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Cliff Notes: How to Evaluate a Company Before Investing with Troy & Ian · Earn Your Leisure

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• 1:48
  Speaker 1: pushing your vision forward. When we evaluate a company, these
• 1:53
  Speaker 1: are the things that we're looking at. Number one, the
• 1:55
  Speaker 1: current price. I mean, that seems pretty obvious, but I'm
• 1:58
  Speaker 1: just gonna say it.
• 2:00
  Speaker 2: You want to know where.
• 2:01
  Speaker 1: The current price is because you want to know where
• 2:03
  Speaker 1: it falls in its range. And its range means it's
• 2:06
  Speaker 1: fifty two week high versus fifty two week low, right,
• 2:08
  Speaker 1: So that range is where it's at for its peak
• 2:11
  Speaker 1: for the year and where it's for it's low for
• 2:13
  Speaker 1: the year. Now, if that current price is near the peak,
• 2:17
  Speaker 1: and this is what we always tell people, but nobody listens.
• 2:20
  Speaker 3: You have to wait, God'll wait. If you buy the High,
• 2:23
  Speaker 3: you will die. I'm sorry, I'm so sorry. Please write
• 2:27
  Speaker 3: it down. If you buy the High, you will die.
• 2:29
  Speaker 3: You are going to be upset and you're gonna text
• 2:32
  Speaker 3: me and Troy. Hey, I need to talk to him. Hey,
• 2:35
  Speaker 3: don't do it. Everyone who bought it at Apple water High,
• 2:39
  Speaker 3: they are shipping their pants right now.
• 2:40
  Speaker 2: I'm like, I told you to wait.
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  Speaker 3: Even the greatest companies have pullbacks, which is a sign
• 2:45
  Speaker 3: of the overall economy.
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  Speaker 1: Right, So this is important, right, You want to make
• 2:49
  Speaker 1: sure that you're in a range. Like I would say
• 2:52
  Speaker 1: a ten to fifteen percent pulled back from it's high.
• 2:54
  Speaker 1: Some people might go further twenty percent, which was equal
• 2:57
  Speaker 1: of correction. So anytime a company pulls back any between
• 3:00
  Speaker 1: ten to twenty percent, that is considered a correction. So
• 3:04
  Speaker 1: if we look at Apple, which was at one hundred
• 3:06
  Speaker 1: and ninety dollars now going down to one sixty seven.
• 3:10
  Speaker 1: But these are the times when you want to look
• 3:12
  Speaker 1: at so when you start seeing red, and that's why
• 3:14
  Speaker 1: we always tell people never, never, never be fearful. When
• 3:17
  Speaker 1: you see red, this is the time you should be greedy.
• 3:19
  Speaker 1: This is the time, you should be like, all right,
• 3:21
  Speaker 1: I was patient. Now my patient is going to pay off.
• 3:24
  Speaker 1: It's pulled back to a point where I cannot get
• 3:26
  Speaker 1: into the investment and see the benefits on the appreciation
• 3:29
  Speaker 1: all the way up. So the fifty two week and
• 3:31
  Speaker 1: fifty two week high and low are important. Profitability is important.
• 3:36
  Speaker 1: Is the company making money?
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  Speaker 3: That's so key. I know it seems like a basic thing.
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  Speaker 3: But some companies people ask about they are negative. So
• 3:46
  Speaker 3: if the company is not making money, how do you
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  Speaker 3: think that the company is going to grow. It may
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  Speaker 3: grow off speculation and may grow if it was an aspect,
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  Speaker 3: but a lot of those companies end up dying.
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  Speaker 2: So please like, make sure that the company at least
• 3:57
  Speaker 2: is in profit.
• 4:00
  Speaker 1: Ability is important, right, profit margin and this is something
• 4:02
  Speaker 1: and we'll do two together. Right, We'll do profit margin
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  Speaker 1: operating margin, because I know when I'm listening sometimes and
• 4:08
  Speaker 1: I'm like, we'll use Disney for example, like we did
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  Speaker 1: the other day, and we're like, wait, what's the profit margin?
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  Speaker 1: The profit margin means what?
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  Speaker 3: How for every one hundred dollars, Well, how much are
• 4:18
  Speaker 3: they're keeping? So for Apple to be a multi trillion
• 4:20
  Speaker 3: dollar company, they keep twenty five dollars out of every
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  Speaker 3: one hundred that comes in phenomenal business model, especially at scale.
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  Speaker 3: So if they're keeping between fifteen percent to thirty percent,
• 4:33
  Speaker 3: I'm in love with it. If it's single digit profit margin,
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  Speaker 3: it's a business I don't want to invest in. And
• 4:39
  Speaker 3: I think it's one of the purest ways you can
• 4:41
  Speaker 3: evaluate a company to see if it's worth investing in. Like,
• 4:44
  Speaker 3: I want to pick on Disney again, but if you
• 4:46
  Speaker 3: do look, Disney profit margin is two point sixty five percent.
