Unable Investment
Club
June, 2025 Meeting Minutes
June 22, 2025
The monthly meeting of
Unable Investment Club was held at Fort Rock Brewing in Rancho Cordova on Thursday,
June 5, 2025. The scheduled location,
Mr. Tequila, was closed. The meeting commenced at 3:00 pm with KS presiding for
FN. PR, CX, HT, JL and DK were also in attendance.
Unable Investment Club has 1 opening.
The Valuation and Member
Status reports were reviewed and the checks were collected.
Late: None.
Old Business:
None.
New Business:
None.
Stock News:
AMT No news.
AAPL After peaking at around $260 near the end of 2024,
Apple's stock price has entered a bear market. Even with the wide stock market
indices approaching new all-time highs, shares of Apple are down 25%, making it
one of the worst-performing large-cap technology stocks in 2025. Investors are
worried about tariffs, slowing revenue growth, and antitrust lawsuits that may
impact the smartphone maker's future earnings power. Is now the right time to
buy the dip on Apple stock? Let's put the numbers to the test and show why
Apple is a risky big tech stock to purchase today. The iPhone is still a
blockbuster consumer product. Over the last six months alone, the segment has
generated more than $100 billion in revenue for Apple, making it the most
popular smartphone in the world by revenue. The problem for investors is the
fact sales have stagnated for the last few years. Apple has been able to
consistently raise the price of new iPhones, but upgrade cycles are proving
longer and longer for consumers, meaning they are going more years before
buying the latest device. This is a major headwind to revenue growth. In order
to expand its ecosystems of devices, Apple has made inroads into wearables like
the Apple Watch and AirPods. These are successful products, but will not move
the needle for Apple's $400 billion in consolidated annual revenue. To do that,
Apple made its largest hardware launch since the iPhone with the Vision Pro
virtual reality headset. A device that costs $3,500, the headset was supposed
to be Apple's next big computing paradigm, giving its users more advanced
computing tools for work and pleasure. So far, it looks like the Vision Pro has
been a flop. Estimates are that unit sales are cumulatively less than 1
million, with many purchasers reportedly stopping using the device after a
trial period. Apple remains a hardware provider tethered to iPhone sales, a
product category that has matured. Expect more struggles to grow revenue on the
hardware side of things in the years ahead unless Apple can come up with a
breakthrough new computing device. What impact will antitrust lawsuits have on
profits? The golden goose of Apple's business in the last few years has been
its software and services segment. Including App Store revenue, licensing
deals, and revenue from its first-party apps such as Apple Music, services
revenue has grown from $13 billion in 2012 to $102 billion over the last 12
months. Services revenue comes with high profit margins, too. Services gross
profit was $76 billion over the past 12 months, which is closing in on the $110
billion in gross profit the company gets from hardware products. Apple has one
problem: Its services cash cow is under attack. First, the App Store monopoly
on Apple devices has been broken due to a court ruling. Apple charges a 30%
take rate on some transactions performed on an iPhone for application
developers, and previously did not allow third-party payment methods unless users
went to a mobile browser. The court ruling states that developers are allowed
to now market directly to consumers to use cheaper payment methods, which could
mean circumvention of Apple's payment ecosystem. Estimates vary, but App Store
revenue is projected to be at least $10 billion a year in high-margin revenue
for Apple. This is not the only antitrust lawsuit putting Apple's profits at
risk. There is an antitrust court case that partially covers the large payment
Alphabet's Google Search makes to be the default engine on Apple devices, with
estimates that the payment is more than $20 billion a year in pure profit. This
could greatly impact Apple's services gross profit, as well as its consolidated
bottom-line earnings. Add both together, and it is clear that Apple's services
division is under threat, and it's the only bright spot in the business over
the last few years. Apple stock has gotten cheaper to start 2025, but that does
not mean it is cheap. It currently has a price-to-earnings ratio (P/E) of about
30.5, which is higher than some of its technology peers that are growing much
faster. Stocks with P/E ratios above 30 are typically reserved for companies
with earnings growing at a quick pace, with strong future growth prospects.
