What is the purpose of the video?

The video ranks 24 popular stocks based on their free cash flow profiles.

Which companies are included in the ranking?

Companies include Meta, HIMS, Shopify, Nvidia, Disney, and more.

What criteria are used for ranking?

Companies are ranked based on their free cash flow generation, growth, and predictability.

What tier did Meta receive?

Meta was ranked in the A category.

Nvidia was ranked in the S tier.

What issues were noted with HIMS?

HIMS has significant dilution affecting its free cash flow per share.

What was the ranking for Disney?

Disney was placed in the E tier due to flat free cash flow over the past decade.

How did CrowdStrike rank?

CrowdStrike was placed in the D category due to high stock-based compensation.

What is the overall conclusion of the ranking?

The ranking provides insights into the financial health and growth potential of popular stocks.

I Ranked The Free Cash Flow Of Popular Stocks

00:31:18

https://www.youtube.com/watch?v=uQP6SaBHFCc

Zusammenfassung

TLDRThe video presents a ranking of 24 popular stocks based on their free cash flow profiles, categorizing them from S to F tier. Key companies analyzed include Meta, HIMS, Shopify, Nvidia, Disney, and Uber. The analysis focuses on free cash flow generation, growth rates, and the impact of stock-based compensation on shareholder value. Meta and Nvidia are highlighted as strong performers, while Disney and CrowdStrike face challenges due to stagnant growth and high dilution, respectively. The video emphasizes the importance of free cash flow in assessing a company's financial health and potential for shareholder wealth generation.

Mitbringsel

📈 Meta shows strong free cash flow growth but faces dilution.
💡 HIMS is growing rapidly but has significant stock-based compensation.
🚀 Shopify is on a solid growth trajectory, ranked B tier.
🏆 Nvidia is a standout with exceptional free cash flow, ranked S tier.
📉 Disney struggles with flat free cash flow, placed in E tier.
🔍 Uber demonstrates consistent growth, ranked A tier.
💰 CrowdStrike needs to manage stock-based compensation better, ranked D tier.
🍰 Cheesecake Factory shows stable cash flow but lacks growth, in C tier.
📊 Dualingo is on a positive trajectory, ranked B tier.
🚗 Grab is growing but still has more to prove, currently in C tier.

Zeitleiste

00:00:00 - 00:05:00
The video introduces a ranking of 24 popular stocks based on their free cash flow profiles, emphasizing that the presenter does not own any of these stocks. Companies like Meta, HIMS, Shopify, and others will be evaluated on their ability to generate wealth for shareholders through free cash flow growth.
00:05:00 - 00:10:00
The analysis begins with Meta, which shows strong free cash flow growth despite some volatility. The presenter notes the impact of stock-based compensation on dilution, ultimately placing Meta in the A category due to its solid performance but acknowledging room for improvement.
00:10:00 - 00:15:00
Next, HIMS is discussed, showcasing rapid revenue growth and subscriber increases. However, the significant dilution from stock-based compensation leads to a C rating for its free cash flow profile, indicating potential for future improvement as the company matures.
00:15:00 - 00:20:00
Shopify is highlighted for its impressive growth in free cash flow, moving from negligible amounts to $1.73 billion. The company is rated B, showing strong performance but not yet reaching the elite tier. FICO is then praised for its exceptional free cash flow generation, earning an S tier rating due to its consistent and rapid growth.
00:20:00 - 00:25:00
E.L.F. Beauty is examined next, revealing a volatile free cash flow history and significant dilution, resulting in a D tier rating. Disney's complex business structure and stagnant free cash flow over the past decade lead to an E tier rating, reflecting investor concerns about its growth potential.
00:25:00 - 00:31:18
The video continues with Dualingo, which shows promising free cash flow growth and is rated B. Carvana, despite turning around from significant losses, is placed in the F tier due to its overall negative cash flow history. Uber is rated A for its strong growth metrics and positive free cash flow trajectory, while Robin Hood and Warner Brothers Discovery receive lower ratings due to inconsistent cash flow performance.

Mind Map

Video-Fragen und Antworten

What is the purpose of the video?
The video ranks 24 popular stocks based on their free cash flow profiles.
Which companies are included in the ranking?
Companies include Meta, HIMS, Shopify, Nvidia, Disney, and more.
What criteria are used for ranking?
Companies are ranked based on their free cash flow generation, growth, and predictability.
What tier did Meta receive?
Meta was ranked in the A category.
How did Nvidia rank?
Nvidia was ranked in the S tier.
What issues were noted with HIMS?
HIMS has significant dilution affecting its free cash flow per share.
What was the ranking for Disney?
Disney was placed in the E tier due to flat free cash flow over the past decade.
What tier did Uber receive?
Uber was ranked in the A tier.
How did CrowdStrike rank?
CrowdStrike was placed in the D category due to high stock-based compensation.
What is the overall conclusion of the ranking?
The ranking provides insights into the financial health and growth potential of popular stocks.

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Untertitel

Automatisches Blättern:

