Title: September 2026 Portfolio Update Show: Joseph Carlson - Qualtrim Studio (Portfolio Updates) Guest: Joseph Carlson (solo) Date: 2026-SEP-05 URL: https://www.qualtrim.com/app/studio/watch/e4f919aa-070e-40d9-9f6c-f5c93466a4b4 Length: 1:14:11 Note: Transcript from the in-page English subtitle (WebVTT) track of the self-hosted, login-gated Qualtrim Studio video (no youtu.be deep-links); (mm:ss) cues real, grouped ~15s. Fillers (um/uh) and immediate word repeats removed; wording, numbers and names otherwise verbatim (auto-caption mis-hearings left as captioned).
(00:00) Welcome to the September 2026 Joseph Carlson Portfolio Update. This is the longest, and I would say hardest to prepare video of mine because so much effort goes into it. I spend more time preparing these portfolio update videos than any other videos on my channel.
(00:16) Public are exclusive, so any video that I've done in the past month, this one has taken longer because I try to offer a lot of value here, and I've tried to upgrade what I'm doing in terms of these monthly portfolio updates to give you more transparency, more data, more thoughts and analysis, more key takeaways, more valuation,
(00:34) more things that go off this update than the previous ones. So this has taken a lot of effort and I hope you appreciate it. I really think you will. I think you're going to really like this one. I'll also mention that according to the stats on Qualtrics, we have analytics of how many people are viewing every video and the total watch time.
(00:50) And these portfolio updates get more views and more total watch time than any other videos. Some of them come close, like the thesis episodes. They come really close, but these ones get a little bit more. Around 95% of quatrieme members, 95% or more.
(01:07) Watch these portfolio updates. So I hope you get a lot out of this. I think you will. I want to first go over an overview of what we're going to be talking about, because this is pretty in depth. First of all, we're going to be looking at portfolio performance. I'll give you I'll give you a bit of background as transparent as possible
(01:24) of overall building the portfolio transitions in my investing style, where I got outperformance, where the portfolio has underperformed and so on, then we're going to be looking at an outlook on the market. I've talked about this in bits and pieces, but I want to review it here.
(01:39) My thoughts overall on the picks and shovels on the big tech companies, the hyperscalers on what's going to happen, where capital is going to flow in the future and so on. And then we're going to go over trades I made. I didn't make that many trades last month, but we're going to review them and see how those are doing.
(01:55) Then we have portfolio fundamentals and thesis update. These should actually probably be together. The portfolio fundamentals and the thesis update are going to kind of go together. We also have a valuation dashboard and a buy price dashboard. Those also are kind of going together.
(02:10) This is going to be new idea to show you my by price and my valuation and future expected returns for every single stock. And as part of that we're going to be introducing something new this month as well, which is I'm going to pretend as though I don't hold any stocks, I don't even have a portfolio, and I just have $10,000.
(02:29) And my goal is to invest in the best opportunities today. So no thoughts about allocation of my existing holdings. I'm going to pretend I just have $10,000 brand new portfolio. Where do I put that money? That'll be something that we'll do at the very end of this episode.
(02:45) So we have a ton to go over. It's going to be a lot of fun. I think you're going to get a ton of value out of this one. It's been a lot of work, but I think it will be well worth it. Let's go ahead and start off like it says here with a performance update. We're going to be looking at my combined portfolio. Now just to be clear this is not a Holdings page.
(03:02) So these aren't the gains of just the current holdings. This includes dividends. It includes all my cells. All the companies that I sold at a loss are included in this total gain. All the companies that I sold at a gain are included in this total gain. So this is not a cherry picked look at my portfolio.
(03:20) This is all of it. You're seeing all of it right here. We have $528,000 in gains a 200% time weighted return. And if we look at my portfolio over time, I can break it down this way. When I started investing back in 2017, I had very little money
(03:35) because I was only in my development career. I was, well, not really early. I was kind of mid development career. I was I was kind of growing my skills pretty rapidly at that time. But I had just bought a home back in 2013.
(03:50) I paid for a home. I took all my savings out and paid for that. And then I started saving back up. I had a bit of money, and I started a portfolio in 2017, and I started contributing aggressively to it, because I was in a place where I finally had some discretionary money to spend. Now, the unfortunate part is that I made really good returns
(04:08) in 2017 and 2018, and unfortunately, I didn't have much money. So even though this was a very profitable in terms of returns, it didn't really add a whole lot to the total gains because it was on such a small base.
(04:23) And that's part of the issue here. If you're starting to invest, really prioritize deposits, get your portfolio up to $100,000, and then your decisions make a lot bigger impact. During this time period, deposits were the name of the game growing the portfolio. I made good gains on top of it.
(04:39) So a lot of this was gains, but deposits really helped out. Then you can see the portfolio got a bit bigger in 2020 when stocks went down. I kept contributing. My portfolio went down a little bit as well, like 20, 30% along with Covid. So it went down with the market.
(04:54) But really where I made the majority of my gains, I will tell you, most of my gains came in. Let's see if I can I can do it here. Maybe it won't let me. But most of my gains came in right around here. From 2022 to 2025, I made a significant amount of gains.
(05:12) I was one year. I beat the market by like 20% and that really bumped up the portfolio. So a lot of this total gain happened in just the past three years. It was like my portfolio only had a couple hundred thousand dollars in gains, and then it went to 300,000
(05:28) into $500,000 in gains in a matter of months, because some months were so good with some holdings. I had months where Netflix was moving up like crazy. Amazon moved up last year. We had ASML and Google do really well. So the majority of these years have actually been outperformance.
(05:46) But you have to factor in how much time I had in how much money I had in the portfolio at given times. If I started off with more money at the beginning, then I'd have a much bigger total gain today. So if I had started at the very beginning with $1 million,
(06:01) I would have about 3 million total. With 2 million in gains today, it looked very different. Unfortunately, I started with a couple thousand dollars. Now if we look year to date. This is where we see things cool down.
(06:16) And I went over this a little bit in the previous episode. But year today I'm flat. And that's not necessarily terrible. But when you're talking about relative performance, you're talking about opportunity cost. This year I could have had my money in the market, or rather in the S&P 500, and I would have more money.
(06:34) I would have gone up 12%. Right. But also, there's years of the past where I could have had my money in my own portfolio, and I did better there as well. So the thing that some people are saying is, oh, well, Joseph is underperforming
(06:49) this year. That means that he should just abandon stock picking. But stock picking does not require you to outperform the market every single year. Having your own portfolio and your own asset allocation does not require you to outperform every year. In fact, I look this up and Berkshire Hathaway,
(07:05) since the beginning, has only outperformed the S&P 500 and about 66% of years. But the point here is that in order to outperform the S&P 500, you do not have to outperform it every single year. If you outperform it just six out of ten years. And the years that you out perform it, you do buy a lot.
(07:22) You will have overall better performance. Now, when I look at my portfolio, there's a couple things that I find very reassuring. One of them, like I showed before, is this chart shows the biggest contributions to overall returns. When you look at a long time table and that is the revenue growth of a portfolio.
(07:39) And when I look at my portfolio, the revenue is growing very fast across my companies. My companies are growing in revenue very quickly, and they're even expected to next year. The forward estimates based on analyst consensus is 16% revenue growth next year.
(07:55) I actually think that they all beat that. I think the estimates will move up. So that's how I view a little bit of the portfolio, a little bit of the performance so far. I'm very happy. I've actually been very happy with where my portfolio sits. I have an overall goal to get to $5 million.
(08:10) I think it's just a good landmark. It be a huge a huge landmark to get to. Right now I'm at 1.48, which is about 29%. So part of this whole thing I'm going to show you as I build this thing to $5 million and a lot of that, in fact,
(08:25) the majority of it should be from compounding and gains, not from deposits. I'm not just going to deposit endless money to get it to 5 million. We're going to grow this thing by making really attractive investments. So let's transition over a little bit from performance now
(08:40) into how I view the market going over the next five years. When we look at this is a visual where I put all this in and I said, I want to make this into a nice graphic to illustrate this, but this is how I see things playing out.
