20:23 so far has been an incredible year. Just this year, my portfolio is up. Sixty five thousand dollars. That's a 17 percent gain so far. This portfolio has reached a landmark of 90 thousand eight hundred dollars. It's a lot of money and most of it has come from most of the companies that I'm investing in doing really well. All of them are performing at
different levels. Some are doing slightly better than others, but overall the performance has been outstanding, but even as other companies do okay, the portfolio has been led by one Orry. And that one category is the tech category. If I switch over to the year to date view here, Microsoft and Apple are both up over seventeen thousand dollars. This year, this is pretty big games for two companies in a single year. Microsoft, for example, is up 44 percent, it's basically a 45
degree line just going further. And further up with apple were up a remarkable 48 percent year-to-date and likewise it's just a 45 degree line going up and to the right it's actually incredible. How these companies have been Trading. And that's what I want to talk about in this episode as these companies have performed exceptionally. Well in price, I want to see if their intrinsic value has followed. We're going to be discussing intrinsic valuations, especially
of the big tech companies. We also have some additional news, Microsoft is now saying that they're going to earn 10 billion dollars from annual AI Revenue. Going to be looking at what that new reoccurring revenue is and we have an update on Disney, the Disney Financial, Chief clash with the top Executives before stepping down.
So we have the CFO Gene McCarthy stepping down from Disney and we're going to be looking at Disney and doing a little bit of a catch up. And then finally it's Friday which means we go to tick tock and we try to get the best tips for making money. Luckily, we have a tick tock hair, which is the simple instructions of how to make a million dollars. They go over it. Everyone can be a millionaire. Here's how you do it. Now, obviously, we have a lot to get to.
So let's go ahead and get started. First of all, we do things differently here at the jaws of Carlson show. Most investors most content creators and most other channels are short. Term Trend following. This channel, does not do that. We are long-term focus on companies that I call compounding machines compounding machines are companies that are incredibly Capital efficient, their ones that have high
Returns on Capital employed. They're typically monopolistic their dominant in the domain that they compete in. They have high barriers to entry. They have great growth profiles. These companies continually grow organic Revenue, earnings per share and free cash flow per share compounding. Machines are companies that it can be held on multi-year basis. Has I buy into these compounding machines as concentrated positions, and hold them for a
multi-year basis. Meaning that typically, I hold companies for at least a minimum of three years. For example, Costco has been held since 2017, half a decade holding this company. And while I buy into these compound machines, it's also important that I have a different mentality. The most of the market. And this is what I believe is a bigger distinction overall than even the companies I pick, I've showed this slide Before at the beginning of the year, this is the mentality that we try to
have at the Joseph Carlson show. We don't get excited. When the market goes up today, the market is going up this year, the market is going up. Investors are enthused. Investors are excited. They're feeling good. We try to avoid going along with the pack and filling in that same excitement at the same time, when prices get cheaper when the market goes down, we don't let that get us depressed. We divorce our emotions from Market. I meant we remain completely insular in our thinking and
sentiment about company prices. We're patient. Real K, being bored at the Joseph Carlson show. I don't invest in Nvidia, I don't invest in the most flashy companies like Tesla. I invest in boring companies like into it or Costco or Texas Roadhouse. They do not have to be flashy to give phenomenal. Gains, we don't need to fit in with the pack. We have no attachment to stocks, I'll sell any company as long as I think there's a better opportunity.
We remain cold. Calculated and systematic part of the reason this portfolio has done. Well, it's had Market beating returns so far last year and this year is a result of the combination of the stock picking criteria focusing on good companies. And the mentality of having a long term perspective and remaining detached from the rest of the market and remaining, emotionally detached from the rest of the market. Not going along with the pack is much easier said than done.
Most people say that they can do this, most people feel like they can do this. It really comes down to it. Most people struggle doing this. They get excited when everyone else gets excited. They see the gains that they've made this year, and they want to pour more and more money into the same companies, making further gains, we have right now, a market that by the actual metrics is in the extreme greed
category. This is one of the highest grade categories that this measurement has ever had looking at this over a timeline. This is the peak point of greed exceeding, where it's been for the past Two years, investors are enthused. They're pushing prices up more and more every single day and this follows right along with human nature. The logic is pretty simple. When stocks are headed up, investors become very happy and they believe that stocks will go up forever.
