⁠App Economy Insights
$GOOG Google Lands Salesforce Cloud Deal.

💵 Salesforce commits $2.5B over 7 years.
☁️ Agentforce now runs on Google Cloud.
🔗 Deeper integrations across apps.
🤖 Gemini AI powers Agentforce.

📊 $CRM reports Wednesday.
Will AI momentum show up in the numbers? https://t.co/TnaRLYXT1q
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⁠Investing visuals
Palantir $PLTR is now down 36% in one week. However, nothing has fundamentally changed about the business.

"In the short run, the market is a voting machine. In the long run, the market is a weighing machine" - Benjamin Graham
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⁠Stock Analysis Compilation
Alger International Opportunities Fund on Taiwan Semiconductor Manufacturing Company (TSMC) $TSM US

Thesis: Taiwan Semiconductor (TSMC) is well-positioned to capitalize on the rising demand for semiconductors due to its strong business model, technological expertise, and leadership in advanced manufacturing technologies.

(Extract from their Q4 letter)
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⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $MSFT 🧘🏽‍♂️

•NTM P/E Ratio: 29.56x
•5-Year Mean: 30.90x

•NTM FCF Yield: 2.51%
•5-Year Mean: 2.95%

As you can see, $MSFT appears to be trading near fair value

Going forward, investors can expect to receive ~5% MORE in earnings per share & ~15% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $MSFT is a quality business

BALANCE SHEET✅
•Cash & Equivalents: $71.56B
•Long-Term Debt: $39.72B

$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 46x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 22.7%
•2020: 26.4%
•2021: 31.1%
•2022: 34.0%
•2023: 31.0%
•2024: 29.7%

RETURN ON EQUITY✅
•2019: 42.4%
•2020: 40.1%
•2021: 47.1%
•2022: 47.2%
•2023: 38.8%
•2024: 37.1%

$MSFT has great return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2014: $86.83B
•2024: $245.12B
•CAGR: 10.93%

FREE CASH FLOW✅
•2014: $27.02B
•2024: $74.07B
•CAGR: 10.61%

NORMALIZED EPS✅
•2014: $2.63
•2024: $11.80
•CAGR: 16.19%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 8.40B
•LTM Shares Outstanding: 7.47B

By reducing its shares outstanding ~11%, $MSFT increased its EPS by ~12% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 69.4%
•LTM Operating Margins: 45.0%
•LTM Net Income Margins: 35.4%

PAID DIVIDENDS✅
•2014: $1.12
•2024: $3.00
•CAGR: 10.35%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~5% MORE in EPS & ~15% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MSFT has to grow earnings at a 14.78% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (14.78%) required growth rate:

2025E: $13.18 (11.7% YoY) *FY Jun
2026E: $15.04 (14.1% YoY)
2027E: $17.69 (17.6% YoY)

$MSFT has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $MSFT ends 2027 with $17.69 in EPS & see its CAGR potential assuming different multiples

32x P/E: $566.08💵 … ~16.3% CAGR

30x P/E: $530.70💵 … ~13.2% CAGR

29x P/E: $513.01💵 … ~11.5% CAGR

28x P/E: $495.32💵 … ~9.9% CAGR

As you can see, we’d have to assume a 29x multiple for $MSFT to have attractive return potential

At 28x earnings $MSFT has decent CAGR potential

$MSFT is one of the highest quality companies in the world & is firing on all cylinders

Although I wouldn’t want to rely on a >32x multiple, I feel comfortable accumulating the a tranche of $MSFT shares at $403💵 while relying on 28x - 29x

My next tranche of adds would likely be closer to $375💵 (~10% below today’s price) where I could reasonably assume double-digit CAGR potential while relying on 26x, ensuring some margin of safety
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨�[...]

� 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $MSFT 🧘🏽‍♂️

•NTM P/E Ratio: 29.56x
•5-Year Mean: 30.90x

•NTM FCF Yield: 2.51%
•5-Year Mean: 2.95%

As you can see, $MSFT appears to be trading near fair value

Going forward, investors can expect to receive ~5% MORE in earnings per share & ~15% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $MSFT is a quality business

BALANCE SHEET✅
•Cash & Equivalents: $71.56B
•Long-Term Debt: $39.72B

$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 46x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 22.7%
•2020: 26.4%
•2021: 31.1%
•2022: 34.0%
•2023: 31.0%
•2024: 29.7%

RETURN ON EQUITY✅
•2019: 42.4%
•2020: 40.1%
•2021: 47.1%
•2022: 47.2%
•2023: 38.8%
•2024: 37.1%

$MSFT has great return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2014: $86.83B
•2024: $245.12B
•CAGR: 10.93%

FREE CASH FLOW✅
•2014: $27.02B
•2024: $74.07B
•CAGR: 10.61%

NORMALIZED EPS✅
•2014: $2.63
•2024: $11.80
•CAGR: 16.19%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 8.40B
•LTM Shares Outstanding: 7.47B

By reducing its shares outstanding ~11%, $MSFT increased its EPS by ~12% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 69.4%
•LTM Operating Margins: 45.0%
•LTM Net Income Margins: 35.4%

PAID DIVIDENDS✅
•2014: $1.12
•2024: $3.00
•CAGR: 10.35%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~5% MORE in EPS & ~15% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MSFT has to grow earnings at a 14.78% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (14.78%) required growth rate:

2025E: $13.18 (11.7% YoY) *FY Jun
2026E: $15.04 (14.1% YoY)
2027E: $17.69 (17.6% YoY)

$MSFT has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $MSFT ends 2027 with $17.69 in EPS & see its CAGR potential assuming different multiples

32x P/E: $566.08💵 … ~16.3% CAGR

30x P/E: $530.70💵 … ~13.2% CAGR

29x P/E: $513.01💵 … ~11.5% CAGR

28x P/E: $495.32💵 … ~9.9% CAGR

As you can see, we’d have to assume a 29x multiple for $MSFT to have attractive return potential

At 28x earnings $MSFT has decent CAGR potential

$MSFT is one of the highest quality companies in the world & is firing on all cylinders

Although I wouldn’t want to rely on a >32x multiple, I feel comfortable accumulating the a tranche of $MSFT shares at $403💵 while relying on 28x - 29x

My next tranche of adds would likely be closer to $375💵 (~7% below today’s price) where I could reasonably assume double-digit CAGR potential while relying on 26x, ensuring some margin of safety
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫[...]

𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Startup Archive
Elon Musk: “Any new technology is expensive when it starts out”

Charlie Rose asks Elon why Tesla started with the expensive Roadster. Elon replies:

“Any new technology is expensive when it starts out… Because the first thing that engineers are trying to do is make it work. And then when you make it work, you optimize, and you optimize, and you optimize.”

He points out that computers, cell phones, and gasoline cars all followed this cycle. Cars used to be toys for rich people until they were made affordable by Henry Ford.

“And then you combine that with the fact that we’re just a little startup. There’s just no way that we could afford a billion dollars to make a giant car plant that would make hundreds of thousands of cars a year. Because that’s the kind of volume you have to get to to make cheap cars… So we have both a volume problem and a new technology problem. You have to reach scale and you have to work the bugs out of the system. And you want to make your mistakes at a small scale.”
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⁠Quiver Quantitative
I built a trading bot that buys stock in companies that are ramping up lobbying spending.

The portfolio has risen 39% since being released on Autopilot in April.

Politicians seem to be profitable investments: https://t.co/TcAIYzzCa0
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