I'm going to be honest here.. This video is a bit higher-level than most videos. It dives a bit more into valuation theory, the cost of capital against returns on capital and at the risk of alienating some viewers, I have decided to not simplify the subject matter too much. So I apologize if this one is more complex/confusing than most of my videos. I'll my more "normal" video out later this week! Also, just FYI. It's the start of the month which means you can join the Patreon with a free trial until the end of the month: www.patreon.com/josephcarlson It includes an exclusive Discord that I'm on every day, Qualtrim.com (the stock graph tool) and hours of exclusive content. Give it a shot risk free.
Why not start a new channel specifically for higher level content? A lot of you subscribers, myself included, follow you solely for the entertainment value of watching your portfolio and channel grow over time, not for your methodology itself. Even in this video, you didn’t cover anything I wasn’t already pretty familiar with-but I was far more engaged with your content. And I imagine many others feel the same. Plus over time your less experienced subscribers will learn and grow, and eventually they might want more from you than you’re currently providing. Might be time to get ahead of that now.
Hey Joseph I recently found a company that might fit well into your Industrial pie it's called STAG Industrial. They are basically the VICI of industrial real estate, they rent warehouses to companies (Amazon is their biggest customer) Financials look really good and it is relatively cheap right now. Would love to see a video in the future possibly looking into it? Their div yield is over 5% growing yoy
Haha i'm aware - And hopefully I didn't convey that I was angry at those commentors. I'm 100% not upset at them. I enjoy reading others views even if they strongly disagree with me, as long as they don't do personal insults (which 99.9% of people don't do).
Honestly I love it when a financial UA-camr has an opinion or valuation that is different than my own. It's an opportunity to re-examine my own opinion using the evidence or data presented and see if I'm missing something. Sometimes I'm swayed, sometimes I'm not, but the exercise of doing so keeps the portfolio sharp. So keep up the good work Joseph 👍
I was one of those that has been looking to buy into T for a long time since "omg ot's so cheap now, look at the p/e ratio" and also one of the "MSFT is an amazing company, I like everything about it, Financials, growth, increasing dividend, blizzard acquisition etc etc, BUT it's a bit expensive now" guys but this video convinced of both purchasing msft and leaving T on the table. It's just that I' just one retail investor and if you here all these "analysts" say that p/e ratio of msft is too high, it's too expensive you get a bit worried since you're 1. Not an expert, 2. Don't want to lose money.
I saw those comments and was glad you made a vid on it. 10/10 you need to do more of these, might not be entertaining but it gives a lot of context to your picks and is interesting to follow along with my own portfolio. More plz
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
I think the main issue people had with the valuations in the last episode is that the numbers for your valuation seemed to have appeared out of thin air. Always good to hear some of the things that were behind those numbers and how you value companies. I might disagree with some of the notions of valuation you have, but always enjoy hearing your opinions and analysis. Been following you for years now and you've actually inspired me to create my own channel. My valuations are way off yours, but it's always great to see different perspectives and points of view! Thanks for the content!
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
thanks for the response joseph! i hope you know i do not dislike you personally. although i disagree with you on many aspects i can appreciate your process: you have one and you stick to it. everyone should be willing to see and discuss opposing viewpoints. i agree there are MANY aspects that should be taken into account when “valuing” a company.just remember that it is possible and likely that you may be over paying for future growth. as i’ve said previously on one of your videos “yes, you may be correct that your stock prices might be higher in 10,20,25 years whatever your time horizon is. however, you may not be realizing a high annualized return at some based off the prices you may be paying now. thanks again my friend. your ROIC & earnings table was very interesting and one i will take into account when looking at my own stocks (:
But why do you disagree Connor? Sure it’s fine to disagree but you’re argument isn’t even weak it’s nonexistent. Nothing in the market is a sure bet but there are methods to valuation that are downright better than just “it feels too high” which is basically all you’ve presented
@@cosmic_kid2868 i disagree because of the differences in our processes regarding valuation(s). i have my process and he has his, simple as that. i respect his process and take pieces of his and implement them into my process. also, i am not gonna sit here and type out my entire investment thesis in the youtube comment section.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Awesome video Joseph! What I would like to point out, is that ultimately, investors need to understand that there is no universal definition of "overvalued" or "undervalued". Different people will use different discount rates and margins of safety when investing. I know some investors who are happy buying great companies when they are fairly priced, whereas others will wait until their favorite companies are undervalued by a huge margin (which risks leaving these investors sitting on a lot of cash that ends up never being invested). Also, with DCFs and discount rates, some investors will use a discount rate based on the cost of capital of the business, whereas other investors will use a higher discount rates, based on their desired rate of return. If you use a 15% discount rate, a lot more companies suddenly will look overvalued. No right and wrong here, just different philosophies.
This video is FANTASTIC! Your last video was great but to see the reason behind your price targets is extremely helpful. Quick question, would you consider possible “Turn Around” plays. For example, AT&T is starting to focus on debt reduction. Would you ever take a “Poor” performer at a chance they turnaround for the better on the fundamentals and returns due to certain information?
