My Biggest Stock Gain Ever

[00:00:00] Speaker 1: Welcome back, everyone. Today, we're seeing one of the most incredible days in the market that I've seen in a long time. My portfolio alone, just today, is up $65,000. That's a 4.5% increase day over day. Now, I've had a couple days in the market that have been particularly good, but this one is unusual. This is probably the biggest gain I've ever had in a single day. And I believe we're seeing the start of a rotation, a rotation of companies that were the semi-companies, the big winners, the bottlenecks. The companies like Micron and NVIDIA, ASML, we have SanDisk, we have all those companies that investors race to. Well, now it seems like the party's over and investors are shifting gears. They're changing the lane into the companies that bought all those supplies, the companies that own the customer connections. Big tech, we have companies like Amazon that are up 7% today. Meta, Microsoft, Apple, all of these are having big moves upwards. We have MasterCard moving up big. Then we get to other companies, even S&P Global and Moody's are moving up. We also have Duolingo, which reported its earnings yesterday. I'll be going over that, but the stock is up a staggering 35% on the day. Duolingo is having a massive recovery. We have Uber that also reported earnings and is up big today. We'll be going over those earnings as well. Then of course, we have other companies like DoorDash that are moving big as well. This is overall one of the most broad victories of a portfolio in a single day. We also have midterms. Midterms happened, and I'll be going over my thoughts on what's going to happen because of it. Now, not the politics side. I don't really care about the politics, but I want to look at how midterms will affect your portfolio. Because there is news that some of the Democrats that regain control don't like data centers. Democrats want to stop data centers. They want to halt the progress of them. What does this mean for companies like Microsoft, Google, Amazon, and Meta, the big builders of data centers? We'll be discussing that as well. Now, we can jump in and look at my portfolio. This is what it looks like. This is the live data. It's trading right now. And we have a gain total of $550,000. So that's the all-time gain. It's next to all-time highs for my portfolio. So we're back up to all-time highs. If I look at the one day, though, this is particularly crazy. We're up 4.5% on the day, $65,000 right now. And it's distributed amongst almost every position. For example, the only position in my portfolio that's in the red today is ASML. And this is somewhat predictable. I've said before that my portfolio is mostly the companies that are buyers of the AI movement. They're buyers of things like GPUs and they're buyers of data centers. They're the ones making these big CapEx investments. They're also the software, subscription, digital platform companies that own the customer. These companies have not been rewarded this year. Investors have not paid much attention to them. The companies that everybody's been focused on is Micron Technology, NVIDIA, ASML, SanDisk, the energy companies supplying data center builds. All of those have been the major focus. Those are the so-called bottleneck stocks. In my portfolio, I have one of those companies, just one. It is ASML. So ASML has done incredibly good this year. It's up a huge amount, but today it's down amongst every other stock in my portfolio going up. And this isn't unique. I'm not cherry picking here. If we look across different companies that are these bottleneck stocks, we have ASML that's down. We have Micron Technology that's down 6%. We have SanDisk down 8.25%. Bloom Energy, another one of these bottleneck AI stocks is getting crushed today down 7.6%. And then you see the trade-off. You go from those companies that were part of this rotation into the companies that money's being rotated into. This is where the money's going. Amazon's up a staggering 6.4%, up to $266 in a single day. My position in Amazon's up $13,000 today. That's almost a 1% percentage point gain in my portfolio alone from Amazon. Meta's up a marginal amount. I don't consider this a huge jump given today's market, but it is still on the green, 2.3%. Meta's not being as rewarded today as companies like Microsoft, up 6.13% on the day. We have right here, MasterCard, up 3%. Smaller gain from MasterCard, but still beating out all the major indices. And it's my largest position, so this is really bumping up the portfolio. Then we got Google, still trading around, but up 4%, beating out all the major indices. This is where money's being rotated into. As we look further down the list, even the companies that aren't the major big tech holdings are now getting a bid. S&P Global, up 3.56%. It's a good move for S&P Global. It's $5,000 in the portfolio there. Netflix is up 4%. Netflix got very close to $60. It almost triggered my $10,000 buy, but it was just above, and now it seems to be getting a bid. It seems to be going back up, but this one is on watch. Netflix has been crushed this year. We'll see how this one manages through the remainder of the year. Moody's, which I believe is mostly around its fair value, is still moving up big today, even more than S&P Global, up nearly 5%. Costco's still a meaningful holding in my portfolio. It's a $90,000 position, up 2,700. Another thing interesting about Costco is people forget