Welcome back everyone, we have a jam packed episode. 2026 has
been off to a rocky start for many of us that are tech
investors and invested in lots of great software companies.
But as in every case, when there is a sell off, when stocks are
going down, there's also opportunities.
There's companies that trade down that shouldn't, and
frankly, they're buying opportunities.
In this episode, I'll be making the case for three companies,
three that you've already heard about, three that everybody's
heard about, but three of the Max 7 that I believe are the
best buys today, I'll be going over why mathematically, I
believe that is the case. Now, of course, we also have a
lot of other news to get to. For example, we have Chris Hohn
who gave his portfolio update, the 13 F filing.
This gives us an inside look into what he was doing at least
from 2025, and it shows us how he values his stock before this
sell off. So we'll be looking at that.
We have some breaking news that Warner Brothers is now talking
with Paramount. Netflix allowed for a 7 day
grace period for them to talk and potentially have a best and
final offer. We'll be looking at the strategy
of Netflix behind this. We also have news that Goldman
Sachs released a list of AI losers companies that they
consider a sell. Amongst them was Duolingo.
Duolingo is a stock that's been eviscerated.
It's down dramatically. It's one of my holdings and I
made a comparison that Goldman SX has done this very same thing
with Netflix. They also rated Netflix.
They sell very close to the absolute bottom in 2022.
Now this is a post that I made on X and we had Jeremy Lafaye
from Financial Education respond to this directly.
So I'll be going over his response.
I'll be giving some thoughts on Duolingo and some of the
arguments that Jeremy makes. And of course, we have the fail
of the week, which in this case I am forced to address Jemoth
Polyhypatia who in a recent All In episode suggested that the
only reason that Warren Buffett has out performed over his
lifetime was because of Fair disclosure laws suggesting that
Warren Buffett had inside information.
That that inside information is why Berkshire did so well up
until around 2000. We'll be looking over this claim
that Schmoth is making in the fail of the week.
So we have a ton to get to in this episode.
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Now as we start off today, I can't help but notice that the
sell off is continuing, but only for part of the market.
If you look at the S&P 500, it's actually flat this year, which
of course is discouraging. If you're looking at your
portfolio and noticing that it's down 10 to 15%.
Many investors that are in tech companies, data companies, big
tech software companies, their portfolios are going down while
the rest of the market remains flat.
And that is because money's not leaving the market.
It's just repositioning from some companies to others.
We can see that happen in Lifetime.
For example, here's a chart showing S&P Global against
Walmart. Both of these are great
companies. Walmart's everywhere, very
reliable. S&P Global is a strong data
company. It has the credit rating agency.
Most people would argue that S&P Global has a bigger Moat, but
when we look at the data here, it shows a different story.
This is Walmart versus S&P Global.
Walmart is in blue, S&P Global is in red.
And this shows the trailing PE ratio over the past couple of
years. Notice that back in 2021, S&P
Global demanded a higher PE ratio than Walmart.
It was considered a much higher quality.
It was growing faster, growing earnings faster, and it had a
considerably wider Moat. Retails and Notorious are being
incredibly competitive, but we look at the PE ratios over time.
That blue line, which is Walmart, continued to grow
upwards while S&P Global plummeted downwards right in the
tail end of 2025. In the beginning of 2026, we see
this massive Divergent. We're now Walmart for the first
time in years trades at a 54 trailing PE ratio and S&P Global
trades at a 28. Even on a forward basis, if
we're looking over the next 12 months, Walmart trades at over
double the PE ratio of S&P Global, 21 for S&P Global, 43
for Walmart. Investors are liquidating
companies like S&P Global and putting that capital in the
companies like Walmart. And I see this the same thing
with My Portfolio. My Portfolio is down around 10%,
maybe more now. We see that over the past just a
couple of months, we've lost nearly $100,000, maybe 70 to
$80,000 in this portfolio. And while that can seem painful,
I also look at the companies that I hold and they're still in
great condition. When we look in the tech
category, Meta continues to trade down after reporting
blockbuster earnings. Their earnings report was
incredible. They'll grow 25% plus revenue in
2026. Meta trades near A20 Ford PE
ratio, again half the price of a Walmart.
