Two Stocks We Added to Our Watchlist

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

[00:00:06] confidence you need to succeed in the markets.

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

[00:00:15] The Canadian Investor podcast, welcome into the show.

[00:00:20] My name is Braden Dennis as always joined by the unequivocal, Simon Belanger.

[00:00:27] We're going to round out the rest of your list of ETFs for sector specific exposure

[00:00:33] and then we're getting right to the gold.

[00:00:38] The recurring segment brought to you by our friends at EQ Bank, stocks on our watch list.

[00:00:43] We like to do this every couple weeks.

[00:00:46] Things that we're looking at, stones we're turning over.

[00:00:49] You have a smaller Canadian name and I have a company that is in the news for the wrong

[00:00:54] reasons.

[00:00:55] So I think there's lots of good content there.

[00:00:59] Yeah definitely, I'm pretty excited and I mean the sector ETFs, something it took me.

[00:01:03] It's funny because sometimes I'll have these ideas, I'm like oh this will be easy to

[00:01:07] do and then it ends up being way longer than I expected but I enjoy doing it so

[00:01:12] it was still fun too.

[00:01:14] As soon as you have a full on spreadsheet, I'm looking at what you made here.

[00:01:21] People were asking for it on the Patreon, on jointci.com, shout out plug to the Patreon.

[00:01:26] I think you posted it there as well so people can just see the exact tickers, what they

[00:01:29] cover, what the holdings are, all that stuff.

[00:01:33] Yeah exactly, so for Patreon, so jointci.com we try to post the videos a day or two

[00:01:39] early, it's just depending on when our editor is able to post them and upload

[00:01:43] them there and then people saw that this episode was coming out this last Monday in

[00:01:48] advance so they asked me for if I could share the spreadsheet and said oh definitely

[00:01:52] let me finish it because we'll be doing the second part this week and I've seen

[00:01:57] a lot of people go on it and have a look so I think they're appreciating

[00:02:01] that for sure.

[00:02:02] So with that said, for those who are listening and didn't listen last week

[00:02:06] make sure you catch the previous episode because I start off with the first

[00:02:09] five sectors and now the sectors we discussed last week were information

[00:02:15] technology, financials, health care, consumer discretionary and communication

[00:02:20] services and now I'll start off with industrials.

[00:02:23] So industrial the first one I have is a Canadian listed one ZIN from that's

[00:02:28] the BMO equal weight industrials ETF.

[00:02:31] This one has 0.62% fees and the top holdings are Algoma, Badger

[00:02:37] Infrastructure, Stantec, Parkland Corporation and Brookfield Business

[00:02:42] The top five holdings are 15.4%.

[00:02:46] This is an interesting one because it's actually a Canadian industrial ETF.

[00:02:50] So if you're really looking for something that has more Canadian take on

[00:02:55] it, that would be an interesting one again the fees are not low but these

[00:03:00] I've like I mentioned the last time a lot of the time depending if you're

[00:03:03] looking for diversification or not what you'll find with these sectorial ETFs

[00:03:08] is that there's going to be trade-offs right?

[00:03:10] A lot of these you're going to have to trade off fees versus something else

[00:03:14] you're interested in whether it's hedging or less concentration.

[00:03:18] The second one is EXI so that's the iShare S&P Global Industrial ETF 0.42%

[00:03:26] and then you have more US while you have US names here so GE,

[00:03:29] Aerospace, Caterpillar, Siemens, Union Pacifics and RTX Corp

[00:03:35] and the top holdings are 11.24% so pretty evenly weighted as well.

[00:03:41] So I definitely like these a bit more in terms of waiting where last that we

[00:03:46] talked remember there were some that were like 50-60% in the top five holdings.

[00:03:51] Yeah, that's right.

[00:03:53] A little bit different here a little bit more diversified.

[00:03:55] Yeah, exactly and you're talking about names here if you're thinking

[00:03:58] about the S&P 500 the sectors we're looking at that are underweight

[00:04:02] in the S&P 500 a little different in Canada energy will be coming up soon here.

[00:04:07] Obviously, energy is pretty heavily weighted if you're investing

[00:04:10] in the Canadian market but the next one here is consumer staples.

[00:04:14] The first one in the US listed so VDC that's the Vanguard Consumer Staples ETF

[00:04:20] 0.1% fees so 10 basis points the names here are Procter & Gamble,

[00:04:26] Costco, Walmart, Coca-Cola, Pepsi 45% the top five holdings

[00:04:31] so pretty heavily weighted.

[00:04:34] There's also a BlackRock listed one here with similar holdings

[00:04:37] but the Vanguard is much lower fees so to me that's kind of a no brainer.

[00:04:42] The next two are Canadian listed so the first one is BMO Global Consumer

[00:04:46] Staples, Canadian hedge 0.40% fees and then similar names as the previous one

[00:04:54] but just Canadian hedge so Procter & Gamble, Nestle, Pepsi,

[00:04:58] Coca-Cola, Philip Morris and then the top holdings here a bit more evenly

[00:05:02] distributed at 36% and then there's XST again listed in Canada.

[00:05:08] The iShares S&PTSX Cap Consumer Staples if you're looking for Canadian names

[00:05:13] this would be it however the fees are pretty high at 0.61%.

[00:05:18] It's very heavily weighted the top names are 81 or 82% if I round up

[00:05:24] and the top five names are Loblaws, Alimentation Couchetard, Metro,

[00:05:29] George Weston, Saputo so this one I mean I wanted to give a more Canadian flavor

[00:05:35] but super concentrated.

