Earnings Recap: Top Insights from JPMorgan, Bank of America, Taiwan Semiconductor, Netflix, and More

Hello, Robin. Thanks for saying hello. Welcome everybody to our first earnings watch for 2nd quarter earnings 2026. It's been a pretty exciting week. Markets up, markets down, semi stocks, Netflix, a lot of interesting stuff happening this week. The banks absolutely crushing it. Not surprising. Billions and billions of dollars per quarter for these big banks. I've been telling you guys for years about how much money these folks make. I think the Goldman Sachs equity business was up 130%. JP Morgan was up 80%. And we're talking about billions here, folks. Who knows how much the, the one-day IPO fee for SpaceX was to Wall Street? Anybody know how much, how big that was? It was a cool $100 million. It was going to be even bigger than that. But Elon's like, guys, $100 million is good enough, right? And I think even they were like, yeah, it's hard to argue that we need to get more than $100 million in one day for this IPO. And I think they did make more than that. That was just for, I believe, the issue price. And then they do the green shoe and they make even more, then they make more trading it. It was a field day for analysis. All right, yeah, so some people got the game figured out. They're putting in some requests here for other tickers for us to cover during the earnings watch. So if you got them, put them in here. We got 30 minutes, so let's get going. In case you missed it yesterday, we did a lot of talking about Finsights, and there's a very special offer Kyle can drop into the chat to get access to FinCites, what I believe to be the best AI agent in the world for investing, hands down. Hands down. No one else has built agents available to the public. Now, I'm sure that Alex Karp and Planetier have done some really good AI work for their clients in private where they go in and they put that data into a taxonomy to drive an ontology that creates value. for that client and it's private. I think he's doing a great job of that, but that's not released to the public. It's the last thing those companies are going to do. Hey, Palantir, I'm going to pay you several million dollars to give away my secrets. No, but New Constructs is giving away the secrets in footnotes and filings because we're the only one who can do it. And you can get that through FinCEN in a way that's an incredible deal with a special offer. Because you're basically getting Discovery plus FinSites for just a little bit more of the same price we charge for Discovery. And FinSites gives you access to all the data. So it's a pretty amazing deal. Kyle's dropping that in there so you can take a look. All right, Earnings Watch. You can see this is our professional membership capabilities here. And so you can— what I'm showing you, Earnings Watch, I created a portfolio that tracks these companies. And let's just go in order. Taiwan Semiconductor. What happened to TSMC this week? And again, feel free to throw questions in here about anything else. We do have a couple ticker requests. So Taiwan falls sharply. Chip stock slump overshadows Record profits. They pledge another $100 billion to expand US production in Arizona. What's going on with Taiwan Semiconductor, David? Why do they have— looks like they had decent amount of profit soars after second quarter profit. I think they had an awesome profit report, right? We're about to get the new filing, so we're going to get different numbers here, but I don't think anything's going to change here, folks. I don't think anything's going to change in terms of our rating. The profitability of the business is amazing. There's no question. It's great business. Question is valuation and what seeing here is an extremely expensive valuation, which is why it gets crushed when there's any bad news, even if earnings are good, because the earnings required to justify the price here are off the charts. Nobody's going to tell you that. They're going to get you focused on that next quarter. Everything Wall Street focuses on is the next quarter. And then when you go to Columbia Business School and they're talking about valuation, they say, how can we use a DCF model? Because everybody's just focusing on the next quarter. We can't get that right. How can we possibly use a DCF model? That requires us to look farther than that. And it's just a ruse to keep you from understanding the reverse DCF model, which says, I'm not going to look out that far. I don't have to. The market already is. I'm going to reverse engineer what the market is predicting. And that's exactly what we do. And when we go through that exercise, we're seeing more than 100 years of profit growth required. at these levels of profits. We're not saying profits are going to go down. We're not saying revenue is going to go down. We're saying revenue is going to grow at consensus and profits are going to stay the same or get better. And in that scenario, it takes more than 100 years to justify the price. So expensive. 