Transcription
Hey everyone, and welcome back to another video for today. So, it's Friday the 13th when I'm filming this, and of course, it seems like the market is going to be green today. We've had inflation data come out better than expected, which is a good thing in this case, 'cause previously, we had good market data turned out to be bad for the stock market because that could mean that rates are going to stay higher for longer. But if it seems like inflation is getting under control, then you can still cut rates to help the labor market. We'll see what's going to happen. Right now, it seems like we're only going to get two rate cuts for 2026. Some people are already saying that it's probably going to be more, but the majority of the cuts are going to happen in the back half of this year.
Now, in today's video, I do want to focus on, of course, what the heck is going on in this crazy market because previously, we've had, okay, software stocks were getting destroyed because the business is going to be obsolete because of AI, right? That was the narrative for the last 12 months or so. Whether you agree with it or not, that's up to you. I don't agree with it. I think a lot of these companies, software companies, are still going to be here for a long time. Yes, there are some companies that will be disrupted because these companies are features and not really platforms, not really infrastructure. But okay, we'll discuss that today. Or in 2026, it seems like even the company that should be doing the disrupting are going to zero. So, how does that make sense? To me, it doesn't make any sense. Then I'll show you also companies like John Deere, Walmart, Coca-Cola, Costco. They're all getting rewarded by the market. They're all getting rewarded not because they're expected to grow 20% year-over-year. No, they're getting rewarded because those are non-AI related names, non-software related names. They're also trading at an extremely high price-to-earnings metric. Does that make sense? Probably not. But I'll show you the heat map in a bit, and you will see clearly what has happened since the start of the year. We're going to go over a lot of tech companies, of software companies throughout this video. I think it's a very interesting one. Of course, I'm biased since I'm the one talking here to the camera. Anyways, if you enjoy these type of videos, hit all the buttons. Would really appreciate that. If you want to support me even further, do check out link down in the description. End up in comment with the top 10 best stocks to buy now or go to full.com/couchinvestor. Thank you very much.
So, this is the heat map for the year-to-date performance, and it is quite clear what has been happening since the start of the year. You sell tech, and you go into defensive names. You go into names like Walmart, Costco, Home Depot, Exxon, Chevron. All of these names. Of course, the memory players are still doing very well. Micron, SK Hynix. I mean, even Intel is doing well. So, yes, some names here are doing well. Lockheed Martin is doing well. But if you look at this side of the heat map, it's quite clear where the money has been going. You sell tech, you sell AI, you sell software, and you go into these types of names. Johnson and Johnson, Caterpillar. I mean, Applied Materials did report yesterday. Good report. You go into these types of names. Does that make a lot of sense? I would say maybe yes. So, because we had two and a half years of an AI tech bull market, then maybe right now, people in 2026, investors in 2026 are saying, "You know what? Too much uncertainty right now. Let's go into safety for a quarter or two, maybe more, who knows?" And then we'll see what happens. I do think that this, of course, presents huge opportunities for long-term investors because I don't see any of these big companies going away anytime soon.
Now, let's start off here with the CPI numbers. So, inflation data came in cooler than expected, which, of course, is a good thing for the economy. There are way more good numbers than bad ones, but there are still some bad ones. The monthly one headline number up 0.2, below the expected 0.3. Annually, 2.4% increase, down from 2.7 in December. Of course, better than a year ago. We are lapping quite, let's say, higher numbers from last year. Core CPI, excluding food and energy, up 0.3 monthly, 2.5 annually. Where did we see good momentum in energy? Used cars and trucks, motor vehicle insurance, apparel, eggs, as well. But what remains the biggest issue? The biggest issue is still shelter. Now, that is a lagging one. So, we'll see. We'll see what happens in the upcoming readings, but shelter is still the biggest issue here. Service inflation is accelerating. So, airline fares, personal care, recreation, and medical care are all accelerating, which is not great. And then some parts here in food. Food overall, up 2% monthly, 2.9% annually. Cereals and bakery, 1.2% monthly, 3.1% annually. Food away from home, up 0.1% monthly, but 4% annually. Restaurants staying pricey. Of course, these are the headline numbers are good, but these are the numbers that you and me, this is in the United States, so maybe you, not me, you are feeling this in your wallet because these are things that you're probably going to buy each and every day, each and every week. So, there is definitely some work to do, but the headline numbers are definitely better than expected.
