Welcome back, everyone. Today on the Joseph Carlson
Show, there are thousands of companies in the stock market
and in this episode we'll be going over four of them, four
companies that are buys today. The companies we're going to be
going over are compounding machines.
They're very strong companies and they're offering you an
entry point today. We also have other news we'll be
going over, including Netflix now adjusting their deal to buy
Warner Brothers Discovery. Before they were doing it in
part cash and part stock. Now they're likely adjusting it
to all cash. We'll be looking at the real
reason they're doing this. We also have the news that Trump
is demanding credit card companies have a capped interest
rate of 10%. This has caused a stir in the
market. It's caused many companies from
banks to credit card companies to sell down.
There are so many misconceptions, bad information,
and outright lies associated with this news, and we'll be
clearing it all up in this episode.
We have Google continuing from strength to strength.
We'll be looking at how Google's Gemini has a significant
advantage over competitors. And then finally, we have one of
the weirdest stories. In this version of Fail of the
Week, we have Matthew McConaughey trademarking
himself. He's made a trademark of himself
to fight AI misuse. We'll be looking at the full
details of what exactly he's trademarking and how this helps
protect him from AI abuse. So we have a ton to get to in
this episode. And if you haven't already, go
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Now, as we jump into today, you'll notice that my stock
brokerage account is lower than it was just a day ago.
It's quite a bit lower. In fact, we're down around 10 to
$15,000. Just on the day I was actually
getting near $1 million. We were only $7000 away from a
million. Now we're $32,000 away.
Just today, as of right now, we are down $10,000.
If I move to the Story Fund, you see the same thing.
If I look at the past day, we are down $7400.
And this isn't just one company. A lot of companies are selling
off today. Meta, Google, NVIDIA, Apple,
Microsoft, all the big tech companies, all the NASDAQ
leaders, all the AI winners, plus even software companies
into it's down big on the day. Salesforce is moving down a
little bit today. Adobe just hit a 52 week low.
There's no love for Duolingo in this market.
It continues to trade down. Companies big and small today
are getting crushed in this market.
The Dow Jones is down. The S&P 500 is down even more
and down the most is the NASDAQ. The biggest winners are leading
the losses today. So if you're looking at your
portfolio today, it looks like a bloodbath.
Many of your favorite stocks are probably selling down massively.
And this is how investing works. This is exactly how it works.
It's like Mike Tyson says, everyone has a plan until
they're punched in the face. And if you have a plan with your
investments, it's important to stick to that plan, even though
today we're getting punched in the face.
And when looking at both portfolios, when looking at the
top companies to buy, four of them came to mind.
The first one is Netflix. This is a company that I believe
should be on the radar to be a purchase by any new investor.
When we look at Netflix, there's a couple reasons that I outline
this company. First of all, the price is way
down from its recent highs. Netflix is going through a
substantial dip. When I see a high quality
compounding machine that recently traded at $133, it's
now down to a price of $89.00 that catches my attention.
I simply look at these situations and want to learn
more about them. The news of any big acquisition
will likely drag down the stock price of any company, and
Netflix is no exception. But there's reason to believe
that in this case, it's actually a benefit for Netflix.
In the case of Warner Brothers Discovery, the acquisition makes
sense. Warner Brothers Discovery
represents high quality, prestige TV series that have
incredible IP value. Intellectual property is so
valuable in the world of content, and Netflix knows that.
After all, much of what's watched on Netflix is licensed
content from other companies, especially Warner Brothers
Discovery. These are the series of movies
that people love. Warner Brothers has an excellent
box office business and they have an excellent streaming
business. The problem with Warner Brothers
Discovery is that when they were spun off from AT&T, they were
dumped with an enormous amount of debt.
So Warner Brothers Discovery, ever since this point in Q4 of
2022, has had a staggering amount of debt, and that weighs
on you. The interest expense of this
debt weighs on you. Even with this huge amount of
debt, they've spent the past years paying it down every
single quarter, quarter after quarter.
Now, while they're busy paying it down, they can't do things
like invest in new shows, they can't expand their business,
they can't expand in talent and technology.
They're too busy paying down debt.
