Welcome everyone, thank you for joining. We have a good video to get in today. I think you're going to like this one. We're going to be breaking down, big Tech, Microsoft, Apple, Google, Amazon and Facebook. These five companies dominate the market they really do. They dominate their respective markets. They're basically all monopolies
in my opinion. I think every one of them all five are undervalued to different extents, but they all have very different strategies and how they're growing their business, how they're taking money and reinvesting it, they're all doing very Different strategies.
And in this video, I want to break down their different strategies and how to view these different companies as Investments. So we're also going to be looking in particular at Amazon. This is a company that I've really liked over the past couple of years, even though it's traded flat. In fact, I'm in the red by 500 bucks. So just a little bit, but I continue to add more and more to this holding because I think
Amazon is undervalued. I think the company is growing quickly, and I think that the PE Ratio the main determinant of the Vision of a company Amazon's being 53, is misleading for this company because a P/E ratios, most helpful for a company that is optimized for profits. And Amazon has not optimized for profits like Microsoft has, or apple has.
So we'll be going over all of big Tech and why I like all of these companies and contrasting their strategies but I'll also be spending a little bit more time on Amazon. Now, one quick note, before we jump in, I recently just did a three part 3 of our Series on Amazon for the patreon. Yeah, so this is an exclusive series for patreon members, but you can check it out and watch the three-part series for free
by joining the free trial. There's a link in the description, it does not charge you up front so you can check that out if you're interested. I think it's worth it. If you're interested in this company, all right, now let's go ahead and Jump Right In. This is the story fund right now, it doesn't look pretty. We're still down six thousand dollars, but last week we were down 12 thousand dollars.
So we've made up some of the losses but we still have a ways to go. Now I do something different with my portfolio in my channel. I Just showing we're making money. I show this good or bad with complete transparency, even if we're in the red, even if we're losing money, currently I'm still going to continue to show updates. So if you want to follow along for free and see updates on a real portfolio, every single week all through 2022, you can subscribe to the channel and
follow along for free. Now, if we compare this against the S&P 500, this is what it looks like back in November is where the cloud company sold off like crazy, it's where Facebook and PayPal and Netflix old down like crazy, and that hurt the performance of the portfolio. Folio, and we're currently trailing the S&P 500 by around 12%.
Now, a lot of people, look at this, and they make huge conclusions, like the past couple of weeks we've been behind the S&P 500. So All Is Lost, right? The companies that were buying aren't doing well, that's not exactly what this means. I want to highlight one quote from Warren Buffett's, latest Berkshire. Hathaway shareholder letter, he says, whatever our form of ownership. Our goal is to have meaningful investments in businesses with both durable economic advantages
and First class. Seos, please note particularly that we own stocks based upon our expectations about their long-term business performance, and not, because we view them as vehicles for timely Market moves, a lot of people have different views in the market. They say, well, we're behind over the past couple of months, right?
The performance has some good, but that is Market fluctuations because of interest rates Rising, a lot of the market has shifted from growth companies to Value company's financials energy and consumer defensive. Chinese that's market trading that's not how I'm investing. I'm investing in the future. Prospects of these companies and Warren Buffett goes on to say that point is crucial. Charlie and I are not stock Pickers. We are business Pickers.
So Warren Buffett makes a special effort to say, we're not Market timers. We're not looking for short-term Market plays. We're investing in quality businesses, that we think will hold up very well, and they have a lot of durability. So, I understand that right now, the market timer play would be to jump into Commodities and defense companies because there's a Interwar and energy companies because oil prices are going up and I could try to time
those plays. That's not the type of investing I'm doing. I do fundamental analysis on companies that I think will have incredibly strong future perspective growth, and I invest heavily in those companies. It might not work out in the next six months, but over the next four or five years, I think it will work out.
Now, having said that, let's go ahead and take a look at my portfolio and why I continue to have so much money invested in big Tech, why I like, these companies so much even at their current valuations in first? Place we have Amazon. I have 22,000 dollars of value in this company.
Then we have igv is my third largest holding eight percent of this ETF is in Microsoft. So I actually have a decent amount of this 20,000 in Microsoft then we have Google seventeen thousand seven hundred dollars of value in Google. Then we have seven thousand dollars in Microsoft and we even have fifty nine hundred dollars in apple in this portfolio and we have another $775 in Facebook.
