Is it Time To Invest in These 13 Under Pressure Stocks?

[00:00:01] This is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger The Canadian Investor Podcast. Welcome to the show. My name is Braden Dennis, as always joined by the impeccable Simon Belanger. Brother, Nike stock is down 63%.

[00:00:28] Yeah, quite the draw down. We actually, Dan and I talked about that a little bit because we did, yeah, we did the earnings and markets did not like it. No, it's just like... But it's been steady. Yeah, it's not been just that. Steadily going down. Yeah. If that's what we call steady. This is one of those really hard stocks to own. If anyone's ever owned one of these, they'll know what I mean.

[00:00:55] Say you have like an earnings come and the stock drop drops off a cliff. Like you have like a 20% haircut. And you know why? Oh, like guidance was poor. Results were poor. This, that and the other thing. Maybe a combination of things.

[00:01:11] But when you keep getting those elevators down quarter after quarter, like you're like eight into it. Those, you know, those are to really hurt. Those like gut punch after gut punch. You're like in round 10 of a boxing match and you've just been getting smoked to the ribs. Yeah, it feels like it's just a combination of different things one after the other, right? I think you had mentioned rightfully so there's a lot of competition on the sneaker front.

[00:01:36] More and more increasing competition. But then now they came out to basically say they're going to be one of the early, the lack of better words, victims of the tariffs from the Trump administration. And obviously I'm saying victim. I know it's, they still make a lot of money. So don't take this out of context, but you add that to the increased competition, reduced profitability over time too.

[00:02:01] And a name that was once seen as probably a blue chip stock for a lot of people that now it's definitely debatable whether it's a blue chip stock and you can make a case that it's probably entering the, uh, the dilemma of fashion stocks where you never know if it's going to stay in or not, which I always kind of assumed that Nike was the exception to the rule. That's how I operated. I mean, I don't own it, but that's my perception.

[00:02:29] Agreed. Yeah. That, that kind of was like a, the consensus. It's like, don't touch fashion, but Nike's not fashion. It's like, okay, maybe, you know, maybe it is. This is the thing, right? They're still doing like, I don't know. I'm just making this up. I'd have to look on Finch app called 30 billion. And let me get the number right. I have it up here. 30 billion in footwear revenue. Okay. So trailing month. Yeah. Oh wow. That was, I must've seen a graph before. Cause it's exactly 30.5 billion of footwear revenue, which was last year.

[00:02:59] 33. So it's not like the, you know, it might seem so alarmist, right? Like 33 billion of footwear revenue goes down to 30 billion. It's like, okay, what's the big deal?

[00:03:12] The big deal is that those other companies are growing so fast, whether it's Hoka or On Running and they're just not the default shoe. That's the problem. And then, and then there's a question around like, Oh, like they do apparel, they do equipment, they do all this other stuff. It doesn't matter.

[00:03:32] You know, when 30 of 45 billion is footwear, the footwear business slowing down matters a lot. Like it's, it doesn't matter if they're diversified when like, you know, seven, it's called 65% of the businesses in one segment. It matters how that segment performs.

[00:03:51] It'd be, it would be like a portfolio, you know, I'd be like someone, if you had a stock portfolio and you had 20 stocks, but one of them was 65% of your portfolio and it was a dog. And the other ones were doing great. And you'd be like, who cares? Look, everything's doing great. It's like, well, because 65% of your portfolio is in this dog.

[00:04:12] So no, exactly. And like, I'm showing though, look, they're still doing pretty good. Yeah. Like I'm showing people great on a longer term. Yeah, exactly. And I'm showing people here, they still generated the last year over 6 billion in free cashflow. So they're going to be at least okay for the foreseeable future, but it's a trend that you don't like to see reduce profitability, increase competition.

[00:04:37] And then you compare their total revenues. Like you just said with the footwear and footwear being a significant portion of their revenues here. There's definitely some cause for concern. It's, I wouldn't like ring the alarm bells, but there's cause for concern.

[00:04:53] But again, could be an opportunity as well where sentiment is at its lowest and they have a good plan to turn things around. But like I told to, I was talking to Dan when we recorded the Thursday episode, when you invest in these companies where sentiment is down and things may be looking like they're trending the wrong direction, you may have a great thesis, but you have to also be ready to look stupid for a couple of years until things turn around.

[00:05:24] 100%. 100%. And that's really hard, harder to do than you might think. Yeah, no, I'd say, I think the slap in the face the market gives you with this type of example here with Nike is the fundamentals can still be strong. But when the story changes from a slowing growth story to a slowing growth story to actually a negative growth story.

[00:05:51] Oh man, like you wash out basically an entire cohort of investors who had one idea of what that company was going to be over the next few years. So it might seem extreme and detached from reality, but that narrative switch from a steady grower to then, oh, it's a slow grower to, oh, we're actually negative year over year now for two years in a row. That's a problem.

