Aswath Damodaran Grades 9 Trillion-Dollar Stocks transcript

Should you buy a stock just because a company is worth a trillion dollars? >> In other words, did you buy any of these stocks? >> Well, if you were thinking about it, wait until you hear what our guest today, the man Wall Street calls the dean of valuation, Aswath Damodaran, says. >> Yes, he'll explain the secret to how you value a stock, and it has nothing to do with a business being worth a trillion dollars. >> Which is important, Caroline, because he's expecting more trillion-dollar stocks. >> A trillion-dollar company now is going to become more and more commonplace, simply because inflation is pushing up numbers, numbers get bigger.

So, I think you're going to see more trillion-dollar companies. >> Okay, so coming up, we'll explain how Aswath values stocks. >> Plus, we'll get his take on whether these big AI bets by trillion-dollar companies will pay off. >> And we'll ask the professor to grade nine trillion-dollar companies. Is the market getting it right? >> Or wrong. All right, should we get started? >> Let's do it. >> This is Ticker Take. >> John, the most talked about stocks are often the most valuable companies. >> Yeah, Caroline, we've got a fast-growing list of trillion-dollar businesses, and they suck up a lot of attention in the markets, which is not always a good thing for investors. >> Right.

Just because it's worth a trillion dollars doesn't mean it's worth your own investment dollars. >> Exactly. And the thing is, the list of trillion-dollar companies is getting long. Apple was the first to reach a trillion-dollar market cap in 2018, but since then, more than a dozen companies have crossed that line. >> Yeah. And since there's a difference a company's valuation and how you should value a stock, we invited one of the world's best valuation experts to give us his take. >> Yeah, Wall Street calls finance professor Aswath Damodaran the dean of valuation.

He's got a huge following because he helps people understand the investing basics for valuing a business. >> Okay. So, coming up, Aswath will give us his grade on how the market is valuing all of the trillion-dollar companies. But we started by asking him for his secret to properly valuing a business. >> I know people use the term discounted cash flow valuation or DCF as a as an acronym. But, when I look at a business, I think of it as a business.

It sounds sounds silly, but when you buy a business, think of what you're acquiring. This has been true for the hundreds of years, the thousands of years that people have been buying business. You buy the cash flows from that business. The accountants can do whatever they want. It's cash in, cash out. That Venetian glassmaker who bought his business in the 1500s bought the business based on how much generates cash flows.

And he probably didn't have the distraction of accounting earnings getting you away from it. How quickly will these cash flows grow? And how uncertain should I feel about the cash flows? Think about those three questions. What are the cash flows? How quickly will they grow? And what are the That is at its core the same three questions you'd ask about an Anthropic or a SpaceX or a Meta that you would have asked as a Venetian glassmaker.

My philosophy in valuation is you value something based on its capacity as a business to generate cash flows over time, to grow those cash flows, and to be able to sustain those cash flows. And it's my job then to bring them into numbers that tell me whether $100 is too much or 100 million or 100 billion or a trillion. >> And John, before we move on to what he thinks about the big AI company valuations, we also got his take on some popular Wall Street cheat sheets for how to value a stock.

In software, for example, you often hear the rule of 40. >> Right. Okay, well, he's got a pretty strong view on this. Here it is. >> Anytime you take shortcuts, which is what rules bring in, you're being lazy. You're doing this because you don't want to confront the mechanics, the business stories behind the numbers. Rule of 40 will not work for any AI business. Why? There's not There's nothing to multiply 40 by. There are no cash flows right now.

So, if you followed that road, you would never buy an airline company, no matter what the price. You have to confront the reality of which is this is a business in motion. The business is still being formed and you have to make your best judgments on what it look like. So, that's a pricing judgment. It's a pricing metric. So, it's like eight times EBITDA carried into cash flows, right? Why do people use eight times EBITDA?

It's lazy, but it's a quick and dirty way of putting a number on something to say that's expensive, that's cheap. But, anytime people use rules, they're basically are saying, "I don't want to confront the messiness of having to flesh this business out. So, I'm going to adopt a metric that's a shortcut and hope it works for me." And to be quite honest, through the century, this entire century, most of those metrics have failed.

Starting with the traditional cape, the PE ratio, the Schiller PE, and markets you shouldn't invest in stocks if they trade at a PE above a certain number, 16 or 18. You would have been out of stocks since 2012. Take a look at your portfolio and ask yourself what your portfolio would have looked like if you hadn't bought stocks for the last 14 years. You would put your money in cash. So, I am I have very little patience for rules because they're mechanical devices used by people who don't want to flesh out the rest of the business. >> Okay, well, if there are no shortcuts to properly valuing a company, here's a question.