We have ASML, this is one of the few companies it's held its own
during the sell off. Investors haven't been scared of
this one. We have Google that's also
trading down a little bit. This one was a bit higher
valuation, but even Google's getting hit.
We also have Microsoft, which is also been selling off.
We have MasterCard, now in a downtrend, going down seemingly
every day. We have S&P Global.
This one again has had a massive sell off in just the past couple
of weeks. We have Intuit.
This one is trading at below its 10 year valuation on every
single valuation metric. You name it, price to free cash
flow, price to operating cash flow, PE ratios, every single
one. It's at the cheapest valuation
it's been in a decade. And it's important to understand
why this is happening. Why are investors so quick to
sell these companies? Why are they selling US ME,
Global and Moody's? Why are they selling big tech?
Why are they selling every software company and racing to
slow growing retailers? Well, the reason why is because
investors are scared. This is a panic.
Investors are selling these companies because they're scared
of AI and there's no lack of fodder to fuel these concerns,
to fuel these fares. Investors are scared and they
have reason to be. Every single day there's another
hyper viral article that concerns investors that tells
you about how all these software companies are going to 0, how
every one of them is going to be disintermediated with AI.
They're all going to be destroyed.
The world as you know it, all the tools that you use, they're
not needed anymore. We're getting these every single
day. We recently had one that said a
big thing is happening, basically going over how
everything's going to change. All these software companies are
going to be disrupted and you better just hang on or sell out
of them. That one went hyper viral, was
millions of views. It was shared across every
single community, investing community, hedge fund manager,
everyone saw it. And we have another one that was
just recently shared. Yesterday, we had another
article by a different author that fanned the flames once
again of AI concerns of software.
This one was by Nicholas and it's called vertical software.
Are we cooked? This article has 2 million
views, thousands of likes. It was spread across the entire
social media sphere. And it's difficult for me to
believe that these articles, which are hyper viral, they're
spread to millions of investors, many of them hedge fund
managers, people with Bloomberg terminals, people that control
immense amounts of money. They're reading these articles.
And I believe it has an impact on stock prices.
It is changing sentiment across the board.
When you look at the reality with many of these companies
that are being obliterated in the stock market today, many of
them, their fundamentals appear to be fine.
Their margins are going higher. They're acquiring customers.
They still have pricing power. Many of the fundamentals do not
represent the concerns that are being founded today, and I
believe that there hasn't been strong rebuttals, but I think
we're starting to get them. One that I've read is from
Unemployed Capital Allocator. He wrote a rebuttal to Nicholas,
and I believe it's worth mentioning a few things here.
One of the major points he makes is addressing this claim that
you're not going to need user interfaces.
That's one of the biggest claims from the AI is going to destroy
software bears. They're saying that software is
dead because you don't need a user interface.
You can just do everything through a text box.
You can do it all through a chat, you can go to your job and
you'll just have a text prompt and you can ask it whatever you
want and get all the information you need.
Sounds very easy. Easier than messing with a a
bunch of user interfaces, right? Well, that's not necessarily the
case, he says here. No, a text box isn't going to
replace learned UI. Where does learned UI really
matter? Which is user interfaces, tools
with tons of degrees of freedom, and where actions per minute
actually does matter? Professional workflows, modeling
software, video editing tools? Ones where knowing the shortcut
is a decent part of the job. A text box is not replacing
this. The idea is quite alluring to
those that don't know the UI. Look, you can just tell it to do
something and it does it until you need to do it multiple
times, then you start to go. Man, I wish there was a quick
way for me to send this prompt to do this exact thing I want it
to do. Oh, and remember all the info
I'm supposed to provide so that I can get back exactly what I
want. Maybe I can map it to a button
and a keyboard short. Oh wait, that's the user
interface. Text is amazing because it's
universal. Text is also absolutely horrible
because it has infinite degrees of freedom and introduces
another level of abstraction. This is not what you want when
you need to do a lot of specific things quickly.
This is exactly right. Just think of the role that user
interfaces and software actually play.
