1 00:00:00,200 --> 00:00:02,200 Welcome back everyone. Today on the Joseph Carlson 2 00:00:02,200 --> 00:00:04,000 Show, we're getting into earnings week. 3 00:00:04,040 --> 00:00:08,880 This is the Q2 earnings of 2024, a time where we get to see how 4 00:00:08,880 --> 00:00:10,880 things are going. We get to check in on our 5 00:00:10,880 --> 00:00:13,680 companies, get a bit of a report card of what happened over the 6 00:00:13,680 --> 00:00:16,600 past three months, learn how much money they made, learn how 7 00:00:16,600 --> 00:00:19,640 the business is developing, take a look at the key performance 8 00:00:19,640 --> 00:00:22,760 indicators. We also get to get input from 9 00:00:22,760 --> 00:00:25,320 our management. Are they doing a good job and 10 00:00:25,320 --> 00:00:27,120 what is their expectations of the future? 11 00:00:27,240 --> 00:00:29,360 How do they see things developing over the next three 12 00:00:29,360 --> 00:00:31,280 months? Earnings season is a time where 13 00:00:31,280 --> 00:00:34,480 we can learn a lot about our companies and it can help inform 14 00:00:34,480 --> 00:00:36,280 us on how to position our portfolio. 15 00:00:36,720 --> 00:00:39,600 Now this week, we have a couple important companies. 16 00:00:39,600 --> 00:00:42,360 I've highlighted the ones that I think are the most relevant, the 17 00:00:42,360 --> 00:00:45,440 most interesting. In red tomorrow morning, we have 18 00:00:45,520 --> 00:00:48,080 ASML. ASML is a high quality 19 00:00:48,080 --> 00:00:50,880 compounding machine. It's a new holding in Dev 20 00:00:50,880 --> 00:00:53,920 Cantosario's portfolio. It's a company that makes highly 21 00:00:53,920 --> 00:00:57,040 specialized and incredibly complex machinery. 22 00:00:57,280 --> 00:00:59,240 These are machines that are are enormous. 23 00:00:59,240 --> 00:01:02,960 They cost hundreds of millions of dollars and they play a small 24 00:01:02,960 --> 00:01:06,800 but pivotal role in the creation of semis, in the creation of 25 00:01:06,800 --> 00:01:08,680 chips. We also have a lot of financial 26 00:01:08,680 --> 00:01:11,720 companies reporting earnings. I'm not going to go over every 27 00:01:11,720 --> 00:01:15,120 bank and explain their book value and their valuation. 28 00:01:15,520 --> 00:01:17,000 I don't think that's so interesting. 29 00:01:17,280 --> 00:01:20,240 But I do want to comment on banks overall and talk about 30 00:01:20,240 --> 00:01:22,960 Ally Financial. This is kind of a bank and 31 00:01:22,960 --> 00:01:25,440 fintech company and consumer company. 32 00:01:25,560 --> 00:01:28,120 So we'll be going over Ally Financial's earnings moving on 33 00:01:28,120 --> 00:01:30,120 from Wednesday. We get into Thursday where we 34 00:01:30,120 --> 00:01:34,920 have TSMC, the juggernaut in chip making, very important 35 00:01:34,920 --> 00:01:38,600 company that has a pivotal role in that entire supply chain. 36 00:01:39,040 --> 00:01:42,600 We also have Domino's Pizza. This company is a franchise 37 00:01:42,640 --> 00:01:45,880 restaurant company with extremely high margins, not much 38 00:01:45,880 --> 00:01:48,200 tangible assets. It's considered a long term 39 00:01:48,200 --> 00:01:50,920 compounding machine and it's one of the pivotal companies that 40 00:01:50,920 --> 00:01:54,360 helped Terry Smith make his name by the compounded returns from 41 00:01:54,360 --> 00:01:56,240 this one. Then moving on to Thursday after 42 00:01:56,240 --> 00:01:59,520 market close, we have Netflix, which is always an exciting 43 00:01:59,520 --> 00:02:02,880 earnings report because Netflix is one of the few real tech 44 00:02:02,880 --> 00:02:07,120 companies, a Fang company used to be kind of big tech that's 45 00:02:07,120 --> 00:02:10,479 reporting earnings by itself. There's no other companies to 46 00:02:10,479 --> 00:02:13,640 kind of in the blow. There's not Google and Microsoft 47 00:02:13,640 --> 00:02:16,760 reporting the same day. All the focus and attention 48 00:02:17,120 --> 00:02:20,760 Thursday after market close will be on Netflix and nothing else. 49 00:02:21,120 --> 00:02:23,920 So Netflix gets nearly 100% of the attention. 50 00:02:24,120 --> 00:02:27,880 That makes it very volatile. I'm a big Netflix investor. 51 00:02:27,880 --> 00:02:29,600 I'm a fan of the company and the product. 52 00:02:29,880 --> 00:02:31,480 So I'll be sharing some thoughts on that one. 53 00:02:31,520 --> 00:02:34,160 And then Friday before market open, we have American Express. 54 00:02:34,640 --> 00:02:37,240 This is one that's similar to Visa, MasterCard, we'll be going 55 00:02:37,240 --> 00:02:39,400 over this one as well. So we have a full week to get 56 00:02:39,400 --> 00:02:41,400 into many exciting companies to cover. 57 00:02:41,400 --> 00:02:44,560 And I'll be trying to give some context and insight into what to 58 00:02:44,560 --> 00:02:46,400 expect with these upcoming earnings. 59 00:02:46,720 --> 00:02:49,920 We'll start things off with Wednesday morning before market 60 00:02:49,920 --> 00:02:52,600 open. We have ASML, which is a very 61 00:02:52,600 --> 00:02:55,640 high quality company, one that I have had on my watch list for 62 00:02:55,640 --> 00:02:59,240 quite some time. This is a company that even Dev 63 00:02:59,240 --> 00:03:03,080 Kantasaria, who only has a a small amount of companies, just 64 00:03:03,080 --> 00:03:06,120 a few of them, he even has a a little bit of ASML in his 65 00:03:06,120 --> 00:03:09,800 portfolio, which he filters out anything that's not excellent. 66 00:03:10,080 --> 00:03:13,360 So ASML is a company that's making it into the portfolios of 67 00:03:13,360 --> 00:03:16,760 very high quality investors. Now, what does ASML do? 68 00:03:17,280 --> 00:03:20,440 It's a company that makes a very complex machine. 69 00:03:20,480 --> 00:03:23,080 These machines use lithography. They're using light to print 70 00:03:23,080 --> 00:03:26,360 tiny patterns on silicon. And this is the fundamental step 71 00:03:26,360 --> 00:03:29,920 in mass producing microchips. Now, this isn't the only thing 72 00:03:29,920 --> 00:03:31,680 they do. They do a couple other things, 73 00:03:31,680 --> 00:03:33,360 but this is like the main thing they do. 74 00:03:33,720 --> 00:03:37,320 And this may be just one small part of the total chip making 75 00:03:37,320 --> 00:03:40,320 process, but this is a critical portion. 