Okay folks, so I have an unpopular opinion, but let me go ahead and pick your brain about something. Welcome to the first few trading days of 2019. Apple stock would open in the high 30s, split, adjusted hit lows at 35.50 and then never again return to that price point. That year.

In 2019, the Fed would decide to back off from its interest rate height goals after destabilizing the market in 2018, especially towards the end of the year. And little did folks know that not only would the Fed be backing off from their modest rate hikes, but that just shortly, a year later, you'd have a massive pandemic and the Fed would actually go and loosen monetary policy even more. This unprecedented easing of monetary policy was one of the biggest aids at helping Apple on a trajectory that brought it from those 35 lows at the start of 2019 to the new highs that we're seeing today at 182 dollars that it just hit on Monday. in a relatively short amount of time, a company that was already one of the most proven and biggest companies in the world in 2019 went on to 5x again.

There are many stores like this with many different tech companies over the same time period, if not an even shorter time period. and it's companies like Apple who the overall market has extreme exposure to that led to the market having such unprecedented gains these last couple of years. What is so special about Apple is that unlike something like a Tesla, while Tesla was still dealing with bankruptcy threats, Apple was reporting record quarters. the more uncertainty and doubt a stock has attached to it, the more room it has to run if they prove those doubts wrong aka the risk premium or the Discovery Premium.

Discovering value before everybody else means that you get a lot more money and a lot higher return. But when it comes to something like an Apple, you have a very interesting picture because there just wasn't much doubt of Apple's future in 2019. Not much extra value to discover, just value expected to grow. It was a major and healthily growing big company, no threat of bankruptcy, no doubt about their expansion plans.

Everything was laid out perfectly to a T, and people probably had in the back of their mind that hey, this is gonna beat expectations over the next couple of years. You simply can't say that there's a lot of Discovery Premium or Risk Premium that Apple was offering at the time of purchase in January 2019.. Yes, they've certainly hit and beat a lot of expectations, they've expanded their goal posts, they've diversified their revenue streams out the market, had high expectations, and Apple beat them. But 5x the valuation.

Is Apple really five times as good as it was just two three years ago. How much of it was actual value that the company created for customers and shareholders that commanded a higher price compared to how much of it was fed pumping or crowd-based euphoria cycles. Because when you look at the top holdings of the S P 500, it's not just Apple, Microsoft Alphabet, Amazon, Meta have all had similar stories and these are all excellent companies, but there's a certain limit to how much you could pay for an excellent company before. it doesn't make any sense anymore, and these have gotten more and more concentrated over the last year.

A lot of people have sold out of so many other stocks specifically to buy the Big Dogs, and they've performed very, very well as a result. But as we are heading into 2022, it's time that we start analyzing the actual value behind them instead of just blindly buying them. It's important to identify and be aware of areas that are seeing overall market exuberance that are seeing crowds just rushing to buy no matter what the price. And right now there's really no other sector quite like Big Tech for that, and even crazier to think about.

Today, the market is enjoying some fed clarity and the market had a very, very nice green day all around. And who's leading well? Once again, Big Tech, you're seeing Big Tech consistently have some of the most extreme inflows week after week, whenever the market just has a little bit of a sigh of relief. A lot of this capital isn't even looking anymore at what the companies are doing, they're just buying the big names that they know and I want to use Big Dog number One, Apple as an example. I made a spreadsheet to break down what you're getting for your dollars.

So on January 3rd, 2019, Apple traded at lows of 35 dollars and 50 cents. Now, a few days ago, it went as high as 182 dollars. That's a 413 percent increase in price per share. What has the company done during that time? Well, if you compare the most recently reported quarter from each date, on January 3rd, you had 63 billion in revenue.

On December 13th, you had 83 billion. That's a 35 increase in revenue. Very solid That came out to a price to sales multiple. That changed from 2.88 to 8.14 though, it jumped 183.

So today, you're basically paying 183 more for the revenue than you were paying. In 2019, you're paying 183 more per dollar of revenue than you were paying in 2019.. So yes, the revenue's up, but you're paying more for each dollar despite the fact that the revenues up, if that makes sense. That said, revenue is increasing faster compared to the year ago quarter.

With this first report clocking at 20 and this year clocking at 29 growth, that's a 45 increase. Very solid. So growth rates are higher, at least over that adjusted time period. But if you look at the overall trend, hey, it's been a positive trend.

So they are doing better in terms of growth rates, which is saying something for such a massive company. Part of that is due to A very, very hot consumer spending environment that we had as well as stimulus checks. But still. I mean the trend is fine.

You look at their guidance for the next quarter. Back in 2019, they were projecting the next quarter to rake in between 89 billion and 93 billion in revenue this quarter. They are providing no guidance because of supply chain issues and coveted uncertainty. Companies that provide no guidance on earnings generally trade at a discount.

You get extra premium because you have an uncertainty there These days. with Apple, it doesn't pay that premium anymore because people are like hey, wait, we trust Apple. It's gone up so much and the numbers they've done quarter over quarter have been so positive. Who cares if they don't give us guidance, We trust them.

That said, what is working in Apple's favor is they did do some share buybacks taking shares outstanding from 19 billion to 16.8 billion for a 12 total decrease that returns value back to the shareholders. And when you look at their gross profit increase at 46 and you take that into consideration per share, Apple is returning 65 more profit per share than they did January 3rd of 2019. Great great couple of years 65 more profit? That's fantastic. This is an excellent company, but again, the stock price is trading split adjusted up 413.