00:00:00
Welcome back everyone. We have another
00:00:01
tear ranking video. These are always fun
00:00:03
to do. And in this case, I'll be ranking
00:00:05
the free cash flow profile, the free
00:00:07
cash flow of 24 of the most popular
00:00:10
stocks in the market. And here's the
00:00:12
kicker. These are stocks that I don't
00:00:14
own. Not a single one of them. So, they
00:00:16
are 24 popular companies that I do not
00:00:19
own. We have stocks like Meta, FICO,
00:00:22
Elf, Grab, Shopify, Spotify, Hymns,
00:00:25
Robin Hood, Cheesecake Factory, Warner
00:00:27
Brothers, Discovery. We have Crowd
00:00:30
Strike, Dualingo, Disney, Reddit,
00:00:32
Nvidia, on and on. So, we'll be ranking
00:00:35
these companies based on which ones are
00:00:36
generating the most wealth for
00:00:38
shareholders. Which ones are growing
00:00:40
that free cash flow undiluted the
00:00:42
fastest and the most predictable. Now,
00:00:44
let's go ahead and jump in. Okay, so
00:00:46
we're starting off with a big one here.
00:00:47
We have Meta. Let's take a look at this
00:00:49
one. I've looked at Meta. This is one
00:00:51
that I've been tracking, and obviously
00:00:53
the share price shows this company's
00:00:55
been on a roll, but we have to look at
00:00:57
the free cash flow. What I like to do
00:00:58
personally looking at free cash flows of
00:01:00
companies is quarter by quarter free
00:01:03
cash flow is pretty volatile. You don't
00:01:05
get the best picture. It looks a little
00:01:07
messy. So I like using the quarterly
00:01:10
trailing 12 months. That just means the
00:01:12
most previous four quarters combined.
00:01:14
Every single every single quarter it's
00:01:16
showing the trailing one year. So this
00:01:18
is what it looks like with meta. Overall
00:01:21
very very strong. you have these these
00:01:24
valleys and peaks, but underneath that
00:01:27
you see consistent free cash flow
00:01:29
growth. Now, there is a couple things.
00:01:31
It doesn't look perfect. We have a big
00:01:33
low in 2022. We have it resurgence back
00:01:36
upwards. Now, it's starting to go back
00:01:38
down a little bit. If we look at this on
00:01:40
a per share basis, we can see that it
00:01:42
looks a bit better, meaning that Meta is
00:01:44
doing buybacks. So, it's actually
00:01:46
increasing faster. One of the issues I
00:01:48
think with Meta along with a lot of big
00:01:50
tech companies is when we factor in the
00:01:52
stockbased comp, we do have a lot of
00:01:54
dilution here. So even though they're
00:01:56
generating $52 billion in free cash flow
00:01:59
over the trailing 12 months, they have
00:02:01
$17 billion of stockbased
00:02:04
compact of somewhere around 33%. I'd be
00:02:07
happy to own a company that has a free
00:02:09
cash flow profile that looks like this.
00:02:10
Meta is going in the A category. It's
00:02:12
not there yet in the elite category of
00:02:14
S. It's not perfect. There's just a bit
00:02:16
too much stockbased comp. Other than
00:02:18
that, pretty good. Next up, we have
00:02:20
HIMS, the subscription drug company.
00:02:22
This company is sure growing fast. Look
00:02:24
at the revenue of it. Sheesh. It is
00:02:26
growing really, really fast. Total
00:02:28
subscribers are going up like crazy. We
00:02:30
have the monthly revenue per average
00:02:32
subscriber. That's also going up like
00:02:34
crazy. Now, $84 per sub. But we get to
00:02:36
the free cash flow. How does all of this
00:02:38
translate to profits? Well, I'll give
00:02:40
the caveat that HIMS still feels like
00:02:42
it's early in its journey. So, I'm not
00:02:45
expecting much, but looking at this, it
00:02:47
looks pretty good at first glance. It's
00:02:50
going up like crazy. Plus 346%
00:02:53
year-over-year. Rapid free cash flow
00:02:55
growth. I like seeing that. Now, we have
00:02:58
to dig in a little bit deeper. When I
00:02:59
look at the free cash flow per share,
00:03:02
let's see how dilutive they
00:03:04
are. You see the You see the change
00:03:07
there? We go from free cash flow. And
00:03:09
this is like this is like that Homer
00:03:11
Simpson meme where he has the clip
00:03:13
pulling all of his fat behind him, all
00:03:15
of his skin tight. It it's what you're
00:03:17
seeing right here. You're seeing that
00:03:19
meme play out where we go from the free
00:03:20
cash flow. It looks really pretty at
00:03:22
first glance. This is what management
00:03:24
would love you to focus on. When you
00:03:25
factor in dilution and you divide it by
00:03:27
the amount of shares outstanding because
00:03:29
HIMS is diluting, we can look at that
00:03:32
right here. They have to have shares
00:03:33
going up. I I don't even have to look at
00:03:34
it, but you can see the shares going up.
00:03:37
210 million, 221, 229, 234, 235, 240,
00:03:42
246. If you're a shareholder, you own a
00:03:45
percentage of a company. As they print
00:03:48
more shares, your percentage gets
00:03:50
smaller. You're entitled to to a smaller
00:03:53
portion of the cash flows. So, it
00:03:55
directly affects how much cash you are
00:03:58
entitled to as a shareholder. So, we
00:04:00
don't like seeing this part of it. When
00:04:02
we put these side by side, this is the
00:04:04
dilution that's happening. Roughly half
00:04:06
their free cash flow is eaten up by
00:04:08
stockbased comp now. Again, this is a
00:04:10
company early in its journey. So, I
00:04:12
don't consider that too much of a
00:04:14
problem right now. Looking at the free
00:04:15
cash flow profile today, it looks like
00:04:17
it belongs in a C. It's not terrible,
00:04:19
but it's also not amazing because they
00:04:21
have so much dilution going on. Now,
00:04:23
it's trending in the right direction in
00:04:25
a year or so. I could see it moving up
00:04:27
to a B or an A. That's what we like to
00:04:29
see. Next up, we have Shopify. This is
