Today on the Joseph Carlson show, stocks are going crazy.
Some of the biggest companies in the world like Amazon are up 5
or 6%. The overall indices are up
around 3% on the day. And this comes at a time of
renewed optimism of de escalation on tariffs.
There is news that the White House is considering slashing
Chinese tariffs to a huge degree.
We'll be going over the latest in this news, Trump's attempts
to de escalate the situation. Scott Bessent, the one that's
leading this charge of trying to calm the markets and potentially
making deals with lots of trading partners.
We'll be looking over all the latest as well as how this
effects our portfolios. Now we also have news just
yesterday that Tesla reported earnings they missed on
everything and the stock is up around 7% on the day.
Like you would expect, we'll be going over why this is a common
occurrence, why Tesla misses on everything and the stock goes
up. And we also have Moody's and
Equifax, two companies in My Portfolio that both reported
earnings will be reviewing both of them as well as going over
all my portfolios and the holdings in them.
We're going to take a look at what my performance looks like,
how it stacks up against the market and which companies I'm
looking at buying. So we have a lot to get to in
the episode. Let's go ahead and jump in Now.
We kick things off by first looking at what's causing this
market to surge today. Some of the biggest companies
like Amazon, which were the most impacted by the Chinese tariffs,
are the ones that are up the most today.
And that is because the news that the White House is strongly
considering slashing the tariffs.
This is a de escalation of the trade war.
This is what investors have been looking forward to.
The Trump administration is considering slashing its steep
tariffs on Chinese imports, in some cases by more than half, in
a bid to de escalate tensions with Beijing.
Now, so far, President Trump hasn't made a final
determination. They say that the discussions
remain fluid and several options are on the table.
One administration official said Trump would act unilaterally and
would need to see some action on Beijing to lower the tariffs.
So although nothing is definitive right now, it does
look like there's a strong chance of the escalation.
In fact, 1 senior White House official said the Chinese
tariffs were likely to come down between roughly 50 and 65%.
The administration is also considering a tarred approach
similar to the one proposed by the White House Committee on
China late last year. 35% levies on items the US deems not a
threat to national security, but at least 100% for items deemed
as strategic to Americans interests.
The strategy is adapting here from a broad based aggressive
roll out of tariffs on China, tariffing every single item that
we can, to now much more nuanced strategic specific approach.
And overall, the market likes this more strategic approach.
Investors are getting further and further on board of this
plan. Now during this entire tariff
rollout, the one person that investors can really think, if
you're an investor and you're excited about your portfolio
going up today, the person that you owe the most gratitude
towards is Scott Besson. He is the one that's in the
White House that is the most for free trade collaboration and
making smart and strategic deals with our partners.
He's also the one that shares the best message, the most
unified message. For example, he recently said
that America first does not mean America alone.
This is a much needed message, one that's being repeated over
and over again, showing that even if you believe America's a
great country, if you're like me, if you have a flag in your
background, if you're very American first, it doesn't mean
that you want to do it alone. America's made better by our
strategic partnerships, by our strong ally ships across the
world. He says, quote, America first
does not mean America alone. To the contrary, it's a call for
deeper collaboration and mutual respect among our trade
partners. This is the message that America
needs going forward. And Scott Besson continued on,
saying, quote, far from stepping back, America First seeks to
expand US leadership in international institutions like
the IMF and World Bank. Scott Besson in a private
meeting, said that he expects de escalation with China.
The de escalation will come in the very near future, Besson
said during an event hosted by JP Morgan.
He characterized the current situation as essentially a trade
embargo, according to people who attended.
So we can clearly see what's going on here.
The evolution of the strategy over time, it's starting off
Broad bold, going in with huge sweeping tariffs, imposing them
on virtually every country in the world and then reducing them
more strategically, more focused to align with specific products
and countries that better align with EU s s strategic goals.
And the market like seeing this transition as this continues on,
going from this broad based tariff to this more strategic
approach, the market will be bullish as a response.