Can I buy a stock because it has a market cap of more than a trillion dollars? Doesn't that mean there are a lot of other investors that think it's worth buying? >> Well, we asked him about that, too, and here's what he said. >> Plus, markets don't value businesses. They price They price them based on demand and supply, and that doesn't necessarily give you a number similar to what you get if you value them as businesses.

You have something that's in the mood of the moment that's hyped and there's a lot of hope and potential around it. Markets will price that potential in based on demand and supply and deliver a number. But you got to stay true to why you came into this game. If I stay true to my philosophy, I'm not buying SpaceX because a lot of other people think it's worth 1.7 trillion. I have to buy SpaceX because I think the cash flows it can generate as a company are enough for me to pay 1.7 trillion.

And you got to make up your mind when you enter the market what game you came to play. Did you come to play the investing game where you don't care about what the rest of the world thinks? You're buying the business after all, and you can look at the cash flows and ask yourself, is it worth 1.7 trillion? Or you can play a different game. You can say, "Look, I don't care about value. I care about price. I'm going to buy at a low price and sell at a high price.

I don't care what the value is. If people think it's, you know, the price is 1.7 trillion today, and there's enough hope and hype there to push it up to 2.2 trillion, I'm entering the game. It's in many ways a simpler game. It's called the trading game, not the investing game. And 95% of the world plays the trading trading game." >> Okay, we're going to get Aswath's grades on how the market is valuing those trillion-dollar companies in just a minute.

But we did want to talk about investing in the AI opportunity as well. >> Right. The idea that, okay, well, cash flows are important, but we are in this new era, the AI era. And if the promise of AI is big, can you allow yourself to focus on that rather than good old-fashioned cash flows? So, here's his take. >> The way I describe AI is we're building the most expensive factory known to mankind. More than the railroads, more than the automobile business, more than the PC business, more than the dot-com business.

By my estimates, we've invested collectively across companies about 2 and 1/2 trillion dollars building the factory. But here's the challenge. We don't know what the factory will make. We don't know whether people buy what we make in the factory and what they will pay for it. We're building it on the expectation that the products and services coming out of this factory will be so sought after. So desirable that people will pay not tens of billions, but trillions of dollars for the products and services.

So let's take, you know, this this starting point you made. Are there companies out there that are being pushed up by the promise of AI? There are three companies that I can think of as trillion-dollar companies where AI is the reason they got there. Most of the others got there before AI even came along. Meta was a trillion-dollar company. Google was it? I mean, these are companies that got there because they had great advertising businesses or a great smartphone business in the case of Apple.

The three companies where AI can be pointed to as the proximate or the primary reason for why they got to be trillion-dollar companies are Nvidia. And two companies that haven't gone public yet. Now, Anthropic and OpenAI. And perhaps space you can throw SpaceX in the mix even though AI is only a part of the business, it's the biggest potential part of the business. With Nvidia, the money's already here. Because Why? Because they supply the architecture for building the factory.

They make the chips. So they're one of the few AI companies where it doesn't have to be promise of potential, it's right here. Not only do they dominate the chip part of the factory business, the architecture, they have People think of Nvidia as a chip maker. It's not, it's a chip designer. It designs chips. TSMC makes the chips and it sells these chips to to to five of the largest tech companies in the world. It's the Meta, Alphabet, Microsoft.

You can throw in Oracle and Coreweave into the mix. And here's the magic of the Nvidia business model. They take the TSMC chips, they mark them up 900%. And they sell them to these five big tech companies. It's a model that's fragile because both sides are probably saying, "Why aren't we getting a bigger slice of the pie?" TSMC is saying, "Hey, why are we getting only 10% of the revenues that Nvidia has?" And the five big tech companies are saying, "Why are we letting Nvidia market up 99%?" The answer is right now, they have no choice.

Cuz they bought into this world where they believe they need the Nvidia chips to keep the factory running. And without it, they will fall behind. But if you look at the companies that actually make money from selling AI product and services, Anthropic is probably the lead player in that game. And it has what, even if you count based on just the most recent revenues multiplied by 12, which is a very charitable way of defining revenues because it's called the annualized revenue run rate, rather than the actual revenues, it's about 80 billion.