00:04:31
the best company out of Canada. Some
00:04:33
people will argue that it's Brookfield.
00:04:35
I don't agree. I think Shopify is a
00:04:37
better company. It is a genuinely
00:04:39
amazing tech company, a finance company.
00:04:41
They're building out a a huge digital
00:04:43
ecosystem. I think it's great. So, this
00:04:46
one is one that I really like. I've
00:04:48
looked at it. I hope to own it someday.
00:04:50
When we look at the free cash flow
00:04:51
profile, let's bring it up here. First
00:04:54
glance, it looks like it's growing
00:04:55
rapidly. We're looking at operating
00:04:57
leverage. You don't have companies grow
00:04:59
free cash flow this fast without a lot
00:05:01
of operating leverage. Went from
00:05:02
essentially nothing in 2022 now
00:05:05
generating 1.73 billion. So massive
00:05:09
parabolic growth when we look at this.
00:05:11
The free cash flow per share also
00:05:13
doesn't look too much worse. Notice the
00:05:16
subtle change there. It goes from a 64%
00:05:19
growth rate to a 63. Right now Shopify
00:05:22
is in the B tier category. well on its
00:05:24
way, doing great, but it's not quite up
00:05:26
there with the A or S tier companies
00:05:28
that are in the elite category. Next up,
00:05:30
we have FICO. I bet you can guess where
00:05:32
this one's going to go. Come on. It's
00:05:34
going to go in the the S tier. FICO is
00:05:37
an S tier free cash flow generative
00:05:39
company. And the way to think of that is
00:05:42
try to find a company that has a better
00:05:44
free cash flow profile than FICO. It's
00:05:48
insanely difficult. They almost don't
00:05:50
exist. there there's not many companies
00:05:51
on planet Earth that have generated more
00:05:53
free cash flow at a faster clip and a
00:05:56
more consistent basis. When we look at
00:05:58
this over time, back from 2002 to 2015,
00:06:02
FICO would be somewhere in like a C-
00:06:04
tear. It's not really growing. It's just
00:06:06
kind of maintaining. And they were
00:06:07
growing a volume of scores over that
00:06:09
time period. In 2017, they started to
00:06:11
change their pricing structure once they
00:06:12
got to saturation. And they flexed
00:06:14
incredible pricing power. Now, there's
00:06:17
so much pricing power inherent in this
00:06:20
company that the government's looking at
00:06:21
it. That's when you know a company's
00:06:23
very, very powerful. When the only
00:06:25
entities that can really prevent it from
00:06:27
raising prices is the government. Now,
00:06:30
the free cash has grown 48% over the
00:06:33
past one year. In the past 5 years, it's
00:06:35
grown 21%. Not only that, but it's so
00:06:37
efficient, they've done so many buybacks
00:06:39
along the way that it's grown at 49% on
00:06:42
a free cash flow per share basis. So,
00:06:44
this one goes in the S tier. It doesn't
00:06:46
have anything else to prove. Next up, we
00:06:48
have the beauty company, E.L.F. Beauty.
00:06:50
This is the makeup company. Let's go
00:06:51
ahead and take a look at this one here.
00:06:53
We can bring it up on Qualram. If you're
00:06:54
not aware, E.L.F. Beauty is one of these
00:06:56
companies that came in and they
00:06:58
disrupted the makeup market, the beauty
00:07:00
market with lower price goods. And they
00:07:02
somehow convinced girls it's okay to buy
00:07:05
lower price goods. They're they're just
00:07:07
high quality, but they're at a better
00:07:09
price point. You don't have to break the
00:07:10
bank to buy some makeup. And so, it's a
00:07:12
great product overall. I really like
00:07:14
what they're doing. When we look at the
00:07:16
revenue growth, they certainly had a ton
00:07:18
of revenue growth since 2021, going from
00:07:20
400 million up to 1.3 billion. But with
00:07:23
a lot of these companies, they are so
00:07:26
susceptible to different economic
00:07:27
changes that their margins go up and
00:07:30
down. And this is what we see over time.
00:07:32
Now, this isn't the prettiest free cash
00:07:35
flow history that I've seen. We're
00:07:37
currently sitting at the same free cash
00:07:38
flow it generated over the trailing 12
00:07:40
months that it did way back in 2016. I
00:07:44
don't like seeing that. I'd rather have
00:07:45
a company reach new highs in free cash
00:07:47
flow and never go back down. That's what
00:07:49
Bergkshire does. It's never going to go
00:07:51
back down. FICO is never going to have
00:07:53
free cash flows today of what it had in
00:07:55
2016. It'll just never happen. Same
00:07:57
thing with Netflix and many other
00:07:59
companies. The other thing that we can
00:08:00
look at here is if we zoom in a bit to
00:08:01
the past 5 years, we go to the free cash
00:08:03
flow per share. It also doesn't look
00:08:05
quite as compelling because the company
00:08:08
is doing a substantial amount of
00:08:10
dilution. So to fund their operations,
00:08:12
to get through whatever time periods
00:08:14
they're going through, you can see the
00:08:15
share count going up like crazy. Right
00:08:17
now, I put ELF in the Dtier category.
00:08:19
Now, keep in mind, this is just on their
00:08:21
current free cash flow profile. It can
00:08:23
improve over time. There's other aspects
00:08:25
of a company, but the free cash flow is
00:08:27
a bit too volatile for this one to be
00:08:29
included with these other companies.
00:08:30
Next up, we have Disney. I used to own
00:08:33
Disney at one point. It was actually a
00:08:34
company that I lost money on,
00:08:36
unfortunately. A small amount, but I did
00:08:38
lose some money on it. And we're going
00:08:40
to take a look at Disney's free cash
00:08:42
flow here. The biggest thing that
00:08:43
investors need to appreciate about
00:08:44
Disney is the magnitude of the
00:08:47
transformation and the complexity of the
00:08:49
business. This business is far more