And this is where I want to highlight an imortant
distinction. The content of Warner Brothers
Discovery in the actual business in terms of their assets and
their production is excellent. It is top tier content and
everyone that has access to the library knows that the
financials, their current market structure is really bad.
They have an enormous amount of debt that is causing them years
of continual debt management. The reason that the Netflix
acquisition makes so much sense is because Netflix will get the
IP. They'll get the incredible
content that'll really help out Netflix's library for the long
term, and it also solves the problem of their bad financial
structure. Netflix has the financial
strength to pay for this acquisition and the debt very
easily. This will not be something that
holds it on the company from reinvesting back into the
future. So I look at this as a situation
where Netflix is solving the biggest problem with Warner
Brothers Discovery, which is the financial situation while
obtaining that incredibly valuable IP from their library.
Netflix knows this and they want this deal badly.
They already have a signed agreement agreement, and they're
trying to protect themselves from the ongoing attempts from
Paramount to block their deal or obstruct their deal or make it
so that Netflix can't buy Warner Brothers Discovery.
And Netflix is making moves to preempt this.
David Faber on CNBC explains this fully.
The vote is the key. It was not going to take place
until the late spring or early summer.
That will change should Netflix move forward with a change to
all cash. Why?
Well, when you issue stock, you've got to issue a lot more
financials, a lot of accounting around it.
And that just takes a lot of time, a lot of time, a lot of
effort work, not to mention expense even for doing that.
This makes it cleaner and quicker.
And how much quicker? A lot, we're talking months.
In fact. Again, unclear, but you could
see a shareholder vote as soon as late February, early March.
If in fact Netflix does this, you will get the proxy and you
will get the date, but perhaps the proxy will come very soon.
Again, that's the point I'm making here.
The proxy itself would not be filed for quite some time if you
were continuing to include stock in the transaction.
That will change with an all cash offer and that will bring
the question as to whether Paramount is going to raise and
some and do something beyond suing and claiming it's being
treated unfairly in order to try to win the day.
That remains unclear at this point, but Sarah will have the
effect of consolidating that timeline significantly.
By moving from having their deal in part cash and part equity to
straight cash, it clarifies a deal, it makes it simpler, and
most importantly, it pushes the timeline forward for Netflix.
Getting a vote on this by months.
So Netflix is moving fast to close this deal down fast.
The take away here is that Netflix is being aggressive in
pursuing this deal. They know that Paramount is
nipping at their heels. They're doing everything they
can to steal Warner Brothers discovery from them and Netflix
is not going to let that happen. But where does that leave us as
Netflix investors? This has been a company that I
have in the portfolio. I already have a decent holding
in it and the stock doesn't seem to like this.
In fact, investors seem to be selling out based on this news.
I think investors and Wall Street have this wrong.
Netflix should not be selling down on this news for a simple
reason. Usually stocks sell down because
they're becoming structurally weaker.
For example, Salesforce is selling down over the past
couple of months because the stock is becoming structurally
weaker. With advancements in AI and
coding, there's lots of other tools that are putting pressure
on Salesforce, making it so that this company has to contend with
all different types of competitors.
Adobe's selling down and multiples are contracting
because the company's becoming structurally weaker in the
competitive landscape. They're now having to deal with
the likes of Figma and the likes of Canva, big competitors that
are taking market share on the low end consumer and on the
design consumer. Adobe's in a structurally weaker
position than it was a year ago. By contrast, Netflix's stock is
selling down as the company's becoming structurally stronger
with the acquisition of Warner Brothers Discovery.
Netflix has simply won the game. There's no coming back from
that. There's no alternatives.
Netflix would have such a massive library that it would be
indisputable. Can you even imagine the content
that Netflix would have? Their production capacity would
be unmatched. Netflix's streaming library
would be unmatched. Their utility and ability to
cross sell different pieces of content to different consumers
of all varying tastes would be unmatched.
Netflix is already the strongest media company in the world and
this would only increase their power and make them stronger.
So we have a company that's going down in stock price as
it's becoming structurally stronger.
Now, many of you may say, well, look, Disney bought a different
company, and look how that's worked out for Disney.
