchangeably. They're not the same. 102 00:05:01,200 --> 00:05:04,760 Microsoft Cloud is like every single cloud product. 103 00:05:04,760 --> 00:05:07,880 It's just like Microsoft Excel. It's everything that's hosted in 104 00:05:07,880 --> 00:05:09,960 the cloud that uses one of their clouds. 105 00:05:10,400 --> 00:05:12,720 That's Microsoft cloud. But then you have Azure. 106 00:05:12,840 --> 00:05:15,320 This is Microsoft's actual cloud offering. 107 00:05:15,600 --> 00:05:18,400 This is more directly relatable to something like Google Cloud 108 00:05:18,680 --> 00:05:21,560 or like AWS. Azure's annual revenue exceeded 109 00:05:21,560 --> 00:05:26,720 75 billion, up 34% with constant currency market share gains and 110 00:05:26,720 --> 00:05:30,600 global data center expansion over 400 data centers in 70 111 00:05:30,600 --> 00:05:33,200 regions. What? 112 00:05:33,640 --> 00:05:36,360 Excuse me, is this something where they're like manipulating 113 00:05:36,360 --> 00:05:38,400 the data? I had to do a double take when I 114 00:05:38,400 --> 00:05:43,480 saw these numbers growing 34% and at a $75 billion annual 115 00:05:43,480 --> 00:05:46,160 rate. When we again compare this to 116 00:05:46,160 --> 00:05:49,160 Google Cloud, and I'm very bullish on Google, I'm a bullish 117 00:05:49,160 --> 00:05:51,880 on all these cloud companies. But if we compare this to Google 118 00:05:51,880 --> 00:05:55,480 Cloud, we have search, YouTube ads, let's cross all of those 119 00:05:55,480 --> 00:05:59,000 out, then we have Google Cloud. Google Cloud is at a run rate of 120 00:05:59,000 --> 00:06:01,680 $50 billion. So it's actually relatively 121 00:06:01,680 --> 00:06:04,320 close to Microsoft, 50 billion versus 75. 122 00:06:04,720 --> 00:06:08,800 But Google Cloud grew by 32% last quarter, quarter over 123 00:06:08,800 --> 00:06:12,360 quarter. Azure, which is at a $75 billion 124 00:06:12,360 --> 00:06:17,040 run rate, you're at 34%. So it's bigger and growing 125 00:06:17,040 --> 00:06:20,200 faster. That's usually not a recipe that 126 00:06:20,200 --> 00:06:21,680 happens. You usually get one or the 127 00:06:21,680 --> 00:06:23,560 other. Usually you're a lot bigger, but 128 00:06:23,560 --> 00:06:26,160 you grow a little bit slower because of the law of large 129 00:06:26,160 --> 00:06:28,760 numbers. But what Microsoft is showing is 130 00:06:28,760 --> 00:06:32,080 that even though they're bigger, they are growing faster. 131 00:06:32,480 --> 00:06:35,360 And to pull that off, you have to have an advantage. 132 00:06:35,360 --> 00:06:37,600 You have to have very specific advantages, which of course 133 00:06:37,600 --> 00:06:42,280 Microsoft has their advantage is that Microsoft is doing a lot of 134 00:06:42,280 --> 00:06:46,200 integrations from local on premise to cloud. 135 00:06:46,200 --> 00:06:49,160 They're doing migrations rather where they're taking a lot of 136 00:06:49,160 --> 00:06:51,280 their customers that they already have because everybody 137 00:06:51,280 --> 00:06:55,040 uses Microsoft products and they're saying, hey, our cloud 138 00:06:55,040 --> 00:06:57,920 offering works really well with our our Microsoft products 139 00:06:58,200 --> 00:07:02,080 simply upload to the cloud. Those migrations have speed up 140 00:07:02,080 --> 00:07:04,600 this year as well as all of their AI tooling. 141 00:07:05,160 --> 00:07:08,840 So Microsoft has this very unique, very good dynamic 142 00:07:08,840 --> 00:07:11,880 working with the company that Google's tried to mimic, but is 143 00:07:11,880 --> 00:07:15,360 having a harder time mimicking and AWS simply doesn't have. 144 00:07:15,400 --> 00:07:17,680 Now again, to give this some perspective, if we go back to 145 00:07:17,680 --> 00:07:22,040 Google, Google Cloud is at $50 billion, growing 31%. 146 00:07:22,320 --> 00:07:26,120 Microsoft is at 75, growing at 34%. 147 00:07:26,440 --> 00:07:28,160 And then we compare this to Amazon. 148 00:07:28,880 --> 00:07:31,600 A lot of people are saying Go, Microsoft has a better cloud 149 00:07:31,600 --> 00:07:34,480 business than Amazon because Amazon's growing a lot slower. 150 00:07:35,200 --> 00:07:39,200 AWS will probably post growth of 17 to 18%, maybe a little bit 151 00:07:39,200 --> 00:07:43,360 faster if we get lucky. But AWS is growing around 18%. 152 00:07:43,840 --> 00:07:46,880 And again, that's a lot slower than Microsoft or Google. 153 00:07:47,160 --> 00:07:54,040 But AWS is at a $112 billion run rate, $112 billion when they 154 00:07:54,040 --> 00:07:58,600 report later today. AWS could be bigger than both 155 00:07:58,800 --> 00:08:01,360 Microsoft Azure and Google Cloud combined. 156 00:08:02,080 --> 00:08:05,360 So even though they're growing slower, AWS is substantially 157 00:08:05,360 --> 00:08:07,520 bigger, and I don't think that gets highlighted enough. 158 00:08:07,960 --> 00:08:11,520 So it is true that Microsoft is growing super fast, faster than 159 00:08:11,520 --> 00:08:14,040 Google, a lot faster than Amazon. 160 00:08:14,040 --> 00:08:15,920 But Amazon does have a massive cloud. 161 00:08:15,920 --> 00:08:19,200 They mention here that Microsoft is scaling data center capacity 162 00:08:19,200 --> 00:08:22,440 faster than competitors, so they're actually building out 163 00:08:22,440 --> 00:08:24,880 new data centers at a faster rate. 164 00:08:25,160 --> 00:08:27,640 It says in competitors. I wonder which competitors 165 00:08:27,640 --> 00:08:29,640 they're talking about. They have to be talking about 166 00:08:29,640 --> 00:08:33,600 Google and Amazon right? Every Azure region is now AI 1st 167 00:08:33,600 --> 00:08:36,640 and supports liquid cooling for greater infrastructure 168 00:08:36,640 --> 00:08:39,520 flexibility, continued improvement in efficiency and 169 00:08:39,520 --> 00:08:43,360 performance, 90% more inference tokens for the same GPU via 170 00:08:43,360 --> 00:08:45,640 software optimization. So again, the most important 171 00:08:45,640 --> 00:08:48,720 thing in this report, the very top thing outlined, is Microsoft 172 00:08:48,720 --> 00:08:51,360 Cloud and AI scaling. The reason that the company's up 173 00:08:51,360 --> 00:08:55,120 so much today is because of the monumental acceleration in 174 00:08:55,120 --> 00:08:57,680 Microsoft Azure. The fact that they're growing at 175 00:08:57,680 --> 00:09:01,800 a 34% rate is incredible. It does make the company deserve 176 00:09:01,800 --> 00:09:04,600 a higher multiple. Now on top of that, there's a 177 00:09:04,600 --> 00:09:06,600 lot of other things. The cloud isn't growing in 178 00:09:06,600 --> 00:09:09,320 isolation. It basically powers every other 179 00:09:09,320 --> 00:09:12,560 tool from Microsoft. You have AI, platform, data and 180 00:09:12,560 --> 00:09:15,440 developer ecosystem. Introduction of Microsoft's 181 00:09:15,440 --> 00:09:18,160 sovereign cloud to address specific data residency. 