00:08:51
complex. The transition they're going
00:08:53
through is far bigger than most people
00:08:55
anticipate. They have ESPN, they have
00:08:58
parks, they have cruise lines, they have
00:09:00
streaming services, they have disperate
00:09:03
media conglomerates and different things
00:09:04
that they own. Disney's so big, so
00:09:08
complex that it's very difficult to do
00:09:10
analysis on. Now, when we bring up the
00:09:12
free cash flow of this company over
00:09:14
time, it it reminds me a little bit of
00:09:17
ELF in terms of having a lot of history,
00:09:20
a lot of volatility, long periods of no
00:09:23
growth. Overall, what I don't like in
00:09:26
this recual line is the fact that we're
00:09:29
back to where we were back in 2014. So,
00:09:32
we have essentially a full decade of
00:09:35
flat free cash flow. Now, if we just go
00:09:38
through the past couple of years, it
00:09:40
looks great. It looks like they're
00:09:41
growing it. But again, if you're an
00:09:42
investor since 2015, which many people
00:09:44
are, you've seen no growth in this
00:09:47
company over the past decade. And stock
00:09:49
prices follow free cash flow. So, when
00:09:52
we bring up the stock price over the
00:09:53
past 10 years, you have 3% returns. Not
00:09:57
per year. This is just your return. 3%.
00:10:01
Not good. So, what we see here is a
00:10:03
stock that's just trying to reclaim the
00:10:05
same free cash flow as it had during its
00:10:06
peak era, 2015. I'm putting Disney in
00:10:09
the E tier. I think it deserves to be
00:10:11
there until it can grow a stable line of
00:10:14
free cash flow for more than a couple
00:10:16
years. Right now, it just hasn't proven
00:10:18
that. This company's already lost a lot
00:10:20
of trust with investors. Next up, we
00:10:21
have Dualingo. This is the app you can
00:10:23
learn different languages. It's a
00:10:25
subscription and adear model. They also
00:10:27
have added in a lot of different things
00:10:28
like you can learn math or chess.
00:10:30
There's there's all these different
00:10:32
verticals are going down. The revenue is
00:10:34
growing very quickly. We see lots of
00:10:36
metrics like EBA moving up. So, how does
00:10:38
this translate into the free cash flow
00:10:40
line? When I look at it, it looks
00:10:42
honestly pretty good. There's not much
00:10:45
to complain with here. It looks good
00:10:47
across the board. 52% year-over-year
00:10:50
based on the trailing 12 months. They've
00:10:52
never had a quarter with negative free
00:10:54
cash flow. Let's go ahead and take a
00:10:55
look at their stockbased comp. Their
00:10:57
stockbased comp is big, but it's mostly
00:11:02
fixed. It's not going up that much. So,
00:11:04
the free cash flow is growing
00:11:05
dramatically faster than the stockbased
00:11:07
comp. We see the free cash flow per
00:11:09
share looks pretty good, growing 41%
00:11:12
year-over-year. This company has done
00:11:14
nothing throughout its history except
00:11:16
grow its real free cash flow per share
00:11:18
over time. Dualingo for me is going to
00:11:20
go in the B tier category. It is getting
00:11:22
close to that A tier category. It just
00:11:24
needs more time to prove itself. Next,
00:11:26
we have Carvana. Notable for their
00:11:28
vending machines of cars. You've seen
00:11:30
these huge buildings on the side of the
00:11:32
road. It's a company where they they
00:11:34
make it real easy to buy or sell your
00:11:35
cars. That's the whole pitch. And I'm
00:11:37
frankly surprised that this company is
00:11:38
still in business. For a time period
00:11:40
there, I thought they were going out of
00:11:42
business. Let's take a look at how
00:11:43
things have evolved. The revenue went
00:11:45
down. Well, it spiked in 2021. Then it
00:11:48
started to trend downwards. Then in
00:11:50
2024, it started to pick back up. So
00:11:53
things started to head in the right
00:11:54
direction. Now this company was
00:11:57
extremely cash flow negative at one
00:11:59
point losing up to $3
00:12:02
billion a year on a trailing basis. They
00:12:05
were losing three over $3 billion per
00:12:07
year. But they turned it around. Losses
00:12:10
went from 3 billion to 2.5 down to 1
00:12:13
billion down to minus500 million. Then
00:12:16
they started to actually have positive
00:12:17
free cash flow. Now, it's not like
00:12:20
they're generating crazy amounts of
00:12:22
money. In fact, it's going to take a
00:12:24
long time based on this to grow to where
00:12:26
they make up for their losses, but they
00:12:28
are now actually a free cash flow
00:12:30
positive company. Good job for them, at
00:12:32
least not going bankrupt. I think that
00:12:34
needs to be applauded. That's a a pretty
00:12:36
remarkable thing to do given the
00:12:37
circumstances. But, I'm going to put
00:12:39
this one in the F-tier category for now.
00:12:41
It It's just It just doesn't look
00:12:43
pretty. Next up, we have Uber. We all
00:12:46
love Uber. Let's go ahead and take a
00:12:47
look at this one. Uber's growing real
00:12:49
fast. We have Bill Aman in on the stock,
00:12:51
buying it big. And every metric, you
00:12:54
just look at these charts. They're all
00:12:55
moving up and to the right. Exactly what
00:12:57
we want to see. They have active users
00:12:59
growing, revenue, gross bookings, the
00:13:01
amount of trips done, EBA, and this is
00:13:03
all translated into a much stronger than
00:13:06
previously thought company. For a while,
00:13:09
Uber had the same thing where it was
00:13:11
losing a lot of money. It looked like
00:13:12
things are going bad. They started to
00:13:14
move things in the right direction. they
00:13:16
reached scale. A lot of the centralized
00:13:19
expenses of running a robo taxi network
00:13:21
like having the support staff, the
00:13:23
infrastructure, you know, the the all