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  Speaker 3: So if I had a business that for every one
• 4:55
  Speaker 3: hundred dollars I came and I kept two bucks, what
• 4:57
  Speaker 3: you want to invest in me? I don't care about
• 4:59
  Speaker 3: the I ain't King three that they got in the vault,
• 5:02
  Speaker 3: Simba died. Sorry, Until you get that pret well in theory,
• 5:06
  Speaker 3: until that profit margin is higher, I'm scar.
• 5:09
  Speaker 2: I hate all of Disney right now. Now.
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  Speaker 3: I wanted to win for Troy as an investor, I'm like,
• 5:14
  Speaker 3: I can't.
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  Speaker 2: There's no way on.
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  Speaker 3: Earth I can touch that investment right now. So profit
• 5:18
  Speaker 3: margin matters a hell of a lot.
• 5:19
  Speaker 1: It's a it's a huge indicator, and it's the reason
• 5:21
  Speaker 1: why we love in videos so much. When we talk
• 5:23
  Speaker 1: about profit margins Like we brought up Apple and when
• 5:25
  Speaker 1: you hear twenty five percent thirty six percent, I think
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  Speaker 1: for Microsoft, when you're hearing videos at forty eight percent,
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  Speaker 1: nearly fifty percent profit margins every hundred dollars, they're keeping
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  Speaker 1: fifty of it.
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  Speaker 3: Yes, And if they pick up one hundred and twenty
• 5:40
  Speaker 3: million from UH from Meta for the metaglasses, like not
• 5:44
  Speaker 3: knowing billion, they're keeping forty eight percent of that. Like
• 5:51
  Speaker 3: you see why Jenson's so happy on stage. Jenson looked
• 5:54
  Speaker 3: like a rock star at that last conference. I would
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  Speaker 3: too if for every billion came in I was.
• 5:59
  Speaker 2: Keeping for Yes.
• 6:00
  Speaker 1: I think Zuckerberg said they're buying three hundred was it
• 6:03
  Speaker 1: three hundred thousand, three hundred thousand GPUs from the video
• 6:07
  Speaker 1: at an average price, let's say the price, and they
• 6:08
  Speaker 1: said that the prices could range from twenty thousand to
• 6:10
  Speaker 1: forty thousand per chip. You're talking about a six to
• 6:13
  Speaker 1: ten billion dollar transaction. If they're keeping a fifty percent
• 6:16
  Speaker 1: profit margin on that transaction, keeping.
• 6:19
  Speaker 2: Three billion off of one company from.
• 6:21
  Speaker 1: One company, they've they've they've made three to five billion.
• 6:24
  Speaker 2: Come on, man, which is like unstoppable, I.
• 6:27
  Speaker 1: Mean pretty, that's pretty remarkable operating margin.
• 6:30
  Speaker 2: Yeah, operate margin. Just think of it as like gross
• 6:34
  Speaker 2: and how much we'll a room they have.
• 6:35
  Speaker 3: So if you go to Nvidia, they have fifty four
• 6:37
  Speaker 3: percent operate margin, which is amazing. So I'm looking at
• 6:42
  Speaker 3: the differential between how much operating margin and how much
• 6:45
  Speaker 3: margin they're keeping inside of the profit margin, and it's
• 6:49
  Speaker 3: really a good range. All that really means is like,
• 6:51
  Speaker 3: for they're managing the money that comes in incredibly well.
• 6:55
  Speaker 3: Like if they had let's say fifty five percent operate
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  Speaker 3: margin fifteen percent profit margin, I would be like, what are.
• 7:02
  Speaker 2: You doing with the money?
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  Speaker 3: You're doing some music industry accounting with the money that's
• 7:06
  Speaker 3: coming in, right, But they're doing a great job. For
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  Speaker 3: most of the money that is coming in for operating expenses,
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  Speaker 3: they are converting that into profit, which I absolutely love.
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  Speaker 1: Perfect revenue sounds self explanatory, but this is the money
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  Speaker 1: that is being brought into the company, right, So when
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  Speaker 1: we talk about revenue, that's important, But the next line
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  Speaker 1: is equally is important.
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  Speaker 2: Right.
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  Speaker 1: You could be bringing in money, but what is the debt?
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  Speaker 2: Right, So when we.
