Two Stocks on Our Watchlist and Tracking the Right Metrics

[00:00:01] [SPEAKER_00]: This is The Canadian Investor, where you take control of your own portfolio and gain the

[00:00:07] [SPEAKER_00]: confidence you need to succeed in the markets.

[00:00:10] [SPEAKER_00]: Hosted by Braden Dennis and Simon Belanger.

[00:00:15] [SPEAKER_01]: The Canadian Investor podcast.

[00:00:18] [SPEAKER_01]: Welcome in to the show.

[00:00:21] [SPEAKER_01]: My name is Braden Dennis.

[00:00:23] [SPEAKER_01]: As always, the boys are back in business as always joined by Mr. Simon Belanger,

[00:00:29] [SPEAKER_01]: the tenacious.

[00:00:31] [SPEAKER_01]: Bro, I just turned 29 yesterday.

[00:00:33] [SPEAKER_01]: Yeah.

[00:00:34] [SPEAKER_01]: You said to me, I said, what do I do here?

[00:00:38] [SPEAKER_01]: My last year, my thirties.

[00:00:40] [SPEAKER_01]: You said start stretching.

[00:00:42] [SPEAKER_01]: There's a reason professional athletes hit the age cliff in their early thirties.

[00:00:47] [SPEAKER_01]: I think that is sage advice, dude.

[00:00:49] [SPEAKER_01]: I my hips.

[00:00:50] [SPEAKER_01]: It's my hips, dude.

[00:00:51] [SPEAKER_01]: Yeah, that's where it all comes from.

[00:00:54] [SPEAKER_01]: Guys like you and me sitting down for work all day.

[00:00:56] [SPEAKER_02]: Yeah, I mean, I'll send you some exercises.

[00:00:58] [SPEAKER_02]: I know if you have hip hip opening exercises, I have a whole slew of like stretching and

[00:01:04] [SPEAKER_02]: mobility.

[00:01:06] [SPEAKER_01]: You're seasoned now.

[00:01:07] [SPEAKER_01]: Yeah, exactly.

[00:01:08] [SPEAKER_01]: Dude, for me, it's all it's all it's all in the hips just like just like golf.

[00:01:13] [SPEAKER_01]: It's all in the hips.

[00:01:14] [SPEAKER_01]: Dude, we have two great segments today before we do fan favorite podcast recurring

[00:01:23] [SPEAKER_01]: segment on the show here.

[00:01:24] [SPEAKER_01]: Stocks on our radar.

[00:01:25] [SPEAKER_01]: So we're each going to go through something and then we're each going to go through a

[00:01:30] [SPEAKER_01]: stock that has popped up on our radar for one reason or another.

[00:01:33] [SPEAKER_01]: Explain what they do, explain what we like or need to explore about their future

[00:01:38] [SPEAKER_01]: coming up.

[00:01:39] [SPEAKER_01]: And that segment is, of course, sponsored by our friends at EQ Bank.

[00:01:43] [SPEAKER_01]: I will kick us off today.

[00:01:45] [SPEAKER_01]: It's been a while.

[00:01:47] [SPEAKER_01]: I've done this segment on the show a few times now, and it's by design that it

[00:01:54] [SPEAKER_01]: often and that's because I think these types of discussions don't happen enough.

[00:02:00] [SPEAKER_01]: There's a lot of information online, a lot of information from this podcast about how

[00:02:06] [SPEAKER_01]: to find the next big winner, you know, how to research stocks, how to get excited,

[00:02:12] [SPEAKER_01]: how to do research, different ideas of portfolio companies that you might want to

[00:02:17] [SPEAKER_01]: take a look at.

[00:02:18] [SPEAKER_01]: But there is very little discussion relatively about monitoring, about

[00:02:26] [SPEAKER_01]: portfolio management, maintenance and how to get what I call Zen mode.

[00:02:33] [SPEAKER_01]: Because this took me a long time.

[00:02:35] [SPEAKER_01]: This took me years and years to get to confidence where I feel fully Zen.

[00:02:44] [SPEAKER_01]: Now, what I mean by that is when I don't feel Zen in my portfolio, tracking stuff,

[00:02:51] [SPEAKER_01]: it feels like you know when you have an inbox when you come back from vacation,

[00:02:55] [SPEAKER_02]: you're like losing control.

[00:02:56] [SPEAKER_02]: It's almost that right?

[00:02:59] [SPEAKER_01]: Yeah, you come back from vacation and your inbox at work is like an absolute

[00:03:04] [SPEAKER_01]: nightmare and disaster and you feel like you have no idea what's going on.

[00:03:08] [SPEAKER_01]: That's the feeling I get when I have no idea what's happening with my

[00:03:11] [SPEAKER_01]: portfolio positions.

[00:03:13] [SPEAKER_01]: And because of my investing style, I don't have to feel that way that often

[00:03:17] [SPEAKER_01]: because I'm buying companies I believe are going to be great quality through

[00:03:20] [SPEAKER_01]: ups and downs.

[00:03:22] [SPEAKER_01]: But it's the stack of emails piled hundreds high and drowning to catch up

[00:03:28] [SPEAKER_01]: on it and trying to go read every earnings call or type into each

[00:03:34] [SPEAKER_01]: portfolio position on Finch out like what happened in the earnings call.

[00:03:38] [SPEAKER_01]: It's still like anxiety inducing, right?

[00:03:41] [SPEAKER_01]: So here's how I keep on top of things and here's how I simplify it so that I

[00:03:47] [SPEAKER_01]: can maximize beach time and minimize stress time, maximize Zen mode.

[00:03:55] [SPEAKER_01]: So I'm going to go through my examples of four companies I hold for my

[00:03:59] [SPEAKER_01]: portfolio and what I do with a spreadsheet.

[00:04:03] [SPEAKER_01]: And of course, there are other factors in industry dynamics I'm looking at,

[00:04:07] [SPEAKER_01]: but this is a baseline of a spreadsheet that I keep constantly.

[00:04:12] [SPEAKER_01]: One or two things that I'm looking at for each company that I know if these

[00:04:17] [SPEAKER_01]: are tracking, then my investment thesis is playing out.

[00:04:22] [SPEAKER_01]: So I'm going to go through four examples here.

[00:04:25] [SPEAKER_01]: First example is MasterCard company I own.

[00:04:29] [SPEAKER_01]: I am just looking to track total transaction volume over time.

[00:04:35] [SPEAKER_01]: That's what I'm most interested in seeing because that and its duopoly

[00:04:41] [SPEAKER_01]: counterpart or oligopoly counterpart globally is a toll road on transactions

[00:04:48] [SPEAKER_01]: via the card network.

[00:04:50] [SPEAKER_01]: I know they're going to print like 60% free cashflow margins, and I know

[00:04:54] [SPEAKER_01]: that they're going to have pretty steady take rates unless there's huge

[00:04:58] [SPEAKER_01]: regulatory intervention.

[00:05:01] [SPEAKER_01]: So I'm good with just tracking that number.

[00:05:05] [SPEAKER_01]: ASML, their backlog and total units sold.

[00:05:10] [SPEAKER_01]: Look, this is a business where they're selling a number of units that I can

[00:05:14] [SPEAKER_01]: easily keep track of in 2018.

[00:05:16] [SPEAKER_01]: That number was 387 in the trailing 12 months.

[00:05:19] [SPEAKER_01]: It was 570 in terms of net bookings.

[00:05:23] [SPEAKER_01]: I just want to track if bookings are performing well, and this is

[00:05:29] [SPEAKER_01]: largely a cyclical macro type of number.

[00:05:34] [SPEAKER_01]: Intuitive Surgical, their installed base.

[00:05:36] [SPEAKER_01]: This is the amount of surgery robotic systems that are out in the world.

[00:05:40] [SPEAKER_01]: That number has gone from under 5000 in 2018 to over 9000 now as of

[00:05:46] [SPEAKER_01]: their most recent quarter.

[00:05:47] [SPEAKER_01]: And this is the base that they are going to generate revenue and

[00:05:52] [SPEAKER_01]: instrument recurring revenue on.

[00:05:55] [SPEAKER_01]: Number four and a company that is going to come up again later in this

[00:05:59] [SPEAKER_01]: podcast, WSP Global.

[00:06:02] [SPEAKER_01]: I want to track two things, their service backlog.

[00:06:06] [SPEAKER_01]: So that's their customers filling their books with work they're going

[00:06:08] [SPEAKER_01]: to complete in the future and organic growth since they buy a lot of

[00:06:12] [SPEAKER_01]: companies. One or two things for each of these businesses allows me

[00:06:18] [SPEAKER_01]: to look at a one pager.

[00:06:20] [SPEAKER_01]: It allows me to extract those numbers quickly from the platform I'm

[00:06:25] [SPEAKER_01]: using and know that I'm tracking well.

[00:06:28] [SPEAKER_01]: And it also gives me the ability to take a hard look in the mirror if

[00:06:33] [SPEAKER_01]: it's not meeting my expectations.

[00:06:35] [SPEAKER_01]: And so I think this is super, super important for self-directed

[00:06:40] [SPEAKER_01]: investors to have some sort of system.

[00:06:42] [SPEAKER_01]: This is my system.

[00:06:44] [SPEAKER_01]: It doesn't have to be your system, but have some sort of system to

[00:06:48] [SPEAKER_01]: reach what I believe is Zen mode because you don't make good

[00:06:52] [SPEAKER_01]: decisions when you have that stack of emails piled up in the

[00:06:57] [SPEAKER_01]: inbox.

[00:06:58] [SPEAKER_02]: Yeah, and I think it's a good system for you.

[00:07:00] [SPEAKER_02]: And I think it's important for people to remember if they do have

[00:07:04] [SPEAKER_02]: time to dig into more of the earnings calls, the data, more

[00:07:10] [SPEAKER_02]: specific data for even any of the names that you own, right?

[00:07:14] [SPEAKER_02]: Some of the names that might overlap that they own as well.

[00:07:17] [SPEAKER_02]: I mean, I've been pretty vocal about that.

[00:07:20] [SPEAKER_02]: There's a reason why I've reduced the number of amount of

[00:07:23] [SPEAKER_02]: holdings is for me, it was becoming harder to stay on top

[00:07:26] [SPEAKER_02]: of it. So that's why I'm supplementing it with index funds

[00:07:30] [SPEAKER_02]: and ETFs.

[00:07:31] [SPEAKER_02]: And that just made sense for me.

[00:07:32] [SPEAKER_02]: But if someone, you know, maybe they pick and choose a

[00:07:35] [SPEAKER_02]: little bit of what you said, but also they still like to

[00:07:38] [SPEAKER_02]: listen to every earnings call, that's fine.

[00:07:41] [SPEAKER_02]: I think at the end of the day, it's all about time

[00:07:43] [SPEAKER_02]: commitment.

[00:07:44] [SPEAKER_02]: Exactly.

[00:07:45] [SPEAKER_01]: And establishing some sort of baseline, like those things

[00:07:48] [SPEAKER_01]: you mentioned are all things that I like to do a recorder as

[00:07:51] [SPEAKER_01]: well.

[00:07:51] [SPEAKER_01]: But some sort of baseline that you can commit to and just

[00:07:56] [SPEAKER_01]: have some sort of process there feels good and maintaining

[00:07:58] [SPEAKER_01]: this database, like it's really quite easy.

[00:08:02] [SPEAKER_01]: You know, it's one or two lineups.

[00:08:04] [SPEAKER_01]: You know when people say like if you can't explain

[00:08:07] [SPEAKER_01]: something simply, you don't understand it well enough?

[00:08:09] [SPEAKER_02]: Yeah.