182 00:09:18,440 --> 00:09:23,120 Microsoft Fabric revenue rose 55% with over 25,000 customers. 183 00:09:23,560 --> 00:09:28,280 Azure Data Bricks, Snowflake, Azure Cosmos DB, Azure Postgres 184 00:09:28,280 --> 00:09:32,760 SQL showed strong adoption and support for open AI workloads. 185 00:09:33,520 --> 00:09:37,600 Azure AI Foundry is gaining traffic, offering tools for 186 00:09:37,600 --> 00:09:40,680 redesigning, customizing, and managing AI agents at scale. 187 00:09:41,000 --> 00:09:44,880 Foundry now has 14,000 customers with 80% of the Fortune 500 188 00:09:44,880 --> 00:09:47,840 using it. Foundry serves over 500 trillion 189 00:09:47,960 --> 00:09:52,440 AI tokens per year, a sevenfold increase indicating widespread 190 00:09:52,440 --> 00:09:55,120 platform use. So when Satya Nadella talked 191 00:09:55,120 --> 00:10:00,000 about no longer being a software company, but now being an AI 192 00:10:00,000 --> 00:10:03,880 engine that powers AI for the rest of the world, this is what 193 00:10:03,880 --> 00:10:06,680 we're talking about. They are are basically like a 194 00:10:07,000 --> 00:10:09,440 Microsoft can now be looked at as like you get into your 195 00:10:09,440 --> 00:10:12,840 toolbox and you have all these various tools, but they are the 196 00:10:12,840 --> 00:10:15,320 toolbox for artificial intelligence for the rest of the 197 00:10:15,320 --> 00:10:16,960 world. That's the type of company 198 00:10:16,960 --> 00:10:19,960 they're transforming to. We go to Copilot in the 199 00:10:19,960 --> 00:10:23,480 application layer. Copilot Suite has over 100 200 00:10:23,480 --> 00:10:27,400 million monthly active users, a commercial and consumer with 800 201 00:10:27,400 --> 00:10:30,120 million users engaged in AI features across Microsoft 202 00:10:30,120 --> 00:10:33,520 products. So copilot alone has 100 million 203 00:10:34,080 --> 00:10:36,040 active users. If we look at this, we can go 204 00:10:36,040 --> 00:10:39,320 back to Microsoft here on the insights page and one of the 205 00:10:39,320 --> 00:10:43,760 KPIs we track in Qualtrum here with Microsoft is the 365 206 00:10:44,280 --> 00:10:47,520 consumer subscribers. Now, if you're not aware of what 207 00:10:47,520 --> 00:10:51,200 this is, this is the amount of people using their whole like 208 00:10:51,200 --> 00:10:53,440 suite of software, the 365 suite. 209 00:10:53,800 --> 00:10:57,760 But within this suite is Copilot O, the 100 million users of 210 00:10:57,760 --> 00:11:03,360 Copilot are part of the scope of the 347,000,000 using 365 211 00:11:03,360 --> 00:11:06,280 consumer subscribers. We have Microsoft 365. 212 00:11:06,600 --> 00:11:10,160 Copilot adoption is accelerating with significant seat growth and 213 00:11:10,160 --> 00:11:13,680 notable enterprise wins. Barclays, UBS, Adobe. 214 00:11:14,000 --> 00:11:17,720 Copilot Studio enables customers to create and tune their own AI 215 00:11:17,720 --> 00:11:19,200 agents. With three million agents 216 00:11:19,200 --> 00:11:22,600 created in the past year, this is directly competitive towards 217 00:11:22,600 --> 00:11:25,120 Salesforce. Salesforce has the agentic 218 00:11:25,120 --> 00:11:28,840 technology as well. GitHub Copilot continues rapid 219 00:11:28,840 --> 00:11:32,360 growth with 20 million users and enterprise customers count up 220 00:11:32,360 --> 00:11:36,800 75% quarter over quarter. Used by 90% of the Fortune 100 221 00:11:37,320 --> 00:11:42,160 in healthcare, Dragon Copilot usage increase by 7X in business 222 00:11:42,160 --> 00:11:44,680 applications. Dynamic 365 is seeing share 223 00:11:44,680 --> 00:11:48,360 gains across industries. How can you read through any of 224 00:11:48,360 --> 00:11:51,800 this and be slightly pessimistic about this company? 225 00:11:52,280 --> 00:11:55,920 They have like 100 different tools, all of them being used in 226 00:11:55,920 --> 00:11:58,760 growing amounts, gaining market share against competitors. 227 00:11:59,240 --> 00:12:01,360 You have consumer business, LinkedIn and Xbox. 228 00:12:01,360 --> 00:12:04,320 We're getting off of the cloud and copilot here at Microsoft 229 00:12:04,320 --> 00:12:06,160 has a wonderful social media company. 230 00:12:06,480 --> 00:12:08,480 Linkedin's one of the best that you can get economically 231 00:12:08,480 --> 00:12:11,520 speaking. AI features and agents are being 232 00:12:11,520 --> 00:12:13,560 deployed across hiring and sales on LinkedIn. 233 00:12:13,880 --> 00:12:17,240 The gaming business, you have 500 million monthly active 234 00:12:17,240 --> 00:12:20,400 users, strong performance in Xbox and PlayStation publishing 235 00:12:21,200 --> 00:12:24,880 Call of Duty Black Black Ops 6 reached 50 million players and 236 00:12:24,880 --> 00:12:28,120 Minecraft saw record active usage in revenue helped by the 237 00:12:28,120 --> 00:12:31,360 Minecraft movie movie. So we have good growth in the 238 00:12:31,360 --> 00:12:33,400 other various segments. These aren't as core to 239 00:12:33,400 --> 00:12:35,040 Microsoft. Another thing that they 240 00:12:35,040 --> 00:12:39,760 mentioned on the earnings call is that Xbox, what is it called 241 00:12:39,760 --> 00:12:43,520 the Xbox membership that you can get the Game Pass that's also 242 00:12:43,520 --> 00:12:46,160 seeing strong growth. So they're again getting more 243 00:12:46,160 --> 00:12:49,640 subscribers, more of this residual type of revenue in 244 00:12:49,640 --> 00:12:52,680 every business line. Microsoft launched over 100 new 245 00:12:52,680 --> 00:12:55,920 security features in the past year, expanded capabilities in 246 00:12:55,920 --> 00:12:58,600 Microsoft Sentinel and Tread, Defender and PureView. 