[00:06:19] Yeah, yeah, exactly. And it's, it's something to keep an eye on whether it's a value trap value play. I think it's really hard to say, but like I told Dan, I mean, look at Warren Buffett. A lot of the time that Warren Buffett will make investments, you'll hear people saying that he's lost it. What is he doing? He might look pretty stupid for a year or two.

[00:06:40] And then little do we know, five years later, seven, eight years later, you're looking back and like, wow, Buffett bought it at just the right time. He stood by it. He had a thesis and now he looks like a genius. Yeah. Yeah. You have to be willing to look dumb. I don't know if you noticed this, but I looked at what you had prepared for the pod and I moved the order of your segments because I want to talk about this right now. I love this. So just take it away.

[00:07:09] Okay. Well, and so the segment here is the opportunities in the logistic freight and transportation. I touched a little bit about it on it with Dan just very quickly because we were talking about FedEx and that enters this kind of sphere. And obviously it's a, there's a different type of companies, but they're all facing some pretty significant drawdowns here. And the reason why I want to look at them is, look, there's been a lot of volatility unless you've been living under a rock.

[00:07:38] Ever since the orange man, Donald Trump has been elected. And especially since the beginning of this year, there has been a lot of ups and downs and obviously a bit more downs than ups. But still it's been very volatile and it's easy to freak out a little bit to get nervous. I mean, these are all normal emotions. We're emotional beings. So it's completely normal to feel that.

[00:08:04] But I think people sometimes forget that with this volatility, you can start having some pretty interesting opportunities come up because the market will be so pessimistic on certain parts of the market because of all of what's going on right now. And I pulled 13 different names pretty much like in this part of the market. I don't know if they're all considered the same sector, but they they're affected by the economy.

[00:08:32] They're definitely affected about the rhetoric about tariffs with Trump's flip-flopping every day. It seems like on, uh, on social media about the tariffs. And I think these are worth looking at whether they're good investments or not. I haven't dug in very deeply in each company, of course, but there's a couple that I do have on my radar. So before I get started, anything you want to add? So to summarize the list you're going to go through, it's companies that move goods. Yeah, that's the best way to do it. Yeah. Move goods. Exactly.

[00:09:03] Yeah. So the first one, there's 13 in total. Some people will be familiar. Some may not be familiar as well. But, uh, the constant here is that I did it over the last year and I looked at what amount of drawdown they're facing. And obviously that would be versus the peak they would have had in that past year. So CP is the first one here. Canadian Pacific, 14.5% drawdown. Canadian National Rail, obviously CP, CNR. Usually they're talked together quite a bit.

[00:09:33] This one, 21.3% drawdown. I wanted to use a U.S. name to compare here, Union Pacific. There's a few different railways you can look at in the U.S. That's one of the better known ones. 8% drawdown. TFI, we've talked about it on the podcast. This one is the number one on this unfortunate list of 45% drawdown.

[00:09:54] And obviously we saw most of this happen in the last month or so with Alain Bédard coming out and basically just laying it out there, being very straight and upfront with his shareholders and saying like things are not good. It's not just us. It's just the industry in general. Rider Systems, ticker R. And Union Pacific, I forgot, ticker is UNP. Rider Systems in the U.S., 14.9% drawdown.

[00:10:22] Again, it's kind of a rental trucking company you have here. Old Dominion Freight Lines, very well regarded typically in the trucking space, ticker ODFL. 27% drawdown, which kind of started when the TFI earnings call came out. So I think TFI kind of dragged down Old Dominion at the same time. You can literally see it on the chart. If you look at it, it's almost like simultaneous.

[00:10:48] That has crept further and further up my watch list. Yeah, yeah, exactly. There's definitely very interesting companies there. FedEx, ticker FDX, 22% drawdowns. If you listened to the previous episode, I was talking to Van. If you haven't, feel free to listen to it. They had some really interesting things to say on the call, FedEx. They're mainly saying that, yeah, they're seeing that there's a bit of a slowdown.

[00:11:16] They've actually revised their guidance down three quarters in a row now, their revenues guidance. So they issued it at the end of Q4 of their last fiscal year for 2025 fiscal year. And every single quarter, they've revised it down. So I think it just goes to show the uncertainty. I don't think obviously they're doing it on purpose. They're doing the best they can with the data they have. The problem is there's just so much uncertainty. And I think just that guidance revision, a bit like BRP did as well a few quarters ago,

[00:11:46] management teams are trying to figure it out and they have trouble doing it. I think it's just a reflection of that. UPS, 26% drawdown, ticker UPS. Cargo Jet, 36% drawdown, ticker CJT. I know that's on the TSA. I know Dan is a big fan of this one. And I think he started a position. This one is definitely intriguing for me. XPO Logistics, ticker XPO, 29% drawdown.

[00:12:15] GXO Logistics, ticker GXO, 36% drawdown. Costco, not the Costco that we know, COSCO Shipping Holding. This is a kind of maritime freight company. So they do shipping on these large container ships. It's listed in Hong Kong, so a bit more difficult to buy. Ticker 1919. This one is 17% drawdown. And the Mare SK Group, listed in Denmark.

