As-salamu alaykum, everybody. I hope you are doing well, Ramadan Kareem. It has become apparent to me that ninety percent of my time pre Ramadan was spent searching and consuming food because all of a sudden I feel like I have ninety percent more time during Ramadan. So note to self after Ramadan, maybe spend less time on that topic. The markets had another red day today. America is becoming great again under Trump's administration. Dow Jones lost another six hundred points today after losing a similar amount yesterday. So the dollar index is down. The Russell is down one point thirteen percent. The Nasdaq is down point three six percent. S&P is down one point two two percent. And obviously this is compounding on the losses that we previously experienced. Now, in these times, as I always say, macro will solve itself. Yes, there are new tariffs. There's tariffs on Canada, tariffs on China, tariffs on Mexico. That's going to impact the economy for sure. There's new tariffs on agricultural products that will go into effect in April. Tariffing everything is what this administration is doing. That being said, what people tend to... misjudge or misweight is the reactions that happen because of the reaction. So there will be a reaction from the tariffs that are put. We're already seeing it in the market. We're probably going to see it in the inflation data. If these tariffs persist, we'll probably see them in the economy. If these tariffs persist, we'll probably see them in consumer sentiment, right? That's the first order reaction. But then there's a reaction to that. And that is the president may be looking at the market and saying, hey, these tariffs aren't really doing me any favors. Perhaps I should change policy here. The Fed may be looking at the economy and saying, hey, these tariffs are going to cut X amount of jobs. They're going to cause the economy to slow in a short period of time, perhaps we need to revise our monetary policy. And therefore, the reactions to the reaction that, you know, second order effects of the headlines that we're seeing today is what people tend to discount, not really take full or have full appreciation for. And you can see this reaction already displayed in the probabilities for an interstate cut. As I mentioned, the Fed may relook its monetary policy. And the good news is it's not like we're at zero percent interest rates where the Fed really doesn't have any tools to stimulate economic activity. Uh, we're at, uh, uh, four hundred and fifty basis points. So there's a lot of room for us to cut. And the probability for an interest rate cut in May, recall how I was saying right now, the markets are pricing in a probability for a cut in September. That is, you know, a greater than fifty percent chance of a cut. You'd have to go all the way to September. Now the market is thinking, oh, hey, we might get a cut in May. So now it's almost fifty fifty that we get a cut in May. And the probability for a twenty five base point cut is forty three point four percent. That's the slime here that I'm looking at. Whereas if you looked one week ago, that probability was twenty four point nine percent. So it almost doubled in just one week. And this is why I always say, you know, take these probabilities with a grain of salt, because in an instant they can change. They can double and they can have and double. on any news item. So I try to not focus on the macro. And instead, I try to focus on the opportunities that the macro may be making available for me. Now, something that caught my eye today, I'm always looking out for PIF members, trying to see if I can get them a discount on something. Super microcomputer. This is a company that we actually analyzed for our elite members. And it was north of a hundred, I believe at the time we passed on it. Now it's at thirty nine, but it actually bottomed below twenty. And the reason for this, well, part of the reason was that It turns out management wasn't being that straightforward with their numbers and they lost their auditor and they were at risk of falling out of compliance with NASDAQ's requirements. But it looks like management has been able to stave off the threat of delisting from NASDAQ and As a result, we've seen some recovery in the stock. There are still a lot of risks involved in Supermicrocomputer, but that is legal risks. The DOJ has a case against it. But at least for now, the NASDAQ delisting risk is no longer on the table. And so today it was the second... highest positive move in the S&P. It was up today, eight point five percent. This is this chart, by the way. um year to date it's up close to thirty percent but again if you compare it to the high that it achieved in march of twenty twenty four it's nowhere near its high it's still at thirty nine dollars and its high was close to one twenty so is this an opportunity is this a screaming buy right now you know maybe with the finances in place the threat of the listing no longer front and center for this stock is it going to reclaim those highs well in order to analyze this I like to do a valuation put the numbers in front of me and do a valuation Sorry about the white screen. It appeared that we had all gone to heaven. But yeah, this is Google Sheets format. I hope you're not squinting your eyes too much. Let's