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Welcome everyone. It's time for another update. We have you know, it's like deja vu. We just have the same day over and over again. The same two days. We have a nice little green bump. Seems like the market might go up a bit. Then it's immediately followed by this. It's followed by a huge red day. We have the Dow Jones down half a percent, so not too bad if you're in those companies.
The S&P 500 down 1.38% and the QQQ. The QQQ has been the major focus here. It's down 2.4%. It's recovering a bit. It was down 3 and 1/2% this morning. And most of this has been caused by one company in particular, Snapchat and the CEO of Snapchat. He recently gave some updated guidance. He said that things are deteriorating faster than expected.
So, we're going to jump into his call and explain what caused this sell-off because we have so many ad-based companies, companies like Google selling off 5.6%. Facebook is down 8 and 1/2%. Amazon, just the ad portion of Amazon, it's down 2.8% today because of that. We have other ad companies like Roku down 15% based on Snapchat's call.
Pins, Pinterest is down 23% again, entirely based off of Snapchat's call. This call was so shocking to the market. Apparently, what the CEO said was so shocking that literally the Wall Street Journal is reporting on it at the very front page. Their headline article talks about the Snapchat call and how it soured investor sentiment.
So, what did this guy say? What did he say that was so doom and gloom that caused this type of sell-off? Well, we'll talk about it here. So, as always, we have a lot to jump into in this episode. I'll be playing the audio from that Snap call, so we can hear what that guy said causing the sell-off. And we'll be doing a portfolio update.
So, in fact, let's go ahead and start off with the portfolio update. This is a story fund. It is a growth portfolio that I started early 2021, which in hindsight was not the time to start this type of portfolio. I invested in growth, I think large cap growth, which I think are better value than smaller cap or speculative growth, but I invested in these companies in early 2021.
I put a lot of money in last year and it just hasn't gone well. There's no other way to say it. It's underperforming the market by a large extent. These companies are totally out of style right now in the market. The market wants companies that are very defensive, that have very predictable futures, that have been around for a 100-plus years.
So, the market's pushing into companies like Procter & Gamble and Clorox and Coca-Cola. They're moving out of any type of company that doesn't have the characteristics of those those defensive companies. Now, I think over a longer time scale, another 5 to 10 years, I do believe that these companies will outperform that other group of companies, the very defensive ones.
But, that's not going to be for a while because right now the market is incredibly scared. There is no other way to put it. Investors are incredibly scared right now. In fact, let's go ahead and just put some data with that fear. Here is the Fear & Greed Index, which is kind of a you know, it's a little bit corny of a gauge, but I actually think it's pretty scientific.
They use a bunch of metrics to decide if investors overall are fearful. So, this is completely objective. It's not just a subjective thing, right? And right now it's in extreme fear. That's pretty bad, but the bigger picture is it's been this way. It's been in extreme fear for the entire month of May.
So, we're going on 24 days in a row of the market being in extreme fear mode, investors being pessimistic. Investors are so fearful right now, they're selling on basically any news. And honestly, this fear is causing a lot of portfolios, not just mine, to get crushed over the past few months. To give this some greater context, I asked how many of you have your portfolios overall in the red?" And 72% of you, 72% said that you're in the red.
There was 18% saying that you're barely in the green, on the verge of going in the red, and then 9%, only 9% said, "I'm way in the green." The reality is many of you that are in that 72% category are in the red because you started investing within the past 2 years. If you started investing just recently, or if you put a lot of money in the market in 2021, there's a good chance that you're in the red right now.
It's very difficult to avoid. You would have had to make some very concentrated bets in the different industries like oil to avoid going into the red. Now, on this note, there's something I think that's interesting to point out, and I think it's actually important. I'll throw it up on the screen here.
This is a little bar chart from my YouTube analytics. What I did was I went into the analytics of YouTube. I I went into the demographic of my viewership. So, YouTube knows what age you are. They have ways of figuring that out. It's Google, right? They know everything about you. And what they do is they compile the percentage of your audience and your viewership that your channel attracts.
Now, we don't have a lot of people that are kids on this channel. So, the 13-to-17-year-olds are 0.1%. So, literally nobody 17 or younger is watching this channel. But, we do have a lot of 18-to-24-year-olds. We have the greatest The greatest portion of the audience is 25-to-34-years-old. That's the same group that I'm in.
Then, we have a pretty good chunk of viewership that's in the 35-to-44-year-olds category. Then, we have even a you know, a a good amount in 45-to-54, and then it drops off big from there. We only have around 6% of the audience that's older than 55. Now, this data is actually incredibly important. The way that compounding works is through time.
That is the most important ingredient. When we're doing investing, we're buying these companies, the biggest thing that you're always told for every investment, especially in equities, is it takes time. You go through a lot of volatility. You have to hold on, dollar cost average in, not get frightened out of your positions, and most importantly, give it time.
You have to give it time for the market to grow, for economies to recover, for us to go through this scary time of of interest rates rising, and time will cause the compounding to happen. When I look at this data, I see that the 18-to-24-year-olds, you're just getting started. You're just building your portfolio.