[00:12:45] Again, same kind of thing. Sea shipping or maritime shipping. 10% drawdown here. Yeah. It's a... So you have Union Pacific in a small drawdown of 8% all the way to basically Cargo Jet at 36%. Seems like... TFI, 45. Yeah. TFI, 45. Yeah. TFI is a big winner here. The big winner in the drawdown fast tier. My best sell of all time. Not a big deal.

[00:13:14] If you were to sort these by drawdown, you would find almost a perfect correlation to closest to the sun of moving goods across the Canadian and US border. Yeah. Yeah. Right? No, that's right. Yeah. So that's the story on these, in my view. I mean, freight is... You have a kind of a double whammy. Freight's cyclical to begin with.

[00:13:42] So you have like the down cycle, going into the down cycle while you have a bad narrative on top of it. That's a good perfect storm for some big equity drawdowns. Yeah. Yeah. And then you get the added uncertainty, like typical slowdown. At least companies know what to expect. You have that extra degree of uncertainty and you cannot blame companies.

[00:14:08] What is trade, world trade going to look like five years down the line? It's very difficult to say. If you know, Brayden, please tell me. I don't know. I feel like even... I would tell you, but I... You don't feel like it? I don't... Yeah. I don't have the energy. Sorry. I think there's a bunch of different ways it could go. Whether, you know, a lot of it will be dependent on the US. It will be not only dependent on the Trump administration. What happens in the midterm?

[00:14:37] Do we see a shift to the Democrats? Who gets elected the next election? What are countries going to do against the US as a pushback for all these tariff threats? Is it going to be a different approach for North America, this hemisphere versus Europe versus Asia? There's all these different questions that it's impossible to answer. We just don't know. So you have to feel for these companies that are in the thick of it. And it's hard to blame them for revising guidance like FedEx did.

[00:15:07] FedEx is probably one of the most international of all these plays, I would say. But they still get the bulk of their revenue in the US nonetheless. Yeah. So what are you looking at? Well, for me, I do... I'm intrigued by definitely... Well, CP is the one I am probably the closest to pulling the trigger on. Mostly because I'm thinking of just swapping Canadian National Rout for CP.

[00:15:34] Mostly because I've not been a fan of the CEO and the capital allocation they've done. Buying back shares at an elevated price. And now it's not looking like a great capital allocation strategy. Especially that they were buying back shares more than their free cash flow in the last few years. So it's been something I'm a bit critical where that extra balance sheet flexibility would have been pretty handy right now. So that is the one from that perspective. And I love having a railway in my portfolio.

[00:16:04] So CP would make sense here. Cargo Jet is definitely intriguing given that they're one of the only players in the airfare cargo in Canada. There's Air Canada Cargo. I know they have a little bit there. But they're one of the ones that does the quickest overnight delivery. So I think they do have a bit of an advantage there on the domestic market. And I think they're probably being drawn down more than they need to.

[00:16:34] Just because of the sentiment being so pessimistic in Canada right now. And the trucking companies are also very intriguing for me. So whether it's a TFI or Old Dominion freight lines. Those are the other two I'm really interested in. The logistics. I don't know them enough. Just based on the drawdowns. It may pique my interest just to see what's going on and what they have to say. Yeah. No, it makes sense. How about you? Anyone piquing your interest here?

[00:17:03] I've always admired Old Dominion. And it was kind of like TFI and Old Dominion, I believe, have been the two best run trucking consolidators in North America. And Old Dominion has just been an unbelievable compounder. And so has TFI. But Old Dominion's always just traded at an egregiously much, much higher multiple. That's why I could never justify owning it.

[00:17:31] It's always traded at such a much higher multiple. And probably will continue to. But I haven't touched trucking basically since I sold TFI. I haven't looked at it really since. TFI could have a lot of upside. Not before maybe it has a bit more downside. That's very possible too. The reason why I say upside, when I listened to the most recent call,

[00:17:57] is Alain Bidal was very upfront that their U.S. operations can be very, like, much more efficient than they are. They are very efficient in Canada. But the U.S. operation, I think it's two-thirds of their revenue. There's still a very small player in the U.S. Because even if it's two-thirds of their revenue, it's still a small pie, like, in terms of the U.S., what would be available. And in Canada, it's a third, but it's a much smaller market. So they have a much bigger presence in Canada.

[00:18:26] And they said that they have a lot of things that they could improve on efficiency in the U.S. So that's why I'm saying he's a good, you know, he has a great track record. And when he says it, when he's upfront like that, I have no doubt that that will be a big focus of them, especially if they see that it's going to be a rough couple years. Freight recession even mentioned that word in the earnings call. So there could be some upside as they focus on being more efficient in the U.S.