(08:55) We first have the situation that we're in right now, which is 2023 to 2026. We have the influx of AI, and despite what Ed Zittrain or whoever says AI is insanely useful, the business uses are endless and it's going to continue.
(09:13) Coding is just one of them. It's going to be used in multiple vectors and fields. So with that insane utility, there's going to be a lot of build out, a lot of influx of demand for this. And we're seeing that and we've seen that over the past couple of years. So I see phase one as the build phase.
(09:29) And during the build phase when companies have to pay to build chips, memory, networking, data center and power, that's a huge capital flow in all these companies, which of course is going to be reflected in their financials.
(09:45) Their financials are going to explode, which they've done. All the companies that are providing the tools for this massive build out the chips, the memory, the networking, the data center, the power, all of that. The companies like Nvidia and AMD and micron and SanDisk and all the power
(10:00) companies, of course, they're receiving this massive build capital. These are companies that were historically somewhat cyclical. You can look at them and they don't have continued demand. They don't have the touchpoint with customers on a daily basis with subscription like revenue.
(10:15) No. Most of these were more commodity like sellers of products that were really needed. But they've received a massive influx of scarcity like demand, and that's caused these companies to do incredibly well. That's also lifted the market. It's created jobs. It's caused a lot of a lot of economic activity in the past couple of years.
(10:34) And that's being reflected in their market caps and their financials and investor enthusiasm. And in a lot of momentum, a lot of momentum follows into these type of events. So what's happening right now also is happening on a solid foundation.
(10:50) Meaning this build out is for AI. And my belief is AI is very real, it's very useful and it's worth the build out. It's so worth the build out. I don't think that the United States will regret this at all. So I think that it's built on a solid foundation of being a useful product.
(11:07) That doesn't mean that my belief is we should chase the build out companies. If you've done that and you've timed it well, you've gotten a lot of momentum, you've probably got good gains. And in the year of 2026, obviously you need to be in those companies to get the best games you could do well outside of them. But the majority of gains are going to be in this build out phase.
(11:24) We move on to phase two, and this is what I believe that we're transitioning into. The timelines here are very hazy. I don't know exactly when one phase will end of the other will begin. But from 2026 to, let's say, 2028, we really press on the monetization.
(11:40) This is the companies that have been paying for all the chips and memory and networking, data center and power, where they really got to start making money and monetizing cloud search, advertising productivity. You're going to see the hyperscalers really,
(11:57) really turn the dial said monetize. Now that it's being integrated into all of the United States, all the business flows, all of the world is using AI everywhere. They're going to monetize it like they do any product. And so I see that transition happening and that's that's
(12:13) where my portfolio starts to benefit is during the phase of monetization. But then we get to phase three, which is 2027, to let's say 2030. This is where you get to massive distribution, where it becomes more widely available.
(12:29) It's no longer like a niche thing that techies are introducing into companies. It's just everywhere. We have marketplaces, payment systems, enterprise workflows, consumer platforms. This is where the advantage shifts towards companies that already own the demand.
(12:44) This is where the hyperscalers really start to benefit from 2028 to 2032. This is where we get into a bit of a commoditization. And again, these are all happening over time. But this is a general timeline for my thoughts. Prices will go down, models will get more ubiquitous.
(13:00) You won't be able to tell as much of a difference between Claude Opus or ChatGPT Codex, or whatever it may be. They'll be open source models. There's going to be AI everywhere, and when AI is everywhere, what type of companies benefit the most?
(13:15) That's what we're looking at here. This is the most dangerous part for those companies. In fact, I'd say that step four is the most dangerous step for people that are still in the step one companies. If you're still in chips, memory, networking, data centers, and power
(13:31) when we get to 20, 28 and 20 to 2032, when we get to phase four, that means that that you're in a dangerous spot, because now the demand that this fierce scarcity, demand for these products
(13:46) may it may abate a little bit, it may dissipate a little bit. So I look at this as a situation where a lot of these things become more commoditized, more ubiquitous. Society has them everywhere. And that really kind of takes the demand off of all the bottlenecks,
(14:01) all the bottlenecks. Stocks are no longer bottlenecks. They're now competing back along with each other side by side. Some of them will do well. Maybe a company like Nvidia will build a good enough moat, and they'll be able to sustain above average returns, but many of them won't. Many of them will really struggle once we get to phase four.
(14:18) Then we look at how this plays out long term. Which companies are the best situated overall? I think at the very end of this, which ones are going to benefit the most? And I think it's going to be the same old game. I think it'll be the same thing that we've seen historically. That is the long term owner of the customer,
(14:35) the distribution, the data, the trust, the network effects in the aggregation. The durable economics belong to businesses that control the customer relationship. Those are the same companies we've talked about there the Googles, the Amazon, the meta, the ones that aggregate the Netflix,
(14:54) the Ubers, these are all aggregators that aggregate immense amount of demand. We don't know which ones will do well to which varying degree. You can all make your bets. But my portfolio is full of those companies. It's just full of them. I think that having the companies that have the networks have the aggregation.
(15:13) They own the customer, they have the distribution, they have all the infrastructure built. I think they'll be a very good business to be in. So that's how I've tilted my portfolio so that we get to this transition. Now you may say, well, Joseph, that's great,
(15:28) but you're going to have to wait 5 to 6 years before you get any gains. You want to be early. That's where you get the gains. Investors price things in as soon as they think they'll happen in the future. So as soon as investors get a little bit further along,
(15:43) we could really get to phase two. And they start they start pricing in phase four and phase five, just like a lot of the build out, even though it's happening today, it started being priced in 2024 and 2025. So you want to be ahead of this.
(15:58) I don't want to build my positions in these companies after the fact, or once the market already realizes it's happening. So that's how I see things playing out over the upcoming years, and I believe my portfolio is well positioned for that. And I'm fine being patient. My companies, again are growing 18% per year.
(16:14) They're going to grow 16% next year. These companies are evolving. They're increasing prices. They're doing lots of great things. So even though the stock prices overall are flat, I believe I'm set up really well. I feel really good about it now. We still have a lot to cover. Let's go ahead. And before we jump into the portfolio itself, let's cover trades
(16:30) that I did over the past month and at the beginning of the year. I did a lot of trades. In the past month, I haven't done many, I've only done one. I bought $1,000 of Uber stock on August 5th at $67.66.
(16:45) And I have right here. Let's go ahead and zoom in here. I have right here a screenshot of the trade. So this is out of the Joe's trades on the discord. And I'll post any trade that I do. There we have it right here. I say that I'm buying $1,000 of it, that I'll have more analysis soon.
(17:03) So that is my trade of the past 30 days. Now when we look at this. Why did I make that trade? Well, one of the reasons why is Uber was in a dip. So if we bring up Uber here and we just go to the stock price, we can look at the past three months. Here is August 5th right there.
(17:18) So it's the exact bottom. That's the day that I bought it right. And it's not like some extreme deal. I didn't buy $20,000 of it. I just bought $1,000. But it was more that I was I was signaling, I thought, it's a good deal right now. It's gone down.
(17:33) I think it's undervalued. It's trading with a lot of fear and uncertainty right now. And of course it had a nice bounce. When you do that, you often find them. If they have a nice bounce. It's up 13% in the S&P 500. Over that same timeline is down a 0.7%.