[00:05:37] Yeah as soon as I mean in the last one that the industrials end with

[00:05:41] the consumer staples as soon as you go into the Canadian only one there just

[00:05:46] isn't that many companies that will fit the bill and if it's market cap

[00:05:51] you get something like Loblaws and Couchetard are massive companies

[00:05:57] they just are compared to what are the other options that are publicly traded

[00:06:02] on the TSX it's just not that many of them but so far one generic comment

[00:06:07] here you've touched on industrials and consumer staples this is when

[00:06:10] your spreadsheet and this segment is actually really useful all the

[00:06:14] sudden because I think I was pretty critical last week of just like all of

[00:06:19] those what I'll call sectors air quotes here are just like replicas of the

[00:06:24] S&P 500 with higher fees yeah right like because you have these companies

[00:06:30] that are worth trillions of dollars are so diversified now they can just

[00:06:34] throw them into any bucket but you can't really throw them into

[00:06:37] industrials and you can't really throw them into energy at least at

[00:06:40] least in the way that they characterize them so this is when

[00:06:43] these actually become really useful no exactly so you know I think it's

[00:06:48] it was a fun exercise to do and the one thing I'll add here for George the

[00:06:53] Canadian one is I'm pretty sure George Weston owns like a controlling share

[00:06:58] into Loblaws right so it's correct yeah so it's it's even more so

[00:07:03] concentrated so I find it like you said it's a bit funny but again I

[00:07:06] think it's still a fun exercise to do it's still an option with for

[00:07:10] people to want to diversify depending if you're looking more you know

[00:07:14] you're more heavily invested in Canada then maybe last week's episode will have

[00:07:19] more ideas because then it'll be probably that set those sectors you want to

[00:07:23] diversify a bit more and then the opposite is kind of true right now if

[00:07:27] you're more heavily invested in the US or the S&P 500 the sectors we're

[00:07:31] talking about probably make a bit more sense because they're underweight at

[00:07:35] the S&P 500. I'm surprised Empire isn't also high. I think it's just

[00:07:41] the next one yeah I think it's number six that I think it just missed the

[00:07:45] cut if I remember correctly but no they're they're pretty close behind so

[00:07:50] the next one here energy so I'm looking at the first one listed in

[00:07:54] Toronto or in Canada HXE the global XS&PTXX capped energy index ETF

[00:08:02] this one 27 points basis point in fees and then you have the top names

[00:08:09] you have Canadian natural resources, Sinovus energy, Imperial oil, Meg energy and

[00:08:14] white cap resources and the top five names or are 47% in weighting obviously

[00:08:21] Canada is pretty well served when it comes to that so I think you can

[00:08:25] definitely my view is that you know if you're interested in just you know

[00:08:30] looking in Canada for these type of companies you'll have some pretty

[00:08:33] interesting names obviously there's some big ones in the US too the

[00:08:37] second one is ZEO the BMO equal weight oil and gas ETF 61 basis point in terms

[00:08:44] of fees and the names are Sunkor, Sinovus, Termaline, Imperial oil,

[00:08:49] Canadian natural resources again it's relatively equal weighted it's never

[00:08:55] exact and the total here is 47% for the top names there's not that many

[00:09:01] names in it so keep that in mind that's why it's so heavily weighted

[00:09:04] here but if you go down the list I mean the weightings are very similar and

[00:09:09] then the next one is VDE the Vanguard energy ETF 10 basis points for fees so

[00:09:15] extremely low fee so you have the big US companies here so Exxon Mobil,

[00:09:19] Chevron, ConocoPhillips, EOG resources and then the last one is

[00:09:25] Marathon Petroleum and the percentage for the top five holding is 51% here

[00:09:32] anything you want to add before I go to the next sector?

[00:09:35] No everything looks pretty standard there.

[00:09:38] So the next one here is materials this one was really interesting so

[00:09:45] there's two names the first one is XME and I'll explain why it was

[00:09:49] interesting so the iShare S&P TSX cap materials ETF 60 0.61 fees or 61 basis

[00:09:57] point and you have some pretty well-known companies of people who are

[00:10:02] investing in kind of more mining companies so Agnico Eagle Mines, Barragold,

[00:10:07] Nutrien, Wheaton Precious Metals and Franco Nevada the last two are actually

[00:10:13] metal or mining streaming companies and the top holdings here represent

[00:10:18] 49% higher fees but it does have definitely the Canadian exposure

[00:10:24] component the next one is VAW so the Vanguard materials ETF and this

[00:10:29] one is interesting when you compare it to the previous one so it's 10 basis

[00:10:33] point fees so very low fee but this is where it comes in to look at the

[00:10:37] actual names to figure out what kind of exposure you're looking for

[00:10:42] because you have the names here that are Lind, Sherwin Williams, Freeport

[00:10:46] McMorrin, Ecolab, Air Products and Chemicals and the top names are 36.5%

[00:10:53] and the different type it's definitely a different type of material exposure

[00:10:57] versus the XMA the previous one the previous one obviously was more mining

[00:11:02] focus where this one is more of a material but kind of processed materials

[00:11:08] industrial material focus so that's I think that's just an interesting thing

[00:11:13] for people to keep in mind is these are two like air quotes material ETFs

[00:11:17] but the type of companies that they have are very different

[00:11:21] yeah it's like do you want a gold miner or Sherwin Williams paint exactly so you

[00:11:28] have you kind of have the base material versus the more processed material if

[00:11:32] that's kind of a way to put it I actually really like the companies in

[00:11:36] that the Vanguard one yeah yeah I mean it's just yeah it's just funny

[00:11:43] though that they're both materials ETF yeah and and you know I'm not a

[00:11:48] big pure play commodities guy but like something like Sherwin Williams Lindy

[00:11:52] Ecolab Air Products and Chemicals like those are really high quality pretty

[00:11:57] high moat well well established brands like really good businesses and they've

[00:12:02] been terrific stocks through the years as well yeah definitely now the

[00:12:05] next one next sector on the list second to last one so utilities so you

[00:12:10] know income investors that's definitely probably your playground here

[00:12:14] the first one is ZUT so DBMO equal weight utilities index 0.61% in fees so

[00:12:21] pretty well-known name so BEP so Brookfield Renewable Partners Boral X