Apple's net income has not grown since 2022, making it one of the
slowest-growing stocks with a high P/E ratio on the market today. That is a
dangerous combination. We cannot forget to talk about tariffs. Apple is at the
heart of the trade war between the United States and China, where most Apple
devices are assembled. In the past, Apple has been able to negotiate its way
out of high tariffs put on its devices, but this time may not go so well. High tariffs
on imports to the United States would be brutal for Apple, as it is virtually
stuck assembling most of its devices in China for the time being. Plus, moving
to new markets or the United States comes with added expenses. There is not
much to like about Apple stock today. Its key product is seeing slowing growth,
the profitable services segment is under fire, and it trades at an expensive
valuation. Add tariff risk, and there is no good reason to buy the dip on Apple
stock today.
AMAT Share prices of Applied Materials have jumped
impressively from the 52-week lows they hit just over two months ago, gaining
31% in a short time on the back of the broader rally in the tech-laden Nasdaq
Composite index that has clocked solid gains of 25% during the same period. What's
worth noting is that investors shrugged off Applied Materials' mixed fiscal
2025 second-quarter results (for the three months ended April 27), which were
released on May 15. The semiconductor equipment supplier reported robust growth
in sales and earnings for the quarter, but its top line was a tad lighter than
expected. The company's outlook for the current quarter followed a similar
pattern. However, savvy investors would do well to note that Applied Materials'
results and guidance were resilient at a time when the tariff-fueled turmoil
and the restrictions on sales of semiconductor equipment to China are turning
out to be headwinds for the company. Let's take a look at the factors that
could help Applied Materials stock maintain its momentum on the market. Applied
Materials is growing at a faster pace despite reduced dependence on China. Applied
Materials reported year-over-year growth of 7% in its revenue in the previous
quarter, while its non-GAAP earnings per share (EPS) increased at a faster pace
of 14%. A quarter of its revenue came from sales of semiconductor manufacturing
equipment to China. For comparison, Applied Materials' top-line growth was flat
in the same quarter last year, while its adjusted earnings increased at a much
slower pace of 5%. Applied Materials got 43% of its revenue from Chinese
customers in the year-ago period. So, the company's growth accelerated even
though restrictions on sales of advanced chipmaking equipment to Chinese
customers hurt its business in its largest market abroad. This can be
attributed to the global growth in semiconductor demand owing to catalysts such
as artificial intelligence (AI). Equity research firm Summit Insights Group
predicts that the improvement in demand for advanced chips in the second half
of 2025 and next year should allow Applied Materials to continue doing well
even if its Chinese business remains negatively impacted. Applied Materials CEO
Gary Dickerson's remarks on last month's earnings conference call suggest
something similar: The impact of AI datacenter innovation and investments is
apparent in the wafer fab equipment market, where there are significant shifts
in the spending mix this year. We see investment in leading edge foundry-logic
growing substantially in 2025, and we also expect spending for leading-edge
DRAM to be up significantly. Large-scale AI infrastructure investments such as
the $500 billion Stargate project and the multibillion-dollar investments by
cloud-computing giants to bolster their AI capabilities are the reasons why
foundries and chipmakers are focused on enhancing their manufacturing
capacities. Foundry giant Taiwan Semiconductor Manufacturing, for instance, is
set to increase its capital expenditures (capex) by 38% at the midpoint of its
forecast to $40 billion in 2025. The Taiwan-based company is on track to build
nine fabrication plants this year. TSMC further points out that it will spend
70% of its capital spending on advanced process nodes. That's not surprising as
almost three-fourths of the company's revenue comes from selling chips
manufactured using advanced nodes that are 7-nanometer (nm) or smaller in size.
Looking ahead, TSMC estimates that its revenue from sales of AI chips is likely
to increase at an annual rate of mid-40% through 2029. So, it won't be
surprising to see the company spending more money on shoring up the production
capacity of advanced chips to meet the AI-fueled demand. The increase in capex
by the likes of TSMC is expected to drive a 2% increase in global semiconductor
equipment spending this year to $110 billion, followed by a much stronger
increase of 18% in 2026. This should ideally lead to an acceleration in Applied
Materials' growth as well, paving the way for more stock price upside. Analysts
are forecasting a 10% increase in Applied Materials' earnings this fiscal year
to $9.49 per share. This is expected to be followed by a smaller jump in fiscal
2026 before another year of double-digit growth in fiscal 2027. However, the
sharp acceleration in global semiconductor equipment spending could allow
Applied Materials to grow at a faster rate over the next couple of years. But
even if the company's bottom line grows in line with consensus expectations and
its earnings hit $11.17 per share after a couple of fiscal years (as per the
chart above), its stock price could jump to $329 (based on the tech-laden
Nasdaq-100 index's forward earnings multiple of 29). That points toward an 88%
gain from current levels in the next three years. Applied Materials stock is
now trading at just 18 times forward earnings, which is a nice discount to the
Nasdaq-100 index, which serves as a proxy for tech stocks. However, the market
could reward Applied Materials with a richer earnings
multiple in the future if it can deliver stronger-than-expected earnings
growth. That's why savvy investors may want to buy this semiconductor stock
while it is still trading at an incredibly cheap valuation, as it has the
ability to go on a terrific bull run going forward.