(17:48) Now is this the biggest deal? No, it's only $1,000. But I want every trade I buy to be good value. I want them to be buying great companies at good prices. And so I am going to try to be very good about my new buys, about every one of them being buys like this, where I'm buying companies
(18:06) that are really good, they're doing well and they're presenting really good value. Now let's go ahead and jump into the actual portfolio. Let's go ahead and look at some of the updates of my thoughts on what's going on with these companies as well as I have provided, instead of just a little buy and sell toggle,
(18:21) I provided my actual discounted cash flow analysis on each of these, and I'll summarize this all on a table at the end, so you don't really need to write any of this down. We'll be going over a summary at the end. So with Google let's go ahead and just review what's going on with this company. When we look at Google.
(18:36) In fact let's look at the it's my largest position currently $200,000 105,000 of that being gains. Let's go ahead and just take a look at what's going on with this company. This is news by the way. That is mostly relevant to the past 30 days.
(18:51) So it's very recent updates of what's going on. Gemini 3.8 flash launched today. That was a day ago. So we have Google saying that its newest flash model makes a major jump in coding and agenda capabilities while maintaining flash level speeds and cost.
(19:08) Google seems to be emphasizing their faster models. They don't have the thinking models is as good as other companies right now, like ChatGPT or OpenAI, but their flash models are really good, and so I like the progress there with the models. We also have Gemini surpassing 1 billion monthly users.
(19:26) It's up from 950 million last quarter. Gemini is increasingly looking like a major standalone consumer platform, so when they have a billion plus monthly users, it's just massive. Gemini is a huge success. Now, does Google have advantages? Of course they do.
(19:41) They can get everybody on Android to use it. They can make it like the Siri of Android. They can plug it into Gmail and YouTube. They can get people to use it in lots of different ways. But that's the power of distribution, and Google has it. Google avoided an ad tech breakup.
(19:56) A judge rejected the Department of Justice proposed ad X divestiture, significantly reducing the near-term structural risk to Google's advertising business. Google just can't lose in the courts. They're just two for two. They didn't have to sell off Chrome. They don't have to sell off their ad business.
(20:12) And the people that are losing in this situation are the ones that are wanting to destroy the big, bad monopolies. When it comes right down to it, the judges are looking at this and they don't want to rip apart the best companies in America, especially when companies like Google do face competition. They aren't really out outright monopolies outside of YouTube.
(20:30) Maybe almost everything Google has close competitors. There's their cloud hosting, there's close competitors to getting information and searching. There's ways to do it in chat TV and Claude now. So Google I don't even believe is monopoly.
(20:45) I truly don't believe they are. So I'm glad that the government is not really breaking them up. Now we look at the expected return for this one. I put in the growth rate of 15%. I think that's about accurate for Google. You can argue over the recommended or what you think is appropriate.
(21:01) P multiple. I put 25 times. I think I should trade around 25 times. That's a safe assumption over five years. And then my desire to return for every company's 15%, which means today, based on those assumptions, you'll get a 9.6% return going forward over the next five years.
(21:18) That's below my hurdle rate. So that's why I'll go over this later, but I'm not suggesting Google's as super strong by today. We need to have a dip. We need to have something a little bit better in Google, but it's good enough that I want to hold it my portfolio. It's just such a good company.
(21:33) Next up we have meta. Meta is a new position this year. Massive position over the past month, the $18 billion settlement removes a major legal overhang of the stock. Meta settled the youth addiction cases brought by 51 attorney generals.
(21:52) More importantly for the investment thesis, the agreement largely preserves metascore recommendation and advertising model rather than forcing a fundamental redesign of the business. So the huge majority of users, there's nothing different with Meta's product. The fee is not as bad as the headline
(22:07) makes it appear, and it's paid out over ten years. When you account down the 70% they're paying, it moves it to like 12 billion, and then they're paying it over ten years, which if you discount that, it's more like paying 9 billion. So it's really about half of what the headline number is economically speaking.
(22:24) I think meta did a good job with this trial. I also think it believes I believe this gives them a little bit of the moral high ground to now argue that TikTok should follow suit. They should be under the same exact rules as meta. Is TikTok really better for teens and for kids than meta?
(22:40) I don't think so. I actually think TikTok's worse. So. So I think that they do have some moral high ground to argue that TikTok should be there. They're also arguing that YouTube should be as well. I do YouTube a little bit differently than meta. Meta launched Muse Glimmer in August.
(22:56) This is a new open weight model designed to run on a single GPU. While Zuckerberg laid out a broader push to keep advanced AI models open and inexpensive to deploy. It's an interesting new data point on how meta intends to compete with Google
(23:12) and OpenAI, rather than simply trying to build the biggest closed model. They just want AI to be everywhere. They want aggregation. Meta knows that they're an aggregation company. So if AI is everywhere, if everybody's using AI cheaply, it really diffuses the power of the bottleneck.
(23:28) So basically meta views it as they're operating under. They're not liberated. They're operating under Apple's terms of service and Google's terms of service. And they have to go through them. And they don't like that. They don't want to have the same thing happen with AI. They don't want a couple of big winners
(23:43) that are bottlenecks that meta has to operate through. So they're trying to diffuse and make it so that AI is more commoditized and meta is working that direction. Now, when I look over the assumptions on this company, I have a growth rate assumption of 13%.
(23:59) That's earnings growth. So revenue growth will be faster. Earnings growth will be slower because a lot of their growth is unprofitable investments. They're going to have to amortize all of this CapEx investment. So I do not expect the EPs growth to be as fast over the next five years as the revenue.
(24:14) I think that even considering meta trading out of 24 times multiple, which I believe is warranted if you have a 15% desired return, that means that from today you would get an 18% compounded annual return. That's really good.
(24:29) Really good. To get the 15% return, you have to buy the stock at $677. So there's there's margin of error here. There's room to be wrong with meta and still make a lot of money. So when I look at this meta represents I think still today
(24:45) a really good opportunity. And again we'll go over all of this. We'll review all the by prices on a dashboard after this. Let's go ahead and move on to Amazon. With Amazon we have a couple of things going on. Let me get zoomed in here we have Amazon with AWS
(25:00) adding another 2 million Nvidia GPUs. On August 26th, AWS and Nvidia announced that AWS plans to deploy 2 million additional Nvidia GPUs in 2027 to 2020 2028, on top of the more than 1 million GPUs AWS has already planned to add.
(25:17) Amazon specifically said demand has exceeded its earlier expectations. Oh come on, this is Amazon is every single message from them. They're like, yeah, not only is AI real in the demand real, it's just bigger than last time we talked about it.
(25:33) The next update like a month later. Yeah, it's super real. And everything about the AI is going to be much more dramatic than we thought about before. We are going to even up our plans more and more. The market remains unconvinced.
(25:48) I'm I'm very convinced I like this build out. I like that Amazon is going to own a huge portion of this demand. Keep in mind, Amazon is also just big from basic IT infrastructure. A lot of that is going up to the cloud. Amazon was already a massive business before AI,
(26:05) so they were already well positioned and now they're just an even bigger business because of AI. I mean, this is incredible what's going on with Amazon I absolutely love I love the story behind this stock. I think it has one of the strongest stories.
(26:20) Two Amazon is starting to seriously scale drone delivery. On August 19th, Amazon announced that Prime Air will expand nearly 500 US cities and towns by year end, roughly six x the current footprint. Amazon says it's already made hundreds of thousands of drone deliveries
(26:37) this year, and is now doing thousands per day at its busiest locations. So they're going to six x the drone delivery. Incredible. It's not going to be long until I have I have drones delivering packages from Amazon, which is good
(26:53) because with my wife ordering packages, we have them every day. Many of them are just small things. They don't need a whole driver to come over. So I think that this is going to be incredible. When this gets going further and further, I really think it's going to be a big game changer for Amazon.
(27:08) Third, Alexa Plus is becoming Amazon's consumer AI layer. You know, when you shop on Amazon, how Alexa Plus is kind of like moving itself into the conversation. It's helping out with purchases. They're expanding the role of this and really making Alexa their go to AI.
