2 Stocks I'm Buying In November! — Transcript

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1. 0:00two stocks I'm buying in November of
2. 0:022026. The first one is a mega cap. High
3. 0:05quality company. I waited for months to
4. 0:08for the sentiment to change on the stock
5. 0:10cuz everyone was optimistic. I like
6. 0:13buying fear. I like buying whenever most
7. 0:15people are doubtful about something and
8. 0:17I finally got the chance to buy the
9. 0:19stock. The second one is also a hated
10. 0:21more of a misunderstood turnaround
11. 0:23semiconductor and I'm going to talk
12. 0:25about the stock again. I hope you enjoy
13. 0:27it as always. The first one is Google.
14. 0:30Google. I mean, I can't believe I'm
15. 0:32talking about Google because a few
16. 0:33months ago at $400, everyone loved
17. 0:36Google, but at $280,
18. 0:39it says the search engine is dying
19. 0:40because of AI. I mean, it's really funny
20. 0:43how fast the sentiment changes. And I
21. 0:45this is why I love the markets. This is
22. 0:47why we have opportunities. You know,
23. 0:49Warren Buffett says he doesn't like real
24. 0:50estate because in real estate, you don't
25. 0:52have so many emotional people all the
26. 0:54time. You have someone that really knows
27. 0:56how much their asset is worth. So you
28. 0:58can't get a discount but in the market
29. 0:59you get discounts because investors are
30. 1:02selling Google because Google search is
31. 1:04not declining in revenues it's declining
32. 1:06in growth from 19% to 12%. Isn't this
33. 1:11crazy? Like if you look at how mature
34. 1:13Google search is a lot of brands are
35. 1:14mature. Proctor and Gable is mature.
36. 1:16Apple's app Apple phone is mature. Most
37. 1:19mature brands they are so well known
38. 1:22they grow 3% revenues 4% 5%. For me, I'm
39. 1:26actually shocked that Google search is
40. 1:28still growing 12% despite everyone in
41. 1:30the world using Google search. To me,
42. 1:32that's actually impressive. But the main
43. 1:35story here is that AI will kill Google
44. 1:38search. I believe this is somewhat true.
45. 1:40I think could happen over the long term.
46. 1:42But I think there's a big story that
47. 1:44most investors are missing. And I'm not
48. 1:46going to talk about Gemini because they
49. 1:47have a billion users on Gemini and I
50. 1:50think they will be able to monetize ads
51. 1:52on Gemini over the long term. But ignore
52. 1:54Gemini. Let's assume that Chat GPT and
53. 1:57then Muse and Claude and all of them,
54. 1:59they pretty much wins the race here and
55. 2:01they disrupt Google search. Well, if
56. 2:03they're going to disrupt Google search
57. 2:05and if everyone will be using them all
58. 2:07the time, that means they're going to
59. 2:08require a lot of compute. Who's the
60. 2:10biggest seller of compute to those LLMs?
61. 2:13It's Google Cloud. So, you can't really
62. 2:15escape Google. Google Cloud is now
63. 2:17growing at 102% in revenues. 102%.
64. 2:21So if you look at their operating
65. 2:23income, it's skyrocketing like crazy. It
66. 2:26just hit about 11.1 billion. So my
67. 2:29thesis is that if AI will disrupt Google
68. 2:32search, Google cloud will wreak a lot of
69. 2:36those profits and it will replace a lot
70. 2:38of the search revenues if search starts
71. 2:41to decline in revenues. Now if you look
72. 2:43at the backlog of Google, they have $567
73. 2:46billion for the cloud business.
74. 2:49Absolutely massive. The company expects
75. 2:51to recognize 55% of the total backlog as
76. 2:55revenue over the next two years or 24
77. 2:59months. This is my calculation on
78. 3:01Google. We're going to take the 561
79. 3:04billion for the total backlog and we're
80. 3:07going to take out the 55%. We get about
81. 3:10$38 billion in revenues that will be
82. 3:14recognized over the next two years. Now,
83. 3:16I did some research and I found out that
84. 3:19Google Cloud's operating margin is 36%.
85. 3:23Amazon Web Services is 38%. But let's
86. 3:26assume they can stay at 36% operating
87. 3:29margin. And I'm going to times that by
88. 3:3336%.
89. 3:35I would get about $111 billion in
90. 3:38operating income that will be recognized
91. 3:40over the next eight quarters. So if I
92. 3:43divide it by eight quarters, the end
93. 3:45result Google will end up with about
94. 3:4813.8 billion more in quarterly operating
95. 3:52income by the end of the second year,
96. 3:54which is about 2028 2029. Now, if I add
97. 3:59the current uh cloud operating income of
98. 4:02about 11 billion, you're getting about
99. 4:05$25 billion in quarterly operating
100. 4:09income from Google Cloud alone over the
101. 4:12next two years or so. We don't currently
102. 4:14know the operating income of Google
103. 4:17Search because they bundle it together.