[00:18:54] And then when the economy starts turning and things start looking better, TFI could potentially have quite a bit of upside here. But again, it's the kind of thing that you could look stupid for a long time before it turns around. So do your due diligence. Obviously, this is not investment advice, but these are, it just, it was hard to ignore. Like that whole part of the stock market seems to be completely hated by the market in general.

[00:19:25] Yeah, it's like analysts want to work on this like perfect spreadsheet where you can kind of map out all the numbers. It's already, it's already impossible to forecast. And then you get like this flip-flop whiplash of the future of trade. And it's like, all right, I, you know, throw in the towel until there's some sort of certainty here. And you just see that come out in the price of the equity. Let's shift gears. Let's talk Canada a little bit.

[00:19:54] We have two things here. So first, first of all, when this comes out, it's not really breaking news, but it's fairly new news here as live recording. When this podcast comes out, the elect Canadian election will be in four weeks, if my maths are correct. That's right. Four weeks after this podcast comes out.

[00:20:16] And we will be providing objective political commentary over the next four weeks, knowing that there are, this is not a biased show one way or another. I think you'll see that naturally you'll see which ways we lean. I don't think that that is a shock to anyone. So that's a caveat over the next four weeks.

[00:20:42] What I will say is when we have more stuff to talk about, and we probably dedicated some time around this election over the next four weeks to talk about it here on the podcast. This is such an incredibly important election for Canada. And you can say that for all federal elections. But look, we've been operating without a government for how long now, Simone?

[00:21:10] I know now the economy is in the seat and they're going again. But how long was that period? Like a month and a half? Yeah, I mean, you can even make a case that we've been, even since mid-December, right? Since the Chrysia Freeland, like, departure that happened. Yeah, exactly. Mid-December. Because at that point, I think there wasn't a lot of legitimacy left. So I think it's been a period of time.

[00:21:34] And whichever way you're leaning, right, whether it's liberal, conservative, NDP, green, block, if we have some Quebec listeners, or even the PPC, doesn't really matter. At the end of the day, for me, I think one thing I've said is we need to have an election to give whoever's elected a mandate. Because you can say whatever you want about Trump and his administration. And, you know, I've been very critical of the Trump administration.

[00:22:03] I think most Canadians are. But at the end of the day, they have very smart people there as well. You know, a lot of people will disagree with their approach, and that's fine. But they're also not stupid. And they also know that there's an election around the corner. And why would they negotiate right now with the current government?

[00:22:22] Why not just write it out until the election is done and then deal with whoever will be there in power for the next four years if it's a majority government or, you know, the next year or two if it's a minority? Why would they, right? Like, it makes no sense. Yeah. Mm-hmm. Yeah. That's such an incredibly important fork in the road. I don't know how else to describe it. Yeah. I think that's a good way to put it. Yeah.

[00:22:47] Because just like there's so many things that need to be addressed in the middle of, like, obviously these tensions with the south of the border. And it just needs some serious skill. But I think we've lost – I'll leave it at this, and I'll talk about the loony and facts. I think the Canadian public, based on what I'm seeing on Polymarket and some polls and stuff, I think we've lost the script a little bit.

[00:23:16] And let me explain what I mean by that. There has been a ton of issues with this country, namely housing, the economy, the growth of public sector, the lack of growth in the private sector, squandering of resources, all of those things. Inflation has been absolutely critical.

[00:23:42] And so the election a year ago was – if it was to happen a year ago, people were thinking about the economy. They were thinking about inflation. They were thinking about getting the country back on track, like some of the kind of key fundamental aspects of what we need to do. Getting the deficit somewhat rhyming with being under control. Like, you know, the core things that we need to do.

[00:24:09] And when I say I think we've lost the script, it's just been Trump derangement system. Trump derangement syndrome. Yeah, I was going to say, I think you got – System. There's a system around it. Yeah. We've lost the script around – it's just about the US. It's just about getting back at him. Okay? Do you know what I mean? That's where I think we've lost the script. Like, even if that does matter a lot, which it does, you got to fix home base a little bit here.

[00:24:38] And the narrative has been so dominant on the last 60 days of news and really just been drowned out around like what we really need to focus on. Yeah, I mean, I think it's important to remember that there are some domestic issues, some really important ones like you just mentioned. And of course, the US is front and center right now. It's taking everyone's attention. I mean, it's like – Just suck – this is what Trump does.

[00:25:07] He sucks the air out of the room. Yeah, exactly. That's what he does. But at the end of the day, I think, you know, hopefully all the parties will talk about their policies. And I have not read all the platforms yet. I'm not sure if they're all out or not. Probably not. Usually it takes a week or two. Maybe it will be out. But yeah, those are the things I'll be looking for is just – I want – I've been pretty clear. I want the government to spend within its means.

[00:25:35] There are some social things that I have dear to my heart, and I'm sure you have some. I'm sure our listeners will have some of their own too. But for me, at the end of the day is also making sure that, you know, our GDP per capita actually stops going down, for example. These are things that happened well before Trump that, you know, you don't have to pay over a million dollars to have a decent home. Like, it's things like that, right?