(27:25) There are several developments in August, Amazon expanded Alexa Plus internationally to Australia, and on August 5th, the integrated it directly into the fire TV on August 19th, and they're continuing to expand its shopping capabilities. Amazon says tens of millions of customers
(27:40) are now using Alexa Plus, so there's a million things I could go into. Amazon. These are just three of, I think, the biggest, most meaningful ones. Now Amazon I believe, has one of the best stories in the market. But the stock price has moved up recently. So if we look at Amazon I'll bring it up here.
(27:56) Amazon is actually one of the stocks that's doing relatively well this year. It's a hyperscalers but it's up year to date by about 13.5%. So with it moving up I've I've lowered my expectations a little bit in terms of future returns because you're paying a higher price today.
(28:12) When I look at this I see that the growth rate I assume is high teens. I'd say 18% earnings per share growth over the next five years. Now, again, this is not just next year. This is the compounded growth over a five year period. I believe the multiple that Amazon should trade
(28:29) at is around 30 with the huge growth, with the defensiveness of the company, the moat, I think it's just massive. And when we look at those together, we get a return from today's price of 13.48% per year. Over the next five years, incredibly strong return,
(28:46) 13 to 14% returns for five years straight is great. So even though it's not my 15% hurdle, which I really want, it's still really good. I think Amazon is one of the better positions today. Now let's look at both of these companies in my portfolio real quick.
(29:02) So we just went over Amazon a position number three, about 12.6% of my portfolio. And it's a $187,000 position with $62,000 in the green. Now, even though Amazon has been not great
(29:17) for the past five years, if you just drag a chart five years, you can get above the five year returns based on when you buy. I didn't just by Amazon at the five year chart. I bought it during dips when it would dip down, so my returns in Amazon are better than Amazon's overall returns.
(29:34) I want to repeat that my personal returns in owning Amazon are better than the overall just stock chart of Amazon, because I didn't just buy it and hold it one time. I bought it when it dipped down, especially in 2022. So that's been a really good one. We have $62,000 of gains in that one.
(29:50) Mastercard is $194,000. Massive position. And the time weighted returns on this one are really good because I've only owned it the majority of my Mastercard position for a short period of time, and I made $46,000 in returns
(30:05) because I bought it during a dip this year. So like if we look at Mastercard and how it's traded, we can bring it up on Qualtrics here in the year to date, you can see that it had a bit of a slump middle of the year. This is about where I bought it and it's just gone up at the end of this year. So overall I'm very happy with both of these positions.
(30:22) I think they're both great companies to build positions in. Let's go ahead and take a look at what's going on with Mastercard. Mastercard has closed its acquisition of BenQ, and now the acquisition was closed on August 3rd, adding infrastructure
(30:37) that moves the and converts money between traditional currencies and stablecoins. This is strategically important because Mastercard is positioning itself to connect new payment rails rather than be disrupted by them. So they're not they're not just trying to become insular from stablecoin and crypto.
(30:54) They're trying to be the rails and payment rails of every type of commerce. Mastercard is defining its role in agenda commerce. In August, Mastercard laid out how it thinks AI agent payments will work need identifiable credentials, provable user intent,
(31:10) spending permissions, limits and dispute mechanisms. Mastercard sees its tokenization, authentication and fraud instructions becoming that trust layer between the AI agent and the actual movement of money. So they're so good at this. They have so much data, and they already are in this business
(31:26) that they're one of the go to partners to make a transaction a safe. And I'll be real, if I'm having an agent go and buy something on the internet, I want something like Mastercard to protect me. I want something that's trusted in this role, and they play that role so well.
(31:43) So I like the at adaptations of Mastercard. I like the thesis, I like the update. I don't see anything that's a red flag to me. When I plug in my assumptions for Mastercard, I have an earnings per share growth rate of 15% for the next five years, a PE multiple of 31 times.
(31:59) That's probably the highest multiple, I think, of any company that I think is appropriate. And that's because Mastercard has fundamentals that are truly difficult to replicate in a different company. They're just one of a kind. So a very strong expected return of Mastercard over the next five years.
(32:16) And that's after it's already given me a strong return this year. So we look at the next one here and it's going to be Netflix. Let's go ahead and take a look at my Netflix position. First we zoom in here. We have Netflix as position number eight. So these aren't exactly we're not going in them in order of the highest weighted position.
(32:34) But Netflix is roughly a 7% position on $104,000 with $32,000 in the green. I have a history of Netflix. I like the company. I like the product. A lot of people complain about Netflix, but look, I find things to watch on it
(32:49) all the time. If you want to watch a great series and you haven't seen it, Better Call Saul is on Netflix. It's great. It's a little slow starting off, but as you get into it gets much better. Netflix is getting into prestige TV, they're getting into live events, they're getting into podcasts, they're getting into everything.
(33:04) I like the direction the company is going. One of the main points here, and I think an ongoing theme of Netflix is basically just their ad demand. Their advertising is growing like crazy. They are they're making their ad platform better. They're making it so that you can buy ad inventory easier.
(33:19) So they're making it easier on advertisers. And also the ad plan is growing so fast because the ad plan is the cheapest plan. So a lot of people that want Netflix, but they don't mind watching a couple minutes of ads per hour, they're going to sign up for that, that ad tear.
(33:34) So this is growing. It's doubling in size in 2026. I think it's growing rapidly. The other thing is Netflix is committing further to video podcasts. On September 1st, Netflix renewed its entire initial original podcast lineup. They announced more exclusive shows from creators like Katt Williams and Harlan Coben.
(33:52) I don't really know them, so I don't know much about these particular podcasters, but apparently they have a following and Netflix is putting more podcasters on their platform. This is causing a ruckus with YouTube. YouTube's like, wait, Netflix is stealing a lot of our top creators,
(34:08) a lot of our podcasters. This isn't good. They're paying them. So YouTube's trying to respond by making like a crater fund that they fund creators and they keep them here and they give them all these special perks. Right? Like YouTube is actually panicking with what Netflix is doing.
(34:23) And that just shows that what Netflix is doing is effective. They are poaching a lot of the best creators from YouTube. They're giving them a bigger set. They're investing in them. They're making their show bigger on Netflix. Right. And this is also a problem for YouTube because YouTube right now, it's
(34:38) considered a bit of a graduation, like you started out as a YouTuber, now you're going to Netflix, right? That's a big that's almost like a step up. Most YouTubers would want to be on Netflix. That sounds more prestigious, and YouTube is trying to fix that, but it's hard to fix.
(34:53) Netflix is really going for a lot of this. They're going for it fast. The other thing that I think is maybe the biggest point, maybe I should have put this one to the top, but I've gone over this a couple times. Netflix could evolve from being one streaming service into being the place where people manage and watch streaming,
(35:12) meaning Netflix could transition their service from, I'm just going to go to Netflix and watch Netflix shows or license shows to I'm going to go to Netflix to watch TV, and Netflix is where I buy my HBO membership and my Paramount membership and my Fox one, my ESPN or whatever it is, whatever will have it.
(35:30) Netflix wants to be a hub. When you're hub, you can make money from other people's content, and that's a very attractive situation to be in. There's risks to the user interface in the design. They can't diminish the experience. But there's also big financial benefits.
(35:45) When I run analysis on this, I could see Netflix making billions of dollars more per year without investing the commensurate billions of dollars of content to make those billions. So basically, it'd be incremental billions of dollars of free cash flow,
(36:00) which Netflix is already an insanely free cash flow positive company. Netflix just gushes money. This company makes so much money. A lot of people look at Netflix's as a weaker company. They look at it like it's a weaker company because it's a streaming service.
(36:15) Have they looked at the financials? This is not a weak company. When I look at Netflix, just look at some of this. First of all, the revenue growth. Does that look weak? It sure doesn't to me growing 16% year over year. That's the latest year 16% revenue growth.