see here if I can make this even bigger for you guys. All right. So this is a summary of the stuff I've been looking at. Let's go here. All right, so SMCI, for those who are unfamiliar, Supermicrocomputer, makes servers and storage solutions focusing on AI, cloud computing, and data center infrastructure. You don't need me to tell you how hot these industries are right now and how much they are experiencing explosive growth. Now, to kind of get an idea of where the business is right now, if you look at Q for twenty twenty four, the revenue was five point six billion. Where it was was cute. And let's say Q two twenty twenty two. Let's use this as a reference point. Revenue was one point six billion. So. big growth in its revenue. In fact, the compound annual growth rate, if you figure it out, it's around fifty five percent. So that's great. The revenue growth is exceptional. Gross profit, not really exceptional. So we went from, even though the growth in the gross profit was great, the actual number and as a percentage, not too great. So if you look at Q two, twenty twenty two was two hundred eighty seven million Q four, twenty twenty four. So we're using the same two quarters here to compare six hundred and seventy million. So more than a doubling here. But if you calculate the gross margin, the percentage of gross profit over revenue, in Q four, it was eleven point eight percent. In Q two of twenty twenty two, it was seventeen point six percent. So there's actually a falling of gross margin. That's never good because it may suggest competition and it may suggest that there's not much pricing power that the company commands. So I always tell you guys, there are easy way to make money and hard ways to make money. And I like to invest my money in the companies that are in businesses that I would classify as easy places to make money. It doesn't seem based on these margins that this is where SMCI is. If we look at operating expenses, something I like to see, which is in SMCI's favor, is an aggressive growth in research and development spend. I don't like seeing growth in administration spend. I like seeing it in research and development because that means hopefully, if the management is competent enough, that good surprises are on the way. Now, if you look at Q for twenty twenty four, their spend was three hundred million in Q to twenty twenty two. It was one hundred and twenty two million. So it grew. The research and development grew more than their gross profit grew, which. is good because the research and development is growing, not too good because the profit margins are not that great. So operating income, Q four, twenty twenty four, three hundred and eighty six. Q two, twenty twenty two, one sixty five. Again, here we did more than a doubling. Net income was three hundred and twenty million in Q four of twenty twenty four, one hundred and forty million in Q two of twenty twenty two. Now, if you look at the margins here, same story that we saw with the gross profit. five point six percent in q four of twenty twenty four eight point six percent in q two of twenty twenty two so the margins are falling the gross margins are falling the net income margin is falling I don't really like to invest in businesses where margins are falling especially if the businesses are in the double digits I'm sorry, single digits for the net income. That's really not a good combination. A falling margin plus you're already in the single digits, not great. But nevertheless, it's still maybe cheap as a company. So what are we going to do to value this company? We're going to look at what we expect it's going to generate in free cash flow. in money for investors over the foreseeable future because that's how you're supposed to value any cash producing asset all right so we saw the net income revenue for q for twenty twenty four And for my projection, I'm going to assume the profit margin stays stable, doesn't decline, even though that's the trend, but doesn't either. So that's an assumption. You're free to make your own assumptions here. Discount rate is ten percent. Terminal growth rate is three percent. Shares outstanding is five hundred ninety three million shares. So. I'm not going to go through every one of these, but I'm going to tell you that the reinvestment rates. free cash flow is basically net income minus um you know what you have to reinvest basically and so you can calculate it by net income times one minus the reinvestment rate if you look at previous quarters the quarters that I covered the reinvestment rate was quite high and the free cash flows were quite low, like I'm talking two percent low. So this is not really a cash producing machine, but I assumed moving forward a fifty percent reinvestment rate. So essentially the company was able to convert fifty percent of its net income into free cash flow, which is something it hasn't been able to do in the previous quarters. So you get and I use the net income projections, the consensus net income projections for the next three years. And then I assumed ten percent growth after that for two years. And then I assumed three percent growth in perpetuity after that. So if you take all these cash flows and you take the value of the company at year five and you discount it to today using the