And the next bullish phase of this, the next thing that
investors can look for in terms of big days like today is a
ladder, a ladder of new trade deals announced with different
strategic partners over the upcoming months.
The White House is also reportedly very close with many
key deals, some like Japan and India.
When these get announced, there's only one way the market
can go. And throughout all of this, with
the trade policy becoming more clear, with investors becoming
more optimistic, you can start to see what the best decisions
have been. And that has been to stay the
course and buy the dip. Now, let's go ahead and move on
to some headlines. The first big piece of news is
that Tesla is in the green by 6%, which may leave you with the
impression that Tesla had a fantastic earnings.
But I'm here to report, regrettably, that Tesla's
earnings were not great. In fact, they weren't only not
great, they weren't even good. Tesla's an interesting case
because once again, they missed on everything.
Top and bottom line, miss revenue and earnings per share.
The net income was down 71% year over year.
The revenue declined 9% year over year.
The operating margins are lower than Texas Roadhouse, a sit down
restaurant, yet somehow the stock is in the green.
It's in the green by 7% at this point.
Tesla missing on earnings and the stock going up after is not
a surprise. It's more of a seasonal
tradition. It's like daylight savings time
or being surprised when Mariah Carey comes around in November.
It's something that we all know is going to happen, but we all
act shocked when it happens again.
And here we have it happening again.
Tesla missed big and the stock is in the green.
And it's clear why this continues to happen.
Tesla's unique example of a company where investors are not
focused on any of the numbers or the past historical results.
They are squarely focused on the commentary from management.
And Elon Musk delivered where he needed to, which was the 1st 5
minutes of the earnings call. He casually stated that Tesla
would become bigger than the next 5 biggest companies
combined. Now, keep in mind, this is a
company that's struggling through seasonal sales to sell
its vehicles, a company that generated less than free cash
flow than Netflix, and the CEO of the company saying that it's
going to become the biggest company times 5.
Even though these future promises and visions by Elon
Musk seem a little out there, investors give him more credit
because of what he's accomplished.
Tesla, after all, is a huge outlier, a huge success that
shouldn't have been in the first case.
So investors look at these big, bold promises from Elon Musk
with greater optimism. And although they missed on
everything this quarter, not everything was bad.
Tesla investors have reason to be incrementally bullish based
on this quarter. If we look at the earnings call
summary, transcript of what happened, what really went on
this quarter, nothing summarizes it better than the transcript
summary generated by Qualtrim. This is something that we've
dramatically improved and updated.
It breaks it down by topic and it explains every single thing
that Tesla did or any company that just reported earnings.
For example, if we look at what Elon Musk actually talked about
on this quarterly call and what investors are bidding the
company U-71 of the first things he mentioned on the call was
Dodge. Investors have been concerned
that Elon Musk is damaging the brand of Tesla by being involved
with DOGE. Elon Musk addressed his work
with the Department of Government deficiency focused on
reducing waste fraud in the US government spending.
Due to completion of the foundational DOGE work, Musk
will soon be reducing his time spent on government activities
and reallocating more time to Tesla.
So he basically said, hey, look, we've done most of the set up,
I'm not really needed there anymore, and now it's just doing
unnecessary damage to the Tesla brand.
So I'm going to step away from Doge, let them do their thing.
I'll still have some connections there, but I want to kind of
detach so I'm not damaging the brand of Tesla.
He stated that the protest against his government work are
by groups previously benefiting from inefficient spending.
So a lot of the people fighting back against DOGE were people
that were upset that their jobs are being cut.
But this is huge news for Tesla investors.
They want to know that their CEO is more focused on Tesla than it
is on the US government, especially when that's damaging
the brand. So this is one of the reasons
the stock is moving up. We also have Tesla's current
state and the outlook. This is Elon Musk's commentary
on what he expects for the future.
And this is where we get into those big grandiose plans.
