Tokenization of Stocks: NYSE, Blockchain, and AI-Driven Earnings Research

Hello everybody, it's exciting times over here at New Constructs. Tokenization of stocks, it's happening. Let's jump into some of that. So let me tell you why this is happening, folks. When you know it's for real It's when the big money gets in. Of course, they're going to get in a little bit late. New York Stock Exchange announces new tokenization platform. Who else is doing this? Tokenization of stocks creates digital tokens on a blockchain. So that's what that means, right? So you trade on the blockchain. Benefit of being on the blockchain: 24/7 operations, no market hours, instant settlement, stablecoin-based funding, not bank wires, natively issued as digital securities. So the weird thing about the stock market is that it's It seems digital because we just trade in our accounts. But in the back end, you've got all this kind of sort of manual processes that take time, even if they're mostly digital, like settlement, T+1, T+2, T+3. How efficient is that? Right? It should just be all instant. I made my order. It looks instant in my account, but there's stuff going on in the background. What is all that? I think that's legacy inefficiency just designed to employ legacy people who want to keep making money doing things that they've been making money doing forever. So this blockchain is going to, I think, break that. NYSE, they're doing it too. What does that mean for firms like Coinbase, Kraken? Let's talk about Kraken for a second here. Kraken. Actually, you know what? Let's just do this. I'm going to type this in. X stocks. What are X stocks? Tokenized stocks and ETFs backed Kraken. Gate, Solana, it's coming. What kind of research do you think? Hey DL, thanks for the shout out. And by the way, love it when you guys are in the chat and the Q&A. Pile on in there. Let's make this interactive. I'm going off script here and talking a little bit about Bitcoin and crypto. And I just say Bitcoin is the catch-all for crypto because I think there is a major difference. The coins, by the way, when I talk to people that really understand blockchain crypto, they're like, There's a big change about to come along. They're going to make most of the coins illegal because people in the business will tell you it is an awful rip-off sort of system. And I think the regulators, everybody wants to put an end to it because it's a major system for ripping people off. You're selling people on the promise that their coin's going to go up and they're going to get rich quick schemes. Look, they still sell. They'll probably always sell. And, but it needs regulation. The point is, the blockchain is going to affect stock trading. So how do you think firms like Coinbase and Kraken and Robinhood are going to lure clients like you away from your Schwab to trade on their platform? Eventually, you're going to have to trust that this is better. But are you going to want to go to this platform without the Kraken or the Coinbase platform if they don't have good research? Right? A lot of you are Schwab clients and you've been complaining about not having access to new constructs there. What if new constructs was on Coinbase, Kraken? How cool would that be? And how much of a great fit is it for them? Look, they're competing with Wall Street anyway. How about add another way to compete? We'll give you honest research. We're like the Prometheus of good research, taking it from the Wall Street gods and giving it to the retail. Yeah, our research is pretty good. You want proof? I have Harvard Business School, MIT Sloan, Ernst Young papers vetting, validating the data. And then how about the performance of our index, Core Earnings Leaders Index? Up 27% versus 18% for the S&P 500. Outperformed by more than 50%, 50% better than the S&P 500. I'd say that there's Qualitative data. That performance provides some pretty good evidence that there's alpha there. So would you rather build your own research platform if you're them? Based on what? They could probably find a team of people and experts to build something from scratch. Be a lot more expensive. I can tell you that for sure. What we can do will be pennies on the dollar. I'm talking single-digit percent is what it would cost for them to spend. And it would take a long time for theirs to be as good. What we have is proprietary and special for a reason, but it's super, super scalable. AI ready. Google built an AI on it. Google choose to build their AI on our data. They should maybe choose to build their research on our data. White label it, take it as is, all that. Okay. Any questions about any AI stuff? You guys like that? Not like that? You can give me some thumbs down, thumbs up, or follow-up questions. Love to hear it. Otherwise, I'll jump into the earnings watch. Let's see, I'm going to log out of my institutional account and I'm going to log in to my Portfolio Insights account. You guys familiar with Portfolio Insights? We have a new set of memberships. If you're not aware, we added 2 new memberships, right? For a long time it was Stock Tracker Or Pro, $49 a month or $1,000 a month. We brought something into the middle, folks. I think that's going to make a lot of people happy. We had a lot of people asking about that for a long time. So Discovery is really just Stock Tracker plus a screening tool. So people love the screening. By the way, screening, unbelievably valuable screening at new constructs, right? To go through the entire US market And be able to screen everything. And by the way, it's not going to be just the US market for very long. We are actively working on a deal. We got a lot of partners to grow global. We finally need to go global. Goodness gracious. We've been like, oh, it's so good with America. People want global. We're going to go global. Now's the time. The technology does almost everything automatically. Couldn't have better proof that the data works. Time to scale. And we're going to be able to scale at an efficiency that the world's never seen. The best ever. So anyway, but US stocks right now is our focus. That is 80% of the world market cap. So that's not bad. And screening tool, amazing here. It's the screener. It's not the full deal screener like you get with Pro. It's ratings only, but you can screen the entire universe, stocks, ETFs, and mutual funds by our ratings. By the way, our ratings aren't too bad. All right. As you guys know, core earnings leaders. Does really well, but so does the Very Attractive Stocks Fund. The Very Attractive Stocks Index. You can see here, if we go versus the S&P 500, 5 years, 125%, 124% to 86%. 