ROCE is a great ratio, but it's also a backward looking ratio. It tells you what happened, not what's going to happened. So there are many companies right now that have very low ROCE that eventually will spike upwards as their investments finally start paying off. Those are some companies to look for, ones that you think are making huge investments right now that will give very high returns (well above cost of capital) in the future. My example of this is Amazon. Currently it has very low ROCE, but I think in the future that will improve upward a lot.
@@JosephCarlsonShow thanks for providing the example of Amazon. Ratios are mainly measurements of past performance so I think that’s where one’s research has to come into play to determine if they feel current investments or initiatives will pay off in the future, just like you mentioned. It’s something I try to incorporate more rather than just relying on ratios.
@@k9-charlie711 Let’s say you own a restaurant. The Capital Employed is the money for the cooks and all other people that you might hire. The Invested Capital is how much money you put in the restaurant overall, e.g. tables, the real estate, chairs… This is why I also like ROIC more than ROCE since it also takes physical assets into account.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Thanks for the analysis. My portfolio overall is still in defensive with cash on the side. On the big down day will nibble a bit on the stocks I like. Will also sell into strength for growth part of the portfolio until we can get a better picture of Fed tightening is waning down.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Also there is a difference between questioning the choice of the companies and questioning the valuations. If they get valued too high, there is a risk of buying too high. The next earnings might adjust the p of the forward p/e’s.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Can you go through SCHD's top holdings and review ROCE? I can't imagine IBM will look good, but I'd like to see the breakdown. Thank you for your insights into market activity and sharing your Qualtrim Insight tool's findings with the public.
I think what people don’t understand is that no matter how many books you’ve read, courses you’ve attended, you’ll find it impossible to find the “correct” range to enter a position. Even if you could precisely value a company (impossible) there are way too many factors affecting that number. Guys, this is an art and at the end of the day the value of a stock is what investors are willing to pay for it (Tesla).. just enjoy the great content Joseph is putting out.
Hey brotha. Nice vid - love seeing how different people are in valuing their companies. In my opinion, you're valuation method isn't that accurate for valuing companies for the long term. A company's growth potential will likely look a lot different 10 years down the road from now - and in turn will not demand as high of a P/E. In other words, your valuation model doesn't take into account the normal maturation cycle of a business - unless I guess you assume that your companies can continue to grow earnings at the same rate ad infinitum. I think DCF models are by far the most accurate & customizable valuation metric one can use. Sure, it's a bit more work - but you only really need to run it quarterly when new financials are released.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Lmao the clapback. I think most of those commenters are from your old days of super safe/boring dividend companies. They probably don't see eye to eye with you on growth prospects/10 year horizons of expansion. Dividends are cute and all but expanding a business ethically and scaling it in profitable means is the real beauty.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Long time fan of you Joseph. In past videos you have used Aswath Damodaran to explain investing and valuation concepts. You have spoken highly of him and I wonder if that is because you have watched his lessons and talks and use his concepts in your approach to value. You touched briefly on some important principles of valuation in your video but stopped short of showing your calculations and spread sheets. Perhaps this simplicity is to keep the video appropriate for newbs. I think its important you dive a little deeper in your process. Aswath would be unhappy with your video explanation for your valuations. He would ask you questions such as "what is your discount rate, Growth rate, terminal value, time period, risk premium chosen, capital expenditures amounts etc that were used in your model. I have these same questions. He would say you have told a great story, but he needs to see the numbers and your assumptions to back it up. Please make a third follow up video going into more detail on your model. Showing how and what you do in a model, even for just one company, would be sufficient I believe to show haters/trolls what goes into making your valuations reasonable. Take care.
Appreciate you explaning everything, always found you to be thorough with your work and use you regularly for a second insight to some investments i make. Keep it up!
This is the first video I've liked in a while Joseph. When you broke out the table at 19:58, that really got me engaged as there is technical, mathematical basis with cited research. That said, I'm going to need to look at what time frame this data was based on. If it was based only on recent time, i.e. the last 10 years, it's going to be suspect with the extended QE and expansion of money supply. Anyway, keep these technical analyses coming. I really haven't agreed with your stance much in recent time, but when you present the basis like you did here, I can track with you and understand where you're coming from better.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Strip out $SCHD and then let’s see if you beat the SCHD etf over next 12 months. Also what would be a nice piece of content is to look at your portfolio against a basket of passive portfolios such as classic Bogle x3-index or classic 60-40 or even just against Berkshire. Then net out your true costs which is your time which I presume you can charge out to clients at $150/hr plus. If you want you can net out any sponsorship or Patreon income. Maybe this is a pure lifestyle choice but I remain unconvinced your personal ROCE (inc sweat) is worth the effort.
The chart that Joseph put together is very practical and I agree with his numbers. Also, during these times, his portfolio is holding up well, most people are down way more, and many have even been margin called.
