10 lessons over 10 years & Two stocks we like

[00:00:00] This is the Canadian Investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets

[00:00:10] Hosted by Braden Dennis and Simon Belanger

[00:00:14] The Canadian Investor podcast welcome into the show. My name is Braden Dennis as always joined by

[00:00:22] the unequivocal Simon Belanger

[00:00:25] I'm pumped for today's show because

[00:00:29] I'm gonna do a roundup of like everything

[00:00:32] That I've learned over the last 10 years into 10 concise points and then Simone and I both have a stock on

[00:00:40] Our radar. I think they're both TSX names too, which is a rare circumstance

[00:00:46] Yeah, do will listed for mine, but yeah still okay

[00:00:51] well, that's good right because I mean this is the Canadian Investor podcast and

[00:00:55] And

[00:00:56] We sprinkle in a lot of Canadian content, but of course there's a lot of action a lot of the more interesting companies

[00:01:03] On us markets, but there's a behemoth next door. Yeah

[00:01:07] Yeah, yeah, you know if you've heard of them. Okay, so I was at the coffee shop last Saturday as I do and I

[00:01:15] like making content obviously online because

[00:01:19] One I get enjoyment out of it and two it's marketing for finch at usually like that's I'm not gonna kid myself

[00:01:27] like that's one of the main motivations and

[00:01:29] I did a kind of 10 year reflection and I had a lot of fun with it

[00:01:35] I should I got tons of good reception from it on Twitter

[00:01:39] It's one of those things where I got kind of personal and you expect some people to be haters in the comments

[00:01:45] And it was just like overwhelmingly positive for a platform like Twitter. Yeah, you know

[00:01:50] That's an achievement. I mean today. Yeah. Yeah, that's an achievement right there

[00:01:55] So I'm just gonna go through the 10 lessons over the last 10 years of investing and Simone we can

[00:02:03] Feel free to chime in on everyone we can discuss and yeah, I'll just get into it

[00:02:09] So the back story here is I'm turning 29 this summer when I turned 18

[00:02:14] I couldn't wait to open my brokerage account. So I I am one of those people that

[00:02:21] That a young age was very interested in business and finance

[00:02:25] I was an engineering student at the time in my first year of university

[00:02:28] but I was pretty pumped to open my brokerage account and

[00:02:33] My plan was to own the index, you know, I I do

[00:02:37] Kind of comp I would say

[00:02:40] I'm surprised at my wisdom at that age by just

[00:02:44] Chilling owning the index and learning as much as I can

[00:02:48] Because a lot a lot of young people a lot of young men might go to the old stock market casino pretty quickly

[00:02:55] so I was fully indexed for two years and

[00:02:59] In 2016 so now I've been had my brokerage account for two years. I was 20 years old

[00:03:06] I was taking my engineering undergrad and I started allocating to a few individual public companies

[00:03:11] You and I probably would have met three or four years after that and so

[00:03:16] My unaudited returns since then have been pretty solid, you know

[00:03:22] 14%

[00:03:23] companion annual growth rate on the on the portfolio that includes all fees that includes all

[00:03:30] Transactions with draws money in money out. It's it is very intensive

[00:03:37] Simone you can see the spreadsheet that I built like it's pretty it's pretty good

[00:03:40] Like I know use it. Mm-hmm even Dan uses it all the time now. I see him constantly

[00:03:47] Dan's like dude this spreadsheet's amazing

[00:03:49] They're talking about Dan Kent because when he started using it for his joint TCI updates

[00:03:54] He's like, are you monetizing this thing? Like you could sell this spreadsheet

[00:03:58] I guess kind of because joint TCI subscribers get a copy of it. It's at the top of every post

[00:04:05] But that's not what this is about so the

[00:04:09] The performance has been solid. It's been, you know market beating

[00:04:14] Kind of similar to the S&P over that time

[00:04:17] which is pretty remarkable that the S&P's done that well as well and

[00:04:21] And it's not lost on me that it's probably not worth the effort over just simply holding the index

[00:04:29] But I do it because I love analyzing businesses obviously

[00:04:33] I mean this this show went for six years before anyone cared about it

[00:04:38] Managing the portfolio is something I want to be able to do as long as I'm able to it's

[00:04:44] intellectually stimulating and Simone

[00:04:46] I think we can agree there are worse hobbies

[00:04:51] Yeah, no, I think I agree for the most part with that

[00:04:54] I guess for me

[00:04:55] It's a bit reverse where I went from more picking stocks to having more index allocation

[00:05:00] And I think that that's totally fine and I reserve the right to one day just say

[00:05:06] I don't love this anymore and just go fully index like I think that that's also fine

[00:05:11] But right now I don't have any plans to do that. I find it extremely intellectually stimulating

[00:05:15] I love doing the podcast. I love talking about individual companies

[00:05:18] So I have so much to learn these 10 things are not meant to be a

[00:05:25] set of rules to live by but rather a bunch of ideas to chew on and

[00:05:30] I've only been doing this for coming up to 11 years

[00:05:34] I'm hoping to be able to do this for many many decades to come

[00:05:39] So it's not meant to be a set of rules to live by all right number one

[00:05:43] The more experience I have the less portfolio turnover. I desire I

[00:05:50] Want to trade as little as possible

[00:05:54] You saw my joint easy eye portfolio update last weekend. I was like I did nothing. That's it

[00:06:03] Yeah, you made up for it and so my bar for quality

[00:06:07] As a result of that since I want to trade as little as possible

[00:06:11] My bar for quality has gone up tremendously because my my mindset on that is I

[00:06:18] want to own something so good that does an idiot can run it and

[00:06:24] I'm gonna sleep well at night if the stock market turned off for 10 years and it

[00:06:29] Returned on in 10 years and I still on the position like that's

[00:06:33] More and more of my get more experience. My mindset goes toward that number two

[00:06:39] most

[00:06:40] Folio outperformance comes from just a handful of decisions

[00:06:45] You see this power lot play with most long-term track records

[00:06:50] You see it with your performance. You see it with my performance

[00:06:54] You see a lot of concentration build and high conviction names

[00:06:57] My example here is obviously constellation software which have been a shareholder