76 00:03:40,320 --> 00:03:41,680 It's a portion that you can't skip. 77 00:03:41,760 --> 00:03:44,240 In order to make the chips, you have to have the lithography 78 00:03:44,240 --> 00:03:45,960 machines. If you don't have them, your 79 00:03:45,960 --> 00:03:47,720 production's basically shut down. 80 00:03:48,160 --> 00:03:51,160 Now, in order to make these machines, it's much easier said 81 00:03:51,160 --> 00:03:53,840 than done, and I can't possibly explain all the complexities 82 00:03:53,840 --> 00:03:56,600 that go behind this, but there are literally hundreds of 83 00:03:56,600 --> 00:03:58,040 thousands of parts to each of these. 84 00:03:58,360 --> 00:04:01,960 They cost in excess of $500 million per machine. 85 00:04:02,320 --> 00:04:05,640 So if you even think about an NVIDIA chip, an NVIDIA server, 86 00:04:06,000 --> 00:04:09,760 that cost somewhere around $30,000, maybe up to $300,000. 87 00:04:10,240 --> 00:04:15,240 These machines from ASML cost $500 million plus, and the price 88 00:04:15,240 --> 00:04:17,920 is going up. So they are orders of magnitude 89 00:04:17,920 --> 00:04:21,079 more complex than almost any other physical machine on earth. 90 00:04:21,120 --> 00:04:23,200 They're literally some of the most complex feats of 91 00:04:23,200 --> 00:04:26,080 engineering on planet Earth. So what they've accomplished is 92 00:04:26,080 --> 00:04:29,760 remarkable and they have basically a monopoly on this 93 00:04:29,760 --> 00:04:32,280 market. So right now, ASML faces very 94 00:04:32,280 --> 00:04:34,720 limited competition. There's no other company on 95 00:04:34,720 --> 00:04:37,320 earth that can replace what they're doing because of their 96 00:04:37,320 --> 00:04:40,640 technological advantage, because of the complexity of these 97 00:04:40,640 --> 00:04:43,680 devices, they also have very few customers. 98 00:04:43,920 --> 00:04:46,440 They have a high customer concentration of sales into the 99 00:04:46,440 --> 00:04:50,240 big chip makers like TSMC, and they want to keep these 100 00:04:50,240 --> 00:04:53,680 customers happy by always fulfilling their orders on time 101 00:04:53,680 --> 00:04:56,680 and keeping their demand. So ASML doesn't want to 102 00:04:56,680 --> 00:04:59,160 overprice things. They don't want to make their 103 00:04:59,160 --> 00:05:02,440 customers have a big incentive to move over to a competitor. 104 00:05:02,520 --> 00:05:04,960 But as we look at this stock, knowing that it's a high quality 105 00:05:04,960 --> 00:05:07,880 company, there's a price to pay for every company. 106 00:05:08,120 --> 00:05:10,360 And that's my biggest issue with ASML. 107 00:05:10,720 --> 00:05:13,760 When I look at this stock, it's undoubtedly been one of the best 108 00:05:13,760 --> 00:05:15,920 performing. It's really just been 109 00:05:15,920 --> 00:05:17,800 phenomenal. Look at it year to date, it's up 110 00:05:17,800 --> 00:05:21,920 47.9%. So it's been doing incredibly 111 00:05:21,920 --> 00:05:24,920 well this year. We go back one year, up 40%. 112 00:05:25,240 --> 00:05:29,400 We go back five years, five years, it's up 417%. 113 00:05:30,000 --> 00:05:32,640 Obviously, there's not a lot of stocks that perform this well. 114 00:05:32,640 --> 00:05:35,320 And this is really what you get when you have a company that is 115 00:05:35,320 --> 00:05:39,560 a monopolistic part of the overall development cycle of 116 00:05:39,560 --> 00:05:42,640 chips and semiconductors. When chips and semiconductors 117 00:05:42,640 --> 00:05:45,680 are doing so well because of the lack of competition, they have 118 00:05:45,720 --> 00:05:48,440 ample pricing power. They've fulfilled on the demand 119 00:05:48,440 --> 00:05:51,520 of their customers and have kept them happy, and they've profited 120 00:05:51,520 --> 00:05:54,160 greatly from it. So this has been a massive 121 00:05:54,160 --> 00:05:57,800 compounding machine, a company that's on a spectacular role, 122 00:05:58,360 --> 00:06:01,880 but it's also at one of the most expensive prices it's traded at 123 00:06:02,160 --> 00:06:05,400 in recent history. We look at the PE ratio, it's 124 00:06:05,400 --> 00:06:10,400 trading at a 44 Ford PE price to sales is 14, enterprise value to 125 00:06:10,400 --> 00:06:13,520 EBITDA of 38. We have a free cash flow yield 126 00:06:14,080 --> 00:06:17,200 of half a percent. They don't do much stock based 127 00:06:17,200 --> 00:06:20,880 comp, so it's basically just a half percent free cash flow 128 00:06:20,880 --> 00:06:22,720 yield. But even with no stock based 129 00:06:22,720 --> 00:06:26,200 comp, that's still a very, very low free cash flow yield. 130 00:06:26,320 --> 00:06:29,680 The idea of buying a company with a half percent free cash 131 00:06:29,680 --> 00:06:34,080 flow yield in an environment where treasury rates are 5% is 132 00:06:34,080 --> 00:06:37,000 very difficult to get behind. It's just so difficult. 133 00:06:37,320 --> 00:06:40,240 It doesn't matter how much of A monopoly it is or how great the 134 00:06:40,240 --> 00:06:42,760 company is, how spectacular the growth is. 135 00:06:43,000 --> 00:06:45,640 When you have a company that's trading at half a percent free 136 00:06:45,640 --> 00:06:50,000 cash flow yield when treasury rate is 5% and it's guaranteed, 137 00:06:50,280 --> 00:06:53,280 that just makes the calculation and the discounted cash flows in 138 00:06:53,280 --> 00:06:56,360 the future projections so difficult to get behind. 139 00:06:56,440 --> 00:06:59,160 So that's the basic problem I have with ASML right now. 140 00:06:59,640 --> 00:07:02,760 When we look at the business overall, I also think it's doing 141 00:07:02,760 --> 00:07:04,680 fantastic. We look at the revenue growth. 142 00:07:04,680 --> 00:07:08,360 It's been explosive revenue growth, but I still have the 143 00:07:08,360 --> 00:07:11,720 same opinion that I think it may be slowing down a little bit in 144 00:07:11,720 --> 00:07:13,720 the future. I don't think it's going to go 145 00:07:13,720 --> 00:07:17,080 down or it's going to collapse or that this is the top, but I 146 00:07:17,080 --> 00:07:20,320 think the rate of growth may slow down in the future. 147 00:07:20,680 --> 00:07:23,120 We have the net bookings of the company. 148 00:07:23,480 --> 00:07:26,320 The net bookings reached a peak in 2021. 