@@ajackstrades8513 Not really, anyone can do a fundamental analysis, and those charts line up pretty accurately. Of course all of this is assuming the world doesn't come to an end or we enter some kind of major war. A baseless opinion of someone on UA-cam with no common sense to back up anything, would be a channel like Stock Moe and many other noise traders out there.
Please don't apologize! Some, if not all of us, are grateful for a little higher level at times. I thought this was maybe the best one you've done -period. The only problem is that we can't see the study you provided links to because it requires passwords or membership or access. I found a few other studies that referenced it but again, no access. I would very much like to review it and will try to repeat this on the discord or in Qualtrim, hoping you will see it. Thank you so much for this video. A lot of food for thought.
This is probably the best video of yours that I've seen so far. I've been looking at ROIC for stocks I'm interested in but never connected it to the PE in this way. In hindsight I assigned higher PE to companies that had a moat but I suspect high ROIC and moat are highly correlated.
i love disagreeing with people, i enjoy discussing both of our thoughts and values, this being something that I can use to reformulate my calculations, it helps me a lot on making buying decisions! Cheers Joseph and everyone else contributing to the community!
A very interesting demo on fundamental analysis to define stock valuations. Companies generating a much higher ROIC vs the cost of capital (also known as the required return asked by the investors to take a risk in the company) are the ones that may deliver higher returns in the future. Thanks for sharing your analysis!
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Great job Joseph. The only thing I would add is that your method of investing works really well with a lump sum of cash like yours. Most folks however are trying to grow their portfolio to a decent size in order to get where you are at.
Well said Joseph! Thanks for this detailed explanation. Essentially one has to pay up for quality. Qualify almost always trades at a premium, whether stocks or housing etc. Have a great week. T.
Really appreciate you doing this video. I like your MS analysis. Industry and company outlook very important. Airlines are clearly a sector to avoid. However, ignoring the current macro I think is a problem. There is a real threat of a financial accident so it's worth looking at the most vulnerable companies in that scenario. They could be wiped out. We know EV growth outlook is guaranteed and Tesla is unquestionably leader but valuation makes it vulnerable. What is reasonable valuation and undervalued price for Tesla? Personally I feel the most safe with consistent and growing Dividend yield as this is a true return on capital.
Joseph. Good video and good explanation. Unfortunately, when I watched your previous video, I mostly thought the fair value numbers were arbitrary because there was no explanation to how they were derived. I think if the method for finding that fair value was more straightforward it would be easier to understand and accept them. Even if people disagree, if the process is understood than at least we can have a good conversation about it. For example, if the table of eps growth and roic is the basis for the valuation, then that should have been explained before stating a fair value. If people want to dispute that table, fine, but your original video really lacked transparency into the valuation assumptions and methods.
I like your explanation of how the S&P and SCHD works to outperform most everyone. I like to save time, energy and brainpower and just let SCHD do it's thing. And I don't get killed if a few of my fave stock picks take a dump for some unknown reason. But I will make room if I have a strong conviction on a stk or a high div paying sector if they trade down cheap enough during a recession.
i had to replay the video at least 11 times to fully understand the credit suisse chart but im glad i did and grasped the concept fully. is 8% cost of capital average today or historically or does it differ by company?
Wow Joseph this is one of your best videos yet. I say that as someone that has been subscribed since 2018 I genuinely believe you killed this one! Keep it up 👍
11:10 This data looks very much informative, can u pls share the website name? And by the way I'm from India, love ur content a lottt.... Keep doing - keep growing 🥰
I do have one issue with the chart being used (the one with earnings growth and ROIC). Shouldn't cost of capital also factor into this? If company A grows at 8%, has an ROIC of 10% but cost of capital of 9%, surely that warrants a smaller PE than a similar company that also has an ROIC of 10% but cost of capital at 6%?
How much has Microsoft returned versus the market at the 20 PE ratio? Was that maybe in hindsight a huge mistake by people who didn't buy it up? If one believes, probably correctly, that MSFT growth will slow, then is maybe waiting for a future date where it trades at a lower multiple missing the boat on making most of its excess earnings?
Looking at valuations based on a chart from one PE study doesn't seem like a strong agreement. Also comparing Airlines or Auto companies to Tech or even CPG is unfair.
Great video sir. Not enough UA-camrs talk about ROIC. Ignore macro and just buy good companies. Buffet, Munger and Lynch have all said it millions of times. Why people can’t follow it is beyond me. Well done.
I like terry smiths approach! And it makes sense. I just have doubt in my ability to pick long time compounders which is fine. I would love to learn what things you do not like about the businesses you own? What risks are there that you understand well that market does not and which you do not understand? How do you ensure you are not over diversifying? Or you do not care as long as total numebr you hold is quality. P.S I do not like dividends due to double tax I have to endure but I also do not like when management does buybacks at high evaluations and nothing when shit hits the fan (meta was buying back stock at $300 (was not a shareholder then) ). I understand why you like dividends :)
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Your just adding to my MSFT confirmation. I haven't even done a deep dive into it and based on my assumptions it is a fantastic buy at this price range. I am adding more to my position.