[00:07:01] I've been lucky enough to be a shareholder of that and this been goes for for as long as I have been smart enough to

[00:07:06] own them and

[00:07:08] Most outperformance comes from just a few handful of decisions for you. It's been a few individual names

[00:07:14] Bitcoin for sure. Yeah, no question. I

[00:07:18] There's power loss like there's an actual

[00:07:21] Distribution curve that plays out in almost every portfolio. So this is normal number three

[00:07:26] Buffett talks a lot about this but you know

[00:07:29] He says he's better investor because the businessman and that better business and because he's an investor and

[00:07:36] Being an entrepreneur has made me a better investor in three ways

[00:07:41] one assessing management teams to

[00:07:45] being more patient through the ups and downs because

[00:07:48] there are many of them and

[00:07:51] The real life of running a business is more

[00:07:55] Nuance than a stock price go up stock price go down and then

[00:08:00] Three which is kind of related to that assessing real risk

[00:08:04] Not share price volatility because I find that to be a terribly poor measure of public company risk that the finance industry has leaned on for

[00:08:12] So for so long real threats

[00:08:14] Real threats to the business and their competitive managers real chances of me losing my money because the company's no no good anymore

[00:08:22] I think I've been better at assessing

[00:08:24] That style of risk and not share price up sharp price down

[00:08:28] Yeah, I think I definitely agree with that too and obviously for you

[00:08:32] It's Fin Shad, but we also run the TCI podcast network and you know, there's decisions

[00:08:37] We take in that maybe we could have seen a bigger financial

[00:08:42] Benefits short term, but it would have definitely not been a good benefit longer term

[00:08:47] even like certain type of advertisers or even you know been asked countless times of you know stock promotion and

[00:08:55] Those are decisions that we said no

[00:08:57] We don't want to do because I think like people trust us and value our insight and I think longer term

[00:09:03] I think it was the right decision to do and I think assessing management that way as well

[00:09:08] You constantly see management teams that are so focused to the short term

[00:09:12] And you know, I was having a discussion with obviously dividend

[00:09:16] Fin twit which is very passionate about their dividends

[00:09:19] but what I notice more and more is a lot of these dividend, you know favorite stocks and you know, BCE kind of comes to mind but

[00:09:29] Management oftentimes are kind of just so focused on keeping that dividend and don't have a long-term focus for the business

[00:09:37] Instead of you know, what I think and I think you agree with that a lot of the time

[00:09:41] It would be cut the dividend get the business in order

[00:09:44] And it'll be a much better business and I think the total returns will actually benefit from it longer term by doing that

[00:09:52] But unfortunately a lot of management teams don't have that courage

[00:09:56] That's exactly right like who wants to be the guy who makes that capital allocation decision

[00:10:01] The stock price drops 10% that morning because of his because of you

[00:10:05] Right like that will happen, but you're right if you're to zoom out and see okay

[00:10:11] What's probably gonna be best for the business and better on a total return type scenario?

[00:10:16] long-term thinkers get to win in the long term like

[00:10:22] Optimists and long-term thinkers get to win long term short-term thinkers get to win in the short term

[00:10:28] But what game do you want to win it? I want to win in the first one. I don't want to win in the second one

[00:10:33] Yeah, so I is align yourself to that

[00:10:37] All right number five this is actually probably one of my most one of my favorite ones and

[00:10:44] a lot of self-reflection in my portfolio has come to make me realize this which are

[00:10:51] technology moats are

[00:10:53] A lot less sticky are a lot less durable than my younger early 20s brain thought

[00:11:00] The moats and the real deep competitive vanages companies that are really really solid

[00:11:08] are typically entrenched in really boring industries and

[00:11:12] Have been more enduring because of that think of the card networks think of railroads

[00:11:20] infrastructure credit ratings the credit ratings have been the same duopoly since

[00:11:26] like the

[00:11:28] Early 1900s and started actually in the late 1800s with the railroad credit agencies

[00:11:35] which was standard of pores and

[00:11:38] Moody's and so

[00:11:40] those types of

[00:11:42] moats are very boring

[00:11:46] Compared to a technology moat

[00:11:48] but you know every scene Moore's law has proven that technology changes really really fast and

[00:11:56] The high-growth high-tech business with a huge head start a huge head start they're way out of everybody

[00:12:03] You know, they got this they got that they got this they got that it is a bulletproof idea

[00:12:09] Until it's not right like I don't have any really better way to say it

[00:12:13] It's it feels like a bulletproof investment thesis

[00:12:17] until the landscape of technology changes a decade later and

[00:12:21] It's a dinosaur all of a sudden

[00:12:23] Yeah

[00:12:23] And the one that I I would probably add to that the ones that really end up doing well in the technology space at least from my

[00:12:30] perspective is the ones that have that technology advantage but also the network effect to go with it and

[00:12:36] That's one thing I've realized I've realized over the years that

[00:12:40] Network effects are more powerful than I thought because you know how many let's just take Twitter, right?

[00:12:47] Whatever you think about, you know, Elon Musk or X right at this point

[00:12:51] I mean the reality is there's just not really any great alternatives and

[00:12:56] What whatever people even those who hate Elon Musk a lot of them end up returning to the platform

[00:13:02] Because if they go on threads or truth social

[00:13:08] There's just on there's been all of these like try to

[00:13:11] Yeah

[00:13:12] Telegram I don't know there's a bunch of them. Yeah

[00:13:14] Yeah, because why would you want to go on a platform that there is almost no one there?