38% better, right? So screening tools are awesome. And then you've got portfolio insights. And this is really a hybrid again. In this one, in Portfolio Insights, for all the stocks in your portfolio up to 50, you get all the same details as you get as a Pro subscriber. So the real difference is you just don't get it on as many stocks. You don't get like Pro, you get everything, get the full screening. But with Portfolio Insights, you do get the insights on individual stocks. And here's what I'm talking about, these kinds of insights, right? You click here. This is a Portfolio Insights membership. You can see I've only got 8 tickers, the 8 tickers we're talking about today. And you get the details on the rating. So all these details, the rating breakdown, which is super powerful. This is like a model, someone building you a model. I submit that it would cost you at least $25,000 to go find someone who could build this for you. The expertise to get it as right as we get it, at least $25,000 if you can find someone that can do that. There's not many of them. I know most of them. I've trained a lot of them. And some of the few other people trained me. It's a small group. Building good models has not been a popular practice on Wall Street for a long time. So you're going to have a hard time finding them. And I know they don't really teach it in business schools because they bring me in to guest lecture. And I'm teaching them like 2 hours. It takes more than 2 hours, my friends. It takes hours and hours. It used to take 6 months. Our systems are doing a lot now so we can help people. We can allow people to train while working. But it used to be 6 months before I let an analyst touch a model. That's how we did it to start New Constructs. 6 months of training, 2 weeks of intensive training. I had a training course. We called it the live training class, but 2 weeks intense. And it was a no pass, no play. If you didn't get at least a 90 on my final exam, see ya, you were done. And we hated to do that for a lot of people. But we did. But guess what? We are uncompromising about our data standards. And then another effectively 5 and a half months of training in the system. And that's where we just like, we, we basically, it's like game tape in football, right? The tape don't lie. The system doesn't lie. So we could track every single thing they parsed, how fast they did it, how accurate it was. And then we would just coach them and coach them. Now we can do that a little more automatically and we can let them parse a lot of stuff and the machine's gonna help them get it right. And still coach them along the way so they can be productive and actually parsing real filings over filing season. Off on a tangent. The point is, the data is incredibly good and the system's great. But you get— when you have Portfolio Insights, you get all these great details. The rating breakdown, my friends. Super cool, right? Economic earnings versus reported earnings. The number of shares outstanding, return on capital, return on tangible capital, 2-year, 3-year, 5-year average for ROIC. DuPont model, so you can break ROIC down into margins and capital turns. Free cash flow, super valuable. By the way, free cash flow in the tech sector— check out the Danger Zone report on Monday. Major changes in free cash flow in the tech sector. Not in earnings, free cash flow. This is what Michael Burry is talking about, folks. Michael Burry is not dumb. He's right. I wouldn't necessarily probably go with the whole depreciation schedule stuff. He's right about that too. But that's, to me, that's a little more complicated. The easier message is cash flow on the decline. There is a popular tech company, it'll be in our report, a popular tech company where free cash flow is so negative, it's 97% of the enterprise value. A negative 97% free cash flow yield. That's not sustainable, folks. And we've already seen the market call Oracle's bluff on negative free cash flow. Sorry, we're not going to lend you any more money. Debt got marked down. When the numbers get this big, we're talking like negative $130 billion for Oracle. I'll look it up. Let's look it up. We'll put Oracle in here. ORCL. I was just talking about this in our Danger Zone interview. Oracle free cash flow, you can see negative, negative $194 billion, 24% of enterprise value. Would you loan them money? Is the AI race over? No, just beginning. Who here knows what I've talked about in terms of the second stage of the AI race that nobody else has talked about? You get a free copy of the Danger Zone report if you put in the right answer here into the chat. What's the second stage of the AI spending bonanza? We're going to have to spend— they're going to spend a lot of money on infrastructure, energy, storage, chips, all that stuff. What else are they going to have to spend money on? No guesses? All right. Nobody gets any free reports. Free. So you get free cash flow yield analysis. You get free cash flow margin. So you look at free cash Free cash flow as a percent of revenue. Negative free cash flow, 2-year average, 165% of revenue. Ah, Wally, yes, Danger