I really don’t understand how factoring roic or roce into a valuation makes sense like take roce for example if a company with share holders equity of 80 debt of 20 and a cash pile of 99.9999999999… could have a roce of practically infinity couldn’t it? So would that company be worth all the money in the world? And then that quote about how no matter how cheap a company gets doesn’t make it a good company but even if a business goes out of business and liquidates all their assets and pays off their debts at a net 0 but it pays out a dividend of any amount beforehand there is infect some price at which buying would outperform the indices. Think this is why the vast majority of people agree the best way of approximating value is discounted cash flow if you are capable of making reasonable assumptions.
Joseph I’m with you! Don’t listen to the troll. They are the ones that miss the bottom and buy the top and then sell when the market crashes lol it’s a shame
I think it's fairly easy to criticize and make an anonymous comment on the Internet. Would love to see those people's portfolio performance tracked so we can come back later and see if their "comment" is accurate. Joseph has. And I think that's the difference.
Watching this video in late Aug 2023. Pretty interesting to listen to these thoughts and compare the valuations to where they trade today. Might be a good idea for a video to look back to see how your estimates are holding up … or not.
No valuation is accurate, the goal is to be less wrong than the market. There are many ways to value a company and in my opinion, using a few simple ratios on their own is not sufficient. I would love it if you review one of my latest videos and share your thoughts. I try to be comprehensive, start with the fundamentals and see how the valuation changes based on different assumptions.
Joseph, where do you get these amazing company graphs that you show in the video? I am talking about the dashboard that shows plenty of metrics and the evolution over quarters.
Instead of always going to Texas Roadhouse apple and Microsoft can you explain your valuation for TROW it’s at the bottom of the list but it’s the most undervalued on the list being well under your undervalued number.
I'm going to be honest here.. This video is a bit higher-level than most videos. It dives a bit more into valuation theory, the cost of capital against returns on capital and at the risk of alienating some viewers, I have decided to not simplify the subject matter too much. So I apologize if this one is more complex/confusing than most of my videos. I'll my more "normal" video out later this week!
Also, just FYI. It's the start of the month which means you can join the Patreon with a free trial until the end of the month: www.patreon.com/josephcarlson
It includes an exclusive Discord that I'm on every day, Qualtrim.com (the stock graph tool) and hours of exclusive content. Give it a shot risk free.
Why not start a new channel specifically for higher level content? A lot of you subscribers, myself included, follow you solely for the entertainment value of watching your portfolio and channel grow over time, not for your methodology itself. Even in this video, you didn’t cover anything I wasn’t already pretty familiar with-but I was far more engaged with your content. And I imagine many others feel the same. Plus over time your less experienced subscribers will learn and grow, and eventually they might want more from you than you’re currently providing. Might be time to get ahead of that now.
Joseph, perhaps you should show us a more systematic and consistent way of doing valuatioin.
Hey Joseph I recently found a company that might fit well into your Industrial pie it's called STAG Industrial. They are basically the VICI of industrial real estate, they rent warehouses to companies (Amazon is their biggest customer) Financials look really good and it is relatively cheap right now. Would love to see a video in the future possibly looking into it? Their div yield is over 5% growing yoy
Great content 👏🏻
I think you should do more in depth videos like this
Remember that there are the 99% of us who enjoy your videos and watch passively without angrily commenting.
Haha i'm aware - And hopefully I didn't convey that I was angry at those commentors. I'm 100% not upset at them. I enjoy reading others views even if they strongly disagree with me, as long as they don't do personal insults (which 99.9% of people don't do).
We love you joe and so does my money!!!
Honestly I love it when a financial UA-camr has an opinion or valuation that is different than my own. It's an opportunity to re-examine my own opinion using the evidence or data presented and see if I'm missing something. Sometimes I'm swayed, sometimes I'm not, but the exercise of doing so keeps the portfolio sharp. So keep up the good work Joseph 👍
Very healthy attitude.
Totally agree!
Spot on!
A second opinion is helpful
I was one of those that has been looking to buy into T for a long time since "omg ot's so cheap now, look at the p/e ratio" and also one of the "MSFT is an amazing company, I like everything about it, Financials, growth, increasing dividend, blizzard acquisition etc etc, BUT it's a bit expensive now" guys but this video convinced of both purchasing msft and leaving T on the table. It's just that I' just one retail investor and if you here all these "analysts" say that p/e ratio of msft is too high, it's too expensive you get a bit worried since you're 1. Not an expert, 2. Don't want to lose money.
I saw those comments and was glad you made a vid on it. 10/10 you need to do more of these, might not be entertaining but it gives a lot of context to your picks and is interesting to follow along with my own portfolio. More plz
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
I think the main issue people had with the valuations in the last episode is that the numbers for your valuation seemed to have appeared out of thin air.