247 00:12:59,200 --> 00:13:01,920 I've talked to employees of people from places like 248 00:13:01,920 --> 00:13:05,480 Crowdstrike and they list Microsoft as one of their 249 00:13:05,480 --> 00:13:09,520 biggest competitors. So even just security focused 250 00:13:09,560 --> 00:13:12,960 enterprise cloud application companies view Microsoft is one 251 00:13:12,960 --> 00:13:15,280 of their biggest competitors. What we're seeing here is 252 00:13:15,280 --> 00:13:18,640 incredible fundamental business performance with every segment 253 00:13:18,640 --> 00:13:22,080 of the company growing hundreds of various products, all of them 254 00:13:22,080 --> 00:13:24,840 growing and taking market share. And then to encapsulate all of 255 00:13:24,840 --> 00:13:28,280 that, the cloud is outgrowing even its gigantic competitors. 256 00:13:28,360 --> 00:13:31,120 Overall, the report was better than solid. 257 00:13:31,120 --> 00:13:33,920 It was incredible. This is a report where you can 258 00:13:33,920 --> 00:13:36,640 try to look through it with a fine tooth comb and find 259 00:13:36,640 --> 00:13:39,400 something to criticize, but if you do that, you're missing the 260 00:13:39,400 --> 00:13:43,000 bigger picture. This is a massive, ingrained 261 00:13:43,040 --> 00:13:46,320 tech company deeply embedded in every single company in the 262 00:13:46,320 --> 00:13:49,720 world, but now it's embedded itself even more by powering the 263 00:13:49,720 --> 00:13:51,600 rest of the world with artificial intelligence. 264 00:13:52,040 --> 00:13:54,520 Microsoft is not going away for a long period of time. 265 00:13:54,800 --> 00:13:56,560 This company will far outlive me. 266 00:13:56,800 --> 00:13:58,720 And over that time period, I think it's going to continue 267 00:13:58,720 --> 00:14:01,920 generating enormous amounts of wealth even at the share price 268 00:14:01,920 --> 00:14:04,920 that it's currently at. I refuse to trim this one. 269 00:14:05,360 --> 00:14:07,840 I just refuse to trim it. When I see a company that's this 270 00:14:07,840 --> 00:14:11,240 fundamentally strong, it's hard for me to find any weakness in 271 00:14:11,240 --> 00:14:13,280 it. So as of now, Microsoft is 272 00:14:13,280 --> 00:14:16,760 lifting My Portfolio, becoming a bigger and bigger position, and 273 00:14:16,760 --> 00:14:18,760 I continue to hold. Now moving on, of course, we had 274 00:14:18,760 --> 00:14:21,480 Meta also report their earnings. They're up even more today, up 275 00:14:21,480 --> 00:14:24,880 12% on the day. Now Qualtrm notes here that Meta 276 00:14:24,880 --> 00:14:27,400 Platform shares are trading higher after the company 277 00:14:27,400 --> 00:14:31,760 reported better than expected Q2 financial results and issued Q3 278 00:14:31,760 --> 00:14:35,320 sales guidance above estimates. So there's the quick summary. 279 00:14:35,840 --> 00:14:39,240 Meta beat on both this quarter's results and they beat on their 280 00:14:39,240 --> 00:14:41,840 expectations of guidance. And this is one of those things 281 00:14:41,840 --> 00:14:44,080 where Mark Zuckerberg just keeps doing it. 282 00:14:44,440 --> 00:14:48,120 He keeps doing this thing where he beats the earnings estimates 283 00:14:48,120 --> 00:14:52,640 by like 2030%, even 50% or more. These incredible earnings beats. 284 00:14:52,640 --> 00:14:55,360 For example, if we just pull this up on Qualtrim, we look at 285 00:14:55,360 --> 00:15:00,000 the the dot plot chart here we look at the earnings over time. 286 00:15:00,000 --> 00:15:02,760 This shows that they beat. Then if we show the estimates, 287 00:15:02,760 --> 00:15:06,200 you can get an idea of this. It was $7.14. 288 00:15:06,480 --> 00:15:12,400 Sorry, the estimates were for $5.88 and they came in at $7.14. 289 00:15:13,000 --> 00:15:15,520 It's incredible. How do they beat by that much? 290 00:15:15,880 --> 00:15:19,360 The estimates were for 44.8 billion and they came in with 291 00:15:19,360 --> 00:15:22,680 47.5. The analysts aren't even close 292 00:15:22,680 --> 00:15:24,160 and they haven't been close for a while. 293 00:15:24,400 --> 00:15:25,840 Look at the last couple of quarters. 294 00:15:26,200 --> 00:15:29,480 They weren't close this quarter. The analysts weren't close last 295 00:15:29,480 --> 00:15:32,400 quarter or the one before or the one before. 296 00:15:32,880 --> 00:15:36,280 They're a little bit closer in Q3 of 2024, but still just shy. 297 00:15:36,920 --> 00:15:40,800 Meta is outperforming the analyst estimates by huge margin 298 00:15:40,960 --> 00:15:42,560 quarter after quarter after quarter. 299 00:15:42,800 --> 00:15:45,080 So the the stock of course is going to have incredible 300 00:15:45,080 --> 00:15:48,280 performance when you have that type of outperformance every 301 00:15:48,280 --> 00:15:50,880 single quarter of expectations. Now we can take a look at some 302 00:15:50,880 --> 00:15:53,560 of the financial performance metrics here and they're pretty 303 00:15:53,560 --> 00:15:56,920 staggering. Q2 revenue reached 47.5 billion, 304 00:15:56,920 --> 00:16:00,680 up 22% year over year. So Meta is still growing at that 305 00:16:00,680 --> 00:16:04,480 rate over 20%. When a company can continue to 306 00:16:04,480 --> 00:16:08,680 grow above 20% year over year, it's hard for anything else to 307 00:16:08,680 --> 00:16:11,520 go that wrong. It really the other metrics have 308 00:16:11,520 --> 00:16:15,720 to be terrible for you to grow 20% for a long period of time 309 00:16:15,960 --> 00:16:18,880 and to have bad performance. The top line revenue growth 310 00:16:19,040 --> 00:16:21,160 gives so much wiggle room for everything else. 311 00:16:21,400 --> 00:16:25,120 If you're growing 20%, it's difficult for margins to go 312 00:16:25,120 --> 00:16:26,560 down. It's difficult for you to have 313 00:16:26,560 --> 00:16:29,160 other troubles in the business, especially when you have 1/2 314 00:16:29,160 --> 00:16:31,480 decent business or at least a great one like Meta. 315 00:16:31,840 --> 00:16:36,040 So a company of this quality growing 22% is huge. 316 00:16:36,920 --> 00:16:40,280 Operating income was 20.4 billion with 43% margin. 