Zone report, you got it, man. Don't let me forget, come into support, tell them we owe you the Danger Zone report. Should be out Monday. Yes, the second spending is on data, folks. How good is a machine if it isn't seeded with really good data? It's terrible, right? You got to have super high quality data. Quality doesn't even— it doesn't have to be high, it has to be perfect quality, right? If it's 99% good, you don't know what the 1% that's wrong, because if you knew the 1% was wrong, you wouldn't have 99%, you'd have 100% because you'd get rid of that 1%. So when you're 99%, doesn't matter, because if there's a 1% chance that important decision you're making is based on bad data, are you going to trust it? Now, it's okay if maybe you're looking for advice on what kind of clothes to buy or what doctor to go to or what restaurant to take as a reservation or getting, building out an itinerary. You can go back and check it later. But when it comes to really important, sophisticated things that people will pay real money for, you gotta have it right. There's no middle ground. Data, quality data. That's the second spending of the boom. We haven't even started that yet. And that's going to be really expensive because there's only 1 or 2 really good datasets in every domain. Not going to be that many. And they're going to spend a ton trying to build them on their own from scratch. And they will fail for the most part. And then they'll come to firms like New Constructs and say, tell us how you did it. And I'll say, write me a check first, or you can license and I won't show you how I did it. And so we also have portfolio insights, good stuff, all based on quality data because it's not just the Very Attractive Stocks Index, it's the Earnings Leaders Index, which does even better than the Very Attractive Stocks Index, right? Over the last year, you see the Very Attractive Stock Index is about the same as the S&P 500, but the Core Earnings Leaders Index dominates. Dominates. I see somebody raise their hand. Put your question in the chat. We can take it there. All right, let's knock through some of these earnings. Let's get done what we came here to do today. Interactive Brokers. So they reported this week. How did it go? Great. Beats on revenue, better than expected earnings. Look, we're not surprised, folks. And my Pro subscription would tell me what our earnings distortion score is. I wouldn't be surprised. If it was a beat, look, we like the stock. They're beating, they're still cheap. This is one of the few places you get good value, my friends. I don't know what to say. Very attractive, super good business, financial services, great technology, economic earnings crushing accounting earnings, and still relatively cheap. What to say? Beat the number, no big surprise. DHI suspended. On Portfolio Insights, you don't get suspensions. That's a pro only. That's super insightful. If you're interested in what causes suspensions, you just click on this link here, you get a new tab, you get an explanation of everything that's causing the suspension. My sense is that it's because the— they got a brand new filing coming in. Cheat code, Trainer at the Helm. I know what the suspensions are. When it's pending, we suspend it because it's about to change. So DH, this one looks good. We still like this. We can see how they did with earnings. Maybe not so good, down a lot. Last few days. Lower profit expects elevated incentives to drag down margins. All right. What we found in our analysis of these firms is that the expectations are still low. So they're going to get some bad news here in the near term. But the valuations of the stock are even lower in terms of profits not growing more than 10%. 1.1 price-to-economic-book value means the market is expecting this company's profits To never grow more than 10% above where they are now, inflation adjusted, but never more than 10% from where they are now. So I think that's cheap, and we got we're facing a major housing shortage. Look, if you know you want a time horizon that's a little bit longer, at some point this stuff's got to turn. Schwab, my good friends at Schwab, talking to them about some AI, nothing substantive. No, even NDA, even subscribe to. But if you're a client of theirs, keep banging on them about adding our research. Keep banging on them, especially considering how well the index and the ETF have done. Keep banging. So yeah, you can even buy access to our index through Schwab too. Like, that's there. So they know, they see it. And my experience working with Google, it's been amazing. Like, they built stuff faster than some of these big firms we've been talking to for over 6 months. We've probably done 3x what we've done at some of the largest, some of the most sophisticated asset management firms already with Google. We did that already, built the agent. It's about to be published hopefully, man, we got a week to get to the end of the month. Yeah. All right. I'm going to say mid-February latest. We're really close. It's all red tape at this point. Like it works. It's all red tape working through their system to public and commercialize and all that. We literally have to hire a third-party consultant. Like you pay 'em like significant money, over $20K, right? Just to get it listed. Okay. Anyway, that's the world. Still red tape even with those firms, but building it, the actual technology, like to have something usable. We've been using it. We've had a couple people who've been beta clients. And hit us up in support if you want to be a beta client on the AI. We might take a couple non-institutional or non-pro users for that. Love to know if you're interested. So I was like to the team, oh my gosh, this is who we want to work with. So that's part of why we're interested in talking to Coinbase and Kraken and these folks. We want to work with