[00:12:25] Atco Altagas Algonquin the top five old things are 37.5% higher fees but

[00:12:33] the fact that it's equal weighted plus Canadian exposure may be enticing

[00:12:38] to some people again to me a joll comes down with trade-offs a lot of

[00:12:42] the time for fees versus what else you're putting more emphasis on the

[00:12:46] second one is VPU so the Vanguard utilities ETF list in the US again

[00:12:51] pretty consistent with Vanguard 0.10% fees so 10 basis point you have

[00:12:57] NextEra Southern Co Duke Energy Consolation Energy American Electric

[00:13:03] Power and the top five names are 35% so XLU is another solid option with

[00:13:10] almost identical fees but slightly different weightings and names so

[00:13:14] something people could be checking out here and then the last one is the

[00:13:19] real estate sector clearly real estate has been reeling quite a bit with

[00:13:23] higher rates the first one is VRE listed in Canada so that's the

[00:13:28] Vanguard FTSE Canadian Cap Reit ETF 0.39% fees so you have first service

[00:13:35] Canadian apartment properties RioCAN Collier's International and Granite

[00:13:40] real estate or Granite REIT and 49% for the top five names and then the US one I

[00:13:47] think to me makes a whole lot more sense because there's more name it's

[00:13:50] better diversified so it's USRT the iShares Core US REIT ETF 8 basis point

[00:13:57] for fees so extremely low so you have Prologis Equinix

[00:14:02] Welltower Simon Property Group and Digital Realty and the top names are

[00:14:07] 31% so that wraps up all these sectoral ETF anything you wanted to have

[00:14:14] for the last two utilities and real estate no just that some of the fees

[00:14:19] on these Canadian ones are far too high like I couldn't imagine myself

[00:14:22] paying 61 basis points to own you know a collection of Canadian utilities

[00:14:27] yeah yeah I don't I don't know how that like I could never justify such

[00:14:33] yeah and the problem there's not that many a Canadian kind of focus ones when

[00:14:38] you get into sectoral ETF you also have the fact that oftentimes you're

[00:14:42] looking at just a handful of companies or not that many companies but again

[00:14:47] for the Canadian investor podcast I wanted to provide at least a Canadian

[00:14:51] option and one of the things that I've noticed is that there seems to be an

[00:14:57] offering or there must be demand for it but there's a lot of hedging

[00:15:02] a lot of CAD hedge ETFs and whenever you see that which is fine if you want

[00:15:08] something that's hedge that's completely fine but you pay for that so those

[00:15:12] comes with they come with higher fees and based on what we've talked about

[00:15:17] before on the podcast they tend to underperform as well compared to the

[00:15:21] non-hedge version yeah the more niche you get the more it turns into

[00:15:27] a product and the more niche you get and the thinner the market there's gonna be

[00:15:33] less ETF providers aka less competition aka higher fees like this is this is

[00:15:39] the same as any other type of product that exists in the world and this is

[00:15:44] this is a financial product and some of them are fantastic you know it's

[00:15:48] the ability for you to own hundreds of high quality businesses for you know

[00:15:54] next to no fees with some of these really really like broad index ETFs is

[00:16:02] an amazing creation for the everyday person yeah very grateful that they

[00:16:06] exist yeah exactly and I think this also highlights that the US market

[00:16:11] being so big right the US stock market whereas even these sectoral ETFs tend

[00:16:17] to have relatively lower fees because there's more competition but there's

[00:16:21] also so many more names even in those sectors where in Canada you know it's

[00:16:27] definitely more limited let's move on to stocks on our watch list

[00:16:30] presented by our friends at EQ Bank we have two names here I will kick us off

[00:16:35] I just learned that you and Dan talked about this company recently on

[00:16:40] yeah it was 20 minutes ago so I'll be tuning into you know that segment

[00:16:48] as well and that company in the news and the stock on my watch list today is live

[00:16:56] nation just to recap the whole idea of stocks on our watch list it is not

[00:17:01] stocks that we own it is not stocks that we necessarily are even pitching

[00:17:06] we might like them we might find them interesting we might find them to be

[00:17:11] a trap but they are on our watch list for one way or another whether

[00:17:16] there's a new development the company has gotten better or worse so the valuation

[00:17:21] has increased or decreased so none of it is meant to be advice and meant to

[00:17:25] just highlight our process on thinking of new ideas and turning over new

[00:17:30] rocks so the interesting news that has developed on live nation it will

[00:17:37] get into and it's not a business I'm jumping to get a piece of but I'm

[00:17:41] really interested in tracking to see how this shakes out so live nation is a

[00:17:46] company that not every single person if you ask hundred people on the street

[00:17:51] will know but all 100 of them I can say with confidence will probably know

[00:17:57] their subsidiary ticket master and ticket master has become Simone the

[00:18:04] Oh yeah.

[00:18:07] I can think of very few very few companies that consumers have had less

[00:18:15] like such a sour taste in their mouth you know very few companies have

[00:18:20] reached that level like ticket master and I have personally found concert

[00:18:25] tickets to be in a completely absurd market as of late generally the

[00:18:30] business is broken I've been saying that for a long time I think the

[00:18:33] ticketing business is broken I think it's a bad deal for artists I think

[00:18:37] it's a bad deal for consumers I think it's a bad and and it's not even that

[00:18:42] good of a deal for ticket master and I'm gonna go into why that is and

[00:18:46] and how we've got here but it's not working really for anyone is my

[00:18:53] general sense of the ticketing market and I think ticket master

[00:18:57] deserve some of the blame but not all of it and I'm gonna discuss a situation

[00:19:01] also the counter argument and general solution that I think might make sense

[00:19:07] to move forward so if you're buying a ticket to any mediums or large stadium

[00:19:13] sized event major venues major sports leagues huge record label type tours

[00:19:20] they're gonna be using ticket master through ownership or exclusive live

