I Just Bought $8,000 Of These Two Stocks

Key Concepts

• Stock Purchases: The author's recent investments in Google and Amazon.
• Story Fund: A concentrated portfolio holding six positions, nearing $400,000 in value.
• Passive Income Portfolio: The author's larger portfolio, also holding Google.
• Anchoring Bias: A cognitive bias where investors are anchored to past prices, hindering rational decision-making.
• Google Search Growth: Double-digit quarterly revenue growth, driven by increased user engagement and AI features.
• Google Chrome: The threat of divestiture has been removed, a significant positive for Google.
• Google Cloud: Accelerating growth, attracting smaller companies and "unicorns" due to integration with DeepMind and Gemini.
• Waymo: Rapid expansion in ride-sharing and international markets, with a new partnership with DoorDash for food delivery.
• YouTube: Compounding its lead in streaming time, gaining market share against competitors.
• Amazon: Recent dip, but strong long-term catalysts including AWS growth, e-commerce dominance, and potential in logistics/robotics.
• Salesforce: Reaccelerating growth projections (10% organic), improved operating margins, and significant free cash flow generation.
• Sundar Pichai Interview: Discussion on ChatGPT's launch, Google's AI strategy (Gemini), and long-term bets like Waymo and quantum computing.
• Grant Cardone's Advice: A critique of simplistic financial advice for making $400,000 annually.

Stock Buys: Google and Amazon

The author details two recent stock purchases totaling $8,000: $5,000 in one company and $3,000 in another. These buys were not for excitement but for predictable and meaningful returns with protected downside.

Google

• Investment Context: Google was purchased in both the "Story Fund" and the "Passive Income Portfolio."
  • Story Fund: A $59,700 position with $31,000 in gains.
  • Passive Income Portfolio: A $91,000 position with $25,000 in gains.
• Rationale for Buying at All-Time Highs: The author addresses the common investor hesitation to buy at peak prices, attributing it to "anchoring bias." He argues that significant positive developments since April have justified the current valuation.
• Key Bullish Catalysts for Google:
  • Google Search Growth: Continues to grow at 10-12% quarterly, with increasing user volume and engagement in AI overviews. This growth is not solely due to increased ad load but also rising usage frequency.
  • Chrome's Future: The threat of divestiture has been removed, securing a critical asset with billions of daily users.
  • Google Cloud Acceleration: Growing faster and attracting smaller companies and "unicorns" due to its integration with AI models (DeepMind, Gemini) and strong security features.
  • Waymo's Progress: Rapid expansion in ride-sharing and international markets (e.g., London in 2026), coupled with a new partnership with DoorDash for food delivery. Waymo is executing safely and expanding its services.
  • YouTube's Dominance: Compounding its lead in streaming time according to Nielsen ratings, gaining market share consistently over the past three years.
• Overall Assessment: Google has become fundamentally stronger over the past six months than any other company in the author's portfolio, with multiple bullish catalysts playing out simultaneously. The author believes there is low downside risk.

Amazon

• Investment Context: An additional $3,000 was invested in Amazon, increasing the author's position. The purchase was made during a slight dip, not at an all-time high.
• Key Bullish Catalysts for Amazon:
  • AWS Profit Engine: Continues to grow incrementally each quarter. Reports suggest capacity expansion and accelerated growth in the coming year, which is a significant catalyst for the stock.
  • E-commerce Dominance: Maintains a leading position in US e-commerce despite competition from Walmart. This dominance fuels its lucrative advertising business.
  • Services Revenue Growth: Services are making up a larger percentage of revenue, indicating a higher-quality revenue mix.
  • Logistics, Robotics, and Automation: A future catalyst not fully priced in. Amazon is expected to leverage its logistics expertise, robotics, and humanoid robots to replace dangerous, low-paying jobs and then license this technology to other companies.
• Overall Assessment: Amazon is seen as a company with significant long-term optionality and growth paths, with a dominant lead in multiple industries. The author anticipates a change in its current downward trend.

Salesforce: Dreamforce and Future Projections

Salesforce recently held its Dreamforce convention, where it outlined future projections and addressed investor concerns.

• Growth Reacceleration: Salesforce projects a return to 10%+ organic growth, addressing concerns about its recent slowdown from 20% to around 8%.
• Financial Improvements:
  • Operating Margins: Doubled from 17% to 34% between 2021 and 2025.
  • Free Cash Flow: Projected to increase from $4 billion in 2021 to $14 billion in 2025.
  • Shareholder Returns: 99% of free cash flow will be returned to shareholders via dividends and buybacks, with a significant step-up in repurchases expected.
• Investor Sentiment: While the projections are positive, investors remain somewhat skeptical, reflected in the stock's flat performance.
• Author's Outlook: The author believes that if Salesforce continues to execute on its strategy and reaccelerate revenue growth, the stock could see significant upside, potentially reaching $300-$330 per share. Despite being the author's worst performer, he intends to hold it due to the positive developments.

Sundar Pichai Interview: Google's AI Journey and Long-Term Vision

An interview with Sundar Pichai, CEO of Google, and Marc Benioff, CEO of Salesforce, revealed insights into Google's perspective on AI and its future.

Reaction to ChatGPT's Launch

• Pichai's Perspective: He acknowledged OpenAI's first-mover advantage with ChatGPT. He explained that Google, due to its scale and existing customer base, had to be more cautious and responsible in releasing its AI products. Unlike smaller companies like OpenAI, Google had more to lose and a reputation to protect.
• Google's Preparedness: Despite the initial perception, Pichai stated that Google was already making significant progress in AI, with a full-stack approach from infrastructure (including custom chips) to world-class research teams (Google Research, Brain, DeepMind) and models. He viewed ChatGPT's launch as a shift in the window of opportunity, positioning Google to seize it.
• Execution: Pichai highlighted Google's rapid iteration and execution following ChatGPT's release, including bringing Google Brain and DeepMind together and developing Gemini. He considers Google's handling of the AI challenge over the past year an overwhelming success, evidenced by Gemini's app store performance and the integration of AI into search without negatively impacting ad rates or engagement.

Google's Next 5-10 Years: Long-Term Bets

Pichai discussed Google's long-term investments and vision:

• Waymo: Acknowledged as a long-term bet that has taken years of investment and is now showing significant returns, creating hundreds of billions of dollars in value. This counters criticism from investors like Chris Hohn who previously questioned the investment.
• Quantum Computing: Pichai expressed strong confidence in quantum computing becoming a reality within the next 10 years. He believes Google has the leading quantum lab in the world, with its chief scientist recently winning a Nobel Prize in Physics. This is seen as a potentially transformative technological shift that Google is well-positioned to lead.
• Digital Intelligence Layer: Google is building a "digital intelligence layer" for the future, with quantum computing being a key component.

Fail of the Week: Grant Cardone's Financial Advice

The segment critiques Grant Cardone's simplistic advice on how to make $400,000 per year.

• Cardone's Method: Divide the desired annual income ($400,000) by 365 days to determine the daily income needed ($1,095). He suggests that if one has ever made that daily amount, they can achieve the annual goal by replicating it every day.
• Critique: The author highlights the absurdity of this advice, pointing out that it ignores the complexities of income generation, the need for consistent effort without breaks, and the practical challenges of achieving such a target daily. It's presented as a superficial and unhelpful approach to financial planning.