You probably have 40-plus years of investments ahead. 40 years, that's a long time to be able to invest. 25-to-34-year-olds, the biggest cohort of this channel, 42%, you have 35 years, 30-plus years at least to be able to let your money sit there and grow. That's a lot of compounding. I bet in 30 years you're going to look back at 2022, and it'll just be a blip on the radar.
You would have put so much money in your 401k and Roth IRA and different investments over that time horizon that this will look like just a small uh bump in the road. Even the age group older than that, 45-to-54-year-olds, is still young. People are living until they're they're 80s, they're 90s. You're going to have at least 10 years for this to recover, an entire decade.
And likely the market will be a lot higher the next decade. In fact, I strongly believe that. Now, when we move up from that category, and we get into the 55 years and older, that represents around 6% of the audience here, so it is a a decent amount, but I think you should be more conservative at that stage.
You're getting up to the point where you have a big retirement that you've been growing for the past 30 years. Obviously, you should be more diversified. You should take on less risk overall, and the focus there should be on capital preservation, not maximizing your gains. But for the huge majority of us, this clearly shows that that the big majority of us are early in our investment journey, and I think that's important to point out right now.
Because when you're looking at these losses, it can be very discouraging, but if you put this in the lens in the frame of a 30-year investment horizon, I don't think it's quite as discouraging. Now, as you can see, these companies are getting crushed right now. It doesn't really matter which ones I pick or their valuation right now.
The market is selling off indiscriminately every single growth company as it does this trade in this transition and this rotation of value. That's the market that we're in. Now, I am stubbornly sticking with this portfolio and the companies that I own, not following the trade of going into consumer staples and going into commodities because I think that I have the time to ride this out.
Basically, I have the luxury of time on my side. I can wait two or three years for the market to go through a rotation and go through a recession, eventually recover, and I think that many of these companies, in fact, I think all of them will be much bigger. That's the assumption I'm making. So, in the meantime, over the short term, this is going to be painful.
Holding on to companies that have traded down that the market no longer seems to favor is a very difficult thing to do. When I look at the performance of this portfolio against the S&P 500, the S&P 500 is now starting to trade down. It's actually in the red, and my portfolio, the growth companies, are down now 32%.
So, that is a huge hit to the portfolio, but regardless, I'm sticking to these companies. As painful as it is, I'm sticking with this portfolio. I've already sold off all the companies that I think either have weak fundamentals or they're companies that were overvalued, and now I have a portfolio that I believe both is undervalued.
Every single holding I think is undervalued, and I think they all have very strong fundamentals. I have another video planned where I plan on going through the valuation of every single holding. So, I'll do that one probably tomorrow, but right now, I'm just sticking to these companies. It's painful right now, but I'm going to ride out the storm.
Now, moving on, let's go ahead and talk about Snapchat for a minute. We know the market's already very skittish, extremely fearful. Every single indicator shows that, especially the market today. It's even trading down further right now. We're down now 3%, right? So, the market is just as fearful as it gets, but then we have the Snapchat CEO, Evan Spiegel, speaking at the JP Morgan's 50th annual global technology media conference.
And what he does is he gives an update on the guidance of Snapchat. So, Snapchat reported their earnings 1 month ago, and they gave guidance, and it was considered to be conservative guidance, right? They give a range of how they're going to grow, and they gave what was considered to be conservative guidance.
But, then he gives updated guidance just a a month later. Literally 4 weeks later, he's giving updated guidance, and this is what he says. This is what spooked the markets. Yeah, well, the macroeconomic environment has definitely deteriorated further and faster than we expected when we issued our guidance uh for the second quarter.
Uh so, you know, even though our revenue continues to grow year over year in the second quarter, it's likely that revenue and EBITDA will come in below the low end uh of our guidance range. So, He just said that the macro environment deteriorated faster than expected, and this is 1 month ago again, and he said that our guidance on revenue and EBITDA will come in even below the low end of their guidance, which was already considered to be very conservative.
Certainly something that we're working through along with many other businesses that are impacted uh of course by the supply chain issues, inflation, concerns about interest rates, the war in Ukraine, uh etc. So, there's a lot to to deal with in the macro environment today, but we're staying focused and really on the long term and investing through it.
Those are the comments. There's a lot of macro issues to to deal with, and we're going to come in even below the low end of our guidance. Those comments caused this. Apple is down 3.2%. We have Microsoft down 1.38%. We have Amazon down 4%. 4% just today, and it's already almost close to $2,000 a share.
We have Google down 6.6% based off of Snapchat and the CEO's comments. It's down 6.6% down to $2,000 a share. We have Facebook down nearly 10% today, again based on this CEO of Snapchat and his comments about missing their guidance, changing their forecast 1 month later. We have Roku down 17.6% and we have Pinterest down 22%.
All of that on the back of pretty benign comments by the Snapchat CEO. Now, Snapchat itself, after giving those remarks, is down 41.6%. It's down $9.36 a share just today. It's down to $13 a share. And Snapchat, just to give you an idea of how crazy this market really was, Snapchat at one point in time was valued at over $80 per share.