317 00:16:40,480 --> 00:16:43,560 Net income was 18 billion. These are massive numbers. 318 00:16:43,800 --> 00:16:48,600 Expense was 27 billion, up 12%. So the expenses are growing far 319 00:16:48,600 --> 00:16:50,480 slower than the top line revenue. 320 00:16:50,680 --> 00:16:53,600 When we look at some of the more business metrics of the company, 321 00:16:54,320 --> 00:16:56,600 one thing that's always impressed me is how they're able 322 00:16:56,600 --> 00:16:59,600 to get so many people using their platforms, keep them on 323 00:16:59,600 --> 00:17:03,240 their platforms and then kind of cross sell them to their other 324 00:17:03,240 --> 00:17:05,839 platforms. So people using Instagram are 325 00:17:05,839 --> 00:17:09,560 going to be using Reels or Facebook or you know, all all 326 00:17:09,560 --> 00:17:12,280 the different properties they have on each platform. 327 00:17:12,640 --> 00:17:14,359 Even going out to things like Threads. 328 00:17:14,400 --> 00:17:17,079 They're getting more people to use different, different 329 00:17:17,079 --> 00:17:20,160 platforms. They have Meta reached over 3.4 330 00:17:20,160 --> 00:17:22,839 billion daily active users across his families. 331 00:17:23,040 --> 00:17:25,920 A family of apps reporting strong engagement across 332 00:17:25,920 --> 00:17:27,920 Facebook, Instagram and WhatsApp. 333 00:17:28,079 --> 00:17:31,560 If we look at this number over time, the family daily active 334 00:17:31,560 --> 00:17:34,360 people metric, this is what we're looking at here is up 335 00:17:34,360 --> 00:17:38,640 6.42%. Now that is strong growth when 336 00:17:38,640 --> 00:17:44,280 you keep in mind that this is from 3.43 billion people to 3.48 337 00:17:44,320 --> 00:17:46,720 billion. So they added on hundreds of 338 00:17:46,720 --> 00:17:48,480 millions of people in the last quarter. 339 00:17:48,960 --> 00:17:50,760 Incredible to see that continue growing. 340 00:17:50,840 --> 00:17:53,720 Time spent increased due to AI driven improvements with 341 00:17:53,720 --> 00:17:56,960 Facebook up 5%, Instagram up 6% in the quarter. 342 00:17:57,320 --> 00:18:00,240 They're still keeping people on their platforms for longer 343 00:18:00,240 --> 00:18:03,200 periods of time. Instagram video time and 344 00:18:03,200 --> 00:18:06,040 Facebook video time both increased by 20% year over year 345 00:18:06,040 --> 00:18:08,320 globally and in the US, respectively. 346 00:18:08,680 --> 00:18:12,320 So they're growing much faster in video across all their 347 00:18:12,320 --> 00:18:15,160 platforms than any other any other form factor. 348 00:18:15,880 --> 00:18:17,760 You can look at that as a competitor to YouTube. 349 00:18:17,760 --> 00:18:20,760 I I certainly think it is, But I also just think that video is by 350 00:18:20,760 --> 00:18:24,800 far the most intriguing and engaging way to consume content. 351 00:18:24,840 --> 00:18:26,680 It's more engaging than just audio. 352 00:18:27,120 --> 00:18:32,360 Even Spotify says that video is more engaging than the audio on 353 00:18:32,360 --> 00:18:34,400 their platform. Whenever someone uploads a video 354 00:18:34,400 --> 00:18:36,560 podcast, they have higher engagement levels. 355 00:18:36,600 --> 00:18:39,080 Mark Zuckerberg noted that he believes we're getting closer to 356 00:18:39,080 --> 00:18:42,400 super intelligence, meaning that the artificial intelligence has 357 00:18:42,400 --> 00:18:45,840 begun to self improve internally, with initial use 358 00:18:45,840 --> 00:18:48,640 cases seen for autonomous AI agents enhancing product 359 00:18:48,640 --> 00:18:51,320 algorithms. So basically the whole idea of 360 00:18:51,320 --> 00:18:56,840 super intelligence is it's like a a system that improves itself 361 00:18:56,880 --> 00:19:01,480 with no feedback from humans. It's self reinforcing, self 362 00:19:01,480 --> 00:19:04,320 improving all by itself. That's super intelligence 363 00:19:04,760 --> 00:19:07,360 because when you do that for long enough periods of time and 364 00:19:07,360 --> 00:19:10,360 it compounds over time, theoretically that means that 365 00:19:10,360 --> 00:19:13,600 computers could far outweigh human intelligence and do it in 366 00:19:13,600 --> 00:19:16,280 a self reinforcing way. That's what Mark Zuckerberg is 367 00:19:16,280 --> 00:19:19,680 going for here. He's hired this team of really 368 00:19:19,680 --> 00:19:22,440 smart people that they're paying hundreds, millions of dollars, a 369 00:19:22,440 --> 00:19:25,080 small team to continue making these improvements. 370 00:19:25,440 --> 00:19:27,960 So Meta's become a little bit like Google where they're now 371 00:19:27,960 --> 00:19:29,760 doing a lot of experimental stuff. 372 00:19:30,040 --> 00:19:33,240 They're doing more labs and kind of becoming a researchers and 373 00:19:33,240 --> 00:19:37,680 scientists along with just a business and that's been really 374 00:19:37,680 --> 00:19:40,240 successful for Google. I think it will work for Meta as 375 00:19:40,240 --> 00:19:42,440 well. Generative AI and AD creation is 376 00:19:42,440 --> 00:19:44,520 increasingly contributing to ad revenue. 377 00:19:44,800 --> 00:19:48,560 New models deployed and AD rankings and retrieval systems. 378 00:19:48,880 --> 00:19:51,960 Introduction of ad placements and threads feed and WhatsApp 379 00:19:51,960 --> 00:19:54,920 updates tab with plans to gradually increase ad supply. 