[00:19:24] nation agreements ticket masters real edge is their relationship with venues

[00:19:29] and leagues like the MLB for example major league baseball you go to a Blue

[00:19:34] Jays game you're buying on ticket master and for some context estimated

[00:19:38] number of fans from live nations filings which we we compiled directly

[00:19:43] on finchat which I've pulled up here the number of fans has gone from around

[00:19:47] 50 million gone to events under the live nation you know portfolio up to

[00:19:53] last 12 months at 150 million they ended 2023 at 146 million trailing 12 months

[00:20:00] at 150 million I think they saw like 20% top line growth quarter of a

[00:20:05] quarter sorry year-over-year on their latest quarter and this translates to

[00:20:09] in revenue across their concerts segment the ticketing segment and the

[00:20:15] sponsorship and advertising advertising segment to around five and a half

[00:20:19] billion to around 23 and a half billion during that same time frame from 2012

[00:20:25] to the trailing 12 months as of you know the last four quarters and so the

[00:20:31] largest segment of the business by far is that concerts revenue so that did

[00:20:37] around 18 almost 19 billion dollars on the top line in 2023 so that's the

[00:20:45] business right and there are very complex ties to the venues the artists

[00:20:51] the sports leagues ticket master themself and then of course the holding

[00:20:57] co live nation so someone before I get into an overview of the lawsuit

[00:21:02] any quick thoughts on the ticket the ticketing business the world of

[00:21:06] tickets today and maybe live nation yeah I mean I've used ticket master

[00:21:11] services like probably most people listening to this episode and if there's

[00:21:17] one area where you make purchase and you feel like you're getting slightly

[00:21:21] ripped off it's it's like people and people may not fully know why or

[00:21:28] understand why but you see these additional fees or you check out and

[00:21:33] you think you're gonna pay $200 and then your final bill is what like

[00:21:39] with all the additional fees and I think that's especially right now right with

[00:21:43] high inflation I think right now is probably where it's coming up to light

[00:21:47] where people want to still enjoy these kind of concert or going in

[00:21:52] person these experiences but you know the fees are just so high and

[00:21:56] it's definitely coming in the spotlight and you know I went over in

[00:21:59] the previous episode what the Department of Justice is alleging but

[00:22:03] I feel like a lot of people will be sympathetic to the lawsuit I'll just say

[00:22:08] that yeah oh yeah totally and in this segment is not for me to be a live

[00:22:13] nation apologist but to look at the business in its current state look at

[00:22:18] the the raw facts about the business and you know potentially some

[00:22:23] solutions here that that you know I can armchair quarterback here I won't

[00:22:28] go too much into the details because it looks like you guys discussed that

[00:22:31] next episode on the actual lawsuit but I'll break down here just a really

[00:22:36] quick summary of it so far which is the the quote here from the Department

[00:22:40] of Justice website live nation ticketmaster exclusionary conduct and

[00:22:44] dominance across the live concert ecosystem harms fans innovation artists

[00:22:49] and venues the DOJ with along with 30 state and district attorney filed

[00:22:56] lawsuit against live nation and its wholly obsited wholly owned

[00:23:00] subsidiary ticketmaster the complaint filed today quote alleges that live

[00:23:07] nation ticketmaster unlawfully exercises is monopoly power in violation of

[00:23:13] section 2 of the Sherman Act as a result of this conduct music fans in

[00:23:18] the United States are deprived of ticketing innovation and forced to use

[00:23:22] outdated technology while paying more for tickets than fans in other

[00:23:27] countries now there's a lot to unpack there right and they've basically gone

[00:23:33] and said you know the fees are the fees are no good fans are getting

[00:23:37] harmed their technology sucks and maybe it does I mean this is legacy

[00:23:41] tech now ticketmaster has been around for a long long time and all these

[00:23:45] startups have been trying to innovate and build build ticketing solutions

[00:23:50] but it's just like so antiquated at this point right and it's it's they

[00:23:55] do have those competitive advantages and people building tech today in the

[00:23:59] ticketing business probably are saying these exact things like their tech is

[00:24:03] garbage you know it was built 30 years ago and it's it's not robust and

[00:24:09] I think that a lot of that came to light when you have like millions of

[00:24:13] of fans of Taylor Swift last year trying to buy tickets of the eras

[00:24:18] tour and ticketmasters couldn't handle the volume and so is it

[00:24:23] perfect no absolutely not is the technology outdated I don't know but

[00:24:27] probably do fans feel like they're getting ripped off yes absolutely yes and

[00:24:33] so the stock only fell 8% on the news which might not sound which might

[00:24:38] sound like a lot but for a DOJ breakup an antitrust lawsuit you know

[00:24:44] filed in my view that doesn't seem like much and because it says quote

[00:24:49] at the end of this of this statement from the DOJ quote it is time to break

[00:24:55] up live nation ticketmaster so they know they're pretty clear with their

[00:24:59] words there right to me this is the market saying yeah one we already knew

[00:25:04] about this two what are you gonna do about it and three they already

[00:25:07] mentioned that they're gonna open up this investigation in 2023 so it's not

[00:25:11] necessarily shocking news so so that's that's the lawsuit as of today

[00:25:16] there's a lot to unpack live nation has responded with a public press release

[00:25:21] you can go read the entire complaint filed by the DOJ by just googling it

[00:25:26] real quick and you know it's it's actually fairly easy to understand

[00:25:29] it's nice you know much legalese so you can you can dig more into it they

[00:25:33] have like point form and that's what I went over with Dan so kind of the

[00:25:37] point form and the one thing I'll add to is I mean they say the US

[00:25:41] compared to other countries I'm not sure if they looked at Canada because

[00:25:44] I don't think it's that much better than the US when it comes to that so I

[00:25:48] think they're probably picking and choosing and the last thing I'll say is

[00:25:52] it does feel like this is politically motivated because it's a way for the