I was fortunate enough to sell out a large Portion this company before the major draw down and I'll explain why I did that in a minute. But if we look at the valuations of these companies, they can look a little scary based off their PE ratio. For example, we take Amazon this company has a 52 forward, P/E ratio, looks a little expensive. Apple looks a lot better, it's out of 27, which still seems kind of expensive, but, you know, it's Apple, it's a great
company. So maybe investors are just paying up for this one. We have Microsoft to me. This is one of the most wide moat businesses in the world, but it still has a 30 to Forward. P/E ratio. I still continue to believe that Microsoft is undervalued. We have meta or Facebook trading at a 16 forward, P/E ratio. Now, Facebook is not my favorite company. I don't really love any of their
products that much. I don't care for Instagram that much or Facebook, but I will say their Core Business is incredibly cheap at a 16 forward, P/E ratio. There's not a lot baked into the price here. Then of course, we have Google, this is a company that I really do like their products. Obviously, I love YouTube, they have YouTube music youtube,best, Premium. They have Google search. They have Android and they're trying to get into cloud and this business trades at a 23
Ford P/E ratio. So when we just briefly, look over these companies and their PE ratios, they look like they're all kind of expensive but I think this all over States. How expensive these companies are. I think every one of them is cheaper than the PE Ratio would imply. And one of the big reasons that I think that the PE Ratio actually overstates the expense of these companies making them look like they're more expensive than they actually are.
Is because of how aggressively all of them reinvest and I want to go over there. Reinvestment and growth strategy with Microsoft. It's simple. First of all, they copy other companies so they see Zoom building out conference software. They cieslak, building out chat software and Conference software and Microsoft builds out teams. Did they think of that
themselves? Know they just copy those companies and since they already have such a huge network of companies, they work with their customer. Acquisition cost is a fraction of these other companies so Microsoft can copy other companies. All the time and build out their same software and they can sell it easier than those companies. That's a big way that they grow, but Microsoft also reinvest heavily through Acquisitions.
They're constantly buying other companies, they bought Minecraft, which was a very attractive by it's a cash cow. Now, they bought LinkedIn. Possibly their best acquisition ever. It's the only social network that doesn't have the problems like Russia misinformation and moderation problems with people being upset because it's a business social network. But they're growing The ad Revenue. They're like crazy.
Then they bought GitHub. This is a knowledge base that they have and it gives them a further insight into the coding industry. Then they have Activision Blizzard as their current biggest acquisition, a 70 billion dollar acquisition of a massive gaming company. That's a cash cow so Microsoft can take this enormous amount of
cash flow. They have continually by companies left and right, Congress isn't stopping them and they can copy any other companies in anything that they're doing and implement it in. Our core office suite, the growth potential of Microsoft is still completely untapped, they can continue to grow like crazy through copying and through buying now.
Next up we have apple Apple's. Reinvestment strategy is much different than Microsoft's. They do copy features from other things and implement it into their service. So that's a similarity. But apple does not do Acquisitions. They're not going out and buying Minecraft or Netflix or Tesla or other companies. That's just not the way that they run their business and they reinvest rather they do Secret projects.
I do projects in secret for multiple years, not talking about them, not advertising them, but they pour a ton of money into these secret projects. And if those projects are good enough to see the light of day, to be able to actually go to a customer, they'll finally reveal it, but they will only do that when they're confident, that it will be a success. That's the only time Apple
actually reveals a project. And that's the reason that so many things Apple does are successful, is because they work on a lot of stuff and they'll only reveal it if they have a Amount of confidence that it will be successful. And we know a couple big directives are working on right now in secret they're working on AR and VR, they're working on the Apple car and they're working on Healthcare. These are some of the things we know that they're working on.
Now, one of the rumored updates we have from Apple and their VR headset, is the device has reportedly completed. Second phase, engineering, validation test to ensure that the Prototype units, meet apples design goals, and specifications. Did you times added that the headset is? Added to Depew by the end of 2020 to. So we could see an AR VR headset from Apple debut by the end of this year.
So even though apples trading at, like a 27 PE ratio part of the reason why is because they're putting so much money into these projects. They're working on cars and Healthcare AR and VR. They're pouring a lot of money into this stuff that they could, otherwise be giving back to shareholders through dividends or share BuyBacks. So they would actually become more profitable if they weren't pouring so much more money into these Aspen's.
But Apple thinks they'll create more value down the road with these Investments. The next up, we have Google Google, does long shot bets, but I'm not investing in Google because of their long shot bed. So I actually think that there are the weakest in terms of their reinvestment into these long shot bets, most of their long shot. Bets get scrapped most don't work out. It's kind of like throwing spaghetti against the wall and seeing what sticks? Right.
