Welcome back, everyone. Today on details of Carlson show. Apple had a market cap of three trillion dollars. A market cap of three trillion dollars is pretty good, but it's not good enough. According to Dan Ives, he's an analyst for apple and other tech companies, he says that Apple will be at four trillion dollars in market cap. In 2024.
Is he, correct? We're going to go through this interview and I'll give you my full analysis on his Arguments, for Apple hitting a four trillion dollar market cap. Now, we also have some news about Microsoft, that isn't quite as good. Microsoft says that it could abandon the Activision deal. If the judge ends up delaying, it Microsoft may end up losing this case if they lose the case, they're going to have to pay Activision Blizzard will be looking at the financials of Microsoft.
How does that three billion dollar payment? Impact their cash flows? And then of course we have the big news of this year. We're having a good month, we're having a good year. We've had a monster Market rally in 2023. That's quote. Defied all expectations. Well, it shouldn't be defined our Asians in this video, I'm going to explain why I believe there's a high likelihood. The market will do well for the
next couple of years. There's a lot of good evidence to show that this stock market can continue and of course it's Friday. So we have the financial advice from Tick Tock and this one. They're talking about how much money you need to feel like you can retire and that you've made it. So we're going to be going into tick-tocks retirement advice. Now, the first thing that I want to mention is if you're one of the new members to this channel, we do things a little differently here.
And we have had a lot of new members recently. In fact, when I look at the analytics, just over the past 28 days. So the past one month, we've had something like 6,500. Do people join? So, welcome all of you. I'm glad that you've decided to join the channel. A couple things that I think are worth mentioning. First of all, this is not a Channel or you just talk about stocks in the news. We do something different here where we actually show what
we're doing with our money. I know that that's a somewhat unique concept, it's not something a lot of people. End up doing. But I've shown what I've been doing with my finances with my investments for four years now publicly every single week you can follow along like following a reality show. You can see exactly what I'm doing. Every trade buy and sell with
transparency. The portfolio so far has gone up in 92 thousand dollars over those past four years giving a 68 percent return beating out the S&P 500 by a little bit, but I can't celebrate too early this year still in progress.
But this is the portfolio. It's a collection of high quality businesses that I call Compounders, these companies are exceptional they're the top of their class in their industry and I consider the companies in this portfolio to be not just good companies but I think they're the top 1% of the top 1%, these companies are orders of magnitude better than the average company. They have assets, they have monopolistic positions, they have cash flow profiles.
They have moats that are incredibly difficult for other companies. To compete with a lot of these companies, I consider to be outright monopolies. So what I've been doing over the past couple of years, is building a concentrated positions into these companies once that I think will continue to compound for a long period of time. Have incredibly long runways and I continue to just buy more and more of mostly the same exact
companies over and over again. The goal of all of this is, of course, to make money money through capital appreciation. Money through dividends, the Dividends are cash. Add into the account which are then reinvested back into the portfolio. In the companies that I think, will give me the highest return at the given time.
So I'm constantly in a Snowball Effect, reinvesting all the dividends paid into the individual stocks that I think present the best opportunity to look at which stocks present the best opportunity. I use something called the dip finder. It's one of the tools that shows me how all the companies in my portfolio are trading over different time lines so I can look at the 3-month the six month and so on and we try to have a lot of fun while doing
this as well. But I think that Biggest thing I'd like to point out here, the biggest point of emphasis is by far the overall returns and transparency that I'm doing here still to this date. The majority of content creators, do not show their total performance since the beginning of their portfolio, they show different snaps.
They might show different stocks here and there, they might show their current Holdings and hide all the ones that they've previously sold out of, but they don't show their total returns. This is my total returns since starting the portfolio and I We'll continue to show it every single week. So having established that, let's go ahead and jump into some news here. Now, the big headline news of the day is that Apple hit a trillion dollar market cap.
A trillion dollars. 08 that was like a couple years ago they had a trillion dollars now they hit a two trillion dollar market cap. They doubled from a trillion 08, that was was that a year ago two years ago that they had a two trillion dollar market cap. Oh they hit three trillion dollars. We're at the third trillion dollar market cap for Apple seems like I'm having Shabu here. I remember the first time that Apple hit the 1 trillion dollar market cap.
I own the company. When it hit that market cap that was after 2017, I can't remember precisely when, but I remember owning the stock when they hit that trillion dollar market cap, then they hit the two trillion and my thought was wow, that was a lot easier than them hitting the first trillion, Apple really cranked out the profit they increased, the cash flows hitting that second trillion, and now her at the third trillion dollar Market cap. Now, I've been an apple Fanboy.