• 7:28
  Speaker 1: Talk about revenue, we talk about debt. What we're really
• 7:31
  Speaker 1: encumbassing is the balance sheet. So you might hear people
• 7:33
  Speaker 1: talk about what's the balance sheet, what's the balance sheet,
• 7:36
  Speaker 1: what are they bringing in? How much is it costing
• 7:38
  Speaker 1: them to bring that in, and what is the overall
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  Speaker 1: debt that s left over after that that revenue is
• 7:43
  Speaker 1: brought in. So those when we talk about balance sheets,
• 7:46
  Speaker 1: that's the encumbass in the last one I think is
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  Speaker 1: I mean when we talk about importance when we're looking
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  Speaker 1: at a company. Now we're telling you these things, but
• 7:54
  Speaker 1: in a set we're going to show you exactly how
• 7:55
  Speaker 1: to find these things, so that when you try to
• 7:57
  Speaker 1: evaluate the company, you can know exactly where they are
• 8:01
  Speaker 1: and then you could say, all right, this is a
• 8:03
  Speaker 1: good investment. This may not be a good investment, like
• 8:06
  Speaker 1: you might hear all the news in the world, right,
• 8:08
  Speaker 1: Like Uber would be like two years ago, if we
• 8:11
  Speaker 1: put Uber to this test, yeah, we would look at
• 8:15
  Speaker 1: it and say, I'm not sure if this is a
• 8:17
  Speaker 1: sound investment right now.
• 8:18
  Speaker 2: Yeah, it would have been a failed two years ago.
• 8:20
  Speaker 1: It would have been a fail right because they weren't
• 8:22
  Speaker 1: even profitable. That has changed over the past couple of years.
• 8:25
  Speaker 1: But operating cash flow in encompassed.
• 8:27
  Speaker 2: That for us, well, I took the last two. I'll
• 8:30
  Speaker 2: let you take this.
• 8:32
  Speaker 1: Yeah, I always talk about operating clash flow. It's like
• 8:34
  Speaker 1: one of my favorite things to talk about. It's the
• 8:36
  Speaker 1: last line budget on on the statistics for financial the
• 8:40
  Speaker 1: fundamentals for a company, because it talks about how much
• 8:44
  Speaker 1: money they have left over? Right when they have their assets, Yep,
• 8:49
  Speaker 1: their liability is are weighed? What is left over?
• 8:52
  Speaker 2: What's left over?
• 8:53
  Speaker 1: A thing we've heard before, right, Yeah, I ass of
• 8:56
  Speaker 1: a liabilities great slogan. Right, that's what's left over? And
• 9:00
  Speaker 1: why is that important? Because when companies have operating cash
• 9:03
  Speaker 1: flow or we could say free cash flow, that means
• 9:06
  Speaker 1: that they have money for innovation. That means they have
• 9:09
  Speaker 1: money for maybe the best hiring. That means they have
• 9:12
  Speaker 1: money for murders and acquisitions.
• 9:13
  Speaker 2: Acquisitions are key. Yeah. Look, we talked about it on Monday.
• 9:16
  Speaker 3: Without Instagram, Facebook will probably be dead in the water.
• 9:19
  Speaker 2: I mean, I put the clip.
• 9:21
  Speaker 3: Microsoft made a big Bomber made a bid for twenty billion,
• 9:24
  Speaker 3: got it turned down. Great move by Zuckerberg, and Zuckerberg
• 9:27
  Speaker 3: then goes and buys Instagram. And at the time you
• 9:30
  Speaker 3: can argue Zuckerberg was a better CEO than Bomber, But
• 9:33
  Speaker 3: they had to operate in cash flow to be able
• 9:35
  Speaker 3: to make that acquisition for a billion, which has been
• 9:37
  Speaker 3: like one hundred and fifty extra turn for pH risiculous.
• 9:41
  Speaker 2: And shout off to black Belt that.
• 9:43
  Speaker 1: When you guys are talking about the biggest or the
• 9:45
  Speaker 1: greatest investments of all time, you spoke about Meta acquiring Instagram,
• 9:51
  Speaker 1: but you talked about Google acquiring YouTube for one point
• 9:54
  Speaker 1: six billion of all time.
• 9:57
  Speaker 2: Yeah, I mean think about that.
• 9:59
  Speaker 1: That was twenty years ago. What has that returned then?
• 10:02
  Speaker 2: Right?
• 10:02
  Speaker 1: We talked about YouTube by itself is a multi billion
• 10:06
  Speaker 1: dollar company.
• 10:07
  Speaker 3: Mustily and if they were in public, YouTube were probably
• 10:10
  Speaker 3: number one in that communications list.
• 10:13
  Speaker 2: Definitely on the ATV. Absolutely.
• 10:16
  Speaker 1: Yeah, It's bigger than any communications network you can think of.
• 10:19
  Speaker 1: It's far to pass for Rizon or any other service
• 10:22
  Speaker 1: Charter Disney for sure. YouTube is that Netflix.
• 10:29
  Speaker 2: I would say YouTube is TV for this generation.
• 10:33
  Speaker 1: It is.
• 10:34
  Speaker 3: It is like if I said to you twenty years ago,
• 10:37
  Speaker 3: Google is going to go buy all the TV networks
• 10:39
  Speaker 3: in America, You're like, there's no way, And then they
• 10:42
  Speaker 3: got YouTube.
• 10:45
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