CNI CN (CNI) has announced plans to invest approximately
US$30 million in Tennessee as part of its 2025 capital investment strategy.
This initiative will focus on infrastructure, technology, rolling stock
equipment, and network improvements, aiming to boost the efficiency and safety
of the rail network across the state. This follows a robust investment of US$36
million in the state during 2024, which included significant projects such as a
US$7 million upgrade to the locomotive fueling facility at Harrison Yard and a
US$1.3 million enhancement to the transload facility at the Memphis railyard.
These strategic upgrades underline CN's commitment to maintaining critical
logistical nodes within Tennessee. CN's operations in Tennessee are
substantial, with the company employing approximately 655 individuals and
operating 161 railroad route miles. In 2024, CN's local economic impact was
considerable, with US$24 million spent locally and US$8.7 million paid in cash
taxes. The company's community contributions included investments of US$64,000,
underscoring its role in supporting Tennessee's economic vitality. According to
Tracy Robinson, President and CEO of CN, the investment is part of a broader
strategy to enhance network resiliency and efficiency, ensuring long-term
sustainable growth both in Tennessee and across CN's extensive rail network.
The Tennessee Department of Transportation has expressed its approval,
highlighting the alignment between CN's investment and the state's
transportation goals.
COST Costco's discount warehouse club has offered shoppers
low prices on high-quality goods for years, and lately, the stores have
attracted a growing number of higher-income earners as well. More than
one-third of the company's customers have household incomes above $125,000. Its
strategy of appealing to as many consumers as possible is paying off. In its
fiscal 2025 third quarter (which ended May 11), the company's sales rose 8% to
nearly $62 billion and its base of cardholders grew by 6.6% over the past 12 months
to 140.6 million. What's more, Costco boasts an average membership renewal rate
of about 93%. This growth occurred as Americans have become more cautious about
their spending. While consumers are guarding their wallets more closely, they
have no issue with paying for Costco's memberships to get access to its
low-priced bulk goods. That's fantastic news for Costco, and it's a good
indication the company will continue to appeal to consumers no matter what
happens with the economy in the near future. And as Costco is on course to end
its fiscal 2025 with 24 new warehouses, the company could tap further into
cost-conscious buyers for many more years to come.
EME No news.
GOOGL For more than two years now, ChatGPT developer OpenAI has
been at the center of the artificial intelligence (AI) revolution. The company
has raised billions in funding from Microsoft, works closely with leading
AI-focused cloud providers such as CoreWeave, and is among the key players
pushing a $500 billion domestic AI infrastructure initiative called Project
Stargate. Recently, OpenAI found itself in the headlines yet again following
news of a major partnership with Alphabet. Let’s explore how OpenAI and
Alphabet are teaming up, and assess why this deal could be a game changer. Why
is OpenAI teaming up with Alphabet? Microsoft's investment in OpenAI wasn't
just about raising capital. As part of their partnership, OpenAI became tightly
integrated into Microsoft's cloud service, Azure. While Azure's infrastructure
has been key to OpenAI maintaining explosive growth over the last two years,
recent moves from the ChatGPT maker suggest it's looking to avoid vendor
lock-in with Microsoft. For instance, as part of Project Stargate, Oracle is
reportedly exploring purchasing several billion dollars worth of Nvidia's
newest Blackwell GPU architecture and leasing access to these chips to OpenAI. According
to recent reporting, OpenAI's partnership with Alphabet revolves around the
same use case as the Oracle deal: accessing compute power through the Google
Cloud Platform. As data workloads continue to rise, training and inferencing AI
models becomes increasingly sophisticated and costly. Hence, broadening its
cloud compute infrastructure beyond Azure is critical for OpenAI. Why this
partnership could be a game changer for Alphabet While cloud computing has
emerged as a fast-growing business for Alphabet, Google Cloud operates at a
much smaller scale than Microsoft Azure and Amazon Web Services (AWS). That
said, working with OpenAI may look odd from the outside as the platform could