[00:13:19] That's the whole point where I did that work effects and there's network effects in other ways obviously

[00:13:23] But I think that's just an easy example. You're so right and

[00:13:28] There is a long list of dead bodies of companies that have tried to disrupt those huge network effects companies and

[00:13:37] people switch over and then they realize like

[00:13:40] They find themselves back on Twitter they find themselves back on those, you know those big network effects

[00:13:46] So I'm totally aligned right like those tech companies have really really hard to disrupt network effects

[00:13:54] Versus like a technology

[00:13:56] Advantage or it's being so far ahead, you know the competition's

[00:14:00] 10 years behind them but visa and mastercard the perfect example different kind of network effect

[00:14:06] Different kind of network effect right that's like a tech company ish and

[00:14:11] They have this amazing two-sided network effect. Yeah, good luck if you show up with your discover card. Yeah exactly

[00:14:19] exactly

[00:14:20] All right number six most of the biggest witness

[00:14:25] that most of the biggest winners that I've witnessed during my time as a

[00:14:32] market pundit and

[00:14:35] Chiming in and trying to see what works and what doesn't is

[00:14:41] from

[00:14:43] management teams that value

[00:14:45] optionality

[00:14:46] If I look at the mega mega winners

[00:14:49] I've seen that management has created winners out of thin air at

[00:14:55] huge huge

[00:14:57] scales the perfect example of this is

[00:15:01] Amazon web services being formed out of Amazon like

[00:15:05] those types of world world changing leaders world changing type entrepreneurs like Jeff Bezos

[00:15:13] Value optionality from day one on his mission. He's like, okay

[00:15:19] We're gonna start with a category like books because it made sense and he has so many reasons for it

[00:15:25] But he always knew that the everything store was the

[00:15:29] The real vision and then he's like, oh wow we built this absurd

[00:15:36] Compute infrastructure to be the everything store

[00:15:40] Let's spin that out as its own separate cloud compute like they kind of invented cloud computing next thing

[00:15:45] You know you have this hundred billion in run rate high margin

[00:15:50] wonderful scale company

[00:15:52] inside of Amazon and

[00:15:54] I've seen this time and time again with the management teams that value

[00:15:58] Optionality and can create new business lines and create new products and services

[00:16:03] That didn't exist before leveraging what they already have

[00:16:07] Those have been the world changing wealth creating type

[00:16:12] Assets. Yeah. Yeah, I mean I don't have too much to add there. I think that's

[00:16:16] That's completely true. I think it's also a fine line sometimes with you know those conglomerate that we saw in the

[00:16:23] 1990s and 2000 that end up getting into too far out of the core business

[00:16:28] But I think there's enough, you know, that's kind of close for with your AWS example in Amazon

[00:16:34] That ties in both together. But yeah, I think I think you're right if well executed. I definitely agree with you

[00:16:40] Yeah, of course, it only needs to be that level of execution. All right number seven

[00:16:46] this is one that is

[00:16:49] very

[00:16:50] controversial it feels like

[00:16:52] where value investors

[00:16:55] really feel like

[00:16:57] They need to always be getting a great deal when buying the stock and I have found that the best companies in the world

[00:17:05] tend to both be very highly valued and yet underrated at the same time and

[00:17:12] Yes, these can coexist

[00:17:14] Like you can have something on a trailing multiple that is super highly valued

[00:17:20] Everyone knows it's a great company and

[00:17:22] Still be underrated in their ability to compound and in five years you look back and go

[00:17:29] That stock was actually cheap, you know, like it takes a

[00:17:34] Flipping of the mindset around value and valuation a little bit more forward-thinking

[00:17:40] Assessing quality a bit more

[00:17:43] those two things

[00:17:44] Can coexist and it took me a long time to realize that they can coexist that stock can have a huge a high multiple

[00:17:52] highly valued and

[00:17:54] Underrated it took me a long time to realize that those can coexist at the same time

[00:17:58] Yeah, and a lot of it. I think a lot of the time you'll find the best

[00:18:03] Points to invest in those companies where there's just some shorter term uncertainty and the market kind of overreacts

[00:18:10] I mean there's countless examples for that. I added to Lule lemon recently and that's my

[00:18:16] Kind of thesis with Lule lemon is the market is kind of overreacting from a shorter term basis and not

[00:18:24] Thinking longer term obviously it's still it's not cheap

[00:18:27] I mean if you're comparing it, I don't know

[00:18:30] Like if you think you're gonna pay like five

[00:18:33] Yeah, if you're if you're thinking you're gonna pay five times earning for Lule lemon

[00:18:37] It's not happening but it's still

[00:18:40] It's a better value than it was and considering the growth. I think it's it's a great play

[00:18:44] That's why I added to it, but that kind of goes I think it's underrated company right now

[00:18:50] I think people are undervaluing the power of the brand and

[00:18:54] The potential has to grow in China. Yes, I will say China

[00:18:57] But again, I think it's a a sensible play to make in terms of growing in China and the type of brand they have

[00:19:05] They have over a hundred stores there now

[00:19:07] Yeah, yeah, they're growing quickly, but it's still I think it's as big right now as the

[00:19:13] Canada revenue, but again, okay when we compare China and Canada. It's not

[00:19:18] Yeah, so yeah

[00:19:21] Slightly slightly more people. Yeah, just a couple more people. I think yeah

[00:19:25] Number eight my most complex ideas have rarely worked out and that's not me saying that they can't work out

[00:19:33] Some of them certainly have but the batting average is lower when I've had to have

[00:19:40] three moving pieces all collide and of an investment thesis and

[00:19:47] They just don't seem very obvious and you couldn't explain them to a five-year-old in terms of your investment thesis

[00:19:55] Those ideas can work

[00:19:58] I've just found that they're the batting average on them working and the

[00:20:03] Outsize returns even to the upside if they do work out has been lower

[00:20:08] Like if I look through the track record, I look at every trade every investment thesis over the last 11-ish years

[00:20:16] those have been

[00:20:18] Mostly duds when I've had to have three or four moving pieces. It's like you need like

[00:20:24] The solar eclipse to happen or something, you know, it's it's perfectly shaded over the moon

[00:20:29] Like it's a lot more difficult to pull off. I have found in practice

[00:20:34] Yeah, I'm making me jealous with this list. I'll have to do Twitter a thread on

[00:20:39] What mine is hey next week you do your 10 you should do your 10

[00:20:43] Yeah, no, I think I'm you definitely inspired me. I think for me

[00:20:47] I I think I would go down the kind of deep value investing for the most part

[00:20:53] I've had some successes doing that

[00:20:55] but

[00:20:56] unfortunately when you get into deep value oftentimes there's a bit of a turnaround involved and