It seems comical when you really just think about it. Investors think that because stocks have gone up, they will go up forever but that's exactly what they do. They come up with, rationalizations they Um, up with lots of different explanations of why this stock will never go back down of why it's headed higher and higher and higher. Think about the companies that this is happening with right now.
I can think of, at least, one of them that I think fits this category Nvidia, this companies up another 2% today investors can't pour money into this company fast enough. The market cap is a staggering one point zero five trillion dollars, the P/E, ratios a 40 Ford, PE the Enterprise Value to anybody. 56. That's over double what Amazon is. Right now, the free cash flow yield of the company's .47 and if we factor in stock base competent .21, but what do we have going on right now with
Nvidia? The shares are trading higher. As the Geniuses at Morgan. Stanley have raised their price Target from 450 to 500 dollars. The analysts always follow the stock price, as the stock goes up. There's no reason it'll ever come down. There's nothing that can ever turn this train around and video is headed for the moon and all the fools not making money in it right now. Well you're just missing out so
you better jump on that train. If we look at a company like Microsoft, just a year ago it was going in the opposite direction. Look at it over the past five years from 2021 to 2022. The price is going down and the investor sentiment on Microsoft at the time was literally the exact opposite as the price steadily. Went down investors thought that it would continue to go down. They came up with rationalizations and
justifications. For I Microsoft had always been overvalued and it was finally going back down and this time, it was deserved. So we have the mentality of the market. When stocks go up investors, believe they'll go up forever. When stocks go down investors, believe, they'll go down forever and obviously, neither of these cases are accurate. The truth lies somewhere in the middle. Every company has an intrinsic value. And that's what we try to measure, engage our buys and sells off of.
So, knowing that investors right now are in the hypemode the enthusiastic mode and the stocks will I'll never come back down mode having that context in mind. Let's go ahead and look at my portfolio and estimate, the intrinsic value and how things have changed. The first thing I want to do is actually go back and reference a video. I did eight months ago, this video was eight months ago, it was seen by 65,000, people, the exact date was September thirtieth, twenty twenty-two.
And what I did was valuations on a lot of the companies that I held at the time, at the very top, we had my intrinsic value estimate for Apple. The current price of At the time of this video was 142 dollars. Now, apple is trading at a price that I considered to be undervalued. 140. Right there was the undervalued price. I said, the fair value of Apple was 180. Overvalued was 220, apple is now at 185 slightly above my intrinsic value estimate it trades at a free cash flow.
Yield of 3.3, a stock based compensation staff. Free cash flow yield of 2.9. So it's actually getting up there a little bit higher where the free cash flow you Olds lower, but it's still healthy. Apple still has a better yield than a lot of other comparable tech companies. And if we're going to Value the company on an earnings basis, it's at a 25 PE. And now I'm in the green by over
twenty four thousand dollars. Now, it's great, that Apple has reached that fair value estimate, I believe it's gone up to its true intrinsic value. But as the price goes up as the market has, now given Apple a good bid. It means the margin of safety has gone down. For example, I think it's easier for Apple to trade from 180. To 140, then it would be for Apple to trade from 140 to 180.
Even though both of them are 40 dollar price declines, I didn't going from 140 down to 100 makes Apple extraordinarily cheap, going from 180 down to 140. Just makes it undervalued so apple right now, is that a decent price? But the margin of safety is a little bit less as a companies traded to intrinsic value. The way that I look at this is
that right now? Apple for me is not a by and I know it's different because I already have A large position in this company but I really try to add to it. A monk's weakness, when other investors are fearful. When other investors are questioning the future of Apple. That's when I add more to the company right now is not one of
those time periods. Investors are not questioning the future of Apple. Their pricing in a very bright future for Apple, a prosperous one one that I think will happen but it's already being priced in to some extent. So while Apple in my opinion is not a cell I'm not going to be exiting my holding It's certainly not a by what I'm doing with apple right now is I'm holding.