For example, if you want to check all of your stocks on your
watch list and see how they're trading today, you want to open
up an empty chat and have to type in, hey, can you get me all
of the stocks in My Portfolio and what they're trading today,
enter and then have it surface that information seems like a
bit of a hassle. Wouldn't it be a little easier
to just open up an app and already have all of your watch
list organized in the way that you want, presenting the
information in the way that you've already organized it,
remembering what you've done previously?
Are we really going to replace every user interface that
already has information standardized and organized and
the way that we want to see it for an empty text chat that will
have to prompt it every time we want to do something?
Many of the arguments that these software bearers are making make
sense. On the surface they sound kind
of cool till you really think about it.
Once you realize what you actually want to accomplish and
the fastest way to do that. Software is needed, user
interfaces are needed, and open-ended text chats aren't
without their downsides. One of the arguments that's
being made right now is also that software companies with all
the business logic that they do, all the things that they
systematically figure out, well that's basically worthless
because AI can simply do that in a markdown file.
There is zero chance that a complex web of markdown file is
going to replace business logic entirely.
The reason is quite simple. You do not want to introduce a
layer of unpredictability and degrees of freedom of your core
business logic. This is the stuff of nightmares
even for simple levels. When you introduce complexity
and interdependency, it is a straight line to system failure
in bankruptcy. This is of course 100% correct.
Imagine for example that you don't have any set business
logic and you're not using software.
Instead you have AI bill all of your customers.
Well the AI hallucinates and gets 1 calculation wrong.
All of a sudden you build your customers all the wrong amount
and now you have to make up for it.
Any type of mistake with core business logic would have
critical failures. And we've seen what AI does.
In many cases it changes its mind with the same prompt given
two times. In many cases it can't read
simple instructions. Nailing it down to do the same
thing routinely is incredibly difficult.
After all, every time the AI does something, it re analyzes
it and does it in a different way.
That's why if you ask it to generate an image, then you ask
it to generate the same image again, it will look different
every single time. Trying to replace core business
logic of a company that's ran by years of tested software is not
going to be replaced by AI. These arguments have become very
pervasive, and they spread throughout X and Reddit and
other investment circles, all throughout Discords.
When you really look through a business and what it needs to
run, these companies are not going to trust AI to run core
business logic. They're not going to replace all
user interfaces with text prompts.
Most of the core arguments behind the death of software are
unfounded. They're not practical in real
conditions. So as I look at this, I try to
make sense of what's true and what's not true with the AI
concern. And from what I can tell, many
of these companies are being way oversold.
The fares are frankly just incredible.
At this point, investors don't want any software company for
any reason, no matter how resistant they are to AI.
In some cases, these companies are going to be beneficiaries
from AI. I'll just highlight a couple
examples here. Again, we're looking at S&P
Global, which has been crushed over just the past couple of
months. We look at it and it's trading
at a 21 Ford PE ratio. Why is the market so concerned
about S&P Global's market Intel business?
Well, because they sell a lot of data, and apparently AI is going
to make all that data freely available and easy to consume
for everyone, which of course is not the case.
A lot of their data's proprietary to begin with.
AI doesn't have access to it. And the breadth of data that S&P
Global has with private markets and commodities, physical
assets, things that are hard to collect and organize, is going
to give them immense pricing power.
That segment continues to grow even though the stock is getting
crushed specifically because of that segment.
But even if you were to assume that S&P Global's market Intel
business went to 0, it was literally 100% disrupted.
S&P Global would trade at a 27 Ford PE.
It's still a company that would be reasonably priced.
In fact, it would be cheaper than its long term average.
That's much bearish sentiments being priced in today for
companies like this. We look at other companies that
are trading down today, ones like Big Tech, the Mag 7.
The Mag 7 has traded down dramatically over just the past
couple of months with many of the same fares.
In this case, it's not that they're going to be disrupted by
AI to some extent, that's the concern, but it's also that
they're spending a lot of money on CapEx.
The market's finding a reason to sell out of all of these growth
companies, whether it be software or the Max 7.
When we look at the Max seven overall, here's how the
valuations breakdown. First of all, if we look at them
all together, all combined, and we average out the PE ratio,
they're trading at an 80 trailing PE and a Ford PE ratio
of 52. That seems a little expensive.