[00:25:58] administration the Biden administration to show that they're

[00:26:01] trying to you know target corporation that are taking advantage of

[00:26:06] consumers so and that's one point I made is I think we might see more

[00:26:10] actions like this leading up to the election so that they can say look

[00:26:14] we're doing something about this whether you agree or not with you know what

[00:26:18] they're doing that's fine that's what I'm saying but you know when there's

[00:26:23] where there's smoke there's fire right so and that's what I mentioned I

[00:26:26] would not be surprised to see these a few more actions similar to this

[00:26:31] targeting other kinds of corporation before the November election yeah

[00:26:35] it's like in Canada you know picking picking a villain those have been you

[00:26:41] know Galen Weston and the the grocery store company like the grocery

[00:26:45] conglomerate chains like easy targets consumers generally are upset consumers

[00:26:52] know that something's not right and needs to be broken and it's an

[00:26:56] opportunity as you mentioned yet to show that hey we're doing something

[00:27:00] yeah and so easy target so so if the rest of my segment here is to is

[00:27:05] is to establish two things here one is live nation an opportunity here and two

[00:27:11] are they a regulatory scapegoat that's that's those are the two things I want

[00:27:18] to try to unpack here in the segment so let's look at the counter-argument

[00:27:23] the financial I I look at a lot of monopolies you know it's one of my

[00:27:29] favorite investing styles is to look at monopolies and try to own pieces of

[00:27:35] them it's no secret that that's one of my investing philosophies here with

[00:27:40] public markets because they exist let's not kid ourselves the margin

[00:27:45] profile of live nation sure does not look monopolistic I have here on the

[00:27:50] screen you want that the gross margins EBITDA margins operating

[00:27:54] margins pretext margins net margins and free cash flow margins from thin

[00:27:58] jet of live nation does this look like a monopoly to you because to me it sure

[00:28:05] does not yeah it looks like a it looks more like it looks like Walmart's

[00:28:10] margins actually almost identically yeah you could probably make a case that

[00:28:15] they're not great margins they could potentially be better though if they

[00:28:19] innovated more right and they may be complacent because they have this

[00:28:24] monopoly in place and there's not that competition pushing them to be

[00:28:29] better so that's definitely a counter-argument that could be said

[00:28:32] here saying well yeah they're not a guy great but they're good enough and

[00:28:36] they're they probably don't want to change anything because it's working

[00:28:40] pretty well for them on the bottom line I think for sure I do wonder on

[00:28:44] the gross margin though at 23% like the fees that are coming you know the

[00:28:51] the management team has come out and said you know we take the blame a lot for

[00:28:56] the fee structure because in our fee comes you know everyone else's fee so

[00:29:02] their take they're saying our take rate on the fee is way lower than like

[00:29:06] almost every other marketplace that exists out there that people are using

[00:29:11] today in terms of like digital marketplaces and so to that point I

[00:29:17] say okay sure I also say you guys are idiots for taking for hiding all that

[00:29:22] fee under your own name who all like every other person just goes in there

[00:29:27] I mean they if I was if I was them I would have broken those fees out by by

[00:29:31] each vendor a long long time ago so that you don't look like a bad guy

[00:29:35] but hey that's that's that's just what I would do so the margins

[00:29:40] certainly don't look like a monopoly okay sure there's there's points to

[00:29:44] be made both sides there okay live nation wrote a press piece and I

[00:29:50] highlighted one segment here of it quote the complaint and even more so

[00:29:55] the press conference announcing it attempt to portray live nation ticket

[00:30:00] master as the cause of fan frustration with the live entertainment

[00:30:05] industry despite admitting that the face values of tickets are typically

[00:30:10] set or approved by artists it blames concert promoters and ticketing

[00:30:14] companies neither of which control prices for high ticket prices it

[00:30:20] ignores everything that is actually responsible for higher ticket prices

[00:30:24] from rising production costs artists popularity to the 24-7 online ticket

[00:30:29] scalping that reveals the public's willingness to pay far more than

[00:30:34] primary ticket prices it blames live nation and ticket master for high

[00:30:38] service charges and just the fact that there are fees but ignores the ticket

[00:30:44] master retains only a modest portion of those fees in fact primary ticketing

[00:30:49] is one of the least expensive digital distributions in the economy and they

[00:30:54] went on to show a bunch of different marketplaces from you know Airbnb to

[00:30:58] ride-sharing with uber to you know Amazon's twitch the video game

[00:31:04] streaming company so it showed other things in the in the space there so to

[00:31:10] me this person's a fault that person's a fault he said she said it's broken

[00:31:15] and it's not working tickets tickets for large venues regardless of who the

[00:31:20] distributors are is completely broken and the same has happened with other

[00:31:25] competitors of live nation you know they you know they have a lot of

[00:31:29] market share and they might be monopolistic in some of their

[00:31:31] practices but they do have competition seatgeek won a big deal with the

[00:31:38] Barclay Center and they showed that after the fees actually went up on

[00:31:45] primary and reseller after switching services so okay that that that shows

[00:31:52] one little argument for them I despise the ticket game I mean you always

[00:31:57] feel bad right like you highlighted this when do you buy a ticket and think

[00:32:02] that felt great you know like very rarely does that happen because you

[00:32:10] thought you were paying X amount and you ended up paying 10 X of the amount

[00:32:13] you went to go buy $40 tickets for your favorite band and they ended up

[00:32:18] at 350 at checkout or you you know you you know that they were bought for

[00:32:25] $40 by the scalper or someone who was on the site right on the first second to

[00:32:29] midnight and you paid 350 after you know paying the reseller up charge and

[00:32:34] so you end up paying some of those fees especially post-pandemic you go I

[00:32:41] haven't seen any concerts or artists in my favorite bands come into town

[00:32:45] you're like okay I'm gonna I can justify the cost a large artist the

[00:32:51] bunnies the in-demand hockey game the Toronto Maple Leafs the tickets are