And from what I see with apple this year, I do believe the intrinsic value is nudging upwards as the companies creating more avenues for growth. There's a metric. I love to look at for the intrinsic value of a company and it's the adjusted free cash flow per share. This metric is the free cash flow on a per share basis - the stock based Campana per share basis. So, in my opinion, it's the most pure form of free cash flow that you get and it's the best
overall. Indicator of whether companies actually growing its intrinsic value or not. What we can see is that over the past five years. Apple's intrinsic value has grown dramatically. Going up at a rate of nearly 24% per year. I think that Apple can continue to grow its intrinsic value at around 15 to 20 percent per year. It seems a little aggressive but people thought this is aggressive way back in 2017. The company's 3x from there and the intrinsic value has grown by 3x as well.
And they've done it with Enormous ecosystem. That is the most important part of apples moat. As long as they maintain the ecosystem, they will continue to find Avenues to be able to monetize their massive installed
device and committed user base. The thing that really sets Apple apart from where it was five years ago, is the product categories that it now has the company has an entire category called Services, which is the high margin digital Revenue portion of this company growing at a very fast pace there Eking out now, over 20 billion dollars in service Revenue per quarter, 100 billion dollars a year in service Revenue, that's like a
fortune 20 company just because of their service revenues alone. And I don't know the exact numbers on this, but I assume that the margins on this service Revenue are similar to The margins of Microsoft. So while I do not consider Apple cheap anymore and I would not instruct someone to pile into apple with their life savings anymore. It's not quite at the point that I would sell the company.
I'm still Looking at this type of range, if the company gets above two hundred dollars per share but gets into the two tens. I will be selling a large part of my steak at that point but we're just not there yet. Now the next big tech company that's gone through an incredible run is Microsoft. Another large concentrated compounding machine in this portfolio. Microsoft trades at a price of around 350 dollars today and the
company's price. Year-to-date has basically been a 45-degree slope going up over and over again. And Investors are obviously in the category now of being estatic being excited, Microsoft has literally positioned itself as the AI dominant company trying to muscle out Google and metaphor. That top tier position.
They predict now that AI in and of itself will lead to an incremental, ten billion dollars in reoccurring revenue, and they say that this will happen by intermingling all of their AI products like chat, gbt and putting AI into being searched into the Windows operating system and to things like Azure and all of their various software. So AI is now a part of Microsoft investors. Love AI investors, love the new shiny thing to get excited
about. In this case, it's a i and it's become a large buzzword that I do believe impact stock prices. Now, while today, Microsoft trades around 350 dollars a year ago when I made my valuation framework and I came up with the intrinsic value of 350. Microsoft at the time was trading for. $238 it went up more than $100 in share price, what I'd like to do for the research on Microsoft and the current valuation is reference a video. I did on big Tech valuation just five months ago.
The video is called Big Tech his cheap and it came out. January 6 2023. Here's a segment from that video where I go over, Microsoft's valuation, why I thought the company was cheap and I think this works as a good Anchor Point currently. Now, next up, we have Microsoft, which is another company I think is cheap. I own this one in the story fund and my dividend portfolio.
Looking at this one, the big problem with Microsoft is the forward P/E ratio, that's what everybody's looking at in today's market, which I think is good, but we have to look at a couple things here on quadrant says the forward P/E ratios based. It's a 27 and keep in mind, this is based on analyst estimates of next year's earnings. And this is where we have some disagreements. I think this is very low. It's assuming an eight dollar earnings per share, next year when we look at a lot of Of
different assumptions. We have this right here which is a table of different analysis to suing nine dollars. And fifty four cents next year, my assumption is that Microsoft can earn around 10 dollars next year if Microsoft earned ten dollars next year which again I think they can it's no guarantee
worst case scenario. They earn eight and it's really a 27 Ford PE ratio but if they earned eight dollars or sorry ten dollars next year, instead of eight the Ford PE would be 20 You right now, maybe buying Microsoft at a 22 Ford PE. If we look at that historically that means that Microsoft right now today is the cheapest it's been since 2019 for just a couple trading days there and then all the way back to 2017.
That's the last time you'd be able to buy Microsoft at today's price and people are saying that Microsoft is so expensive. Now it's such an expensive company, look at the high. Multiple Microsoft was just trading at a 35. Five Ford PE for over a year that's where this company trades during bull markets with how powerful it is. It has a credit rating better than the US government.