[00:08:10] [SPEAKER_02]: Yeah.

[00:08:10] [SPEAKER_01]: That's how I feel about an investment thesis or a KPI

[00:08:14] [SPEAKER_01]: that you want to track or a handful of them that you

[00:08:17] [SPEAKER_01]: want to track for each company.

[00:08:20] [SPEAKER_01]: You should be able to distill it down to like, if this

[00:08:23] [SPEAKER_01]: tracks, I'm good.

[00:08:25] [SPEAKER_01]: You know, like the thesis is playing out.

[00:08:27] [SPEAKER_01]: Of course there are things outside of your control at the

[00:08:30] [SPEAKER_01]: macro level that are going to be random and sporadic.

[00:08:34] [SPEAKER_01]: That's the world we live in.

[00:08:35] [SPEAKER_01]: Like it's organized chaos.

[00:08:37] [SPEAKER_01]: But a lot of those things are certainly kind of out of

[00:08:40] [SPEAKER_01]: your control.

[00:08:40] [SPEAKER_01]: And as an investor, I want to focus on the things that

[00:08:42] [SPEAKER_01]: I can track and I can be in my control.

[00:08:45] [SPEAKER_02]: Yeah.

[00:08:45] [SPEAKER_02]: No, I think that's-

[00:08:46] [SPEAKER_01]: Or at least are knowable.

[00:08:47] [SPEAKER_02]: Yeah, exactly.

[00:08:48] [SPEAKER_02]: I think that's great.

[00:08:49] [SPEAKER_02]: And I think it's just being strategic, right?

[00:08:51] [SPEAKER_02]: Like you're trying to focus the time you have to be as

[00:08:54] [SPEAKER_02]: efficient as possible.

[00:08:56] [SPEAKER_02]: And that's what works best.

[00:08:57] [SPEAKER_02]: And I think at the end of the day, I've said it before.

[00:09:00] [SPEAKER_02]: I'll say it again.

[00:09:01] [SPEAKER_02]: You just have to be honest with yourself in terms of no

[00:09:04] [SPEAKER_02]: matter how much you love investing in terms of how much

[00:09:06] [SPEAKER_02]: time you have to commit and then build a strategy around that.

[00:09:10] [SPEAKER_02]: Yeah, absolutely.

[00:09:12] [SPEAKER_02]: All right.

[00:09:13] [SPEAKER_02]: What's up next?

[00:09:13] [SPEAKER_02]: Yeah.

[00:09:14] [SPEAKER_02]: So I entitled this segment, the problem with

[00:09:17] [SPEAKER_02]: Although it is using NVIDIA as the kind of case study here,

[00:09:23] [SPEAKER_02]: not a long case study, but I think it was, it's very

[00:09:27] [SPEAKER_02]: relevant because obviously we're recording that and NVIDIA

[00:09:29] [SPEAKER_02]: actually reported yesterday evening.

[00:09:31] [SPEAKER_02]: So today, the stock, when I last look, I think it was

[00:09:35] [SPEAKER_02]: down around, it's been down between two and 4% for most

[00:09:39] [SPEAKER_02]: of the day.

[00:09:40] [SPEAKER_02]: Oh, it's close to down 5% now.

[00:09:43] [SPEAKER_02]: And the reason I wanted to talk about that is, first of all,

[00:09:47] [SPEAKER_02]: if you look at the quarter, like, I don't know what you

[00:09:50] [SPEAKER_02]: thought, but I thought it was a phenomenal quarter.

[00:09:53] [SPEAKER_02]: Like at first glance, at the very least.

[00:09:55] [SPEAKER_01]: What's not to like?

[00:09:56] [SPEAKER_01]: It's unbelievable.

[00:09:59] [SPEAKER_01]: I could, I also like, I can't believe how much cash

[00:10:03] [SPEAKER_01]: it's spitting off.

[00:10:04] [SPEAKER_01]: It's unbelievable.

[00:10:06] [SPEAKER_01]: The pricing power, like you're selling hardware at 80%

[00:10:10] [SPEAKER_01]: gross margins.

[00:10:10] [SPEAKER_01]: It's like double LVMH.

[00:10:14] [SPEAKER_01]: It's like double Ferrari.

[00:10:16] [SPEAKER_01]: Unbelievable.

[00:10:17] [SPEAKER_02]: Yeah.

[00:10:17] [SPEAKER_02]: And it won't be ill, be like, I'll do this a bit

[00:10:20] [SPEAKER_02]: as a quick earnings recap.

[00:10:22] [SPEAKER_02]: But like you said, I mean, it was a very good quarter.

[00:10:24] [SPEAKER_02]: I just want to give some context because people might

[00:10:27] [SPEAKER_02]: just see the, not look at the earnings release or not

[00:10:30] [SPEAKER_02]: look at the results and say, okay, they must have had

[00:10:33] [SPEAKER_02]: a bad quarter.

[00:10:34] [SPEAKER_02]: It's down 5%.

[00:10:36] [SPEAKER_02]: That's actually pretty, as far from the truth as you

[00:10:39] [SPEAKER_02]: could get.

[00:10:39] [SPEAKER_02]: They had a phenomenal quarter.

[00:10:41] [SPEAKER_02]: So they were guiding for revenues to be in the range

[00:10:43] [SPEAKER_02]: of 27.4 to 28.6 billion.

[00:10:47] [SPEAKER_02]: Revenues actually came in at 30 billion, which was

[00:10:50] [SPEAKER_02]: 5% better than they had guided.

[00:10:52] [SPEAKER_02]: And when they do guide, they actually give a number

[00:10:55] [SPEAKER_02]: and then they say plus my plus or minus 2%.

[00:10:58] [SPEAKER_02]: So that's why I gave that range here.

[00:11:00] [SPEAKER_02]: And that's a 122% increase year over year and a 15%

[00:11:05] [SPEAKER_02]: increase versus the previous quarter.

[00:11:07] [SPEAKER_02]: They also beat analysts expectations, which were

[00:11:10] [SPEAKER_02]: higher than their own guidance on that front.

[00:11:14] [SPEAKER_02]: They are expecting gross margins to be in the

[00:11:16] [SPEAKER_02]: mid seventies in terms of percentage versus 76.4

[00:11:20] [SPEAKER_02]: for analysts expectations.

[00:11:22] [SPEAKER_02]: I wanted to mention that because that was kind

[00:11:25] [SPEAKER_02]: of pinpointed at potentially one of the things

[00:11:27] [SPEAKER_02]: that resulted in the stock being down today.

[00:11:30] [SPEAKER_02]: They are guiding for revenues of 32.5 billion

[00:11:34] [SPEAKER_02]: for Q3, which would be a 8.3% increase versus

[00:11:38] [SPEAKER_02]: the previous or this current quarter and 80%

[00:11:41] [SPEAKER_02]: year over year.

[00:11:42] [SPEAKER_02]: And they've also approved an additional $50

[00:11:44] [SPEAKER_02]: billion worth of buyback.

[00:11:47] [SPEAKER_02]: So I tell someone this and most people would

[00:11:50] [SPEAKER_02]: say, okay, this stock will definitely be up on

[00:11:54] [SPEAKER_02]: the day because it's been a phenomenal quarter.

[00:11:58] [SPEAKER_02]: They beat expectation.

[00:11:59] [SPEAKER_02]: They even beat their guidance and they beat

[00:12:02] [SPEAKER_02]: analysts expectations.

[00:12:03] [SPEAKER_02]: Well, that's not what happened.

[00:12:05] [SPEAKER_02]: And I'm sure Dan and I will chat a little bit

[00:12:07] [SPEAKER_02]: about it this Thursday when we do the news

[00:12:10] [SPEAKER_02]: and earnings.

[00:12:11] [SPEAKER_02]: But the reason I wanted to mention that is

[00:12:14] [SPEAKER_02]: that's the problem with high valuations is

[00:12:17] [SPEAKER_02]: it just becomes so difficult to establish

[00:12:20] [SPEAKER_02]: whether you know what's priced in at this

[00:12:22] [SPEAKER_02]: point and to be investing.

[00:12:25] [SPEAKER_02]: And obviously it's one day, maybe, you

[00:12:27] [SPEAKER_02]: know, a week, a month, a quarter, a year

[00:12:29] [SPEAKER_02]: from now, the stock just goes on a rip and

[00:12:32] [SPEAKER_02]: it just, you know, goes up 25, 30%.

[00:12:35] [SPEAKER_02]: I don't know.

[00:12:36] [SPEAKER_02]: But I think it's really important for people

[00:12:40] [SPEAKER_02]: to take note of this because I think

[00:12:42] [SPEAKER_02]: people will sometimes try to bet that it

[00:12:44] [SPEAKER_02]: will pop on earnings or whatever the

[00:12:46] [SPEAKER_02]: case is.

[00:12:47] [SPEAKER_02]: But when a company is trading at such

[00:12:51] [SPEAKER_02]: high valuations, it's just very difficult

[00:12:53] [SPEAKER_02]: to establish, you know, what's already

[00:12:55] [SPEAKER_02]: baked in the price and what the company

[00:12:57] [SPEAKER_02]: actually has to do in the next quarter,

[00:13:00] [SPEAKER_02]: year, five years to be able to grow

[00:13:03] [SPEAKER_02]: into that valuation.

[00:13:04] [SPEAKER_01]: Yeah, I mean, it's happiness equals

[00:13:07] [SPEAKER_01]: expectations minus results.

[00:13:11] [SPEAKER_01]: I believe that true to be.

[00:13:13] [SPEAKER_01]: I believe that to be true for life and

[00:13:16] [SPEAKER_01]: for investing, right?

[00:13:18] [SPEAKER_01]: It's you have expectations so, so high

[00:13:21] [SPEAKER_01]: and you deliver something so wonderful.

[00:13:26] [SPEAKER_01]: And it's like when you go to the

[00:13:28] [SPEAKER_01]: movies, this blockbuster so hyped up.

[00:13:31] [SPEAKER_01]: You're so excited.

[00:13:33] [SPEAKER_01]: The movie was fantastic, but you walk

[00:13:34] [SPEAKER_01]: out of there disappointed.

[00:13:36] [SPEAKER_01]: That's what happens in the market.

[00:13:37] [SPEAKER_01]: Yeah.

[00:13:38] [SPEAKER_01]: Oh yeah.

[00:13:39] [SPEAKER_02]: I mean, it's yeah, it's it's crazy.

[00:13:42] [SPEAKER_02]: And like, I'll ask you another question.

[00:13:44] [SPEAKER_02]: Like what would happen if they came

[00:13:45] [SPEAKER_02]: in slightly below their guidance?

[00:13:48] [SPEAKER_01]: Yeah, I mean, you have something,

[00:13:51] [SPEAKER_01]: you have something priced to

[00:13:53] [SPEAKER_01]: perfection and maybe it's the big

[00:13:55] [SPEAKER_01]: question.

[00:13:56] [SPEAKER_01]: I mean, this is not a discussion

[00:13:57] [SPEAKER_01]: about Nvidia.

[00:13:59] [SPEAKER_01]: But like the question is just like

[00:14:02] [SPEAKER_01]: how long is the build out going to

[00:14:05] [SPEAKER_01]: go for?

[00:14:05] [SPEAKER_01]: Yeah, that's that's that's the

[00:14:08] [SPEAKER_01]: the money to be made or lost on

[00:14:10] [SPEAKER_01]: Nvidia stock.

[00:14:12] [SPEAKER_01]: And I think that there's still a

[00:14:14] [SPEAKER_01]: lot of upside here.