[00:21:01] You know, you have to buy in at the right multiple and the turnaround has to happen

[00:21:06] Even if oftentimes management has a great plan

[00:21:10] Sometimes it doesn't always work out and the one I mean there's one of my holdings right now that I am debating

[00:21:15] I'm waiting for the next quarter and I'll kind of reevaluate and I'm down 25% or so

[00:21:21] It's not a big position, but that's allied property reek again

[00:21:24] I still think the premise is there

[00:21:26] But I'm coming back to is that money better invested somewhere else and it will have better returns going forward

[00:21:33] So for me my thing is probably yeah the deep value that

[00:21:38] Not the cigarette butt, but you know because I don't think is that but the deep value investing

[00:21:42] Well, that's a good example of by the way, I don't think I think you should stick to your guns on that one

[00:21:47] but

[00:21:48] That's how they're here. No there the

[00:21:51] the

[00:21:53] Market also has to agree with you and that can take years

[00:21:57] With these with those deep value plays like that's what I mean by there's so many more moving pieces that rely on

[00:22:05] Not only you being right the timing being right the turnaround being right and the market actually

[00:22:13] Rewarding you yeah sentiment. I would say

[00:22:16] Yeah, there's just a lot of moving pieces anyway, so they can work

[00:22:20] But my batting average has been lower on more complex investment ideas. All right nine. I often get distracted by

[00:22:29] Ideas that I'm like

[00:22:30] Psychologically long or short and what I mean by that is like I'm rooting or betting against some company without any capital on the line

[00:22:39] This does nothing for this does nothing for me. This is a complete waste of time

[00:22:44] I should be yeah

[00:22:46] Yeah, I should be turning over rocks making a decision and moving on and I think that that's more my

[00:22:51] Personality anyways, but I get distracted and there's many more decisions worth spending time on and

[00:22:58] I look at these companies that I'm like

[00:23:02] Not even long that I'm like cheering on and like I'm like see look I was right

[00:23:07] It's like yeah, but you didn't even put any money on the line

[00:23:11] You dork like that's what I'm thinking to myself and so make a decision and move on because there's so many decisions

[00:23:18] worth spending time on then

[00:23:20] You know kind of being in and out of

[00:23:23] Psychologically long or short stocks right like yeah

[00:23:26] I'm trying to compound my capital a high investment at a high return and doing that doesn't add to that goal

[00:23:33] Yeah, I mean I can just think for me the the way I can relate to that is you know all those poker sites

[00:23:39] You can do like play money

[00:23:41] And I always found that so stupid because like people don't play the way they would play if there's no money on the line

[00:23:48] people are just like a completely reckless and

[00:23:51] I mean, I think it's the same thing right if you don't put money behind an idea

[00:23:55] I mean, it's easy to say but you're not putting anything on the line

[00:23:59] And I always found that you know funny because they're like oh train playing play money

[00:24:04] I mean sure if you want to learn the basics of the game of like raise called fold and how the game works

[00:24:10] But if you want to learn the rules, but you won't learn the rules. That's about it

[00:24:14] Yeah, so that's the way I kind of relate to that one

[00:24:18] It's so true because if you're right like to look back to your analogy if you're right

[00:24:24] You're like, ah, I'm a genius but if you're wrong, ah, there was no money on the line. Who cares right like that's not reality

[00:24:32] And and I do this with my investment ideas that I'm just like psychologically long or short and it's a waste of time

[00:24:38] I need to be I need to do better. All right number 10 doing nothing for extended periods of time is okay and

[00:24:45] likely even

[00:24:46] optimal frequent portfolio

[00:24:49] Activity is the nemesis of compounding

[00:24:52] With the way that I invest in my style of investing it is the nemesis of compounding

[00:24:58] And so number 10 relates to number one, which is I want to do less and number 10 is

[00:25:05] Doing nothing is actually not just okay, but perhaps even optimal and

[00:25:11] I have a there's a period there if you you can see on my screenshot there

[00:25:16] There's a period in in 19 when I had just a monster summer. I had like

[00:25:23] six

[00:25:24] Months in a row that were like up 4% up 5% up 3% up 4 is like some of my best market performance

[00:25:30] It's our some of my best out performance not just performance, but like against the market. It was not doing that great. I

[00:25:37] Was on a five four month backpacking trip. I don't even think I opened my broker once

[00:25:44] During that time and so of course there's some luck at play here

[00:25:49] Of course, that's not the you know

[00:25:51] The law here is that I shouldn't look at my portfolio

[00:25:55] But that is pretty telling that doing nothing is actually sometimes very optimal now when it comes to making decisions

[00:26:04] Yeah

[00:26:04] No, I think a lot of the time, you know less is more and especially right now

[00:26:11] I mean I'm finding as a whole and I've been pretty vocal on that and been proving wrong with the way the markets are going but

[00:26:17] And I'm still investing and I'm not like, you know

[00:26:20] I'm trimming on the edges certain things

[00:26:22] But I still think the markets are pretty richly valued currently and I find it harder and harder to find some really

[00:26:30] Attractive play and these kind of environment. I think it's perfect kind of environment to just you know sit back and relax

[00:26:38] totally I mean

[00:26:40] the most

[00:26:42] like the Hall of the

[00:26:44] goats of investing the Hall of Fame of investing of course include Warren Buffin and Charlie Munger and

[00:26:51] they've laid out the path to success which is

[00:26:55] Read all day in their office like what profession would put you at the

[00:27:00] Hall of Fame like the Tiger Woods the LeBron James the Michael Jordan of your your

[00:27:07] Your sector of investing

[00:27:10] and

[00:27:12] The least activity is optimal like

[00:27:15] They're not a lot. They're doing a lot of stuff. They're just kind of thinking and and doing very little activity

[00:27:23] It is so contrary to almost every other profession

[00:27:26] And so I think that there's some valuable learnings there

[00:27:28] Well, you can even relate for those who aren't too like sports, right?