A Ford PE of 52 is kind of pricey.
But there's one big outlier in the mag seven.
That is Tesla. Tesla's trading at above a 200
PE. If we remove Tesla from the
calculation, the Ford PE ratio goes from 50 to 27.
So it's dramatically reduced just by removing that one
company. The valuations look a lot more
sensible then we look at removing other companies.
For example, if we remove Apple, NVIDIA and Tesla and we just
have the big four tech companies left, the PE ratios look even
better. In fact, when we look at this
over time, this is what it looks like.
We have the PE ratios of these four companies, Amazon,
Microsoft, Google and Meta over time.
And this is also a little bit misleading because we have
trailing PE ratios and for example Meta is actually more
expensive on a trailing PE because of a one time tax hit.
It would look even cheaper today and it's at the lowest point in
a multi year timeline. We look at the big four growth
by comparison, even though the PE ratio of these companies is
declining dramatically. We have earnings per share
growth that's also growing dramatically.
And again, this chart also isn't even as high as it would
normally be because of the major tax hit that Meta recently had.
We also had Microsoft with a tax hit.
We can even look at these companies on an operating cash
flow basis. They are racing up to all time
high. The core business, if you
measure it on an organic basis, meaning how much cash they're
generating without the reinvested CapEx, it is growing
substantially. Every single one of them.
Google's the only company that's trading at a reasonably high
valuation as a big tech company. If we were to remove Google from
the equation, meaning we only have Meta, Amazon and Microsoft,
those three companies, the forward PE ratio is a 24 for
those three of the MAG 7, 24 Ford PE.
To put that in comparison, when we look at the S&P 500 right
now, the S&P 500 is trading at an estimated 22 Ford PE.
So you're paying almost the same price for Amazon, Microsoft and
Meta that you are for the entire S&P 500.
Are these companies average companies that should trade
within the average of the S&P 500?
Should they be priced with the same level of growth
expectations? And Mote?
Well, I don't think so. I think these companies are
substantially better than the S&P 500.
The historical analysis proves that they're growing earnings
much faster. These are the companies that are
pushing the indices higher. They're growing their cash flows
much faster. These companies are generating
record net income, record earnings and record cash flows.
So I understand if you're afraid of software companies, if you're
afraid of big tech and their CapEx investment.
But just keep in mind that every time there's a rotation, there's
a sell off. There's a big narrative out
there that tells you, you need to avoid these companies even
when they're at 52 week lows, when they're at multi year low
valuations, when they're fundamentals still look very
sound in most cases. Those are buying opportunities
and I believe for many of the companies today, they have once
again become buying opportunities.
Now let's go ahead and move on to some news.
Now. The first piece of news that
we'll discuss today is Chris Holmes 13 F filing.
Many of these super investor 13F filings are being reported.
They're coming in every single day and we finally got Chris
Holmes. Now when we look at the the
changes that Chris Hohn did, let's go ahead and just look at
the activity here and we can discuss them.
We have right here the the buys and sells what he did and this
is as of Q4 of 2025 S the most recent that we know this data is
as of December of 2025. During that time period, he
added to Microsoft, he added to S&P Global, he trimmed Visa, he
trimmed Canadian Pacific, and he trimmed Canadian National
Railway. Now all of these are relatively
small changes, but I think that there's a couple things that are
notable here. Chris Hoehn determined that it
was worth adding to S&P Global and Microsoft as of Q42025.
Now, if we look at the price of these companies that he was
adding to again Q4 of 2025, we can look at them right here.
We have the prices all across this quarter from beginning to
end for both S&P Global and Microsoft, meaning that he was
buying Microsoft and buying S&P Global at prices around $480 to
540. S&P Global was right around that
same price and he was adding to both of them.
Where do they trade today? S&P Global's fallen around $80
since Chris Holm's last buy of the company, so it is
substantially cheaper. Microsoft today is trading at a
price below $400.00 per share, so the stock is a full $100
cheaper than his last purchase of it.
What this tells me is that Chris Holm believed these companies
were undervalued last quarter at 80 or $100 more expensive than
they are today. And unless something has
fundamentally changed, unless he's changed his mind after
reading the things online and seeing some of the data, he
probably thinks that they're substantially undervalued today.