Which leads us to this pre-market action. When you're watching this, the market will probably be open already, though. The pre-market action seems a little bit better than what we have seen over the past couple of days. Will it hold? Remains to be seen. My bet is on yes. Last Friday was also kind of a relief day. Today, we have the inflation data. We had some other macro data earlier in the week. Things seem to be trending in the right direction. And so maybe, maybe we're due for a small relief rally. I don't know, but we'll see.
Moving on to the interesting part, I would say, which is speaking about specific companies, speaking about specific sectors in the market, and of course, speaking about maybe stocks that you own in your portfolio. So, the big issue right now that I have is that the market seems to be all over the place. The market seems to be saying, on the one hand, software is getting destroyed because AI is going to disrupt them. On the other hand, the AI names. I'm not even talking about those in the private sector because that doesn't make any sense at all. If you look at the valuation for XAI, for OpenAI, for Anthropic, they are worth way more than some of these highly, highly profitable companies in the public market now. Okay? They might be growing much faster than a Salesforce, a Service Now, and things like that, but from a profitability standpoint, they're nowhere near where these companies are. So, that's something that I don't quite understand. But okay, there's a lot of hype in the private sector. But going back to the AI stocks, the AI companies, those that are publicly traded, those that are supposed to do well. Clearly, these stocks are also getting hit because I guess AI is not a real thing anymore. But if AI is not a real thing anymore, then why are these software companies getting destroyed? You see the problem here? It, to me, just doesn't make any sense right now. I've also said this on X yesterday. We're all talking about how you can "vibe code" any product into existence, and this will disrupt huge companies. I think AI "vibe coders" will be replaced before they replace any big software company. Why is that? Quite simple. I'll give you a couple of examples here. Can you "vibe code" this? This is Shopify. Can you "vibe code" all of these solutions? You can maybe "vibe code" yourself into making a Shopify website or a copycat of that website. But can you maintain it the way Shopify does it? Can you give potential customers all of this? I highly doubt it. I highly, highly doubt it. Salesforce, I know some people don't like it. It's not growing fast, etc., etc. But again, can you "vibe code" this? Can you make sure that this platform can support tens of thousands of clients? Can you maintain that platform? Can you update it? Can you offer customer service, customer support? Can you update it and make it better time and time again? Can you "vibe code" all of this? Probably not. Are you generating tens of billions of dollars in profits and free cash flow? Probably not. Moving on to Service Now. Same thing here. Can you "vibe code" all of this? You cannot. Adobe. Another thing. I know, yeah, you can prompt great images and super short clips. Remember the videos that are made by AI? What are they? 8-second clips, 10-second clips. Okay, maybe a year from now, those are going to be 15-second clips and things like that. But this is the Creative Cloud ecosystem from Adobe. What's stopping them from giving you the tools to make exactly what you are doing on ChatGPT V3 or these Chinese solutions? By the way, a lot of these third-party AI models are integrated inside of Adobe's ecosystem because, guess what? You, as a professional creator, would probably still like to edit it. Color correction, sound, some other stuff. Can you "vibe code" all of this ecosystem? Highly doubt it. Then we talk about the no-brainers here. Amazon's ecosystem, Meta's ecosystem. No. Meta is the simplest example I can give you. Can you "vibe code" three billion users? Probably not, right? It's very cute that you can code yourself a nice little platform that only you use. But what if suddenly a million users are supposed to use it? What if 10 million, a 100 million? Let's say you just created the new ChatGPT, you will have close to a billion users. Can you maintain that? Can you update it? Can you make sure that the platform works each and every day as intended? My opinion is no. Also, we are talking here about "vibe coders" time and time again, or these small AI startups trying to disrupt these huge giants. What is stopping