That's true. Disney's a big media company,
and you may see some comparisons from the Walt Disney Company to
Netflix. The difference with these
comparisons is that the thing weighing down on Disney is not
their streaming assets. It's not Fox, it's not Disney
Plus. What's weighing down on Disney
is their declining cable TV business.
Without that, Disney would be a compounding machine.
By contrast, Netflix is not buying any cable TV assets from
Warner Brothers Discovery. They're only buying Warner Bros.
They're not buying Discovery. So Netflix is getting just the
good parts without getting any of the bad parts.
This puts them in the strongest position possible.
This makes competition even harder against Netflix.
It strengthens their business without diluting it into secular
declining businesses like cable TV.
When I look at Netflix today, I see a company that's declining
in stock price because of short term concerns, because of
commotion, because investors think it's a dead stock for the
next year. But in reality, this is a
company that's moving step by step aggressively into a much
stronger position in the media landscape.
I think that Netflix is a buy today, right now, but I want to
warn investors that this is a highly volatile company and this
could go much lower. I could see on the low end, in
fact I could, I could really see it happen where Netflix trades
all the way down to around $70 per share.
I think that's where we get to around the lowest end.
The upside, by contrast, is very big for Netflix over the next 5
to 10 years. If they secure the deal with
Warner Brothers Discovery, if they get all the debt under
control, which they will, and if they leverage their content at
the scale of Netflix, we can see really big things from this
company over the next 10 to 20 years.
I see it multiples higher than what it is today.
The second stock that is a buy today is JP Morgan Chase.
And this is one that I haven't covered recently, but it's
actually a company that I used to have in my port portfolio and
it's a company that I made solid gains on in a short amount of
time. I bought it during the COVID
lows. I held it for a couple years and
sold it for around a $15,000 gain.
Like you'll hear many investors say, I wish I never sold the
company because it's much higher today than it was then.
The stock price has over doubled from $150.00 to around 350 now,
but it's recently gone through a small pullback.
Now, it might be surprising that I highlight JP Morgan as a buy,
seeing that this is a bank and banks are typically not
companies that I buy because they're looked at as more
cyclical, less dependable. They are also black boxes.
They're more difficult to understand, and that's
traditionally what banks have been.
But over the past five years, banks have really evolved and a
couple things have changed dramatically under the hood of
what's going on with JP Morgan Chase.
The transition that's happened is that companies like JP
Morgan, the largest banks in America, are looking more and
more like tech companies. In fact, they don't really look
like the traditional bank that takes in deposits and makes
loans to make money. That's historically what banks
have done. But instead, JP Morgan can now
be looked at as more of a platform business that uses its
banking charter to have an unfair advantage over
traditional tech companies. And this is the same thing that
Tom Lee has been arguing with the financials for some time,
that investors are looking at them in an antiquated way, that
they're simply banks taking in deposits and lending money.
But that's not the business model of these banks today.
Financial services companies are really big beneficiaries of AI
and they're big beneficiaries of using blockchain technology.
Both will allow them to reduce their employee intensity of
their business. And so I think the large tech
Ford banks are going to start to see margin expansion and trade
more like tech stocks in the future.
And that's why, you know, the JP Morgans and the Goldmans could
actually be the next Mag 7. They are looking more and more
like tech companies every single day.
Part of what JP Morgan does is they take in deposits, they lend
out money just like any other bank, and that does make up a
big portion of their revenue. But there's also a lot of other
aspects to what this company's doing and how they're earning
real revenue inside the consumer segment of JP Morgan.
The Sapphire credit card makes them around $29 billion
annually. You have interchange fees, you
have annual fees on their high end card.
These are more tech like services than banking services.
You have another huge segment of this $20 billion per year that
they're earning through wholesale payments.
This is very similar to the business model of Stripe.
They're basically processing payments.
They earn an enormous amount of money from doing that and
Stripe, as we look at it, is not a bank company, it's a tech
company. But JP Morgan has this type of
business built into it, making up a significant portion of
revenue. Then on top of those massive
segments of their consumer cards, their branches, their
Stripe like business, they also have wealth management services
where JP Morgan handles money for super wealthy clients as
well as many institutions. And then they also have
commercial banking where of course, they give big loans to
big businesses. They help different businesses
go public. They help different businesses
with all financial situations. The mix of revenue from JP
Morgan has looked more and more tech like every single year.