149 00:07:26,680 --> 00:07:30,080 They went down in 2023 even though the stock price race 150 00:07:30,080 --> 00:07:31,800 stopped. Now they're trying to get these 151 00:07:31,800 --> 00:07:34,040 bookings back up. So we'll see them go up over 152 00:07:34,040 --> 00:07:37,240 time, but if we look at this on an annual basis, this will paint 153 00:07:37,240 --> 00:07:40,560 the picture more clearly. The net bookings have been down 154 00:07:40,920 --> 00:07:45,160 from 2022 to 2023. So right now it looks a little 155 00:07:45,160 --> 00:07:48,480 soft with the net bookings, but overall the business is still 156 00:07:48,480 --> 00:07:51,120 doing well. They still expect increased 157 00:07:51,120 --> 00:07:54,400 demand over the coming years. ASML is a great company with a 158 00:07:54,400 --> 00:07:56,600 great future. And if you're just a super long 159 00:07:56,600 --> 00:07:59,760 term investor and you have it in your portfolio as a compounding 160 00:07:59,760 --> 00:08:02,480 machine, I think you can safely put on the blinders. 161 00:08:02,480 --> 00:08:04,000 Ignore this next earnings report. 162 00:08:04,280 --> 00:08:07,440 Don't worry about it, whether or not it drops or goes up and just 163 00:08:07,440 --> 00:08:09,440 hold on to it for the next 10 years and you'll probably do 164 00:08:09,440 --> 00:08:11,800 really well. But in terms of this upcoming 165 00:08:11,800 --> 00:08:15,680 earnings, I have my concerns, the mixture of the valuation, 166 00:08:16,200 --> 00:08:19,280 you know, the, the semi market slowing down a little bit. 167 00:08:19,760 --> 00:08:22,160 I think there's a combination of things that makes me a little 168 00:08:22,160 --> 00:08:24,520 bit more concerned about this earnings than their most recent 169 00:08:24,520 --> 00:08:26,880 ones. So it's difficult to say. 170 00:08:26,880 --> 00:08:29,320 I don't know what direction it's going to trade at, but I do know 171 00:08:29,320 --> 00:08:32,159 that there's higher expectations for this company than there has 172 00:08:32,159 --> 00:08:35,120 been over the past year. Now let's go ahead and move on 173 00:08:35,120 --> 00:08:37,799 to Ally Financial. Ally Financial is a bank and a 174 00:08:37,799 --> 00:08:40,480 financial service company. I think it's a good product. 175 00:08:40,480 --> 00:08:42,600 They have a good interface, they have good services. 176 00:08:42,960 --> 00:08:45,600 They have around the clock customer service through chat 177 00:08:45,600 --> 00:08:47,480 and phone. But one of the notable things 178 00:08:47,480 --> 00:08:49,320 about this bank is that they don't have any physical 179 00:08:49,320 --> 00:08:51,160 branches, or at least they have very limited. 180 00:08:51,160 --> 00:08:55,120 If they do, it's an online bank. There's more banks following 181 00:08:55,120 --> 00:08:58,520 this model, and then there's the older fashion banks that are 182 00:08:58,760 --> 00:09:01,560 still doing the older model and they're making that work like JP 183 00:09:01,560 --> 00:09:04,160 Morgan. But Ally Financial tries to keep 184 00:09:04,160 --> 00:09:06,280 their margins higher, tries to keep a higher level of 185 00:09:06,280 --> 00:09:09,440 profitability by having the online only model. 186 00:09:09,760 --> 00:09:11,600 And overall, I think it's a good business. 187 00:09:11,600 --> 00:09:14,840 But I've avoided Ally Financial for the same reasons I've 188 00:09:14,840 --> 00:09:18,360 avoided basically every bank. I don't find them attractive 189 00:09:18,360 --> 00:09:20,840 investments overall. The more you learn about banks, 190 00:09:20,840 --> 00:09:22,680 the more you avoid them as investments. 191 00:09:23,120 --> 00:09:26,720 They make money by lending it out to people and then you own 192 00:09:26,720 --> 00:09:29,880 whatever they're lending out. So if they're lending out car 193 00:09:29,880 --> 00:09:32,920 loans or used car loans, then that's what you own. 194 00:09:32,920 --> 00:09:35,320 You own the the car loans that they're lending out. 195 00:09:35,520 --> 00:09:38,080 In this case, that's exactly what Ally Financial does. 196 00:09:38,200 --> 00:09:40,320 Now, if we look at the stock performance over the past five 197 00:09:40,320 --> 00:09:44,640 years, the stock chart really resembles the used car market. 198 00:09:44,880 --> 00:09:48,160 If you remember, the used car market went up dramatically in 199 00:09:48,160 --> 00:09:50,560 2020. So did Ally Financial stock 200 00:09:50,560 --> 00:09:53,200 because they are making a lot of money extending out new loans. 201 00:09:53,440 --> 00:09:55,920 They had an increased demand and what they specialized in. 202 00:09:56,280 --> 00:09:58,320 So they were, they're doing great. 203 00:09:58,440 --> 00:10:01,240 Business is booming and then the used car market starts to go 204 00:10:01,240 --> 00:10:02,800 down. Prices start to go down. 205 00:10:03,040 --> 00:10:05,720 Ally Financial is doing repossessions, which they lose 206 00:10:05,720 --> 00:10:07,720 little money on. It's true that they're lending 207 00:10:07,720 --> 00:10:10,440 out something that they have collateral, but getting the cars 208 00:10:10,440 --> 00:10:13,120 back, reselling them, they can lose money in the process of 209 00:10:13,120 --> 00:10:15,000 that. So the stock price starts to 210 00:10:15,000 --> 00:10:17,720 fall similar to the used car market. 211 00:10:18,000 --> 00:10:20,960 Again, when you're investing in banks, you have to look at what 212 00:10:20,960 --> 00:10:23,680 they're lending out their book because that's what you're 213 00:10:23,680 --> 00:10:26,160 investing in. In the case of Ally Financial, 214 00:10:26,160 --> 00:10:28,760 the reason I did not find this company attractive at the time 215 00:10:29,040 --> 00:10:32,000 is because I did not find the used car market attractive. 216 00:10:32,440 --> 00:10:35,920 Now we see a bottoming out phase right here in 2023. 217 00:10:36,320 --> 00:10:38,720 That's where it got to the very bottom and then we see the stock 218 00:10:38,720 --> 00:10:40,240 start to go up a little bit after that. 219 00:10:40,920 --> 00:10:43,680 Overall, if we look at Ally Financial, I don't think it's 220 00:10:43,680 --> 00:10:46,600 such a bad buy right now. I really don't it's come down 221 00:10:46,600 --> 00:10:48,760 South much. While the company has been good, 222 00:10:48,760 --> 00:10:51,800 they've managed their book well over the past couple of years 223 00:10:51,880 --> 00:10:54,160 and they're at a very low valuation even for a company 224 00:10:54,160 --> 00:10:57,360 like this, very low valuation of less than a priced a book of 225 00:10:57,360 --> 00:10:59,880 one. So there's not much baked into 226 00:10:59,880 --> 00:11:02,680 the price here. Expectations aren't very high. 227 00:11:03,000 --> 00:11:05,880 If I'm looking at Ally Financial, this is a stock that 228 00:11:05,880 --> 00:11:07,600 I would feel fine going into earnings. 