380 00:19:55,320 --> 00:19:58,640 Business messaging and Click to message revenue continue to 381 00:19:58,640 --> 00:20:02,200 grow, especially in the US over 40% year over year growth for 382 00:20:02,200 --> 00:20:05,680 Click to message content recommendation and original 383 00:20:05,680 --> 00:20:08,440 content. Continued optimization of 384 00:20:08,440 --> 00:20:11,840 recommended algorithms with LLMS, including Llama, driving 385 00:20:11,840 --> 00:20:14,320 significant improvements, especially on threads. 386 00:20:14,600 --> 00:20:16,920 So what they're doing here is they highlighted that they're 387 00:20:16,920 --> 00:20:20,440 trying to surface smaller, newer content creators that are 388 00:20:20,440 --> 00:20:23,040 actually creating good content, because a lot of them just get 389 00:20:23,200 --> 00:20:27,160 lost in a sea of content. And they're using LLMS to 390 00:20:27,160 --> 00:20:29,760 determine that this is fresh content. 391 00:20:29,760 --> 00:20:32,400 It needs to be shown to other people, and they're growing a 392 00:20:32,400 --> 00:20:34,840 little bit that way. They have focused effort on 393 00:20:34,840 --> 00:20:37,800 promoting original content. And then one of the notable 394 00:20:37,800 --> 00:20:41,480 things about the shift with Meta is that they remain focused on 395 00:20:41,480 --> 00:20:45,600 leveraging a small, talent dense team for frontier AI research 396 00:20:46,000 --> 00:20:48,840 contrasted with the larger scale teams used for incremental 397 00:20:48,840 --> 00:20:50,800 product enhancements across its platform. 398 00:20:51,160 --> 00:20:54,960 So for AI, Mark Zuckerberg is convinced that that a few amount 399 00:20:54,960 --> 00:20:58,320 of really small smart people is better than a large amount of 400 00:20:58,320 --> 00:21:00,640 mediocre people. He thinks that if you can just 401 00:21:01,120 --> 00:21:04,000 pay the right people, buy the right team, that it can make 402 00:21:04,000 --> 00:21:07,000 more gains in AI than just hiring endless amounts of 403 00:21:07,000 --> 00:21:09,360 people. The primary focus over the near 404 00:21:09,360 --> 00:21:12,520 medium term is not immediate monetization of generative AI, 405 00:21:12,520 --> 00:21:14,840 but ramping user engagement and product quality. 406 00:21:15,160 --> 00:21:18,960 Monetization will follow as products and scale matures. 407 00:21:19,000 --> 00:21:20,440 I think that's the right approach as well. 408 00:21:20,760 --> 00:21:23,760 Meta's investment cadence is directly tied to business 409 00:21:23,760 --> 00:21:26,800 opportunity and return expectations, focusing on 410 00:21:26,800 --> 00:21:30,120 sustained profitability growth over time, even if investment 411 00:21:30,120 --> 00:21:32,520 cycles occasionally surpass short term margins. 412 00:21:32,960 --> 00:21:34,920 So they are in this for the long term. 413 00:21:35,040 --> 00:21:36,960 Now let me be clear about one thing here with Meta. 414 00:21:36,960 --> 00:21:38,920 The company deserves to be moving up today. 415 00:21:39,200 --> 00:21:42,520 It deserves to trade at the 29 PE ratio it now trades at. 416 00:21:43,040 --> 00:21:46,200 Expectations should be higher moved up for Meta because how 417 00:21:46,200 --> 00:21:49,120 much they have proven Wall Street wrong again and again. 418 00:21:49,680 --> 00:21:53,040 Now I'm of the opinion that right now Meta is a a great 419 00:21:53,040 --> 00:21:55,280 company. I would be fine having this one 420 00:21:55,280 --> 00:21:57,760 in My Portfolio. But I look in compare and 421 00:21:57,760 --> 00:22:01,040 contrast the opportunity of Meta and Google and I just think that 422 00:22:01,040 --> 00:22:03,680 Google is such a good opportunity for me. 423 00:22:03,680 --> 00:22:06,360 When I I look at putting in incremental money into the 424 00:22:06,360 --> 00:22:11,000 market, I look at Google trading at an 18 to 19 PE ratio and Meta 425 00:22:11,000 --> 00:22:14,720 trading at a 29. And even if Meta has some unique 426 00:22:15,160 --> 00:22:18,160 things about it that Google doesn't have, Google has a lot 427 00:22:18,160 --> 00:22:19,920 of unique things about it that Meta doesn't have. 428 00:22:20,040 --> 00:22:23,320 And both of these companies had incredible earnings reports. 429 00:22:23,680 --> 00:22:27,000 They're growing quickly. Google Cloud is not slacking. 430 00:22:27,000 --> 00:22:30,960 And this company is full stack integrated from creating cloud 431 00:22:30,960 --> 00:22:34,400 infrastructure, artificial intelligence models all the way 432 00:22:34,400 --> 00:22:36,640 to distribution. They already have the AI 433 00:22:36,640 --> 00:22:39,840 research labs as well. So in my opinion, even though 434 00:22:39,840 --> 00:22:42,640 Meta is incredibly strong and I see it as a great company, I'd 435 00:22:42,640 --> 00:22:45,520 be fine holding in My Portfolio, when I'm looking at new 436 00:22:45,520 --> 00:22:48,480 incremental cash flows, I'd probably choose Google over 437 00:22:48,480 --> 00:22:50,240 Meta. Now outside of Microsoft and 438 00:22:50,240 --> 00:22:52,280 Meta, there's still a lot of important companies that 439 00:22:52,280 --> 00:22:55,040 reported earnings. One of them is S&P Global. 440 00:22:55,040 --> 00:22:58,480 This one just reported today, the stock is reacting by around 441 00:22:58,760 --> 00:23:02,760 up 4 1/2% and it says that S&P Global shares are trading higher 442 00:23:02,760 --> 00:23:05,520 after the company reported better than expected Q2 443 00:23:05,520 --> 00:23:09,720 financial results and raised its financial year 2025 adjusted 444 00:23:09,720 --> 00:23:12,000 earnings per share guidance above estimates. 445 00:23:12,320 --> 00:23:14,840 So they be on the top and bottom line and they're raising their 446 00:23:14,840 --> 00:23:17,160 guidance. This is something that's very 447 00:23:17,160 --> 00:23:20,360 common for this company. Now when I look at S&P Global, 448 00:23:20,640 --> 00:23:25,960 this is around a 13% weighted position, $38,000 in gains. 