[00:26:04] It's just affordability is really important, whether it's housing affordability, but just necessities as well. And I've said it time and time again on the podcast. Someone even, like, was saying that, you know, I was being too political by saying that the counter tariffs that would be imposed by Canada on produce would be hurting the more vulnerable population in Canada. I'm like, I don't know how that's political. It's just a reality.

[00:26:34] The basic needs, when you have a lower household income, a bigger portion of your income actually goes to food and lodging for those necessities. And if you're putting higher taxes on that, which are paid by the consumer in the end, by the companies importing and then it's passed on to the consumer, it's going to hurt the lowest income household the most. And thankfully, we're not in that bracket of people. But that's something I think will be very important during this election.

[00:27:03] And I think it should be. And obviously, Trump as well. But I think those things is important. And people vote with whoever kind of aligns best with the things that matter most to them. The loony. Let's talk about the weak loony. So, year to date, or actually not year to date, on a trailing one-year basis, the TSX-60 has outperformed the S&P 500.

[00:27:30] On a trailing one-year total return, the TSX-60 is at 18.5%, where the S&P 500 is at 12%. Who would have thunk? Yeah, who needs big tech? Who needs big tech, right? And you might be thinking, why? How? What's the discrepancy? Okay. And so, I pulled this tweet from our good friend, Barry Schwartz, good friend of the pod, of Baskin Wealth Management. His office is just down the street, actually.

[00:27:57] Barry pulled, I'm going to assume, or it is pulled this up for Barry. TSX companies, TSX-60 companies with low exposure to the Canadian dollar. Magna, Gildan, Couchtard, Brookfield, BAM. Waste Connections, Rooters, Shopify, Constellation Software, Tech Nutrient, CCL First Service, CGI, and CAE. All those companies have less than 15% of their revenues in Canadian dollars, which is interesting. A lot of them you would think is very Canadian.

[00:28:27] Some of them you would think is very Canadian companies. Some of them you know are mostly international. Like a Shopify, no one's really surprised that that's a thing. And I commented, these companies love a weak loonie. And he replied, so does my portfolio. Okay. So I think this back forth and the discrepancy between the performance of the indices tell you kind of a really big story happening here.

[00:28:57] Which is there is some really nice arbitrage with a weak loonie. And there are a lot of businesses that really like a weak loonie. Magna is a good example. Shopify is a great example. I guess like think about it this way. I don't have to get all macroeconomics, okay? USD coming in the door, CAD going out. There's layers to this, but that's a really over easy to understand simplification. USD goes in, CAD goes out.

[00:29:26] You have an arbitrage on the CAD there. Yeah, I think a company, I was looking at Kustal's earning. Kustal, it's hurt them a decent amount. The stronger US dollar, but that's because they also have a pretty big presence in Europe. So the US dollar has been not only strong against the Canadian dollar, but also against the euro. So I think for them, it was more on the lukewarm side. And that's probably going to vary, right? From business to business, depending.

[00:29:53] Because this is just looking at the Canadian dollar, but depending whether it's a lot of their businesses in the US or US plus the rest of the world, it's going to have a different impact there. Yeah. And your portfolio too, right? Like if I'm holding a bunch of US stocks and I'm measuring my returns in CAD, right? Yeah. I mean, you could argue I should do the returns in US dollars, but I'm living my life in CAD for the most part, right?

[00:30:21] So there is some baked in returns there when the loonies week, at least as it rides down that curve. Yeah. Yeah, no, it's a fair point. I mean, it's definitely been a boost to my portfolio because I have a decent chunk of change in US treasury bills, which has seen what I measure it in Canadian dollars too. So it's seen a good boost for that.

[00:30:44] And to me, that's the correct unit to use CAD just because, I mean, until I start using US dollars to spend every day, I was still measuring in Canadian dollars. Yeah. Last time I checked, you live in Ottawa, Ontario. So... Yeah. One writing away from Mark Carney's writing. Is that right? Yeah. Yeah. It's not far from my writing, but yeah, it's...

[00:31:12] I think my in-laws are actually in that writing. So, yeah. There you go. All right. I have... Okay, we have two segments left here. We're at 35 minutes. Where do you want to go from here? I don't have a specific order. Yeah, mine will be pretty long. So why don't we use your... Do yours and then depending where we're at, we can just keep mine for next week. Okay. Because it's more of a... It's more of an evergreen topic for mine, so... Sure. Sure.

[00:31:41] Sounds good. Okay. So I have... I don't know if you want to share this for joint TCI listeners, but I have up here a Venn diagram of... Basically, it's a three-circle Venn diagram, okay? So I have no idea who made this. I would love to give the credit source for this as I always do on the pod. Definitely not AI. But yeah, definitely not AI. It looks like it's from an old textbook.

