Will This Multi-Billion Dollar Canadian Acquisition Get Blocked?

[00:00:01] [SPEAKER_00] This is The Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Braden Dennis and Simon Belanger

[00:00:14] [SPEAKER_01] Welcome to The Canadian Investor Podcast. I am here with Dan Kent. We are doing our news and earnings episode. Dan, how are you today? Are you excited? There's lots to talk about.

[00:00:24] [SPEAKER_02] Yeah, we're right in the thick of it now. Some management issues going on at a few Canadian companies, tons of earnings. It's going to be a good episode.

[00:00:35] [SPEAKER_01] Yeah, I think definitely it's the time of the year, time of the earnings season that's fun because we have plenty to choose from. Yeah. I find sometimes, right, we have to look back a few weeks back, see any earnings that we might have missed. Where right now, I had a whole lot to pick from. I tried, well, we both tried to do a mix of kind of Canadian and a few US names as well.

[00:00:59] [SPEAKER_01] So it's really jam-packed and we'll start off right off the bat with Parkland Fuels acquisition. So you want to go over that and maybe just explain what Parkland Fuels does for those who are not super familiar with the company.

[00:01:14] [SPEAKER_02] Yeah, so Parkland is kind of like Alimentation Couchtard in a way, but they do have refineries as well. But for the most part, they're going to be that gas station operator. I think one of the bigger gas stations, I guess, at least in Alberta, I don't know if you have them over there, would be something like a fast gas. Oh, I don't know if you have these. I've never heard of them. Yeah. So that's like one of the main Parkland stations here.

[00:01:40] [SPEAKER_02] But they got into a deal with Sunoco to acquire Parkland in a cash and equity deal. So the deal will be worth $9.1 billion. And at this point in time, I think Parkland's market cap is around $6.7 billion. It was something like a 25% premium or something. But this deal does have a couple options for shareholders.

[00:02:02] [SPEAKER_02] So they can either take $19.80 in cash and receive 0.295 shares for every share of Parkland they own. They can opt for just $44 cash in an all cash deal, or they can go all shares and get just a little over half a share. And the deal is expected to close pretty fast. It would be the second half of 2025.

[00:02:28] [SPEAKER_02] And the one reason I wanted to talk about this is for long-term listeners of the podcast, you might remember us talking about the fiasco that was going on between Simpson Oil and Parkland. And in fact, this is actually one of the main reasons I ended up selling my Parkland shares last year. And I believe, you know, I got a bit lucky and managed to sell at the top. But this situation has got pretty ugly.

[00:02:53] [SPEAKER_02] Just a little bit of history on this front, which is definitely relative to the acquisition here. And I'll get to that point eventually. But Simpson Oil owns around 20% of Parkland. It's just under 20%. So they're a huge shareholder. Back in 2019, they entered an agreement which stated that although Simpson owned a large position in the company, they were not allowed to initiate any sort of takeover bids or influence any sort of board decisions.

[00:03:19] [SPEAKER_02] So Simpson was set to have normal shareholder rights. I believe this was after March 31st, 2024. So last year. And I do believe at that time, there was a very high likelihood that the company was going to push and likely succeed. They had a lot of shareholder backing in overhauling the board because they were disappointed with how the company was being run. So Parkland typically holds its annual general meeting in May.

[00:03:48] [SPEAKER_02] However, what the company ended up doing is rescheduling that AGM to late March. So conveniently, you know, running the AGM right before Simpson would get its voting rights back. So this was kind of the time that I just bailed from the company. I could tell that something was brewing here. There was definitely a spat between these two.

[00:04:12] [SPEAKER_02] And we fast forward to 2025 and apparently Parkland yet again moved its AGM. But it looks like they pushed it forward from May to June. And then they struck this deal to sell the company. And what is interesting here is Simpson Oil apparently had nearly 60% shareholder agreement on overhauling the board.