00:13:25
the people to help out with everything,
00:13:27
those scale really well with the amount
00:13:29
of rides done. So, you see that
00:13:31
operating leverage kick in and then they
00:13:33
turn positive in 2022. Now, it's growing
00:13:36
consistently. What I see here is
00:13:38
basically a line of free cash flow
00:13:40
growth all the way back from Q1 of 2020.
00:13:44
just a a big line from negative to
00:13:46
positive. I'm going to put Uber with
00:13:49
Meta. It's not perfect, but it's really
00:13:52
good right now. I think it's a tier.
00:13:54
Next up, we have Robin Hood. This one's
00:13:56
become more popular as this company's
00:13:58
pushing out a lot of new products, a lot
00:13:59
of new features. They're doing some cool
00:14:01
things. Now, granted, free cash is not
00:14:04
always the best metric to use for
00:14:06
anything that resembles a bank. So, I
00:14:08
understand it's not the the best metric
00:14:10
here. And this is what we see with some
00:14:12
banks or different financial
00:14:13
institutions when measuring free cash
00:14:15
flow. It doesn't look that consistent,
00:14:17
but in terms of free cash flow, they're
00:14:18
not really generating anything above
00:14:20
their stockbased comp. Now, again, this
00:14:22
is a free cash flow ranking, and I have
00:14:23
to rank it primarily by the free cash
00:14:25
flow. I understand there's good things
00:14:26
going on with Robin Hood. It's not a bad
00:14:28
company. I'm not saying that, but right
00:14:30
now, the free cash flows don't look
00:14:32
amazing. Next up, we have Warner
00:14:33
Brothers Discovery. This company's gone
00:14:35
through a bit of a journey. It is the
00:14:37
HBO Max or the Max or the HBO Max
00:14:40
streaming service. They keep changing
00:14:41
the name of it. Let's go ahead and take
00:14:43
a look at the free cash flows. Now, when
00:14:46
we look at the free cash flow, let's
00:14:47
bring it up here. Where is it? There it
00:14:49
is. We have the free cash flow chart. It
00:14:51
looks pretty good. We have the free cash
00:14:53
flow going up dramatically in 2022. It
00:14:57
went up to $7 billion, but it started to
00:15:00
come back down. In fact, it it's
00:15:02
actually come back down by half. So, the
00:15:04
free cash flow looks okay. We had a big
00:15:06
spike there. The real problem with this
00:15:08
company that you'll see is this is the
00:15:11
tricky part. This is why we have these
00:15:12
additional tabs here that you can click
00:15:14
on. You want to look at the free cash
00:15:16
flow per share because remember you're
00:15:18
buying shares of a company. Dilution
00:15:21
matters. When we click on this, the
00:15:23
picture changes. We just look at that
00:15:26
again.
00:15:30
You you see the difference these two
00:15:32
different metrics make? We're visually
00:15:34
illustrating here. One of them it looks
00:15:38
pretty good like it's going up over
00:15:39
time. The other paints an entirely
00:15:41
different picture. Now why is that the
00:15:44
case? Because they diluted shareholders
00:15:46
a lot to fund a big acquisition. It's
00:15:49
not just Warner Brothers, it's Warner
00:15:51
Brothers Discovery. To buy Discovery,
00:15:54
they had to dilute shareholders a
00:15:56
sizable amount. When we look at this
00:15:58
metric, which I think is more telling
00:16:00
for the real situation that shareholders
00:16:01
are in, it really does look terrible
00:16:04
right now. This is not a great
00:16:06
performing company with its free cash
00:16:08
flow. And on a side note, the investors
00:16:10
were correct to deny David Zatlaf, the
00:16:12
CEO of the company, a $51.9 million pay
00:16:16
package. Now, this almost never happens
00:16:18
because in most cases, people are pretty
00:16:20
happy with their CEOs. They're usually
00:16:22
generating wealth, doing their thing.
00:16:24
But investors roundly denied it. They
00:16:26
said they don't want to pay him and I
00:16:27
don't think they should. As an investor,
00:16:29
you want returns. That's why you're
00:16:30
paying the CEO to operate the company,
00:16:32
to execute, and at the end of the day to
00:16:34
get positive returns. When we look at
00:16:36
this company, it's down 71% over the
00:16:38
past decade. Over just the past 5 years,
00:16:39
it's down 62%. Why would you want to pay
00:16:43
the CEO50 $60 million when you're
00:16:47
getting crushed in the stock? It makes
00:16:49
no sense. So, I agree with the
00:16:51
shareholders. I would have voted to not
00:16:52
pay him as well. Now, let's go ahead and
00:16:54
move this to the F where it belongs.
00:16:56
Next up, we have Spotify. This is
00:16:57
another company, another stock I really
00:16:59
like qualitatively. I like the product.
00:17:02
I like how users are addicted to it. I
00:17:04
love how ubiquitous it is. I love how
00:17:06
big the total addressable market is. It
00:17:08
reminds me in a lot of ways of Netflix.
00:17:10
Now, I've hitched my ride to Netflix
00:17:12
firmly. I actually think that Netflix is
00:17:14
a bit better than Spotify for a couple
00:17:16
different reasons, but Spotify is not
00:17:18
bad and the stock is doing fantastic.
00:17:21
You see revenue is growing, their
00:17:23
monthly active users growing over time.
00:17:25
We have some cool charts here showing
00:17:26
that the the premium users, adup
00:17:29
supported users are both growing. And
00:17:31
how is this translating into free cash
00:17:33
flow? Well, similarly to Netflix, the
00:17:36
company has had explosive operating
00:17:37
leverage and free cash flow growth over
00:17:39
just the past 2 years. So in 2023, it
00:17:42
was $58 million of free cash flow. The
00:17:45
trailing 12 months, it's 3 billion. Huge
00:17:48
growth for this company. really
00:17:50
tremendous growth. When we look at it on
00:17:52
a per share basis, it looks about the
00:17:54