[00:32:10] Seriously, I'd love to give credit to who wrote this, but I have no idea where I got it from. I have this cold... Like, I have this process where I basically just email myself a screenshot and add it to the docs later if I see something that I want to get on the podcast because... I text myself, so it's the same. You have to have a process because you will think of... If you don't capitalize on when you get an idea in the wild, like I could be anywhere, then you'll never have enough ideas for the pod.

[00:32:40] So you got to have a system. Anyways, it's a clever little diagram, which is a three-circle Venn diagram. So if you can picture a Venn diagram, there's the two circles. This is the one with the three circles, which basically means if it's in the circle that shares area with all three of the circles, that means it shares common characteristics of all of them.

[00:33:03] And so it's basically this framework for thinking about when a stock is in kind of like the strike zone, okay? And so the three circles are moat. So, you know, kind of quality of the business, the characteristics that can make it durable for a really long time with its moat. Number two is the management. So, you know, who's running this? Are they skilled? And then the third is the valuation, the price, okay?

[00:33:31] If you have a strong moat, but a bad price, it shares those two. You got to think, does the market know something I know I don't? Maybe. This is where the value trap, this is where the value traps come in. It's not necessarily a value trap, but beware of value traps. It's in that zone of where you might have a value trap. Okay.

[00:33:59] The management is good and the price is good. There's overlay there. Avoid a turnaround trap. This could be the turnaround trap where even the best jockey, aka the best operator of the business, can't do well on broken legs, okay? Okay. So, you know, you have the best jockey, but the worst horse. You're not going to win the Kentucky Derby, okay? So, this could be the turnaround trap.

[00:34:25] Now, on the top, you have really good management and a really good moat, but you don't have the good price. So, you know, is this business priced for perfection? You know, this is the like, will I buy a quality company at any price? Great management, great moat, but the price ain't there, okay? So, you kind of have these three overlaying scenarios where you only have two out of the three. You have a great management and great price, but no moat.

[00:34:53] You have great moat, great price, bad management. You have great management, good price, bad moat. Those are the areas where things can get a little bit complicated. But when the market gives you something, aka the price is good, for a capable management team with a strong moat, that's the strike zone. And the center of all three of those kind of pushing and pulling ideas is the strike zone between all three of those. And I tend to agree.

[00:35:22] This is where you have to be really patient because you don't get all three of those lining up all the time on a regular given day. These are the opportunity strike zones. And you only get a few. We had one in 2022. And they happen every three or four years, in my opinion, from studying history. So, that's the strike zone. Yeah. And it looks like it could very well happen for certain types of businesses this year or in the next year.

[00:35:52] And I think that's, I think, a theme that we'll be talking about quite a bit in the upcoming couple of years is this uncertainty, thanks to a big part of Donald Trump. Let's not, you know, let's say how it is. I think it's going to create some opportunities because the market is going to be jittery and not sure where things are going. And if you're able to identify some businesses that will be resilient, regardless of what happens

[00:36:19] down south, and the market does not have the same opinion in the short term, then it's going to create some really good buying opportunities for some really good businesses that have good modes at a very reasonable price. Yeah, definitely. Well said. I mean, this strike zone doesn't happen all the time. And I think that it's easy to come up with a long list of reasons why it's not the right time.

[00:36:47] You know, it could keep going down. Is now really the right time? There's still so much uncertainty, blah, blah, blah, blah, blah, right? Like, of course, if I rewind the clock, it's bottom of the drawdown in 2022. Software has been, oh, God, tech was really, really rough. I mean, meta Facebook stock was down 75%, which still to this day is crazy.

[00:37:16] It's like absolutely absurd. So you get those types of situations and you're thinking, oh, like, no, it's not the right time. It can keep going down. Yes, of course it can keep going down. Of course you don't have a crystal ball. However, you can say it meets all three of these criterias. I think it's a good to fair price. The moat is there and the management's there. It's in the strike zone.

[00:37:43] So who cares about the next six to eight weeks or six to eight months when I care about the next six to eight years, right? So if it meets those criteria in the strike zone, don't worry so much about timing it perfectly because you might or you might not. That's going to be luck coming into factor and it's not going to matter that much.

[00:38:08] On the margins over a long period of time, it'll work itself out. Sometimes you'll get things right timing wise. Some things you'll mess things up timing wise. But in the long run, on the margins, those things are not going to matter so much. What is going to matter better is that you're getting those things in the strike zone. Yeah, and I think that that's a great opportunity. If you find a company that you really like, it's starting to get around that sweet spot

[00:38:36] of, you know, the price is starting to be attractive. It has a good mode, a good management team. What you can always do if there's a whole lot of uncertainty, that's where you can probably dollar cost average and you tell yourself, okay, I'll just buy a third of my position now, a third of my position, couple of weeks, and another third in like a few more weeks, whatever timeframe you want to do. If you want to make sure, you know what, there could be a universe where this company still

[00:39:05] goes down another 10, 15, 20%. There could be a universe where it goes, starts going up from here and its bottom. You can hedge that a little bit with just doing a dollar cost average and just averaging out your costs. You're going to get at the end of the day, if you're making the right call, you're still going to get a pretty good average cost basis by doing that because you're going to be in around the bottom one way or another. That's right. Yeah. You don't have to time it perfectly.