It's down to $13 a share and I still think the company's overvalued. If you look at the company Snapchat and what we're dealing with, this is the company that's dragged down the entire stock market. This company has solid revenue growth, right? Like every other tech company has been growing revenue over the past, you know, the past couple of years.
Look at the EBITDA of this company. This is the one dragging down every other company. No EBITDA, doesn't make any money. It's barely got any free cash flow over the past couple of quarters, but on a diluted basis, it basically has no free cash flow. We look at the earnings of this company, there's no earnings to speak of.
It's basically always negative. We look at the balance sheet of it, strong balance sheet. So, they have more cash than debt. That's good. We look at the EPS of the company. Again, no earnings, no net income, negative EPS. So, Snapchat isn't making any money, they're not profitable, they're not paying a dividend because they have no money to return to the shareholder.
So, you're not getting any dividend from them or any capital returned. You're also getting a lot of dilution. This is the amount of shares outstanding since beginning of Snapchat, since they went public, since they had their IPO in 2017, they've issued roughly 400 million plus shares. Probably 15 to 20 billion dollars in shares.
So, So in the public market are buying these shares, providing Snapchat with funding to pay their employees and to pay their executives very big compensation packages. The executives of these companies are paid very handsomely. Meanwhile, the investor in the company has an all-time return since IPO of minus 51%.
These are the type of companies in the market right now. Many of them exist. Snapchat is just an example. There's many companies right now taking from investors in the public markets. They're taking their money, supplying them with huge pay packages for the executives, and meanwhile they're diluting you and offering terrible risk-adjusted returns.
And even after this company has provided this abysmal performance since IPO-ing, it's still overvalued. It's trading at a 62 Ford PE ratio. That is very expensive in today's market for an unprofitable company that does massive share dilution. Now this problem goes well beyond just Snapchat. Snapchat is the highlighted example right now because it's the one that the media's focusing on, but overall the market is full of these type of companies.
Companies like Snapchat that dilute the shareholder, don't give good risk-adjusted returns, and don't generate meaningful amounts of free cash flow. The market is entirely full of these companies I think because of a decade-long policy of having low interest rates and easy monetary policy. I think it's created a lot of what I consider to be zombie corporations.
We have lots of companies like Snapchat that aren't generating any profits, any meaningful free cash flow, and they're not doing it on an undiluted basis. They're diluting shareholders like crazy. The market is literally full of these companies. And so usually I'm optimistic. Usually I think the market will recover quickly and I think that things will be good, but I think we're going to have to go through a process of washing these companies out of the market.
And I think that these dilutive, non-cash flow generating companies that rely on investors' liquidity, they rely on investors giving them dollars, are going to have to be washed out of this market first. On this topic, we have the Bridgewater co-CEO Greg Jensen. So he works at Bridgewater and I think he's a very intelligent guy.
He does a lot of macro forecasting, so he focuses on stuff that I don't spend as much time on, but he said some interesting things. I listened to this full podcast and I thought it was very interesting. He said, "Quote, the markets are pricing in actually a pretty darn smooth landing here. And so, I think today's market price is still overly optimistic.
It's been small moves relative to the secular change that we're actually experiencing. While most of the market seems to think that this has been already a big drop, right? This is a big drop." He's basically saying that the market right now is pricing in the best-case scenario, not the worst-case scenario.
And later on in this, he gives a very startling statistic. This is something that really caught my attention. Jensen estimates that roughly 40% 40% of the US market, quote, can only survive essentially with new buyers entering the market because they're not cash flow generating themselves. And that's near a historic high.
It's basically right there in line with 1999 or 2000. That is a startling statistic. He's saying that 40% of the market are essentially Snapchat-like companies. Companies that are probably overvalued. They have no profitability. They really have no cash flows. And the only way that they're generating any income is through share issuance, diluting the shareholder, through outside capital, through the public markets.
He's saying these companies are not going to be able to survive once they have to rely on their own income streams. As more liquidity gets sucked out of the markets, assets that have seen their valuations rise as a result of investor inflows, rather than cash flows, are now vulnerable. So, the companies that are the most vulnerable, I think, for the next 2 years are the ones that are not cash flow positive on an undiluted basis.
The companies that are relying on dilution to generate their cash flows, I think, are very vulnerable right now. So, what I'm doing in this instance, I have bought companies that are all free cash flow positive on an undiluted basis, meaning that every single one of these companies can survive easily on their own without raising any capital through debt or dilution.
And I plan on continuing to hold these companies. So overall, I think this will take time. 40% of the market is full of these companies that are basically zombie companies. They've grown up with cheap capital and share dilution, not by their own cash flows. And I just think it will take time until these companies are completely washed out.
But we're seeing it happen. We're seeing these companies become unfavorable by investors, and they're having to change their business model. In the meantime, I think we just have to be patient. That's all for this episode. I'll see you in the next one.
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