about this company. They just don't pay attention to it because the multiple's so high. But if we look at the performance, year-to-date, Costco's up 21%. Just want to point that out. Costco is crushing it this year, beating both indices again. After Costco, we have Texas Roadhouse, which is reporting earnings tomorrow. It's being bid up into earnings, and I think the earnings will be great. So overall, when I look at today, I see it as further evidence of a rotation from the semiconductor, the bottleneck stocks, the ones like the memory companies and the chip companies, into the companies that have the more enduring business models. When I evaluate companies like MasterCard or Amazon, and I put them against SanDisk or Micron Technologies, it's true that right now, SanDisk and Micron Technologies are making astronomical amounts of money. So any bulls on those companies will point to their demand, to how much money they're making today, how much cash flow they're making today. But if you pull up a longer chart, you see that they go through huge influxes of demand, and then it cools off for a period. Now, we don't know when that cooling off will happen, but what I do know is that these business models that have the consumer, that have billions of customers on every single product that they release, these ones have a very enduring business model. They're subscription-based, advertising-based. When you use AWS, it's on a recurring basis. It grows year after year after year. And so I believe investors will start to question how much they should emphasize this AI trade. I think the bottleneck trade will start to have a little bit more questionability. Investors will get a little bit more concerned about it. And investors like Brad Gerstner, who are big on these companies, will now start rotating into the big tech companies, into the software companies, into the ones that have all of those customers, the relationships. These companies control the world. Google, Apple, Microsoft, Amazon, all of these companies have the products that you use every single day. To think that they're not going to be able to monetize that many connections, I think is absurd. The investors that have priced the CapEx as low profitability CapEx or not high returns, I think is also crazy. These companies have an ability to monetize at an incredible rate and they're already showing that. So I feel very good about how my portfolio is positioned going forward. And I think we're going to see more days like this in the future. Now, it won't be a perfect transition. It's not going to happen overnight and continue on. There's going to be ebbs and flows, but I think we're going to see more of this over time. Now, one company that reported earnings just yesterday and is now currently up 32% is Duolingo. Duolingo is a smaller position in my portfolio. It only makes up around 2.7%. So this isn't some gargantuan bet that my portfolio lives or dies by, but it was a stock that I was excited about. Duolingo, I believe, has a lot of potential. Now, after today, the stock is only down $5,600 on a $41,000 position, down about 15%. Duolingo is going through an incredible recovery from its lows. If we look at the price chart here, Duolingo fell from $180 all the way down to $90 per share. It started to recover rapidly. It went up to $150. Then it traded back down. And with today's trade, it's back up to around $170, working its way back almost flat year to date. Right now, it's currently down 3.6% on the year. Gaining 32% is a big day on a stock, but we have to put this in context. Duolingo is not a typical stock. It's a company that has a small market cap. It's only $8 billion. With a lot of companies we're dealing with, the MasterCards and Amazons and Googles, those have trillion dollar market caps. So it's more difficult and it requires more money to move those market caps than it does a company like Duolingo. Duolingo with only an $8 billion market cap, well, things can change quickly. If the company starts doing well, the market cap could double. It's a company where things can improve rapidly. If the company does poorly and sentiment goes south, the market cap can quickly be chopped in half. That's what we saw over the past year. So this is a situation of a highly volatile company. And if you've been following Duolingo or invested in this company, you'll see the trade up and down every single day is around 5%. But today is a massive increase in share price and it shows how quickly the narrative and things can change. So Duolingo stock is up big today and the company's doing well. It's actually performing well, fundamentally speaking. Intrinsically, the company's doing really quite well. That is the reason that investors are having such a strong, positive reaction on the day. For example, the daily active users went from 50.5 million to 64.9 million year over year, a 29% increase. So it gained 29% daily active users year over year. In the last quarter alone, the user growth accelerated. It went from the previous quarter being 58.7 million daily active users now to 64.9 daily active users. So Duolingo added on 6 million daily active users in the past three months alone. incrementally on top of their already large daily active user user base. And what this tells you is a couple of things. One of them is that it's still growing. Duolingo is still growing and the rate of growth has increased in terms of the people using the