3.7 price to economic book value, very expensive. Pop quiz. What's the price to economic book value if Jersey Mike's IPO happens at the expected $12 billion valuation? Anyone who answers that question gets a special prize. I'll give you— I was going to say a million. I'm not going to. Nobody knows because we haven't published a report yet, but I'm going to give you a sneak peek on what that stock implies. So, Taiwan Semiconductor, classic good company, bad stock, great earnings, doesn't matter. Market sentiment's changing. We're no longer going to overvalue semi stocks because we've overvalued them so much. So, you're going to get hurt. And again, this comes down to what kind of investor do you want to be? Do you want to be an investor who is riding the whims of the market? Oh, I hope I get on that semiconductor win and make good money. Let's go. Party time. Let's brag about my stock picks at the cocktail party. Or am I going to be careful, methodical, and successful in the long term? Am I suckered into being able to brag to my buddies in the near term? And of course, stay quiet when it's not going well? Or am I just going to be careful, methodical, and plotting? Maybe that's what the stock market is for. Ever think about that? Allocating capital, carefully building businesses, being smart about where you put your money, focusing on discerning between what's a good business, what's a bad business, what's a good valuation, what's a bad valuation, what's a good price and a bad price. We think about good prices and bad prices for everything else we do. Do we go to expensive, bad restaurants? No. Should we invest in expensive, bad stocks? No. Should we— do you go to restaurants that are way too expensive for what they charge? No. We would never do that. Why would you ever do that? It's a waste. Same is true for stocks. And you got Wall Street for years telling you the opposite because Wall Street makes so much money doing that and they're really good at it. You got the best salespeople in the world because it's one of the most profitable businesses in the world. Doesn't mean you have to fall for it, folks. We're Truth Serum to give you an alternative. All right, let's move on. JP Morgan. What's this stock doing? What we've been saying it would do forever. Just keeps crushing it, making absurd amounts of money at a much more reasonable valuation despite the performance that we've seen here as of late. This has been a long time, long idea, focused this long. Absolute crush. Undervalued stock continues to execute. Not quite as profitable, but way cheaper valuation. Okay, stock market goes down, JP Morgan goes up. Folks, this is definition of why you pay attention to new constructs, because this is where we found— I, I actually made— I remember when we made the JP Morgan first made the long idea a few years ago, I was like, the JP Morgan is safer than the S&P 500. I'm out there on the record saying that JP Morgan, one stock, is better and safer than the S&P 500, even though the S&P 500 is supposed to provide all these safety diversification features. I called BS on that because the S&P 500 had become so leveraged to junk overvalued stocks. Not always junk stocks. Microsoft and Nvidia, they're not junk stock. Great companies, profitable. But those things have gotten so expensive. And they're taking in Tesla, and they're taking in plenty of other junk stocks in the S&P 500, speculative stocks that made it more volatile than JPMorgan. And guess what? I think I'm true. Let's go and put this to the test. Let's compare to S&P 500, 5 years. JPMorgan way better. So I was saying this a few years ago, Kyle. I don't know if you can, if you have it handy. Actually, you know, we can look this up. We should be able to look up the JP Morgan articles in this part of the website. Let's see. It should be— whoops, that's not what I wanted. I wanted the JP Morgan. Here we go. 9 reports over time. Yeah, bank of the best, bank on the best. So yeah, over 5 years ago is when we started Talking about this, truth is back in vogue. The strong get stronger. So yeah, we've liked JP Morgan for a long time and been less volatile and a better performer. They say in Wall Street business, you got to pat yourself on the back because no one's going to do it for you. Wall Street, they stab you in the back, right? They kiss you on the cheek and stab you in the back. So I got to pat myself on the back on the JP Morgan call, and we still like that stock. ASML. This is just another version of TSMC and a lot of the tech stocks