be seen as both a technical competitor and existential threat to Google's
search business and AI efforts. However, I think there is a more interesting
aspect to this relationship whereby Alphabet is hedging the economic profiles
of its various platforms. Since ChatGPT emerged, skeptics have been sounding
the alarm on Alphabet's internet search business (Google). The bear narrative
is that inputting a query into a chatbot such as ChatGPT and receiving a
detailed response instantly will turn people away from the traditional search
process of Googling something. Although Alphabet continues to own significant
surface area on the internet thanks to properties such as Google and YouTube,
some search trends are beginning to indicate that ChatGPT and other large
language models may be encroaching on Google's dominance. In turn, Alphabet's
search advertising empire may be about to crack. While the exact details about
OpenAI and Google Cloud's relationship are under tight wraps, I have some ideas
as to why this deal could actually make a lot of strategic sense for Alphabet. In
a scenario where OpenAI and its peers begin to erode Google search -- thereby
taking a toll on Alphabet's advertising revenue -- Alphabet is still able to
capture some downstream monetization. What I mean by that is Alphabet's cloud
infrastructure business captures revenue that is otherwise lost from the
consumer-facing advertising segment of Google search. In turn, this new stream
of cloud revenue can help tighten the gap with AWS and Azure. In addition, a
far more lucrative opportunity for Alphabet could be to hone Google's own AI
capabilities by gaining visibility into OpenAI's workloads. Granted, this last
point may be wishful thinking for the time being, as it's not entirely known
what Alphabet will be privy to with regards to accessing OpenAI's data flow. Is
Alphabet stock a buy right now? The valuation disparity between Alphabet and
its cohorts could suggest an overly bearish narrative, rooted in two primary
areas. First, some investors may be of the opinion that Alphabet entered the
cloud computing race far too late and will never catch up to Amazon or
Microsoft. Second, the rise of OpenAI has been labeled an existential threat to
Google for years now -- and I think Alphabet's steep discount relative to its
peers is pricing in such a narrative. As I outlined above, though, the irony
from Alphabet's deal with OpenAI is that the company might actually have
unlocked a backdoor channel to continue thriving even as its core search
business faces mounting pressure. To me, the deal with OpenAI is a
transformative game changer for Alphabet in the long run and I see the stock as
a no-brainer buy right now.
LIN No news.
MSFT Although Microsoft started the year on a sour note,
more recent developments have given the stock new life, and shares are up by
11% year to date. Looking at the company's results for the third quarter of its
fiscal 2025, ending on March 31, should give long-term investors plenty of
hope. It's not just because it reported solid top- and bottom-line numbers; the
most promising segment also continues to make headway. Microsoft Azure, the
company's cloud unit, recorded revenue growth of 33% for the period. The tech
leader's total revenue increased by a far more modest (but still strong) 13%
year over year to $70.1 billion. Azure is second only to Amazon Web Services in
this industry and has been gaining ground on its competitor. Moreover,
artificial intelligence (AI) is helping to improve the segment, and that's
where the company's most obvious long-term opportunity lies. Also, Microsoft
benefits from a wide moat thanks to switching costs within its cloud unit and
its suite of productivity tools, as well as its strong brand name. The company
also generates significant free cash flow. Though its trailing-12-month free
cash flow has declined by 6.4% compared to this time last year, $69.4 billion
is nothing to sneeze at. Microsoft's consistent profit and ability to generate
cash have typically enabled it to reinvest in the business and pursue other
lucrative opportunities, even as some of its former fast-growing segments
mature. Expect much of the same in the future. Another aspect that makes
Microsoft attractive to long-term investors is its balance sheet. It has the
highest credit rating available from S&P Global, even higher than that of
the U.S. government. Lastly, the tech giant is a strong dividend stock. Its
forward yield isn't impressive at 0.7%, but it has raised its payouts by 167.7%
in the past 10 years. Microsoft combines growth and dividends, and it looks
like a reliable stock to hold on to for good.