My guess is when we see the reports for Q1 of 2026, we're
going to have seen a lot of super investors pie this dip.
I think there's going to be a lot of them that buy it
aggressively. Now moving on, we get to news
that Netflix has worked with Warner Bros to allow seven days
of Warner Bros to consider Paramount's offer.
Sounds a little bit complicated, but let's go ahead and just read
what's going on here. Netflix has said in a statement
that it believes that software remains superior, but has
granted Warner the seven day waiver of certain obligations of
their merger agreement to engage with Paramount to fully and
finally resolve this matter. So Netflix doesn't need to do
this. They have in their agreement
that Warner Bros can't shop alternative agreements.
Like they basically are tied into Netflix.
But then it says here that Netflix wavered their agreement.
They said, hey, you know what, go ahead and just listen to
Paramount go get their final and best offer, even though it's in
our contract to not allow that, we're going to make a special
exemption. So you have 7 days to talk to
Paramount and get their best offer.
Now, it's interesting why Netflix is doing this.
When I've looked at this news, I've tried to analyze it, but
from what I can tell, my best guess is that Netflix is
basically just calling their bluff.
They're telling Paramount to put up or shut up, to do something,
to just give your best offer and then leave us alone.
If Paramount puts up a low offer, if they don't put up
something attractive after this seven days, then Netflix can
finally argue that it's done, that it's over with.
They don't have to deal with activist investors and with
Paramount constantly nipping at their heels, wanting to to be
part of this deal. If they have one week to finally
conclude this, maybe the drama can be put aside and Netflix
always has the option to counter an offer.
They have the first call on it. If Paramount puts up a billion
dollars more or $5 billion more, Netflix can decide if that's
still worth it. They can model it out and they
can see if it makes sense. Netflix is going to pay more
than what they believe is worth it for their shareholders.
They're very long term focused. So I see this as a strategic
move from Netflix telling Warner Bros that they have time to act,
exposing their weaknesses, putting it back on them.
The ball's now in their court and finally seeing what they do.
If they are going to provide a higher offer, we'll find out
within one week and moving on, we have some more Duolingo
drama. It's a stock that always has a
lot of opinions, but in this case, this is part of a viral
post on XI posted about the cell rating that Goldman Sachs
recently gave Duolingo. They said that Duolingo was an
AI loser, rated it as a cell. And I noted in my ex post that
Goldman Sachs has done this before.
They've also done this in the past where they wait for a stock
to drop a huge amount like 70 plus percent and once it's at a
very low price they give it a sell rating.
They did the same thing with Netflix.
Goldman Sachs gave a sell rating on Netflix June 10/20/22.
And if we look at the math of the performance of Netflix
versus the QQQ or the S&P 500, it is up 320% since then.
So Netflix's performance since Goldman Sachs gave it that sell
rating is now about triple the QQQ.
Another fun fact worth mentioning is that Goldman Sachs
sell rating on Netflix almost exactly time the bottom.
They gave the down rating and it occurred when the stock was only
5 to 10% away from the absolute bottom of the 2022 sell off.
Now I put this on X and a lot of people had a lot of feedback and
opinions on it and one of them was Jeremy Lafave from Financial
Education. He responded to this tweet and
reacted to it in one of his recent videos.
I just want to play the video so we can go through it and kind of
discuss his comments here together.
This one Joseph Carlson posted this said Goldman just said that
Duolingo little Dingo is an AI loser and said it's a cell.
Here's a performance from when they called Netflix a cell right
now. I thought this was worth
mentioning here. And the reason being is just
because 1 stock has done well in the past and somebody said it
was a sell, doesn't mean the next stock's going to do that,
right? And so let's be honest, there's
a big difference between somebody like a Duolingo and
somebody like a Netflix, right? A Duolingo is like a niche
product that, you know, how many people are really going to stay
signed up for Duolingo for the next 5-10, fifteen, 20 years?
I don't think there's very many, you know, I, I, and I don't
think that's AI, don't think that's a big statement.