Always good to hear some of the things that were behind those numbers and how you value companies. I might disagree with some of the notions of valuation you have, but always enjoy hearing your opinions and analysis.
Been following you for years now and you've actually inspired me to create my own channel. My valuations are way off yours, but it's always great to see different perspectives and points of view!
Thanks for the content!
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
I think you use common sense and good metrics to choose companies. These are rough times. Every company is hurting.
Thank you for these videos
when sentiment is poor, everything looks overvalued and trash looks cheap! Hurts many retail investors.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
thanks for the response joseph! i hope you know i do not dislike you personally. although i disagree with you on many aspects i can appreciate your process: you have one and you stick to it. everyone should be willing to see and discuss opposing viewpoints. i agree there are MANY aspects that should be taken into account when “valuing” a company.just remember that it is possible and likely that you may be over paying for future growth. as i’ve said previously on one of your videos “yes, you may be correct that your stock prices might be higher in 10,20,25 years whatever your time horizon is. however, you may not be realizing a high annualized return at some based off the prices you may be paying now. thanks again my friend.
your ROIC & earnings table was very interesting and one i will take into account when looking at my own stocks (:
I loved the comment - keep sharing them even when you disagree. Good to get feedback on where i can be wrong.
But why do you disagree Connor? Sure it’s fine to disagree but you’re argument isn’t even weak it’s nonexistent. Nothing in the market is a sure bet but there are methods to valuation that are downright better than just “it feels too high” which is basically all you’ve presented
@@cosmic_kid2868 i disagree because of the differences in our processes regarding valuation(s). i have my process and he has his, simple as that. i respect his process and take pieces of his and implement them into my process.
also, i am not gonna sit here and type out my entire investment thesis in the youtube comment section.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
I love this comment. This is 100% correct.
Joseph kinda bashing people who use 1 metric ( PE ratio), while he is only concerned mostly with ROCE
Joseph, what calculation did you do to get to the number 105, 130 etc for Texas Roadhouse? 26:10
Probably your best video. I was going to ask you about that MSFT valuation: very interesting study.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Awesome video Joseph! What I would like to point out, is that ultimately, investors need to understand that there is no universal definition of "overvalued" or "undervalued".
Different people will use different discount rates and margins of safety when investing. I know some investors who are happy buying great companies when they are fairly priced, whereas others will wait until their favorite companies are undervalued by a huge margin (which risks leaving these investors sitting on a lot of cash that ends up never being invested).
Also, with DCFs and discount rates, some investors will use a discount rate based on the cost of capital of the business, whereas other investors will use a higher discount rates, based on their desired rate of return. If you use a 15% discount rate, a lot more companies suddenly will look overvalued. No right and wrong here, just different philosophies.
This video is FANTASTIC! Your last video was great but to see the reason behind your price targets is extremely helpful. Quick question, would you consider possible “Turn Around” plays. For example, AT&T is starting to focus on debt reduction. Would you ever take a “Poor” performer at a chance they turnaround for the better on the fundamentals and returns due to certain information?
ROCE is a great ratio, but it's also a backward looking ratio. It tells you what happened, not what's going to happened. So there are many companies right now that have very low ROCE that eventually will spike upwards as their investments finally start paying off. Those are some companies to look for, ones that you think are making huge investments right now that will give very high returns (well above cost of capital) in the future. My example of this is Amazon. Currently it has very low ROCE, but I think in the future that will improve upward a lot.
@@JosephCarlsonShow could you explain roce vs roic, it's confusing me
@@JosephCarlsonShow thanks for providing the example of Amazon. Ratios are mainly measurements of past performance so I think that’s where one’s research has to come into play to determine if they feel current investments or initiatives will pay off in the future, just like you mentioned. It’s something I try to incorporate more rather than just relying on ratios.
@@k9-charlie711 Let’s say you own a restaurant. The Capital Employed is the money for the cooks and all other people that you might hire. The Invested Capital is how much money you put in the restaurant overall, e.g. tables, the real estate, chairs… This is why I also like ROIC more than ROCE since it also takes physical assets into account.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Thanks for the analysis. My portfolio overall is still in defensive with cash on the side. On the big down day will nibble a bit on the stocks I like. Will also sell into strength for growth part of the portfolio until we can get a better picture of Fed tightening is waning down.
Great job Joseph, love the details to how you select your stocks. That helps me trust your portfolio even more and your rationale. Thank you
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Also there is a difference between questioning the choice of the companies and questioning the valuations. If they get valued too high, there is a risk of buying too high. The next earnings might adjust the p of the forward p/e’s.
Link provided for research report is not correct
I’ve never heard anyone on YT discuss this before. Thank you for the insight. Adding this to the list of things I check before making an investment
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Is there a reason google isn't listed? I have yet to watch your previous video, so not sure if you explain it there.
Can you go through SCHD's top holdings and review ROCE? I can't imagine IBM will look good, but I'd like to see the breakdown. Thank you for your insights into market activity and sharing your Qualtrim Insight tool's findings with the public.