[00:27:32] And let's just say hockey because we're Canadian podcast

[00:27:35] But a lot of older players and they're younger than me but still older players

[00:27:40] Let's say in their 30s

[00:27:41] You'll see that the ones that remain good are actually oftentimes way smarter with and conserve their energy and they're much more efficient

[00:27:49] In their play compared to their younger selves even because the experience they've gained

[00:27:55] They know how to conserve that energy and they also realize at that age that you know

[00:28:00] Their body might not be able to do exactly the same things that they were five ten years ago

[00:28:04] And that's always something I get fascinated with is how

[00:28:09] Intelligent the older players and efficient and smart they can be so there's a wide receiver for the Seattle Seahawks named Tyler Lockett who's a

[00:28:18] He's a journeyman wide receiver now. He's just so consistent

[00:28:22] He's been money and he's a smaller guy and he's just been money him and Russell Wilson had a

[00:28:29] Connection for so so long and he's still great to this day if you look

[00:28:34] Tyler Lockett you pull up just a highlights of his career. He almost never gets hit ever

[00:28:41] He will run out instead of taking on some big linebacker

[00:28:45] Or he will literally just go down and not get smoked by an oncoming safety

[00:28:51] Because he there might have been maybe one yard forward

[00:28:55] But it's not worth it to him and his team to get injured or threaten his career because he's a

[00:29:00] Very important piece to that that team so that just reminds me of Tyler Lockett if you look up a compilation of just all his highlight plays

[00:29:07] He never gets hit. It's it's it's pretty it's pretty spectacular

[00:29:13] All right, let's move on to stocks on our radar

[00:29:17] Presented by our wonderful show sponsor and friends

[00:29:20] EQ Bank if you don't have an EQ Bank account yet, dude

[00:29:25] It's it's money because for me for instance

[00:29:28] I got to put a bunch of money away at tax time and

[00:29:30] My GIC I just got a notification that it matured which I timed up right to do my taxes next week. So it's

[00:29:37] It's great. It's just money

[00:29:39] It's it's the the returns are good that even just in the cash savings plus account is so good

[00:29:44] So Simone take us away with your first name here and then I'll go after mm-hmm

[00:29:49] So this is the name so it's Franco, Nevada ticker

[00:29:53] FNV dot to I talked about that must have been a couple years ago

[00:29:58] It's been a while since I talked about them. It is a mining play

[00:30:02] It's a it's a precious metal streaming company with a focus on gold

[00:30:07] So the business model is different than traditional miners

[00:30:10] They get revenues from royalty and stream investments

[00:30:14] So essentially what that means is they finance mining companies their development and

[00:30:20] Expansion efforts and in exchange for a percentage of their future production or revenue

[00:30:25] And as part of the financing usually they'll receive a percentage of the future production and an extremely reduced price

[00:30:33] Just to give people an idea

[00:30:35] In their most recent year they were paying an average of

[00:30:41] $296 per gold equivalent ounces when it was selling above

[00:30:47] $1,700 or actually

[00:30:49] 1900 the average price that it was selling so it just goes to show that it is a very interesting model

[00:30:55] They do have a lot of diversification

[00:30:58] So in terms of commodity two-thirds is about as gold

[00:31:01] So the rest is between silver which is 10% and then you get oil as well

[00:31:08] So they have some exposure there which around 10% as well

[00:31:12] And the rest is just a mixture of other mining and natural gas

[00:31:17] They also have a pretty good diversification

[00:31:20] So 88% of their operations are located in the Americas

[00:31:23] So that includes obviously North America Central America and South America

[00:31:28] And the rest is in the rest of the world in terms of assets are also very well diversified in terms of total assets

[00:31:37] One of the big issues and if you're familiar with the name or you pull up the stock chart

[00:31:41] You'll see that there's been a significant drop in the price a couple months ago

[00:31:45] Well, that was because there was a ruling that there the cobra penama mine was found

[00:31:54] Unconstitutional oh my god. You want to say that for me?

[00:31:56] Unconstitutional there you go unconstitutional

[00:32:00] I got it. Okay, and and pat it on the French version to that word

[00:32:06] Yeah, I think I'm just coming off of that cold. I'm still having trouble pronouncing certain words

[00:32:12] Gotta use you got to use the francophone excuse. Yeah

[00:32:16] And the mine was operated and it made the news by first quantum

[00:32:20] So you may have seen that braided on BNN

[00:32:22] It was kind of all over the place when it was happening and

[00:32:25] operations were halted in November of last year and

[00:32:29] Franco Nevada is essentially written off the mine although they are still exploring legal avenues and obviously they wore backing here

[00:32:37] So this was a streaming, you know deal that they had with first quantum

[00:32:42] This came as a blow because it represented 20% of their assets

[00:32:47] So it's definitely a significant blow because of that their guidance for 2024 is about 18% lower than 2023

[00:32:54] However, it's important to note that the guidance is based on gold equivalent ounces also known as geo

[00:33:00] and

[00:33:01] That actual revenues could be higher or lower because it'll be dependent on the price of gold

[00:33:08] Or the price of the other commodities that they mine now

[00:33:11] Geo is actually just a metric used for mining companies in order to compare various metals mine

[00:33:17] To the price of gold and have a common metric for their whole operation

[00:33:22] Because very few minor will be producing like just gold for example

[00:33:25] so gold equivalent ounces just

[00:33:28] levels that out and

[00:33:30] Just to give a people like I said how good of a business model it is like I mentioned earlier references

[00:33:35] So there was

[00:33:38] $76 per geo last year and they were selling at an average price of

[00:33:44] $1976 so definitely

[00:33:47] Something very interesting about the business model. What's especially nice to see is Franco, Nevada

[00:33:53] Is that they are backing quite a few projects that will hopefully come online in the next few years?