That's kind of the approach Google takes. It's okay. Maybe something will work out in the future. But the reason that I invest in Google is because of their Core Business. Business. They have a very strong core business with YouTube. You're seeing massive YouTube, premium subscription growth YouTube. Music is now being competitive with apple music and Spotify.
They have YouTube TV. They're also of course, the owner of Android and they have Google cloud, which they're trying to grow trying to compete with Amazon. So Google has an incredibly strong core business but their whole advertising Network and all the different things are growing. But they're long shot bets from what I've seen, they go on for years and they're usually not that fruitful. So I'm not investing in Google. Because of their long shot beds and the company trades at a low
20 s PE ratio. So even if none of their lung shot bets turnout, I still think the company's undervalued just based off of their Core Business. Then we have Facebook Facebook. I actually think has the riskiest reinvestment strategy. It's led by Mark Zuckerberg and it's basically one directive. The big thing that they're doing to grow the company and the future of it is the metaverse.
So they have a more concentrated bet than Any of the other big tech companies on one directive which is a meta verse the other ways that they're trying to grow. Their Core Business is by basically engagement having people. Stay on their platform for longer, monetizing them for longer. That's a big competitive industry. They're competing with Tick-Tock and Netflix and YouTube and anything else that takes your time away, Facebook's competing
with them. But in terms of the reinvestment strategy, it is the most concentrated. Everything is based off of One Thing, Mark Zuckerberg is working on which is the metaverse. So in my opinion, I think that this is actually a more risky bet. Either it will work out big and the company will go up multiples because they loan a huge part of the future metaverse or it will just be a flop. It'll be something like the Amazon Fire Phone, right?
It'll be something like the Microsoft phone or Apple's multi charging pad. You know, some of these things don't work out like expected. So Facebook can't make the metaverse latch onto Society in the way that he envisions that will be a big problem for Facebook. So again, I think that this concentrated bets a bit more risky than the other big Tech bets. And that's the reason that I took a lot of the gains and
Facebook a couple months ago. Now, having said that Facebook has traded down to such a ridiculously low, P/E ratio, the even if the metaverse doesn't work out, I think they'll continue to offer good value, just based on their Core Business. Now, next up, we have Amazon Amazon's reinvestment strategy is dramatically different than Facebook's while Facebook has these concentrated bets where they're putting everything into the metaverse and that's Mark
Zuckerberg is focused on Amazon. Never bet the farm on any one thing they build out. Lots of small investments in projects and then as they start to grow, they put more and more focus on it and more effort on it. That's how they grew AWS. That's how they grew their Logistics. That's how they grew. Alexa and all the smart home devices and that's what they did with Amazon Prime video. They didn't start any of these with twenty billion dollar initial Investments.
They just grew them from a small, starting point to now a major business and they're doing the same thing with music and physical retail, they continue to just look at different potential projects, fund them with some growth, and the continue to invest in them as they continue to show success.
So when I look at Amazon's reinvestment strategy, the way that they run their business and try to grow it and try to reinvest, I find it much more preferable to Facebook's because again I think it's far less risky. I think Amazon has a much higher chance of having a lot of these projects work out and be fruitful than Facebook's. So, that's the comparison I'd make. Now, having said that Again, I think all these companies are
undervalued. I like the reinvestment strategy from Microsoft app on Amazon, the most and Facebook's trading at a very cheap price, even its Core Business. Compared to its earnings is incredibly cheap. So I think all these companies are undervalued but I think Amazon has the most potential currently to surprise to the upside. Now while we look at the P/E ratios of big Tech and it can seem a little expensive because they're in the mid-20s. I want to compare that basket of
companies. We just talked about to another basket of companies. This is consumer defensives companies that investors right now are piling money into. We have McDonald's Corporation, the real estate and food company that's trading at a twenty four point five for PE ratio keep in
mind. That's right there in line with Apple. So McDonald's is as expensive as apple with its current price to earnings ratio and it's actually it's a little bit cheaper than Microsoft, but it's actually more expensive than Facebook and more expensive than Google.
So McDonald's is At a higher price to earnings ratio than Apple, Facebook, and Google. Now, what is McDonald's doing in terms of their long shot, bets, in terms of building out infrastructure for the future is McDonald's, releasing an AR and VR headset later this year. That might revolutionize the world right? Like some Apple devices really end up doing. I don't think so.