platform. It also tells you that the people that were talking about how AI is disrupting Duolingo, how it will never be able to compete, they said that people are just going to go to ChatGPT or Muse or Anthropic. And look, I can spin up a language app. I can Vibe code it. Look, I typed build a Duolingo clone in Anthropic. That's just the same, right? Wrong. It's not the same. And that's the reason that people aren't using your Vibe coded language learning app and instead they're using Duolingo. You see, the issue with these thoughts are they're just not practical. Nobody really wants to start a massive language learning app with thousands of lessons, tens of thousands of lessons in structured format. Nobody wants to create ladders and ranking systems and streaks. Nobody really wants to go through the effort of making so it has retention or it has characters, characters that you get to know over time and you can talk with. Nobody wants to perfect all the small things that make Duolingo work as well as it works. Without all those little edge cases, all that fine tuning, it's not enough to compete with this company. The people that have talked about how AI will easily replace this have just been wrong and they're wrong again in the numbers. AI has enhanced Duolingo's ability to create core structure rapidly. Their user growth has sped up both on a daily active user basis and a monthly active user basis. Now there's many people that enjoyed Duolingo going down. Frankly, they liked seeing me fail. There's some people that get joy out of that. I know it's not everybody. Some people like seeing other people succeed. There's some people that like seeing other people fail. Makes them feel better about themselves. If Joseph fails at something, then at least, you know, at least you can feel better that you didn't fail in that way. There's some people that find joy in watching other people fail. Watching other people lose money because it makes them feel better about themselves. And that was apparent with Duolingo. This is a stock more than any that people enjoyed watching me fail with. They enjoyed watching it go down. Many people danced on the grave of Duolingo with a lot of glee. So it's a hard thing for some people to see this stock going back up. It's almost like it's frustrating for them. They're looking at it and they're going, no, that's supposed to be a failed investment. That one was supposed to do poorly. And it's not. Duolingo is doing well. Even looking at the business, the other metrics are doing well. Paid subscribers grew by 14% up to 13.1 million. It actually accelerated this quarter. So not only are they growing in their monthly users, but they're also converting those monthly users to daily active users. You can see that conversion going on here. This is the percentage of their daily active users that make up monthly active users and it's growing over time. Then the daily active users like the product enough that many of them upgrade to a paid subscription to get rid of the ads and have additional additional features. That's where you get the paid subscriptions growing by 14%. This is a solid conversion cycle. Duolingo has a free product. It gets a lot of people in the door. Many of them use the product at least once a month. Then they start to use it every single day as they get the streak and they start enjoying it more. And then if they use it for long enough, a lot of them will just pay for a year in advance. That's where you see the paid subscribers and the bookings growing. Both of these came in above estimates. The financial metrics of Duolingo look very solid. The user growth and engagement look very solid. And the product improvements are also great. Duolingo is getting better. If you haven't used it in the past year or so, try it out again. It is dramatically better. For example, Duolingo used to have two paid tiers. They had super, which was the upgrade, and then they have the max, which is the upgrade above super. Max was kind of expensive and it had features like the video call feature. You could have unlimited video calls. They're sunsetting the max tier. They're just getting rid of it and they're putting unlimited video calls in super, making it more accessible, more broad, bringing more value to their biggest tier. This may affect bookings in the short term, but this makes the product much better and gives a lot of people a bigger reason to upgrade. The video calling is exceptionally good. You can practice learning languages much better in an interactive video call than you can just filling out a sentence. So this is a major product improvement. The company's product is actually getting better. And while that's going on, we have Duolingo with an exceptional balance sheet. The stock continues to gain cash every single quarter. In the meantime, they can just make money with interest. Now the interest rates are higher, but this puts them in a very flexible position to do acquisitions or buybacks if they need. This is over 10% of their market cap in cash. So overall, I like what I see with Duolingo. I see great progress. I think the company intrinsically is worth more. And of course, I love seeing stocks like this. Ones that have epic falls in stock price. They go down dramatically. Everybody counts them as dead. Many people pointing to them as the worst examples in the market, the worst stock picks ever. And they all of a sudden have these big resurgences as the