NU Nu is an all-digital bank servicing Brazil, Mexico,
and Colombia. It's growing rapidly across metrics, from members to revenue to
profits to assets under management. It started as a platform to offer financial
services to Brazil's underbanked population, which faces high barriers to entry
in the traditional banking system. But it has quickly caught on among all
demographics for its easy-to-use and tech-strong app, and it counts 59% of
Brazil's adult population as members. The Brazil market is already quite
robust, but Nu is still growing at strong rates, adding a million new members
monthly in recent quarters. It's growing even faster in Mexico and Colombia,
where it's still a minor player but has outsized opportunities. It added 4.3
million members in total in the 2025 first quarter, or 19 million since last
year, a 19% increase for a total of 118.6 million. Nu has a strategy of
upselling and cross-selling new products from its diverse assortment, and
combined with new members, it's enjoying high growth. Revenue increased 40%
year over year in the first quarter. It's also a low-cost operator, with no
physical branches, a model that lends itself to high profitability. The
interest-earnings portfolio increased 62% in the first quarter, and the net
interest income also adds to strong profits. Net income totaled $557 million in
the quarter, a 74% increase over last year (currency neutral). Nu stock fell
earlier this year after the news that Berkshire Hathaway sold out of it. But as
a tech-focused growth stock, it was never the typical Buffett pick. It's been
soaring the past few weeks since it doesn't have much exposure to U.S. tariffs,
and it continues to deliver strong results. Management has made reference to
becoming a global company, and it's just getting started. Between new markets,
new products, and new members, Nu has fantastic long-term opportunities.
NVDA Forget chasing the next artificial intelligence (AI)
unicorn. While venture capitalists funnel billions into speculative start-ups,
Nvidia continues to dominate the infrastructure powering the entire industry. A
projected 9% annual return may not sound thrilling, but it could be the
smartest risk-adjusted investment in tech this decade. According to Coatue
Management, an American technology-focused investment firm, Nvidia's market cap
could grow from $3.5 trillion today to $5.6 trillion by 2030, implying a 9.6%
compound annual growth rate from current levels. That's a far cry from its recent
hypergrowth, but it reflects a business that's maturing into its role as the
backbone of the AI economy. Here's why Nvidia remains a compelling buy -- even
as its pace of growth slows. Think of Nvidia as the Apple of AI. Just as the
iPhone represents great hardware backed by an impenetrable ecosystem, Nvidia
has built something far more valuable than fast chips -- it has created the
core operating system for AI. The company's Compute Unified Device Architecture
(CUDA) software platform has become the default language for AI development,
with over 4 million developers now embedded in the ecosystem. Switching to a
competitor means rewriting years of code, creating a switching cost that grows
stronger every day. But Nvidia isn't stopping at software dominance. The
company has systematically expanded into every layer of the AI stack. DGX Cloud
lets companies rent AI supercomputers by the hour, democratizing access to
massive computing power. New enterprise platforms help businesses deploy AI
without armies of data scientists. The Omniverse platform powers everything
from factory simulations to digital twins of entire cities, while the majority
of automakers now rely on Nvidia's DRIVE platform for autonomous vehicle
development. This isn't diversification for its own sake. Each new product
strengthens the core GPU business. A company using Nvidia for robotics
simulations naturally gravitates toward Nvidia chips for its data centers. The
network effects compound with each customer. Yes, 9% annual returns sound
pedestrian compared to Nvidia's recent rocket ride. But consider the
mathematical reality -- when you're already generating $44 billion in quarterly
revenue from a $3.5 trillion base, hypergrowth becomes virtually impossible. What
matters is that this 9% comes with something venture-backed AI start-ups can't
offer: Certainty. The company's Blackwell architecture was fully booked within
months of launch, with shipments stretching into late 2025. In its most recent
quarter, data center revenue surged 73% year over year to $39.1 billion, while
gross margins -- excluding one-time charges -- hover above 70%. That's the kind
of pricing power that competitors can only dream about. And with $54 billion in
cash and marketable securities, Nvidia can weather any storm while continuing
to invest aggressively. But here's what growth projections might be missing:
Nvidia isn't just selling more chips to the same customers. It's expanding the
entire AI market. Right now, AI remains largely confined to tech giants and
cutting-edge enterprises -- not because of cost, but because of complexity.