It's a diversified monopolistic business that has its hands in every part of corporate America. I don't see this company going away for another hundred years. So even if the earnings come in a little bit lower, next year, worst case scenario, you're getting it at a 27 Ford P/E ratio, which I still think is inexpensive for Microsoft. But best case scenario, you get it out of 22 for PE because next year they earn ten dollars in earnings per share. And again, I don't think that
that's out of the question. I think there's a decent chance they can earn nine and a half ten dollars. So, in that video five months ago, I went over the worst case in the best case. And like I said, the worst case scenario was you're owning Microsoft at a 27 Ford PE which I didn't think was all that bad and I certainly didn't think that investors would lose money even with the worst case, Scenario. But what happened was the best
case scenario. I say in the video that Microsoft trades at around a 35 forward P/E, in a bull market. And I also say that I believe that Microsoft would earn around 10 dollars in earnings per share. Well, here we are. Microsoft is projected to earn around 10 dollars in earnings per share in 2023 and the companies around 350, which puts it nicely in that, 35 forward
P/E. So, we're back into the bull market, Microsoft is now fully valued and the stock price has gone up. Over $100 from 240 to 350. Now, that's great for buying Microsoft, a year ago and participating in this huge market gain and this huge shift that's happened over the past year. The issue has it, puts it now, nicely and that intrinsic value category. This is the area that we don't really want to be buying companies in. We want to buy them in the undervalued category.
So this puts us in the same predicament with apple, we have a company that I believe is at its intrinsic value. I don't think it's grossly overvalued, but I also don't think that it's now undervalued and as its in its intrinsic value, the margin of safety is a lot lower.
The company could trade back down into that undervalued category, but the decision of whether to lock in games and take advantage of all of this Market, enthusiasm, or the decision of whether to just hold the company, remain long term. And let this thing, ride is a tough decision, Microsoft again, over the past year has gone from a 22-4.
PE to a 35, a 22 to a 35, is a lot of multiple expansion, a lot of investors becoming excited and investors can change their enthusiasm on a dime and this thing could swing back around multiples, could contract. So that's the chance you take and the risk. You Take by remaining long. The company right now, with Microsoft, I feel very similar with apple that this company is not a by, but it's also difficult to sell the company right now.
I'm going to be Baiting my options here over the next week, whether or not I decide to trim and take a little exposure off the table, lock in some gains, or whether or not. I remain with my full fifty, six thousand dollar position. But as of right now, neither Apple nor Microsoft are cheap. They were cheap, just six months ago.
They're not cheap today. Now after that, we have some other companies even outside, a big Tech that I did valuations on VG, for example, was trading at $29 per share. I said, the intrinsic value was 33 VG's a large holding of mine. I really The company because of the Simplicity of business model and the predictability of its cash flows and growth. But Veatch has gone almost to that 33 dollar Mark right at the intrinsic value trading up from 29.
Now the shift from 29 to 33 doesn't seem quite as impressive but keep in mind that this company also has a 7% yielding dividend pays a hefty dividend every single quarter but this is another one that I don't consider to be heavily undervalued right now. I consider it trading right around around its intrinsic value, Value another company that I don't want to continually add a ton of money. Right now, I'd rather just hold it. After that, we have Texas Roadhouse.
This is another company that's a little bit weaker than the ones that I've been talking about. It's no apple or Microsoft. It's a restaurant and restaurants have a lot more Fierce competition. They're certainly not monopolistic. But at the time of this video just a year ago, Texas Roadhouse was trading at $89 per share. I said that, that was undervalued and that the fair value Trinsic Value Estimate for this company was 105, Texas.
Roadhouse is currently at 110, it's above that previous intrinsic value estimate and the gains really have come in for this company between the dividend that it pays. As well as the capital appreciation. I now have eleven thousand six hundred dollars in this company. So this is another one that's in that same category of I believe being fairly valued but not necessarily being heavily undervalued. The big deal of Texas, Roadhouse being super cheap, I think is mostly gone.
Now, the company should compound at its normal rate. Rate of around 15 to 20 percent per year. And then the last one I'll mention is Costco. A lot of people have questions about why I own Costco. When the company's trading far above, what I even consider to be the true intrinsic value of the company.
For example, when I made this video nearly a year ago Costco stock price was trading at 480 and I had the intrinsic value at 380. A full $100 cheaper than the current price but I continued to hold every single share of the company. So why do I hold a company that I think trades above its intrinsic? Value. The company has proven throughout so much of its history that it looks optically more expensive than it actually. Is that has been the same story since day, one of owning this company.