Like, sure, there's a lot of people that might try out a
product like that and like, oh, I think it would be fun to learn
Italian. Oh, I think it would be fun to
learn Spanish or, you know, whatever, right?
I'm gonna learn French. OK, You know, and they sign up
for a bit and they kind of mess around with it and they pay a
little bit or maybe they don't pay and they just see ads or
whatever, right. And then eventually they stop
using it. Netflix is not that sort of
company. There's a huge difference here.
Like Netflix, the type of company that when somebody signs
up, like they're going to stay signed up five years out, 10
years out, 20 years from now, right?
Unless somebody comes and replicates Netflix whole
business model, which isn't super realistic.
Duolingo's not that sort of company.
People might sign up for the product and try it out and then
not use it anymore and they might start paying and then, you
know, six months later they're going to stop paying, or a year
later or two years later or something like that, right?
Netflix, that's a hard one. Like once people sign up for
Netflix to get them off that Netflix account, it was
difficult. Like Netflix would have to go up
dramatically in price. And so Netflix, when they
capture a customer, they probably have a customer for the
next 20 years, next 10 years, right?
Duolingo's not that same company.
So I think that's very, very important to keep in mind here.
But I think it's natural sometimes for investors to say,
well, this analyst or this company, they said this was a a
cell in the past and look at it did so well.
So this kind of the company and and things like that.
But you know, I just see massive fundamental differences between
a certain company like that and somebody like a Netflix, right?
So that's his comments on Duolingo and I actually really
like them because I I think it represents the other side.
Every stock there's, there's two trains of thoughts.
There's two different stories behind it, narratives behind it,
and I think that Jeremy really does represent the bearish
narrative on Duolingo really well.
The first argument that he says is that Netflix is not like
Duolingo. And he refers to Netflix as a
product that everybody wants. They want to be entertained.
You know, when you sign up for Netflix, you never really cancel
it. And Duolingo, by contrast, is a
niche product. You may sign up for it, try to
learn a language for a while, get bored of it and move on.
So that's the way that it's described.
But when we zoom back to 2022, when Goldman Sachs gave that
cell rating on Netflix, Netflix had just lost subscribers for
six months in a row. Netflix was shrinking.
So Netflix wasn't viewed as a product that people signed up
for and kept forever. It was viewed as a product that
was shrinking subscribers returning.
Netflix is a subscription business.
If they're not constantly gaining subscribers at a rate
exceeding their churn, then they're going to lose
subscribers. Their business is going to
shrink. That was the exact narrative
that was happening during that time period.
In fact, if you go back to 2022, the narrative at that time was
that Netflix was basically dead. They weren't one-of-a-kind.
They didn't have market dominance.
They're a company competing with Paramount.
They're competing with Disney Plus and HBO and YouTube.
They're being crowded out by many of the free streamers, user
generated content. Instagram and Netflix was just
this saturated streaming company that couldn't compete and was
losing subscribers. Now it looks like a company
that's undefeatable. It looks a lot different.
It's more cash generative, but the exact same thought process
existed back then with Netflix. The difference is Duolingos
actually never lost subscribers. Duolingo's never had six months
of shrinking. Duolingo's always grown.
The subscriber numbers are growing quarter over quarter
incredibly fast. Another thing that Jeremy says
here that I think is a common description of Duolingo is that
it's niche. It's a niche product.
Right now there are over 1.5 billion people learning English,
1 1/2 billion. That's not what I define as
niche. When a huge chunk of the world
is actively trying to learn a subject, and there's one company
that offers a very good product at teaching that subject,
keeping people motivated, making it fun to learn that subject,
that's not a niche product. That is something that's
appealing to a massive amount of people.
There's huge network effects with English.
English is not something people learn just for vacation.
It's not something that they learn because they don't have
Airpods that can translate. English is the language of
business, of aviation, of mathematics, of coding.
It has massive network effects. For many people, learning a
language is not something they're just doing for fun.
It's not a flavor of the month. They have real motivations
behind doing it. Duolingo has capitalized on that
market. And of course, that's not the
only language that they teach. They cover hundreds of different
languages back and forth in different directions, better
than any other application. In the edtech language learning
category, they're by far the biggest.