449 00:23:26,200 --> 00:23:28,000 It's moving up quite nicely this year. 450 00:23:28,840 --> 00:23:32,160 I don't have too much to say other than this one is what I 451 00:23:32,160 --> 00:23:35,040 expected, which is business as usual when we look at the 452 00:23:35,040 --> 00:23:36,560 revenue segments of this company. 453 00:23:36,920 --> 00:23:40,160 One of the major things that could help this company is 454 00:23:40,160 --> 00:23:43,160 interest rates dropping. If interest rates do go down, 455 00:23:43,160 --> 00:23:46,200 which I think they eventually will, it'll help out every 456 00:23:46,200 --> 00:23:49,080 segment of this company. The indices, you have more 457 00:23:49,080 --> 00:23:52,440 investments going, more trading, the market intelligence, you 458 00:23:52,440 --> 00:23:53,960 have more interest in investment. 459 00:23:53,960 --> 00:23:56,920 When interest rates drop, you have the rating business. 460 00:23:57,280 --> 00:23:59,640 All that global debt. When interest rates drop, it 461 00:23:59,640 --> 00:24:02,800 helps out global debt. All of that is benefited by 462 00:24:02,800 --> 00:24:05,200 interest rates dropping. Now, that's not something that 463 00:24:05,200 --> 00:24:07,720 you need to bet on. So if you're invested in S&P 464 00:24:07,720 --> 00:24:10,120 Global, you're not just sitting around waiting for interest 465 00:24:10,120 --> 00:24:12,920 rates to drop because the company will do fine even if 466 00:24:12,920 --> 00:24:15,520 that doesn't happen. But it can be viewed as an extra 467 00:24:15,520 --> 00:24:19,240 catalyst for this company. Overall, the report is strong. 468 00:24:19,320 --> 00:24:21,680 Business as usual, continue to growth for company. 469 00:24:21,680 --> 00:24:24,600 I'll continue to hold. One company that's having a lot 470 00:24:24,600 --> 00:24:27,560 more trouble that recently reported and it continues to 471 00:24:27,560 --> 00:24:31,920 fall is FICO. It's down another 6.7% on the 472 00:24:31,920 --> 00:24:36,080 day, down to $1400 per share. Now it seems like a a high share 473 00:24:36,080 --> 00:24:41,800 price, but if we look just this year, FICO was trading at $2200, 474 00:24:42,200 --> 00:24:45,720 so it went from 2200. Now it's down nearly 30% on the 475 00:24:45,720 --> 00:24:49,800 year, down 50% from its highs. It's down to $1400 per share. 476 00:24:50,080 --> 00:24:52,960 Qualtrum has a note here noting the reason why it's saying that 477 00:24:53,360 --> 00:24:57,080 Fair Isaac shares are trading lower after the FHFA director. 478 00:24:57,360 --> 00:25:00,800 Poult yesterday said Fannie and Freddie will allow lenders to 479 00:25:00,800 --> 00:25:04,040 use Vantage 4 Point O Score with no current requirement to build 480 00:25:04,040 --> 00:25:07,240 new infrastructure. Multiple analysts lowered their 481 00:25:07,240 --> 00:25:12,000 price targets on the stock. So what's going on is FICO was 482 00:25:12,000 --> 00:25:15,680 one of the ones that was the sole approved to do credit 483 00:25:15,680 --> 00:25:18,720 ratings and now they're just expanding it, allowing Vantage 484 00:25:18,720 --> 00:25:20,560 Score. Now theoretically, this helps 485 00:25:20,560 --> 00:25:24,440 out Vantage Score owners like we have, for example, Equifax here. 486 00:25:24,560 --> 00:25:29,040 This is a company that I own and this could theoretically help 487 00:25:29,040 --> 00:25:31,360 them out, but it's not a huge business segment. 488 00:25:31,760 --> 00:25:34,880 So if Vantage Score grows, that's good for Equifax. 489 00:25:34,880 --> 00:25:37,520 It's another business line, but it's not like the biggest thing 490 00:25:37,520 --> 00:25:40,600 going on with the company. So this hurts FICO a lot more 491 00:25:40,600 --> 00:25:44,280 than it helps Equifax. But either way, as an Equifax 492 00:25:44,280 --> 00:25:46,720 owner, I'm not concerned about this at all. 493 00:25:46,720 --> 00:25:49,600 It doesn't affect me. This really only effects FICO. 494 00:25:49,680 --> 00:25:51,400 Now. Why has FICO become such a 495 00:25:51,400 --> 00:25:54,400 target for regulators? Why are they wanting to adopt so 496 00:25:54,400 --> 00:25:57,080 much competition and allow Vanish Score to compete directly 497 00:25:57,080 --> 00:25:59,560 with them? Well, part of it is that FICO 498 00:25:59,840 --> 00:26:02,480 raised prices rather aggressively over a short period 499 00:26:02,480 --> 00:26:04,960 of time. They went from like a dollar a 500 00:26:04,960 --> 00:26:08,800 score to around 5 or 6 bucks a score over just a short amount 501 00:26:08,800 --> 00:26:11,280 of time. And even though the amounts are 502 00:26:11,280 --> 00:26:13,760 small, it looks huge in terms of percentages. 503 00:26:14,320 --> 00:26:18,760 Imagine if for just a second the dollar 50 hot dog combo at 504 00:26:18,760 --> 00:26:22,280 Costco suddenly went to like $8 in a single year. 505 00:26:23,040 --> 00:26:25,800 You you just be Jarred by it. People say what's going on? 506 00:26:25,800 --> 00:26:29,000 It was $1.50 and now it's $8 in a single year. 507 00:26:29,360 --> 00:26:31,320 I mean the people would be furious about it. 508 00:26:31,400 --> 00:26:34,480 Normally looking at a hot dog combo and seeing that it's for 8 509 00:26:34,480 --> 00:26:38,040 bucks may not raise any eyebrows, but the rapid price 510 00:26:38,040 --> 00:26:40,360 increase is what raised eyebrows for FICO. 511 00:26:40,840 --> 00:26:42,960 And this is what the CEO is trying to address. 512 00:26:42,960 --> 00:26:46,840 So he's kind of on a media tour here doing PR damage control 513 00:26:46,840 --> 00:26:49,200 over their price increases. And this is one of the most 514 00:26:49,200 --> 00:26:52,200 interesting conversations because the CEO directly 515 00:26:52,240 --> 00:26:54,800 addresses the price increase comments. 516 00:26:54,960 --> 00:26:58,080 Look, the difference between a penny and five cents is 500%. 