[00:39:35] The problem with doing that is you do have to have a plan and pull the trigger. Because if you just start with the one third as my example, and then the stock starts going up a few weeks down the line, then you're like, oh no, like, did I miss my, did I miss my opportunity? You just have, you need to have a plan. Maybe you tell yourself, you know what, I'm doing it in three installments. As long as the valuation stays within this range, I am doing it.

[00:40:01] If it doesn't, then okay, I'll, I'll, I'll just do the one third and wait until it gets back there. But you need to have a plan in place because it's too easy to chicken out, lack of better words, just because you start seeing the price going up. Yeah. So you're saying and do it in tranches could work. Yeah. Yeah, exactly. But having kind of a plan is what's really important. Yeah. Yeah. I don't hate that idea.

[00:40:26] If, if, what, whatever psychologically can get you to buy stocks when they're beaten down is probably a good thing, right? Even then it feels bad, especially if you're someone who like, doesn't like for me, it feels good. For some people psychologically feels bad to buy them on when they're on a drawdown. So whatever you can kind of psychologically get you over that hump is probably a good thing. Yeah.

[00:40:54] And whatever helps the emotions die, like die down a little bit. Right. But I think that's the biggest thing that investors, whether it's retail investor, professional investors, you know, I've, I've talked to portfolio managers before. I've been in the same room as investment managers for pension funds and they're regular people like everyone else. Like there are emotions running, like they're not robots. They also have emotions. Yes. They're smart people.

[00:41:23] They will look at the data, but like everyone else, emotions can get the best of them. And I think it's important to look at ways to make those emotions not flare up too much and that you focus on making a good investment and forget about the emotional aspect of it. And, you know, buying a company that you think is a strong buy at the time and then freaking out because it drops another five, 10%.

[00:41:50] If there's a way for you to just make sure your emotions don't get the best of you, I think you should definitely do it. Whatever that is. Some people, it will be just to do the position right off the bat, the full position. If you do in tranches, like we just talked about, that might be the best approach for you, but there's different kinds of things, but it's recognizing those emotions. I think it's a big part of what makes good investors versus kind of break even investors or those who won't necessarily beat the benchmark.

[00:42:19] Speaking of barely beating the benchmark, you know Manish Prabhrai, right? Yeah. Oh yeah. Yeah. What if I told you his fund since inception has done 2% a year? Are you serious? I mean, he must, depends what benchmark he's using, I guess, huh? Maybe he's- Yeah. Is your benchmark 0%? Benchmark is cash. Yeah. I think, yeah, he's been close.

[00:42:49] Yeah, no, it's crazy. So the way, I mean, you can look it up. It's the Prabhrai Wagons Fund. I just got to say, okay? Hold on. Let me share my screen so I can show you this. I'm not trying to talk trash or whatever, but this is just not what I would do, okay? If I ran a fund, this is not what I would have. Okay. So it's the website for those listening. I mean, he's being transparent. He's being transparent. Oh man, I don't know.

[00:43:18] Explain to those that are just listening. Yeah, yeah, yeah, yeah. So you can see it for yourself on wagonsfund.com. Wow. There is a picture of like two AI horses. This is AI, right? Yeah. Okay. There's a picture of two AI horses as the backs. I guess that's symboling the wagon fund. Since inception, S&P 500 up 41.65%. Wagon fund up 2.18%.

[00:43:46] So it's a short timeframe that, you know, the fund started in 2023. So I'm not saying like, I'm not trying to clown on him, but like- The year to date? Wow. Year to date, yeah, down 15%. So the risk adjusted returns are all out of work. Risk adjusted returns are unbelievably bad. Oh yeah. Like how can you, like basically you're paying, this is what it's telling me,

[00:44:12] and granted it's a small sample because it's from September 29, 2023 to February 28, 2025. But this is what it is telling me is you're getting less returns when things are good and more downside when things are bad. Correct. That's right. That's exactly right. Wow, huh? Yeah. Yeah. Okay. So I've opened up now the presentation. I wonder what they're invested in.

[00:44:40] It shows you, it's like Turkish stocks or something. Okay. Oh, here it is. Okay. Here's the holdings. TAV Airport Holdings, which I guess is like the Turkish Airport Holdings. Oh, okay. Okay. Yeah. Yeah. Yeah. Which is probably a pretty moaty stock, but I think the currency, you've just been getting rinsed by the Turkish currency. Yeah. Yeah. And it's 16% of the portfolio. Yeah. Yeah.

[00:45:04] And then just like a bunch of really cheap US stocks, really like value, value, like mega low PE stocks. Yeah. And then Edelweiss Financial Services in India and companies, 15% of the portfolio. Yeah. Toll Brothers. Now, probably not the best move to bet on housing, on home builders, US home builders during that timeframe. It's not been the best bet to do. Yeah.

