4 Compounding Machines To Buy Now

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 to qualtrm.com and try out a free trial. It is the best stock analysis platform.

Qualtrm has charts and graphs that are easy to use and easy to visualize. Qualtrm has news of recent events catching you up to speed on what's happening with every company in your portfolio. Qualtrim has an advanced watch list with a dip Finder feature that shows you which of your companies are in a dip and which ones are in a price surge. Qualtrim has summarized earnings called transcripts by topic to make it easy to browse what's going on with a company.

It also has a DCF calculator that's super easy to use, a portfolio analysis tool, and more. Try it out risk free at qualtrim.com. 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.