I don't think McDonald's is doing a whole lot of reinvestment McDonald's is probably incrementally building out their business closing stores and underperform, opening more stores that might perform. I'm better. That's basically what they're doing. They might adjust prices a little bit and raise prices, but is this company, reinvesting anywhere close to the level that big Tech is the answer is, no, we can look at the Clorox company trading at a PE ratio of 33.
Again, investors are fleeing big Tech. They're fleeing Cloud companies and they're rushing to companies like Clorox. We can again look at big Tech Amazon's out of 52. So Amazon is more expensive than the Clorox, company apples cheaper, Microsoft. Even cheaper, Facebook is cheaper and Google's cheaper four out of five. Big tech companies are substantially cheaper on a price to earnings ratio then the Clorox company. Now maybe I'm missing something here but it doesn't appear as though.
Clorox is growing like crazy. We can compare the revenue growth of Clorox to the revenue growth of, let's say Microsoft one of them sees incremental consistent growth, has a extremely wide moat and then we have the Clorox company. It's D flat. It might be going a little bit over time but what am I missing with this company? Are they doing any massive reinvestments? Are they buying Activision Blizzard are they building out a premium subscription model? You know what is this company
doing? In terms of reinvestment I would stack up the reinvestment plan of Clorox against any big tech company and I don't even think it comes close but yet investors are paying a higher price for this company. Then almost every single big tech company aside for Amazon. That's the only one more expensive. Now, we can cite more examples. We can Look at Kimberly-Clark. This company trades, at a 22 forward.
P/E ratio, 22 forward. P/E investors are racing into these companies, they're paying up for these companies. It had three percent Revenue growth year over year last quarter three percent. That's what the revenue growth looks like over the past five years. Again, we compare that to Facebook. It's trading at a 16 for PE and had twenty percent Revenue growth last year. So for 20 percent Revenue growth
with very high margins. You're paying a And for PE, and with Google you're paying a 23 for PE for 32 percent Revenue growth and extremely high margins. But investors for whatever reason prefer this company they think this is what's going to create future prosperity and future wealth investing in Kimberly-Clark. We can also take a look at Coca-Cola a company that's almost completely stagnant. Not growing at all, and investors are paying a 25.4 for PE ratio.
It, grew ten percent quarter over quarter last year. But that's only because of the reopening because restaurants reopened overall, the company's not growing Coca Cola is mostly a stagnant company. And if you look at the earnings per share, it's been this way for the past, almost 10 years, the earnings per share have gone up almost none over the past 10 years but yet Coca-Cola is a company that investors are
paying a 25.5 forward. P/E ratio for this company that's not building up the metaverse. They're not building out YouTube premium. They're not building out AR and VR headsets in the Apple car. So they're not buying Activision Blizzard, in fact, they do very little in the way of reinvestment. It's trading at a higher price to earnings ratio than alphabet, then Facebook and around the same PE ratio as Apple. That's what investors are pricing this at.
So, when I compare these two groups of companies, on the one hand, we have big Tech, we have Microsoft and Apple, Amazon, Google and Facebook, and then in the other basket, we have these type of companies. We have McDonald's the Clorox company Kimberly-Clark and Coca-Cola. If you compare the E ratio is to each other. They're trading for around the same big Tech is selling for around the same price as these companies.
And in my opinion, when I look at them over the next five years and which ones are going to have bigger earnings and create more value for shareholders. I think without question big Tech will outperform this group of companies without question. I don't even have any doubt in my mind that that will happen.
Big Tex earnings right now are artificially lowered based on their heavy reinvestment, they're doing unlike Kimberly-Clark and Coca-Cola, every big tech company is doing Well, amounts of investments into future projects that will probably create a lot more value for shareholders. So I do comparative analysis of big Tech and their earnings potential, the projects, they're working on. And the moats are the business, how stable they are in durable?
They are. I continually think they're undervalued compared to the Alternatives companies that investors are rushing into oil companies commodity companies and consumer defenses. I don't think that's where you're going to get long-term wealth. It might be a good trade, that might be a good trade over the next couple of months, but that's not the way that I'm
investing. Investing for the long term for the future and I see more value in these big tech companies that I do in many of the Alternatives. So I hope that gives some insight of why continually by Amazon and these other companies. Again if you want to see the three-part Series on Amazon, there's a link in the description of joined the patreon. I think if you try it out, you really like it. But that's all for now. I'll see you in the next one.