same. Again, 200% free cash flow per
00:17:58
share growth. Obviously, the stock is
00:18:00
going to move up. When we look at the
00:18:02
stockbased comp, it's actually going
00:18:03
down as they're growing free cash flow.
00:18:05
I'm putting it in the A tier category.
00:18:07
Very good. A very good start, but they
00:18:09
need a few more years to really justify
00:18:11
being in the S tier category. Now, next
00:18:13
we have MCI. If you're not familiar with
00:18:15
this company, it's the one where they
00:18:16
have the indices for companies outside
00:18:19
of the US. So, global indices. It's kind
00:18:22
of like the S&P global or the, you know,
00:18:25
S&P index, but for foreign companies.
00:18:28
And it has a lot of growth because
00:18:29
foreign markets have lots of organic
00:18:31
growth. So, what we see here is a
00:18:33
company that's growing organically over
00:18:34
time for long periods of time. We have a
00:18:37
company that has high retention rate.
00:18:39
They earn a lot of money through fees by
00:18:41
people linking to their ETFs. basically
00:18:43
the same way that the Dow Jones indices
00:18:46
or S&P Global earns money with their
00:18:48
indicy business and you see the
00:18:50
retention rate remain very high
00:18:53
95.3%. People can't move away from these
00:18:56
ETFs. We look at how this translates
00:18:59
into the free cash flow profile. Now
00:19:02
this this people, ladies and gentlemen,
00:19:05
this is what an S tier free cash flow
00:19:07
profile looks like. It goes up and to
00:19:10
the right consistently almost every
00:19:13
single quarter, quarter after quarter
00:19:16
organically for years. They prove this
00:19:19
through years of time. We go over time
00:19:22
and it's a bit rocky. Back in like 2012
00:19:26
to 2013, but still not even bad. Ever
00:19:29
since then, for well over a decade, they
00:19:32
have had a straight line. I mean, I
00:19:34
mean, just look at it visually. You can
00:19:35
see it's very easy to determine which
00:19:38
companies are fundamentally strong based
00:19:40
on their free cash flow profiles. Now,
00:19:42
of course, we can look at the big
00:19:43
caveat. Are they are they diluting
00:19:45
shareholders like crazy? Let's look at
00:19:47
the free cash flow per share. They're
00:19:49
not only not diluting shareholders, but
00:19:51
they're such an efficient business, they
00:19:53
funneled this back into share buybacks,
00:19:55
which means that the free cash flow on a
00:19:56
per share basis is growing even faster.
00:19:59
Take a look at that. It looks like a
00:20:02
steeper line when you have a free cash
00:20:04
flow per share. This one is going in the
00:20:06
S tier category. I I just think it
00:20:08
belongs there. Next up, we have
00:20:09
Cheesecake Factory. Now, some investors
00:20:11
kind of scoff at food companies,
00:20:13
restaurants, especially sitdown
00:20:15
restaurants. I don't. I've made a lot of
00:20:17
money with restaurants. Every investment
00:20:19
that I've made into a restaurant, like
00:20:21
Starbucks, Chipotle, Texas Roadhouse,
00:20:23
they've all made money. Uh Chipotle was
00:20:25
a fantastic investment. It went up
00:20:27
around 30% in just a few months. Texas
00:20:30
Roadhouse is literally one of my best
00:20:32
investments of all time. substantial
00:20:34
gains in that company. So, I take
00:20:36
restaurants rather seriously. I've
00:20:38
looked at Cheesecake Factory a time or
00:20:40
two. My biggest apprehension for this
00:20:43
company is that their restaurants are
00:20:45
very ornate and kind of elaborate. They
00:20:48
they're not really easy to just open up
00:20:50
anywhere. They also have a very complex
00:20:52
menu and most restaurants find it
00:20:55
difficult to scale with as big or robust
00:20:57
of a menu as Cheesecake Factory. So,
00:20:59
they basically have a more elaborate
00:21:00
operation that inhibits their ability to
00:21:03
rapidly scale like a Texas Roadhouse,
00:21:05
like a Starbucks, like a Chipotle. But
00:21:07
either way, I think there's a lot of
00:21:08
positives to it. I really like
00:21:10
Cheesecake Factory. I think it's a fun
00:21:11
place to go. I always uh look forward to
00:21:14
it. When we look at the free cash flow
00:21:16
on this restaurant, it doesn't look
00:21:19
great right now. It's basically
00:21:21
generating free cash flow consistently,
00:21:23
which is good, but it's not growing it.
00:21:26
And while it's true not every company
00:21:27
needs to grow free cash flow, you can
00:21:30
run a a big profitable business and have
00:21:32
the same free cash flow every year. As
00:21:34
an investor, you want growth to beat the
00:21:36
market. You want growth in these
00:21:38
metrics. I'm going to put this one in
00:21:40
the Ctier category. It's not terrible,
00:21:43
but it's also not amazing. Right now,
00:21:45
they still have some work to do to
00:21:47
really grow that free cash flow per
00:21:49
share over time. Next up, we have
00:21:50
Airbnb, the company that's trying to
00:21:52
become the everything app. They are
00:21:54
basically a direct competitor to a
00:21:56
company that I own, which is Booking
00:21:58
Holdings. Now, when I initially looked
00:22:00
at Airbnb, that's what actually led me
00:22:03
to Booking Holdings. It it shows up when
00:22:05
you're doing research on the company,
00:22:07
and then I saw more research more from
00:22:08
my Discord, different members, and I
00:22:11
started to like Booking Holdings more
00:22:13
than Airbnb. The stock has outperformed
00:22:15
Airbnb almost over every time period.
00:22:18
Uh, we have the free cash flow line
00:22:19
here, which is all right. It's really
00:22:23
not amazing. When we look at this, it
00:22:24
really hasn't moved much over the past
00:22:26
year. We look at the free cash flow per
00:22:28
share. It's up 5% over the past year.
00:22:31