(36:32) No slowdown in sight. We look at the free cash flow of the company. Let's go ahead and take a look at that. Yeah this is what this is where we're at with Netflix. Free cash flows of $11 billion in the trailing 12 months. We have free cash on stock based comp.
(36:48) The stock based comp is non-existent. So this is real cash flow to the investor. This is one of the most financially strong companies in the world. And it's growing fast. It's moving into advertising. It's consolidating more internet platforms, more podcasts
(37:03) and live TV, more sporting events, more hyped events like that. I think it's great when we look at Netflix, it also is at an attractive valuation based on my forward estimates. So I'm trying to make accurate estimates here. That's the goal. I don't want to be conservative. I don't want to be aggressive.
(37:19) I want to be accurate. I believe that Netflix will grow at 16% per year for the next five years. I believe the multiple that it should deserve is around 25 times. When I plug that in, I get a future expected return of 15.77%.
(37:35) So it meets my hurdle expectations. Now, there's lots of people concerned about Netflix and the engagement or whatever Bloomberg wrote about last. I'm not quite as concerned about that. I think the company is doing great. We look at ASML, let's go ahead and jump into this one.
(37:52) We got to do a quick update on the portfolio. We'll look at that. Asme is a $120,000 position. The majority of that is gains at $87,000 in gains. First of all it's Asme. There are risks to this company.
(38:07) The risk is not that the moat is going to be invaded. The risk is more regulatory risks. China has become the clearest near-term risk. Later, late August reporting indicates Washington may push for much tighter restrictions on Ismail's remaining dove sales and servicing.
(38:24) In China. That matters because China is still a meaningful part of Ismail's business. It represents 14% of the Q2 system. Sales by equipment location in management has been expecting China to account for roughly 20% of 2026 sales. So a risk that exists here is basically
(38:40) that the US says, hey, you can't do business with China. And the US could say that even though SML is not a US company, there's nothing they could do us. If the US puts like sanctions for a company or says to stop doing business there, they basically say you have to or you're going to face
(38:56) all these financial fallout and penalty, and most of them have to abide by that. But the US also doesn't. I think I think that a lot of cool heads will prevail. I really don't think there's going to be a hard stance. I would say the smell does have a little bit of exposure there.
(39:13) So again, it's nothing to do with the of the company or how good the quality of the stuff is. This is all geopolitical stuff. Leading edge chip capacity still looks extremely tight. This is on the bullish side. Samsung raised prices on some advanced foundry nodes by as much as 15% in August,
(39:30) with its four nanometer capacity reportedly already full as a strains available manufacturing capacity. Basically, there's just more and more demand for their products. Even today, these bottlenecks, like ASML, are still seeing increases in demand,
(39:47) which is very good. Now, unfortunately, when I look at this, I see a situation where I believe that a lot of it's being priced in. So if we move over to the assumptions here as Mills a great company, but a lot of people decided it was a great company
(40:04) throughout the last year and bid the stock up a lot. I believe that the earnings per share will grow around 13%. I think it deserves around a 30 times multiple right up there with Mastercard, with how good of a it has. But that leaves us with a very low expected return.
(40:19) And that's why I actually out of all the companies I own, this is the only one that I've sold recently as a trim, even though I love the position fundamentally. So it's easy for me to sell companies, very easy to sell them if I believe the fundamentals are going in the toilet.
(40:34) If I think a company is getting worse and worse and worse. I don't like the competitive dynamic. I don't like the product development. I'm going to get rid of it and buy something else. I'll buy something that I do like the direction it's going. What I don't like doing is selling companies that are fundamentally great, and that's what I did with asthma.
(40:51) Now, I did not sell my entire position. I sold 20%, but that was still a cell. And the reason that I did that trim was because of the valuation. I just think it got way ahead of itself. I think the Ismail's fair value is more in the range of $1,300 per share, maybe 14, not exactly 1800 to $2000 per share.
(41:10) I think that's bid up with a lot of momentum, so I'd be cautious with its current valuation. Now, granted, I did a trim. I'm not exiting the position. I realize momentum can go on longer than expected, so I'm still going to try to keep a foot in the door with that one.
(41:25) Moving on. We get to SOB Global and Moody's. I combine both of these. But let's go ahead and take a look at my position in these companies. So I go down the list here we have we have right here number five S&P global S&P global is a $130,000 position
(41:42) $23,000 in the green S&P global has underperformed. Its been one of my position positions that has underperformed. So like Google Mastercard, Amazon, SML, Microsoft have been big outperformed. S&P global has not.
(41:57) And if we look at what's going on with this company let's just take a look here. Oh yeah I forgot we combine this with Moody's as well. So we'll take a look at that one as well. Moody's is holding number 11. It's much smaller. It's about half the size $52,000.
(42:13) Total size 11,500 in gains. It's performed a little bit better than SMB global. So let's go ahead and take a look at both of these companies. Both companies are embedding their data directly into AI systems. So they both take in the same approach here.
(42:28) SMP expanded its Microsoft partnership in August, putting its proprietary intelligence directly into Microsoft 365 Copilot workflows. Moody's became a launch partner for Gemini Enterprise for Financial Services, allowing Gemini to pull Moody's ratings,
(42:44) research and entity data through its MCP server. So both of these companies, they both want everybody to access their data. They don't care how you want to plug in with an API. Go ahead and use our API. You want to plug in with an MSC. Go ahead and use chat to use
(43:01) Copilot, use Gemini, use whatever you want you can plug in. We just want you using our data. That's the name of the game here. They're not trying to control the user experience. They're trying to control the data of which the user uses. Investors are giving Moody's the benefit of the doubt and not SMB global.
(43:17) The market has treated the two differently in 2026. Around the start of September, Moody's was only down 5%, while SB global was down 17%. Despite both businesses producing strong underlying results. Now, the reason why S&P global, I believe is down more than Moody's
(43:33) this year is because there's a little bit more stuff going on. It's not as clean of a picture. For example, you have the mobility separation. They spun off mobility. You have market intelligence restructuring another big change going on.
(43:48) You have leadership changes. Investors don't like that. And you have uncertainty around how quickly the MI business can and downward consensus revisions following the spin and recast. So I think that you have a lot of things going on with S&P global that you don't necessarily have going on with Moody's.
(44:05) With S&P global, I have an 11% earnings per share growth rate for the next five years. 27 times multiple gives me about a 12 to 13% return. It's very good for a company of this caliber. Having that type of return I think is very good. We have Moody's likewise 10 to 11% growth rate,
(44:23) 28 times multiple, a 10% return, give or take. I think both of these are strong, but I think right now that SMB global is the more attractive investment between the two simply because of Moody's might be I think they're very similar in terms of their overall strengths.
(44:39) But S&P global has the better valuation. Now moving on. We get to Microsoft. Let's go ahead and take a look at Microsoft's position here. We have a $106,000 position 52,500 in the green. So it's a 7% position holding number seven.
(44:56) Let's go ahead and take a look at what's going on with Microsoft. Microsoft is finally showing investors exactly how big Azure is. The biggest news is transparency. Microsoft just reorganized its financial reporting around agents and infra and devices and consumer and will begin disclosing Azure revenue directly.
(45:15) It revealed Azure generated 29.4 billion last quarter and 101.9 billion for 2026. So we finally got the Azure numbers. And we're going to see that trend. And we're going to be to compare that growth directly to AWS and Google Cloud, which is really big.
(45:32) And by the way, the quality charts are going to be updated to reflect this. Plus it will still include all the historical data. So we're going to be having a lot more KPIs, a lot more ability to track this type of stuff on qual trim. And in fact, I plan on about five
(45:47) the amount of KPIs we're tracking in Qualtrics. So this is going to be one of them that will be updated as well. Microsoft is accelerating its push into custom AI chips. Microsoft is reportedly preparing to unveil Maya 300. Maybe that's how you say that.