assumptions that I mentioned, laid out you come out to and you add all these cash flows together you come out with a market cap of eighteen point one billion dollars divided by five hundred and ninety three million you get thirty dollars a share thirty point thirty dollars point five nine thirty dollars and fifty nine cents So right now it's trading at thirty nine dollars and fourteen cents. So right now, for me, even though I fully admit one of my assumptions may be wrong, maybe the growth rate is wrong, maybe their margins expand. That's the big one here. Maybe their margins expand. Maybe their their reinvestment rate isn't as high, although I doubt it because for the nature of the business that they're in, which is hardware, the reinvestment rate tends to be very high. One of those assumptions may be wrong, but I like to invest in the no brainers, the things that are obvious wins. And right now, super microcomputer doesn't seem like that. The main problem and why I think investors get tripped up is that If you look at the revenue that this company is expected to generate and you look at the market cap, they seem kind of out of whack. So in twenty twenty four, you're talking about fifteen billion dollars in revenue. And it's trading at a market cap of. Close to twenty three billion. So that seems pretty cheap. It's less than two times sales. The company is. But because their margins are so bad on the order of five percent. This tends to be the wrong way to look at things. Again, the story of the stock would change completely if I started to see margin expansion. That's what would really flip the story for this stock for me. But as it stands right now, considering the trend that we've observed in the quarters that we analyzed, This is not what I'm seeing. I'm not seeing margin expansion. Couple that with some of the problems that management is having. I don't feel compelled to take a risk on it. Again, there's a lot of opportunities out there that are, I think, a lot more obvious than super microcomputer. So as it is right now, even if you give a plus or minus margin of error, it's at least in the ballpark of where it should be. And so I'm not really interested. So for everyone who is wondering about Supermicrocomputer, I know I got a bunch of questions about them. I hope this helps resolve that question for you, or at least tell you what I think about the stock, and then you can obviously make your own decision. This is not financial advice. Be sure to do your own due diligence, as I always say. Salamat, everyone. In the chat, Salamat Amin. Hello, beautiful people. Salamat Hafez. Doge was very low. Yes. Abdullah, finally, SMC Live. Glad you found it useful. Salam, Rashad. Salam. HNL Mediterranean relaxed. That sounds great, actually, at this time. Looks like Ukraine war issue is resolved, hopefully. Shouldn't we get some relief? Really? I didn't hear that. Rashad, who said that? Dr. Khaled says, Salaam. Seems there's more barakah in our time in Ramadan. That's very, very true. Zuhair says, Salaam. Nice to see you. Dr. Bas says, Assalamualaikum. This market manipulation by Trump, his team, and his policies is really crazy. It feels unfair that this is allowed to even happen. Yeah, you could look at it that way. The other way to look at it is that he's creating a lot of opportunities for us. I really think that the market is at a point where it's no longer being discerning. Like good companies are getting whacked just like crummy companies are. So this is... the type of sentiment that creates the great opportunities sometimes the market will adjust because it would just frothy on bad companies and those will adjust but what we're seeing right now is that good companies and bad companies are getting whacked all the same and that's what creates great opportunities am I trading meme coins no I am not trading I am investing for the long term And full disclosure, the only sort of meme coin I hold or traditionally known meme coin I hold is Dogecoin. Mariam, what is your opinion on leveraged Tesla ETFs, which give multiple times return from an Islamic halal perspective? Good question, Mariam. Leverage is something that we want to avoid as halal conscious investors. This involves... debt, basically. And it is one way where many investors get wiped out. And what you want to do as an investor, the most important thing about investing is capital preservation. You don't want to lose your money and get yourself out of the game. Leverage is a way where investors get themselves out of the game. So long as you're in the game, you can live to play another day. But if you're out of the game, you can't do that. Avoid leverage at all costs as much as it is tempting to engage in. I have talked about meme coins a lot about my comfort rating in meme coins. So check those out on my channel. I also have an article on my X account regarding meme coins. So check that out as well. I hope you guys found this beneficial. If you'd like me to review another stock, let me know. I will be picking on the stocks that were listed in the members pick or members picks channel in our Discord. Leave a like on this live if you enjoyed it. Become a PIF member if you aren't already. Until next time, make sure to take care of yourself. As-salamu alaykum and peace be upon you all.