They have a bigger market share than Netflix does of media or
YouTube does of content creation.
Duolingo is enormous in this category of learning languages
in different subjects. Another subject that they've
advanced into is chess. Chess has 600 million people
that are active players of this game. 600 million is not niche.
That's quite a big market to grow into.
Even if Duolingo captures a tiny fraction of that market, they'll
be substantially bigger. And of course, chess players are
growing in numbers as well. The sport overall is growing.
Chess is one of those games where you don't really learn it
for a short amount of time. People play it their entire
lives. It's like a culture.
It's considered a a learning exercise.
There's so many people across the world that play that one
common game. Then Duolingos, also in math and
music, which of course are not niche as well.
These are basic fundamentals that everybody on planet earth
needs to learn. Every kid in school is learning
these things. They're pivoting into categories
that are the opposite of niche. They go into categories that
billions of people are actively trying to learn.
The thought process that Duolingo users just to use the
app for a couple months and then they quit.
That can happen. And in fact, that's the story of
many people when they share a bearish view on the company,
they'll say, well, I tried it out.
I tried to learn something for a month or two, and then I just
broke my streak and never used it again.
That's not what the numbers show.
When we look at the numbers, Duolingo is a stock that is down
80%. It is getting crushed.
While all the numbers, all the charts look like this.
This is what every single one of them looks like.
The numbers are all going up and to the right at a fast pace.
Millions upon millions of people using it every single day.
Duolingo has over 50 million daily active users, people that
are logging on and using it at least once a day.
When we look at Duolingo and the amount of people that are paying
subscribers, that's what this chart is.
It continues to just climb up and to the right.
Since 2020, it's up 945% from 1.1 million to now 11.5 million.
At the end of 2023, Duolingo had 5 million people that were on a
year or longer streak. So 5 million people that I've
used the service every single day for over a year now, that
number is 10 million. The amount of users that are
dedicated users using the application every single day for
over a year has literally doubled in just the past couple
of years. And we see this trend
continuing. And then finally, I'll just
mention one last thing. Jeremy mentioned that Goldman
Sachs, just because they said Netflix was a sell right at the
bottom 5% from the absolute bottom in 2022, they got that
call completely wrong. That doesn't mean they're wrong
with Duolingo. And that's true.
Maybe they're right with it. Maybe Duolingo will continue to
go down and be a bad investment. That could be the case.
But I'll I'll mention that my my point in bringing up Netflix is
not to say that Netflix is similar or the same as Duolingo.
I'm not arguing that those businesses are fundamentally the
same. They're very different, like
anybody can point out. But what is the same is Goldman
Sachs and many of these analyst firms have a long history of
giving sell calls right at the bottom.
They'll have buy calls when the stock is going up.
They'll hold it as a buy for years and years and years.
And then after stocks get crushed when they're down 70%,
then the professional analysts will say now it's a sell.
They'll give this sell call at the exact wrong time.
And they've done this continually within their sell
list, the companies that they're calling software losers and that
investors should get out of and sell today.
They also have Salesforce, one of your own holdings, Jeremy.
They call this one a sell. They're telling you to get out
of it now. Now that Salesforce is
completely crushed. Now it's being priced for
complete doom. Goldman Sachs says it's a sell.
They also just recently called Adobe a sell.
They said that that one's not worth holding.
It's going to be disrupted by AI.
And this is, again, not something that's uncommon.
These companies and analysts wait until stocks drop
dramatically and then they tell investors at the very bottom to
get out exactly like they did with Netflix.
Now moving on, we get to the fail of the week, which we have
to highlight Chamath Polyhypatia for a recent take that he
expressed on his podcast, the All In podcast.
Now, Chamath has had an obsession for some time with
comparing himself to Warren Buffett, but we'll look at the
most recent example here. Here is Chamath Polyhypatia
talking about fair disclosure laws and how Warren Buffett
presumably benefited from that, and that's how you explain his
out performance. In 2000, we introduced the law
called Reg FD. And what was the point of Reg
FD? It was basically that if you're
ACFO, you cannot talk to an individual stock manager and
tell him something that you then don't tell everybody else
essentially inside information that used to be not illegal.