these huge giants from copying that exact startup? Because all of these big companies have billions of dollars in cash flows. Most of them that I'm showing you on the screen. So, what's stopping them from either doing an acquire or basically saying to one of their engineers, "Look, we want this. Just copy that. We'll give you the money. We'll give you the resources. We give you the GPUs. Copy that, integrate it into our ecosystem, and be done with it." What's stopping them from doing it? Nothing. Because I think that that's exactly what's happening right now inside all of these companies. They see their stock go down. They see they're under pressure. And so unless management is extremely stupid, I believe this is exactly what they're doing. I believe they are "vibe coding" the solution inside the company and integrating it into their own ecosystem. Guess what happens later? Well, the "vibe coders" that were talked about at the start, they are going to disappear. So, it's not the big companies that are going to disappear. Yes, maybe some of them, yes, because their solution is just a feature that can be very, very easily copied. But the companies that I'm showing you here, this is another one, Rubrik. I don't think they're going away anytime soon. We're only. This is financial services. This is SoFi because, guess what? Fintech has also been crushed because I guess you're not going to need a loan anymore, or investments, or things like that, right? Because AI, AI will do everything. We've seen that with FICO. We've seen that with S&P Global. Yes, maybe the business models will change for some of these companies. Maybe it's not going to be priced per seat anymore. It's probably going to be priced per outcome. We've talked about that in the previous video. Price per outcome, price per query. So, maybe the business model is going to change, which is why we're seeing the market pull down the metrics, the valuation, the pricing metrics that these companies were used to trade at. More on that in a bit. But when we look at all of this, we think about the big companies, we think about their ecosystem, we think about their customers, we think about the billions in profits that they're generating. Seems like the market is completely forgetting that and fully focused on the highly, highly cash-burning, unprofitable startups. They can do everything while the others will do absolutely nothing. To me, it doesn't make any sense. And so, what do we see this? Before software stocks get crushed because AI could destroy them. AI stocks went up because they would win. Now software and AI stocks go down. Make it make sense. What we're also seeing is this price drives sentiment. Stock goes up, business must be doing very well. But now that all of these stocks have come down, it's so over, right? It's so over for Service Now. It's so over for Shopify. It's over for Amazon, Microsoft, Adobe, Salesforce. All of these companies, it's so over. Why? Uh, look at their stock. It has come down. Sorry to say, ridiculous. Doesn't make any sense.
Which then leads me to the repricing across the board. Why has that happened? And for that, of course, we're going to use my favorite platform here, fiscal.ai. As you know, there is a link down in the description and the pin comment. You'll get 15% off if you use the link. And your users can get two weeks of Fiscal Pro for free. So, if we take the, okay, maybe exaggerated example here, which is Microsoft. This is Microsoft's expected revenue growth over the next coming years. It's going to be very important because then, when we're going to look at the stocks that are up this year, that are getting a super high multiple, you're going to see what their growth is at, if there is any growth. So, Microsoft still expected to grow 16.3% in fiscal '26, 15.3% in fiscal '27, and then 16.5% in fiscal '28 to reach $440.7 billion. So, does that seem like a bad company? Does that seem like a company that's going out of business? Probably not. This is a company that's trading at 23 times forward PE, 25 times trailing PE. If you look at price to free cash flow, with all of these stocks, of course, as capex increases, that's also a thing. At one point, capex will not increase as fast as this year and as last year. Guess what will happen next? Well, you're going to see free cash flow go back up significantly. But then, if you look at operating cash flow for all of these companies, the big companies, even the software ones, it's still incredible. It's still one of their strongest competitive advantages versus the small AI players.