[00:32:56] immediately scooped up and sold back on the platform that they were purchased

[00:33:00] on it's completely goofy so I think the DOJ has the right direction but the

[00:33:07] wrong target in terms of they are certainly part of the blame but they

[00:33:13] need to fix the rules in which they operate in my mind you know if it's

[00:33:18] them or someone else who operates them you know just generally whoever

[00:33:22] distributes tickets you have a 24-7 scalper market that needs addressing

[00:33:27] immediately in my view now they've had their issues especially with the the

[00:33:31] Taylor Swift era's to our pub bad publicity didn't help so to round this

[00:33:37] out I am NOT a live nation apologist I have no horse in this race no

[00:33:40] shares in the company really as consumer I just want to see some

[00:33:43] change here but this doesn't feel like the right angle if they're gonna

[00:33:46] break apart live nation and ticket master and break their venue agreements

[00:33:51] another distributor will come in and do the same thing right like the

[00:33:57] incentives are built where I sell a hundred tickets 50 scalpers come on and

[00:34:04] and I'm pretending to like try to hold them out from the door but it's

[00:34:09] it's really good for me if they do because then there may be more

[00:34:11] transactions on there like there's no incentive for anyone whether it's live

[00:34:17] nation or competitor who comes down the road to do anything different so I'm

[00:34:22] watching this via my watch list I think the business is very high quality

[00:34:27] they obviously have competitive advantages with the venues leagues and

[00:34:30] artists you just have to wonder if the current regime is gonna make an

[00:34:34] example out of them or or just continue to tell everyone what they

[00:34:39] already know which is it's broken yeah yeah I mean I don't know which way it's

[00:34:43] gonna go I think like I said with Dan I think it is just gonna be

[00:34:46] interesting to follow where it leads up to and just the rim like just the

[00:34:51] consequences it could have not only on this industry but other industries

[00:34:57] right like I will think one that comes to mind that could be at risk in the

[00:35:01] crosshair of DOJ is definitely big tech like I don't think it's any

[00:35:05] secret and I think we've been hearing some rumblings for years now that you

[00:35:10] know big tech should be broken up it's getting too big I would not be

[00:35:14] surprised if there's a similar kind of action against a Google for example in

[00:35:18] the next couple of years because it is easy political points even if it

[00:35:23] doesn't amount to much they can point to that and say look we know you're

[00:35:27] paying high fees these guys are getting too big here's what we're

[00:35:31] trying to do about it yeah the problem with breaking up big tech is all the

[00:35:35] lawmakers seem to have big tech in their US retirement 401k plans it's so

[00:35:41] weird on the US how that works like they literally like do legislation and

[00:35:45] they own all this stocks that they do legislation on it is ass backwards

[00:35:50] is it ever so yeah you and I mean you and Dan will keep following the

[00:35:55] story I'm gonna keep following it from you know the business like look

[00:35:58] at the end of the day here I have my opinions about the ticket game but you

[00:36:03] know I'm an investor and I'm here to objectively try to buy underpriced

[00:36:07] assets look for opportunities of companies that are you know unfavored

[00:36:12] and unloved by the public that are you know economic powerhouses so

[00:36:18] I'm not gonna I'm not gonna you know lie about what I'm looking for

[00:36:21] here looks that's that's that's what I am looking for here whether you

[00:36:24] know I like or agree with the you know how the ticket business works is really

[00:36:29] just not a nod it's not gonna be changed by me so I'm just looking for

[00:36:33] maybe opportunity and that's to be seen yeah and I guess the last thing I'll

[00:36:38] say here is like I mentioned with Dan is you know we try not to get

[00:36:42] political or anything like that but the reality is politics does have

[00:36:46] influence on definitely certain types of business when it comes to

[00:36:50] because they're the ones that vote these laws in and we think about we talk

[00:36:55] about railways and the regulatory mode that they have I mean obviously these

[00:36:59] have been in place for decades if not you know it's almost a century but

[00:37:03] the reality is some kind of businesses it will have a big impact we're just

[00:37:07] trying to kind of give our perspective on it not taking sides

[00:37:11] or anything but just wanted to clarify that

[00:37:14] what do you got on the docket here yeah so this one I think you may

[00:37:18] have talked about this company before once on the podcast so it's called

[00:37:24] Savaria Corporation ticker sis.to and the way I got inspired or reminded of

[00:37:31] this company is I just I didn't want to do a screener although finchad.io

[00:37:35] has great screeners but I wanted for people to just give me

[00:37:40] some ideas so I said give me some ideas that fit into this criteria

[00:37:44] under two billion market cap sales growth of at least five percent profitable

[00:37:50] both on a net income and free cash flow basis and bonus points if it's

[00:37:54] Canadians and I asked people give me the ticker in a brief description of

[00:37:59] the business I got some great names some more that I'll be digging into

[00:38:03] some you know didn't fully meet the criteria but that's okay and I think

[00:38:07] Savaria probably doesn't meet the sales growth criteria but it still

[00:38:12] peak my interest because I think there's some interesting tailwinds going on

[00:38:15] here so Savaria specializes in and actually the inspiration was from Danny

[00:38:21] on Twitter so Danny Gallo so the big props to Danny for responding and

[00:38:26] giving me that idea. Savaria specializes in the design manufacturing

[00:38:31] distribution of accessibility equipment and products it's a pretty small

[00:38:35] company at 1.25 billion market cap listed on the TSX so it is a

[00:38:41] Canadian company they manufacture a range of lifts including wheelchair lifts

[00:38:46] stair lifts and vertical platform lifts the company also produces home elevators

[00:38:51] these elevators are often customized to fit the specific needs and aesthetics

[00:38:55] preferences of homeowners that require them they also offer elevators for

[00:39:01] commercial buildings including low-rise and mid-ride structures they are