How much of that growth is really deserved by the numbers? And what about future growth? Hey, companies trade ahead of themselves, right? If people think that Apple's going to triple revenue in the next couple years, well, they're going to factor that into the price. But how much are you factoring in here? You're factoring in five times the valuation of Apple in 2019. Apple at that time, people thought was over value. Now you're factoring in that entire company times five Charlie.

But Apple has Ev plans. Bruh. Okay and fine, but how much of that gets factored into Apple stock price is entering a low margin, high competition industry that Apple has no previous experience in. Really going to create as much value as the entire company of Apple in 2019? Is it going to create 5x the value or even 2x the value? Apple could eat Lucid, Rivian and Fisker, and maybe part of Tesla, and the valuation still wouldn't make sense for that.

I'm sure the general oh, Apple's going to innovate into other sectors is something that bolsters the share price, but again, to what extent. The core here is their extremely successful and high margin hardware business and software business. I love Apple. I think they're going to be a huge player for many, many decades down the road, but again, numbers matter.

It's not just oh, I like the company buy at any price and it's the same story. When you're talking about a lot of other big tech companies from Facebook, Microsoft, Netflix, software companies like Adobe, you go through the list. There's a lot of stories very, very similar to this. And it's not that they're not great companies, it's just that you're paying so much more for each unit of growth than you ever have before, to the point where it's like, hey, does this even make sense anymore? You're paying for other people's risk premiums and you're not getting any risk premium yourself.

So net in effect. What am I saying? I'm saying that Big Tech is getting exuberant and it's getting very, very overcrowded. People are rushing to it as a safe haven for growth, specifically because it's had such a record couple of years. But that's a bad strategy.

You could buy the best companies if you buy them at the worst prices. Well, you're not going to make much money, of course. Yet I don't even know that it makes a lot of sense over a medium-term time horizon. When you're going into 2022, we're seeing a lot of those personal, disposable income numbers trend down.

People are gonna have less money, not more money to spend on a lot of these discretionary goods. With a lot of these big tech companies, you had two massive, massive years You had 2020 where everybody was stuck at home and had to buy and spend all their time on the computer with hardware and software. With 2021, you had all of this huge economic bounce back. Everybody's like, okay, well now we got our jobs back.

we got more money to spend on things, people had stimulus checks that could go out and buy iphones Pretty much all of 2021. You had a hot consumer sentiment market, but now we're heading into 2022. People have less money to spend on things that are discretionary. A lot of these companies that saw massive growth in one year are now going to have to try to beat that in the next year.

and they're not going to be able to. Most of these companies are going to have to compare their sales to years where you had massive, massive increases. It's very difficult to compete with that. Am I saying that big tech is in a bubble that's going to pop massively? No.

Unless the Fed over does their monetary policy tightening. I think that most big tech companies are probably going to hit a point soon where they trade like Amazon Amazon did really, really well. Everybody was really, really excited about E-commerce E-commerce numbers went up Huge. Amazon factored in lots and lots of growth.

Then all of a sudden, the next year came. And guess what? E-commerce wasn't as hot as it was the prior year. After two decades of insane consistent growth, Amazon's like, hey, wait a second. We're seeing a push back in sales because all of a sudden people go from having to be locked in their damn house to going out and actually buying things in person again.

So you see that trend shift for a year or two, and the market has to adjust to that. So what happens with Amazon? Well, instead of tanking, it basically just stays stagnant. The market knows that hey, after a couple years, this is going to be a big player again, but it has to get back on a stage the last 15 16 months. Hey, the market has basically been saying hey, we love Amazon, but it's just factored in so much that we have to wait for the fundamentals to catch up to its price.

And once it does, then we can start breaking it out. I think that quite simply, you're going to see the Us economy underperform expectations a bit. Next year, you're not going to see very boom-bastic growth and sales numbers in these companies. You're actually going to see worse numbers because you're comparing it to 2021 and 2020 and the market's not going to beat them down, but it's also not going to want to keep rallying them up.

You're going to see most of them find a point where they start stagnating Right now. You're kind of in the middle of the euphoria where people are like hey, okay, well if I have extra capital and the market's not taken, I'm going to put it in big tech. But eventually it's going to get to the point where people realize, hey, wait, there's actual numbers behind these companies and I'm paying for years and years of growth just because I like the company. Personally, I'm a big fan of cheesecake, and I think that Cheesecake has a promising outlook in my future for my future dietary habits.

I would pay five dollars. I would pay 10. I'd pay 20 for cheesecake. But when you say hey, would you pay 500 for cheesecake that's when I start saying, you know I like cheesecake.

It's not that I don't like cheesecake, it's just that I don't like it for 500. when the market's exuberant in a sector, it doesn't matter how long it's going to take for the company to earn the valuation, people just pay it to screw it. But when valuations start coming into check, the people that bought it all-time high start getting screwed. Now again, hopefully you start seeing some stagnation before that actually happens so that you can get a more healthy cycle than an uptrend, but something to be aware of.

That's at least my perspective. I would just say if you're going to buy stocks, make sure to look for ones that are actually a very, very good deal instead of just buying it because it's going up in the moment because you can make money for a couple months doing that. But if you're not somebody that has a long enough time horizon to weather the storms and actually understand the perspective when taken into consideration valuations, I think you're gonna have a really bad time. Anyways, folks that caps off this video.

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