I've been a fan of both the products of this company, the services and the stock. I've been an enormous fan of Apple stock for a long period of time. This has been one of my earliest positions, I've continually added to it, I've not sold any of this stock and I'm very glad that I haven't because this has been a wonderful stock to own. I'm currently up in total value over 100 percent. So, I have a fifty five thousand dollar holding. Now, I'm in the green by around 27,000 dollars.
But in actuality since the beginning, I would be up over two hundred percent on this stock had I not continually raise my cost basis by continually buying more of it. So I've only added to this company over and over again, but apples, one of these companies that no matter how big the company grows, no matter how high the valuation is, it always seems to outperform investors expectations in.
This is something that I think is notable, I think this is a shortcoming of investors still to this day. When Apple hit a trillion dollar market cap, a lot of people thought that it's already the biggest company in the world, there's no way it's going to outperform. It has so many analysts covering the company. It has so many people using the products. How is there any Alpha to be had and a company?
So widely known by everyone. But this company that was already the biggest in the world out performed, the S&P 500 by five times, over the past, Years, it five, except the performance of spy, it 3x, the performance of the QQQ. So even comparing it to the NASDAQ. It has completely destroyed the NASDAQ over the past five years it's out performed almost every Super investor and hedge fund in existence over the past five years and it's done.
So while being the biggest company in the world, almost the entire time. Now, trying to explain this can be difficult. Why is Apple continually Arming expectations. Why are investors not pricing this company? Appropriately? It generates more cash, flows and expected. It, generates more profits higher amounts of Revenue higher returns and expected almost every single year.
So, I want to look at one analysis explanation of why this stock is going from a three trillion dollar market cap to a four trillion. Next year. Dan Ives, please app will be a four trillion dollar company next year. He's still bullish on it. He still thinks it's underpriced and he has this explanation of what investors are missing. So we're going to be looking at this and I'll explain whether or not Dan Ives is correct. I think this time it happens Dan in.
Do you think that the underlying fundamentals support that valuation more at this time than they did in January of 2022? Yeah, I think it's a historic day, not just for Cupertino but for Tack and I think when you look at the story here, specific on the services side, that's the key. Part of the sum of the parts, I think. Well, I the Bears. Miss and, you know, I don't
think it ends here. We believe this, the four trillion dollar market cap by 2025 and at the end, the day Apple continues to play chess While others are playing checkers. Okay? So he has the basis of his argument there. The big thing that he highlighted that he says investors, Miss is the services part of it, Apple's playing chess, While others are playing checkers. If we bring up Apple hair on qual trim which is a website available to patreon members, we can take a look at what Dan Ives
is talking about. With apple, we have all the metrics and valuation, and this is what most investors focus on. They look at the valuation and they say the apples trading at a 25 PE. So it's expensive or cheap based on that. They look at the free cash flow.
Yield three percent yield. It's expensive or cheap based on that but we know that companies are much more complex than just a yield or P/E ratio, determining the future cash flow of the company is incredibly important in forming a full valuation and when we look at what Dan Ives is, Talking about this sum of the parts, we can bring that up on the revenue chart. We have the revenue right hair from Apple. This is quarter by quarter.
We see it all the way going back from 1985 when it was just a device maker making iPods. I remember buying one of the first iPods and then the iPod Shuffle. I got one of the beefy iPods that had the spinner wheel and had like 40 gigs of memory. I thought it was amazing. Then of course they came out with the phone, a game-changer, the stock price dropped The revenue continued to grow over
the past. Couple of decades, apples Revenue has been explosive, has continued to grow and this is again what most investors are focused on. They look at overall Revenue, growth rates apples, Revenue has grown at 10 percent over the past 10 years. Why? I know a lot of companies growing their revenue faster than 10%, that doesn't sound that good but these numbers again, don't share the full story. There's a little bit deeper context, we can look at if we go to the The product segments are
we get to the sum of the parts? Let's cross out some of the older product divisions and make this a little bit cleaner. Here we have the sum of the parts of apples Revenue so these are all the exact same total revenue but now we see them broken up by different categories. In this we can take a look at what Dan Ives is talking about. You says that investors are missing the services. Apple is not a hardware company anymore. They are a device install. So they do have a large part of
their revenue, that's hardware. But the services is by far the most important part of their story and has been the most important part of their story for a long period of time. If we cross out the services, we see the growth over all of the revenue. This is the slower growing part of the revenue. They just need to maintain their
install base. They don't really need to grow this all that much, so it's growing with inflation and small price increases, but this isn't a booming part of apples business. When we look at the services and we cross out everything else, we see the explosive growth of services doubling since 2018. And while this part of the business is growing. The margins are much higher while Apple's total margins around 40%, the services are easily 60% plus so much higher margin.