numbers actually show that they're doing quite well. I've been through this before many times. I'm sure it will happen in the future. This is just another example. Now next we have Uber. This is one that flew as high as $90 per share. Then it sold off a lot. That's when I jumped into the company. It went down a little bit more, but now it's having a resurgence. It's up 7% on the day after the most recent earnings. I think we should look at an interview with the Uber CEO, Dara. [00:15:25] Speaker 2: Yeah, absolutely. So gross bookings for us grew 20% year on year on a $60 billion base now, which is terrific. TRIPS grew 16% year on year in our audience. [00:15:37] Speaker 1: He just said 20% gross bookings is terrific. Now, CEOs always want to say everything they're doing is terrific, right? That's a CEO talk. They're very good communicators. This is terrific. This is not just a CEO saying it. That's a very, very good number. Consider the size of Uber. Consider that organic growth rate for a company that size and at that valuation. This is very, very good. So I don't think that he's overstating it at all. [00:16:03] Speaker 2: As an all-time record, well over 200 million monthly active users growing at 14% year on year. The trend that we saw this quarter was actually that we have more demand than we have supply. So the demand, especially for mobility services, is exceeding that of the supply of drivers, of couriers on our platform. And unlike, you know, the Silicon Valley chip makers where we just want to, you know, they raise price on their customers, we don't want to raise price on our customers. The way that, you know, you raise prices, either the customers have to pay more time, ETAs go up, or prices for their rides or their deliveries goes up. And that's not how we want to run our business. So we're actually now investing significantly in supply in India, in Brazil, in Canada, even in the U.S., to make sure that we have the right amount of driver and courier supply to meet the demand that we're seeing from the consumer, which remains actually quite strong. [00:17:03] Speaker 1: Wait, in terms of an investment that you may... That's just wild to me. Consider the billions of rides they're doing, four billion plus rides a single quarter. And he says that they still have too much demand, more demand than they have supply. And Uber's the company that's good at having dynamic supply, fulfilling demand with supply. But even so, Uber still struggles with that issue of not having enough supply. [00:17:26] Speaker 3: I have to make, going forward, when you think about the robo-taxi market and what happens in a sort of a post-Waymo world for you, I don't know where you think that all stands, but how much do you think you're going to have to spend? [00:17:42] Speaker 2: Well, we have talked about investing and committing over $10 billion in capital, and it's a combination of investing in various partners, partners like Neuro, like Avride, like many other partners, Rivian as well, who are developing the technology. And it's a really efficient way of investment where for every dollar we invest, usually they're able to raise $2 to $3 from external investments as well. Then we invest in operationalizing AVs. So, for example, our partnership with Waymo in Atlanta and Austin, right now AVs are much less profitable, so to speak, than human beings. That will kind of over a period of time, we think AV profitability will be equal to human kind of profitability as well on our platform, but that is certainly going to take time. And then we are also committing to vehicles. You know, these are very, very expensive cars with incredible sensor stacks, compute stacks, et cetera. And so we have committed about $10 billion for AV going forward. We believe that we're going to have over 2,000 AVs in multiple markets next year. And then we're going to get into the tens of thousands in 2028 and then substantially more in 29 and 30. We think, you know, these autonomous vehicles are going to be safer. And the good news is that in markets in which we see AVs introduced, the market growth is actually accelerating. So the market growth in AV markets or mature AV markets as is California and, for example, Texas, is growing about seven points faster the whole category than the rest of the nation. So it does look like these autonomous vehicles are opening up new demand channels, which is great for everybody. [00:19:29] Speaker 1: he shares such a good story. This is a great story, a great narrative for the company. I think that Dara does a wonderful job trying to sell investors on what the goal is for Uber, the vision that he sees. And even when I look at the bear cases with Waymo and Tesla's Cyber Cab, I think there is a bear case there. There's a chance Uber could be unsuccessful or have market share stolen, but I think that's very low because when you look at Waymo, even in places like San Francisco where they've been operating for years and years, very effectively, Uber's still growing even in those markets where AVs have been for a long period of time. So I don't believe that Dara is making it up when he says that AVs create more demand, that we're going to work with them, we're going to have many competitors, but the mobility market's so massive, we'll be very successful. I believe him. I think he's telling the truth here. Of course, he's outlining the positives of the company like a CEO does. He's not sharing