[00:14:16] [SPEAKER_01]: And I can't believe I'm saying

[00:14:17] [SPEAKER_01]: this. If the build out goes

[00:14:20] [SPEAKER_01]: just two or three years longer

[00:14:22] [SPEAKER_01]: than people expect, then you have

[00:14:23] [SPEAKER_01]: huge, huge amounts of cash that's

[00:14:26] [SPEAKER_01]: going to be spun off that analysts

[00:14:27] [SPEAKER_01]: are projecting right now today.

[00:14:28] [SPEAKER_01]: But to your point around the

[00:14:32] [SPEAKER_01]: around valuations is you have

[00:14:36] [SPEAKER_01]: something priced to perfection

[00:14:38] [SPEAKER_01]: like you did with all I would

[00:14:41] [SPEAKER_01]: say most software stocks through

[00:14:43] [SPEAKER_01]: 2021, if not all were priced

[00:14:46] [SPEAKER_01]: that you're going to have this

[00:14:48] [SPEAKER_01]: pulled forward growth that you

[00:14:50] [SPEAKER_01]: saw post covid continue for five

[00:14:53] [SPEAKER_01]: plus years and it continued for

[00:14:56] [SPEAKER_01]: 18 months tops.

[00:14:58] [SPEAKER_01]: And then it was like, oh shit,

[00:15:00] [SPEAKER_01]: like this thing's priced like I

[00:15:02] [SPEAKER_01]: have my growth projections out

[00:15:03] [SPEAKER_01]: five years and it slowed down

[00:15:06] [SPEAKER_01]: to like twenty eighteen levels

[00:15:07] [SPEAKER_01]: in 18 months.

[00:15:10] [SPEAKER_01]: The math doesn't work.

[00:15:11] [SPEAKER_01]: Yeah. Right.

[00:15:12] [SPEAKER_01]: And so this is just a math

[00:15:14] [SPEAKER_01]: equation and valuation and

[00:15:16] [SPEAKER_01]: reality is gravity.

[00:15:19] [SPEAKER_01]: You can jump off the ground.

[00:15:21] [SPEAKER_01]: You can leave Earth for a

[00:15:22] [SPEAKER_01]: little bit, but gravity will

[00:15:24] [SPEAKER_01]: always bring you back to

[00:15:25] [SPEAKER_02]: Yeah. And when it's trading to

[00:15:27] [SPEAKER_02]: add such high valuations like

[00:15:29] [SPEAKER_02]: it is now, and I'll just throw

[00:15:30] [SPEAKER_02]: a couple of items that I think

[00:15:32] [SPEAKER_02]: are not talked a whole lot.

[00:15:34] [SPEAKER_02]: I've been pretty vocal.

[00:15:35] [SPEAKER_02]: You know that about the Taiwan

[00:15:36] [SPEAKER_02]: risk, right?

[00:15:37] [SPEAKER_02]: Nvidia, pretty much all of

[00:15:39] [SPEAKER_02]: their trips are produced in

[00:15:40] [SPEAKER_02]: Taiwan, maybe a tiny portion

[00:15:42] [SPEAKER_02]: or outside, but I would say

[00:15:44] [SPEAKER_02]: probably 90 percent plus are

[00:15:46] [SPEAKER_02]: produced in Taiwan.

[00:15:47] [SPEAKER_02]: So that is a risk there.

[00:15:48] [SPEAKER_02]: Who knows what will happen so

[00:15:50] [SPEAKER_02]: far? I think it's been calmer

[00:15:52] [SPEAKER_02]: than a lot of people expected,

[00:15:53] [SPEAKER_02]: especially since the Taiwanese

[00:15:55] [SPEAKER_02]: election was earlier this

[00:15:56] [SPEAKER_02]: year, and that was supposed

[00:15:57] [SPEAKER_02]: to be definitely an inflection

[00:15:59] [SPEAKER_02]: point. But you also have,

[00:16:01] [SPEAKER_02]: you know, I think the elephant

[00:16:03] [SPEAKER_02]: that we're not talking about

[00:16:05] [SPEAKER_02]: next door about the U.S.

[00:16:07] [SPEAKER_02]: election. Trump has been very

[00:16:08] [SPEAKER_02]: vocal about tariffs and Trump

[00:16:11] [SPEAKER_02]: is I think we can probably

[00:16:14] [SPEAKER_02]: most people can agree that

[00:16:15] [SPEAKER_02]: he's probably more on the

[00:16:16] [SPEAKER_02]: protectionism side when it

[00:16:18] [SPEAKER_02]: comes to the economy.

[00:16:19] [SPEAKER_02]: Well, you know, what prevents

[00:16:22] [SPEAKER_02]: Trump from deciding to put

[00:16:24] [SPEAKER_02]: even more intense restrictions

[00:16:26] [SPEAKER_02]: on where these most advanced

[00:16:28] [SPEAKER_02]: AI chips are shipped?

[00:16:30] [SPEAKER_02]: Maybe he puts even more

[00:16:32] [SPEAKER_02]: restrictions on China.

[00:16:33] [SPEAKER_02]: Maybe they even put

[00:16:34] [SPEAKER_02]: restrictions on other

[00:16:35] [SPEAKER_02]: countries that are

[00:16:36] [SPEAKER_02]: purchasing these types of

[00:16:37] [SPEAKER_02]: chips right now.

[00:16:38] [SPEAKER_02]: So I'm just saying that

[00:16:40] [SPEAKER_02]: these are potential wildcard

[00:16:42] [SPEAKER_02]: that there's all these

[00:16:43] [SPEAKER_02]: expectations that are built

[00:16:44] [SPEAKER_02]: in and the valuation of

[00:16:46] [SPEAKER_02]: Nvidia right now, and things

[00:16:48] [SPEAKER_02]: could take a really sharp

[00:16:50] [SPEAKER_02]: turn, you know, six months,

[00:16:52] [SPEAKER_02]: a year, two years down the

[00:16:54] [SPEAKER_02]: line. Just forget about the

[00:16:55] [SPEAKER_02]: old AI buildup.

[00:16:56] [SPEAKER_02]: It could just be, for

[00:16:57] [SPEAKER_02]: example, a geopolitical

[00:16:59] [SPEAKER_02]: turn that has a massive

[00:17:00] [SPEAKER_02]: impact because it's such a

[00:17:02] [SPEAKER_02]: strategic asset to countries

[00:17:04] [SPEAKER_02]: like the U.S.

[00:17:05] [SPEAKER_02]: So I just wanted to

[00:17:07] [SPEAKER_02]: to mention this.

[00:17:08] [SPEAKER_02]: I mean, obviously we're

[00:17:08] [SPEAKER_02]: talking more about Nvidia,

[00:17:10] [SPEAKER_02]: but you can think about

[00:17:12] [SPEAKER_02]: you said software companies,

[00:17:14] [SPEAKER_02]: right? SAS in 2021.

[00:17:16] [SPEAKER_02]: They really the

[00:17:17] [SPEAKER_02]: valuations were really

[00:17:18] [SPEAKER_02]: stretched by I think it's

[00:17:19] [SPEAKER_02]: just important to remember

[00:17:20] [SPEAKER_02]: that when you have

[00:17:21] [SPEAKER_02]: valuation that are just that

[00:17:23] [SPEAKER_02]: high, you know, on the

[00:17:25] [SPEAKER_02]: short term, but also the

[00:17:26] [SPEAKER_02]: longer term, you have to

[00:17:27] [SPEAKER_02]: start asking the question

[00:17:28] [SPEAKER_02]: like what's already priced

[00:17:30] [SPEAKER_02]: in.

[00:17:31] [SPEAKER_02]: But almost 19 billion of

[00:17:32] [SPEAKER_02]: operating profit.

[00:17:33] [SPEAKER_02]: Yeah. Oh yeah, it's crazy.

[00:17:34] [SPEAKER_02]: And then 50 billion

[00:17:35] [SPEAKER_02]: buyback switch.

[00:17:37] [SPEAKER_02]: That one I question.

[00:17:38] [SPEAKER_02]: I was chatting with

[00:17:39] [SPEAKER_02]: texting with Dan and I'm

[00:17:40] [SPEAKER_02]: like, why would they like

[00:17:42] [SPEAKER_02]: buy back 50 billion?

[00:17:43] [SPEAKER_02]: Honestly, like, why not

[00:17:45] [SPEAKER_02]: just issue a special

[00:17:46] [SPEAKER_02]: dividend at that point?

[00:17:48] [SPEAKER_02]: Like I just seeing the

[00:17:49] [SPEAKER_02]: valuation so high, like

[00:17:51] [SPEAKER_02]: it's hard to make a case

[00:17:52] [SPEAKER_02]: that these I mean,

[00:17:54] [SPEAKER_02]: it could happen, but I

[00:17:55] [SPEAKER_02]: think it's definitely

[00:17:57] [SPEAKER_02]: you know, a bit of riskier

[00:17:58] [SPEAKER_02]: in terms of thinking

[00:18:00] [SPEAKER_02]: they'll grow within that

[00:18:01] [SPEAKER_02]: valuation.

[00:18:02] [SPEAKER_02]: Whereas why not just pay

[00:18:03] [SPEAKER_02]: your shareholders and let

[00:18:04] [SPEAKER_02]: them do what they want

[00:18:05] [SPEAKER_02]: with that money?

[00:18:06] [SPEAKER_02]: But I mean, that's

[00:18:07] [SPEAKER_02]: that's me.

[00:18:08] [SPEAKER_01]: I'm looking at.

[00:18:09] [SPEAKER_01]: I'm looking at the

[00:18:10] [SPEAKER_01]: insider. I'm like, I'm

[00:18:11] [SPEAKER_01]: trying to see what Jensen

[00:18:12] [SPEAKER_01]: is doing with his own.

[00:18:13] [SPEAKER_02]: I think he's sold a bunch.

[00:18:15] [SPEAKER_01]: Yeah, yeah, I think

[00:18:16] [SPEAKER_01]: that's what I saw

[00:18:17] [SPEAKER_01]: because that's always what

[00:18:18] [SPEAKER_01]: I want to look at

[00:18:19] [SPEAKER_01]: if they're doing buybacks

[00:18:21] [SPEAKER_01]: at that price,

[00:18:23] [SPEAKER_01]: because the executives

[00:18:25] [SPEAKER_01]: will be like they'll

[00:18:28] [SPEAKER_01]: guide for growth.

[00:18:29] [SPEAKER_01]: But if they're like, guys,

[00:18:30] [SPEAKER_01]: I actually think that

[00:18:32] [SPEAKER_01]: these I think 50 percent

[00:18:33] [SPEAKER_01]: of data center revenues

[00:18:34] [SPEAKER_01]: coming from three customers.

[00:18:36] [SPEAKER_01]: Right.

[00:18:36] [SPEAKER_01]: Something like the

[00:18:37] [SPEAKER_01]: big the big cloud providers.

[00:18:39] [SPEAKER_01]: So I wonder if they're

[00:18:40] [SPEAKER_01]: like, you know, I can see

[00:18:42] [SPEAKER_01]: this happening for years

[00:18:43] [SPEAKER_01]: and years out for

[00:18:44] [SPEAKER_01]: than the market does right now.

[00:18:46] [SPEAKER_01]: Well, buy back stock.

[00:18:47] [SPEAKER_01]: But but he's he's selling

[00:18:48] [SPEAKER_01]: two hundred and forty

[00:18:49] [SPEAKER_01]: thousand shares

[00:18:52] [SPEAKER_01]: every few days.