[00:04:39] [SPEAKER_02] So what Simpson is saying is that this current board of directors should not be able to sell the company like this. I mean, they didn't say this outright, but there's a good chance that the majority of them probably would have been punted, which is why Simpson is saying they're really not fit to be making a transaction like this. And I mean, this just kind of looks like a situation of, you know, like the board. Oh, you want to get rid of us? Like, screw it. We'll just sell the company.

[00:05:08] [SPEAKER_02] And with, you know, the AGM being pushed out, it probably allows them to do this. And I think, you know, the company is trading at what do we have here? What is it trading at today? It's only $38 or $39 a share. I think, yeah, $38.30. And the purchase price is for $44. So clearly the market believes there's a chance that something is going to be going down here. Like the deal might not go through. And Simpson has openly stated it does not like the acquisition.

[00:05:36] [SPEAKER_02] And because there's such a big shareholder, this is likely where the arbitrage is, because this is a pretty big discount to the acquisition price, especially considering the deal is expected to close. They just said in the second half of 2025. So we could be talking next quarter. We could be talking the fourth quarter, end of the year. And I mean, this has been one of the more interesting situations involving a board and a major shareholder I've remembered in quite a while.

[00:06:05] [SPEAKER_02] And I mean, all I can say is I'm pretty happy to be watching on the sidelines because this, I don't know, it just seems pretty ugly. You don't really want to be getting in fights with a major shareholder like that. And I mean, it just seems like they're trying to outmaneuver one another.

[00:06:23] [SPEAKER_01] Yeah. So what say you, Dan, do you think it happens or not? I don't know.

[00:06:27] [SPEAKER_02] It's hard to say.

[00:06:28] [SPEAKER_01] Like, I would imagine. You know, if you had to make a call on it, do you think this still happens or not?

[00:06:36] [SPEAKER_02] I would say no, because if Simpson had that big of, I mean, I guess unless investors are satisfied with the price. But really, I mean, Parkland was like 47 bucks a share last year. So there, I mean, unless, you know, if they had a 60% shareholder agreement on overhauling the board, maybe they could rally, you know, enough shareholders here to maybe push back on this deal.

[00:07:00] [SPEAKER_01] Parkland doesn't feel like a good time to maximize those kind of assets either. Right. Like anything related to consumer discretionary oil and gas is trading at a pretty steep discount right now. So it's a bit of a head scratcher why they would even go ahead and do that. But I guess it makes sense the way you explain it. It's almost to, you know. Yeah. It's like a screw. Yeah.

[00:07:26] [SPEAKER_02] I think that's what it is. I mean, yeah, because a prime example, if you look at something like Custard, like it's gone through what it's got to be like a 15 month drawdown now. I mean, it's, it's down like 20 some percent. Like, I don't really think right now would be the best time to sell this company. But I mean, I guess, you know, if they're all going to get overhauled, it makes sense maybe for them to just try to sell the company right now. It doesn't really seem like that good of a deal to me whatsoever. Yeah.

[00:07:55] [SPEAKER_01] And even when you're looking, so you compared it a bit to Custard because of the convenience store aspect. But even if you're looking at just a refinery side of things, I mean, if you look at the largest refiner in the U.S., Marathon Petroleum Corporation, and they're in a like 34 percent drawdown from the peaks or peaks or highs that they had in the past year. So it's a pretty significant drawdown.

[00:08:22] [SPEAKER_01] So it just tells you that both sides of the business are not necessarily at the most opportunistic time to be selling that business. Yeah.

[00:08:31] [SPEAKER_02] Well, I mean, even from a valuation perspective at $38 a share, Parkland's trading at six and a half times. It's free cash flow. Pretty good. I mean, I'll tell you who's getting a good deal.

[00:08:43] [SPEAKER_01] I'll tell you who's getting a good deal. It's not Parkland. It's not the shareholders. No, that's a good overview. Yeah, I guess we'll probably have some more developments on it. It seems like any type of gas station, convenience store play seems to be a bit of drama in Canada, right? You have also Alimentation Custard with the 7NI negotiations or who knows. I don't think there's been that much movement on that front recently. So it'll be interesting to see what happens.