229 00:11:07,840 --> 00:11:10,720 Now moving on to Thursday before market open, we get into one of 230 00:11:10,720 --> 00:11:14,720 the mega companies here, the large semiconductor company 231 00:11:14,720 --> 00:11:17,720 itself, TSMC. The performance of it has just 232 00:11:17,720 --> 00:11:19,520 been incredible. There's no other way to say it. 233 00:11:19,560 --> 00:11:22,120 Anything in this realm has done well recently. 234 00:11:22,520 --> 00:11:25,520 But TSM being in the center of it all, being the funnel in 235 00:11:25,520 --> 00:11:28,160 which all of this goes through, has done particularly well. 236 00:11:28,440 --> 00:11:32,240 This year, it's up 82 percent, 82% so far this year. 237 00:11:32,560 --> 00:11:37,800 The past year it's up 76%, in the past five years up 343%. 238 00:11:38,400 --> 00:11:41,560 So it's tripled the market, quadrupled it. 239 00:11:41,720 --> 00:11:44,440 Either way, it's just clobbered the markets returns and that's 240 00:11:44,440 --> 00:11:48,360 again because this is the area to be and semiconductors and 241 00:11:48,360 --> 00:11:50,680 chips. This is the era of hardware. 242 00:11:50,840 --> 00:11:53,960 Now I do have concerns about TSMC. 243 00:11:54,400 --> 00:11:57,520 It's a company that I think is amazing and I think it's a great 244 00:11:57,520 --> 00:12:00,120 long term hold. I actually like the positioning 245 00:12:00,120 --> 00:12:04,520 of TSM more than a company like NVIDIA, because TSM I think has 246 00:12:04,520 --> 00:12:07,440 more predictable demand over the next 10 or 20 years. 247 00:12:07,720 --> 00:12:10,680 They have so many customers and they're kind of a winner no 248 00:12:10,680 --> 00:12:13,200 matter what. What happens in all 249 00:12:13,200 --> 00:12:17,000 eventualities in the future, I see TSM winning unless there's 250 00:12:17,000 --> 00:12:19,520 some crazy event, like a geopolitical event happening 251 00:12:19,520 --> 00:12:22,280 with China. Outside of some crazy event like 252 00:12:22,280 --> 00:12:26,160 that, I really think TSM is positioned as a company that's 253 00:12:26,160 --> 00:12:28,640 central to everything. They're the bottleneck that 254 00:12:28,640 --> 00:12:31,200 every other winner has to go through to make their chips. 255 00:12:31,600 --> 00:12:35,040 So this is one that I feel fine. Any investor buying into it for 256 00:12:35,040 --> 00:12:38,440 the next 10 years, holding onto it, putting on the blinders and 257 00:12:38,440 --> 00:12:41,000 ignoring the earnings reports quarter by quarter and just 258 00:12:41,000 --> 00:12:43,040 holding this company. But when we look at this 259 00:12:43,040 --> 00:12:45,960 quarter, there is a lot of people rotating into these 260 00:12:45,960 --> 00:12:49,560 stocks, a lot of funds driving more and more money into these 261 00:12:49,560 --> 00:12:52,280 semiconductor companies, into these chip makers. 262 00:12:52,280 --> 00:12:55,640 TSM is a big supplier of chips to NVIDIA and Apple, and they 263 00:12:55,640 --> 00:12:58,600 are advancing Wednesday after the world's largest third party 264 00:12:58,600 --> 00:13:01,520 chip manufacturer reported a surge in sales. 265 00:13:01,640 --> 00:13:04,800 Taiwan Semiconductor dominates the high end chip manufacturing 266 00:13:04,800 --> 00:13:07,920 market, including the three nanometer and two nanometer 267 00:13:07,920 --> 00:13:11,040 chip, and are expected to power the next generation of 268 00:13:11,040 --> 00:13:14,600 smartphones. So again, this is a company that 269 00:13:14,760 --> 00:13:17,480 it's not just counting on NVIDIA, it's not just counting 270 00:13:17,480 --> 00:13:19,640 on Apple. It doesn't really matter. 271 00:13:19,640 --> 00:13:22,560 Whatever company happens to be advancing the most powerful 272 00:13:22,560 --> 00:13:24,960 chips, TSM is going to make them. 273 00:13:24,960 --> 00:13:27,960 So This is why I see this one as a more safe bet or a more 274 00:13:27,960 --> 00:13:31,000 predictable company than many other companies in the chip 275 00:13:31,000 --> 00:13:34,160 manufacturing process. Most of the best chips in the 276 00:13:34,160 --> 00:13:36,400 world get funneled down through TSM. 277 00:13:36,480 --> 00:13:38,800 The movement looks like a rotation back into technology 278 00:13:38,800 --> 00:13:41,680 hardware stocks after the outperformance of software 279 00:13:41,680 --> 00:13:44,120 stocks in June. So we see all of these people 280 00:13:44,120 --> 00:13:46,000 moving their money back into chip stocks. 281 00:13:46,000 --> 00:13:49,760 They went back into the AI game. They've seen this game before. 282 00:13:49,960 --> 00:13:53,800 What's happened in the recent past is chip stocks go up, AI 283 00:13:53,800 --> 00:13:55,880 stocks go up. Anything associated with that 284 00:13:55,880 --> 00:13:58,640 part of the market is where the money's AT, and we've seen this 285 00:13:58,640 --> 00:14:00,720 before. Investors and funds want to be 286 00:14:00,720 --> 00:14:03,280 wherever the magic's happening. Right now, the magic is 287 00:14:03,280 --> 00:14:06,360 happening in chip making, so a lot of investors are pushing 288 00:14:06,360 --> 00:14:09,080 into that market. In many cases, the valuations 289 00:14:09,080 --> 00:14:11,440 are getting more and more stretched, which I believe, 290 00:14:11,440 --> 00:14:14,120 again, puts this into a more dangerous category. 291 00:14:14,520 --> 00:14:16,760 We have analysts here pointing out that they believe the 292 00:14:16,760 --> 00:14:20,560 market's now getting to a point where it's becoming FOMO and 293 00:14:20,800 --> 00:14:23,440 momentum driven. Quote, what I'm learning about 294 00:14:23,520 --> 00:14:28,000 about investor sentiment and investing in 2024 with AI is, is 295 00:14:28,000 --> 00:14:31,080 that it's FOMO, fear of missing out driven market. 