[00:33:59] They also have a pristine balance sheet

[00:34:02] They have no debt and 1.5 billion in cash and if you're familiar with miners and I know I know you don't know that much about

[00:34:09] Miners, but I think you know enough to know that they're typically very leverage

[00:34:13] So they're typically seen as just a leverage play on whatever commodity that they're extracting

[00:34:19] Yeah

[00:34:19] I have just pulled up a pretty cool chart on finch at so I was just curious about like volume

[00:34:25] With these companies I'm always curious about volume growth because the other element of pricing with these commodities is

[00:34:34] Up to the macro and I'm always just really curious about actual volume

[00:34:39] So I grabbed every single

[00:34:41] equivalent ounces sold for everything that they do

[00:34:45] Gold silver PGM iron oil gold gas gold equivalent and GL gold equivalent other and

[00:34:51] Stacked them on a bar chart over over time and you can see they've gotten into many different things and

[00:34:58] They I mean it's compounded at a pretty good rate over the last 12-ish years

[00:35:03] It looks like 2022 2021 were monster years. Yeah, yeah

[00:35:08] And then you're seeing you're seeing that's that what's come offline in 23 here

[00:35:12] So maybe a little pullback in the short term. Yeah, exactly

[00:35:14] I wish was due because of that mind the curl break but Panama obviously

[00:35:19] So that is kind of a short-term headwind, but I mean they have a really strong track record

[00:35:25] They intend on financing their new projects with cash flow from operations as well

[00:35:30] It certainly trades at a premium to minor

[00:35:32] But I love the business model less risky and I mean the returns has just been

[00:35:39] Quite amazing if you're looking at the last 10 years. So I did pull a chart here

[00:35:44] In our document from FinChat as well. And if you're looking at the last 10 years, I mean the returns are

[00:35:52] Just slightly better than the S&P 500. So these are total returns. That's what the stock doing nothing since 2020

[00:35:59] Yeah, yeah, exactly

[00:36:01] It's been kind of going up and down and clearly has had a pretty significant pullback because of the whole

[00:36:06] Cobrae Panama mine, but I think it's just I I love this one

[00:36:10] I mean, I probably should have bought it the time I talked about it. It's one of those

[00:36:15] Time and time again to the years. Yeah. Yeah exactly. So I think logically long

[00:36:20] I'm psychologically long

[00:36:22] But I think it's a great place especially for those who want some exposure to

[00:36:26] Precious metals and maybe don't want to own gold directly or don't want to old a gold

[00:36:31] Specific ETF because there are some that are backed by physical gold for example

[00:36:35] Or you want to own gold but also have

[00:36:38] Exposure to a bit of oil a bit of silver so other types of metals

[00:36:42] I think it's a great great play for that and again, they should be resilient because they have I mean

[00:36:48] You don't see that very often companies with zero debt

[00:36:51] you do a bit more in the tech space and other areas but in these

[00:36:55] Kind of mining plate. You don't see that very often

[00:36:58] So it's one that I may be adding to my portfolio very soon just to give me a little bit more of exposure

[00:37:04] Not crazy amounts, but I do want to get a little bit of exposure towards that mining

[00:37:08] Yeah, they're best in breed as far as I know

[00:37:11] I mean look the multiple for a commodity name is very high. Yeah, so the market definitely recognizes

[00:37:18] This is really well run the balance sheet is pretty damn good and I mean it just comes down to you for me

[00:37:25] I like the idea like the thesis it just comes down to me. I do

[00:37:30] You don't do commodities two things that you're a lot that you said you like right now. Yeah, I do never fashion

[00:37:36] Now I have hashtag never fashion. So I love Lulu. I'm

[00:37:41] Wearing this stuff right now and to never commodities. So I'm just I

[00:37:46] Just exclude myself arbitrarily for these names, but that's okay

[00:37:50] But that's what's great about investing right you can tailor what you invest in on what you have the most conviction in and

[00:37:56] You know we have some similar I think

[00:38:00] Philosophies, but we also have things that we defer and that's completely fine

[00:38:05] And I think that's that's what we want to teach people is try and discover what works for you. That's right

[00:38:11] that's exactly right because

[00:38:13] If you don't know what you own and don't have a lot of conviction in what you own

[00:38:19] Even if you're right

[00:38:20] You're not going to be able to hold the name or hold it with conviction even if your investment thesis is right

[00:38:26] And so that doesn't that doesn't work. I've seen it time and time and again just not work

[00:38:30] All right another Canadian name here

[00:38:33] Tara vest so

[00:38:35] Tara vest as a TSX stock that has been a monster. It's uh, it's up 500 percent in the last five years

[00:38:43] It's up nearly 40x since 2012. It's just

[00:38:48] absurd and if you look in the last

[00:38:51] Since 2012 and I call that out because that's really when the current CEO took over for the business

[00:38:57] Revenues on the top line have compounded at 20% and operating income has compounded at 17% and

[00:39:05] You hear me and you go. Oh, thanks for telling me now. I missed the boat, you know

[00:39:09] It's stocks up 40x up 500% blah blah. Thanks for telling me now

[00:39:13] Well, maybe not not so fast. This is only a

[00:39:18] 1.2 billion in market cap TSX stock. This is probably the smallest

[00:39:23] Market cap of any stock have ever brought up on this segment

[00:39:26] This is a small business maybe small to mid on the TSX. It's a TSX. Yeah, it's whatever

[00:39:33] This is actually a sweet spot. I like to hang out within Canadian stocks because

[00:39:38] At this size, it's very rarely looked at by institutions

[00:39:42] It's just constrained out of basically every

[00:39:45] Every fund in the US at this point

[00:39:49] Maybe like a few small cap

[00:39:51] discoveries funds, but there's not a lot of eyeballs on this not a lot of analysts looking at this and so that's

[00:39:59] That's me counter pointing the fact that it's been a monster is

[00:40:03] You know, maybe the second best time is now. Who knows? I don't know

[00:40:06] Now I got interested from a pal on Twitter who's been banging the drum on this stock for a while now and

[00:40:12] Based on his track record

[00:40:14] I'm not ignoring him anymore. Okay

[00:40:18] Based on his track record when he bangs the drum

[00:40:20] I'm not nor them anymore because he's been so concentrated on the constellation software names as well

[00:40:26] And so that's how I know him. So he basically owns Terra Vesta in constellation in size

[00:40:32] so credits for my segment here to an

[00:40:36] Portfolio manager of plural investing called Chris Waller

[00:40:39] I've taken a few parts of his write-up bits and pieces to create and explain this segment