[00:09:11] [SPEAKER_01] But it's pretty fascinating that there's some drama for both for different reasons, obviously.

[00:09:17] [SPEAKER_02] Yeah. I mean, if you're on the contrarian side and you think this deal will go through, there's almost a $6 a share gap in price. I mean, obviously, that always poses some risk because, again, like Simpson's a big shareholder and obviously they do have a lot of shareholder support. So, again, I'm betting it doesn't go through. But if it does, yeah, that's a pretty big gap.

[00:09:44] [SPEAKER_01] Okay. Well, we'll move on to the next one here. Another Canadian place. So this one, everyone in Canada knows the name. I think a lot of people hate it. Hates the name. Yeah. Hates the name. So Loblaws is the company I'm talking about. Whatever you think about Loblaws and some of its past practices, the reality is it's from a pure investment and business standpoint, it has been quite good. So looking at it that way.

[00:10:12] [SPEAKER_01] So we're looking here at revenues. They increased 4.1% to $14 billion. Food, same store sales, increased 2.2%. Drug retail, same store sales, which is primarily shoppers drug mart or PharmaPrix on the Quebec side, increased 3.8%. Pharmacy and healthcare services, same store sales increased 6.4%. E-commerce increased a whopping 17.4%. That surprised me.

[00:10:40] [SPEAKER_01] I wasn't expecting to see that, especially from primarily a grocery chain, that they still have that much in terms of e-commerce.

[00:10:51] [SPEAKER_02] It's just a permanent shift, I think. Yeah. Like, I know plenty of people who just order their groceries online and go pick them up.

[00:10:59] [SPEAKER_01] Yeah. Well, yeah. I mean, we did it during the pandemic when it was like the only way to do it, you know, when they were limiting the amount of people, at least in Ontario, that could go into the store. So we just do the click and collect. Yeah. But we haven't done in years. Yeah. And I was actually going to a superstore in Ottawa. And I noticed there was quite a few cars waiting in those like parking spot for the click and collect.

[00:11:24] [SPEAKER_01] So it's not, I guess, now that I think more, we're talking about it, I'm not as surprised, but still 17.4%. Now that the pandemic is well in the rear view mirror, a bit surprising for me.

[00:11:36] [SPEAKER_02] Yeah. And it's grown like they've continually grown that because you would think pandemic comparables would be very hard to top. But yeah, I mean, clearly there's a shift like people, I don't know, when I go get my groceries, I want to go into the store. I mean, I guess for like box goods and stuff, but like, I don't want those guys like picking out my produce. Exactly.

[00:11:56] [SPEAKER_01] I don't know. That's it. Yeah. I like that too. I like to pick a lot of this stuff. So, and what I found one of the issues is sometimes they would like give you a substitute and it was just not great. So yeah, I'm like that. Their internal food CPI was in line with Canada's grocery CPI in Q1. Tariffs and counter tariffs did not impact food inflation in Q1. Tariff related impacts are now starting to show up in prices, but they are working with vendors to mitigate the impact.

[00:12:26] [SPEAKER_01] They onboarded 30 new Canadian suppliers this quarter as they continue to push off for more Canadian made alternatives. And you can tell on the call that they are very focused on food inflation and tariffs. So say what you want about Loblaws and their management team. I mean, they do have the pulse of the population and they know that's a sticking point. So they're definitely, at least they're saying the right things, whether you think it's just a facade. I'll let people decide.

[00:12:55] [SPEAKER_01] The word tariff was said 14 times while inflation was said four times. They started putting the symbol T on tariff products to clearly show when the price is impacted by tariffs. I haven't noticed that. Have you? I haven't either.

[00:13:10] [SPEAKER_02] I mean, I would imagine this is just so they don't take any flack from rising prices. They want to make sure that, you know, you know it's not them.