[00:39:05] designed to meet the accessibility requirements of public and commercial

[00:39:08] spaces they provide vehicle lifts and modifications that enable people with

[00:39:13] disabilities to enter exist and drive vehicles independently and they also

[00:39:19] offer a variety of patient handling equipment as well as other accessibility

[00:39:23] products and what makes Savaria interesting as a grow play in the

[00:39:29] future is our aging population which I don't think I'm breaking that to

[00:39:33] anyone that knows a little bit about demographic our population especially

[00:39:38] with baby boomers getting older is getting older and the reality is that

[00:39:43] you know as you get older the probability that you're going to start

[00:39:48] having some mobility issues increase and I found a paper by Stats Canada

[00:39:55] and I will add it in the show note that was from 2021 on the age of

[00:40:02] disability from onset to limitation and I found the data quite interesting

[00:40:06] since they break it down by type of disability and some are much younger

[00:40:11] than I expected of your thinking about mental health or even vision or

[00:40:17] hearing a disability I think those just you know going on memory I think

[00:40:22] they tend to start in the late 20s on average to in your 30s so that

[00:40:26] was something I wasn't really expecting but according to this paper

[00:40:31] and don't ask me because I just took the information and I wanted to make sure

[00:40:35] I had that because so people didn't you know say well you know I'm 65 and

[00:40:40] I'm super mobile like I know plenty of people in their 60s 70s and even

[00:40:45] older that are super active that are probably more mobile than I am

[00:40:49] because of my back issues so this is just the data that I found in this

[00:40:53] paper but the average onset of mobility disability was 53 years of age

[00:41:00] now according to stats Canada again from 2019 to 2023 the population age 50

[00:41:07] or older increased 6.1% from 14.3 million to 15.2 million the reason I

[00:41:14] took age 50 is just because the brackets that they were giving the

[00:41:18] closest one was the age 50 bracket so I took that one but of course it is

[00:41:23] showing that obviously we have an aging population and it could be a

[00:41:28] big tailwind for a company like Savaria Corporation so before I talk a bit about

[00:41:34] the financials anything you wanted to add here?

[00:41:37] This is a stock I have looked at gotten interested in every few years

[00:41:46] for a long long time never never pulled the trigger there's always been

[00:41:51] something that I've just never really been comfortable with you know

[00:41:55] kind of its growth beyond its current market and it's been a decent

[00:42:01] compounder I haven't looked at the stock as of late I think it's gone up

[00:42:05] around the market during that time maybe a little better than that I mean

[00:42:10] they are certainly riding the tailwind of an aging population I see

[00:42:16] you know where I see their product a lot is the product that you put on

[00:42:20] the back of like cabs or vehicles that need to move people for accessibility I

[00:42:27] see them them quite a bit and you know really cool company like what they're

[00:42:32] doing like it's kind of like a feel-good company right like

[00:42:36] providing people with more accessibility people who are disabled

[00:42:40] you know they get these lifts and modifications to help them get in and

[00:42:45] out of vehicles or up the stairs or you know what these kinds of things

[00:42:48] so it is really cool I'd like to I haven't looked at it in a while so I'm

[00:42:54] just kind of all ears on a recap of their financials here and then we can

[00:42:58] go from there yeah I mean it is definitely a quick recap because our

[00:43:02] stock on the radar so I didn't want to do a deep dive I just wanted

[00:43:06] to bring some context as to why I think it's an interesting play again

[00:43:10] just stock on a radar here but here's a few things that are interesting so

[00:43:15] revenues have increased at a compound annual growth rate so CAGR of 24% since 2018 although it has been

[00:43:23] plateauing a little bit in recent years last year revenue increased 6% so

[00:43:28] that was a bit of slowdown there but again I think if you have a mindset

[00:43:32] of bit more longer term this could definitely be an interesting play net

[00:43:38] income was increased has increased at a CAGR of 16% since 2018 and

[00:43:44] increased 7% last year free cash flow has increased at a CAGR of 32% since

[00:43:51] 2018 but was down 14% last year and free cash flow per share has been

[00:43:56] trending quite nicely as well it's kind of up slightly down up slightly

[00:44:01] down up and increases more than down and that free cash flow per share has

[00:44:06] increased at a growth rate of 21% over the last five years and for a

[00:44:11] dividend investor they pay a quarterly dividend that is currently yielding just

[00:44:16] shy of 3% and free cash flow more than covers the dividend with the ratio

[00:44:21] typically being around 40 to 50 percent obviously it'll vary a little

[00:44:26] bit depending on the free cash flow for the year so there is a lot of

[00:44:30] interesting things I just started kind of looking at it a bit more I

[00:44:35] wasn't meant to be a deep dive or anything like that I would need to

[00:44:38] learn a bit more on the business have a closer look at their margins if they've

[00:44:43] had kind of price pressures as well if they were able to pass that on to

[00:44:47] consumers I think one of the things that I need to look into as well is

[00:44:51] I'm sure a lot of revenues are they come indirectly from consumers so

[00:45:00] they'll be paid by insurance companies or WSIB so work you know

[00:45:06] workplace I can't remember the full name but the workplace insurance board

[00:45:11] workplace safety insurance board and things like that so that's something as

[00:45:16] well to dig into but definitely an interesting name at least on the

[00:45:20] possible tailwind going forward it's I'm looking at forward estimates and

[00:45:25] forward estimates are not everything analyst estimates are not everything

[00:45:28] but the guiding for 4.8% on the top line for this year 8% the

[00:45:34] following year 8.5% you're looking at like mid single high-digit

[00:45:40] revenue growth on the top line here I think you know they have that nice

[00:45:45] tailwind I'd be really curious to know like what other geographies they can

[00:45:49] really break into these are things that I'd really want to understand like

[00:45:55] I know I've been saying this a lot lately but it's it's true anything

[00:46:00] under like 10 billion in Markey cap right now I get very excited because