Nvidia's push to simplify deployment through easier tools, pre-trained models,
and plug-and-play solutions removes the technical barriers. When every small
business can implement AI without a team of engineers, the addressable market
doesn't just grow -- it explodes. Think of local governments optimizing traffic
patterns, small manufacturers predicting equipment failures, or family doctors using
AI diagnostics. The market expansion opportunity dwarfs any competition
concerns. Yes, Nvidia trades at a forward price-to-earnings (P/E) ratio of 34
-- a premium by traditional standards. And yes, Advanced Micro Devices is
gaining ground while cloud giants like Microsoft and Alphabet are building
their own AI chips. Meanwhile, U.S. export restrictions have cut off a
significant portion of China-related revenue, removing an estimated $8 billion
in near-term sales. But what's the alternative? Betting on early-stage AI
start-ups with no profits, no moat, and unproven demand? Nvidia's valuation
isn't cheap, but it reflects something rare in tech: Dominance with durability.
Wall Street keeps searching for the next big thing. But the best tech
investment of the next decade may not come from a stealth start-up or a buzzy
IPO. It's already here, hiding in plain sight. Nvidia, with its projected 9%
annual returns, offers what's become rare in technology: Scale, certainty, and
sustained innovation. While others gamble on speculative AI plays, Nvidia
continues to compound wealth with the dependability of a utility and the
velocity of a start-up. The AI revolution isn't slowing. It's accelerating.
Every breakthrough, from autonomous vehicles to digital twins, reinforces
Nvidia's grip on the infrastructure that powers it all. Sometimes the smartest
move isn't chasing the next Nvidia. It's owning the one that already reshaped
the future -- and is still just getting started.
SPGI S&P Global plays a pivotal role in financial
markets, with its businesses encompassing credit ratings (S&P Ratings),
indexes (S&P Dow Jones Indices), and data and analytics (S&P Global
Market Intelligence). Its high-margin, recurring revenue businesses support
substantial, growing dividends and robust buybacks. With a history of dividend
increases over 53 consecutive years and a wide economic moat, S&P Global
compounds earnings while returning capital to shareholders. Its pricing power
and global demand for its services make it a durable dividend stock suited for
long-term investors.
TSM Nvidia doesn't make the chips that go into its GPUs;
that's done by Taiwan Semiconductor. Alongside Nvidia, Taiwan Semi also has
several other notable names in the AI arms race as clients, as well as consumer
electronics customers like Apple. If you've got a device that would be
considered advanced technology, chances are there's a chip produced by Taiwan
Semiconductor inside of it. Taiwan Semi is also expanding from its home base in
Taiwan to the U.S., Japan, and Germany, reducing the single point of failure
risk by having all manufacturing based in Taiwan. Taiwan is always at risk of
war with mainland China, which could disrupt the global economy should action
occur. However, a takeover would likely trigger the rest of the stock market to
sell off heavily. As a result, I think investors overstate the risk of
investing in a Taiwan-based company. There's a ton to like about TSMC as an
investment, but its growth is near the top. Management projects that Taiwan
Semi's AI-related revenue will increase at a 45% compounded annual growth rate
(CAGR) over the next five years, with total revenue increasing at nearly a 20%
CAGR. That's market-crushing growth, but the stock trades at nearly the same
multiple as the broader market, as measured by the S&P 500. At 22.8 times
forward earnings, its valuation is almost the same as the S&P 500's 22.9
times forward earnings. This reasonable valuation, combined with above-average
growth, makes Taiwan Semiconductor a no-brainer buy today. Investors can
confidently take a position here and expect solid returns over the next five
years.
TTD As the leading independent demand-side ad tech
platform, The Trade Desk has been a longtime winner on the stock market. The
Trade Desk consistently innovates with new technology, including its AI
platform Kokai, its Unified ID 2.0 cookieless tracking protocol, and its
OpenPath supply path optimization program. Now looks like an especially good
time to buy shares of the Trade Desk because they're on sale, trading down 50%
from their peak late last year. That's partly due to a disappointing earnings
report in February, when the ad tech company missed its own guidance for the
first time since its IPO. At the time, CEO Jeff Green said a few internal
errors contributed to the miss, rather than a competitive threat or
macroeconomic weakness. In the first quarter, the company redeemed itself,
reporting 25% year-over-year revenue growth to $616 million. The Trade Desk was
one of the few digital advertising companies to continue to deliver strong
growth, showing its ability to grow in any type of market environment. Looking
ahead, The Trade Desk continues to gain support for its cookieless tracking
solution, growing its larger customer ecosystem and making the platform even
stronger. The Trade Desk looks well-positioned to continue delivering steady
growth, and investors can capitalize on a rare discount in the stock right now.