[00:18:55] [SPEAKER_02]: And these big providers, too,

[00:18:56] [SPEAKER_02]: they have the resources

[00:18:58] [SPEAKER_02]: to kind of decide like,

[00:18:59] [SPEAKER_02]: you know what?

[00:19:00] [SPEAKER_02]: Like, why don't we

[00:19:01] [SPEAKER_02]: start looking at

[00:19:02] [SPEAKER_02]: potentially making

[00:19:03] [SPEAKER_02]: some of our own chips,

[00:19:04] [SPEAKER_02]: even if they're not as good

[00:19:06] [SPEAKER_02]: at long term, I mean,

[00:19:08] [SPEAKER_02]: it'll be worthwhile for us.

[00:19:09] [SPEAKER_02]: Like, I'm not saying

[00:19:10] [SPEAKER_02]: it would happen necessarily,

[00:19:12] [SPEAKER_02]: but they do have

[00:19:14] [SPEAKER_02]: the resources if they really

[00:19:15] [SPEAKER_02]: wanted to to start entering

[00:19:17] [SPEAKER_02]: that or at least,

[00:19:18] [SPEAKER_02]: you know, look at other solutions

[00:19:20] [SPEAKER_02]: that are more cost effective.

[00:19:24] [SPEAKER_01]: Jensen, of course,

[00:19:25] [SPEAKER_01]: this is insider data

[00:19:26] [SPEAKER_01]: from from FinChat.

[00:19:28] [SPEAKER_01]: The you go to the ownership

[00:19:29] [SPEAKER_01]: tab for the company

[00:19:30] [SPEAKER_01]: and then you go to trades.

[00:19:31] [SPEAKER_01]: And of course, there's always a

[00:19:33] [SPEAKER_01]: greater, a broader story

[00:19:34] [SPEAKER_01]: to be told about

[00:19:35] [SPEAKER_01]: insider transactions,

[00:19:36] [SPEAKER_01]: but just objectively

[00:19:37] [SPEAKER_01]: surface level here.

[00:19:39] [SPEAKER_01]: Jensen's offloading

[00:19:40] [SPEAKER_01]: about a million shares

[00:19:42] [SPEAKER_01]: every couple of weeks.

[00:19:45] [SPEAKER_02]: He's doing OK.

[00:19:46] [SPEAKER_01]: He's doing a million dollars

[00:19:47] [SPEAKER_01]: every couple of days

[00:19:48] [SPEAKER_01]: on the open market.

[00:19:49] [SPEAKER_01]: Mark Stevens,

[00:19:51] [SPEAKER_01]: who's one of the executives,

[00:19:54] [SPEAKER_01]: he did sold 156K

[00:19:56] [SPEAKER_01]: with the shares.

[00:19:57] [SPEAKER_01]: The executive VP

[00:19:58] [SPEAKER_01]: of operations sold a million bucks

[00:20:00] [SPEAKER_01]: or no 13 million bucks

[00:20:02] [SPEAKER_01]: with the shares.

[00:20:04] [SPEAKER_01]: 104 million from Mark Stevens

[00:20:08] [SPEAKER_01]: on late July.

[00:20:10] [SPEAKER_02]: Even if they believe

[00:20:11] [SPEAKER_02]: they still believe

[00:20:12] [SPEAKER_02]: in the future prospects

[00:20:14] [SPEAKER_02]: of the company,

[00:20:15] [SPEAKER_02]: they'd be stupid

[00:20:15] [SPEAKER_02]: not to sell some of their state

[00:20:17] [SPEAKER_02]: at least hedge a little bit

[00:20:20] [SPEAKER_02]: and diversify.

[00:20:21] [SPEAKER_02]: So I would say like

[00:20:22] [SPEAKER_02]: like you were saying,

[00:20:23] [SPEAKER_02]: like I think I wouldn't

[00:20:24] [SPEAKER_02]: put too much talk into that.

[00:20:26] [SPEAKER_02]: No pun intended.

[00:20:27] [SPEAKER_01]: No, they should.

[00:20:28] [SPEAKER_01]: I mean, the market cap's

[00:20:29] [SPEAKER_01]: three trillion dollars.

[00:20:30] [SPEAKER_01]: Like if you've grinded

[00:20:31] [SPEAKER_01]: your whole way to this business

[00:20:33] [SPEAKER_01]: work there as long as Jensen

[00:20:35] [SPEAKER_01]: has at the helm.

[00:20:36] [SPEAKER_01]: It's like if I'm not going to,

[00:20:38] [SPEAKER_01]: you know, line my pockets

[00:20:40] [SPEAKER_01]: at three at three trillion,

[00:20:42] [SPEAKER_01]: when am I like

[00:20:43] [SPEAKER_01]: you get a complete free pass.

[00:20:45] [SPEAKER_01]: It's more of a comment

[00:20:46] [SPEAKER_01]: around the stock buyback

[00:20:48] [SPEAKER_01]: versus insider moves.

[00:20:49] [SPEAKER_02]: Yeah, exactly.

[00:20:50] [SPEAKER_02]: But no, I think

[00:20:51] [SPEAKER_02]: and it's just a good reminder.

[00:20:53] [SPEAKER_02]: I just wanted to say that.

[00:20:54] [SPEAKER_02]: I think this is especially true

[00:20:56] [SPEAKER_02]: for obviously high

[00:20:57] [SPEAKER_02]: flying stocks like Nvidia

[00:20:59] [SPEAKER_02]: for the most part,

[00:21:00] [SPEAKER_02]: when you have a company

[00:21:01] [SPEAKER_02]: that that meets its forecasts

[00:21:04] [SPEAKER_02]: or goes on the higher end

[00:21:05] [SPEAKER_02]: of its range

[00:21:06] [SPEAKER_02]: when they do some guidance

[00:21:07] [SPEAKER_02]: and they release results.

[00:21:09] [SPEAKER_02]: Results will tend to do quite well,

[00:21:11] [SPEAKER_02]: assuming that they don't offer

[00:21:13] [SPEAKER_02]: guidance going forward.

[00:21:14] [SPEAKER_02]: That is really bad.

[00:21:15] [SPEAKER_02]: But, you know, at the end of the day,

[00:21:17] [SPEAKER_02]: when the valuations are high,

[00:21:19] [SPEAKER_02]: who knows where it goes.

[00:21:20] [SPEAKER_02]: So I think it was just

[00:21:22] [SPEAKER_02]: I decided to do that segment

[00:21:24] [SPEAKER_02]: because I saw the results

[00:21:25] [SPEAKER_02]: and then I saw the reaction

[00:21:26] [SPEAKER_02]: of the market and I was kind of

[00:21:29] [SPEAKER_02]: scratching my head a little bit.

[00:21:31] [SPEAKER_02]: Congrats to people

[00:21:31] [SPEAKER_01]: who listen to this podcast.

[00:21:32] [SPEAKER_01]: You have been long the stock.

[00:21:34] [SPEAKER_01]: Oh, yeah, congrats.

[00:21:35] [SPEAKER_01]: Well done.

[00:21:36] [SPEAKER_01]: Well done.

[00:21:37] [SPEAKER_01]: Hey, I own it through my index funds.

[00:21:39] [SPEAKER_02]: So that's that's how I.

[00:21:40] [SPEAKER_02]: Yeah, there you go.

[00:21:41] [SPEAKER_02]: Exactly.

[00:21:42] [SPEAKER_01]: No, seriously, well done.

[00:21:43] [SPEAKER_01]: I mean, this is the most wild

[00:21:47] [SPEAKER_01]: growth of a particular

[00:21:48] [SPEAKER_01]: segment, a.k.a.

[00:21:49] [SPEAKER_01]: the data center build out

[00:21:51] [SPEAKER_01]: right place, right time,

[00:21:53] [SPEAKER_01]: the demand for their hoppers

[00:21:56] [SPEAKER_01]: and like people building up

[00:21:57] [SPEAKER_01]: these obscene

[00:22:00] [SPEAKER_01]: amounts of super clusters

[00:22:01] [SPEAKER_01]: and data centers.

[00:22:02] [SPEAKER_01]: It's like, wow, good for you guys.

[00:22:05] [SPEAKER_01]: 78 percent gross margins

[00:22:07] [SPEAKER_01]: on H100s.

[00:22:09] [SPEAKER_01]: Unbelievable.

[00:22:09] [SPEAKER_01]: Pretty good. Yeah.

[00:22:11] [SPEAKER_01]: All right, let's move on to

[00:22:13] [SPEAKER_01]: stocks on our watchlist

[00:22:15] [SPEAKER_01]: presented by our friends, EQ Bank.

[00:22:17] [SPEAKER_01]: You and I both have one here

[00:22:21] [SPEAKER_01]: and I have a Canadian

[00:22:23] [SPEAKER_01]: stock that I've actually

[00:22:25] [SPEAKER_01]: owned for years and years,

[00:22:28] [SPEAKER_01]: which is uncommon to

[00:22:30] [SPEAKER_01]: show up in this segment.

[00:22:31] [SPEAKER_01]: Usually I'm turning over

[00:22:33] [SPEAKER_01]: some new stone, you know,

[00:22:35] [SPEAKER_01]: trying to flip over some new leaves

[00:22:36] [SPEAKER_01]: with some some new ideas

[00:22:38] [SPEAKER_01]: that I've never heard of.

[00:22:39] [SPEAKER_01]: But this one has just been sitting

[00:22:40] [SPEAKER_01]: in my portfolio

[00:22:43] [SPEAKER_01]: right in high.

[00:22:44] [SPEAKER_01]: I don't know if you've seen the chart

[00:22:45] [SPEAKER_01]: on WSP Global.

[00:22:47] [SPEAKER_02]: I know it's done well.

[00:22:47] [SPEAKER_02]: I haven't looked at it

[00:22:48] [SPEAKER_02]: in a few months, so I'm assuming

[00:22:50] [SPEAKER_02]: it just continued.

[00:22:51] [SPEAKER_01]: The chart is unbelievable,

[00:22:54] [SPEAKER_01]: you know, and that's not why

[00:22:55] [SPEAKER_01]: I hold names, but it's

[00:22:57] [SPEAKER_01]: it is sure nice to look at.

[00:22:59] [SPEAKER_02]: That's the one I'll talk about

[00:23:00] [SPEAKER_02]: is not Canadian.

[00:23:01] [SPEAKER_02]: We have not talked about it

[00:23:02] [SPEAKER_02]: on the podcast and it

[00:23:04] [SPEAKER_02]: is performed quite well as well.

[00:23:08] [SPEAKER_01]: Nice.

[00:23:09] [SPEAKER_01]: So the reason it's

[00:23:10] [SPEAKER_01]: on my radar today

[00:23:12] [SPEAKER_01]: as a shareholder of something

[00:23:14] [SPEAKER_01]: to potentially add to

[00:23:16] [SPEAKER_01]: because, look, I haven't added

[00:23:17] [SPEAKER_01]: to it, I think, since 2018,

[00:23:19] [SPEAKER_01]: but I've never sold a share.

[00:23:20] [SPEAKER_01]: I've just let it ride.

[00:23:21] [SPEAKER_01]: It's on my radar again

[00:23:23] [SPEAKER_01]: because

[00:23:25] [SPEAKER_01]: I was just looking through

[00:23:26] [SPEAKER_01]: the global acquisition targets

[00:23:28] [SPEAKER_01]: that they have been

[00:23:31] [SPEAKER_01]: talking about and that they've

[00:23:33] [SPEAKER_01]: been buying.

[00:23:35] [SPEAKER_01]: So earlier in their history,

[00:23:37] [SPEAKER_01]: like when I was a shareholder,

[00:23:39] [SPEAKER_01]: there this was the list of their

[00:23:42] [SPEAKER_01]: acquisitions of that year.