Portion of the business is growing at a faster rate. This is also lifting the entire company and this is no small. Has Apple Services did 21 billion dollars last quarter that is astronomical. So right off the bat, just the first 10 seconds of what Dan Ives has to say. I think he nailed it. I think so far. His analysis of Apple is spot-on, but he has more to say about the company. They what do you call it?
Something there that the Bears have complained that there's I guess there's not something that it's all been incremental. There hasn't been any Quantum Leap in in Apple's product mix and that and but that hasn't stopped that you can see it right there. I mean that obviously has a lot to do with momentum and the narrow advance that we've seen in the NASDAQ, obviously, but Apple has hit on a lot of cylinders just You know, it didn't go from an eight cylinder
to a 12 cylinder. It's just got a really good eight. Cylinders sure. I think, when investors are missing in my opinion, the ones that have bet against apple is it's a golden install base. We're done by 1.2 billion, iPhones, 2 billion iOS devices. And the hall theme. Tactician cook has Led Apple through all the challenges from a supply chain to other issues.
And you have 25% of the install base is not upgrade their iPhone 4 plus years and that's why this is just starting on Some of the parts into what I believe is really just almost a middle Innings. He goes on saying, that another thing that investors are missing is the golden install base. I believe this is another correct take from Dan eyes. I think he has this spot on. Apple has the golden install
base. The install base is the number of devices that consumers have they have over a billion devices out there actively being used by consumers. So we have a ton of people. Let's say 1 billion. Devices. It might not be that much. It might be a little bit more. It's, it's a little bit difficult because a lot of Apple users have more than one device. But either way, we have this massive current install base.
All the people that use Apple devices all the install base there, in part of this ecosystem. There's a lot of coverage about the ecosystem. There's tech review channels that go into how Apple makes it very difficult to leave their install base to leave their ecosystem. Once you've become part of it, In it. You've used iMessage, you've signed up for the Apple card. You have the Apple savings account. You have the Apple notes app. You have all your photos uploaded to Apple photos.
You have so many different things that Apple has done to keep you in part of their ecosystem, that it's nearly impossible to leave this install base and go to a competitor like Android. It becomes burdensome ownerís, something that you don't want to do.
So, the install base is a golden install base of high income consumers, a lot of discretionary Money to spend on services and that's what apple is a master at taking this golden install base and monetizing them through the sales of all of these services with apple. Everything is the ecosystem. That's the moat. That's the value proposition. That's the intrinsic value driver. That's the story of Apple.
That is the investment thesis, wrapped up in one word, its ecosystem, if the ecosystem is not existent for Apple, if it gets torn apart or destroyed, I would say My full position and apple. If the ecosystem remains intact, if it grows stronger, I maintain my position and apple. It's all reliant on the ecosystem. So, I think this is another correct take from Dan eyes. I think he's spot on here. As long as Apple can maintain their masterfully designed ecosystem.
They'll find ways to monetize it. They'll find ways to grow their free cash flow. So overall I agree with Dan Ives on as analysis here. I think that this has been an amazing Buy in. Plain sight, the ecosystem has Has been underrated by investors contain Lee discounted the strength of it over the past five years. Investors that recognized the power of the ecosystem early on reaped the rewards and one of those investors a pretty good one.
I think his name was Warren. Buffett you recognize that ecosystem a long time period ago, he bought 30 billion dollars of the company and I think his Equity stake now is somewhere around 170 billion dollars he's beat out. Everyone else. Buffett Remains the Out. Now, of course, we can't forget about Microsoft. This is another pretty good company. That's on a good streak. This year, I have a holding in this company 55,000 dollars, similar to Apple but not quite
as much gains. This one's up. Twelve thousand dollars. Microsoft has a couple bad pieces of news coming out. Just in the past day or two. The news is that Microsoft says it could abandon the Activision, Blizzard deal. If the judge delays, it they say the first day of the week long hearing that could determine the outcome of Microsoft 70 billion dollar acquisition.
Addition of the video game, giant Activision Blizzard opened Thursday with a promise from Microsoft, if a federal judge grants an injunction that would delay, the deals closing, Microsoft could abandon the deal altogether. So they wanted to let the judge know that the if you even delay this deal then we're probably going to we're probably gonna scrap it at that point. Microsoft's lawyer said quote, this is going to decide whether or not the deal goes forward.