[00:40:44] So not claiming that this is my work credits Chris Waller portfolio manager of plural investing

[00:40:50] Terra Vesta Industries is a serial acquirer of the least sexy industrial businesses

[00:40:56] As you can think of as their bread and butter. Well before you keep going look at so I pulled something for a doles on join

[00:41:04] TCI they'll see but it's a free cash flow per share of Terra Vesta and it's pretty impressive

[00:41:10] I'll be honest like it's I mean it's not a straight line, but it's

[00:41:15] Definitely trending the right way. So you've got my attention. What's the cagger on it? I can't see cuz so small

[00:41:21] Yeah, it's 36% yeah over the last 10 years. So that is um, yeah, it's not

[00:41:27] I think I can understand why it's not a straight line just because as you started I was like

[00:41:32] I've never heard of this place. I'm looking through what they do so I can understand why yeah

[00:41:37] Yeah, and especially what they're putting into the free cash flow number. Yeah, I mean the

[00:41:43] It's gonna be lumpy especially with growth cap X maintenance cap X. So

[00:41:49] They are acquiring

[00:41:52] some really unsexy

[00:41:55] industrial businesses

[00:41:56] their bread and butter is storage tanks and pressurized tanks so

[00:42:01] Think of like propane cylinders both that are like stationary

[00:42:06] Situated in one spot for industrial applications as well as the ones that go on trucks that you see on the highway those big

[00:42:13] tankers that drive by and so

[00:42:16] That's around half the business the other half is split to a roughly a quarter into boilers and furnaces and the other

[00:42:23] Quarter is oil and gas equipment, which is probably the most cyclical

[00:42:28] Nature of their business is 25% of their revenues in the oil and gas equipment

[00:42:33] But when sick reality hits they just buy more because they can get really really good deals when sick locality hits in that area

[00:42:40] So they're acquiring

[00:42:43] Very niche mom and pop businesses and then get to work

[00:42:47] I think Chris Waller has here that they buy them for like 11 times free cash

[00:42:52] Restructure them and within like a quarter there. The price they paid is actually around 7x

[00:42:58] And then they optimize even from there and so they can actually get really good deals

[00:43:04] But also paying a price that makes sense for these bottom props and can get the deal done and get them happy to

[00:43:10] Transition the business over so they're buying fairly low multiples of their cash

[00:43:16] And then can continue to optimize from there. I have a screenshot here from plural's estimates and tariff as filings

[00:43:23] They're buying usually a hundred percent of these companies

[00:43:27] 37 million 108 million 15 million 3 million 5 million 28 million

[00:43:33] So that's kind of the the range there from low single digit millions to

[00:43:39] 40 ish to the highest one of Highland tanks for a hundred and 8 million

[00:43:44] so

[00:43:44] The company has been a bit of a special situation because it was started in 2004

[00:43:51] But it's been involved with the Canadian company called Clark Inc.

[00:43:54] Which I believe is like private equity since 2006 in

[00:44:00] 2020 they spun out the ownership of

[00:44:02] Tarravest and as a dividend to Clark shareholders and it's been operating on its own since

[00:44:08] These special situations tend to work out when management is really solid the CEO Dustin Hall

[00:44:16] Who is a very private guy is

[00:44:20] a beast in

[00:44:22] 2012 Dustin Hall was in his 20s

[00:44:24] He was hired out of university after completing his PhD in physics to work as an analyst

[00:44:31] He's been effectively running the company since that's how sharp he is

[00:44:35] He came out of his PhD from school basically not a lot of experience and they gave him the keys to the castle like right away

[00:44:41] And dude's been a beast since like you can see when he stepped in

[00:44:47] The business took off like it kind of hummed and hard till 2012 and then Dustin Hall took over and he's been executing

[00:44:54] apparently word on the street very private guy, but there's like this

[00:44:58] Apparently someone that knows him that is connected into the this Twitter group. I'm in about the stock

[00:45:04] Apparently he got his PhD and the CFA at the same time see if a is no joke

[00:45:10] No, no PhD in physics. No joke

[00:45:13] His PhDs in physics, which is crazy see if at the same time and he said quote it was fucking easy

[00:45:23] Okay, whatever

[00:45:29] Makes him sound cocky, but I think he's far from that dude because it's literally only one photo of him on the internet

[00:45:36] This guy just loves to do acquisitions corporate restructuring. He definitely reminds me of Mark Leonard

[00:45:41] It's funny how you know you say confident. That's good and then you say cocky. It's like, oh, that's not good

[00:45:47] It's always the fine line between the two, huh? I say to a guy like this. You're a lot

[00:45:53] You're not cocky. You're confident because you know, you're good, but you're also good

[00:45:59] Cocky is you you think you're good and you might not be that good

[00:46:03] You're underperforming your you know how you say you are this dude's been that dude

[00:46:09] So he's been he definitely reminds me of Mark Leonard

[00:46:12] Rolling up these like fragmented

[00:46:15] niche companies that are like one two player in there in their space they operate in and there's one photo of him on the internet like a

[00:46:24] Ribbon cutting ceremony. That's it. It's all you can get on this guy

[00:46:28] the management team owns around 25% of the company and

[00:46:32] Acquisitions when done poorly destroy value, but when they're done right M&A can certainly work very wonderfully

[00:46:39] When I'm looking at roll-ups personally roll ups just means

[00:46:43] M&A strategies they're rolling up a specific vertical in this case. It's mostly storage tanks the high high tech high

[00:46:50] Sexy business of storage tanks it comes down to four things for me one does the team have a track record

[00:46:56] Yes, check two is it a good niche and they have expertise in that niche? Yes check

[00:47:04] Are they expert managers?