[00:23:44] [SPEAKER_01]: Canada, Canada, Canada,

[00:23:45] [SPEAKER_01]: Canada, Canada, Sweden,

[00:23:48] [SPEAKER_01]: Finland, UK, Canada,

[00:23:50] [SPEAKER_01]: Canada, Canada, Canada.

[00:23:52] [SPEAKER_01]: OK, that was the acquisition

[00:23:54] [SPEAKER_01]: targets a lot in Quebec,

[00:23:56] [SPEAKER_01]: a fair bit in Ontario

[00:23:57] [SPEAKER_01]: as they build out this

[00:23:58] [SPEAKER_01]: like multidisciplinary

[00:23:59] [SPEAKER_01]: engineering.

[00:24:00] [SPEAKER_02]: Canada's of Europe with Sweden

[00:24:01] [SPEAKER_02]: and Finland.

[00:24:03] [SPEAKER_01]: OK, exactly.

[00:24:04] [SPEAKER_01]: The candidates of Europe.

[00:24:06] [SPEAKER_01]: This is their last

[00:24:07] [SPEAKER_01]: ten ish.

[00:24:09] [SPEAKER_01]: Spain, US, Finland,

[00:24:12] [SPEAKER_01]: Canada, Australia,

[00:24:13] [SPEAKER_01]: Switzerland, US again, UK,

[00:24:15] [SPEAKER_01]: Australia, Canada, USA,

[00:24:18] [SPEAKER_01]: USA, USA, Switzerland.

[00:24:21] [SPEAKER_01]: So the mix

[00:24:23] [SPEAKER_01]: in their execution

[00:24:26] [SPEAKER_01]: strategy of look, hey,

[00:24:28] [SPEAKER_01]: we did a lot in North American

[00:24:29] [SPEAKER_01]: acquisitions as we bolstered out

[00:24:31] [SPEAKER_01]: this multidisciplinary firm

[00:24:32] [SPEAKER_01]: in North America,

[00:24:34] [SPEAKER_01]: but we got targets

[00:24:36] [SPEAKER_01]: all around the world, folks.

[00:24:38] [SPEAKER_01]: And when when they say that,

[00:24:41] [SPEAKER_01]: I'm like, OK, I'm interested.

[00:24:43] [SPEAKER_01]: When they execute on it,

[00:24:45] [SPEAKER_01]: I'm financially very interested.

[00:24:47] [SPEAKER_01]: And so I like roll ups

[00:24:50] [SPEAKER_01]: when there's when they're done

[00:24:52] [SPEAKER_01]: by really smart capital

[00:24:53] [SPEAKER_01]: allocators, which which

[00:24:54] [SPEAKER_01]: I believe that they are.

[00:24:56] [SPEAKER_01]: But I like when they have

[00:24:59] [SPEAKER_01]: opportunities outside

[00:25:01] [SPEAKER_01]: of North America.

[00:25:02] [SPEAKER_01]: It's why I've been

[00:25:03] [SPEAKER_01]: I've praised Canadian

[00:25:06] [SPEAKER_01]: stocks like Waste Connections

[00:25:07] [SPEAKER_01]: and Dollarama, because look,

[00:25:10] [SPEAKER_01]: I get it what, you know,

[00:25:12] [SPEAKER_01]: what Waste Connections is done

[00:25:13] [SPEAKER_01]: and what they're going

[00:25:13] [SPEAKER_01]: to continue to do in North America

[00:25:15] [SPEAKER_01]: with rolling up

[00:25:16] [SPEAKER_01]: garbage collection.

[00:25:18] [SPEAKER_01]: Fantastic.

[00:25:19] [SPEAKER_01]: But I want exposure

[00:25:21] [SPEAKER_01]: to potentially 50,

[00:25:23] [SPEAKER_01]: 60,000 targets,

[00:25:25] [SPEAKER_01]: not 300, 400 targets.

[00:25:27] [SPEAKER_01]: That's a materially

[00:25:28] [SPEAKER_01]: different runway.

[00:25:29] [SPEAKER_01]: And so I'm very interested

[00:25:31] [SPEAKER_01]: in what they've opened up

[00:25:32] [SPEAKER_01]: here around the world

[00:25:33] [SPEAKER_01]: as WSP Global

[00:25:35] [SPEAKER_01]: in the name Global has suggested.

[00:25:36] [SPEAKER_01]: So that's number one.

[00:25:38] [SPEAKER_01]: And number two, their.

[00:25:42] [SPEAKER_01]: Organic revenue growth

[00:25:44] [SPEAKER_01]: has far, far surpassed

[00:25:46] [SPEAKER_01]: my expectations

[00:25:47] [SPEAKER_01]: with these types of companies

[00:25:49] [SPEAKER_01]: you can kind of expect

[00:25:51] [SPEAKER_01]: anywhere from zero to four percent

[00:25:55] [SPEAKER_01]: inflation hikes in

[00:25:57] [SPEAKER_01]: in organic growth over time.

[00:26:00] [SPEAKER_01]: And yes, of course,

[00:26:01] [SPEAKER_01]: you're going to see a bit

[00:26:02] [SPEAKER_01]: of inflationary price

[00:26:03] [SPEAKER_01]: growth in these numbers.

[00:26:05] [SPEAKER_01]: But overall, it has persisted

[00:26:08] [SPEAKER_01]: for years way beyond

[00:26:10] [SPEAKER_01]: my expectations, even before

[00:26:11] [SPEAKER_01]: we saw a lot of inflation

[00:26:13] [SPEAKER_01]: in the global economy.

[00:26:14] [SPEAKER_01]: We're organic net

[00:26:16] [SPEAKER_01]: revenue growth has been over

[00:26:18] [SPEAKER_01]: eight percent for many,

[00:26:20] [SPEAKER_01]: many quarters in a row.

[00:26:22] [SPEAKER_01]: Twelve percent, nine percent.

[00:26:24] [SPEAKER_01]: Of course, there was some contraction

[00:26:25] [SPEAKER_01]: when things were shut down in 2020,

[00:26:28] [SPEAKER_01]: but not too bad.

[00:26:30] [SPEAKER_01]: And the backlogs

[00:26:32] [SPEAKER_01]: grown from eight billion

[00:26:34] [SPEAKER_01]: to 14.7 billion.

[00:26:37] [SPEAKER_01]: Just since December 2019

[00:26:39] [SPEAKER_01]: ending quarter.

[00:26:41] [SPEAKER_01]: So the growth,

[00:26:42] [SPEAKER_01]: the opportunities globally

[00:26:44] [SPEAKER_01]: and the organic growth

[00:26:45] [SPEAKER_01]: have far surpassed my expectations.

[00:26:47] [SPEAKER_01]: I like to reward winners.

[00:26:48] [SPEAKER_01]: I think it deserves

[00:26:49] [SPEAKER_01]: another look here.

[00:26:51] [SPEAKER_02]: Yeah, I mean, I mostly

[00:26:53] [SPEAKER_02]: listen to you to know

[00:26:54] [SPEAKER_02]: about that company.

[00:26:56] [SPEAKER_02]: It's also an area

[00:26:58] [SPEAKER_02]: I think that you understand

[00:26:59] [SPEAKER_02]: a bit better than I do,

[00:27:01] [SPEAKER_02]: but definitely wished

[00:27:02] [SPEAKER_02]: I would I would have bought it

[00:27:04] [SPEAKER_02]: when you brought it to my attention

[00:27:06] [SPEAKER_02]: a while back.

[00:27:07] [SPEAKER_01]: It's pretty it's fairly

[00:27:08] [SPEAKER_01]: easy to understand

[00:27:09] [SPEAKER_01]: in the fact that it's a services

[00:27:12] [SPEAKER_01]: conglomerate like a censure,

[00:27:14] [SPEAKER_01]: like a CGI,

[00:27:15] [SPEAKER_01]: but specifically for civil

[00:27:17] [SPEAKER_01]: engineering applications.

[00:27:19] [SPEAKER_02]: That's fair.

[00:27:20] [SPEAKER_02]: Yeah, pretty.

[00:27:21] [SPEAKER_02]: I just don't understand

[00:27:22] [SPEAKER_02]: the civil engineering part.

[00:27:24] [SPEAKER_02]: And so I mean, that's it.

[00:27:26] [SPEAKER_01]: I used to know a little bit better

[00:27:28] [SPEAKER_01]: in my days of static

[00:27:30] [SPEAKER_01]: and static mechanics

[00:27:31] [SPEAKER_01]: and fluid dynamics.

[00:27:32] [SPEAKER_01]: But hey, I understand it enough.

[00:27:34] [SPEAKER_01]: And I think that it's

[00:27:35] [SPEAKER_01]: a fairly easy business

[00:27:36] [SPEAKER_01]: to understand in terms of the numbers

[00:27:38] [SPEAKER_01]: and the financials.

[00:27:40] [SPEAKER_02]: That's good.

[00:27:42] [SPEAKER_02]: Speaking of businesses

[00:27:43] [SPEAKER_02]: that I don't fully understand

[00:27:44] [SPEAKER_02]: just yet, Schneider

[00:27:46] [SPEAKER_02]: Electric is the

[00:27:47] [SPEAKER_02]: the one on my watch list.

[00:27:49] [SPEAKER_02]: It's a company I've heard of before.

[00:27:51] [SPEAKER_02]: I'm sure you have.

[00:27:52] [SPEAKER_02]: Right, Schneider Electric.

[00:27:53] [SPEAKER_02]: Definitely.

[00:27:53] [SPEAKER_02]: Yeah.

[00:27:54] [SPEAKER_02]: So for those not familiar,

[00:27:55] [SPEAKER_02]: it's just a global company

[00:27:56] [SPEAKER_02]: that specialize in

[00:27:58] [SPEAKER_02]: in energy management

[00:27:59] [SPEAKER_02]: and automation solutions.

[00:28:02] [SPEAKER_02]: Their primary focus

[00:28:03] [SPEAKER_02]: is on making energy safer,

[00:28:05] [SPEAKER_02]: more reliable, efficient

[00:28:06] [SPEAKER_02]: and sustainable

[00:28:07] [SPEAKER_02]: for a wide range of industries.

[00:28:09] [SPEAKER_02]: That includes buildings,

[00:28:11] [SPEAKER_02]: data center, infrastructure,

[00:28:13] [SPEAKER_02]: specifically also

[00:28:15] [SPEAKER_02]: electrical grid infrastructure

[00:28:16] [SPEAKER_02]: and industrial sectors.

[00:28:18] [SPEAKER_02]: It is a company that's listed

[00:28:20] [SPEAKER_02]: in Paghees Stock Exchange.

[00:28:22] [SPEAKER_02]: So under the ticker S E

[00:28:25] [SPEAKER_02]: and you can also buy it

[00:28:27] [SPEAKER_02]: over the counter in North America

[00:28:28] [SPEAKER_02]: under ticker SBGSF.

[00:28:31] [SPEAKER_02]: It may be a bit difficult for some

[00:28:32] [SPEAKER_02]: to buy the actual

[00:28:34] [SPEAKER_02]: kind of Paghees listed shares.

[00:28:37] [SPEAKER_01]: I think the Paris

[00:28:39] [SPEAKER_01]: listing is S U, by the way.

[00:28:42] [SPEAKER_02]: Oh, yeah, you're right.

[00:28:43] [SPEAKER_02]: It's S U.

[00:28:43] [SPEAKER_02]: Yeah, it is S U.

[00:28:44] [SPEAKER_02]: Sorry about that.

