Google (GOOGL) is presented as a top risk-adjusted opportunity, currently undervalued due to a false narrative that its search business is dying. A potential re-rating could push the stock towards the $220-$230 range as strong growth in Search, YouTube, and Cloud continues to prove the negative sentiment wrong. A contrarian opportunity may exist in FICO (FICO), which has fallen sharply on competition fears but is expected to see a notable rebound in the coming quarters. Alongside Google, Amazon (AMZN) is also highlighted as a durable, high-quality company with significant long-term potential.

Google (GOOGL)

• The host is very bullish on Google and just invested another $5,000 into the stock.
• He considers it one of the best risk-adjusted returns in the market, offering a high degree of predictability combined with strong growth potential.
• The primary investment thesis is that the company is currently mispriced and undervalued, trading at an attractive forward P/E ratio of 18 to 19.
• There is a strong negative narrative in the media and among online creators that "Google Search is dying." The host draws a parallel to the negative sentiment surrounding Netflix in 2022, which turned out to be the best time to buy that stock.
• Contrary to the narrative, the data shows Google Search is healthy, with revenue growing 12% year-over-year. This growth is driven by more users, more search queries, and higher ad rates.
• Downside protection: The host believes the market is ignoring the value of Google's other assets.
  • YouTube and Google Cloud alone are growing at a combined 21% per year.
  • He estimates that in less than five years, the value of just these two businesses could be worth Google's entire current market cap, providing a significant margin of safety even if the search business were to struggle.

Takeaways

• Bull Case: The current negative narrative around Google Search is an opportunity. As Google continues to post strong growth numbers over the next 2-3 quarters, this narrative could die out, leading to the stock being "re-rated" to a higher valuation (e.g., a 22-25 P/E ratio).
• Potential Price Movement: The host suggests a re-rating could push the stock from its current price of ~$180 to the $220-$230 range in the short-to-medium term if the company continues to execute well.
• Long-Term Value: The underlying value of assets like YouTube, Google Cloud, and Waymo provide a strong safety net for the investment, making the risk/reward profile attractive.

Waymo (Subsidiary of Google)

• Waymo is expanding its total addressable market by now offering its driverless ride-hailing service to teenagers (ages 14-17) in Phoenix.
• This is positioned as a potentially safer alternative to services like Uber for parents, with features like specialized rider support, trip sharing with parents, and ride receipts.
• This move targets a demographic that may not have driver's licenses or cars, potentially creating a significant new use case for the service.
• Waymo is also expanding geographically, currently driving cars manually in New York City to gather data and seek a permit for autonomous testing in one of the largest ride-hailing markets in the U.S.
• The host refutes the common criticism that Waymo is limited because it has to "map" cities, pointing out that Tesla (TSLA) vehicles have been spotted doing a similar process (which Tesla bulls call "validating") with LiDAR systems before expanding to new areas.

Takeaways

• Waymo's continued expansion into new demographics and major cities like New York strengthens the long-term growth story for its parent company, Google.
• These developments are part of the "hidden" value in Google's stock that the market may be underappreciating.

FICO (FICO)

• The stock has been "decimated," falling sharply after regulators announced that mortgage lenders can now use a competing credit score model, VantageScore 4.0, for loans sold to Fannie Mae and Freddie Mac.
• Previously, only FICO scores were accepted for this massive part of the mortgage market. This introduces a direct competitor for the first time.
• VantageScore's model incorporates alternative data like rent, utility, and telecom payment history.
• The host believes the market may have overreacted to this news.

Takeaways

• Contrarian Opportunity: While the news is a clear negative, the host speculates that FICO will not lose its dominant position and will likely only lose a few percentage points of market share.
• He believes the company will continue to post strong numbers and expects a "notable rebound" in the stock price over the upcoming quarters. This suggests the current dip could be a buying opportunity for investors who believe the sell-off was excessive.

NVIDIA (NVDA)

• NVIDIA recently hit a $4 trillion market cap, becoming the world's most valuable company and surpassing Microsoft and Apple.
• The host finds its growth "incredible," especially given that the Chinese market is largely closed off to them.
• Despite its success, the host believes NVIDIA's business is less reliable or predictable than a company like Microsoft (MSFT), which benefits from stable subscription revenue.

Takeaways

• NVIDIA's dominance in the AI space is undeniable, but investors should be aware of its risk profile.
• Its revenue is less predictable than software-as-a-service (SaaS) companies like Microsoft, which could lead to more volatility.

Amazon (AMZN)

• The host is very bullish on Amazon, describing it as a company with "incredible durability and long-term potential."
• It is grouped with Google as one of the best risk-adjusted investment opportunities in the current market.
• While the host chose to buy Google in this instance, he holds a large position in Amazon and considers it a sound long-term investment.

Takeaways

• Amazon is presented as a core, high-quality holding for a long-term portfolio.
• The host sees more immediate upside in Google due to its current valuation, but the sentiment for Amazon remains strongly positive.

Fundsmith & Terry Smith's Strategy

• Terry Smith's Fundsmith equity fund is underperforming its benchmark, down 1.9% year-to-date.
• Smith blames the poor performance on specific holdings like Novo Nordisk (NVO) and Louis Vuitton (LVMH), as well as currency headwinds from a weak British pound.
• The host is critical of Smith's decisions, pointing out:
  • Smith chose to invest in the notoriously complex and unpredictable pharmaceutical industry (Novo Nordisk, Coloplast), so the associated risks were his choice.
  • Smith is now buying back into Intuit (INTU) at roughly double the price he sold it for in late 2022, a move the host views as mismanagement. Smith sold Intuit at $387 and is buying it back at a much higher price.

Takeaways

• Cautionary Tale: This serves as a warning about the risks of investing in complex sectors like pharmaceuticals, where even companies with in-demand products (Novo Nordisk's weight-loss drugs) can face significant regulatory and operational hurdles.
• Analyze Manager Decisions: Investors should be critical of fund managers' decisions. Selling a quality company like Intuit (INTU) based on a narrative (panic over stock-based compensation) and then buying it back much higher can be a red flag for poor position management.