these days. Good company, bad stock, super expensive, 6.4 times price to economic book value. Anyone have a guess on what Jersey Mike's price to economic book value is? Maybe that'll be a little secret. I'll let you know. Jersey Mike's, not a 69% return on invested capital or 54%. Or even 15%. Not rising economic earnings. No. But valuation? Walt Wood, if you were in The Price is Right, you would not have gone at 100 because you know if you go too high, you're automatically disqualified. But good guess, Walt. Priced EBV 100? No. No, not quite. Johnson Johnson? Neutral rated. This is where I would kind of say I was going to make a football joke that I can't make that our old defensive coordinator in college used to say. Anyway, neutral is in the middle. Don't mess with it. And neutral, it's not a long, not a short. We're not going to talk about this a lot. Decent company, pretty expensive valuation, not a lot there. Look, it's a big company and a lot of people are going to be interested, but where we're interested in is, like I said before, those companies where the expectations are way too high and way too low. Let's go focus on the dark corners, the fat tails, where pricing discrepancies are most large, are largest. Let's go look at that. Bank of America. We didn't like this one as much as JP Morgan. The business has gotten better. Probably been a great performer as well. Good business to be in, folks. These major banks. They're, they got an oligopoly and it's on purpose. The amount of regulation a bank, a company has to go through to become a bank is huge. These guys own the business. They're huge. They've got scale. They've got influence and on K Street as well as Wall Street. They're going to make sure the crypto rules and development of that industry are going to occur in a way that's beneficial to them. Very strong business. I don't have any bad things to say about this either. Don't like it as much as JP Morgan because JP Morgan, it's all these things that Bank of America has, but it's like a 15% return on invested capital. It's a 5% free cash flow yield. They're at 7%, so they are a little bit cheaper. But I think free cash flow has probably gotten way better here for Bank of America, I'm guessing. Buying back shares. Look, after getting beat up for doing as much bad stuff as they did, it's like you almost can't miss in this business. And I know that because When I was at Credit Suisse, I saw that business being so horribly mismanaged 30 years ago. I remember one of my good friends in the business, Nick Kolas at DataTrack. They do great work, great research, great research. We used to talk about, there's no way Credit Suisse survives another year. It's just, I can't believe how badly this place is run. It survived for another 20, 25. Why? Because they have a regulatory moat. It's almost one of those, just don't mess it up, man. Don't mess it up. And Bank of America messed it up for a while. So did Wells Fargo, but they're pulling out of it. And look at the free cash flow these guys generate. $32 billion, $12 billion, $9 billion, $32 billion, $29 billion, another $30 billion. Cash flow machines, folks. Financial sectors is underweighted, Kyle. Cough, cough, long idea pipeline. Morgan Stanley, good company, bad stock. This has always been a fancier Wall Street kind of darling, a little bit more expensive. This gets me interested. Goldman Sachs reported this week too. We didn't put them on the list. They had a great report. They were attractive for a while. They were one of our favorites for a while. But yeah, it got expensive. Super profitable business. Never made it on our long idea list. Probably missed on that one. It's just a risky business. They had that Marcus thing going on and Goldman is a little bit sometimes too smart for their own good. Let's compare to BAC, GS. Who else are we talking about here? Oh, Morgan Stanley. Goldman Sachs. Wow. Really crushed it one year. Goldman and Morgan Stanley, best performers, even better than JP Morgan. Interesting. This week, Morgan Stanley down. Didn't Morgan Stanley have a bad earnings report? Yeah, I think they all had a great beat fueled by stock rating, investment banking fees. What's this about? Nebius proves the— Nebius, is this some— maybe they're getting punished for trying to make a case for how these super overpriced companies deserve to continue to be overpriced. I don't know. Interesting situation. But we would say, if you look at our stuff, we would— Morgan Stanley is among the most expensive with red out here. So again, you want to be here in the present. You want to be in stocks where expectations are lowest and profits are best. And so I like JP Morgan. Oh, Walt Wood, going to the other end. All right, let's talk about Netflix. Let's go ahead and talk about