(46:03) Maya 300 as soon as September, and is discussing production of more than 300,000 chips in 2027, potentially scaling above 1 million eventually, the goal is straightforward. Guess what the goal is of Microsoft to develop chips,
(46:19) the same goal as all these hyperscalers reduce dependance on Nvidia. That is the name of the game. That's the whole purpose for doing this. They all know that Nvidia has them in a vice grip. Nvidia just controls these companies.
(46:34) If they want more processing power, they have to go to Nvidia. Nvidia's making more money than the you know, it's just endless money that Nvidia is making. And these companies can't accept this forever. They need to reduce dependance. So that's what they're all doing.
(46:49) No surprises there. I also don't believe it's a surprise from any Nvidia investor that their customers are trying to, in some degree, reduce their dependance on them. With Microsoft, I have a 13% growth rate, a p e ratio that I believe is acceptable or that's appropriate for this company.
(47:07) That's 28. And then from today's price, that would be a 12.23% return per year for five years, which for Microsoft I think would be good. Getting into this 12 to 13% return range is good. And granted, this is my expected return,
(47:24) but you're never going to map out exactly what happens. These expectations are just guidelines. They give you an idea. They kind of are a sanity check of where you are at with a company. So this isn't something where these companies will for sure return 12% or 15%, but they are directionally good guides.
(47:41) Next up we get to Costco. I haven't spent a lot of time on Costco recently, mostly because I don't think it's too good of a buy today. I actually think it's one of my worst value positions that I own, but I can't bring myself to sell the company. It is a 79 $79,000 position.
(47:57) It's actually still big, 45,000 of that being gains. It's one of my best performers ever, a little bit behind Texas Roadhouse, but I have 311% time weighted returns or money weighted returns on this one. I ended up buying Costco way back in 2017.
(48:12) I had some small buys. I wish I bought more because this has been an absolute beast of a stock to own. Costco's phenomenal. It's such a great company. They do. They're like the company that they want everybody to love them.
(48:27) And for the most part, everybody does. Costco is still growing at an unusually strong rate for its scale. August sales rose 9.9%, while digitally enabled comparable sales grew 18%.
(48:42) Consider the revenue that Costco does and the speed at which they're growing with that underlying revenue, that scale. Incredible. This is an incredible company. Costco is extending the membership ecosystem into healthcare. So this is where they're reaching outside of the warehouse.
(48:58) Costco helps you do a lot of things. They help you buy cars and they help you do like home repairs and retitling and finishing HVAC machines, water softeners. Costco just goes into a lot of different things. Costco in Healthcare is preparing a co-branded Medicare plan with scan,
(49:17) potentially connecting insurance with its pharmacy, vision, herring, and other health services. So there's really I had a reach to get anything with Costco that semi interesting. And that's kind of what you're investing in here is a business that not much happens. That's a good thing when you're a Costco shareholder.
(49:33) Not much happens except the company continually grows. They grow more members. They pay a lot of money in dividends with their special dividends. Now, I put in a growth rate of the earnings per share of around 12%, which its historical average is a 33 times multiple, the highest of any stock.
(49:48) But it's Costco. People pay a 50 times multiple for the stock. They do so because they view Costco as safer than a US Treasury. I mean, that really is what it comes down to. People leave. This is the safest money that you can own. The expected returns very low 5.47%.
(50:05) That's why I have not bought any Costco stock in a long time, and I won't until I get a much higher expected return from Costco. I need one that clears at least a 10% hurdle. Given the quality of the company, it can be a bit less.
(50:20) The hurdle rate needs to be a bit less than other companies, but I still think. I still think I need a higher hurdle than 5%. Let's go ahead and move on. This time we're going to be looking at Texas Roadhouse. Oh, this is one of my favorite companies ever.
(50:35) I might have to go there with the family. Maybe we can swing it. Maybe I can bring the baby. The baby's been good. When we go out, he just sleeps. So maybe we'll try to make a trip to Texas Roadhouse. I bet the yeehaw and all the commotion would wake them up though, so we'll have to see you on that one.
(50:50) Maybe I'll have to pick up some food. Texas Roadhouse is a $55,000 position. It's holding number ten and 47,000 of that is Gaines, with 463% money weighted returns.
(51:05) Every by Intel I've done of this company has been well timed. Don't know how I did that. I bought it at a really good time, and then I trimmed it at a good time before it went down. And then I bought more of it after the trim when it went down, and then it went back up. So it's like it's been my best traded stock in my history.
(51:23) And I love it because I love Texas Roadhouse. I love that it's a non consensus pick. It's just a you know most of these companies are Google and things that people can get behind Google and Microsoft. When you bring up Texas Roadhouse people think what is that stock? What is this company doing in Joseph's portfolio?
(51:39) Joseph usually invests in really good companies, so why is he investing in a restaurant? As it turns out, this is a really uniquely good restaurant. So when we look at restaurants, part of what makes Texas Roadhouse so good is its consistency, its operations, the way that it runs things.
(51:56) So when you look at the revenue here and it just continually grows, we look at the number of restaurants. They continually grow, we look at the average weekly sales. They continually grow. 177,000 per week is what they're averaging now. When I first bought the company, it was down to one about 110 to 115.
(52:14) So it's gone up like crazy. Then there to go. Remember during Covid it went up like crazy. So there to go sales were everything. It dropped down, it fizzled out and now it's starting to trend back upwards. The post-Covid boom. And there it goes. Sales are going back up.
(52:30) This company is just incredible. I really love it. I think that they have a great operation. I think they offer a great product for a great price, and it's the performance behind it still continues to this day to be phenomenal. Traffic is still growing in Texas Roadhouse.
(52:46) While most restaurants today are relying on price, so most restaurants, they're going, look, we have about the same traffic. We just got up prices, we've got up prices because we're not growing with new customers. Texas Roadhouse is getting all the customers. They're gaining market share with traffic. And so they're not just relying on price increases to gain revenue.
(53:03) Q2 comparable sales rose 6.2%, including about 3% traffic growth, which is huge. That sounds small, but that's huge and about 33. 2% higher checks. Average weekly sales hit a record 177,000 per restaurant, and comps were still running at plus 6.2% through the first five weeks of Q3.
(53:23) Incredible performance. The beef cost headwind is massive, so if you haven't done research on this, I'll just give you a quick rundown. Cattle size in the US is the smallest it's been in like 70 years.
(53:39) It really is incredible how small our cattle, our cattle lots are. And the reason why it has to do with some disease that spread. And we had to kill off a bunch of them, apparently. And then it's hard to like, breed them back up to a normal cattle size. And then you combine that with an insatiable demand for beef.
(53:55) So we still have the same level of beef demand, but we have a smaller cattle lot size, which makes beef super expensive. If you go to the grocery store and you just want to buy a couple pounds of meat, you're going to realize how much you're paying real fast. You'll go a second take on it. This steak is really $15 a pound, right?
(54:12) It's crazy how much beef is costing. So in the US we're dealing with that. But these problems get solved over time. They'll they'll get the cattle lot sizes back up to historical norms, back up to where they're a little bit better. It'll just take a number of years.
(54:28) Meanwhile, restaurant margins have fallen because of commodity inflation. It reached 7%, but management lowered their full year commodity inflation guide to roughly 5%, and Q3 inflation is expected around 2 to 3%. So inflation is actually going down, which is really good for Texas
(54:45) Roadhouse. And that's their commodity input inflation, not broader inflation. Investor sentiment has shifted toward sit down dining. This is something that I was hesitant to include, but I think it's worth pointing out there's been this big rotation out of quick
(55:01) service restaurants which shares are like Wendy's McDonald's, Chipotle, the ones that you can go in and get your food and leave and you don't have a service, a server. A lot of investors are shifting and rotating
(55:16) from quick service restaurants into sit down restaurants. Over the recent 60 day period, sit down names, including Texas Roadhouse, Darden dramatically outperformed fast casual pairs as consumers increasingly perceive full service restaurants is offering better value.