OpenAI, maybe 50 to 60 billion. Collectively, the companies that generate revenues from AI product and services have revenues of about 250 billion. Not profits, but revenues. But the products they make cost money to make. When Anthropic delivers an agent, a Claude fable for instance, it costs every hour you run it, not only do they charge you, but it costs to run Claude fable. In what No, what what are called AI tokens, but really it's data centers running overtime.

More power, more water, all that real stuff. It's a business which right now doesn't have much in revenues. 250 billion. It sounds like a lot, but not relative to 2 and 1/2 trillion already invested in the factory. And that 250 billion, by the time you take out the cost, become losses at every one of these companies. None of these companies are making money on the 250 billion. Does it mean that we've over invested in AI or these companies?

Not necessarily if you believe in the promise that AI product and services will become such a huge market that it can justify the investment. And that's where, if you're investing, the pushback you have to ask is how big does the market have to get? Cuz I don't know enough about AI to rule this out. Maybe we will be replacing people with AI. How big will the market for AI products and services have to become to justify paying two trillion for, you know, for Anthropic, a trillion and a half for OpenAI, another trillion for SpaceX.

And you start adding up these numbers and say, "How am I going to make my money back without enough revenues?" And you know, my break-even points very quickly get to eight to ten trillion dollars in revenues that you would need to justify what you've invested. And that then becomes the dividing line behind whether you'd put your money in AI companies collectively or not as an investor. As a trader, all bets are off. You might buy Anthropic at two trillion because it'll get pushed up to two and a half trillion.

But as an investor, that becomes the cool point is how big will the eventual market for AI products and services become? And right now, that's kind of a game in motion. You can see even the CEOs of these these big LLM companies have no idea. They're just as much in the dark as you and I are. But that's why I said this is the greatest experiment run in investing history, to invest two and a half trillion in AI CapEx and hope and pray there's enough revenue coming from this to justify that investment. >> Okay, with all that said, let's get to the professor's grades for how the market is valuing all of those AI stocks. >> Sounds like a plan, but before we do, a quick word from our sponsor.

This episode is brought to you by Global X Canada, which just launched the Global X Artificial Intelligence Memory Index ETF, DRAM, d r a m, a new ETF tied to one of the biggest themes in AI, memory and storage. As AI models get bigger, moving and storing all that data is becoming just as important as the chips that process it. Learn more at globalx.ca and in the description. >> Stock number one, Nvidia. >> Arguably the most talked about company in the world, the professor's grade on the market valuing this business at more than $5 trillion a B. >> I'd probably give it a B, B- because it is a company with real substance, amazing competitive advantages.

In fact, you could argue that it is perhaps one of the best-run companies in the world. I think Jensen Huang is an amazing CEO. It's an awesome company, but it's being priced to be the greatest company of all time. Investing is about what what you attach as your description of a company and what the market is attaching as a description. So, rather than grade the market, here's what I'm going to give you. I'm going to give you my sense of the company and what the market is viewing as the perspective and talk about why that drives my investing decision.

I think Nvidia is an awesome company, but the market is pricing it as the most amazing company ever. The most amazing company ever is a higher standard than awesome company, so it's overpriced to me because I think, you know, it is going to face frictions because of the business model that I just described. It doesn't make its own chips and it's selling to people who are going to be looking at other ways to replace these Nvidia chips.

I'm sure Meta's working on its own version of an AI chip so it doesn't have to pay this premium price. So, it's a it's a great business model with tension at both ends of the spectrum and the market is not factoring in that tension enough into the valuation. So, I think it does the B is for the fact that the market saw all of this before the experts did. I mean, before we take issue with markets, remember markets are asked to make judgments on the spot.

They don't have the luxury of saying on the one hand, on the other hand, on the third hand, or let's wait and see. You've got to So, this morning markets woke up with news that the AI's engine might be pausing before running ahead. It had to make the judgment right away. So, I always cut slack the markets because of the fact that you got to make this consensus judgment on the spot. But right now, if you push me on Nvidia, it's a B grade because they brought in the great potential, but it's missing the tensions in the model that will cause those margins to shrink over time, even if the architecture continues to build. >> Stock number two, Apple. >> We mentioned Apple was the first trillion-dollar company, and these days at well over 4 trillion stays close to Nvidia.

The professor's grade? A B+. >> I would say B+ because it's probably the one company in the mix that is decided a different pathway on AI. Unlike the rest, which are building the most expensive AI factory of all time, Apple's been singular in saying, "Look, we're not going to do that until we see how the space plays out." In hindsight, there might be people who look at Apple and say, "This is entirely possible." And say, "You missed out." But my guess is Apple is doing the right thing because it's waiting.