Wells Fargo while we're at it. Let's knock on all these guys at the same time. See if I can go back and get the— there we go. Nice. Wells Fargo's a purple. Oh, he only lets me do 5 at a time, so it knocked out the last one. Can we not do— yeah. All right, all right. So Wells Fargo up on the week while the market's down. So yeah, Wells Fargo is another great— it's kind of a turnaround story, folks. They, they were Running the ship so poorly that they're on my list of the. I think the investment banks will continue to dwindle down. It's just over time, talent's going to go to the best firms. Maybe we'll forever have this group of five or six or so. But I think of all of them, Wells Fargo is among the worst. The one I think that's going to go out of business next is Citigroup. So let's take JPMorgan out of here. Oh, I can't take JPMorgan. Let's we'll take Bank of America out of here. Let's put Citi in here. Down the week big. What happened to Citi? What did they do? Expense concerns. Yeah, folks, folks, friends, we see all these other banks like all green. And if you're not making crazy money in this market and you're an investment bank, you are highly dysfunctional. I was explaining how Credit Suisse was highly dysfunctional. And was able to stick around for 20 years. And this is an example. This is why of all the, the next investment bank to fail is gonna probably gonna be Citigroup, I would say. 'Cause you're not just making money hand over fist these days. You're highly dysfunctional. These banks are highly dysfunctional. It's highly dysfunctional, just like a, like super rich families, like royal families, the dysfunction. These people that are crazy rich, they're upset and they're in a tizzy because they're fighting over who's gonna get the private jet this afternoon. You know what I mean? It's crazy stuff. They're disconnected from reality. And that kind of stuff happens inside these banks. People are just— people get paid so much, they do so little work, the work is low quality, they're misleading investors. You're not talking about good people here to begin with. You're talking about people who are underwriting IPOs and shilling for stocks that they know aren't good. It's kind of the business. So it's inevitably precarious. But yeah, you're not making money. Hand over fist, billions and billions, and a quarter like what we just had. Something is not right. Something is bad. Look out for Citigroup. All right, let's talk about Netflix. It's a classic expectations analysis business. Good company, bad stock. Valuations come down a long way. See what's going on here. See how Netflix compares. What's Netflix done over the last year? Down a lot. So I will say, here we go, it's time to pat on the back. Those of you though have noticed for a while that I can't pat too hard because Netflix went up a long time before it came down. And, but we were early. We were early on the thesis that said, hey, by the way, these guys just aren't going to make that much money. And that's what's happening, my friends. That's what's happening. Very profitable for a little while, but eventually the expectations were just too high for both growth and profitability. They can't have both because streaming is ultimately a commodity business. We see so many different streaming firms out there. Just because they were first doesn't mean they're going to be best. And by the way, we're also seeing that the real growth is going to be in live events, and we're already seeing the bidding on these live events get out of control. Whether it's World Cup, whether it's NFL, whether it's NBA, pro sports, college sports, it's sports in general, MMA, like big billions and billions and like bidding wars because that's it, man. That's the last place where you can get truly novel, unique experiences that people are willing to pay big money for. There's margin in live events. There's a lot less margin in movies and TV series. Every now and then, the movie business was like venture capital, right? You're going to probably miss on 8, but if you make it on 2, you're okay because they'll be such huge blockbusters. Well, movies are coming out all the time and it's just watered down, and the blockbusters just don't happen that often, and they're difficult and expensive, and it's a lot of capital in between. That's why Movie studios used to be owned by bigger conglomerates who had the balance sheet to withstand the huge cyclical of the capital required to make 10 movies and get one blockbuster to make it all back. Netflix, great business. Super smart guy Bill Gurley pointed out that Netflix was one of the first companies to use capital as a weapon, that they had an unlimited amount of capital to fuel losses for as long as it took for them to become a real business. And that's