Elon stressed Tesla's not crisis mode unlike the past, but
expects some challenges and unexpected bumps during the
year. So this is going to be a rocky
year. He's setting those expectations,
but he still paints this very optimistic long term future.
He says he remains highly optimistic, believes Tesla can
become the world's most valuable company, especially with
successful execution and autonomy and robotics.
He emphasized that the company's long term vision large scale
production of autonomous vehicles and humanoid robots.
We know that Tesla has been closer and closer to their robo
taxi plans. They plan on doing this in 2025.
He says the robotaxi in autonomy is a core focus.
Launching fully autonomous paid ride services in Austin in June
using Model wise. So we plan on this going live in
June and investors again, we're looking for that to check off
and they got it. Scaling is planning in other
cities quickly with the intent to generalize solutions that
work across entire jurisdictions relying on AI rather than city
specific mapping. So we know that Elon Musk has
said that Waymo is kind of doing it city by city.
They have to map the entire city.
The way that Tesla's doing this is building AI that works in any
city. And then their only real
restraint is jurisdiction. Just the red tape.
So he doesn't consider Waymo much of A competitor.
He predicted millions of autonomous Teslas will be
operating in the second-half of 2026 with scaling depending on
regulatory approval. There you have this more bullish
sentiment. Millions of autonomous Teslas
next year. That is an incredible statement.
They still have to deliver on this.
But again, this is the reason the stock is up 6%, up 7%.
Investors really love seeing this.
Elon is checking off all the boxes that Tesla investors
wanted to hear. Drivers in China have already
extensively tested full self driving features.
Tesla's generalized AI based solution adapts rapidly to
different locations. So it's going to work in China
very easily, it's going to work in the US, it'll adapt to any
different location. Now we also talked about the
Optimist, the humanoid robot that Tesla's creating.
They say that by the end of this year they expect to have
thousands of these Optimist robots working in Tesla factory
floors. The long term scale up
anticipated to reach 1,000,000 units per year by 2029 to 2030.
So in just five years, they want to be assembling and
manufacturing 1,000,000 units per year.
So this is something they're working on aggressively right
now. Tesla investors are baking this
into the models because again, as we look at all these topics
that were covered, we have to know that Tesla right now is
overvalued based on its current fundamentals.
But all of this is stuff that's happening over the next five
years. If all of this comes to
fruition, if all of these plans really do happen, if they scale
up, if they're able to execute, then Tesla will justify its
current valuation. Now, one thing I like to see was
that Elon Musk was asked specifically about Waymo as a
competitor. He said that Tesla's approach
with AI and cameras is lower cost, more scalable, and not
reliant on expensive sensors and maps, unlike Waymo.
Now, that's the first thing that I would push back on if I was an
analyst there asking him. It's true that Tesla doesn't
have LIDAR, but it's also true that these expensive sensors and
maps are becoming cheaper by the day.
The cost of Lidar has gone down dramatically.
And when you extrapolate the cost of a Lidar sensor on a
vehicle over the course of its lifetime, the amount of miles
driven, it's insignificant. The lighter sensors add on a
little initial cost, but they're amortized over years of use for
these vehicles. And on top of that, the lighter
sensors do add in another form factor, another visual for these
vehicles. Elon Musk repeatedly said that
full self driving needs to be significantly better than
humans, but he also says the reason that they don't need
LIDAR is because humans don't have radar.
Human drivers would be significantly safer and better
drivers if they had radar. If the cost is not prohibitive
then it makes sense to add Lidar.
But Tesla so far continues to refuse to do so, and they see a
path of making this successful without LIDAR.
They also say that Tesla's existing fleet can be
transformed into robotaxis via software updates, offering a
significant scale advantage and the future.
Musk believes most people will no longer buy cars, instead
using autonomous vehicle fleets. When we look at Tesla more
broadly and breakdown what investors are digging into and
their expectations for the future, it all comes down to
narrative. It makes sense that this company
can feasibly always miss on earnings.