[00:13:18] [SPEAKER_01] No, exactly. It's kind of where, you know, at the pump, the gas pump, you get some of the major gas plays or service stations or gas stations would put that on the gas pump. Some say like, oh, this is how the price. Yeah, exactly. It's broken down. So it's not a new concept, but it's kind of interesting. I'll be on the lookout just to see if I notice it next time I go.

[00:13:43] [SPEAKER_01] And they said that the lower Canadian dollar did have an impact on some food prices. So it pushed, obviously, the lower the Canadian dollar, the higher the cost will be on a Canadian dollar basis if they're purchasing things from other countries. Their discount stores keep outperforming their conventional stores as consumers are focusing more on getting value. Not surprising.

[00:14:07] [SPEAKER_01] I mean, we went, my daughter was sick last weekend and I had to go buy a few things. So my wife was like, oh, can you buy some plain chips? Just because, you know, you're trying when they're sick. You try to just get them to eat anything at that point. And I went and they had the no-name brand. I think it was like $2 for the big bag versus Lay's that was like $5. I'm like, well, I mean, I'm pretty sure the chips are going to taste the same. Almost the same. Yeah, they do. Yeah.

[00:14:36] [SPEAKER_01] So it just gives you kind of an idea. Even I do it. Like I find I'm paying more attention for getting the cheaper alternative, especially if you're buying something like I just mentioned, where it's almost the exact same product and you can get it at half the price. And they said that new stores are fueling their top line growth. And lastly, they increased their dividend by 10%.

[00:14:57] [SPEAKER_01] And Loblaws, I mean, one of the things that you can see is it's been really a good play when it comes to free cash flow per share. So I'm just showing this here since 2016. And it's a metric I really like to look at because free cash flow, especially if you're looking at longer periods of time. It's harder to fudge in terms of, you know, accounting numbers. It's really the cash in and out.

[00:15:27] [SPEAKER_01] And it can be lumpy quarterly. But when you start looking more by years, it makes a bit more sense. And looking at it from free cash flow per share since 2016, it's not been quite a straight line up to the right, but it's been mostly up. There's been some ups and down. And why I like it is also it takes into account the outstanding shares. So it gives you a good idea of the amount of cash flow you're getting per share when you're a shareholder. So quite impressive.

[00:15:54] [SPEAKER_01] You don't see that many companies that see their free cash flow per share trending up that way.

[00:15:59] [SPEAKER_02] Yeah, I don't know if you can show this, but I threw a chart in the show notes there of their shares outstanding relative to their price. Because like Loblaws, I would argue that Loblaws is one of the best, you know, shareholder returns. I mean, you have so if you look at the chart, you can see that over the last since around 2018, they bought back 20% of their shares outstanding.

[00:16:27] [SPEAKER_02] I believe it's like over $9 billion and its share price has gone up by 310% over that time frame. So I mean, this is the prime example of when buybacks really start to amplify and are a great way of shareholder returns. And that's on top of like a double digit, you know, dividend growth rate every single year. I mean, you can imagine buying back, you know, $9 billion plus worth of shares.

[00:16:56] [SPEAKER_02] And those shares are now, you know, 300% higher. It's, they've been, you know, if you look at their stock chart over the last five years, they look like a tech company's chart. I mean, they're up like 240 some percent. And it's just like a boring, razor thin margin grocer that's just killing it.

[00:17:16] [SPEAKER_01] Yeah. And at the end of the day, grocers will do well, especially if they're well managed, they'll do well. Whether the economy is doing well or not, people will find substitute. By the end of the day, people have to eat, right? So it gives them a big advantage. And I can be critical of companies buying back shares, but clearly they seem to have done it in a pretty good way. And you have a company like Loblaws too. You don't have that cyclicality risk.