(55:32) After years of fast casual price increases, fast food has raised prices too much. I think the whole industry is in for a big shakeup because people are not wanting to pay over restaurant prices for fast food. Texas Roadhouse has been a massive gainer. I like it in the portfolio.
(55:47) I don't want to keep trimming it some not going to. And look, I'm expected to still make money on the stock. I expected 12% earnings per share growth rate at 25 multiple over the next five years. Now give me an 8.86% future expected return, which is still good. I think it's good for a company that's good.
(56:02) And again there's always upside. There's always chances that things work out more profitably for the company. Now moving on to the next one. We have DoorDash and Uber. My two new positions. These are the newest holdings. DoorDash is up 4.7 thousand or $4700, not 4.7 thousand.
(56:19) So where do I to say it? But DoorDash is a $26,000 position, up $4,700. It's about 22%. Uber is a $24,000 position, up $1,160, up about 5%.
(56:34) Individually, they're a 1.8% and 1.6% position size, so 3 to 4% combined. When I look at these companies, I did make them a bit of a combined by. I wanted to own more of the logistics, more of the aggregator. I like these last mile delivery companies.
(56:51) I like the ride sharing. I really like the businesses themselves. We have Uber and their robotaxi strategy, and they're starting to move to more partnerships, to actual scale. So we have Uber and Wave. They just launched London's first robotaxi service, and Uber separately expanded
(57:06) its agreement to deploy more than 2000 robotaxis across five European cities. That is much more meaningful than just another AV partnership announcement. So Uber, they went through this streak where, you know, they're on the TV going.
(57:22) We're making partnerships with everybody. The CEOs like Dara is like, hey, we're partnering with this company. In this company we have 18 partners. We have 20 partners. And you're going, okay, they've partnered from everybody A to Z that they can partner with. But what is a partnership on paper.
(57:37) What does that actually mean? I could partner with Uber and say, hey, I'm working on an EV when a partner with me. And they go, sure, when you get their Eva, we'll put it on our network. It's a lot more meaningful to actually have wheels on the ground delivering customers, like delivering customers
(57:54) from point A to point B, that is so much more meaningful. So this is a massive actual adaptation. This is a big move announcing another partnership. Who cares. Getting a partnerships that they have to actually transport people with robotaxis is massive.
(58:10) Uber is increasingly becoming the distribution layer through which multiple autonomous driving companies reach customers. That is the entire Uber playbook. They are the distribution layer of which multiple autonomous vehicle companies use their network to deliver customers.
(58:27) Uber is applying the same marketplace strategy to a delivery, so Uber partnered with Zipline in August, with a target of 1 million drone deliveries per day by the end of 2029, starting with on Uber Eats later this year.
(58:42) Uber is also investing directly in zipline, so Uber is not making drone delivery technology themselves. They found the company zipline and they're like, hey, partner with us, get on our network. Just like all these AV companies. We're just going to partner with everyone in aggregate, everyone.
(58:57) We're not going to build this stuff ourselves. We're not building drones ourselves. We're going to partner with zipline. Contrast that with what DoorDash is doing. DoorDash is building autonomous delivery technology itself. DoorDash is actually a massive AI company.
(59:13) They're a machine learning company. They are a technology and robotics company. People joke because you get your burrito delivered, but that's really what DoorDash is. They have a massive team on this. DoorDash received FAA part 135 certification for DoorDash error,
(59:29) allowing it to commercially operate its own drone delivery service. At the same time, it's internally developed dot the ground robots, and it's scaling. DoorDash says Dot could handle a high single digit percent of orders in its largest test markets by year end.
(59:47) Okay, so high single digits. You might not think that's a big deal, but it's a very big deal. Let me let me go ahead and just emphasize this. So you think okay, high single digits, not a big portion of their overall orders. But when you're doing this many orders 3.58 billion
(60:05) a year high single digits is huge if you can have that automated. So even though this is only in a certain amount of cities, it's not overall in the platform. What we're seeing is two different strategies. Uber is trying to become just an aggregator. A company that doesn't have any type of big investments sells.
(60:22) They're not they're not investing in robotaxis directly. They're not building them themselves. They're not investing directly in creating autonomous delivery. You know, with zipline drones, they're not building that out. While DoorDash is taking the more insular.
(60:38) We're building everything ourselves. We're not partnering with anyone. So different strategies. I actually don't mind either of them. And I think that I think that Uber had a chance to build things and that window missed them. They could have done it with the robotaxi
(60:53) way back when, but at the time it was I think they made the right decision because at the time Uber was not profitable. They're already burning billions of dollars and then trying to develop robotaxis on top of that was very challenging. So I understand why the management shifted towards becoming an aggregator
(61:08) instead of trying to build in-house technology themselves. When I look at either of these companies, I'm not overly concerned about Waymo or Tesla, because I think that what Tesla showed over this launch, it was interesting, but it showed that Tesla can have some people get in a car.
(61:25) They can they believe they can drive around the vision and they can deliver some people to get the certifications to do this everywhere, to go through the red tape. It's going to take years and years and years to do to build all the infrastructure. To do this. It's going to take years as well. So Uber has a lot of time to integrate and aggregate more demand while Tesla
(61:42) is trying to figure this out. And while Waymo is expanding, and ultimately, I don't even believe that Uber has to own the entire market, owning a big portion of a gigantic pie is better than owning the entire pie of a very small one, right?
(61:57) They can own a big portion of a very big market ridesharing delivery. These are massive markets. When I look at the assumptions here, this is why I'm so excited about Uber. I moved it to one of my top picks is because Uber Technologies,
(62:14) if we believe it's going to grow 16%, which I do and we believe it deserves a 24 times multiple, which I do. That's a very none of these assumptions are crazy. That's a 17.5% return. The implied return of Uber is very high with, I believe,
(62:30) very accurate assumptions. So there's a lot of skepticism that's being priced into Uber today. And if Uber can prove that it will continue growing in spite of all these other factors, then I believe you'll earn an outsized return in this stock.
(62:46) With DoorDash, the numbers are still good, but they're not as good as Uber. And that's part of the reason why, as DoorDash just raced up 2,023% in the past couple of weeks. So part of it is it literally just went up quickly. The other part is, though, that it's starting at a higher valuation.
(63:03) So the assumptions for DoorDash have to be more aggressive. Now I like owning both of them. Again, I like the diversification versification of both of them, but I think that today Uber is likely a bit stronger of a buy. Next up we have Duolingo. And this is the last stock in my portfolio.
(63:20) Let's go ahead and take a look at the position. Duolingo is a $37,400 position, 9500 in the red. I bought Duolingo and then they had deceleration. That acceleration cost caused investors become a very concerned,
(63:37) very concerned that their marketing, their viral marketing that they relied on from TikTok was drying up and very concerned that their engagement, that their retention, that their competitiveness in the learning ecosystem is going to be severely disrupted by artificial intelligence.
(63:53) So there's still these big concerns being priced into Duolingo. Now, let's go ahead and take a look at why I'm still bullish on this company. My thoughts have not changed. Even though the stock price has dropped. The user growth, first of all, appears to be accelerating again.
(64:09) Duolingo reported 23% daily active users growth in Q2, up from 21% in Q1. So we have user growth acceleration. Then, in August, an investor presentation accidentally displayed 27.4%
(64:24) year over year der growth for August 17th, with similarly elevated growth on other August days. That suggests that user growth re acceleration may be continuing into Q3. So basically Uber during a presentation or something had an upsize.