[00:28:45] [SPEAKER_02]: So it is S U because I had put P A

[00:28:47] [SPEAKER_02]: but I'm like, no,

[00:28:48] [SPEAKER_02]: that's the symbol for Paghees.

[00:28:49] [SPEAKER_02]: Because these European companies,

[00:28:51] [SPEAKER_01]: they always have like

[00:28:52] [SPEAKER_01]: Schneider Electric S E

[00:28:53] [SPEAKER_01]: is the name of the corporation.

[00:28:54] [SPEAKER_02]: That's right.

[00:28:55] [SPEAKER_02]: So you're right.

[00:28:56] [SPEAKER_02]: It's S U.

[00:28:57] [SPEAKER_02]: I listed on the Paghees Exchange

[00:28:58] [SPEAKER_02]: and then again, you can buy it

[00:29:00] [SPEAKER_02]: over the counter as well.

[00:29:01] [SPEAKER_02]: Over the counter is fine

[00:29:02] [SPEAKER_02]: when it's you see that

[00:29:03] [SPEAKER_02]: pretty often, right?

[00:29:05] [SPEAKER_02]: For companies that are listed in Europe,

[00:29:07] [SPEAKER_02]: they may not have a listing

[00:29:09] [SPEAKER_02]: in North America

[00:29:09] [SPEAKER_02]: on one of the main exchanges.

[00:29:11] [SPEAKER_02]: They'll have it over the counter,

[00:29:13] [SPEAKER_02]: whereas obviously over

[00:29:14] [SPEAKER_02]: the counter pink sheets

[00:29:16] [SPEAKER_02]: can be riskier

[00:29:17] [SPEAKER_02]: if you're looking at a company

[00:29:18] [SPEAKER_02]: that's solely listed there.

[00:29:20] [SPEAKER_02]: That's where it gets a real

[00:29:21] [SPEAKER_02]: a bit trickier

[00:29:22] [SPEAKER_02]: because then there's

[00:29:23] [SPEAKER_02]: oftentimes not that much liquidity.

[00:29:25] [SPEAKER_02]: You know, it could be also companies

[00:29:27] [SPEAKER_02]: that are just smaller

[00:29:28] [SPEAKER_02]: that don't want to get listed.

[00:29:30] [SPEAKER_02]: So you just have to keep that in mind.

[00:29:32] [SPEAKER_02]: Doesn't mean that it's listed on OTC

[00:29:34] [SPEAKER_02]: that it is necessarily risky.

[00:29:36] [SPEAKER_02]: It's not, you know,

[00:29:37] [SPEAKER_02]: it's not just apples and oranges

[00:29:39] [SPEAKER_02]: or just one kind of company.

[00:29:41] [SPEAKER_02]: So I just wanted to mention that.

[00:29:43] [SPEAKER_02]: So Schneider Electric could benefit

[00:29:45] [SPEAKER_02]: or should benefit

[00:29:46] [SPEAKER_02]: from structural trends going forward,

[00:29:48] [SPEAKER_02]: like the expansion of the electoral grid

[00:29:49] [SPEAKER_02]: and continued automation.

[00:29:51] [SPEAKER_02]: Like I mentioned,

[00:29:52] [SPEAKER_02]: it's a business that I'm still

[00:29:54] [SPEAKER_02]: definitely learning.

[00:29:55] [SPEAKER_02]: Like I said,

[00:29:56] [SPEAKER_02]: I've started to read up on it.

[00:29:58] [SPEAKER_02]: It is something that's a little bit

[00:30:00] [SPEAKER_02]: outside of my circle of competent

[00:30:02] [SPEAKER_02]: in some of the technological

[00:30:05] [SPEAKER_02]: aspect of it,

[00:30:06] [SPEAKER_02]: but I still think I understand

[00:30:07] [SPEAKER_02]: the general idea around it.

[00:30:10] [SPEAKER_02]: So some of the examples of products

[00:30:12] [SPEAKER_02]: that they produce are

[00:30:13] [SPEAKER_02]: transformers, switchboards,

[00:30:15] [SPEAKER_02]: power meters, cooling racks

[00:30:16] [SPEAKER_02]: for data centers.

[00:30:18] [SPEAKER_02]: They have slew of different options

[00:30:19] [SPEAKER_02]: for industrial automation.

[00:30:21] [SPEAKER_02]: I was like browsing

[00:30:21] [SPEAKER_02]: on their site as well.

[00:30:23] [SPEAKER_02]: They'll implement

[00:30:24] [SPEAKER_02]: and install those solutions.

[00:30:26] [SPEAKER_02]: They'll offer modernization services

[00:30:29] [SPEAKER_02]: for those kind of companies

[00:30:31] [SPEAKER_02]: that would have like older

[00:30:32] [SPEAKER_02]: systems in place.

[00:30:33] [SPEAKER_02]: They can operate them

[00:30:35] [SPEAKER_02]: or manage them

[00:30:36] [SPEAKER_02]: or even support the maintenance of them.

[00:30:38] [SPEAKER_02]: So and the last thing,

[00:30:39] [SPEAKER_02]: they do have some training available

[00:30:41] [SPEAKER_02]: in terms of the actual number.

[00:30:43] [SPEAKER_02]: That's where it gets really interesting.

[00:30:45] [SPEAKER_02]: First of all, it's not going to be

[00:30:47] [SPEAKER_02]: like a super high growth company.

[00:30:48] [SPEAKER_02]: It's a pretty mature company,

[00:30:50] [SPEAKER_02]: but I think it's a very interesting play.

[00:30:52] [SPEAKER_02]: We talked about data centers, for example,

[00:30:55] [SPEAKER_02]: like they could be a beneficiary of that

[00:30:57] [SPEAKER_02]: because one thing that we've talked about

[00:31:00] [SPEAKER_02]: and if you've been reading

[00:31:01] [SPEAKER_02]: a bit more on data centers

[00:31:02] [SPEAKER_02]: is we're going to need

[00:31:03] [SPEAKER_02]: a whole lot of power

[00:31:05] [SPEAKER_02]: to power those data center.

[00:31:07] [SPEAKER_02]: And Schneider Electric

[00:31:08] [SPEAKER_02]: can definitely be a company

[00:31:10] [SPEAKER_02]: that will benefit from that.

[00:31:12] [SPEAKER_01]: This Honeywell,

[00:31:14] [SPEAKER_01]: those types of huge building automation

[00:31:16] [SPEAKER_01]: and what I'll just call like

[00:31:17] [SPEAKER_01]: electrical engineering companies

[00:31:21] [SPEAKER_01]: are going to catch a bid here

[00:31:24] [SPEAKER_01]: if they haven't already.

[00:31:25] [SPEAKER_01]: It looks like they all have already.

[00:31:28] [SPEAKER_01]: The backlog has grown from,

[00:31:30] [SPEAKER_01]: I was just while you were talking,

[00:31:31] [SPEAKER_01]: the backlog has grown from

[00:31:33] [SPEAKER_01]: 6 billion to 15.4 billion

[00:31:36] [SPEAKER_01]: in just five years.

[00:31:38] [SPEAKER_02]: Well, it's actually 19.2

[00:31:40] [SPEAKER_02]: when I read their most recent statement

[00:31:43] [SPEAKER_02]: because I think you're talking about

[00:31:44] [SPEAKER_02]: just one of their segments.

[00:31:45] [SPEAKER_01]: I pulled up just the energy management backlog.

[00:31:48] [SPEAKER_01]: That's what I figured.

[00:31:49] [SPEAKER_01]: Because the industrial automation segment

[00:31:51] [SPEAKER_01]: does not grow nearly as fast.

[00:31:54] [SPEAKER_02]: No, but yeah, no,

[00:31:55] [SPEAKER_02]: when you mentioned that

[00:31:56] [SPEAKER_02]: I kind of knew what you were looking at.

[00:31:58] [SPEAKER_02]: So that's why.

[00:31:59] [SPEAKER_02]: So the market cap,

[00:32:00] [SPEAKER_02]: like I said, it's not a small company,

[00:32:01] [SPEAKER_02]: 127 billion in Euro.

[00:32:04] [SPEAKER_02]: They had sales of 36 billion

[00:32:06] [SPEAKER_02]: in the trailing 12 months.

[00:32:08] [SPEAKER_02]: Sales have grown at 6% on an annual basis

[00:32:11] [SPEAKER_02]: over the last five years.

[00:32:13] [SPEAKER_02]: The energy management segment

[00:32:14] [SPEAKER_02]: represents about 80% of their business

[00:32:17] [SPEAKER_02]: while automation is 20%.

[00:32:19] [SPEAKER_02]: So clearly again here,

[00:32:20] [SPEAKER_02]: energy management is the biggest part

[00:32:23] [SPEAKER_02]: of their business.

[00:32:24] [SPEAKER_02]: They had a backlog like you mentioned

[00:32:26] [SPEAKER_02]: of well 15 for the energy management

[00:32:29] [SPEAKER_02]: and then 19.2 total at the end of 2023.

[00:32:34] [SPEAKER_02]: Net income was 3.9 billion

[00:32:36] [SPEAKER_02]: over the last 12 months

[00:32:37] [SPEAKER_02]: and has grown at 11% on an annual basis

[00:32:40] [SPEAKER_02]: over the last five years.

[00:32:42] [SPEAKER_02]: They generated tons of free cash

[00:32:44] [SPEAKER_02]: over 5 billion over the last 12 months

[00:32:47] [SPEAKER_02]: and free cash flow has grown at 7% per year again

[00:32:50] [SPEAKER_02]: over the last five years.

[00:32:53] [SPEAKER_02]: And free cash flow per share

[00:32:54] [SPEAKER_02]: has grown at the same pace here

[00:32:56] [SPEAKER_02]: over the last five year at 7%,

[00:32:59] [SPEAKER_02]: which you can probably figure out

[00:33:01] [SPEAKER_02]: that the share count has stayed pretty stable.

[00:33:04] [SPEAKER_02]: It has, so they haven't,

[00:33:06] [SPEAKER_02]: it's barely moved.

[00:33:07] [SPEAKER_02]: It increased at 0.36%

[00:33:10] [SPEAKER_02]: over that same time span.

[00:33:12] [SPEAKER_02]: And in terms of gross margins

[00:33:15] [SPEAKER_02]: and operating margin,

[00:33:17] [SPEAKER_02]: that's where I think it gets really interesting.

[00:33:19] [SPEAKER_02]: Those margins have actually steadily increased

[00:33:23] [SPEAKER_02]: over the last however long you wanna look,

[00:33:27] [SPEAKER_02]: but for Joint TCI viewers here,

[00:33:28] [SPEAKER_02]: you'll see that these margins are steadily increasing

[00:33:32] [SPEAKER_02]: over the last 10 years, five years,

[00:33:35] [SPEAKER_02]: whatever timeframe you're looking at.

[00:33:36] [SPEAKER_02]: The only ones that are a bit lumpier

[00:33:38] [SPEAKER_02]: and that's pretty normal

[00:33:39] [SPEAKER_02]: is the free cash flow margin,

[00:33:41] [SPEAKER_02]: but you're looking at gross margins

[00:33:43] [SPEAKER_02]: are around 42%.

[00:33:45] [SPEAKER_02]: You're looking at operating margins

[00:33:47] [SPEAKER_02]: of around 16, closing in on 17%.

[00:33:51] [SPEAKER_02]: And the most recent free cash flow margins

[00:33:54] [SPEAKER_02]: are around 13.9%,

[00:33:57] [SPEAKER_02]: but that's probably a bit more on the high end.

[00:33:59] [SPEAKER_02]: You probably should expect around 11, 12% here for them.