296 00:14:31,360 --> 00:14:35,040 So when you see anything beat slash sound better due to AI 297 00:14:35,040 --> 00:14:38,840 related CapEx spend the stock re rates in a flash as money rushes 298 00:14:38,840 --> 00:14:41,000 to get long. This feels like a bit of a panic 299 00:14:41,000 --> 00:14:43,400 rotation and I agree with that analyst to some extent. 300 00:14:43,400 --> 00:14:46,480 What I see investors in big money doing right now is trying 301 00:14:46,480 --> 00:14:48,920 to position themselves for they're not getting left behind 302 00:14:49,160 --> 00:14:50,840 by staying in the software companies. 303 00:14:51,200 --> 00:14:54,320 Software companies have done OK, but it's the hardware, the 304 00:14:54,320 --> 00:14:58,000 hardware company, the AI company, TSM and NVIDIA that's 305 00:14:58,000 --> 00:15:00,040 really made the riches over the past year. 306 00:15:00,320 --> 00:15:03,360 So a lot of big money's moving into it now, pushing up the 307 00:15:03,360 --> 00:15:06,360 valuations. And as far as I'm concerned, I'm 308 00:15:06,360 --> 00:15:07,840 sticking to my software companies. 309 00:15:08,080 --> 00:15:11,240 I know they haven't done as well like in the past year as NVIDIA 310 00:15:11,240 --> 00:15:14,360 and some hardware companies. But when I look through history, 311 00:15:14,360 --> 00:15:17,560 software has that resilient business model, the SAS business 312 00:15:17,560 --> 00:15:20,240 model, the more predictable earnings and it's done 313 00:15:20,240 --> 00:15:22,080 incredibly well over the past five years. 314 00:15:22,600 --> 00:15:26,240 So in terms of TSMC, just to summarize my thoughts on this 315 00:15:26,240 --> 00:15:29,600 company overall, a long term bet that I think is a predictable 316 00:15:29,600 --> 00:15:33,000 winner, a funnel of all the manufacturing of chips that 317 00:15:33,000 --> 00:15:35,080 happens in the high end in the world. 318 00:15:35,400 --> 00:15:37,680 So I'm not at all bearish on this company. 319 00:15:37,680 --> 00:15:40,200 In fact, I'm incredibly bullish on it over the long term. 320 00:15:40,520 --> 00:15:43,360 But when we're looking at this earnings report, it's another 321 00:15:43,360 --> 00:15:45,680 stock that I'm a little bit concerned about. 322 00:15:45,920 --> 00:15:48,480 It has very high expectations. Maybe it will meet those 323 00:15:48,480 --> 00:15:51,760 expectations, but if it has any disappointment, I could see it 324 00:15:51,760 --> 00:15:53,480 trading down. So it's one that I am a little 325 00:15:53,480 --> 00:15:56,000 cautious on this earnings report, but if you're a long 326 00:15:56,000 --> 00:15:58,120 term investor, I don't believe you have to worry about it. 327 00:15:58,240 --> 00:16:00,920 Now moving on, we get to Domino's at the same time 328 00:16:00,960 --> 00:16:02,800 Thursday morning reporting their earnings. 329 00:16:03,160 --> 00:16:05,680 Domino's is a great company. It's one that I've actually had 330 00:16:05,680 --> 00:16:08,520 for a short time in My Portfolio, but I got out of it 331 00:16:08,520 --> 00:16:11,480 because of the valuation. That turned out to be a good 332 00:16:11,480 --> 00:16:14,960 move at the time. It did trade down for a minute. 333 00:16:14,960 --> 00:16:18,800 It went down after 2021, but it since recovered nicely. 334 00:16:18,800 --> 00:16:21,600 Domino's is on a nice growth track like I expected they 335 00:16:21,600 --> 00:16:23,120 would. It's a great company overall. 336 00:16:23,120 --> 00:16:26,040 It's a franchise business model and it's a company that's a bit 337 00:16:26,040 --> 00:16:29,160 of a recession resistant company because they offer such good 338 00:16:29,160 --> 00:16:32,240 value proposition that many people use them as kind of a low 339 00:16:32,240 --> 00:16:35,040 cost place to get a good meal that feeds a lot of people. 340 00:16:35,400 --> 00:16:37,800 So Domino's overall is fantastic company. 341 00:16:38,080 --> 00:16:41,480 At one point it was a a really important part of Terry Smith's 342 00:16:41,480 --> 00:16:43,840 growth. Microsoft and Domino's were two 343 00:16:43,840 --> 00:16:46,760 of his most outperforming companies during his rise and 344 00:16:46,760 --> 00:16:50,360 prominence. So I like Domino's overall and I 345 00:16:50,360 --> 00:16:52,320 also like it going into this quarter. 346 00:16:52,360 --> 00:16:54,520 Now, you know by now if you've been following this channel, 347 00:16:54,520 --> 00:16:57,080 I've been one of the biggest advocate of restaurant companies 348 00:16:57,080 --> 00:16:59,840 over the past couple of years. I've made them a big part of My 349 00:16:59,840 --> 00:17:02,400 Portfolio as well. I made a large investment in 350 00:17:02,400 --> 00:17:04,359 Texas Roadhouse. This is one of the most 351 00:17:04,359 --> 00:17:06,599 profitable investments I've made in My Portfolio. 352 00:17:07,040 --> 00:17:09,520 It rose from a smaller holding to one of the top holdings in My 353 00:17:09,520 --> 00:17:12,839 Portfolio by over doubling in value over the past couple of 354 00:17:12,839 --> 00:17:14,800 years. When you combine dividends in 355 00:17:14,800 --> 00:17:16,839 the mix, it's just been a massive winner. 356 00:17:17,160 --> 00:17:21,079 Texas Roadhouse is the best sit down restaurant company in the 357 00:17:21,079 --> 00:17:23,520 world. If you measure them by their 358 00:17:23,520 --> 00:17:26,359 execution, their management and their processes, their 359 00:17:26,359 --> 00:17:29,280 profitability and their expansion efforts, it is bar 360 00:17:29,280 --> 00:17:32,280 none of the best. And then you have Chipotle 361 00:17:32,280 --> 00:17:34,280 company that I've continually talked about is having 362 00:17:34,280 --> 00:17:36,440 incredible execution and global scale. 363 00:17:36,680 --> 00:17:39,560 The digital assets it has is also very valuable. 364 00:17:40,040 --> 00:17:43,880 And people are addicted to burritos, so it's not something 365 00:17:43,880 --> 00:17:45,800 I'd bet against. It may seem silly, it's just 366 00:17:45,800 --> 00:17:48,840 burritos, but burritos are well loved by basically everyone 367 00:17:48,840 --> 00:17:50,760 across the world. But now it's gotten to a point 368 00:17:50,760 --> 00:17:54,000 where I've seen a few signs that people are pushing back on 369 00:17:54,000 --> 00:17:56,280 restaurants. They're pushing back a little 370 00:17:56,280 --> 00:18:00,080 bit and we can see that with McDonald's and Starbucks, two 371 00:18:00,080 --> 00:18:03,520 companies that are very good quality, compounding machines 372 00:18:03,800 --> 00:18:06,040 that have both run into huge roadblocks. 