[00:46:06] they're they're small or smaller than then large big tech and stuff but the

[00:46:13] bar has to be so much higher in my mind now in terms of like just growth

[00:46:18] not even quality I'm talking about just growth because my bar and hurdle

[00:46:24] rate is visa my bar and hurdle rate is Matt is Microsoft in those companies are

[00:46:31] just growing so fast still and they're so big it's like it has if it's

[00:46:37] smaller it's probably gonna be lower all things equal it's gonna have less

[00:46:42] competitive advantages smaller scale less brand recognition maybe less Lindy

[00:46:48] over time in terms of staying power so it's got to be grown at least

[00:46:52] faster and for a lot of these names I just can't justify it the visa growing

[00:46:57] like you know mid double digits with you know 60% free cash flow margins

[00:47:02] it's the the the hurdle rate for these smaller names I think is just so hard

[00:47:09] to get get something like this get something like Savaria excited in terms

[00:47:15] of owning it in the portfolio yeah and for me I think it would be

[00:47:19] similar to what you're saying but I think for me the the biggest thing here

[00:47:24] is because the valuations not the cheapest either so you're looking at

[00:47:28] around 19 times forward earnings and then 17 times free cash flow so it's

[00:47:35] not you know it's not super cheap for the kind of growth that you're

[00:47:39] getting the fact that it's a smaller cab company I guess yeah definitely

[00:47:43] small cab it's listed in Canada so probably you know less visibility than

[00:47:49] the same type of company that would be listed in the US so to me and I mean

[00:47:54] obviously I still need to lean more learn more about the business but say I

[00:47:58] knew the business very well everything checks out it's a company that I would

[00:48:02] probably buy if the evaluation would pull back a little bit just because I

[00:48:07] think you should be able to get this company a bit of better valuation

[00:48:12] based on the growth it's showing but also what I just mentioned in terms of

[00:48:16] its size and being listed in Canada so if you get it at the right price it can

[00:48:21] probably end up being quite a good investment with the caveat I still need

[00:48:26] to learn more about it yeah they're making over a hundred million

[00:48:30] it's pretty good yeah I mean they have that and let's expect that to

[00:48:34] double over the next three years too yeah they saw this that's I just

[00:48:39] pulled I guess from exactly so like definitely get definitely getting

[00:48:44] profitable and getting more profitable well they've been profitable for a long

[00:48:49] time but I mean like that they're definitely pulling that lever I just I

[00:48:54] just want to see more than I just want to see double-digit growth on the

[00:48:57] top line for these things or single-digit valuation would that change

[00:49:01] your mind yeah that would be that would be very attractive half like if

[00:49:08] you slash that valuation in half that'd be that'd be pretty interesting

[00:49:13] even if the growth's not crazy with the tailwind that would definitely get my

[00:49:17] attention yeah maybe maybe I'm more value investor at

[00:49:20] heart no I mean they go hand-in-hand right it's just like to do really well

[00:49:28] with this stuff yes you need to pay the right price but you also I mean

[00:49:33] it does there does have to be some level of long-term sustained growth

[00:49:37] for the stock to do well yeah no matter what no definitely like if you

[00:49:41] look at return decomposition it's trading at less than ten times next year's

[00:49:45] enterprise value to EBITDA so depending on which metric you want to use it's

[00:49:51] it's it's reasonable it's not cheap but it's reasonable yeah definitely the

[00:49:57] can't really argue with that but I yeah again thank you to Danny for

[00:50:01] refreshing my memory on this name and I'll definitely have a look at a few

[00:50:05] other names for sure I'm not sure if I'll talk about them all on the

[00:50:09] podcast but was a fun little tweet and the fact that people are actually

[00:50:12] giving me a brief description of the company because screeners are fine but

[00:50:17] it's kind of nice to have a name and then you also know quickly what the

[00:50:21] company does its business lines and then I kind of I it was a great

[00:50:25] exercise saved me a lot of time so thank you everyone yeah I mean there's

[00:50:30] like tens of thousands of listed equities like I think there's one of

[00:50:34] the 65,000 active over a hundred thousand in total on finchat and the

[00:50:39] people like suggest like just a ticker and I'm like did you just mentioned

[00:50:45] a company that 200 million in market cap I've never heard of give me like

[00:50:48] a one-liner exactly yeah give me oh just what they do give me your

[00:50:54] elevator pitch there yeah exactly yeah give me the elevator pitch and then

[00:50:59] this one the pitch is it helps you get into the elevator exactly that's it

[00:51:05] that's the elevator pitch on safaria it helps you get in the elevator thanks

[00:51:10] for listening folks we really appreciate you taking the time to come

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[00:51:30] exposure spreadsheet Google sheet that you can look at is now on there as

[00:51:35] well I was looking at it as well because I'm I look at this is like how

[00:51:41] do I get exposure to health care or biotech without losing all my money

[00:51:45] and that's when this is when these things are helpful I'm not gonna I'm

[00:51:51] not gonna predict the next the next regulatory approval for some hot fancy

[00:51:55] drug no and I mean what it's nice to what the spreadsheet is there's links

[00:52:00] directly to the fun facts for each of them so people can really have a

[00:52:04] quick look that way and it's always funny with Google when you just share

[00:52:08] the link and with viewer access get this anonymous kiwi and stuff like that

[00:52:14] yeah yeah and and so we also have a portfolio tracking spreadsheet on the

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[00:52:25] lot of people don't recognize like you got to do file make a copy if you

[00:52:30] want to edit it yeah exactly not giving you edit access to the template

[00:52:34] people like yeah what is this amateur out here file make a copy yeah if

[00:52:40] you make a copy you'll be able to use it on your own and not affect

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[00:53:48] the Canadian investor podcast should not be construed as investment or

[00:53:53] financial advice the host and guest featured may own securities or assets

[00:53:58] discussed on this podcast always do your own due diligence or consult

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