[00:45:34] This is the, I mean, this is the problem, right? When you just own, like you take like a low PE quant approach to investing, you end up with a portfolio like this, honestly. Like it's kind of gutless to say, but it is, you end up with junky stuff like this and it doesn't work. It doesn't work. Maybe five, 10 years down the line. We don't know. Maybe they'll crush the benchmark. They're having a rough start, but who knows?

[00:46:02] It hasn't worked for like 50 years. Do I have to wait another 50? We're in the fourth turning, so maybe it's going to work now. Oh, man. Again, it's just kind of crazy that like the performance, usually people on their website kind of say like what they do. Yeah. But no, his is just the performance right there. So, you know, you can't say he's hiding anything. No, no. I'll give him props for that. Yeah.

[00:46:31] He's very, yeah. And he's not using an obscure benchmark. He's just using the S&P 500. So props to him for doing that for sure. But yeah, that's definitely alarming where you get like minus 15% year today. Like I don't know if he's doing better now. It's a month later. But to underperform that badly last year. Like it's one thing if you did like 50, 60% last year.

[00:46:59] You crushed the S&P 500 and then you're down 15% this year more than the S&P. Like that is one thing, right? You're okay. You do better when things are good and you do a bit worse when things are bad. But overall, you're probably in front still. Yeah. What's that Turkish Tav airports? Yeah. That thing is getting smoked this year. And they're probably charging decent amount of fees too. That's probably the kicker.

[00:47:29] Yeah. Yeah. That's probably another part eating into the returns. And at that point, I mean, you might as well. If you want to do that approach, you're almost better off doing it yourself at that point. If you want to put the time in. Because yeah, if you want to do a more value approach, I would say there's probably not necessarily like all better names like Occidental. I think that one, you know, even Buffett has been buying that quite a bit.

[00:47:56] So there are some names that there's some validity to them. But I think that probably the biggest issue I see is like it's very concentrated. First of all, in like, you know, the top two holding, one in Turkey, one in India, 15% each. And then all the US ones, they're very kind of value, similar type of, you know, industries, not the same, but similar types of industries, nothing like tech stocks or anything like that.

[00:48:26] So that's the other problem. It's super concentrated. You don't, you're not really well diversified. I was just thinking, did he call his fund wagons fund? Because the only reason people know him is because he hitched his wagon to Charlie and Warren? Oh, I don't know. Yeah. No idea. That's a... He sure did. Smart. You know what? Smart. If you're going to...

[00:48:55] And he's more of a macro guy too, right? If you're going to hitch your wagon to someone, those are two guys to do. Thanks for listening, folks. We really appreciate you for tuning into the podcast. We are now when this podcast comes out four Mondays away from election day, which is crazy. I honestly thought it was going to be pushed out further, but I was wrong. I'm happily wrong.

[00:49:23] So that is four Mondays away. We'll probably have to dedicate a kind of episode. We can do our weekly Pauly Market update. Yeah, let's do our weekly Pauly Market. So Pauly Market currently has Mark Carney at 54%. We're recording this in the afternoon of the 25th. Yeah. 54% versus 47% for Pierre Paulyev. So now's the time.

[00:49:49] If you think Pierre is going to win and you want to buy it on the cheap, now is the time to... Yeah. Smash. Well, I mean, at the end of the day, it's like a coin flip. That's what it's telling us. Like, I've played enough poker to know 54, 47. I mean, it's a coin flip at this point. Yeah. Yeah. That's about the odds I get at a roulette table, isn't it? Well, if you really want good odds, you should bet on Jagmeet Singh at less than 1%. So you're getting a... Wow.

[00:50:19] Think of all... Yeah, that's such an asymmetric bet, isn't it? Yeah. So much asymmetry. Mm-hmm. No, speaking of gambling, I didn't put any money on this, but we put together a Finchat March Madness bracket. Okay. Yeah. Yeah. I would be the same. Most people do. Like, I'm not a college basketball...

[00:50:49] Give me a dartboard and I'll throw some darts and that's going to be my pick. Yeah. I got 13 of 16 Sweet 16 teams. Nice. It says I'm in the 99th percentile. That is... I don't know what the math on that is, but that is extremely lucky. Yeah. Well, yeah, if you didn't know it. Even if you know, I mean, there's always going to be some element of luck, especially... I mean, I'm not very familiar with... It's almost better if you don't know.

[00:51:19] That's how big of a crapshoot these games are. Yeah. Yeah. I guess, yeah. If you stayed on the podcast and listened to us to all this long, good for you. I think for me, the only betting I might do is Montreal Canadiens making the playoffs. Should have done that when they had the Four Nations break. I think they were probably getting 20 to 1 on those odds. Yeah. Yeah. Yeah. They could sneak in that wild card spot. That's the pod, folks. We appreciate you. See you in a few days.

[00:51:48] The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.