#1 Stock Everyone Must Own

Summary

In this video, the speaker discusses the latest stock market news, focusing on key earnings reports from Google, Microsoft, and Meta. Google stands out with impressive earnings, strong growth in cloud services, and an undervalued stock price. Microsoft shows solid results but faces challenges with valuation. Meta, despite strong growth, is also considered overvalued at its current price. The speaker emphasizes a long-term investment strategy, recommending Google as a must-own stock, while advising caution with Microsoft and Meta due to their high valuations. The video also touches on volatility in stocks like Him & Hers and investment opportunities in a fluctuating market.

Takeaways

• 😀 Google’s impressive earnings: EPS beat expectations, revenue grew by 14.9%, and the cloud segment saw a 35% increase in growth.
• 😀 National minimum wage increases: 6.7% increase in the minimum wage, with a significant 16% increase for 18 to 20-year-olds, which some argue could hurt businesses.
• 😀 Businesses facing financial pressures: With rising corporation taxes, National Insurance contributions, and higher minimum wages, businesses are struggling to keep up.
• 😀 Challenges of paying younger workers: A lower wage for 18-20 year olds incentivizes businesses to hire less experienced workers, but it could also discourage them from offering jobs at all.
• 😀 Stock market volatility: Even strong earnings don’t always correlate with immediate stock price growth, as seen with Google’s 2% increase despite impressive earnings.
• 😀 Google is a strong investment: With a solid balance sheet, steady growth, and a low 19x forward PE, Google is considered one of the best stocks to own right now.
• 😀 Investing for the long-term: Stock prices can be volatile in the short term, but looking at a company’s fundamentals will reward long-term investors.
• 😀 Microsoft’s slight dip: Despite good earnings, Microsoft’s stock fell after hours by 3%, likely due to being overvalued at 32-34x earnings.
• 😀 Meta’s solid performance: Meta posted impressive earnings with 19% revenue growth, but its stock has been slightly down recently, likely taking a well-deserved break after a 70% YTD increase.
• 😀 Google’s growth drivers: The success of Google’s search, YouTube, and Google Network, along with profitability from the cloud segment, make it a top contender for any portfolio.
• 😀 Stock market unpredictability: Day traders often influence short-term stock price movements, but long-term fundamentals should be the focus for serious investors.

Q & A

Why did the speaker express concern about the national minimum wage increase?

The speaker is concerned that the 6.7% rise in the national minimum wage, especially for 18-20 year olds, places a significant burden on businesses. With rising costs from increased corporation taxes and National Insurance contributions, businesses may struggle to cope with higher wage bills, potentially leading to fewer job opportunities for younger, less experienced workers.

What was the speaker’s opinion on the 16% wage increase for 18-20-year-olds?

The speaker believes that the 16% wage increase for 18-20 year olds is excessive, arguing that it’s far above inflation and could discourage businesses from hiring young, inexperienced workers. They emphasize the need for businesses to have an incentive to hire younger employees at lower wages to compensate for their lack of experience.

What is the significance of Google’s recent earnings report?

Google’s earnings report was seen as highly impressive, with a 10% beat on EPS and a 14.9% year-over-year revenue growth. The most notable performance was in Google Cloud, which saw a 35% growth and became profitable. The speaker highlights the company’s strong balance sheet, minimal debt, and the fact that the stock is trading at a relatively low 19 times forward earnings.

Why does the speaker consider Google to be a top stock to own?

The speaker believes Google is an exceptional stock due to its consistent growth, strong profitability, a robust balance sheet, and its position as a market leader. Google’s diverse revenue streams and its affordable valuation of 19 times forward earnings make it an attractive long-term investment.

What is the speaker’s current stance on Microsoft and Meta stocks?

The speaker views both Microsoft and Meta as solid investments but notes that their stocks are taking a break after strong performance this year. Microsoft’s 32 times earnings valuation is seen as a bit high, but the company’s 16% growth is still solid. Similarly, Meta’s stock is up significantly this year, and despite some volatility, the speaker still considers it a strong hold.

What concern did the speaker raise about H and Hairs stock?

The speaker is concerned about the volatility in H and Hairs stock, particularly after it dropped 14% due to an FDA decision regarding a drug. The speaker notes that the stock has been subject to swings driven by momentum traders and expresses a desire for the stock to return to more stable price movements based on its fundamentals.

What advice did the speaker give regarding the valuation of Google?

The speaker suggested that while Google is a great stock to own, they would prefer to buy it at a slightly lower price. They would consider increasing their position if the stock dropped by 10-20%, as they feel it would then represent an even better value.

How does the speaker view the current stock market environment for tech companies?

The speaker sees the current stock market environment for tech companies as a bit of a pause, with stocks like Microsoft and Meta taking a break after strong growth. The speaker believes that while some companies are trading at rich valuations, others like Google still present good value for long-term investors.

Why does the speaker think that Microsoft’s stock might be stagnating?

The speaker suggests that Microsoft’s stock might be stagnating because it is now fairly valued at 32 times earnings. With its solid growth already priced in, there’s less room for significant gains in the short term, leading to a bit of a market breather.

What is the speaker’s outlook on Meta despite its high valuation?

Despite Meta’s high valuation at 274 times earnings, the speaker believes the company’s growth and profitability make it an attractive investment. The strong earnings report and continued growth in revenue make Meta a stock the speaker is still holding, even though they’ve seen a significant gain.