517 00:26:58,680 --> 00:27:01,520 It sounds terrible in percentage terms, but let's face it, we're 518 00:27:01,520 --> 00:27:04,600 talking about the price of a FICO sport being in the in the 519 00:27:04,600 --> 00:27:08,480 neighborhood of a cup of coffee, and we're talking about $6000 of 520 00:27:08,480 --> 00:27:11,000 closing costs. Hundreds of dollars in other 521 00:27:11,000 --> 00:27:13,720 fees, hundreds of dollars in title insurance fees, for 522 00:27:13,720 --> 00:27:16,560 example. So $4.95. 523 00:27:16,800 --> 00:27:18,680 Frankly, I think it's a bargain. I cannot. 524 00:27:18,800 --> 00:27:21,080 We could give it away for free and it wouldn't change anyone's 525 00:27:21,080 --> 00:27:22,880 costs. Now the CEO of FICO is correct 526 00:27:22,880 --> 00:27:26,040 and he makes a strong point. Going from a penny to 5 pennies 527 00:27:26,040 --> 00:27:29,680 is a 500% increase, but it's still only 5 pennies. 528 00:27:30,040 --> 00:27:32,840 So looking at the change in percentage terms gives you the 529 00:27:32,840 --> 00:27:36,280 impression that it's this huge change when it's really just 5 530 00:27:36,280 --> 00:27:37,760 pennies. And that's how he's trying to 531 00:27:37,760 --> 00:27:40,160 portray this, that even though they increase the price a lot, 532 00:27:40,160 --> 00:27:43,600 it's still dirt cheap, so it's not that big of a deal. 533 00:27:44,040 --> 00:27:47,200 What I think he misses is simply optics. 534 00:27:47,280 --> 00:27:50,560 He's the CEO of the company. He should be concerned not just 535 00:27:50,560 --> 00:27:54,480 about what's real reality, but what perception is. 536 00:27:55,240 --> 00:27:58,160 I, I have a phrase, it's one in business that my dad has always 537 00:27:58,160 --> 00:28:01,800 told me that in terms of business, perception is reality. 538 00:28:01,920 --> 00:28:04,480 How people perceive something becomes their reality of the 539 00:28:04,480 --> 00:28:07,600 situation. So even if FICO is offering 540 00:28:07,600 --> 00:28:11,960 great value, even if it's true that penny to $0.05 is only 541 00:28:12,440 --> 00:28:16,160 $0.05 in all, it's still a 500% increase. 542 00:28:16,400 --> 00:28:20,680 They still went from less than a dollar to now $5 per score in 543 00:28:20,680 --> 00:28:23,080 just a couple of years. And that's going to raise 544 00:28:23,080 --> 00:28:24,400 eyebrows. That's going to frustrate 545 00:28:24,400 --> 00:28:26,760 people. People look at the increase in 546 00:28:26,760 --> 00:28:29,360 price, Regulators look at that, and they believe that you're a 547 00:28:29,360 --> 00:28:32,960 monopoly extracting toll, monopoly price increases. 548 00:28:33,440 --> 00:28:37,200 Now, if you took the approach of trying to have a better optics, 549 00:28:37,200 --> 00:28:39,840 better perception with regulators, he would have 550 00:28:39,840 --> 00:28:42,480 increased prices on a slower cadence over a longer period of 551 00:28:42,480 --> 00:28:46,400 time, Still fast, but not so aggressively in such a short 552 00:28:46,400 --> 00:28:49,600 amount of time. So my big criticism of the CEO 553 00:28:49,600 --> 00:28:52,840 is basically that even though he might be mathematically correct, 554 00:28:53,120 --> 00:28:55,800 even though FICO represents a very small portion of total 555 00:28:55,800 --> 00:28:58,720 closing costs, even though most consumers aren't really 556 00:28:58,720 --> 00:29:01,560 concerned with it, he played the game wrong. 557 00:29:01,800 --> 00:29:05,040 They are in a dominant monopolistic position, and he 558 00:29:05,040 --> 00:29:07,600 extracted too much pricing power too quickly. 559 00:29:08,000 --> 00:29:11,680 That forced regulators to look at the the situation and now 560 00:29:11,680 --> 00:29:15,760 they're responding aggressively, allowing for more competition in 561 00:29:15,760 --> 00:29:19,360 scoring. So part of this I do feel is a a 562 00:29:19,360 --> 00:29:23,600 misstep by FICO leadership, an unnecessary one where they 563 00:29:23,600 --> 00:29:26,240 guided the business for the short term, not for the long 564 00:29:26,240 --> 00:29:28,280 term. You can raise prices above 565 00:29:28,280 --> 00:29:31,160 inflation and still have a great business for a very long period 566 00:29:31,160 --> 00:29:33,920 of time. So to me, this was a strategic 567 00:29:34,120 --> 00:29:37,440 perception PR mistake. It's causing a nightmare 568 00:29:37,440 --> 00:29:41,160 scenario in the company where the stock is down 28% from just 569 00:29:41,160 --> 00:29:44,640 the beginning of this year. It's now down 10% over the 570 00:29:44,640 --> 00:29:46,360 trailing one year. Now this doesn't mean the 571 00:29:46,360 --> 00:29:49,160 business is bad or that things are going to keep getting worse 572 00:29:49,160 --> 00:29:51,240 for FICO. I believe we'll find some 573 00:29:51,240 --> 00:29:54,800 support eventually, but right now the situation is dicey. 574 00:29:54,800 --> 00:29:58,400 It seems like regulators are really determined to put 575 00:29:58,400 --> 00:30:01,200 pressure on FICO for as long as that's happening. 576 00:30:01,200 --> 00:30:03,560 I feel like this one's a little bit too difficult right now. 577 00:30:03,960 --> 00:30:06,440 I'm going to wait and see if things settle down, see if 578 00:30:06,440 --> 00:30:08,360 there's a little bit more clarity in the situation. 579 00:30:08,680 --> 00:30:11,160 If we look at the total portfolio here, MasterCard is 580 00:30:11,160 --> 00:30:14,360 the second largest position. And I know I don't talk about it 581 00:30:14,360 --> 00:30:18,720 that often because it's just so it's, it's just so steady and 582 00:30:18,720 --> 00:30:22,880 usual and predictable and it's such an easy investment that 583 00:30:23,040 --> 00:30:24,840 there's nothing to really discuss. 584 00:30:25,160 --> 00:30:27,720 It's a great company that constantly compounds, has super 585 00:30:27,720 --> 00:30:30,240 high margin, it's super profitable, that continues 586 00:30:30,240 --> 00:30:33,160 growing at a high rate. And there's not much else to the 587 00:30:33,160 --> 00:30:35,440 thesis. It's a 12% position. 