(64:40) They released one of their numbers and then they legally had to release it to everyone. So we know unless this reports fake Duolingo kind of said, hey, it's not official numbers don't put money on this, but it reflects
(64:56) well, it reflects that the daily active users growth is actually going up. Duolingo has dramatically reduce the cost of AI. Conversational Practice Management said that inference costs of video calls has fallen to less than $0.01, largely by moving towards open
(65:11) source models without seeing a meaningful loss in quality. When Duolingo started, they were starting with like the highest, most expensive models just to get things working. Obviously, that wasn't that wasn't the long term plan that hit their financials in the short term. But now that they have they have the thing working there now moving towards open
(65:29) weight models where they can have their tens of millions of people do conversational practice with AI and not custom of fortune. And why is conversational practice so important? Because the biggest criticism for Duolingo learning has been that there's too much
(65:45) filling things out, too much tapping on the screen, too much writing stuff and reading stuff and not enough speaking. The conversational practice makes it so that their users are speaking, and they want to get more words spoken by their language learners every single quarter.
(66:00) Huge product advancement and very good economics for the company to make this work at such a cheap price. The other point that I'd point out that I think is meaningful is retention is reaching new highs. Duolingo is current user retention rate reached an all time high of 84%,
(66:17) and it's streak revival campaign brought back 15.4 million learners, with the revived users showing better retention than a typical reactivated cohort. How is Duolingo being disrupted by other AI companies when its retention rate is at an all time high?
(66:32) That I'm not finding now, with an expected return of 13%, you may say that Duolingo is not worth the risk, but I think this is more of a pass fail situation either. Duolingo will turn out to be a huge company with 100 plus million daily active users.
(66:47) Very valuable, very big. A Spotify like story where it stands up against other companies. It really offers a unique value. It grows and grows and grows or it kind of fizzles out. It doesn't become much, and it's basically a failed investment.
(67:02) It's more of a pass fail situation. So even though I look at this one over a five year and a return rate, I think that this one's in a different category than most, where either the story works out really well, or I think this one is one that you just end up moving on because they're not able to grow past a certain point.
(67:17) But right now, based on the fundamentals of the company, I believe that the opportunity is still there. They've moved into math and they're really good at math, like they're getting better at tutoring. With math, especially aimed towards kids. They do such a good job with it. They moved into chess and now they're.
(67:33) And now, in fact, there's there's a situation where chess is actually copying Duolingo. So one of the things that I saw recently this is on the discord is let me bring this up here. We'll bring this up here. This is a this is something that was just posted on the discord okay. This is from Chess.com.
(67:49) Doesn't that look a little familiar? Any user of Duolingo will know what this looks like. Having the little avatar. They're having him talk to you and tell you what to do, isolating the turn into what's going on here and then having a heart system. They've implemented a lot of the same things that Duolingo
(68:06) already had before Chess.com had them, so I Duolingo is now being copied by chest. Specifically because Chess.com realizes that Duolingo is a threat. Now it's a threat in a certain extent.
(68:23) Duolingo will never be the tournament chess app. It's never going to be where the Magnus, Carlsen and all the top chess players go. So it's not a threat for anybody that's extremely serious with chess, but it is a threat in the social aspect of getting new learners and people and new customers on Duolingo instead of Chess.com.
(68:40) And of course they want everybody on their service. So now they're trying to take some of the things from Duolingo, but I don't think they're going to be able to do that. Duolingo already has such a sticky product overall. Everybody that uses it becomes engaged. The streaks are stronger, they're notifications, everything is more fine tuned with it.
(68:57) And I think they've carved out a really good place. But this shows how many verticals they can grow into, how many categories of learning they can grow into. And I think there's a lot of optionality and upside in this position. So I still continue to keep it. Now, with all of that, we're going to look at the expected returns.
(69:13) These are the numbers that we went over with every position. So here they are. My hurdle rate of 15% is very hard to beat when I put in these assumptions. Right now, only three stocks, only three of them have that expected
(69:28) return of above 15% meta, Uber and Netflix. Now that's part of the reason why on my show I've been talking the most about those three stocks. They meet my high expected return. I think they offer the best value and the one right now
(69:44) with the highest expected return, of course, is meta. With that 18.14% expected return. Uber's just behind it. We have Netflix just behind that. Now. As fun as it is to draw an artificial barrier between 15, I think that that's a little too hard of a line to cut.
(70:01) For example, is Netflix necessarily a way better by than Mastercard? Because Mastercard's below 15% and Netflix is above it? Not really. I mean, Mastercard may do better than Netflix, right? These are very close, and they're based off of assumptions, which are assumptions.
(70:18) They are inherently going to be wrong. The goal here is to be directionally correct. As I look down the list, the first three we have above the hurdle rate and then below we have Mastercard. Very close very close category. Amazon's also very close.
(70:35) So I think that these five these six here are really good. Meta Uber Netflix Mastercard Amazon S&P global. Duolingo. Duolingo is a more risky by I would not put this as a core position. It's not a core position in my portfolio. It's a smaller position.
(70:50) But I think that it has a lot of upside. Like I've said, we also have Microsoft very close as well, DoorDash up there. It's getting further away now, but still good. And then we have Google I think. Still good, but not a buy. These are two low to far below that hurdle rate Moody's Texas Roadhouse
(71:09) ASML which I've been actively trimming and I'm blocking it right here we have Texas Roadhouse ASML and Costco which is the lowest. Costco is not a buy today. So when I look at these overall this is just a guideline
(71:24) of how I personally view the valuation of all my stocks. Now you may say, well, why don't you just sell every company that's below that 15% return rate? Let's not really how investing works. You can't just sell a company as soon as it's below on investing return rate, and then buy back in without causing
(71:40) a lot of frictional problems without worrying about your concentration levels, your risk factors. There's just other considerations. I don't think that would be good portfolio management. But what I do is I put more emphasis, more new money on the companies that have the higher expected return.
(71:56) And when the companies get a little bit lower, when I've already made gains in them, they move more to a whole deposition, maybe a trim position. I'd emphasize those stocks. So that's the way that I deal with that. But hopefully this gives you a very transparent look at how I view the valuation
(72:11) of all my holdings and which ones I think are the best value today. Let's go ahead and go to that question. Let's pretend that I have no portfolio. Im given $10,000 to start a brand new portfolio today. Where do I put that money? When I thought about it, this is what I would do with that money.
(72:27) I would put $3,000 into meta today. I'd put $2,000 into Uber, 1500 into Netflix, 1250 into Mastercard, 1000 into Amazon, $750 into S&P global, and $500 into Microsoft.
(72:47) That's what I would do. So if we look at it today, we have meta as a 30% waiting. We have Uber is at 20%, Netflix is 15, Mastercard as 12, Amazon is ten, SMB global is 7.5, and Microsoft is five. My expected return is 18% 17, 15, 14, 13, 12, and 12.
(73:06) So very high expected returns for all of them. Now again, I'm not all leaning meta and Uber just because they're above that 15%. I would want some level of diversification, but this would be the total of $10,000. And my weighted expected return
(73:21) across all these stocks is above that 15% benchmark, because the majority of my money is in companies above it, and then I've dispersed the other amount to below it, I would have a weighted expected return of 15.95%. So that's how I would do it. And I think that this $10,000 would do really well.
(73:37) And that's my overall portfolio update. We've covered a lot of ground portfolio performance, my outlook on the market, the trades that I've made, my valuation thesis updates for every company, and so on. Let me know what you think of this type of portfolio update.
(73:52) I think it's really in depth. It covers a lot of ground. And I like I like this type of update. So let me know if you like this and we'll have more content out every single week. More deep dives, more thoughts on it, lots of different companies. I'll be covering more overviews of different industries
(74:07) and lots of different things. So we have a lot to look forward to. See you in the next one.