It's a higher quality revenue mix.
And like Tom Lee says, as the company becomes higher margin,
so should the valuation expand. When we look at the valuation of
JP Morgan, there's also a couple things I want to point out here.
If we look at a traditional bank, the way that you would
value a traditional bank is by the price to book.
And typically you'd look at a traditional bank and say that JP
Morgan is rather expensive. It's trading at a price to book
value of 2.3 times. That's much more than most banks
that trade at 1 1/2 times or one times.
So by the traditional bank metric, JP Morgan is expensive.
But then if you value it the way that Tom Lee is looking at it
from a tech perspective, you'd value it by PE ratios, which is
what we commonly use for tech companies.
And if you're valuing the company by its price to
earnings, it looks rather cheap trading in the low teens, the
mid teens of 14 1/2 Ford PE ratio.
That is very cheap when comparing to almost any tech
company. So whether you're valuing the
company based on its PE or its price to book is determined by
whether or not you're an investor valuing it based on a
traditional bank metric or a tech multiple.
And it's 1 worth considering to any investor that wants to have
access to a massively profitable tech like bank.
Now the third one worth buying today is Amazon.
This is one that's been on my buy list for some time and it's
also a large holding in the portfolio.
There's a lot of different reasons to buy Amazon, including
their growing advertising business, their mixed shift of
higher quality revenues overtime.
You can see that Amazon continually is growing in their
third party seller services, their advertising subscriptions
and AWS. But out of all of these reasons,
I want to highlight too that I believe are the single biggest
reasons to own Amazon today. The first one's Amazon Web
Services, AWS. My thesis with Amazon is that
AWS will continue to accelerate. I believe it will grow 18 to 19%
over the next year and that accelerated growth will continue
to push the stock higher. When we look at the customer
commitments to AWS, those are growing faster than their
current growth rate. We have 22% growth in customer
commitments, which means that more people are signing up and
signing contracts to use AWS in the future.
The operating margins of it are also very high, 35, 5%.
This is much higher than where Googles are or even Azures.
This is incredibly high margins and they should go higher.
But the other reason that I highlight Amazon as a buy today
is because I think overall, when we can break down all the
various things that Amazons doing, it has so many different
touch points to people's lives every single day.
But one of the big stories hiding behind the numbers is the
automation. Amazon is a company that has an
enormous amount of revenue, but very low margins overall because
so much of their revenue is in retail businesses.
This requires a lot of legwork, a lot of manual labor.
Amazon employs roughly 1.5 million employees.
That's a lot of employees. They're one of the biggest
employers in the world. As automation continues to
advance rapidly over the next 5 to 10 years, as robotics take on
more of the legwork, the manual labor that many human workers
are doing today, Amazon should be able to move faster, be able
to ship packages better, have fewer complaints, fewer errors.
They can also have fewer employees.
Amazon can continue to grow the revenue while keeping the
employee count flat, which creates operating leverage,
increased margins. Not only does it have fewer
employees, but it has fewer work time off, fewer lawsuits, fewer
employees being hurt on the job, fewer health insurance claims
and bathroom breaks, and so on. Employees are expensive for
companies. Amazon has an enormous amount of
employees, and having robotics be such a massive tailwind for
this company, I believe is something that investors will be
very attracted to over the upcoming years.
Amazon today is worth over $300 per share, but it continually
trades at around 2:30 to 2:40. Now it is going up in stock
price. And I believe that it will
continue to over the upcoming year.
But I believe investors have a very attractive entry point here
today. And #4 we have MasterCard.
And for this one, I'll group it in with Visa.
Both of these companies are under pressure recently as there
is a new Trump social tweet where he said that he's
interested in capping credit card interest rates at 10%.
And this has caused a huge stir in the markets, not just for
banks like JP Morgan, but also for Visa and MasterCard.
Now, there's a lot of misconceptions about how
Mastercard's business actually works.
For one, MasterCard doesn't earn money on interest payments.