588 00:30:35,440 --> 00:30:37,720 I'm currently in the green by $36,000 on it. 589 00:30:38,160 --> 00:30:40,640 When I look at MasterCard, it was another quarter of business 590 00:30:40,640 --> 00:30:42,920 as usual. We already saw from Visa that 591 00:30:42,920 --> 00:30:45,360 things were going to be good. They were good for MasterCard, 592 00:30:45,360 --> 00:30:47,920 even above expectations. When we look at some of the 593 00:30:47,920 --> 00:30:49,840 metrics here, they're truly just staggering. 594 00:30:49,840 --> 00:30:52,800 Here's what the revenue growth looks like over time, another 595 00:30:52,800 --> 00:30:56,560 15% growth quarter. So MasterCard is a fast growing 596 00:30:56,560 --> 00:30:58,600 business. Everything looks on track with 597 00:30:58,600 --> 00:31:00,560 the business. Free cash flow is growing as 598 00:31:00,560 --> 00:31:02,200 usual. Free cash flow per share is 599 00:31:02,200 --> 00:31:04,760 growing super fast. We have earnings per share also 600 00:31:04,760 --> 00:31:08,400 growing 13 to 15% range. Strong growth there over time 601 00:31:08,400 --> 00:31:11,000 and incredibly consistent. Then you have the earnings call 602 00:31:11,000 --> 00:31:13,720 where they continually note that the business is incredibly good, 603 00:31:13,720 --> 00:31:17,720 but they're not seeing a lot of consumer issues or signs of a 604 00:31:17,720 --> 00:31:19,600 recession or the fears that people have. 605 00:31:19,920 --> 00:31:22,400 On top of that, they're embracing stablecoin and helping 606 00:31:22,480 --> 00:31:25,400 with doing transactions and different things involved with 607 00:31:25,400 --> 00:31:27,600 it. O they're fully embracing the 608 00:31:27,600 --> 00:31:29,600 fintech wave. They're not running away from 609 00:31:29,600 --> 00:31:32,200 it. Now lastly we get to Spotify, 610 00:31:32,800 --> 00:31:36,480 which in my predictions I noted that this one would probably 611 00:31:36,480 --> 00:31:40,320 post great earnings results, but yet it would fade away anyway. 612 00:31:40,680 --> 00:31:42,200 And that's what happened with this stock. 613 00:31:42,440 --> 00:31:44,200 Spotify posted earlier this week. 614 00:31:44,200 --> 00:31:47,440 The stock was around $700.00 when they posted and then it 615 00:31:47,440 --> 00:31:50,600 fell down to around 6:30. So it did the same thing roughly 616 00:31:50,600 --> 00:31:53,200 that Netflix did. They posted a really strong 617 00:31:53,200 --> 00:31:55,880 earnings report, but the stock traded down anyway. 618 00:31:56,320 --> 00:31:59,640 And that's because if they show any slight weaknesses at all, 619 00:32:00,160 --> 00:32:03,000 any softness and guidance whatsoever when your stock 620 00:32:03,000 --> 00:32:05,840 trading at this valuation, investors are going to sell with 621 00:32:05,880 --> 00:32:09,240 any signs of weakness. Now, in my opinion, when I look 622 00:32:09,240 --> 00:32:11,880 at Spotify, it's a company that I've wanted to own for a long 623 00:32:11,880 --> 00:32:14,640 period of time. So I'm very much wanting to get 624 00:32:14,640 --> 00:32:17,160 a stake in equity ownership in this business. 625 00:32:17,520 --> 00:32:19,880 I think they're going to be around for a very long period of 626 00:32:19,880 --> 00:32:21,760 time. It's like a Netflix, it's going 627 00:32:21,760 --> 00:32:23,400 to be around for another 50 years. 628 00:32:23,680 --> 00:32:25,240 They're going to generate a lot of profits. 629 00:32:25,240 --> 00:32:27,640 They have a huge platform. They have more and more monthly 630 00:32:27,640 --> 00:32:29,800 active users. When we look at the data here, 631 00:32:29,800 --> 00:32:34,480 they have 696,000,000 now. So they're basically at 700 632 00:32:34,480 --> 00:32:36,360 million total monthly active users. 633 00:32:36,680 --> 00:32:40,240 When we look at this more specifically, the premium users, 634 00:32:40,440 --> 00:32:45,200 they have 276,000,000 and then AD supported, they have 433 635 00:32:45,200 --> 00:32:47,120 million. And both of these are great, 636 00:32:47,120 --> 00:32:49,840 whether you're AD supported or premium, both of them are 637 00:32:49,840 --> 00:32:53,200 profitable for Spotify. So their user base continues to 638 00:32:53,200 --> 00:32:55,760 grow over time. And I think they're going to get 639 00:32:55,760 --> 00:32:58,280 to that billion mark. They're going to get to a 640 00:32:58,280 --> 00:33:01,120 billion users. So the long term of Spotify 641 00:33:01,120 --> 00:33:03,600 looks great. The problem that I struggle with 642 00:33:03,600 --> 00:33:06,120 is an entry point. I've looked for better entry 643 00:33:06,120 --> 00:33:08,920 points and it's very difficult to find a decent one in this 644 00:33:08,920 --> 00:33:11,160 company. I think I'll start looking if 645 00:33:11,160 --> 00:33:13,640 the stock gets below $500 per share. 646 00:33:14,160 --> 00:33:17,040 That's at the only the only point where I can really look at 647 00:33:17,040 --> 00:33:19,440 it and believe it's worth it with the multiples it trades at 648 00:33:19,720 --> 00:33:22,120 'cause it's already at a 54 PE ratio. 649 00:33:22,160 --> 00:33:24,200 So Spotify had another great report. 650 00:33:24,200 --> 00:33:26,720 They grew their membership base. They're headed towards that 651 00:33:26,720 --> 00:33:29,040 billion user mark. They're growing in free cash 652 00:33:29,040 --> 00:33:31,280 flow and earnings. They're also gaining market 653 00:33:31,280 --> 00:33:33,680 share in video along with Meta and other companies. 654 00:33:33,680 --> 00:33:35,080 So they're growing that out as well. 655 00:33:35,360 --> 00:33:38,280 It's one that I wanna own, but I just can't do it right now. 656 00:33:38,600 --> 00:33:41,200 I'd rather buy something like Google or some other cheaper 657 00:33:41,200 --> 00:33:43,440 company. That's going to be a look at the 658 00:33:43,440 --> 00:33:45,840 earnings report so far. Make sure you subscribe to the 659 00:33:45,840 --> 00:33:48,400 channel to see my reaction to Amazons and Apples.