[00:34:04] [SPEAKER_02]: So that is pretty impressive from that standpoint.

[00:34:07] [SPEAKER_02]: Anything you wanna mention here on the margins

[00:34:09] [SPEAKER_02]: before I finish up?

[00:34:10] [SPEAKER_01]: No, nothing on the margins.

[00:34:12] [SPEAKER_01]: Just a quick comment about these types of companies.

[00:34:15] [SPEAKER_01]: The only challenge I have with them

[00:34:18] [SPEAKER_01]: is the skews and products that they sell

[00:34:24] [SPEAKER_01]: is so expansive that it's really, really difficult

[00:34:28] [SPEAKER_01]: to understand the business

[00:34:31] [SPEAKER_01]: in terms of where they have key advantages

[00:34:33] [SPEAKER_01]: over competitors or why people are choosing Snyder

[00:34:36] [SPEAKER_01]: over someone else in certain verticals.

[00:34:40] [SPEAKER_01]: And there's so many different products

[00:34:43] [SPEAKER_01]: that you have to kind of figure out

[00:34:45] [SPEAKER_01]: which ones you think are important

[00:34:47] [SPEAKER_01]: to the thesis moving forward.

[00:34:48] [SPEAKER_01]: And if you can try to figure out

[00:34:50] [SPEAKER_01]: where is the flagship product demand coming from right now?

[00:34:56] [SPEAKER_01]: Is it the data centers?

[00:34:57] [SPEAKER_01]: Is it something else?

[00:34:59] [SPEAKER_01]: Is it a build out of photovoltaic systems?

[00:35:03] [SPEAKER_01]: Those are the things I'd wanna really understand.

[00:35:05] [SPEAKER_02]: Yeah, and that's a great point

[00:35:06] [SPEAKER_02]: because even with those two big segments that I mentioned,

[00:35:09] [SPEAKER_02]: so you have energy management and automation,

[00:35:13] [SPEAKER_02]: I mean, that's a big bucket right there.

[00:35:16] [SPEAKER_02]: That's a big bucket of solution.

[00:35:18] [SPEAKER_02]: I was just browsing on the website trying to understand

[00:35:21] [SPEAKER_02]: and that's a great point.

[00:35:23] [SPEAKER_02]: That's why I was saying a company

[00:35:25] [SPEAKER_02]: that I don't know super well

[00:35:26] [SPEAKER_02]: because I did find that there was a lot of information

[00:35:29] [SPEAKER_02]: and something I'll have to research more and more

[00:35:32] [SPEAKER_02]: to probably identify maybe some key,

[00:35:35] [SPEAKER_02]: like maybe a handful of key products

[00:35:38] [SPEAKER_02]: that are really some growth vectors for them going forward

[00:35:41] [SPEAKER_02]: because they do have a whole lot.

[00:35:43] [SPEAKER_02]: And if you're not specialized in this kind of sector

[00:35:47] [SPEAKER_02]: with your job, for example,

[00:35:48] [SPEAKER_02]: it may be a bit more difficult and that's where I stand.

[00:35:51] [SPEAKER_02]: So there's still some more research

[00:35:52] [SPEAKER_02]: and that's why it's on my watch list.

[00:35:54] [SPEAKER_02]: In terms of the debt,

[00:35:56] [SPEAKER_02]: I mean, they have 7 billion in net debt.

[00:35:58] [SPEAKER_02]: However, it's really manageable.

[00:35:59] [SPEAKER_02]: They have EBITDA ratio,

[00:36:02] [SPEAKER_02]: a net debt to EBITDA ratio of 1.6.

[00:36:04] [SPEAKER_02]: So that's essentially just how much EBITDA would it take,

[00:36:08] [SPEAKER_02]: how many years would it takes in terms of EBITDA

[00:36:10] [SPEAKER_02]: to repay that debt.

[00:36:11] [SPEAKER_02]: So it would be 1.6 years.

[00:36:14] [SPEAKER_02]: So very manageable.

[00:36:16] [SPEAKER_02]: It's nothing out of the ordinary interest expense though

[00:36:20] [SPEAKER_02]: has jumped 164 million

[00:36:22] [SPEAKER_02]: from 164 million to 423 in 2023,

[00:36:28] [SPEAKER_02]: which is likely because they,

[00:36:31] [SPEAKER_02]: I would have to say they probably refinance

[00:36:33] [SPEAKER_02]: a big chunk of their debt would be my guess.

[00:36:36] [SPEAKER_02]: It could have been variable debt,

[00:36:37] [SPEAKER_02]: but based on the timing,

[00:36:39] [SPEAKER_02]: it's probably just a refinancing that happened.

[00:36:42] [SPEAKER_02]: I mean, they can pay that.

[00:36:44] [SPEAKER_02]: They're more than able to pay that.

[00:36:46] [SPEAKER_02]: So it's not a big issue,

[00:36:47] [SPEAKER_02]: but definitely something I wanna understand

[00:36:49] [SPEAKER_02]: the reason for that

[00:36:50] [SPEAKER_02]: by looking at their financial statement, the footnotes.

[00:36:53] [SPEAKER_02]: I know if you're interested in this company,

[00:36:55] [SPEAKER_02]: it'll be pretty easy to figure out

[00:36:57] [SPEAKER_02]: if you look at those footnotes.

[00:36:59] [SPEAKER_02]: They do pay a dividend that's currently yielding 1.5%.

[00:37:02] [SPEAKER_02]: The dividend is about 40% of free cash flow

[00:37:05] [SPEAKER_02]: they generate currently.

[00:37:07] [SPEAKER_02]: So more than sustainable here, not an issue.

[00:37:10] [SPEAKER_02]: And it's always been a relatively low payout ratio

[00:37:13] [SPEAKER_02]: for their dividend.

[00:37:14] [SPEAKER_02]: It has grown 8% over the last five years

[00:37:17] [SPEAKER_02]: on an annual basis.

[00:37:19] [SPEAKER_02]: So for those dividend investors

[00:37:21] [SPEAKER_02]: that like growing dividends,

[00:37:23] [SPEAKER_02]: this is definitely a company that grows its dividend.

[00:37:27] [SPEAKER_02]: Although I would caution people to keep in mind

[00:37:31] [SPEAKER_02]: that they publish in euros.

[00:37:35] [SPEAKER_02]: I'm sure they get revenues around the world.

[00:37:37] [SPEAKER_02]: So obviously currency will affect

[00:37:39] [SPEAKER_02]: some of their revenues based on that,

[00:37:40] [SPEAKER_02]: but the dividend is paid in euros.

[00:37:42] [SPEAKER_02]: So keep that in mind as the euro fluctuates

[00:37:45] [SPEAKER_02]: compared to the Canadian dollar,

[00:37:47] [SPEAKER_02]: it will probably not be exactly the same

[00:37:51] [SPEAKER_02]: as the potential dividend increase that they would give.

[00:37:53] [SPEAKER_02]: So keep that in mind.

[00:37:55] [SPEAKER_02]: And the company has just like,

[00:37:57] [SPEAKER_02]: it's just crushed to be honest

[00:38:00] [SPEAKER_02]: in terms of the total returns.

[00:38:02] [SPEAKER_02]: So the last five years,

[00:38:04] [SPEAKER_02]: they had total returns of 242% versus 106%

[00:38:09] [SPEAKER_02]: for the S&P 500.

[00:38:11] [SPEAKER_02]: So for a company that's as mature as them,

[00:38:14] [SPEAKER_02]: I mean still growing for sure.

[00:38:16] [SPEAKER_02]: So people looking here,

[00:38:17] [SPEAKER_02]: they'll see the difference between the two.

[00:38:19] [SPEAKER_02]: But I mean, the returns over the last five years,

[00:38:23] [SPEAKER_02]: really, really impressive.

[00:38:25] [SPEAKER_02]: So don't know if it'll continue

[00:38:27] [SPEAKER_02]: and in terms of valuation,

[00:38:29] [SPEAKER_02]: it's definitely not on the cheap side I would say.

[00:38:32] [SPEAKER_02]: So they currently have a P ratio of about 25

[00:38:38] [SPEAKER_02]: on a forward looking basis

[00:38:40] [SPEAKER_02]: and price of free cash flow of 27.

[00:38:43] [SPEAKER_02]: On the higher side,

[00:38:45] [SPEAKER_02]: I would say historically if you can get this company

[00:38:48] [SPEAKER_02]: trading around like in the low 20s

[00:38:50] [SPEAKER_02]: for each of these ratios,

[00:38:52] [SPEAKER_02]: you're probably getting a decent valuation,

[00:38:55] [SPEAKER_02]: a decent deal.

[00:38:56] [SPEAKER_02]: But right now it's probably more of a kind of wait and see,

[00:39:00] [SPEAKER_02]: wait till the valuation gets a bit better.

[00:39:03] [SPEAKER_02]: That's the way I would approach it

[00:39:04] [SPEAKER_02]: if I knew the company better and everything checks out.

[00:39:08] [SPEAKER_02]: But yeah, the valuation is a little bit high here.

[00:39:10] [SPEAKER_01]: I'm just looking at their slide from the latest Q2,

[00:39:14] [SPEAKER_01]: key innovation on products for the year.

[00:39:18] [SPEAKER_01]: The Altivar Starter,

[00:39:20] [SPEAKER_01]: the EcoPact,

[00:39:22] [SPEAKER_01]: the MasterPacti MTZ,

[00:39:24] [SPEAKER_01]: the Airset,

[00:39:26] [SPEAKER_01]: and then a bunch of different software products.

[00:39:29] [SPEAKER_01]: So it gives me two thoughts.

[00:39:30] [SPEAKER_01]: One, I like that there's a combination

[00:39:33] [SPEAKER_01]: between hardware and software happening here

[00:39:35] [SPEAKER_01]: that really strengthens the stickiness of the revenue

[00:39:38] [SPEAKER_01]: without question.

[00:39:39] [SPEAKER_01]: And then my second thought here is

[00:39:41] [SPEAKER_01]: to get confidence in this company,

[00:39:44] [SPEAKER_01]: phone, use a love line.

[00:39:48] [SPEAKER_01]: Whose line is it anyway?

[00:39:49] [SPEAKER_01]: Not whose line is it anyway.

[00:39:51] [SPEAKER_01]: Who wants to be a millionaire?

[00:39:54] [SPEAKER_01]: Style.

[00:39:55] [SPEAKER_01]: Call a friend.

[00:39:56] [SPEAKER_01]: Do you have an electrical engineer friend?

[00:39:58] [SPEAKER_01]: Do you have a electrician friend,

[00:40:02] [SPEAKER_01]: commercial electrician friend

[00:40:03] [SPEAKER_01]: who can talk you through why these products

[00:40:06] [SPEAKER_01]: over the competition

[00:40:08] [SPEAKER_01]: to try to get some of their insights, right?

[00:40:11] [SPEAKER_01]: That's what I would do with these types of names

[00:40:13] [SPEAKER_01]: is don't be afraid to ask people

[00:40:15] [SPEAKER_01]: who are in the industry.

[00:40:17] [SPEAKER_01]: Don't always just talk to investors.

[00:40:19] [SPEAKER_01]: Talk to people who are boots on the ground

[00:40:21] [SPEAKER_01]: with these types of things.

[00:40:22] [SPEAKER_02]: Yeah, it could be boots on the ground

[00:40:24] [SPEAKER_02]: with like Hydro Ontario, Hydro Quebec.