373 00:18:06,320 --> 00:18:08,960 Starbucks customers are saying that they're not buying it, 374 00:18:09,360 --> 00:18:11,720 they're done buying Starbucks. They're pushing back on the high 375 00:18:11,720 --> 00:18:15,520 prices and Starbucks is having to earn back customers with 376 00:18:15,520 --> 00:18:19,000 freebies and giveaways in their apps and lowering prices. 377 00:18:19,440 --> 00:18:22,960 McDonald's had massive price push back on the prices of their 378 00:18:22,960 --> 00:18:25,680 meals. A lot of people were were upset. 379 00:18:25,680 --> 00:18:28,760 They are furious at McDonald's for once being the cheap option 380 00:18:28,760 --> 00:18:31,000 but now being almost unaffordable. 381 00:18:31,320 --> 00:18:34,200 So McDonald's is now coming out with $5 value meals. 382 00:18:34,200 --> 00:18:37,760 They're going back to their old self and I see this push back 383 00:18:38,040 --> 00:18:41,160 maybe having a waterfall effect on different food companies. 384 00:18:41,240 --> 00:18:43,560 We can look at an article here. This is from MarketWatch. 385 00:18:44,080 --> 00:18:46,880 It says that these restaurant stocks could still thrive 386 00:18:46,880 --> 00:18:50,800 despite spending pressure. They highlight the problem 387 00:18:50,800 --> 00:18:52,800 that's going on in the restaurant industry. 388 00:18:52,840 --> 00:18:55,400 Restaurant patrons have been more cautious when dining, 389 00:18:55,400 --> 00:18:58,880 buying fewer items, laying back on alcohol, and prioritizing 390 00:18:58,880 --> 00:19:01,760 value menu items rather than the premium items. 391 00:19:02,040 --> 00:19:05,160 UBS has noticed that consumers are prioritizing grocery 392 00:19:05,160 --> 00:19:07,840 shopping overspending money on quick service restaurants 393 00:19:08,200 --> 00:19:10,920 because people have less money to spend on food. 394 00:19:11,080 --> 00:19:14,160 One of my central thesis is on investing in restaurants is that 395 00:19:14,160 --> 00:19:16,800 people are prioritizing restaurants over grocery 396 00:19:16,800 --> 00:19:20,360 shopping because it's quicker and it's cheaper in many cases 397 00:19:20,360 --> 00:19:23,880 than buying a lot of groceries and preparing a meal for a large 398 00:19:23,880 --> 00:19:26,240 group of people. It's easier to just go to a 399 00:19:26,240 --> 00:19:29,400 restaurant and pay for yourself. But you can see the reverse 400 00:19:29,400 --> 00:19:31,560 happening. People are switching back over 401 00:19:31,560 --> 00:19:34,880 to grocery shopping because restaurants, quick service 402 00:19:34,880 --> 00:19:38,640 restaurants, fast food has become so expensive, it's 403 00:19:38,640 --> 00:19:40,640 unaffordable. In some cases, they stay. 404 00:19:40,640 --> 00:19:43,880 With consumers being less likely to splurge eating out, there are 405 00:19:43,880 --> 00:19:46,400 looming pressures for quick service restaurants to still 406 00:19:46,400 --> 00:19:49,000 perform well. Brands are likely to implement 407 00:19:49,000 --> 00:19:52,560 more practices like promotional offers to stimulate growth and 408 00:19:52,560 --> 00:19:54,680 draw in more guests and lower incomes. 409 00:19:55,200 --> 00:19:57,800 So brands are going to have to give discounts, which is 410 00:19:57,800 --> 00:20:01,440 basically declining prices on their food, whether it's through 411 00:20:01,440 --> 00:20:04,800 a free item or a promotion. They're lowering prices. 412 00:20:04,800 --> 00:20:07,640 And that puts downward pressure on the pricing power of 413 00:20:07,640 --> 00:20:10,640 companies like Domino's, Chipotle and Texas Roadhouse. 414 00:20:11,160 --> 00:20:13,840 But they do mention, out of all the companies in the restaurant 415 00:20:13,840 --> 00:20:16,840 industry that they still believe offers the best value 416 00:20:16,840 --> 00:20:21,560 proposition, it is Domino's, Chipotle Mexican Grill and Texas 417 00:20:21,560 --> 00:20:23,480 Roadhouse. Those are the three that they 418 00:20:23,480 --> 00:20:25,080 named. I didn't write this article. 419 00:20:25,080 --> 00:20:28,560 This is the analyst from UBS. They say that these are the few 420 00:20:28,560 --> 00:20:31,720 restaurant stocks that UBS predicts will still outperform 421 00:20:31,920 --> 00:20:33,920 next year. I think Domino's will do fine 422 00:20:33,920 --> 00:20:36,520 this quarter, but I would not be surprised to see a bit of 423 00:20:36,520 --> 00:20:40,360 softness in their projections to say that demand is slowing down 424 00:20:40,360 --> 00:20:42,640 a little bit. They're having to keep prices 425 00:20:42,640 --> 00:20:44,960 lower, not implement price increases. 426 00:20:45,080 --> 00:20:47,720 And they may be forced to give out more promos, more goodies to 427 00:20:47,720 --> 00:20:49,720 entice customers to continue buying. 428 00:20:49,840 --> 00:20:52,480 Now, moving on, we get to Thursday after market close. 429 00:20:52,840 --> 00:20:55,480 All eyes are going to be on Netflix. 430 00:20:55,560 --> 00:20:58,880 It is the only really big, exciting company reporting 431 00:20:58,880 --> 00:21:00,760 earnings. It's going to be highlighted on 432 00:21:00,760 --> 00:21:03,440 CNBC, the countdown of when they report earnings. 433 00:21:03,760 --> 00:21:05,560 Then you're going to get hit with the news. 434 00:21:05,840 --> 00:21:08,040 What was their earnings? What was their subscribers? 435 00:21:08,280 --> 00:21:11,680 And I have to preface this and warn you ahead of time, Netflix 436 00:21:11,680 --> 00:21:13,960 is typically a highly volatile stock. 437 00:21:13,960 --> 00:21:18,560 On earnings day, it moves up above 10% or down below 10%. 438 00:21:19,120 --> 00:21:22,680 Never really stays the same. Some cases it has, but in many 439 00:21:22,680 --> 00:21:25,840 cases, in fact, frequently almost every earnings, it's a 440 00:21:25,840 --> 00:21:28,800 volatile one that will move. So don't be shocked if it goes 441 00:21:28,800 --> 00:21:30,920 up 10%. Don't be really sad or 442 00:21:30,920 --> 00:21:32,640 disappointed if it goes down 10%. 