So when you're paying your credit card bill and you're
paying interest for late payments, MasterCard isn't
making money from that. They only make a small amount of
money every time you swipe the card.
MasterCard is a tech company. They're not a lender.
They are network focused on speed of transaction, connecting
customers with merchants and banks and making sure the
transaction goes through with fraud protection, with
insurance, and with knowing who you're buying from and knowing
who you're selling to. That is Mastercard's business.
MasterCard and Visa are not in the business of lending money.
Now, after Trump posted this, there is a huge buzz of news
regarding it, and many people jumped on board.
One of them was Senator Elizabeth Warren, who has
proposed this for a long time. We also have other people even
across the aisle like Josh Hawley that also support this.
And there's other notable Democrats like AOC that support
this as well. So there is a number of people
in the Senate that do support this, but that number is
limited. And that's what brings me to why
I believe this company is a buy today.
The concerns over a 10% credit card cap I believe are very
misfounded. And I think the chances of this
actually passing with a hard cap of 10% interest on credit cards
is incredibly unlikely. The biggest problem with trying
to make this work is what would happen in every case.
If companies like Visa, MasterCard can't have any cards
with over 10% annual percentage interest rate, then you would
have of them not being able to lend to almost everyone.
That is a sub 700 credit score. So if you have below a 700
credit score, your credit card is gone.
It's toast. There's no chance you're getting
a line of credit. When you look at the outcome of
this, do you think that your senator and your congressperson
wants to be responsible for you losing access to credit?
You not having your credit card anymore, you having to turn to
loan sharks and buy now pay later applications?
Do they want to be responsible for you losing access to
something you enjoy using? No.
On top of that, the other consequence of this is that
credit card rewards for high income earners, meaning people
that have above a 700 credit, people that have stable incomes,
people that pay their bills on time, their rewards would go
down. O this is a double whammy.
Not only would a massive amount of people, millions of people
would lose access to credit, but the people that earn rewards
would also earn less rewards. So people above 700 credit and
people below 700 credit would be harmed by this bill passing.
Moderate Democrats do not want people to lose access to credit.
They don't want to be responsible for millions of
their constituents not having credit cards that they enjoyed
using. And moderate Republicans don't
like price controls from the central government.
Moderate Republicans like free markets, they like competition.
And in both parties, neither of them want to be looked at as the
person that took away your access to a credit card.
The the House Speaker, Mike Johnson already seems to realize
the blowback that this would cause the unintended effects.
He says, quote, you got to be very careful if you go forward
in that and our zeal to bring down costs, you don't want to
have negative secondary effects of that.
They would just stop lending money and maybe they cap people
on what they're able to borrow at very low amounts.
Mike Johnson's being very careful with what he's saying.
He's trying to balance not offending Trump, but he's also
trying to point out that, look, there are some big things we
have to be concerned about here and he's already highlighting
some of these structural challenges.
And Mike Johnson is exactly right here.
If they go forward through this, millions of people lose credit
cards. Credit card reward points will
go down and the credit limits that people have will go down
substantially. Not only could it be something
that consumers don't like, but it also could negatively affect
the economy. The digital economy is part of
the reason that the stock market does so well that companies
earnings grow is because people can easily and freely and with
less friction transact. If you restrict that, you slow
down transactions. So overall, this is incredibly
unlikely to pass. And as a MasterCard shareholder,
someone that's already bullish on this company, I believe that
when the stock trades down because of political bickering
and different posturing from the president or anyone else, that
that's the time to buy. MasterCard and Visa are becoming
structurally and strategically more important companies in the
world and I believe that MasterCard even has a business
growing outside of their normal Rails business.
With the stock trading at five year low multiples, I believe
it's time to buy now. Finally we get to some news that
Google has an unfair advantage and this was outlined in this
article from The Verge where they go over that.
Gemini's AI will use what it knows about you from Gmail
search and YouTube with personal intelligence.
Gemini can give you a more personalized answer to your
questions. They give an example here of how
this personal intelligence can work like a real life example.
They say that we needed new tires for a 2019 Honda minivan 2
weeks ago. Standing in line at the shop, I
realized that I didn't know the tire size.