[00:40:27] [SPEAKER_02]: Those are likely customers of Schneider Electric

[00:40:31] [SPEAKER_02]: and even if they just do the installation,

[00:40:35] [SPEAKER_02]: they'll probably be able to provide some good insights

[00:40:37] [SPEAKER_02]: how good their products is,

[00:40:38] [SPEAKER_02]: if there's any competitors and stuff like that.

[00:40:41] [SPEAKER_01]: It looks like they're growing fast in India right now.

[00:40:46] [SPEAKER_01]: That is-

[00:40:46] [SPEAKER_01]: That's interesting.

[00:40:47] [SPEAKER_01]: It says high growth double digits.

[00:40:51] [SPEAKER_01]: Just summarizing from their transcript in India

[00:40:56] [SPEAKER_01]: and that number is growing probably the fastest

[00:40:58] [SPEAKER_01]: of any other segment,

[00:41:00] [SPEAKER_01]: even though they don't break it out in their segments.

[00:41:01] [SPEAKER_01]: They've hinted at that in the transcripts.

[00:41:04] [SPEAKER_01]: That is a geography with overwhelming demand

[00:41:09] [SPEAKER_01]: for electrical infrastructure.

[00:41:13] [SPEAKER_02]: Yeah, I mean, yeah, India definitely.

[00:41:15] [SPEAKER_02]: I think that's a really good point.

[00:41:18] [SPEAKER_02]: I wouldn't be surprised

[00:41:19] [SPEAKER_02]: that they would mention that on the call.

[00:41:21] [SPEAKER_01]: I think it was, it's just some crazy stat.

[00:41:23] [SPEAKER_01]: I've brought this up before.

[00:41:24] [SPEAKER_01]: There was like a 25 year period

[00:41:26] [SPEAKER_01]: where you went from low 80%

[00:41:29] [SPEAKER_01]: to nearly 100% electricity access in India

[00:41:33] [SPEAKER_01]: in like 25 year period.

[00:41:35] [SPEAKER_02]: Yeah, I think you mentioned it before

[00:41:37] [SPEAKER_02]: but it is something and obviously-

[00:41:40] [SPEAKER_02]: Staggering.

[00:41:41] [SPEAKER_02]: Like even if, you know,

[00:41:43] [SPEAKER_02]: I'm sure they'll have to do

[00:41:44] [SPEAKER_02]: when you build out the grid so quickly like that,

[00:41:46] [SPEAKER_02]: I'm sure they're going to have to do

[00:41:47] [SPEAKER_02]: a bunch of improvements too in the near future as well.

[00:41:50] [SPEAKER_02]: Reverb.

[00:41:51] [SPEAKER_02]: Exactly, and so it's an interesting play,

[00:41:54] [SPEAKER_02]: especially if they're growing quickly in India,

[00:41:56] [SPEAKER_02]: could be a good way for people to get some exposure

[00:41:58] [SPEAKER_02]: to that Indian growth story

[00:42:00] [SPEAKER_02]: with a company that's not overly risky to be honest.

[00:42:05] [SPEAKER_02]: Like obviously, you know, evaluation aside,

[00:42:07] [SPEAKER_02]: you'll have to hope that the growth continues

[00:42:10] [SPEAKER_02]: at a reasonable pace.

[00:42:13] [SPEAKER_02]: I think mid to high single digits

[00:42:15] [SPEAKER_02]: is probably reasonable to expect

[00:42:17] [SPEAKER_02]: but if they do that,

[00:42:19] [SPEAKER_02]: they should be good for probably the foreseeable future.

[00:42:23] [SPEAKER_01]: Global infrastructure and in this case,

[00:42:25] [SPEAKER_01]: global electrical infrastructure

[00:42:27] [SPEAKER_01]: is a fantastic way to play emergent market growth

[00:42:30] [SPEAKER_01]: without having to buy emerging market stocks.

[00:42:34] [SPEAKER_02]: And even in North America and Europe, right?

[00:42:36] [SPEAKER_02]: Like the growth and just we've mentioned it, right?

[00:42:38] [SPEAKER_02]: Like the demand for data centers,

[00:42:41] [SPEAKER_02]: like we're going to have to upgrade our electrical grid

[00:42:45] [SPEAKER_02]: pretty substantially in the next decade.

[00:42:48] [SPEAKER_02]: I don't think there's any way around it.

[00:42:50] [SPEAKER_01]: And-

[00:42:51] [SPEAKER_01]: I asked Vin Chat, what are the major end markets

[00:42:53] [SPEAKER_01]: that are driving the growth on Schneider?

[00:42:56] [SPEAKER_01]: And it said one data center and networking,

[00:43:00] [SPEAKER_01]: interesting large data centers and enterprise data centers

[00:43:03] [SPEAKER_01]: including AI use cases,

[00:43:07] [SPEAKER_01]: strong demand and great infrastructure,

[00:43:09] [SPEAKER_01]: electrical waste and wastewater transportation sectors.

[00:43:14] [SPEAKER_01]: Again, this is all good.

[00:43:16] [SPEAKER_01]: This is all stuff we wanna know.

[00:43:17] [SPEAKER_01]: I just wanna talk to like networking engineers

[00:43:20] [SPEAKER_01]: and electrical engineers.

[00:43:22] [SPEAKER_02]: Yeah, I'll shoot out a tweet on X or Twitter, whatever.

[00:43:26] [SPEAKER_02]: And I'm sure I'll have a few followers

[00:43:29] [SPEAKER_02]: that are familiar with the business

[00:43:31] [SPEAKER_02]: just because of their jobs.

[00:43:32] [SPEAKER_02]: So I think I'll do that and maybe I can report back.

[00:43:36] [SPEAKER_01]: Before we wrap up today,

[00:43:38] [SPEAKER_01]: I just saw this before I hopped on with you.

[00:43:41] [SPEAKER_01]: Speaking of X, Twitter.

[00:43:44] [SPEAKER_01]: Brazil has shut down SpaceX operations

[00:43:50] [SPEAKER_01]: and Starlink frozen assets, financial assets in Brazil

[00:43:56] [SPEAKER_01]: in retaliation for X's stance

[00:44:01] [SPEAKER_01]: on Brazilian government officials on the X platform.

[00:44:05] [SPEAKER_01]: So they've just said, okay.

[00:44:07] [SPEAKER_01]: Oh wow, okay.

[00:44:08] [SPEAKER_01]: X, you don't have a presence in Brazil

[00:44:10] [SPEAKER_01]: like with financial assets,

[00:44:11] [SPEAKER_01]: but your CEO, founder of the other company does.

[00:44:18] [SPEAKER_01]: And we're gonna freeze the unbelievable

[00:44:20] [SPEAKER_01]: Supreme Court in Brazil in the last few hours.

[00:44:25] [SPEAKER_02]: What are they accusing X of doing?

[00:44:28] [SPEAKER_02]: Let's be honest, of Elon Musk doing at that point

[00:44:31] [SPEAKER_02]: if they're going after SpaceX,

[00:44:33] [SPEAKER_02]: it's clearly because they have-

[00:44:36] [SPEAKER_02]: Yeah, it's an Elon thing.

[00:44:37] [SPEAKER_02]: It's an Elon thing for sure, yeah.

[00:44:40] [SPEAKER_01]: Because they threatened to ban X in the country.

[00:44:46] [SPEAKER_01]: Supreme Court judge says platform faces ban

[00:44:49] [SPEAKER_01]: unless Musk names legal representative within 24 hours.

[00:44:54] [SPEAKER_01]: And then as a result, an action of this,

[00:44:58] [SPEAKER_01]: they've gone after his other company,

[00:45:01] [SPEAKER_01]: which is SpaceX,

[00:45:02] [SPEAKER_01]: because they have financial assets in Brazil.

[00:45:05] [SPEAKER_01]: This is breaking right now,

[00:45:06] [SPEAKER_01]: so I don't know all the details, but this is absurd.

[00:45:10] [SPEAKER_01]: This is crazy.

[00:45:11] [SPEAKER_02]: Okay, because apparently there was a court order

[00:45:15] [SPEAKER_02]: that he was saying you wouldn't follow,

[00:45:19] [SPEAKER_02]: but I'm not quite sure,

[00:45:20] [SPEAKER_02]: so we'll have to read more on it,

[00:45:21] [SPEAKER_02]: but that's interesting, to say the least.

[00:45:26] [SPEAKER_01]: Oh man.

[00:45:30] [SPEAKER_01]: I don't have anything for you

[00:45:32] [SPEAKER_01]: to come after you in this country,

[00:45:34] [SPEAKER_01]: but you have this other company that operates here.

[00:45:39] [SPEAKER_01]: Take a hike, pal.

[00:45:42] [SPEAKER_01]: Wow.

[00:45:43] [SPEAKER_01]: I don't know what the legal precedence

[00:45:44] [SPEAKER_01]: of being able to do that even is.

[00:45:47] [SPEAKER_01]: I have no idea.

[00:45:47] [SPEAKER_02]: Well yeah, and I'm not super familiar

[00:45:50] [SPEAKER_02]: with how the legal system works in Brazil either,

[00:45:53] [SPEAKER_02]: so we're kind of used to a system of law and order

[00:45:58] [SPEAKER_02]: in Canada and the US, Western Europe,

[00:46:01] [SPEAKER_02]: but Brazil, I'm not quite sure exactly

[00:46:04] [SPEAKER_02]: you know how robust it is,

[00:46:05] [SPEAKER_02]: so I think it's something I need to read up on

[00:46:07] [SPEAKER_02]: a little bit for sure.

[00:46:10] [SPEAKER_01]: I'm definitely skeptical.

[00:46:12] [SPEAKER_01]: Thanks for listening, folks.

[00:46:14] [SPEAKER_01]: We really appreciate you listening to the podcast here.

[00:46:18] [SPEAKER_01]: We're here Mondays and Thursdays.

[00:46:21] [SPEAKER_01]: This coming Thursday,

[00:46:23] [SPEAKER_01]: so this podcast comes out on Labor Day.

[00:46:25] [SPEAKER_01]: That's scary, summer's already over.

[00:46:27] [SPEAKER_01]: Labor Day and the Thursday live Wednesday.

[00:46:33] [SPEAKER_01]: We'll be FinChat V4 and we're running a 25% sale,

[00:46:38] [SPEAKER_01]: which we don't do often.

[00:46:40] [SPEAKER_01]: We do a sale on FinChat twice a year.

[00:46:43] [SPEAKER_01]: Once for some big product launch like right now,

[00:46:45] [SPEAKER_01]: and also on Black Friday.

[00:46:48] [SPEAKER_01]: So there's two opportunities to get FinChat 25% off,

[00:46:51] [SPEAKER_01]: this time in Black Friday.

[00:46:54] [SPEAKER_01]: So September 5th and 6th is a good time

[00:46:58] [SPEAKER_01]: to buy a FinChat subscription

[00:46:59] [SPEAKER_01]: because you can get 25% off.

[00:47:01] [SPEAKER_01]: So that is September 5th and 6th,

[00:47:03] [SPEAKER_01]: FinChat V4 is coming out.

[00:47:06] [SPEAKER_01]: We'll see you in a few days.

[00:47:07] [SPEAKER_01]: Take care, bye-bye.

[00:47:08] [SPEAKER_02]: The Canadian Investor podcast should not be construed

[00:47:11] [SPEAKER_02]: as investment or financial advice.

[00:47:14] [SPEAKER_02]: The host and guest featured may own securities

[00:47:17] [SPEAKER_02]: or assets discussed on this podcast.

[00:47:20] [SPEAKER_02]: Always do your own due diligence

[00:47:22] [SPEAKER_02]: or consult with a financial professional

[00:47:24] [SPEAKER_02]: before making any financial or investment decisions.