[00:17:40] [SPEAKER_01] That's some other companies that we've talked about in the past when they buy back share really overpaying down debt, for example, something I've been quite critical of. So that does handcuff them a bit more for future problems if the business slows down. But a company like Loblaws, it's much more resilient because at the end of it, it's a consumer staple, right? It's an essential. So people have to buy it. But good quarter, obviously, for those who own the company.

[00:18:09] [SPEAKER_01] It's been a great company to own from a strictly investment perspective that we're talking about. So now let's move on to another one here, TMX Group, another Canadian company.

[00:18:21] [SPEAKER_02] Yeah. So TMX, they effectively run the, what would it be? The Montreal Exchange, the TSX, TSX Venture, things like that. So they're kind of a good barometer on the activity of the Canadian equity and fixed income markets. So they, and they've done very well, I guess I should say, over the last few years here. I mean, exceptionally well, there's very little competition here in Canada in terms of major exchanges. So they've kind of had the stranglehold in that regard.

[00:18:50] [SPEAKER_02] And they reported a relatively inline quarter overall, which actually caused a bit of a drawdown just because over the last couple of years, I mean, this company has performed so well. I think kind of an inline quarter caused, you know, a bit of profit taking, but they still like total revenue still increased 21% year over year or organic revenue growth, which would exclude acquisitions because they routinely make, you know, smaller acquisitions. It came in at 19%.

[00:19:17] [SPEAKER_02] Earnings per share declined 24% year over year, but this is kind of skewed by a large acquisition in the year prior when you adjust this out. They actually increased by 26%. So Tradeport, which is kind of an energy trading platform. It's one they bought back in 2019, I think, and has probably been their best acquisition arguably ever. I mean, they, they grew revenue by 20%.

[00:19:42] [SPEAKER_02] The only thing I would caution around Tradeport is just, you know, there's a lot of softness and uncertainty in the, in the energy markets overall. But I mean, right now it's, it's kind of unfazed. I mean, they're still growing accounts, revenues growing, earnings are growing. And on the say equity and derivative side of things, I mean, the derivative segment in revenue increased 50% year over year and options contract volumes rose 41%.

[00:20:09] [SPEAKER_02] So there's a lot of speculation right now, I would argue in the markets. Like this is another segment I could see slowing. And I mean, if you look to the chart here, you can see that, you know, when the markets started to turn sour in 2022, and we went through that bear market, you can see their derivatives revenue fell for, well, what would that be? Three consecutive quarters, two consecutive quarters before, you know, going flat a bit.

[00:20:35] [SPEAKER_02] And then when the markets kind of started ramping up again in 2023, you can see a steady rise. So really it all depends on, you know, how the markets perform moving forward. But, you know, speculative activity tends to die down, you know, in bear markets, just like we've seen.

[00:20:52] [SPEAKER_01] It's like people only speculate when, you know, it's just bullish speculation. Not trying because you can use derivatives to profit on downside too in bear markets. There's a way to do that. But that tells me that there's a lot of speculation and probably a lot of novice investors that are just know how to do it exactly like in a bull market, but have no idea what to do as soon as you enter like either a sideways market or a bear market.

[00:21:22] [SPEAKER_02] Yeah, like I would say a good chunk of this is on the institutional side as well. But I mean, on the retail side of things, I mean, this is just people really, for most investors, they really only know how to gamble in a bull market because there's not as much to be made in bear markets. So that's probably why this activity spikes. Another company you see this happening with a lot, if you ever look to something like Robinhood, same thing. Like options activity, crypto activity absolutely spikes during the bear markets.

[00:21:52] [SPEAKER_02] And then it tends to, you know, over the last while kind of flatline during a bear market. But the equity side and the fixed income side are still increasing as well. So they increased 15% year over year. Equity volumes rose 18%. So they traded 36.9 billion securities on the quarter. Fixed income revenue was up. They had mentioned it was probably due to the heightened activity in Government of Canada bonds, probably just due to the overall market volatility.

