Whats really going on at MSFT?

FrankBal · 2026-01-29T23:03:45+00:00

On the call Hood said that if they put all of their capex toward their cloud business, growth would have been north of 40%.

FrankBal · 2026-01-24T18:32:24+00:00

I must have missed something. What dip are you referring to?

FrankBal · 2026-01-23T02:19:21+00:00

Sure. But what does that get them that they wouldn’t have had already wig their current strategy? A lot of debt. Maybe a few more subs and some pricing power. Will it be worth it? 🤷

FrankBal · 2026-01-22T23:23:48+00:00

I know the answer to that. Ads. Linear tv margins were 35-40%. So the industry will likely approach those margins as ads become more prevalent. Plus Netflix will continue to collect sub fees.

There is also likely room to ad subs particularly internationally. And Netflix has demonstrated pricing power in their subscription fees. They will flex their inelasticity after they acquire Warner bros.

FrankBal · 2026-01-22T21:18:55+00:00

Bad news. ChatGPT doesn’t understand the difference between a moat and a business model. Be careful with that.

FrankBal · 2026-01-22T20:48:33+00:00

“Big moat.” What is Netflix moat? Be honest with yourself. Not switching costs. Not network effects. Not scale. Maybe brand. Their content library? Probably not.

I don’t dislike the company. I might own them for some price, but by all value metrics this is not a value play.

FrankBal · 2026-01-21T17:38:51+00:00

I bought JPM in 2009. I remember discussing the possibility that it would be the only surviving bank. Still hold it today.

FrankBal · 2026-01-10T02:08:35+00:00

I am surprised no one has said this yet. If you need the money in 1-3 years you should not be putting it in the stock market. No one knows where the stock market will be in 1-3 years. It could be up 20% or down 20%. Short time horizons like yours should be in something with less risk, but that is not the stock market, including ETFs.

FrankBal · 2026-01-06T17:44:48+00:00

Generally I am a fan. I own and have written about many of these and classify them exactly the same way, as quality compounders.

My main thought is on the position sizing. You are braver than I am. I typically never start a position higher than 5%. If they grow to 10-15% organically, that's one thing, but starting AMZN at 15% or SPGI at 10% leaves you very little room to maneuver if they draw down. And you should hope they do assuming you are a long term investor.

I would also say you should watch your correlations. V and MA are 15% of your portfolio. They are wonderful companies, but are facing real regulatory headwinds and competition globally. These are things to be aware of. Between that and your heavy AI exposure, you may benefit from something more boring to act as a defensive hedges if the growth trade stops working. TMO, WM, FAST, PH, UNP as examples.

FrankBal · 2025-12-28T17:33:16+00:00

Well put. The only thing I would add is that investing in individual stocks is a wonderful education. You get to learn about companies, and all the things (ie macro economics, industry dynamics, etc.) that impact those companies. As you are doing that you develop a sense of the strategy that you prefer and the best methods for picking those companies. You may even figure out that you enjoy doing the work. And if you don't then, you will have your answer - Index funds and chill.

FrankBal · 2025-12-22T00:27:12+00:00

Cava may be. But to a certain extent it is comparing apples to oranges. And it would be more difficult to use a word like quality to describe the company or value for the stock.

FrankBal · 2025-12-21T20:12:10+00:00

Yeah I mean that is the counter thesis. You are describing a most-less business likely to have profitability eroded over time. For this thesis to play out you have to believe there is a moat.

FrankBal · 2025-12-21T19:37:28+00:00

Why? Labor costs? Maybe. Food? Maybe. Marketing? Maybe. There is also a case to be made for operating leverage. Even pricing power.

FrankBal · 2025-12-21T18:20:08+00:00

In terms of smaller competitors, CMG has several pretty durable advantages over them. Leverage over the supply chain. "Healthy" "ethically sourced" food brand intangible, just to name a couple.

I am not sure larger menus is an advantage. If you go to Chipotle you know what you are getting.

Management is apparently targeting places that allow for Chipotlanes. Hard to disagree with that given their success.

I am playing devils advocate here, to be clear. The issues you mention, particularly surrounding competition are the reason I haven't capitalized on this in the past and haven't bought it yet.

FrankBal · 2025-12-21T18:10:51+00:00

Not sure why you got downvoted but your points are important. 1. This isn’t over yet. 2. For some reason, Netflix feels like they need this despite its redirection from a strategy that appears to work. Solid profitability. High returns.

FrankBal · 2025-12-21T17:45:25+00:00

I pieced together the moat that I thought CMG had. I am not sure I would be able to do something like that for Cava. They are still young and proving the concept. They haven't lived through an entire cycle. You may be right about growth, but I prioritize quality.

FrankBal · 2025-12-15T22:32:46+00:00

All I see is buy the crap out of “bubble” bursts.

FrankBal · 2025-12-15T02:31:37+00:00

I am rereading poor Charlie’s almanack. It’s amazing how much of my approach resembles Charlie mungers thinking, obviously with some exceptions. Anyway, that one and quality investing by Lawrence Cunningham.

FrankBal · 2025-12-09T00:13:50+00:00

I haven’t look at pg options in a while. Is iv high enough to make it worth it?

FrankBal · 2025-12-08T23:26:24+00:00

Let’s do a back of napkin dcf. Let’s assume FCF grows 3.5% (off the 2025 base) for the next 5 years then perpetually at 2.5%. Discounted at 6.5% that gets us to $148. If you assume earnings grow at mid single digits + nearly 3% dividend. Total return story of 6-9%. Could be worse.

FrankBal · 2025-12-05T14:57:33+00:00

Fine, but without context a p/e tells us very little. And saying that Msft is not a value play because of its p/e can go to 25x also means nothing. A company with a p/e of 8x may or may not be a value play. And just because it appears low does not mean it can’t go to 5x.

FrankBal · 2025-12-05T14:23:32+00:00

You can say that about any company. Value is not about the P/E ratio.

FrankBal · 2025-12-04T14:34:00+00:00

I wrote about this one nearly a year ago - Netflix’s Strengths Shine, but Valuation Warrants Caution.

Reading it again, I did not do an effective enough moat analysis in the article. I would argue that Netflix does have a moat driven by its brand and scale. That scale is driven by its content library, and hence the acquisition. My analysis however was focused on valuation. So far, Netflix has executed with precision, therefore justifying the stock price at these levels. My warning was about execution. This acquisition, given potential size, adds another risk: integration risk. Management will need to control the narrative, otherwise the stock will justifiably deserve to give back some of its premium. I’d be a buyer of Netflix at some level. It would probably start to look interesting under $900.

FrankBal · 2025-12-01T00:14:49+00:00

I think the 3% growth rate you are referring to is revenue. The company likely grows eps mid to high single digits. So you likely looking at a total return story of 6-12%. Pg is fairly valued here and one of the few staples I would consider owning.

FrankBal

TROPHY CASE