those firms. Working these larger institutions is a different world than the speed and intelligence with which we work at these other places. It's really cool. Schwab, what happened here? Sluggish client recovery, our only gripe. Another strong quarter, higher interest. Yeah, Schwab. Where are we? Schwab neutral. Good profits. It's getting expensive. So, you know, Schwab, it's one of them. There we go. I would say there's potentially significant tail risk that they lose to Coinbase, Kraken, because those firms will be able to offer tokenized stock trading, which is effectively safer and better. And by the way, tokenized stock trading, 100% confidential. They're not gonna be able to sell your orders off to Wall Street firms to take advantage of you, which is what they do when they take advantage of order flow. You like it when Schwab makes a couple hundred million bucks selling off your orders to hedge funds who see it before it hits the market so they can take advantage of it? Do you like that? I don't think you'll see that at these other firms. Netflix. All right, what I saw here— big— they missed. Okay, so down a lot, coming back a little bit today. Down quite a bit. What happened? Earnings on why it needs Warner. Bidding war spooking. Falls after 4th quarter results top forecast. So a good number, maybe not good enough. That kind of fits. Good company. Bad stock. They've got profitable, good for them. Valuation has always been pretty far out there, but I will say they beat us. They beat me in terms of my expectation, their ability to generate enough decent content to be profitable. I didn't think they could do it. Some of their original stuff is great. Documentaries are awesome. I love all the sports documentaries. Love them. Football documentaries, watching them all. Need some wrestling documentaries, Netflix. College wrestling. How about— I got a great idea. Cael Sanderson, one of the most winningest coaches in all sports in all time at Penn State wrestling. That would be an awesome documentary. They haven't lost a dual meet match. It's like a football team not having lost a football game. They haven't lost one in 6 or 7 years. You think Indiana is a great story? Penn State wrestling. They haven't lost a match In six or seven years. All right, J and J. It's our biggest market cap stock. Good company, getting expensive. Yeah, this is a good one. This is one we recommended a long time ago when I think it was around like twenty bucks a share. I don't know. I have to go through my numbers, and so don't take my word on that one. We were early on J and J. It's been good rating for a long time. You can see rating history here. Pretty cool. You can see attractive back when it was cheap. And then neutral, attractive again, but neutral as it got expensive. That's our— that's the way it goes at New Constructs. We're sticking by our guns on fundamentals. We want what we do to be grounded in real data, tangible, understandable results. If that means sometimes we have to let go of these really expensive ones, we're going to do that over time. And we believe it will serve us well. And so far, that's proving true. So far, it's really proving true. Our ratings, our core earnings. It works. Does it work maybe every single year, every single quarter? No. But I'm not trying to win the short game. I want to win the long game. I'm not here for a good time. I'm here for a long time. J&J, how did we do? Flat profit above estimates. All right, great. But didn't move the stock a lot because it's already expensive. Intel. Interesting story. Doesn't look good. Turnaround story. How much of it is priced in? I would say a lot. I think this is suspended for acquisition because the filings that coming in, I think it's acquisition. But yeah, really got a lot of growth priced into the stock. I'd say it's expensive. I wouldn't mess with it. And I think we'll still see that even if earnings aren't great. Oh yeah, it drops 15%. Reality check. Soft guidance. Soft guidance. Expectations are high. The bar was set too high. People love Intel. Owned it for a long time. Probably not a lot of people sold it. Got some huge capital gains built up over time. That's a thing. All right, last one. Capital One. Okay. I used to love this company. This acquisition still, they're still closing. I think that Discover transaction, they were the one of the original like CRM companies. They customized their lending to client. It was great. They had really interesting technology. And I'm talking, I'm going back 20 years, folks, more than 20 years when I was a Wall Street analyst. Capital One was one of the companies I covered. Love the management. Rich Fairbank, CEO. Love meeting with him. Smart, good guy, really focused on technology, pricing credit by the user, not by the group they were put in by a credit agency that might have old data or even bad data. Cool company. Technology investment fell off. It's a big promise. CRM companies merged on their own separately. But I just always liked how Capital One was forward-looking about that. So that was cool. And they were like the last new emerging credit card company to come and compete with all the other big players. Visa, all the big banks, Chase, Amex, Discover, and they've done great. But down a bunch here, looks like they might have had a miss. Mixed results post announces acquisition of another startup. Okay, interesting. Anybody know what Brex— what does Brex do? AI-native software finance suite used to issue corporate cards, automating. Yeah, okay. So, yeah. Yeah, their technology dropped off, so they're having to buy it instead of building on their own. Whatever. It's still good. At least they're leaning in that direction. All right. We are just about out of time. Any questions or comments? Nobody's saying. Thanks, everybody, for being with us. I hope you have a great weekend. Thank you.