It's The word that comes to mind when I look at Apple is restraint. It's a company that's been restrained in everything it's done in the last 15 years. I mean, think about it. I mean, for much of that period, it was a company that had the largest cash balance in history. 300 billion at one point in time. You could buy entire countries with that cash balance. Think of the number of bankers and consultants who must have been around one infinity loop trying to sell Tim Cook on, "You can do this.

You can I've seen, you know, people suggest Apple should buy Tesla. Apple should buy Netflix. Apple should buy Greece." I'm basically throwing everything in the mix. And the amazing thing is Apple has bought none of those companies. That's an ins- To me, that is testimonial to Tim Cook's restraint because companies don't have a restraint their CEO's day and for me Tim Cook left that message of restraint. We have a new CEO, we'll see how this plays out.

But I think with Apple the market is building in that restraint. And it's but the downside for Apple is it's now a smartphone company. It's entire value pretty much rides on the iPhone. It goes from one upgrade to the next one. You're holding a breath if you're an Apple investor saying please God let this not be the one. The one where the upgrade completely collapses and people say look I'll stay with the Apple 17 for the rest of my life or worse still that a disruptor arrives because we've been on the smartphone binge now for about 15 years.

Everything we do rides on the smartphone. But technology is a fickle fickle master. Who knows what we'll be getting our information, our news, our TikTok videos from 5 years from now. So Apple, the good news is that they've been restrained in throwing money. They're the one company that's remained cash rich all through. But the downside is they've become more and more a smartphone company and you worry about the potential for disruption in that core business. >> Stock number three, four, and five, Alphabet, Microsoft, and Meta. >> Well, they all have different trillion-dollar-plus valuations, but the professor's grade for how the market values them is all the same.

In each case, a B-. Here's why. >> I mean Alphabet when if you remember it was was called Google until about 2015-16. A lot of fanfare they renamed themselves Alphabet and it was a strategic reason. Which is they wanted to send the message to the world we're not just an advertising company. We're in all these other businesses that you're not noticing. That was the whole point of that renaming of the company. In 2015, search engine that box that box that we see when we type in Google accounted for 93% of Google's revenues.

Everything else was kind of a bit. 10 years later, 11 years later with a renaming and all the billions of dollars they've thrown to the other businesses, advertising is still the core business. It delivers most of it. The cloud business is the only added business. None of the other businesses that they pushed to the front to say this business is different have ever made it. So, the Alphabet the struggle has always been can they ever be more than a one-hit wonder?

And so far at least the evidence is scant that they can. So, this AI investment is the market holding its breath saying maybe this investment is going to be different. Maybe Google can or Alphabet can succeed with AI in a way that they haven't succeeded elsewhere. So, I'm I'm looking to see if Gemini could deliver on its promise, but I'm not hopeful I'm not hopeful because the history of disruption in any business it comes from outsiders.

Alphabet has too much to lose. It has too much in its existing businesses that cash cows and without the cash So, my worry with Alphabet is not that they will go bankrupt or they'll have too much debt. They have enough cash flows to sustain their mistakes, but that they might have to write off a big chunk of that AI CapEx. I mean, this year alone they might invest what 150 to 200 billion in additional CapEx in AI. And I don't think I know and you're going to go to Meta and Microsoft next.

I don't think any of these three companies knows what it's like to be in a capital intensive business. They've They've been spoiled by success in businesses where they could grow with almost no money invested. Microsoft grew basically it's it's software and it's cloud business with relatively little investment up-front. AI is the first time all three of these companies are entering a capital intensive business. They need to talk to some infrastructure companies to see how different that business is.

And we we will see whether these companies can take the punishment that's often meted out in capital intensive businesses when they don't pay off. Cuz collectively I don't see how these companies can sustain these investments and make them pay off. This is going to be write-offs. The test for Alphabet is when that write-off comes, what happens? How does a company react because they've never had to respond. The company is a good company.

I mean, I have no problem with Alphabet as a company. The market attaching the pricing, you can see it's a company the market can't make up its mind. It goes up and down depending on what the market mood is. A year ago they were down on Alphabet, they're back up on Alphabet. My guess is the market's trying just like we all are trying make a judgment on will Alphabet succeed on this AI. I am not as hopeful as the market.