104. 4:19They call it Google services. It's
105. 4:20estimated to be about $30 billion. So
106. 4:23over the next two years, no matter what
107. 4:25happens to search, you're going to get
108. 4:27about 80% of the search operating income
109. 4:30in Google cloud and search is unlikely
110. 4:32to decline in operating income. It will
111. 4:34likely maintain its operating income
112. 4:36worst case scenario if AI is disrupting
113. 4:39it. So my point is that if those LLMs
114. 4:41they disrupt Google search, Google cloud
115. 4:44will replace the revenue of Google
116. 4:45search. But if Google but if they don't
117. 4:47disrupt Google, then Google search will
118. 4:49do fine and the cloud business is still
119. 4:51going to grow. So, Google has a natural
120. 4:53hedge here that not a lot of people are
121. 4:56paying attention to and they still have
122. 4:58the YouTube business. The YouTube
123. 5:00business is not going anywhere anytime
124. 5:02soon. It's one of the best business
125. 5:04models in the world. I make the content
126. 5:05and they get a pretty fat commission on
127. 5:08a lot of the content that we make. So,
128. 5:10it's a pretty amazing business. Now, if
129. 5:12you look at all of this, not even
130. 5:13talking about the stock portfolio,
131. 5:15SpaceX, they have 15% of entropic. If it
132. 5:18IPOs at two trillions, they get 370
133. 5:21billion in entropic alone. CME,
134. 5:23Qualcomm, and NE so many different
135. 5:25investments. Uh the stock is trading at
136. 5:2721 times earnings. 21 times earnings is
137. 5:30very cheap in my opinion for a company
138. 5:32that's growing so much for such an
139. 5:34amazing highquality company. The stock
140. 5:36was trading at 31 times not long ago.
141. 5:39Now they're trading at 21 times. I think
142. 5:41a lot of fear is priced in. I think it's
143. 5:43always exaggerated. I think a lot of
144. 5:45investors are what I would call getting
145. 5:48caught up in the sentiment and search
146. 5:50again guys it's still growing about 12%.
147. 5:53For such immature business it's not bad
148. 5:55at all and if they do disrupt the search
149. 5:57business the Google cloud operating
150. 5:59income will continue to skyrocket like
151. 6:02crazy and it would replace the search
152. 6:04business operating income in two to
153. 6:05three years. So this is why I decided to
154. 6:08buy Google and I'm planning to buy more
155. 6:10at those prices 295 to 300 but
156. 6:13especially if it goes a little bit
157. 6:14lower. Now the second one which is a
158. 6:16very hated stock is Qualcomm. Qualcomm
159. 6:19hasn't done anything for over 5 years
160. 6:22and many people ask me why don't you buy
161. 6:24AMD and buy all these stocks why do you
162. 6:26own Qualcomm? Although I think Nvidia is
163. 6:29very attractive here, but I owned
164. 6:30Qualcomm for about uh two and a half
165. 6:32three months and I bought the dip again
166. 6:34at 158 this month and I want to buy a
167. 6:37little bit more. Now, one of the reasons
168. 6:39why I like Qualcomm is because they have
169. 6:41something that no other semiconductor
170. 6:43company has. And they have about $4
171. 6:45billion a year in recurring free cash
172. 6:48flow for the next 5 to 10 years, pretty
173. 6:50much forever because they own a lot of
174. 6:52IP. They own the 5G network. So, Apple,
175. 6:56Samsung, all those smartphone companies,
176. 6:58they have to pay Qualcomm billions of
177. 7:00dollars every single year for them to
178. 7:03have the 5G network. And no one's
179. 7:05contracts extend into 2030. After 2030,
180. 7:086G comes out. And Qualcomm also owns 6G.
181. 7:11So, they have this recurring revenue
182. 7:13that takes a lot of the cyclicality
183. 7:15outside of the business, high margin
184. 7:17recurring revenue. And this is something
185. 7:19that I like very, very much. Now, the
186. 7:21main concern is that SpaceX was going to
187. 7:23enter the mobile space and it's going to
188. 7:25disrupt Qualcomm's 5G because they can
189. 7:27give you direct internet or phone
190. 7:29access. But that's not going to happen
191. 7:32because SpaceX themselves, they're
192. 7:34partnering with Qualcomm on a 5G network
193. 7:36for them to launch uh their Starlink
194. 7:39mobile services. And Elon Musk endorsed
195. 7:42the company two times. He said
196. 7:43Qualcomm's technology is excellent. A
197. 7:45lot of the Tesla cars also use the
198. 7:47smartphone chips and that's a
199. 7:49partnership for the future could lead to
200. 7:51a lot of different things and you know
201. 7:53it derisks the company's four billion a
202. 7:56year a lot where SpaceX is not going to
203. 7:58be disrupting it. So this is huge for
204. 8:00the company. Now the second one is if
205. 8:03you look at revenues they're declining
206. 8:048% and earnings before taxes declined
207. 8:0761%. So if you look at this report, you
208. 8:10get a little bit scared. But if you look
209. 8:11at the reason why that's happening, it's
210. 8:13because of the handset revenues, which
211. 8:15is mainly due to Apple. Apple is coming
212. 8:17off the line and it should end by next
213. 8:20quarter. So Apple is really taking down
214. 8:22the revenues 26% on handset. Now if you
215. 8:25look at automotive, it's growing 89% but
216. 8:28you don't see it because the decline in
217. 8:31handset is really killing uh the overall
218. 8:33revenue growth. But once this ends next
219. 8:36quarter and the quarter after, then you
220. 8:38should start seeing massive growth
221. 8:39numbers on the company. And the company
222. 8:42is transitioning away from just selling
223. 8:44handsets. They're entering the data
224. 8:46center business. They're guiding $5
225. 8:48billion for 27 and 15 billion by 2029.