what drove the stock price. And I think what we're finally coming to see is how this business is going to land long-term in a world where they don't really have that big of a moat. Streaming is a commodity, but anybody can do it. We're doing it right now. Maybe we'll get a syndication spot on Netflix and they'll overpay us like they overpay a lot of these other firms. But you get the idea. It's difficult for them to raise prices from much where they are today because you've got a lot of competing alternatives. So I think this is a good company, bad stock. Not as expensive as a tech stock, as a semi stock or some of these other tech stocks. But you can see here green and red. A great point, Roger. It's good. And New Constructs, we give you the truth about fundamentals 100%. The problem is when is everyone else going to realize the truth? But that's also the opportunity, friends. This really comes down to what kind of investor are you? I always talk about, are you a speculator or are you an investor? If you're a speculator, you're going to kind of go with what everyone else is looking at because you got to. You're trying to predict when they're going to figure things out. You're an investor, you don't care about that. Your goal is truth. Your goal is long-term success. Not be able to brag at cocktail parties, but be able to brag to your grandchildren, be able to enjoy time with your grandchildren and your children because you've done well. And that just takes doing the steady, boring thing really well. And yes, to Roger's point, it's nice to know about the truth about fundamentals, much harder to predict when others will see the truth. The other way to point that is that with new constructs, you see the truth before everyone else. That, my friends, is the definition of getting an edge. You see the truth before everyone else. Does it always manifest when you want it to? Does the world always do what you want it to do when you want to do it? No. Do you always get your cake and eat it too? I can't give you both. I can give you cake. I can give you truth before everyone else has it. I can give you an edge. I can't guarantee when you're going to eat it, but I can guarantee that cake will stay good until it's time to be eaten. It's my analogy for the day. All right, Jersey Mike's. What is Jersey Mike's showing us? What if I told you that Jersey Mike's was an unprofitable business Trading at a tech company valuation. It's more expensive. You're pretty close, Walt. 7.8 price to economic book value. That's better than ASML, better than TSMC. Folks, that, my friends, is an IPO. The joke is IPO stands for it's probably overpriced. Yeah. Jersey Mike's, probably overpriced. Okay, folks. Any other questions while we're in here today? I'm going to take one request here. UPS did not go in. I got to tell it which one. Yes. Middle of the road. Don't love it. Don't hate it. In the middle. I want to go in the corners. I want to go where things are way underpriced, way overpriced. That's where I have a chance to beat the market. When the market's vaguely right, as as Ben Graham used to say, I want to talk to Mr. Market. When he's too sad and when he's too happy. That's the way to roll. Okay, folks, thanks very much for being with us today. Make sure you take— check out that Discovery plus FinSites link. Kyle put that in there. Check that out. That's a great training on why we have the best AI in the world. I'm saying this out loud for the world, recorded. We'll say it, the best AI for fundamental research in the world. Why do you think Google chose us? Why do you think Google invested $2 million to build an agent based on our data? Because when technology is fueled by good data, technology has power. When technology is fueled by bad data, it's destructive. The rule and the law about modeling that was true in the beginning of time and is true today. It's very simple. Garbage in, garbage out. Models are only as good as their inputs, folks. AI is not going to be a creator. It's not an alchemist. It can't take sand and turn it into gold. Can't take bad data into good data. You can't fix the inputs with AI. It's just not possible. That's why it's struggling these days, why these guys are not making any money. It's why China's taking market share from the expensive US AI companies because they're all using the same data. It's all internet data. So why am I gonna pay 10 times more for a US AI when I can get the same thing from China? Why do they talk about how generative AI is gonna change the world and they're gonna hack governments? Because they don't want you to know how bad it is in so many other areas. We're gonna give you real AI based on data like what you saw today. So I hope you guys have a great weekend. Thank you, and we'll see you next week.