So, if I were giving a grade to the market, I would say the market's a B- minus basically in terms of making the judgment because it's not asking enough of the follow-up questions on what's Alphabet investing in. What are the odds of a pay-off? Is there a market there? But I could say the same about So, I'll save you the trouble in Meta and Microsoft. I would say the same grade applies. If you have a big cap ex, the market's not asking enough questions about the cap ex, so it's probably giving them the benefit of the doubt.

Though the last year you've started to see even the market get skeptical. The way you see this is when you have an earnings report from these companies, they're watching the earnings. The earnings coming above expectation. The company seem to deliver more than people expected. The number that seems to be drive driving what the market price reaction to earnings is is how much money is being spent in AI cap ex. The larger that number, the more negative the reaction has become.

That's just in the last year. Until about a year year ago, investment capex is viewed as a good thing. You got a price bump every time you said I'm investing more. Now that's I mean, I call this the bar mitzvah moment when you have a big buzz and there's a point where there's a market is a buzz is nice, but I want to see some evidence you're growing up. That you're actually delivering and I think that moment has come for AI.

So I think these companies are starting to recognize it. So now you're starting to see them try to show we're making some profits. But the one thing I would caution you is you see these profits that these businesses are reporting SpaceX XAI is reporting this Alphabet recently did. It's from leasing the data centers they've built to other companies, primarily Anthropic and OpenAI. It's not to make products and services.

So it's almost like they're renting out the factory to each other. Nobody's still making the products and services, but they're claiming the rent income as look we're making money. >> Stock number six, Amazon. >> Okay, well, Amazon has a market cap of more than two and a half trillion dollars and the professor thinks the market is a bit more on course with Amazon compared to Alphabet, Meta, or Microsoft. His grade is a B.

So let's find out why. >> I'll tell you what Amazon has that the other that the three other It's investing huge amounts in capex, but Amazon's never had a cash cow. I call this the sugar daddy effect, which is Meta is a cash cow, Microsoft is a cash cow, Alphabet is a cash cow. For Meta and Alphabet, the cash cow is advertising. For Microsoft, the cash cow is both the cloud business and the software business. It's nice to have a cash cow.

It provides you buffer you've never had to struggle before. What sets Amazon apart is it's never been a money machine. It's never been a cash cow. It's always a I called it a Field of Dreams company for the first 15 years of existence. You remember in Field of Dreams, you build a baseball field in the middle of nowhere and the farmer comes up and says, "Why are you building this baseball field here?" Most famous lines of all time, they you know, "Build it, they will come." That was the Amazon ethos.

We build it, they will come. It's a company that was either money losing or teetering on the edge of money losing that came very close to going bankrupt in 2001 when the dot-com crash happened. They were saved by the fact that they they raised cash just before the the dot-com crash either probably prudentially or prudently depending on how you see It's a company that's lived on the edge before. It's learned what it's like to live on the edge.

So, I think it's psychologically better positioned to take the kind of swings you're going to get in a capital intensive business cuz it's been in the logistics business. So, it's been in capital intensive businesses before. And I describe Amazon as a company with patience built into its DNA. I wouldn't be surprised if all of these four companies that I that we just talked about that are big AI investors, Amazon emerges as an eventual winner simply because it had it has the experience of the kind of blowback you get in capital intensive businesses and getting through it.

I'm not sure either of us gets an A to be honest. I mean, I think we all The thing is it's not that I that I get an A and the market gets a B. It's that we both are trying and I think we're trying as best as we can with the company that's constantly shifting under our feet. I don't think either of us can hope for better than a B. >> Stock number seven, Tesla. Okay, in this case, the professor's grade of the market assessment comes in as a C.

Let's find out why. >> Tesla's tricky. I'm not even sure what business it's in anymore. I mean, I valued Tesla since 2013. When I first valued, I valued it as a luxury automobile. I'm quite honest. I'm not sure what a Tesla is as a company. And I'm not sure the market knows either. Tesla is a personality driven company. What does that mean? When I say Tesla, you think Elon Musk. He's the ultimate storyteller. He can pivot on a spot and make a business story for a half a trillion dollar company a very different and pull it off.

But the other you've tied your value to a single person. And that kind of has its ripple effects, especially in the last two or three years as Tesla has become a political company. In many ways people decide whether to buy the car or not depending on which side of the divide they're on. I'm not going to pick a side in the divide, but it's not good for business when people decide whether to buy your product or not. It's no longer the dominant electric car companies.