I think what people don’t understand is that no matter how many books you’ve read, courses you’ve attended, you’ll find it impossible to find the “correct” range to enter a position. Even if you could precisely value a company (impossible) there are way too many factors affecting that number. Guys, this is an art and at the end of the day the value of a stock is what investors are willing to pay for it (Tesla).. just enjoy the great content Joseph is putting out.
False. The data unequivocally shows that stocks over the long term follow their cash flow growth.
Hey brotha. Nice vid - love seeing how different people are in valuing their companies. In my opinion, you're valuation method isn't that accurate for valuing companies for the long term. A company's growth potential will likely look a lot different 10 years down the road from now - and in turn will not demand as high of a P/E. In other words, your valuation model doesn't take into account the normal maturation cycle of a business - unless I guess you assume that your companies can continue to grow earnings at the same rate ad infinitum. I think DCF models are by far the most accurate & customizable valuation metric one can use. Sure, it's a bit more work - but you only really need to run it quarterly when new financials are released.
Your videos are a breath of fresh air, love the honest & detailed approach
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Lmao the clapback. I think most of those commenters are from your old days of super safe/boring dividend companies. They probably don't see eye to eye with you on growth prospects/10 year horizons of expansion. Dividends are cute and all but expanding a business ethically and scaling it in profitable means is the real beauty.
How would i determine cost of capital? Working through doing my own calculations using qualtrimm
I want to sign up for your Patreon. But can I view Canadian companies on qualtrim?
Great valuation lesson. I appreciate all your hard work putting these together.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Long time fan of you Joseph. In past videos you have used Aswath Damodaran to explain investing and valuation concepts. You have spoken highly of him and I wonder if that is because you have watched his lessons and talks and use his concepts in your approach to value.
You touched briefly on some important principles of valuation in your video but stopped short of showing your calculations and spread sheets. Perhaps this simplicity is to keep the video appropriate for newbs. I think its important you dive a little deeper in your process. Aswath would be unhappy with your video explanation for your valuations. He would ask you questions such as "what is your discount rate, Growth rate, terminal value, time period, risk premium chosen, capital expenditures amounts etc that were used in your model. I have these same questions.
He would say you have told a great story, but he needs to see the numbers and your assumptions to back it up.
Please make a third follow up video going into more detail on your model.
Showing how and what you do in a model, even for just one company, would be sufficient I believe to show haters/trolls what goes into making your valuations reasonable.
Take care.
Is there an extended table/formula you use compared to the Credit Suisse example you show in the video?
Great video as always
I would be curious to your thoughts on some other companies like AMD & Tesla at this point, and when you would pull the trigger
Appreciate you explaning everything, always found you to be thorough with your work and use you regularly for a second insight to some investments i make. Keep it up!
I am happy how you keep improving Qualtrim. The added quick review commentary on the Insights page is great.
This is so good. I’m learning is much. Thank you for making this
This is the first video I've liked in a while Joseph. When you broke out the table at 19:58, that really got me engaged as there is technical, mathematical basis with cited research. That said, I'm going to need to look at what time frame this data was based on. If it was based only on recent time, i.e. the last 10 years, it's going to be suspect with the extended QE and expansion of money supply. Anyway, keep these technical analyses coming. I really haven't agreed with your stance much in recent time, but when you present the basis like you did here, I can track with you and understand where you're coming from better.
Looks like 1961 - 2013 is the time frame, which means multiple large market events are included, as is a period of high inflation. Not a bad dataset.
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Strip out $SCHD and then let’s see if you beat the SCHD etf over next 12 months. Also what would be a nice piece of content is to look at your portfolio against a basket of passive portfolios such as classic Bogle x3-index or classic 60-40 or even just against Berkshire. Then net out your true costs which is your time which I presume you can charge out to clients at $150/hr plus. If you want you can net out any sponsorship or Patreon income. Maybe this is a pure lifestyle choice but I remain unconvinced your personal ROCE (inc sweat) is worth the effort.
The chart that Joseph put together is very practical and I agree with his numbers. Also, during these times, his portfolio is holding up well, most people are down way more, and many have even been margin called.
You’re basing your confidence and bias off an unknown face on UA-cam 🤣😭
@@ajackstrades8513 Not really, anyone can do a fundamental analysis, and those charts line up pretty accurately. Of course all of this is assuming the world doesn't come to an end or we enter some kind of major war. A baseless opinion of someone on UA-cam with no common sense to back up anything, would be a channel like Stock Moe and many other noise traders out there.
Please don't apologize! Some, if not all of us, are grateful for a little higher level at times. I thought this was maybe the best one you've done -period. The only problem is that we can't see the study you provided links to because it requires passwords or membership or access. I found a few other studies that referenced it but again, no access. I would very much like to review it and will try to repeat this on the discord or in Qualtrim, hoping you will see it. Thank you so much for this video. A lot of food for thought.