And while I've been told a million times over that Costco's expensive, Costco's, expensive Costco's expensive, the stock has always done well, it's always done. Well, it's always out performed, it's one of the most consistent earnings grower ibadah, grower and free cash flow per share grower and out of the durability of different companies. I consider Costco. To be incredibly durable, even though it operates in highly competitive environment. Since that video Costco has moved up from 482.
Now, 5:30 the company continues to move up and price above expectations and for me this is something that's really not that unexpected. It's beat the market year-to-date. It's performing like it does. Typically Costco will have minor sell-offs from time to time.
Those are opportunities to buy the dip but overall the company will continue to compound so Costco's once again in this Corey of companies that I don't want to be buying right now, I'm not adding to this position, but I also don't really want to sell out of it. I really want to keep my interest in this wonderful business. It's proven itself, time and time again. And when I underwrite the future growth of the company, I don't see it slowing down anytime soon, so I have to admit, I'm in
an odd position right now. Almost every company in my portfolios doing exceptional and I'm finding few places to put money that I consider to be easy. Money like I did just a year ago. I would never come out with the video. Big Tech is cheap today just the opposite. I think many of these companies are getting a little expensive and there's a couple things that are a little bit concerning in
the market. I think the behavior behind Nvidia, shows an incredible amount of greed, the amount of money being poured into this company day after day is a little bit, alarming and videos. Now, bid up to prices that have an incredibly bright future. No price is too high currently for NVIDIA. So I know that investors are The a stick were in a bull market. Things are exciting right now, but we need to remain cold and calculated and make rational
decisions. And when I look over my portfolio, trying to find the few places that haven't had the same excitement as the rest of the market. There's a couple that I can find. One of them is in the Industrials. The railroads so far this year, have not done. Well, they really have had no enthusiasm whatsoever. There are the exact same price when I bought in at the beginning of this year. So, year-to-date in comparison.
Against the S&P 500 or the QQQ companies like Canadian Pacific, Union Pacific, I would imagine Canadian National Railway and any of the other railroads are not doing so hot. So these companies seem very interesting to me, I'm going to be adding more to both of these positions. I know it seems like the wrong thing to do right now. We should instead be piling our money into Apple Microsoft, Nvidia and Tesla. That's the opposite of how good
investors operate. They pile money into the companies that are not currently. Loved by the rest of the market Canadian Pacific and Union Pacific. Have no magic surrounding them. There is no love being given to these companies and don't let the lack of stock price fool. You, these companies are compounding machines, they meet every single metric. Here is the adjusted free cash flow per share of Union Pacific.
It is up. And to the right for the past decade, it's given Market beating returns with incredibly low risk, and it pays a high yielding dividend at the same time. Canadian, Pacific's, a wonderful company led by an incredibly intelligent management. That now had a great acquisition go through, it'll expand the earnings power of this company, and this is another one that's been widely Market beating for the past decade. It's grown it's adjusted free cash flow per share, it's grown,
it's free cash flow like crazy. The earnings growth have been incredibly consistent so while investors are ignoring these companies while they're just kind of tossing them to the side because right now ai is the focus and these don't have ai in their name. I think their goodbyes right now, I'm going to be buying both of these companies and adding to
these positions. Other companies that I think are a good buy right now in my portfolio, one of them is sp Global. This company has had a little bit of a bid this year, so it's actually starting to get recognized as an AI company, as a digital leader, as being a monopoly. This one's going up a little bit. So I'm not adding more to this position as it's already. Very sizable.
But the one that really hasn't moved, a whole lot is into it, some slightly, I'm in the green by 1500 but I still think this company doesn't have the same Same level of enthusiasm as we see in big Tech, if we look at the past five years into it is all the way back to where it was in late 2020. So into it's another one that is long as this company mostly stays flattish, I'm going to be adding more to this position, getting it up to around a 40,000 dollar position.
So that's where I'm at right now. It's difficult to find places to add money and it's difficult to know whether to hold or whether to sell. For the most part, I bought into companies, it will compound for a long period of time. So I feel fine holding these companies even at their in As value. But as the market continues to race up and investors believe and investors believe that there's no price too high. I will take advantage of that in a calculated way.