226. 8:52They said the 5 billion is a high
227. 8:54confidence number because it's mainly
228. 8:57their partnership with Amazon. Amazon's
229. 8:59partnership is $60 billion for 10 years,
230. 9:03which is about $6 billion in revenues
231. 9:05per year to make custom chips for
232. 9:08Amazon. Pretty amazing stuff, right? And
233. 9:10then the other six, seven billion, it
234. 9:12comes from companies. They have a
235. 9:14partnership with Meta on CPUs. They have
236. 9:16two more uh custom silicone customers.
237. 9:19They haven't announced them yet. And uh
238. 9:21you know, it's it's a pretty amazing
239. 9:23business. And I love the fact that they
240. 9:25have 0% data center exposure. So a lot
241. 9:28of people talk about Nvidia and a lot of
242. 9:30the semiconductors and they say we're
243. 9:32nearing the end of the AI cycle.
244. 9:34Although we're not, but if we are
245. 9:35nearing the end, that means the low P is
246. 9:37justified because they're going to
247. 9:39decline. Well, Qualcomm is just
248. 9:40entering. They're growing from a base of
249. 9:420. They're trying to get 15 billion by
250. 9:452029. Their automotive segment is
251. 9:47growing 89%. They have the 5G recording
252. 9:50revenues and soon 6G. So they're not so
253. 9:53dependent on AI and data centers. they
254. 9:55will do fine if AI is good or if it's no
255. 9:57good. They have a partnership with
256. 9:58Amazon and and they're going to do well
257. 10:00no matter what. So this is why I like
258. 10:03the company very very much. They also
259. 10:05bet on anything that has to do with
260. 10:07physical AI. So all the stuff that
261. 10:09Metamuse has launched, the VR glasses,
262. 10:11the Ray-B band audio and the meta smart
263. 10:14glasses and the Muse device, all of them
264. 10:16are powered by the Snapdragon chip of
265. 10:19Qualcomm because Qualcomm has been
266. 10:20making those phone chips for many, many
267. 10:23years. They're an expert at this. They
268. 10:24know what they're doing. They have some
269. 10:26really good technology and anything that
270. 10:28has to do with robotics or physical AI
271. 10:31has to do with edge computing which is
272. 10:33mainly close to the smartphone chips and
273. 10:35that's where Qualcomm has a massive edge
274. 10:37over AMD, Nvidia and many other
275. 10:40companies. So, it's also a bet on
276. 10:42physical AI and robotics over the long
277. 10:44term. Uh the company is guiding about
278. 10:46$18 of earnings per share by 2029. Uh
279. 10:50the stock right now trading at 18 times
280. 10:52earnings. I think 18 times earnings for
281. 10:54the growth that the stock will be
282. 10:56putting up over the next year or two
283. 10:58after they finish Apple's revenues is
284. 11:01too low. I look at AMD is trading in the
285. 11:0330 times and I think Qualcomm could
286. 11:06potentially put up those numbers if
287. 11:08automotive is growing 70 80% a year and
288. 11:11then handsets stop declining and AI
289. 11:13revenue is coming in at 50 100% growth.
290. 11:1618 times is too low. But I'm using $18
291. 11:19target by 2029 and I'm timing it by 18
292. 11:22times earnings if they just maintain the
293. 11:24PE multiple. This is $324 per share. The
294. 11:28stock right now is trading at a $177
295. 11:32per share. So if I add this one and I
296. 11:34put in divided by $177 per share, I'm
297. 11:38getting about 83% on the upside over the
298. 11:41next two and a half, three years. And
299. 11:42I'm also getting a decent dividend of 2%
300. 11:45that I get paid while I wait for the
301. 11:47company to do whatever they're doing.
302. 11:49So, I really like Qualcomm here and I
303. 11:51also like Google very very much. Those
304. 11:53are the two stocks I bought this month
305. 11:55and I'm planning to buy more of them
306. 11:57very very soon. I hope you enjoyed it.
307. 11:59It was not financial advice. If you did
308. 12:01enjoy it, please press the like button
309. 12:03and maybe consider subscribing. So, I'll
310. 12:05talk to you in another