This is probably the best video of yours that I've seen so far. I've been looking at ROIC for stocks I'm interested in but never connected it to the PE in this way. In hindsight I assigned higher PE to companies that had a moat but I suspect high ROIC and moat are highly correlated.
I am man from Poland. I like Joseph valuations. He is good man.
i love disagreeing with people, i enjoy discussing both of our thoughts and values, this being something that I can use to reformulate my calculations, it helps me a lot on making buying decisions! Cheers Joseph and everyone else contributing to the community!
This is one of your greatest videos!
thanks for sharing the reasoning behind the valuations. Makes even better sense now.
Excellent video. Another metric to measure a company. Thank you.
A very interesting demo on fundamental analysis to define stock valuations. Companies generating a much higher ROIC vs the cost of capital (also known as the required return asked by the investors to take a risk in the company) are the ones that may deliver higher returns in the future. Thanks for sharing your analysis!
That ROIC & Earnings chart is actually a great tool for valuation! Thanks for including it!
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
The way you invest just lends itself to market returns. Why don’t you just buy the index and not waste your time on it?
He's looking to invest in good companies that are undervalued, which will beat the market when you factor in the dividends.
@@DailyMeditation365 really subjective given he’s using one multiple comparison chart to predict his price.
@@DailyMeditation365 he does invest in good companies but so do the indexes in fact his cross over would be quite high.
Your valuation, your money. I am not comfortable buying MSFT at 350.
Great job Joseph. The only thing I would add is that your method of investing works really well with a lump sum of cash like yours. Most folks however are trying to grow their portfolio to a decent size in order to get where you are at.
Very useful. I liked the previous one as well. I learned a lot. More like this!
I love your transparency despite not agreeing with your valuations.
Well said Joseph! Thanks for this detailed explanation. Essentially one has to pay up for quality. Qualify almost always trades at a premium, whether stocks or housing etc. Have a great week. T.
Really appreciate you doing this video. I like your MS analysis. Industry and company outlook very important. Airlines are clearly a sector to avoid. However, ignoring the current macro I think is a problem. There is a real threat of a financial accident so it's worth looking at the most vulnerable companies in that scenario. They could be wiped out. We know EV growth outlook is guaranteed and Tesla is unquestionably leader but valuation makes it vulnerable. What is reasonable valuation and undervalued price for Tesla? Personally I feel the most safe with consistent and growing Dividend yield as this is a true return on capital.
The amount of value in this video is off the chart jesus christ joseph
Joseph. Good video and good explanation. Unfortunately, when I watched your previous video, I mostly thought the fair value numbers were arbitrary because there was no explanation to how they were derived. I think if the method for finding that fair value was more straightforward it would be easier to understand and accept them. Even if people disagree, if the process is understood than at least we can have a good conversation about it. For example, if the table of eps growth and roic is the basis for the valuation, then that should have been explained before stating a fair value. If people want to dispute that table, fine, but your original video really lacked transparency into the valuation assumptions and methods.
This video is crazy to see knowing the value of your portfolio now. I'm actually amazed.
@Joseph Carlson: Excellent explanation. I think this is most folks like me should simply invest in ETF’s like SCHD, VYM, and DGRO.
I like your explanation of how the S&P and SCHD works to outperform most everyone. I like to save time, energy and brainpower and just let SCHD do it's thing. And I don't get killed if a few of my fave stock picks take a dump for some unknown reason. But I will make room if I have a strong conviction on a stk or a high div paying sector if they trade down cheap enough during a recession.
i had to replay the video at least 11 times to fully understand the credit suisse chart but im glad i did and grasped the concept fully. is 8% cost of capital average today or historically or does it differ by company?
Wow Joseph this is one of your best videos yet. I say that as someone that has been subscribed since 2018 I genuinely believe you killed this one! Keep it up 👍
This video is masterful!
11:10 This data looks very much informative, can u pls share the website name?
And by the way I'm from India, love ur content a lottt.... Keep doing - keep growing 🥰
Love the format of taking criticism head on and explaining your viewpoint. Others would just delete the comments
Absolutly great video Joseph! Greetings from Poland!
Spot on !! Bravo !!!
I do have one issue with the chart being used (the one with earnings growth and ROIC). Shouldn't cost of capital also factor into this? If company A grows at 8%, has an ROIC of 10% but cost of capital of 9%, surely that warrants a smaller PE than a similar company that also has an ROIC of 10% but cost of capital at 6%?
The chart assumes an 8% cost of capital. So if a company is above or below that. You’ll have to make slight adjustments.
What is the "cost of capital" exactly?
That graph is cool Joe. I've never seen it before,but it makes sense.
Value investors tend to be more conservative than growth investors.
Joey popped off :) personally i look at free cash flow first before all else, but i like your process a lot
👏👏👏👏Great Video and analysis. Thx
Why dont you hold Visa or Mastercard?? They have a high ROIC
Great video, I havent doubted your analysis, but you fully convinced me now. Where csn I download that chart pls?
Historic P/E for MSFT is 20. So why now, with no better fundamentals than before, MSFT with a P/E of 25 is cheap?