That's a portfolio update. This time. Let's go ahead and move on to the news. We have some breaking news that a chief executive at Disney has abruptly stepped down and this woman was the CFO of the company. She had been there for over two decades and they say that this wasn't her just deciding to exit the company and take a retirement that was part of it but more importantly She was actually having huge.
Disagreements internally. There's a lot of Discord between her and different groups, the abrupt exit of McCarthy, caught some colleagues and Associates by surprise.
A person, familiar with her situation said that, there had been no dramatic changes in her life recently, that would require her to step back McCarthy had clashed with Disney chief executive, Bob, Iger and other top Executives over strategy, including the amount of money that Disney spends on content and a recent restructuring that she felt had not gone far enough. Of the Streamline, the company.
So she had big disagreements with Bob Iger and in one way, or another decided to leave the company. Obviously, when top executives are leaving the company, that's not a really good sign. It's not something that I love to see. This doesn't mean Doom and Gloom for Disney. That's not what I'm saying here, but it is a little bit of a red flag. It just means that things aren't running smoothly in the company. They don't all see in the same vision. They're not all. Executing the same plan and
Disney's a tough one. It's a company that I used to own. I did have this company as a very long-term holding. I started investing in the company in 2017. I held it all the way to 2023. So I held the company, well, over five years and in that time period, Disney gave me one reason or another to become less, and less committed to the company as an investment to have less and less trust that they would build compounding, intrinsic value for the investor.
Now, looking at the company price now and the decision to sell. It seems pretty easy. I sold. A company around 115. So, as right at this point around here, this is one of the activist investor came into the business and really bump the stock price up. I use that as an opportunity to exit at what I consider to be. Not such a bad price. But now it's traded down to around ninety one dollars per share, which is where it's had major support.
The stock price, typically trades down to around that area, it hangs out for a while and waits for another Catalyst to potentially go higher. But looking back now, I don't consider all cells in a portfolio to be bad. Dad and Disney's one of the companies. That as I look back on it, I have no regrets in selling out of this company. It may go up in the future, but
I think it's very unpredictable. They have so much cash flows to make up for so many things have to go right with their execution, they're building out Disney plus, and then continuing to use their same brands of Star Wars and Marvel, which are becoming a little bit exhausted. So I really genuinely wish Disney investors continued luck in the stock. Hopefully, they're able to turn it around, I'd be happy to see
that. But as of Right now, this is another thing that I consider to be a small red flag. Now, it's Friday, which typically means that we have some advice from Tick-Tock. And in this week we have the advice of how to become a millionaire. So I hope you have your pencil sharpened. I hope you're ready. I'm going to instruct everybody with the help of tick-tock of how we can all easily become a millionaire. Here we go. Someone wanted to make a million dollars that was their dream in
life. What would you recommend to them? Anyone can really become a million because like the world is so big at the markets are so massive. All you got to do is get a dollar from a million people out of that's it. The markets are so massive and you can become a millionaire because the world is like so big. It's so big out there that you can become a millionaire and all you have to do is get one dollar from a million people.
Simple as that just go find a million people and get a dollar from each of them like a billion. If you just walk around every single day asking for a dollar, they have a guy in this video going up to a car and asking for a dollar. You have to do is repeat this same process 1 million times and then you're a millionaire. In fact, if you really break down the math, you can become a millionaire in less than one year. All you have to do is ask 2,700 people for a dollar every day.
You can get to know it's pretty easy. So like imagine if you actually worked hard is actually, you know, not that difficult. Now I get the idea here. I don't want to rag on this message too much. I do think that people can become millionaires over time with a lot of Ellen, a lot of good judgment and a lot of hard
work so that's not a message. I necessarily disagree with but saying that it's easy repeatedly, and all you have to do is get one dollar from a million people that is the same as asking 2,700 people for a dollar every single day for an entire year. That's how many it would take you to get one dollar from every single person. Obviously, that's not that easy and saying that there's eight billion people on the planet is really not that applicable.
First of all, a lot of those billions of of people are not going to give you a penny, they're in different countries. They're trying to get money of their own, they're not going to be handing out money to you, just because you go up and ask. So while I agree with the message to not limit yourself, don't think that you can accomplish great things. I also think this over simplifies things a little bit, getting to a million dollars is a very difficult feat to
accomplish for most people. It takes a lot of continued hard work and dedication and serving an offering a lot of value to a lot of people over many years now. That's all for this episode. I'll see you in the next one.