443 00:21:32,960 --> 00:21:35,160 That's the stock. That's what it does every single 444 00:21:35,160 --> 00:21:38,160 earnings report without fail. And after a while, if you've 445 00:21:38,160 --> 00:21:40,640 invested in a company like that for a number of years, you're 446 00:21:40,640 --> 00:21:42,960 just used to the volatility. It's like no big deal. 447 00:21:43,360 --> 00:21:45,920 So whether or not Netflix goes up or down, I'm not going to be 448 00:21:45,920 --> 00:21:49,320 sweating it if it goes down. I won't be emphatically excited 449 00:21:49,320 --> 00:21:52,360 if it goes up. It's just business as usual with 450 00:21:52,360 --> 00:21:54,160 Netflix. That's what I expect out of this 451 00:21:54,160 --> 00:21:56,400 company. I follow their revenue, the 452 00:21:56,400 --> 00:21:59,200 growth of their subscribers, the growth of their pricing per 453 00:21:59,200 --> 00:22:02,480 region over time, which has a chart like this. 454 00:22:02,760 --> 00:22:06,320 It's far more stable and predictable and gradual than 455 00:22:06,320 --> 00:22:08,760 their earnings or their stock price would imply. 456 00:22:09,080 --> 00:22:10,640 But this is what I'm anchored to. 457 00:22:10,960 --> 00:22:14,000 So mentally, what I'm anchored to is this, and that's the 458 00:22:14,000 --> 00:22:16,440 reason that it's easy to hold a stock that's very volatile. 459 00:22:16,680 --> 00:22:19,240 If you're anchored to the fundamentals, that volatility is 460 00:22:19,240 --> 00:22:21,280 not as meaningful. So I just wanted to mention that 461 00:22:21,280 --> 00:22:23,760 because I know we get all excited about how the stock is 462 00:22:23,760 --> 00:22:26,320 trading, but I am going to be focused on the fundamentals of 463 00:22:26,320 --> 00:22:27,920 the business and how things are developing. 464 00:22:28,000 --> 00:22:29,640 Now. I did put together some Netflix 465 00:22:29,640 --> 00:22:32,960 stats of what to expect this quarter and how the stock may 466 00:22:32,960 --> 00:22:35,880 react and trade. Here's some stats associated 467 00:22:35,880 --> 00:22:38,320 with it. They're expected to report 468 00:22:38,320 --> 00:22:40,680 earnings per share growth of around 40%. 469 00:22:41,000 --> 00:22:45,240 So that's the bar They have to beat 40% growth, and the odds 470 00:22:45,240 --> 00:22:48,360 are that they do it. Netflix beats their earnings per 471 00:22:48,360 --> 00:22:50,800 share growth around 85% of the time. 472 00:22:51,240 --> 00:22:54,720 So if you're looking at this statistically, there's an 85% 473 00:22:54,720 --> 00:22:56,720 chance they'll beat their earnings per share growth. 474 00:22:57,120 --> 00:23:00,080 But remember, with a company like Netflix, investors don't 475 00:23:00,080 --> 00:23:02,720 really pay attention to the earnings per share growth as the 476 00:23:02,720 --> 00:23:05,560 primary KPI. The primary KPI has been 477 00:23:05,560 --> 00:23:08,600 subscriber growth. So even though they beat their 478 00:23:08,600 --> 00:23:11,560 earnings per share growth the huge majority of the time, they 479 00:23:11,560 --> 00:23:14,840 still have some volatility because of the subscriber growth 480 00:23:14,840 --> 00:23:17,880 and the other metrics. If we look at another stat here, 481 00:23:18,880 --> 00:23:22,280 out of the last five earnings reports, they've traded down 482 00:23:22,480 --> 00:23:24,640 three of them. So the majority of their 483 00:23:24,640 --> 00:23:27,640 earnings reports, the most recent ones they've traded down 484 00:23:27,640 --> 00:23:30,280 after earnings. So based on the stats here, 485 00:23:30,280 --> 00:23:33,280 statistically, they have a higher likelihood of trading 486 00:23:33,280 --> 00:23:35,480 down after this upcoming earnings than up. 487 00:23:36,080 --> 00:23:38,760 So don't be shocked if they trade down after these earnings. 488 00:23:39,160 --> 00:23:42,640 And keep in mind, they trade down frequently on earnings day 489 00:23:42,920 --> 00:23:45,520 only to recover in stock price the following week. 490 00:23:45,680 --> 00:23:47,360 They've also done that routinely. 491 00:23:47,680 --> 00:23:51,080 I remember 1 earnings report from Netflix, it went down 10% 492 00:23:51,080 --> 00:23:54,040 on earnings day and within one week, it was right back up to 493 00:23:54,040 --> 00:23:56,320 where it was. So there's a lot of options, a 494 00:23:56,320 --> 00:23:59,280 lot of trading that creates volatility that makes the stock 495 00:23:59,280 --> 00:24:02,400 go down in many cases, and then it will recover over time as 496 00:24:02,400 --> 00:24:04,320 people realize the business is OK. 497 00:24:04,400 --> 00:24:06,000 So we have three major stats there. 498 00:24:06,120 --> 00:24:09,000 Now, I added in one thing, and this is technically not a stat. 499 00:24:09,040 --> 00:24:11,600 This is just personal opinion, so it shouldn't be in this list 500 00:24:11,600 --> 00:24:15,000 of stats, but I wanted to add in some personal opinion here. 501 00:24:15,400 --> 00:24:18,040 When I look at the content slate over the past three months from 502 00:24:18,040 --> 00:24:20,480 Netflix, I think it's been pretty weak. 503 00:24:20,840 --> 00:24:23,840 They've had a couple decent movies, but they haven't had any 504 00:24:23,840 --> 00:24:26,240 groundbreaking series. I don't think they've had any 505 00:24:26,240 --> 00:24:29,800 super viral documentaries. And you've had competitors like 506 00:24:29,800 --> 00:24:33,600 Max have House of Dragon and some other bigger shows. 507 00:24:34,080 --> 00:24:38,000 So by comparison, I think that the content slate has been weak 508 00:24:38,040 --> 00:24:42,320 this quarter, which makes me believe it may be a weak quarter 509 00:24:42,400 --> 00:24:45,040 and maybe didn't gain as many subscribers as investors are 510 00:24:45,040 --> 00:24:48,000 expecting now. It's very difficult to say. 511 00:24:48,280 --> 00:24:50,640 Opinions differ, but that's just my opinion. 512 00:24:50,640 --> 00:24:52,640 I think we've had a weak slate the past three months. 513 00:24:52,960 --> 00:24:55,400 The expectations are very high for Netflix right now. 514 00:24:55,880 --> 00:24:58,600 I think there's a higher likelihood the stock drops after 515 00:24:58,600 --> 00:25:00,200 earnings. When I'm looking at the 516 00:25:00,200 --> 00:25:03,560 business, though I'm assessing it on a long term basis, I still 517 00:25:03,560 --> 00:25:06,360 think business is good. Netflix is growing its revenue 518 00:25:06,360 --> 00:25:09,040 in every region. They're growing in subscribers 519 00:25:09,040 --> 00:25:10,480 right now. It's one of the most free cash 520 00:25:10,480 --> 00:25:14,200 flow generative companies in the S&P 500, creating $7 billion of 521 00:25:14,200 --> 00:25:17,360 free cash flow last year and expected to do around that much 522 00:25:17,400 --> 00:25:19,520 this year. So in terms of the overall 523 00:25:19,520 --> 00:25:21,680 business, I still think it's well on track. 