V This week, stablecoin legislation was approved
by the United States Senate. The bill -- called the GENIUS Act -- still needs
to go through the other side of Congress and on to the President's desk, but it
is one step closer to bringing stablecoins into the financial system. By
regulating the new currencies pegged to the U.S. dollar, issuers of the coin
will now need to keep ample reserves to pay back customers and also go through
regular audits. Investors are betting that legislation will spur customer
adoption, which is a threat to Visa. If stablecoins are adopted wholesale by
consumers, it could mean less payment volume through Visa's network. Less
volume means less profit. Does that mean it is time to sell your Visa stock?
Not really. Here's why stablecoins are not a large threat to Visa's business
model today. This legislation is inspiring companies to investigate making
their own stablecoins. According to reports, both Walmart and Amazon -- the two
largest retailers in the United States -- are exploring making stablecoins for
shoppers. Retailers are incentivized to do this because of the high fees paid
to the credit card networks every year, which range from 2% to 3% of every
transaction. Visa only collects 0.1% or a little more of every dollar spent,
while most goes to the banking partners that issue credit cards and give
consumers cash-back rewards. By adopting stablecoins, merchants see an avenue
to avoiding the credit card fees that are a huge expense on their operations.
Wal-Mart and Amazon alone could save billions of dollars a year that are now
going to the financial system. It only needs to see mass adoption of
stablecoins for this to happen. Easier said than done, but there are a lot of
profits on the line for trying. Defeating Visa and credit card fees is not
going to be easy. If it were, the companies would simply stop accepting Visa
altogether. But they cannot, because of Visa's immense scale in merchant
acceptance and consumer usage that is difficult to replicate. Visa has
operations in 200 countries and territories, accepted by 150 million merchants
and growing. It also has 4.8 billion total debit and credit cards in
circulation. Over $15 trillion in total payments volume is processed by Visa
every year. For stablecoins to succeed, they will need to replicate not one but
both sides of this network. Shoppers will not use stablecoins for everyday use
unless they are accepted everywhere. Merchants will not care about accepting
stablecoins if nobody uses them. Call me skeptical that they will reach Visa's
scale anytime soon. This is a classic example of a network effect competitive
advantage, which reinforces Visa's growing dominance in the industry. Plus, we
shouldn't forget about the thing consumers love about credit cards: cash back
and reward points. Credit cards are able to offer so many perks to customers
because of the 2% to 3% fees charged to merchants. Without them, it is a much
worse customer value proposition, another hurdle for stablecoin adoption. No,
you should not sell your Visa stock just because it is dipping on stablecoin
news. It is clear that this company has a strong competitive advantage and
massive scale that stablecoin issuers are nowhere close to matching. The
legislation has not even been approved yet, so there is no reason to panic. That
does not mean the stock is necessarily a buy at these prices. Its earnings per
share (EPS) grew 10% year over year last quarter, which is right around Visa's
long-term growth. As such a large business already, it is not going to produce
hypergrowth in the form of earnings, but steady durable growth over time. Today,
the stock trades at a premium price-to-earnings ratio (P/E) of 34 even after
this stock dip, making the stock expensive. Don't rush out and sell your Visa
stock. But don't think the stock is a home run buy just because it slipped 10%,
either.
VLTO No news.
WM No news.
Stock Picks:
PR:
Buy additional BWXT (nuclear components and products) and EME (electrical and
mechanical construction, i.e.: data centers).
JL:
Not a pick today; still researching Estée Lauder Companies (EL). Engages in the
manufacture of skin care, makeup, fragrance and hair care products. It sells
products under Estée Lauder, Clinique, Origins, MAC, Bobbi Brown, La Mer, Jo
Malone London, Aveda and Too Faced. Its channels consist of department stores,
multi-brand retailers, upscale perfumeries and pharmacies, and prestige salons
and spas.
On Monday, June 9, 2025 the
following order(s) filled:
Buy
18 BWXT @ $132.59/share; total $2386.62
Buy
5 EME @ $476.662/share; total $2383.31
Meeting adjourned at 3:30
PM.
Respectfully submitted by
Ken Bauman.
Next Meeting: Thursday,
July 3, 2025 at 2:30 p.m. at:
El Dorado Saloon & Grill
879 Embarcadero Dr
El Dorado Hills, CA 95762
916-941-3600