Moving on to the pure, I'd say software players here. So, we've got Intuit, Salesforce, Adobe, Service Now, Monday, Wix, and Shopify. So, a bit of everything across the board. I'm showing here you the margins for each of these businesses over the last 12 months, and you tell me if you see anything wrong with these types of companies. With Intuit, this is basically it across the board, operating margin, free cash flow margin, gross profit margin, and net profit margin over the past, what is it, almost 5 years or so. As for Salesforce, this is it. Do I see something wrong with it as of right now? No. Adobe, do we see something wrong with that as of right now? No. Yes, this was the period here where you have that impact from the Figma acquisition. Although it could be very funny if they try to acquire it again for less than $20 billion, but then they still have the same risk of this acquisition not going through and having to pay that penalty yet again. Service Now, is there something that's wrong with this company margin-wise? No. Monday.com, something wrong with the company margin-wise? No. Although with this company, if you look at operating margin, it's still negative, but it is improving. So, yes, some of these names that are still unprofitable. I guess that's the issue. Why should the market give them a higher multiple still today? Wix also. And you're going to tell me Wix? Wix is the easiest one to disrupt. Why do I need to waste my time "vibe coding" a website into existence if the solution is already there with Wix? That's also a thing. If these companies already provide you with good solutions, with a good product, why why do you waste your time into trying to fix something that isn't broken? Plus, Wix offers you, of course, a lot of other solutions once you create that website. If it ain't broken, don't fix it. As for Shopify, there's something wrong with the business right here. There were here a lot of things that went on with the company with that acquisition of that logistics company. So, that's why you're seeing here this weird impact. But all in all, we talked about the company. They reported earnings this week. Stock was up 12%, then it was down 10% during the day. I would say that with Shopify, maybe with some of the other names out there as well, it has more to do with the fact that they were always trading at a rich multiple, and now the market is bringing it back down a bit because of the uncertainty or because growth is not as good as before. More on that in a bit.
So, for example, this is the revenue for Shopify over the last 12 months. Very nicely up and to the right. This is Salesforce, of course, growing slower, but I mean, the amount of revenue that they generate is much higher than that of Shopify. Service Now also up and to the right. Adobe up and to the right. It's not a high-growth company anymore, but it's a growing company that's still very, very profitable. Intuit is one that, okay, maybe could be facing some headwinds here as well, but so far, they are still expected to grow. Now, let's look at the growth rates. So, we start off with Wix, and again, all of it's powered by fiscal.ai. Do check it out. Look at this. Previously, of course, when revenue was much smaller, they were growing much faster, but right now, it is growing, and it actually has seen some small acceleration over the past 2 years or so. It's not growing above 20% anymore. It's growing here around 13 to 14%. They also bought Base 44. So, if you are in this whole "vibe coding" area, I guess they should be winning, right? Because now they also have that "vibe code" aspect to it. But this is the growth rates right now, which, of course, are lower than before. Monday.com, same thing here. Growth rates are there, but it is lower than before. If that happens, then yes, the market will just make sure that your multiples are compressed. Unless suddenly your margins have been exploding, which, as we've seen, most of these companies still have good margins. Some of them are not as profitable as others, but margins are improving. With Shopify, amazing business, never really traded at a super cheap price. You're always going to pay a premium for an excellent management team. And here we see growth above 20%. Salesforce, we do see some small acceleration in revenue growth. Why am I only showing you revenue growth? Because, well, a dying business should not be showing you revenue growth. So, they are expected to go back to double-digit growth. We know that their target for 2030 is what was it? $60 billion or so in revenue. This is a company that's very, very profitable. If they can grow 10%, if they can show some acceleration in growth, then I do think that they will be rewarded. Same thing here with Adobe. Here you are seeing the expected growth decelerate. This is the thing with these types of companies. If they can show the market that growth is expected to accelerate, if they are, if they can become more profitable, that's even better. But if they can show some acceleration in growth thanks to AI, they will be rewarded handsomely. Service Now, excellent company, as we've talked about that before. But does it deserve the same premium as before? Now that the growth rates are coming down, probably not. They still maybe deserve a small premium because they are a very, very good company, high margin, very good execution. But here as well, there is a reason why the premium is coming down. As for Intuit, here you can see expected growth for fiscal '26 is only 12.5%, and that stays around that range for the next two fiscal years, which is slower than the 17% we've seen over the last 12 months and the 15.6% in fiscal '25. So, for some of these companies, there is a reason why the multiple has come down. Maybe it should not have come down as drastically as we have seen it. But there are definitely some reasons for it. And I didn't even show you Meta or Amazon or Microsoft or these types of companies or Google because we've talked about those before. The PE there is not that high. It's either 30, or with Meta, it's even lower than that. These are companies that are generating revenue well above $100 billion, $200 billion, $300 billion. Still growing, in some cases faster than these companies, which also tells me why should I even waste time with these companies if I can buy the other ones at 20, 25, 30 times earnings? That's also something that you should ask yourself.