524 00:25:22,040 --> 00:25:25,480 I'm not selling a single share, but I would not be surprised if 525 00:25:25,480 --> 00:25:28,040 going into this week it trades down after earnings. 526 00:25:28,160 --> 00:25:31,040 Now moving on to this Friday before market open, we have 527 00:25:31,040 --> 00:25:33,120 American Express reporting their earnings. 528 00:25:33,480 --> 00:25:36,200 This is one that I'm asked about frequently because I own 529 00:25:36,200 --> 00:25:39,920 MasterCard, but I don't own Visa, I don't own Discovery, I 530 00:25:39,920 --> 00:25:42,960 don't own American Express. So why do I not own American 531 00:25:42,960 --> 00:25:46,320 Express, but I own MasterCard? The reasoning was simple. 532 00:25:46,680 --> 00:25:49,280 I think all of these companies in this basket are great 533 00:25:49,280 --> 00:25:50,880 companies. American Express is a 534 00:25:50,880 --> 00:25:53,240 compounding machine. I think even Discovery's good. 535 00:25:53,400 --> 00:25:55,720 I think Visa's amazing. I think it's very, very good 536 00:25:55,720 --> 00:25:57,760 company. And then there's MasterCard, the 537 00:25:57,760 --> 00:26:01,200 one that I own a huge amount of. The reason that I selected 538 00:26:01,200 --> 00:26:04,360 MasterCard above all of these other great options is 539 00:26:04,360 --> 00:26:07,240 MasterCard had a little bit faster international growth, 540 00:26:07,520 --> 00:26:09,920 just growing across the world a little bit faster. 541 00:26:09,920 --> 00:26:14,960 They've executed really well and MasterCard has a dominant market 542 00:26:14,960 --> 00:26:17,640 share. Only next to Visa are they the 543 00:26:17,640 --> 00:26:20,040 biggest player. So Visa's slightly bigger, 544 00:26:20,040 --> 00:26:22,520 especially in the US, but MasterCard is massive 545 00:26:22,520 --> 00:26:25,160 internationally. So the combination of a dominant 546 00:26:25,160 --> 00:26:28,640 market share and fast growth made me go into MasterCard. 547 00:26:28,680 --> 00:26:29,960 That was the basic reasoning there. 548 00:26:30,360 --> 00:26:33,320 But having said that, American Express is a great company and 549 00:26:33,320 --> 00:26:34,800 I've never been bearish on this company. 550 00:26:34,800 --> 00:26:36,800 In fact, I think American Express is really good. 551 00:26:36,840 --> 00:26:39,720 One of the key differences with a company like American Express 552 00:26:39,720 --> 00:26:43,800 than Visa MasterCard is American Express is a more fully fledged 553 00:26:43,840 --> 00:26:46,640 service company. It's not just a network. 554 00:26:46,960 --> 00:26:49,920 MasterCard, if you're looking at this one, or Visa. 555 00:26:50,400 --> 00:26:54,240 These are financial network companies that network together, 556 00:26:54,400 --> 00:26:58,120 banks, customers and merchants. They network all of these 557 00:26:58,120 --> 00:27:00,520 parties together with their digital network and they offer 558 00:27:00,520 --> 00:27:03,680 services on top of that. They also offer a lot of other 559 00:27:03,680 --> 00:27:07,360 financial services and even just like technology services, things 560 00:27:07,360 --> 00:27:10,040 like knowing your customer fraud detection. 561 00:27:10,120 --> 00:27:13,240 They offer all of their data as subscription services as well. 562 00:27:13,600 --> 00:27:16,360 So they are a service company. They're not in the business of 563 00:27:16,360 --> 00:27:18,040 being a bank or lending out money. 564 00:27:18,440 --> 00:27:21,200 When we go to American Express here, this is a company that's 565 00:27:21,200 --> 00:27:22,880 in the business of lending out money. 566 00:27:23,280 --> 00:27:26,480 And since I don't invest in banks, I'm not investing in 567 00:27:26,480 --> 00:27:28,480 American Express. It's not a business that I 568 00:27:28,480 --> 00:27:30,720 understand that well. It's not one that I want to jump 569 00:27:30,720 --> 00:27:33,160 into. So it is a great company. 570 00:27:33,160 --> 00:27:35,160 I'm not bearish on it. Again, I think this one's going 571 00:27:35,160 --> 00:27:38,280 to continue to do well, but I have other reasons why I prefer 572 00:27:38,280 --> 00:27:40,560 Visa, MasterCard over American Express. 573 00:27:41,160 --> 00:27:43,320 Now looking at this one, it's actually performed really well. 574 00:27:43,320 --> 00:27:45,040 This year. It's up 29%. 575 00:27:45,360 --> 00:27:46,920 So investors have done great in it. 576 00:27:47,160 --> 00:27:49,440 If we look over the past five years, it's up 90%. 577 00:27:49,880 --> 00:27:51,400 Again, it's it's just done incredible. 578 00:27:51,400 --> 00:27:53,720 And when I look at American Express, my thoughts are pretty 579 00:27:53,720 --> 00:27:55,400 simple. I think the company will 580 00:27:55,400 --> 00:27:57,480 continue to do well. The customer they have is 581 00:27:57,480 --> 00:28:00,400 typically more stable, higher income, more resilient to 582 00:28:00,400 --> 00:28:02,800 downturns. So I think they'll do well even 583 00:28:02,800 --> 00:28:04,720 if there is concerns about a recession. 584 00:28:05,200 --> 00:28:08,640 And overall, when I look at this one, I can't find any reason to 585 00:28:08,640 --> 00:28:11,720 be really bearish on it or to be down on this company. 586 00:28:11,800 --> 00:28:14,600 So if I was a shareholder of American Express, I personally 587 00:28:14,600 --> 00:28:17,000 can't find any reason to be concerned about it. 588 00:28:17,000 --> 00:28:19,240 Now, there's a quick look at this week's earnings report. 589 00:28:19,560 --> 00:28:21,920 Now keep in mind we have a bigger week next week. 590 00:28:21,920 --> 00:28:24,680 We have a lot of the big key companies reporting earnings. 591 00:28:24,880 --> 00:28:26,600 So if you want to see my thoughts on those companies as 592 00:28:26,600 --> 00:28:28,200 well, make sure you're subscribed to the channel. 593 00:28:28,440 --> 00:28:30,840 And if you want additional exclusive content, you can check 594 00:28:30,840 --> 00:28:31,560 out the Patreon.