She said that if this case were to be delayed or lost here, Would be quote, a three-year administrative nightmare. So even though Microsoft could perpetually fund, a lawsuit forever, they really could afford to hire the best lawyers forever, that wouldn't be the best thing for the shareholders. This company wants the cash to go to shareholders. So they don't want to have an ongoing years long nightmare of
a court case here. Microsoft is always having to weigh what is best for shareholders to continue fighting this or to let it go. Now, I personally think this is a bit of a shame. I realize that Microsoft is a very large corporation so people naturally have a bias against the company. They see, big bad Microsoft, they see that they want to buy another big company and they think that that should be blocked.
A big company, shouldn't buy another big company but Microsoft is not the biggest player in gaming. And in console gaming, in fact, Sony is much bigger than Microsoft. In terms of consoles, Sony has around double the market. Share of Microsoft. Sony is the Monopoly when it comes to Console gaming. So Sony's arguing, that Microsoft is the Monopoly while.
Ironically Sony's the Monopoly Sony's arguing, that Microsoft will be exclusive, while ironically, Sony has more exclusive titles in Microsoft, Sony's arguing, that Microsoft will be anti-competitive, while ironically Sony has far more anti competitive when it comes to gaming. One example of that is Microsoft wants to put the Activision Blizzard games on the Nintendo switch. Sony does not. Want that because it would cause
greater competition. So in this case, every bit of data points to Microsoft being L2 by Activision Blizzard, it doesn't restrict competition. It increases competition, Microsoft has gone so far to even guarantee ten years of not making any of their titles exclusive and that still has not been enough to push this through. So I think it will be a shame if this deal doesn't go through. Now, there is an outcome, that's also not good.
If the deal doesn't go through Through with Microsoft, not only did they have to pay all these lawyer fees and they have to pay for all the expense of trying to do this deal. But there is a breakup fee, Microsoft agreed to pay Activision Blizzard three billion dollars. If the deal doesn't go through, if we look at how this impacts their free, cash flows, we can take a look here. This was the free cash flow and 2022. It was sixty five billion dollars.
So paying Activision. Blizzard three billion dollars would bring Microsoft's Revenue. Would bring Mike. Our sauce free cash flow down to this red line. It be right around there. That is a decent chunk of cash. Even for a company, as big as Microsoft so they have a pretty hefty fee to pay hair. Will this overall impact the long-term story of Microsoft, does it turn the company from a by to a cell? Not at all? It's not going to affect the long-term.
I think over the long term story, this is like a speeding ticket, but three billion dollars is a pretty pricey speeding ticket even for a company like Microsoft for those You who are in the Arbitrage play and currently own Activision Blizzard. That's like a consolation prize. If you don't get Microsoft buying the company here, at least you get infused with a lot of cash. So they'll have a big boost to their balance sheet, which will make the company worth a little bit more.
So you have currently around a sixty five billion dollar market cap tack on another three billion to that that will help out if this merger doesn't happen. But when it comes right down to it, this is the reason that I didn't end up doing that merger Arbitrage. Play, I heavily considered it. I thought that Microsoft has the better Case by far. I think they had the better Court arguments, I think the data is on their side.
But when it comes down to it, a judge is one person making a judgment call and they can decide whatever they want and they can rationalize and justify it based on any various data, they want to nitpick. So a judge really is hard to determine and because of the unpredictability of an Arbitrage play, like this, I decided to pass it this time. The other piece of news that I do think is noteworthy and something that should be taken into account for investors is
the market rally this year. It has been exceptional across the board. The indices have gone higher The Wall Street Journal says that the 2023 rally has defied all expectations. If we look at the actual performance here, the S&P 500 is up around 15 percent. The Dow Jones is up around 4 percent. So across the board of very good rally and this is especially incredible because there's a lot of people that were sewing. Fair that were spreading spreading concern about
different issues left and right. It was almost difficult to find people that were level-headed. They had a steady tone and said to stay fully invested in the market, and not concern yourself with all these various things going on. For example, one of the big things that happened earlier this year, was the banking crisis, the regional Banks going bankrupt. Remember that? Remember how the market was supposed to crash?
