Summary
Highlights
S&P 500 net income margins have significantly increased from 5.6% in the 1990s to 10.3% in the 2020s. This rise is attributed to the shift from non-tech to high-margin tech businesses dominating the index, justifying higher average P/E ratios and price-to-book values today, making direct comparisons to 25 years ago less accurate.
The portfolio was flat last week, while the S&P 500 rose 0.34%. Year-to-date, the portfolio is up 37.64% compared to the S&P 500's 10.44%. Upcoming week will feature earnings from Oracle, Adobe, and Chewy, alongside new inflation data. A 25 basis point rate cut is expected from the Fed, with chances of a second cut by December.
Klarna is preparing for an IPO at a valuation under $20 billion, significantly less than its previous valuation of $45-60 billion. Despite a deceleration in growth, Klarna has recently shown re-acceleration in key metrics such as merchants, active customers, GMV, and revenue. Comparisons with Affirm show different growth trajectories and valuation multiples.
The speaker's top portfolio holdings include SoFi (17.6%), Google (second largest), and AppLovin (third largest). Recent purchases include additional shares of Duolingo, AMD, Oscar, and AppLovin. The speaker plans to continue adding to positions like AppLovin and expressed happiness with his Google long-term position.
PayPal is quietly building an ad business within its app, already showcasing ads from major brands like Dell and Sephora. This potential revenue stream, not currently factored into analyst models, could become a multi-billion dollar business for PayPal by 2026, leveraging its vast user data and two-sided ecosystem.
House Republicans are pushing a bill to extend health subsidies, which would be a significant tailwind for companies like Oscar and United Healthcare. Oscar has indicated that an extension would provide positive upside to their financial performance, leading to the stock's recent rally, alongside positive comments from their analyst conference.
Duolingo's stock has seen a 50% drop since May, despite being an extremely well-run business with margin expansion. The market narrative suggests AI is a headwind, but Duolingo's continued high engagement (daily active users and strong ranking against other apps in terms of attention time) indicates its resilience. The number of paying users is at an all-time high, and the stock is considered a 'winner' and market beater.
Peter Lynch's philosophy on diversification is highlighted: he would prefer to own one great stock but buys several if equally attractive. He continuously monitors company 'stories' and adjusts holdings based on unfolding performance, opting to concentrate capital in the stronger stories. The speaker reflects on how this aligns with his own portfolio strategy.