I'm going to put this one down in the D
00:22:32
category. I think it has a lot to prove.
00:22:34
It really has to keep up with its
00:22:36
competitors and even try to grow faster.
00:22:39
Next up, we have Service Now. This is a
00:22:40
company that I've looked at similar to
00:22:42
Salesforce. From my research, Service
00:22:44
Now is actually a better company than
00:22:46
Salesforce. It has more organic growth,
00:22:48
a little bit more operating leverage,
00:22:49
higher margins, a faster topline growth
00:22:52
rate, but it is far far more expensive.
00:22:54
Salesforce trades at a substantial
00:22:56
discount to Service Now. We look at any
00:22:59
of the metrics, they're all moving up
00:23:00
and to the right, and the free cash flow
00:23:02
is no different. It looks really, really
00:23:05
good. We're looking at a company growing
00:23:07
at 16% in the past one year, 30% over
00:23:10
the past 2 year in a kar. The only thing
00:23:12
that I'd take away is that they do a lot
00:23:14
of stockbased comp. Now, they're growing
00:23:17
their free cash flow faster than the
00:23:18
stockbased comp. So, that per share
00:23:20
growth is still strong, but this is a
00:23:23
lot of expense. It's a big drag on what
00:23:25
they could otherwise return back to the
00:23:27
shareholder. I'm putting it in the Btier
00:23:29
category. It's very strong, consistent
00:23:32
for a long period of time, but that huge
00:23:34
amount of stockbased comp, over 50% of
00:23:36
the cash flows being eaten up by that
00:23:38
bumps it down from the AER category.
00:23:40
Next up, we have Nvidia. Let's go ahead
00:23:42
and take a look at this one. You might
00:23:44
be able to guess where this one goes. Uh
00:23:46
it looks kind of like like this is the
00:23:49
type of company that you wouldn't even
00:23:51
be able to make it up. I mean it would
00:23:53
it would seem silly if you if you just
00:23:55
guessed that it would grow the way that
00:23:57
it has. You would seem like a lunatic,
00:24:00
like a heretic uh prophesying of some
00:24:02
great company that would grow grow free
00:24:04
cash flow the way that it has. Look at
00:24:06
this history. It's hard to actually
00:24:09
illustrate how fast the free cash flow
00:24:11
has grown. So, no matter what way you
00:24:14
look at it, this is S tier free cash
00:24:16
flows. Nvidia is a very easy one to
00:24:18
rank. Next up, we have the social media
00:24:20
company Reddit. This is one of the newer
00:24:23
social media companies to the market,
00:24:25
even though Reddit's been around for a
00:24:26
long, long time period. Now, they've
00:24:29
implemented a lot of things that are
00:24:30
kind of one-time things like licensing
00:24:32
data and that type of thing to grow
00:24:34
their revenue rapidly over just the past
00:24:36
year. So, we see some rapid growth here
00:24:39
and I do like the direction this is
00:24:40
going. free cash flow positive rapid
00:24:42
growth year-over-year on a very good
00:24:44
trajectory. When we switch this to free
00:24:46
cash flow per share, it doesn't look
00:24:48
quite as good. Obviously, they have a
00:24:50
lot of stockbased comp. Looks like
00:24:51
that's getting under control a bit. Uh
00:24:54
it it feels like even though Reddit is a
00:24:56
very old company, it feels like they're
00:24:59
just getting to market maturity, like
00:25:01
they're just trying to get their their
00:25:03
operating efficiency under control just
00:25:05
now. In fact, they're they're actually
00:25:07
early in their journey of becoming a
00:25:09
profitable company. They're on a good
00:25:11
track, but this company has a lot more
00:25:13
to prove to be able to show that it's a
00:25:16
great free cash flow generative company.
00:25:18
Right now, it's just way too early to
00:25:19
tell. Next up, we have Brinker
00:25:21
International, which is a weird name,
00:25:22
but it's the company that owns Chili's.
00:25:24
And I like Chili. I think it's actually
00:25:26
a fun time. Who doesn't like going out
00:25:28
to Chili's? Like, I think you have to be
00:25:29
a bit of a prude to not enjoy going to
00:25:31
Chili's. Uh, sign me up for the triple
00:25:34
dipper. That's always my go-to. But I I
00:25:36
like everything. The chips and salsa
00:25:38
there is really good. Chili's has
00:25:39
actually done an incredibly good job
00:25:41
turning this company around. They used
00:25:43
to have a bloated menu. Uh everything
00:25:45
took long to prepare. They implemented a
00:25:48
lot of best practices. They have new
00:25:50
grills. Uh they simplified their menu.
00:25:52
They lowered prices. They really did a
00:25:55
great job turning this around. It's been
00:25:56
a great turnaround story and you've seen
00:25:58
that in the stock price. Look over the
00:26:00
past 5 years. Went from $41 now up to
00:26:03
$144. So Chili's implemented all of
00:26:06
these changes from a restaurant that
00:26:08
seemed like it was struggling, not doing
00:26:09
well. Now they're really relevant, doing
00:26:12
a great job. When we look at the free
00:26:14
cash flow, it's also following. Now,
00:26:17
this is again one that you can go way
00:26:18
back to 2015. Uh it's not too much above
00:26:22
that point, but the company has
00:26:24
fundamentally done a lot of changes over
00:26:26
just the past couple of years to really
00:26:28
grow the free cash flow. On the free
00:26:30
cash flow per share basis, it looks a
00:26:33
little bit better. They're not really
00:26:34
diluting shareholders with this growth.
00:26:36
They've reached an all-time high in free
00:26:39
cash flow per share. I like it. I think
00:26:41
Chili's is headed in a great direction.
00:26:43
I'm actually going to put this one up in
00:26:44
the Btare category. Might seem a little
00:26:47
aggressive, but this company really has
00:26:49
had a fantastic turnaround. Free cash
00:26:51