I won't say that it was legal. I would just say that used to be
not illegal. You call your buddy, he says,
hey, how you doing? He goes, man, quarter was a
blockbuster. You would go and buy the stock
and starting in the 2000s, it became illegal.
And there used to be these networks of information
arbitrage that that took advantage of this.
Now this is an example of Warren Buffett's returns pre and post
Reg FD. Now what do you see?
His returns were double the market returns when this kind of
information sharing was legal. And the minute that he became
illegal and you had to basically act on the same edge as
everybody else, his returns went to the market return.
He generated 0A. In fact, he probably on the
margins lost a little bit. So this is the single best
investor in the world. This is what happens when you
have information symmetry. Now the problem with Chamas
theory here that Warren Buffett only outperformed because of
asymmetry and information is that as soon as you put that
under any type of scrutiny, it falls apart.
For example, we can just look at the best investments that Warren
Buffett has ever made, where he really made his money, the
overall best performing investments he's done throughout
his career. By far the best investment
Warren Buffett has ever made was Apple.
That came after these disclosure laws that came presumably when
Warren Buffett didn't have an edge, but he bought Apple at the
cheapest price you possibly could back in 2016.
Apple's outperformed everything since then.
It's outperformed all of big tech.
It's compounded faster than the market by multiples.
He turned $30 billion into $100 billion in less than 7 years.
This was an incredible investment by Buffett, and this
came with the added limitations that he had to invest in
something that was massive, so his pool of investments was even
smaller. The reason that Berkshire hasn't
outperformed the market for the past 10 years is because
Berkshire is huge. So even when Warren Buffett is
doing the same playbook, buying companies like Apple at extreme
discounts with the same knowledge everybody else has
about the company, but a better aptitude for investing, a better
long term understanding, even though he did that, improved it
once again with Apple, it just doesn't have the same impact.
Berkshire's already too big. He already owns so many energy
companies and railroad companies and so many different companies
that the new investments and the good ideas can't lift the weight
of this massive company. The reason that he's not
outperforming today is because Berkshire is too huge.
It's a problem that Warren Buffett created by being too
good at investing. And that explains the difference
in performance pre 2000. Then post 2000, almost every
investment that moved the needle for Berkshire were ones that he
held for literal decades. Coca-Cola, Moody's Corporation,
American Express, Bank of America, large companies
publicly visible to any investor that Warren Buffett bought at
discounts and held for decades. There's no inside information.
It wasn't because he knew something about the upcoming
quarter. It's because he bought companies
at discounted prices and held them long term.
Now this is what I don't understand.
Chamoth, I don't get why you seem obsessed with discrediting
Buffett. You're trying to do so here by
suggesting that the only reason that he was a good investor
above normal was because of information asymmetry, which
again, is ridiculous on the surface.
He held companies for decades. It's not from information
asymmetry. The other thing that you've done
before is you've compared your returns, your firm to Buffett's.
You compared them at a year one against year one, like you're
going to outperform Buffett. But once the SPAC bubble
collapsed in 2021, that comparison quickly vanished.
No more. You didn't want to show
investors how you compared against Buffett because he
outperformed you, because he's a better investor.
And that's not an insult. He's a better investor than me
or anyone else here, but he's a better investor than you as
well. Your information that you shared
with investors was that Virgin Galactic was a great investment.
It's down 95%. You shared the Open Door was a
great investment. It's down 70% all time You
pumped Clover stock, another one down 90%.
Then Achillea, another one that's down huge.
Pro Kidney, another one that's down 80%.
Sofi is one of your only SPACS that's in the green and it's
underperformed the market overall.
The information that you've provided investors, that you've
said that you have the inside tract that you understand is a
great company, they have been crushed over the past five
years. Investors have been continually
burned following your advice and instead of just admitting that
Buffett is a better investor, an honest investor, one that had a
very transparent and forthcoming career, one that allowed other
retail investors to join alongside the success of
Berkshire, to reap in the same rewards as Buffett, to have the
exact same incentive. You try to incorrectly discredit
him, play his success. And that is the reason that
today you are the fail of the week that's going to be for this
episode. Hope you enjoyed seeing the next
one.