And so long as investors buy into this extremely
extraordinary future, the vision that Elon Musk is painting, they
will still want to hold their shares.
Why wouldn't you if you believe it's going to be the most
valuable company times 5? So when we look at Tesla, it
still remains a battle of narratives.
From my investing standpoint, it doesn't resemble the type of
companies that I personally pick, but I can still see why
some investors are betting on this one.
Next we get into a company that's a recent addition to My
Portfolio, one that I've invested a little over $20,000
into, which is Equifax. Equifax also reported earnings
yesterday, and the stock surged up 14% on the day and it's up
again another 2% today. So when you look at the stock
price, we can just see the magnitude of the surge.
It went from $215 now to 2:48. So big move by Equifax, erasing
all the losses it had over the past month.
And it leaves investors asking why did the stock go up so much?
And there's a few reasons why. First of all, most analysts had
negative sentiment on this company and I did as well.
If you recall my review going into this week, Equifax was
actually a company that I highlighted as believing that it
would be a tough quarter. I thought there's a high
likelihood it would go down further and that's based off of
looking at the company and the many headwinds it's facing.
It has so many current challenges the companies facing
and they did much better than expected across the board.
They simply exceeded investors expectations.
First of all with their earnings per share in revenue, earnings
per share was a big beat, $1.53 versus $1.44.
So you have a pretty significant beat on earnings.
They also beat on revenue. Every part of the company did a
little bit better than expected. So it wasn't just one part
outperforming across the board. The different segments like the
verification business, the mortgage business, all of that
performed relatively well. Equifax also announced a $3
billion buyback program, so they say they're returning
aggressively capital back to the investor.
Of course, investors like hearing that.
It's better that a company that's highly profitable returns
some money back to the shareholder.
On top of doing this aggressive buyback program, they're also
raising the dividend by 28%. That's hard to complain about.
When a company raises its buyback program and then
increases its dividend by 28%, They're returning capital back
to the shareholder every way possible.
Investors like hearing that. Now there are some other things
that they mention on the earnings call that I think are
worth diving into. And again we'll go into the
Qualtrum transcript summary here, which is the industry best
summary of these companies. We have here the Q1 financial
performance. Equifax reported a strong Q1
revenue of 1.44 billion, which exceeded their midpoint of their
guidance. Their debt leverage ended March
at 2.5 turns, aligning with their long term targets.
So they're saying their debt's not a problem at all.
And then the Adjusted EBITDA margins were 29.3%, slightly
higher than last year and expectations with Workforce
Solutions with margins above 50%.
So that great product they have in the Workforce Solutions
called the Work number has extremely high margins.
This is what investors are paying attention to.
Now. All of this sounds great, but
one of my concerns with Equifax was the DOGE effort.
The DOGE effort was to cut government spending and Equifax
has a lot of business with the government.
So it kind of made sense that Equifax would be under target.
After all, Equifax makes a lot of money from the government.
The government is being reduced by the DOGE effort, but Equifax
pivoted in a brilliant way. The EWS is expanding its
presence in the federal and state government markets with
emphasis on program integrity and reducing 160 billion of
improper payments. So out of all the things that
DOGE and the government's trying to cut and become more
efficient, probably the last thing that they would want to
cut is identity verification, knowing who you're dealing with.
The entire product that Equifax sells to the government is one
that reduces improper payments, IE fraud and waste.
Knowing who you're doing business with means that you
have lower amounts of waste in a very beneficial way.
For Equifax. The government becoming more
efficient actually enhances their products value because
they sell a product that makes the government have less waste.
Their marketing team is aware of this and they're putting greater
emphasis into selling this product.
Now in terms of what this company would do in a recession
or with ongoing tariffs in a slower economy, this is what
they highlighted. Equifax believes that 67% of its
revenue comes from recession resilient counter cyclical
businesses, up from 54% in 2022. So I like that they really broke
down specifically how much of their business is not cyclical
and the majority of it's not historical recession analysis.