flow is growing really, really fast, and
00:26:53
it seems like these changes are
00:26:54
sticking. Like it's going to do well for
00:26:56
a while. Next up, we have a company that
00:26:57
you may not be familiar with. It's one
00:26:59
called Verisk Analytics and it's one
00:27:02
that's it's a bit out there, right? It's
00:27:04
a company that you don't deal with as a
00:27:06
customer. The best way to describe this
00:27:07
company is they use a lot of analytics
00:27:10
and risk measurement tools to help
00:27:12
insurance companies properly price
00:27:14
different risks for policies that
00:27:16
they're implementing. So, for example,
00:27:17
if an insurance company wants to have
00:27:19
like a hurricane policy, Verisk
00:27:21
Analytics will help them be able to
00:27:23
price that policy to where it's not too
00:27:25
expensive, not too cheap, where it's
00:27:27
factoring in all the risk and they have
00:27:29
a lot of data to be able to do that.
00:27:30
Now, qualitatively, fundamentally, this
00:27:33
is an extraordinary company, one that's
00:27:35
similar to S&P Global, Equifax. It's
00:27:38
deeply embedded. It's part of the
00:27:40
process of thousands of different
00:27:42
companies. It's high margin software
00:27:44
subscription type revenue just very very
00:27:47
good. It grew 17% year-over-year over
00:27:50
the past year. We have 15% growth over
00:27:53
the past 2 years. When we look at this
00:27:55
on a per share basis, it's growing much
00:27:57
faster because they're also not
00:27:59
dilutive. Their high margin, they
00:28:01
funneled this into buybacks. Vary
00:28:03
Analytics belongs in the S tier
00:28:05
category. They have S tierfree cash
00:28:07
flows. Next up, we have CrowdStrike, the
00:28:09
cyber security company. They went
00:28:11
through that whole debacle with the bad
00:28:13
update, but things have recovered
00:28:15
soundly since then. Everything's moving
00:28:18
up and to the right just like we want to
00:28:19
see. We have this nice growth arc for a
00:28:22
couple of years, just consistent free
00:28:24
cash flow growth, then it flattens off.
00:28:27
Not the biggest problem in the world.
00:28:29
It's okay for companies to take a break
00:28:30
as they do different investments or they
00:28:32
have different different things happen
00:28:34
with a company for a time. Not every
00:28:36
company is going to be perfectly
00:28:37
consistent, but this does raise some
00:28:39
question marks of what's going on. The
00:28:41
big problem for this company is the
00:28:43
stockbased comp. It's one of these
00:28:45
situations where the stockbased comp is
00:28:47
competing with the free cash flow line.
00:28:50
You see that we have the free cash flow
00:28:52
growing and it's trying to out compete
00:28:55
their stockbased comp, but they hire so
00:28:58
many people. They pay them so much
00:28:59
money. They have all these engineers and
00:29:01
analytic experts and salespeople. They
00:29:04
have marketing people they have to pay.
00:29:06
Then on top of that, they have elite
00:29:08
engineers that they have to pay. So the
00:29:10
people in the company are becoming
00:29:11
wealthy. They're getting a lot of value
00:29:13
out of the company, but you're the
00:29:15
shareholder. We want to know what wealth
00:29:18
we're generating. When we look at the
00:29:20
net between the two, it doesn't look
00:29:22
quite as good. I'm going to put this one
00:29:24
down into the D category. CrowdStrike
00:29:27
needs to prove that it can really grow
00:29:28
the free cash flow without the
00:29:29
stockbased comp following up with it.
00:29:32
They need to do that for some time. Next
00:29:33
up, we have Tesla. Let's go ahead and
00:29:35
take a look at how Tesla's doing with
00:29:36
their free cash flow. We have a company
00:29:40
that was doing really well in 2022, but
00:29:43
that was given a lot of tax credits, a
00:29:46
lot of incentives, and a lot of
00:29:48
stimulus. Their customer base was
00:29:50
infused with cash during a time period
00:29:53
where interest rates were very low. So,
00:29:55
you had this combination of of money
00:29:58
raining down upon people and low
00:30:01
interest rates. And Tesla's lineup of
00:30:03
vehicles was really fresh. So right now
00:30:05
the free cash flow has been flat for the
00:30:08
past three or four years. Hasn't grown
00:30:10
much. Right now Tesla belongs in the
00:30:12
seat tier category. Now finally we get
00:30:14
to Grab. You probably heard about this
00:30:16
company, but if you haven't, it's
00:30:17
basically like the Uber or Door Dash of
00:30:20
Asia. So Indonesia, these type of
00:30:23
countries, they use Grab. They're not
00:30:25
using Uber and Door Dash as much as
00:30:27
they're using Grab. We see a very
00:30:28
similar trajectory as Uber. We can kind
00:30:32
of draw this straight line going up from
00:30:34
2022 into current day. Now, it's it's
00:30:37
not perfect, but we're getting along
00:30:39
that point. When we look at the
00:30:40
stockbased comp, there's not much of it,
00:30:42
and it's actually going down. I really
00:30:44
like what I'm seeing here. If we zoom in
00:30:46
a bit further, we go to the free cash
00:30:48
flow per share. It doesn't look too much
00:30:50
different. Just good growth all around
00:30:52
with this company on a free cash flow
00:30:53
basis. I think that Grab is further away
00:30:56
on its journey than Uber. It still has a
00:30:59
bit more to prove. Over time, we could
00:31:00
see this one move up to the B tier and
00:31:02
the A tier, but right now I see it as a
00:31:05
C. So, there you have it. These are some
00:31:06
of the most popular companies in the
00:31:08
market that I don't have in my portfolio
00:31:11
ranked by their free cash flow. Let me
00:31:13
know if you disagree or agree on the
00:31:15
rankings. That's it for this time. See
00:31:17
you in the next one.