How much has Microsoft returned versus the market at the 20 PE ratio? Was that maybe in hindsight a huge mistake by people who didn't buy it up? If one believes, probably correctly, that MSFT growth will slow, then is maybe waiting for a future date where it trades at a lower multiple missing the boat on making most of its excess earnings?
Looking at valuations based on a chart from one PE study doesn't seem like a strong agreement. Also comparing Airlines or Auto companies to Tech or even CPG is unfair.
Great video sir. Not enough UA-camrs talk about ROIC. Ignore macro and just buy good companies. Buffet, Munger and Lynch have all said it millions of times. Why people can’t follow it is beyond me. Well done.
200 for MSFT is about right to me. The valuation together with current bond yields with assumed growth makes it fine.
I like terry smiths approach! And it makes sense. I just have doubt in my ability to pick long time compounders which is fine.
I would love to learn what things you do not like about the businesses you own? What risks are there that you understand well that market does not and which you do not understand? How do you ensure you are not over diversifying? Or you do not care as long as total numebr you hold is quality.
P.S I do not like dividends due to double tax I have to endure but I also do not like when management does buybacks at high evaluations and nothing when shit hits the fan (meta was buying back stock at $300 (was not a shareholder then) ). I understand why you like dividends :)
👆My credit score 👆was 571 and I couldn’t get approved for a loan, a car and a house... NOTHING! It was draining in every aspect of my life because I got kids I have to protect their future. A few weeks later, my score suddenly shot up 830, Mr Done he’s truly honest about what I want and what is expected of me to do. He told me it would take a few weeks to get it done approximately a week and he kept to his word. Now I can thank him enough. Get in touch with him today and make a bright future tomorrow. Mr Done, they are really the best trust me.
Forget about the key board warriors. They are what they are. At least you are transparent.
Your just adding to my MSFT confirmation. I haven't even done a deep dive into it and based on my assumptions it is a fantastic buy at this price range. I am adding more to my position.
Before you add, try to find arguments against MSFT/suggesting that MSFT is overpriced.
@@zxr250 Yeah theres nothing I can think of, Microsft is a great business with a strong moat.
I really don’t understand how factoring roic or roce into a valuation makes sense like take roce for example if a company with share holders equity of 80 debt of 20 and a cash pile of 99.9999999999… could have a roce of practically infinity couldn’t it? So would that company be worth all the money in the world? And then that quote about how no matter how cheap a company gets doesn’t make it a good company but even if a business goes out of business and liquidates all their assets and pays off their debts at a net 0 but it pays out a dividend of any amount beforehand there is infect some price at which buying would outperform the indices. Think this is why the vast majority of people agree the best way of approximating value is discounted cash flow if you are capable of making reasonable assumptions.
Joseph, how do you explain Meta's valuation with ROCE ~27% and P/E ~11.5?
It was a MEGA bargain.
Love your work! Keep em coming. I've learned so much from your content
Great video. The Credit Suisse Source though....isn't that the bank that's in all the trouble today??
Spot on. Fantastic video
Joseph I’m with you! Don’t listen to the troll. They are the ones that miss the bottom and buy the top and then sell when the market crashes lol it’s a shame
What do you think as cash roce (defined as: FCF/Capital employed)? I honestly think its better than your usual ROCE.
MSFT now at $405. Well played sir.
what is the app/platform you're using?
You were mostly right, inspiring
wow, this video aged like fine wine......keep it up Joseph!!!
Always enjoy your videos but this one was superb!
I will be watching again. Thank you !
Top notch work kid!, enjoyed it
best episode yet.
I think it's fairly easy to criticize and make an anonymous comment on the Internet. Would love to see those people's portfolio performance tracked so we can come back later and see if their "comment" is accurate. Joseph has. And I think that's the difference.
Watching this video in late Aug 2023. Pretty interesting to listen to these thoughts and compare the valuations to where they trade today. Might be a good idea for a video to look back to see how your estimates are holding up … or not.
No valuation is accurate, the goal is to be less wrong than the market. There are many ways to value a company and in my opinion, using a few simple ratios on their own is not sufficient. I would love it if you review one of my latest videos and share your thoughts. I try to be comprehensive, start with the fundamentals and see how the valuation changes based on different assumptions.
Most excellent!
This video aged well! As they say, time will tell, and time did tell your approach is sound
love it! thanks for sharing.
Joseph, where do you get these amazing company graphs that you show in the video? I am talking about the dashboard that shows plenty of metrics and the evolution over quarters.
It´s his own software, he programmed it. I think you get it when you sign up for his patreon or something
Joseph, you should start a second channel with these deep dives. Spectacular presentation. I
Instead of always going to Texas Roadhouse apple and Microsoft can you explain your valuation for TROW it’s at the bottom of the list but it’s the most undervalued on the list being well under your undervalued number.
In fairness, if you just say numbers without actually explaining the prices people will react in accordance. Still a fan.