After that? What happened with the banking crisis is seems to have just Come and gone. We had the US, default, remember that, how the u.s. wasn't going to up the debt limit? How there is an argument in Congress? Do you know how many videos I made about the US, default? Exactly, zero that interested me
to know amount. The reason why is because that always ends up the exact, same politicians, both argue to get stuff that they want packed into the bill and the US continues to go forward, and it doesn't affect the stock market. I've been around long enough to see that story play out over And over again. And the same thing with the banking crisis. This is something that I was not
concerned about. I stayed fully invested during this time period, the u.s. moves on from crisis, is like this over and over again, even when they do have a material impact like covid, or even the Great Recession, eventually the market recovers that has been the story since the beginning. Now, there's a lot of people that unfortunately bought into all the fair and doom spread around all of these news
stories. And there's a lot of people sitting on The sidelines right now, the Wall Street Journal notes, that ultimately, those who stayed out of the market this year. And fair of another sell-off, missed out on a robust gain, can you imagine missing out on this performance? This year? If I had missed out on this year, I would have missed out on sixty, eight thousand dollars in gained so far, 17 percent returns an enormous run for this portfolio.
This is the reason it is critical to not try to time the market, the stay invested all the time. All of these people in the industry are always trying to. Guess what the next blow up is going to be. If this year has shown anything, it is that it's difficult to predict which headline-grabbing event will wind up. Having a lasting impact on the market returns. That is exactly correct. This has been said before, but
I'll say it again. You could have the entire release of the Wall Street Journal headlines from here until the end of 2023, and even knowing exactly what headline news is going to happen for the next six months. Would not be able to guess where the markets going to end. They do not correlate with each other. Sometimes they end up being inversely correlated. So is this Market rally defying? All expectations. I think it's an incredible rally but it hasn't defied, all
expectations and I do believe. There's reason to believe that the market rally will continue. We have news of the greatest wealth transfer in history. We have news that baby boomer generation has an enormous amount of stored wealth more than they're going to be able to use within their lifetime. There's going to be a large windfall of inheritance specifically with Millennials year after year, for the next 30 Years, Millennials will inherit more and more money.
This is going to be a massive windfall of spending and something that should continue to propel the markets. So in my opinion, I think investors would still be better served today. Focusing on high quality companies, that can persevere during different environments than trying to predict exactly when Doom and Gloom will strike and how bad it will be. Now, of course, it's Friday. So we looked Tick-Tock for our financial advice.
Here is Two Guys. These are two young looking guys that are discussing when they'll finally make it with money and how much money you need to have to be happy. You said, once you have 20 million dollars, like you can have everything unless you want to buy a jet or a yacht like your set. But for me I'm like a burn through 20 million and like, dude, I could spend 20 million before you could say 20 million. Like and I even think like a hundred millions, not a lot. Let me just pause it right
there. He just said that he could spend time. 20 million before you can even say 20 million. What are these guys talking about? What are they spending twenty million dollars on and he said that he could burn through a hundred million dollars. I think that they're I take it back, the market has gone to high there needs to be a bear Market. There needs to be some type of implosion everything.
I just said, I take it all back. We still have this going on in the market today like I burn through 20 million and like, dude, I could spend 20 million before you could. A 20 million like and I even think like, a hundred millions not a lot. How was 100 million not a lot? What does that even mean? 100 million is what it's more than what the average American, which the average American is incredibly, Rich has tons of luxuries, it's more than what they earn in 50 average. Life times.
A hundred million dollars is a ton of money. I know, like, would you buy an 80 million dollar debt? Let's say, you know, you get the point where, what are you manage it? Are you ever going to stop like at what amount of money are you? To be like okay I'm gonna chill out. I'm gonna be like retire, like chose my kids, never never never know.
Alright they're ambitious I guess these kids look like they're like 17 years old and they're talking about growing up numbers and and talking about how they're never going to be satisfied when you get in the workforce and you actually earn a decent living, you save up money. There comes a time where you actually want to stop working especially if you're not enjoying your job more than you
enjoy leisure time. I've actually had this discussion With a friend, a long time ago, we were discussing the amounts that we would fill pretty set in stone of filling, like we've made it feeling like we have enough money to retire and do what we want. And the number that we came around to as around four million dollars, that was it? Four million was what we consider to be a decent point to achieve as a lifetime goal of saving and investing anything
beyond that. Would be incredibly good, but for Millions enough that you can just with dividends earn over a hundred thousand dollars per Per year, earning 100,000 dollars per year, passively is a very luxurious retirement, you can do a lot with that. You can travel, you can see the world. You don't need to buy a private jet, you can fly in a plane and where some are pods it's going to work out fine doing it that way.
So, we have a bit of a disconnect here, my goal is more in the range of four million dollars. I think that's a pretty good amount of money. Hopefully, I'll get there someday. I'll share it with you along the way if I ever do. But saying that a hundred million dollars is not a lot of money is completely insane. Once again kicked Hawk has done it with the unexpected Financial advice, that's the episode for today. I hope you enjoyed and I'll see you in the next one.