2008 to 2009 in COVID suggests non mortgage businesses could
see low single digit growth even during downturns.
The subscription based revenue growth and increased use of
alternative data add resiliency. Now the mortgage business is
more sensitive to economic cycles like we're seeing right
now. The mortgage business is really
slow, but they note that it offers significant upside during
refinancing cycles and post rate cuts, which will eventually
happen. The company expects to maintain
strong free cash flow, strong margin expansion, and return of
capital even during economic uncertainty.
Overall, a very strong report and I'm happy to be wrong in
this case. I always love seeing my
companies do well. I'm now back in the green on
this one by a decent margin, up $2500 where I was in the red
just two days ago. And I still believe that Equifax
Today is meaningfully undervalued.
Now we also have Moody's at reported earnings yesterday.
I'm not going to spend a lot of time on this one.
It was business as usual, just another quarter of this company
doing the same thing it always has.
One notable thing is the Moodys Investor Services.
This is the credit rating portion of the business had a
record high quarter. So debt issuance for big
companies is still happening and we're seeing the debt renewal
wall. As this happens, this very high
margin portion of the business will continue to collect more.
So this is the global tollbooth, a company that every business
virtually in the world has to go through to issue debt.
And as they issue more debt, as we have this renewal, they're
going to make more money. I think that Moody's continues
to be one of the most predictable businesses in the
market. I don't plan on selling this one
anytime soon. Now finally, we got to take a
look at one of my portfolios. This is the story fun.
I've been tracking this one publicly since the minute I
created it. It's a portfolio that's highly
concentrated into a couple companies that I believe will be
huge winners. Now this portfolio is around 4
years old and we're nearing the five year mark, which was my
goal to outperform the S&P 500 / a five year period.
A lot of people say it's easy to beat the S&P 500 in one years or
just two years. It's a little bit of a luck of
the draw. But over a five year period it
becomes bigger. It's a bigger challenge to
outperform the S&P 500. Now I found that to be just the
opposite. I think outperforming the S&P
500 over the one year is very difficult.
In fact, it's a bit of a coin flip to know how your holdings
are going to perform over one year period.
But as you go further amounts of time, it becomes a little bit
easier because the companies that you pick, their performance
starts to weigh in more. What I've seen with My Portfolio
is that when I first created it, it was doing really well Year 1,
matching the S&P 500. Then we got into 2022.
My Portfolio in blue hair started to underperform the S&P
500 to a huge degree. I held companies like Amazon and
Netflix, all these companies that really tanked.
I also held some companies that just didn't work out, ones like
Alibaba. I simply lost money on them.
But during this time period, I started to double down on my
highest convictions, purchasing more Netflix at the bottom,
purchasing more Amazon towards the bottom, at the very lows
that these companies were trading at.
We went through a long time period here.
That was somewhat discouraging. I gave routine updates showing
that My Portfolio was underperforming the S&P 500 all
through 2022 into 2023. But then we started to gain
momentum. Netflix started to pick up and
this one has really carried the portfolio over the past couple
of years. Amazon also started to move up
as well. In 2023, you can start to see My
Portfolio catch back up to the S&P 500 led by Netflix, Amazon
and Google. It met the S&P 500 in 2024 and
ever since then it's started to surpass it.
Since 2024, it's continued to surge higher and higher,
primarily led by Netflix. When we get into 2025 right
here, you can see that we had an advantage going into 2025
already outperforming the S&P 500.
But moving into it, it also outperformed even in 2025 with
Netflix once again leading the way.
Right now, this portfolio is up 86% and the S&P 500 is up 31%
since inception. This portfolio remains a highly
concentrated a group of bets in companies that I believe have
both great stories, great narratives behind them and great
fundamentals overall, making them highly predictable.
The reason that I named this portfolio the story fund is an
homage to Peter Lynch. A company story is the
combination of the fundamentals with the narrative and I believe
these companies still remain the best stories in the market.
That'll be it for this episode. Hope you enjoyed and see you in
the next one.