I asked Gemini. These days any chatbot can find
these tire specs. But Gemini went further.
It suggested different options, one for daily driving and
another for all weather conditions, referencing our
family road trip to Oklahoma that Google found and Google
Photos. It then neatly pulled ratings
and prices for each. As I got to the counter, I
needed our license plate. Instead of searching for it or
losing my spot in line to walk back to the parking lot.
I asked Gemini and it pulled up the seven digit number from a
picture in photos and also helped me identify the Van SEC
trims by searching Gmail. Just like that, we were set, and
now they're leveraging that enormous amount of data they
have of you, all their photos, all your YouTube history, all
the Gmail, to answer questions about you in a uniquely
personalized way that nobody else can, Nobody else, including
ChatGPT. This is so personalized that
it's hard for me to believe that anybody else will be able to
compete with this. ChatGPT certainly does not have
this information. This is a massive point of
leverage that Google has over ChatGPT.
Another thing that we can point out is that this is exactly what
Apple is supposed to do. Apple is supposed to have
everything that they know about you with the iPhone, but Apple
doesn't have the AI models, so now they're having to combine
with Google and use their model. So Google's even winning with
Apple. Over the past year, we've gone
from Google having no answer to Chachi PT having a sluggish app
failing and falling behind, to now having an app catching up
and one that seems even structurally positioned better
than Chachi PT. One that can leverage this
immense amount of personal data to handle questions in a far
better way for users than Chachi PT can.
Now, finally, we get to the fail of the week, which in this case
is a story of Matthew McConaughey trademarking himself
to fight AI misuse. Matthew McConaughey is taking a
novel legal approach to combat unauthorized artificial
intelligence fakes he's trademarking himself.
Over the past several months, the Interstellar and Magic Mike
star has eight different trademark applications have been
approved by the US Patent and Trademark Office featuring
himself. His attorney said the trademarks
are meant to stop AI apps or users from simulating
Mcconaughey's voice or likeness without permission, an
increasingly common concern of performers.
Now, in this case, you're probably wondering what the fail
of the week is here, and you may think that I'm referencing
Matthew McConaughey as being the fail of the week, but I'm not.
I actually think what he's doing here is totally defendable.
I think it's reasonable Matthew McConaughey should have
ownership over his likeness. The fail of the week is this
ongoing story of AI making life harder for many people.
Last week we saw people using AI to make these new pranks that
are more disruptive to people. Now we see this continual theme
of AI stealing people's voice, their likeness, their image,
without giving any type of compensation to them.
If you own anything in this world, if you have access and
ownership to anything, it should be yourself.
Your voice, your likeness should be what you own.
In fact, I think that Matthew McConaughey is not only in the
right here, but I don't think he should have to trademark
himself. This should just be common law
that he owns his own likeness. Now part of this is funny
because the trademarks that he included are several of the most
Matthew McConaughey things that you can include.
One of them is him standing on a porch.
Another is a three second clip of him sitting in front of a
Christmas tree and the audio of him saying, all right, all
right, all right. His famous line from 1993, dazed
and confused. And Matthew McConaughey himself
has spoken to why he's doing this.
It's because my team and I want to know when my voice and
likeness is ever used. It's because I signed off on it.
Now he actually emailed it. But I just that's the way that I
hear it when I'm reading it. And I don't know if now I'm
going to have a lawsuit where where I own Matthew McConaughey
money because of how great my impression was.
But either way, that's what I picture him saying.
They're actually not going after anyone's specific hair.
They're trying to preemptively get ahead of this trend.
The lawyers say that his likeness may or may not have
been manipulated, but they hope that the trademarks can be used
broadly against unauthorized duplications of them.
The lawyers say that in a world where everyone is watching
everybody scramble to figure out what to do with AI misuse, we
have a tool now to stop someone in their tracks and take them to
federal court. In this case, I 100% agree with
Matthew McConaughey. And I believe it's a failing
that we're getting to the point where people have to copyright
their own image, something that they should already own, that
people should not be able to manipulate and copy and
duplicate without their permission.
But that's all for this episode. Hope you enjoyed.
See you in the next one.