And the electric car narrative itself has stumbled. I mean 10 years ago people thought electric cars were the end game. That by 2035 and California passed a law on this, I think, that every car new car in the market would be an electric car. People assumed that this was inexorable that we'd move towards 100% electric car. That's changed. I think you look around people are see a comeback of hybrids. And electric cars no longer seem to be driving the discourse on where the end game for the automobile businesses.

But I think we're with Tesla we're both at seas and then both the market and I because we're not quite sure what we're pricing in here as a company because it keeps changing. You know, it's like a transformer. Every minute you look at it's a different company and different business line. >> Stock number eight, SpaceX. >> Okay, well here the grade will be an incomplete. Not because it's not worthy of a grade, but for the professor it's still a bit early to pull out the pen.

So here's why. >> SpaceX is interesting as an AI business, but it's also its core business. It's starting business was a space launch business. And it used a space launch business to enter second business which is a satellite internet business because the two are connected because their strength in the satellite internet business comes from the fact that 10,000 satellites up in space, 10 times more than their closest competitor.

And the reason they have 10,000 satellites is they have a cost advantage in launching satellites. They've used their cost advantage to build a second business. So, on those two businesses, SpaceX has strong core competitive advantage. In the space launch business, it costs SpaceX a lot less to launch a satellite into space than its nearest competitor. So, it's a business where they have a core advantage, but it's a limited business.

So, it's a niche market right now, but it's a huge market. Much of SpaceX's pricing is justified by the third business, which is the xAI business. And that's where the potential market is biggest, but then you're running into all the questions we ran into with AI. xAI, I know is reporting tens of billions of dollars in revenues right now. You know where they're getting their revenues? They're leasing their data centers back to And you see the catch in the storyline.

And the storyline they're telling is AI can be a big business. Their product is Grok, but they're not making money on Grok subscriptions or Grok usage. They're leasing their data centers they've built to Anthropic, which is great in the near term. I like that the fact that they're making money, but it cuts against the big storyline. That to me is kind of a red flag in this entire storyline is everybody is still making money in the architecture space.

And with SpaceX, the question is, does this mean you given up? In theory, if you could put these data centers up in space, and with SpaceX, you can't put it past them. And Elon Musk says, "Look, I'm I'm not going to subscribe It's not Grok subscriptions. We're going to put data centers in space, and all these other people who want to use data centers, they're going to have to use our data centers, and we'll collect the revenues from that." >> And stock number nine, Berkshire Hathaway. >> Okay, well, this is the one name with a trillion-dollar valuation that falls outside of the AI story and its road to a trillion was much longer since it's a much older company. >> And in this case, the professor's grade of the market's assessment, a B. >> I mean, Dr.

Personality driven companies, right? Listen, I say Berkshire. What's the name that comes to mind? Buffett and yes, the problem with personality driven companies, they're driven around a person and human beings age. Whatever you think of Warren Buffett, I don't think he's sitting at 94 in an office picking stocks for Berkshire Hathaway. I don't think he's done it for 10 years. But every time Berkshire invests in a company, what's the storyline you see?

Buffett thinks that XYZ company is a good company. I don't think so. And I think it's time to let go. The market's kind of let go. It doesn't believe it, but there are people who are true believers in Berkshire who seem to think that Buffett is going to keep doing this till the age of 150, picking companies and they can follow it along. This is one of the great insurance companies in the US, in GEICO. Berkshire Hathaway for a long time had the greatest perceived portfolio manager of all time running that closed end fund.

But those days are done. It's now a very large insurance company with the closed end fund run by a good portfolio manager, but not the great. I mean, Greg Abel I think is a is a good manager. He's going to try to beat the market. But it's tough to get lightning in a bottle twice. You're not going to get the kind of special status you got when Warren is running the portfolio. So I think Berkshire if you want a company that's a more conventional company, you get dividends and cash flows, Berkshire Hathaway is it.

When you value things, the best you can hope for is a B. Right? Because there will always be things that are out there that you can't bring into your valuation. It requires foresight and if you had foresight, you wouldn't bother valuing companies in the first place because you know what's going to happen, right? So the fact that you're valuing companies means that you've got to have the humility to accept that you could do everything right and you're going to be wrong 90% of the time.

None of these companies should be 50, 60, 80% of your portfolio because you're going to be wrong a lot of the time and you're hoping that your mistakes average out. >> All right. Our thanks to the professor for giving us his grades on those nine trillion-dollar stocks. >> You can learn more about them in our description where there are so many different ways to connect with us here at Ticker Take from the podcast edition of the program to our free weekly investing newsletter. >> And if you like this video, give us a subscribe and we'll see you next time.

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