the biggest bear case, but I think he shares a very compelling narrative. Uber's earnings are really strong across the board. It's difficult for me to find any weaknesses in it, and I like the direction that management's going. I think the stock is going to outperform over the next couple of years. Now, the next big news that we have to go over is midterms. They were yesterday, and the Democrats had an outstanding victory. They regained a lot of control. Now, this does have an impact on many of the companies that I invest in because, well, Trump has kind of been buddy-buddy with a lot of companies. He's having their leaders at his White House. He's talking with them, discussing with them. He's always pro-business. That's a big part of his platform. But then you have the Democrats that haven't had as friendly of a relationship, and many of them don't like data centers. It's a very popular talking point, very popular political position to be opposed to the progress of data centers. Now, there's two sides to this. People love AI in terms of the use cases. So when it comes to actually using AI, people like their feed being better from Instagram. That's powered by AI. They love having better Reels. People like Facebook being better in its recommendations and the things it covers. People like using AI at work when they're making things go faster, when they're building spreadsheets quicker. That side of it, people love, and they use it more and more. Then there's a side that actually powers the AI, which is all the computational power that's held in data centers, and everybody hates that side of it. So it's this funny dynamic where everybody loves part of AI, but they hate the thing that powers the AI, and that's where the Democrats focus on. They don't like the data centers and they want to slow down the construction of it. For example, we have from Bloomberg here, the AI data center boom is set for upheaval after US election route. Yahoo says that Democrats' victories in Texas laid bare voters unease over data centers and signals new hurdles for the industry. The person that just won in Texas has said before that she's going to halt all data center construction. Like, just put pause on all of it. And Texas is like one of the biggest areas of data center construction. Now, it's difficult to say whether or not she could actually do that, what type of red tape has to happen, what deals are actually done, and which ones are new. But regardless, there likely will be far more friction for data centers being built. And many people look at this and they say, oh man, this isn't good. This is not good for Google or Amazon or any of these companies that are spending all of this money to build data centers. I think what investors are missing here is part of the reason that Amazon, Google, and Meta raced ahead to get as much land as possible, to negotiate as much power contracts as possible, and to build as many data centers as possible as quick as possible is because they knew this type of thing was happening. They knew that this was around the corner and Republicans lost a lot of power just overnight. So big tech companies knew that this was inevitable. They knew that they were in a lower regulatory environment where they could build and build quickly and they took full advantage of it. The fact that this could be slowed down now isn't bearish for big tech companies. In fact, this makes data centers more scarce. This makes it difficult for new entrants to go through the red tape, to get approved, to go through the whole process that these big companies have been doing all along. This is why neoclouds and companies trying to build out new data center demand are getting crushed today and the big tech companies are going up. The companies that already own the consumer and owned massive amounts of data centers, well, those just became more valuable. This makes data centers more scarce. And when something becomes more scarce, it becomes more valuable. That means the companies that already have massive amounts of data centers that are operational, ones that are already approved and permitted and already going through construction are far more valuable than the companies trying to enter in the game today. Those are the companies that I own, the big tech companies. And if it becomes nearly impossible to build another data center, all that means is that the companies that control all the computational power, all the intelligence in the world are the ones that have already built existing data centers. So when I read this, I don't see this as bearish on big tech. I don't think that this is going to make the companies I own worth less. The downside is it could constrain future growth in AWS or Google Cloud or Meta's CapEx investments, but all that would do is make it so their cash flows are higher in the short term and it would equally slow down every competitor. And again, it would make the companies existing now be able to charge more for their existing data centers. The ability to power intelligence is already scarce. Data centers are being built to try to lower that scarcity and lower that demand. If they block data centers being built, it'll make that intelligence even more valuable. So with this midterms, I don't view this as necessarily bad news for my portfolio and I think the stock's returns today are representative of that. That's it for this episode. Hope you enjoyed. See you in the next one.