[00:47:06] Yes check and I don't mean just like they have a good tracker to be able to do M&A

[00:47:11] But also after tucking it in operationally and then number four

[00:47:16] Do they have lots of targets moving forward? I don't know. I'm not so sure about that yet

[00:47:21] I read this from Chris Waller's right up

[00:47:25] We see a long runway for the company to successfully continue its approach

[00:47:28] Most of Terra Vests

[00:47:30] Industries are filled with small competitors some of them which are cyclical

[00:47:33] Which result in distressed sellers from time to time there's also address adjacent industries where businesses use similar raw materials and

[00:47:41] Production processes. I think there's probably hundreds of targets

[00:47:45] probably not thousands but

[00:47:47] Long runway, I think for a company that of its size at this point. Yeah, I mean it's interesting

[00:47:52] I wasn't familiar with it obviously if they haven't looked at the balance sheet

[00:47:56] But if they have a strong balance sheet

[00:47:58] Higher rates for longer is definitely not a bad thing if you're looking to acquire distressed assets

[00:48:04] Because clearly there's gonna be some companies that did not manage your debt properly and you can probably take advantage of that

[00:48:12] Yeah, I'd like to see what you think about the balance sheet hop hoppin and finchat

[00:48:16] This feels like a really semo name to me

[00:48:19] That's I wanted to bring it to your attention and it's still very under the radar

[00:48:23] Even though its track record is just mind-bending

[00:48:26] So yeah, this is definitely one that's on my radar. I appreciate the people that brought it up to me

[00:48:33] but yeah

[00:48:35] Canadian name I do worry not to sound like too cocky but with these small cap Canadian names like

[00:48:42] We bring these names up on a lot of radars

[00:48:48] Like there's a lot of money that can flow into this because of our podcast and I do worry about those kinds of things

[00:48:55] I feel yeah, we have no position in it. So no position

[00:49:00] Maybe it's gonna be in one of those

[00:49:02] You know, it's gonna be in Braden's mind for a long time

[00:49:08] Yeah, and as you were talking I looked up I forgot about like I looked up Mark Leonard like pictures

[00:49:14] And I forgot like that he like he looks like Gandalf. Yeah

[00:49:18] Yeah, dude

[00:49:19] Because I remember seeing him with a shorter beard a little bit but like he's always had a beard

[00:49:24] But that is like that is Gandalf level

[00:49:27] Like did he just like kind of embrace the pandemic and just stop shaving all together? Oh, no

[00:49:33] He's been looking like that like that for a while. Yeah, apparently he's like six seven or something

[00:49:38] Like this is the one photo if he's standing with this woman

[00:49:41] He's a freaking beast like he's huge his beard is like four feet long down to like his lower chest

[00:49:50] and

[00:49:51] Apparently he's just this like monster of a

[00:49:54] Of a man that's you know, South African descent lives in Toronto very very private

[00:50:00] There's only a few photos of him on the internet. Yeah, we talked to him

[00:50:04] We'd be talking to his beer and that's how tall he is

[00:50:07] Yeah

[00:50:08] Be right in there. So yeah, I mean just some of these

[00:50:12] Managers are cut from a different cloth when it comes to M&A

[00:50:17] Dustin Haw

[00:50:19] I think has the chops. He's clearly very skilled very intelligent

[00:50:26] he's very focused guys got a CFA and a PhD in physics and

[00:50:32] Since he has been running the company effectively when Clark hired him after like because it was part of the Clark

[00:50:40] He's just been a dog. So I

[00:50:42] I'm really interested in the name mostly because of him and his track record

[00:50:46] Yeah, I'll definitely keep an eye on it because I you know me I like unsexy businesses that perform well, so yeah

[00:50:53] That's exactly the storage tanks like yeah, hey you need storage thing

[00:50:58] It's like honestly a lot of it is like an indirect play on commodities

[00:51:01] So I think it's there's a lot of money to be made when people look at commodities

[00:51:07] Like a lot of whichever commodity you look like if you start looking into who are the providers of the equipment

[00:51:15] To you know produce transport whatever it is those commodities you can often time find some really really interested in business

[00:51:24] Obviously, there's still gonna be some cyclicality with you know the kind of capital investment cycle for the companies that operate in that space

[00:51:32] But you can often find some really interesting companies. My basic career philosophy is to

[00:51:40] start exciting companies and

[00:51:42] invest in boring ones

[00:51:44] That's like my basic career philosophy because it comes back down to like the things that

[00:51:50] The really unsexy things don't change that fast and like you know

[00:51:54] Their moats actually can be a lot more entrenched and there's not some really smart kid out of Stanford

[00:51:59] That's about to come eat my lunch

[00:52:02] Like no smart kid from Stanford right now is coming out of a computer science degree

[00:52:06] He wants to build the next Uber and Airbnb. Nah, he or she wants to build those companies

[00:52:12] That's storage tank guy

[00:52:17] Like it's pretty protected from the Stanford smart kid diversification too. That's another way to look at it

[00:52:23] Yeah, yeah between your career and your holdings agreed

[00:52:27] Thanks for listening to the pod. These are always fan favorites when we do stocks on our watchlist presented by

[00:52:33] EQ Bank we do them

[00:52:36] Pretty often at this point so make sure you're tuning in and

[00:52:40] Hope you guys like that ten lessons over ten years

[00:52:44] It's when I'm looking forward to yours as well because it was a pretty

[00:52:48] Instructive exercise like I learn a lot from writing these types of things

[00:52:53] It's one of my favorite things about the podcast is prepping for the podcast is you have to you got to get all

[00:52:59] Introspective man. You got to get all find yourself mode

[00:53:02] Yeah, and put your thoughts more organized and oftentimes that

[00:53:05] Makes you realize things that you weren't even thinking about or you were kind of thinking about conceptually

[00:53:11] But then you put it down it makes more sense

[00:53:13] It's recording this on Friday afternoon to hop over to a nice little coffee shop tomorrow, you know get dialed in

[00:53:20] Fresh smell of Java

[00:53:22] Yeah, we'll do it on a do it on a vision pro though go do it on a vision

[00:53:26] I have a little rascal running around. I don't have as much flexibility to go to coffee shops

[00:53:32] Come on one hour you got this. No, you're probably right. Thanks for listening folks. We appreciate you. We'll see in a few days

[00:53:39] Take care. Bye-bye

[00:53:40] The Canadian investor podcast should not be construed as investment or financial advice

[00:53:46] the host and guest featured may own securities or assets discussed on this podcast always do your own due diligence or

[00:53:54] Consult with a financial professional before making any financial or investment decisions