And then we reach this point right here. Walmart. Look at Walmart's expected growth for fiscal '26, 3.7% growth. Of course, it's $76 billion in revenue. And then you see some small acceleration to 5%. Now, 5% growth on top of that number is amazing. But this is trading at 44 times earnings. Does it make sense? I don't think so. Costco, around 50 times earnings. You look at the growth rates here, it's actually faster than Walmart. Revenue-wise, a bit, a bit lower, but still close to $300 billion in revenue. Amazing. Yes, AI is not going to disrupt a Costco or a Walmart, but 50 times earnings, 44 times earnings. That's a bit much, right? John Deere, 33 times earnings for declining revenue. This doesn't make any sense. We have here for fiscal '26 a 12.8% decline in revenue. And it has been declining since 2023. Yes, then we are expected to see an acceleration to 9.5%. But why, why is this getting 33 times PE? Doesn't make much sense. Coca-Cola, a company growing 2% or so. It's trading at 24 times PE, which is quite close to their own average, right? Coca-Cola has been like this for many, many years. Why is that? Because with this company, you can predict future cash flows according to the market much easier than some other ones, right? 'Cause it's Coca-Cola. You open the can, taste the feeling, you know? So, 24 times forward earnings for a company that's growing two to 3%, expected to grow 3%. It's still high. The market is saying, "Yeah, but this is a safer bet right now than the tech companies."
Which leads me to the last year. And for us tech investors, 'cause I know most of us are investing in tech. Yes, some of you have energy, some of you have healthcare, some of you have some other so-called boring stocks. But ask yourself this for the software and the AI companies that you own in your portfolios. You look at the stock price, you look at the valuation today, are these stocks going to be higher 1, 2, 3 plus years down the line? If the answer is yes, and you like the business, and you think the business will be better, well, of course, it has to be better, otherwise the stock will not be higher, then this is a great opportunity. I admit it is a very stupid feeling buying a stock, let's say, 3 days ago because it was already cheap, and fast forward to Friday, it's even cheaper. But hey, if we had a crystal ball and we knew how we could buy the bottom each and every time, we would be multibillionaires right now. But that's not the case. What we can do is look at the portfolio, look at the companies that we do own, look at the price. If we like the price, we are buying. If it goes even lower, we have cash. We're going to buy even more. Usually, you get rewarded if you buy great companies at a good prices. And so, that's about it for me in this video. Yes, for us tech investors, for us growth investors, so far 2026 has not been great. But if you remember, the start of 2025 has not been great either, and then it turned out to be a very good year for us because we did buy good companies at depleted prices. Is the same going to happen again? Are we going to have a V-shaped recovery? I don't know. What I do know and what I do control is that I can see what I own. I can look at the valuation. I can look at the business and make a decision for myself. I've been buying names left, right, and center. I'm also probably going to sell Alibaba because, hey, you know what? This whole China thing, every single time the stock is cheap, is going to remain cheap. I'm still in the green. Lots of companies that I do own look even more interesting right now. So, I might completely sell out of that position and then allocate to a local, an Uber, a Rubrik, a Netflix, a Robinhood, even a SoFi. So, it's going to be a very interesting couple of days. Of course, full portfolio update on Sunday. Do check out fiscal.ai for 15% off down in the description and enter a pin comment, and we shall see each other in the next one. Have a great weekend. Bye-bye.