[00:22:22] [SPEAKER_02] And the listing segment remains pretty much the weakest part of the business. This was a huge part of the business during the pandemic. I mean, when valuations were just sky high, listing fees were crazy. They declined 5%. So listing fee revenue declined 5%. And the interesting thing here is, so financing dollars raised dropped 22%.

[00:22:48] [SPEAKER_02] But the number of financings increased by 62%, which kind of leads me to believe that, you know, smaller, more frequent listings rather than, you know, large scale IPOs, which kind of makes sense. I mean, maybe a lot of major companies who are considering going public right now might not be doing so just because of the current environment. I mean, obviously we're probably, well, never say never, but we're probably not going back to the pandemic level interest rates

[00:23:17] [SPEAKER_02] and the crazy IPO market during that time. But yeah, I mean, there's very little competition in the space here in Canada. I mean, this is one, you know, this is a company that I've covered over at StockTrades for numerous years and is actually one of the biggest regrets that I haven't added into my portfolio. I just, I never pulled the trigger on it despite watching it just perform outstanding for many years.

[00:23:46] [SPEAKER_02] But yeah, it was a pretty solid quarter. It's going to be one that you probably got to pay attention to just because, you know, that activity in the options market, in the equity markets, like depending on where the markets go, I mean, we could see a slowdown.

[00:23:59] [SPEAKER_01] Yeah, it'll be interesting. It makes me want to see a bit how it looks like for, yeah, EY comes out with a report every quarter on a global IPO report. And they usually have a small section for Canada. So it'll be interesting what they're saying. But I know it's been very, very slow for the last couple of years. Yeah.

[00:24:19] [SPEAKER_02] Well, I want to, I would imagine, like, I can't even remember it. I could not name off the top of my head a TSX IPO. So they would probably all, like over the last, say, like 15 months, there probably is some.

[00:24:32] [SPEAKER_01] Yeah, there are some, there's like maybe a handful, but they're usually like not companies you've probably heard of. Yeah. Not the kind of companies you'd expect. Yeah.

[00:24:41] [SPEAKER_02] So the bulk of it is probably going to be just activity on the venture, I would imagine. Yeah, exactly.

[00:24:49] [SPEAKER_01] Okay. Okay. No, that's a good overview here. Now we'll shift gears and go to McDonald's. I wanted, we don't talk about it all that much, but it was a very interesting quarter. Not good for McDonald's. I think it's serving notice to a quick serve restaurant. So QSRs, that things may get a bit worse because the consumer is pulling back. And a lot of people may think, oh, the consumer is pulling back. McDonald's offers value and so on. And while the reality is.

[00:25:19] [SPEAKER_01] Not anymore. Yeah, not anymore. And the consumer is definitely struggling. And at the end of the day, I think I haven't been to McDonald's recently. I usually would only go for, you know, when I was younger, maybe after going out. So day and night, get some McNuggets at night. And that's because it was the only place open. But now the only times I go, it's when there's like, I'll go and grab a coffee. That's about it. Yeah.

[00:25:45] [SPEAKER_02] I mean, we like where I'm at, it's pretty much the only place that's open 24 hours. So, I mean, if you're coming back to town late at night, I don't go there very often, maybe like three times a year, if that. But the prices are like, it used to be the cheapest fast food joint around. And now it's just, it's crazy. I can't believe how expensive it is. And I mean, it's really, I mean, just my opinion, but it's just really not that good. But that's just me.

[00:26:11] [SPEAKER_01] I mean, it's, I mean, they call it junk food for a reason, right? It gets the job done. Yeah, exactly. It gets the job done. But definitely struggling here. So, global comparable sales decreased by 1%. This is the fourth quarter in a row where comparable sales either declined or were essentially flat. There was one quarter where they were barely inched a little bit up. U.S. comparable sales decreased 3.6% while international was slightly down to up.

[00:26:39] [SPEAKER_01] I mean, some portions was up. It really depended on where. But overall, yes, international was either slightly down or slightly up. In Canada, traffic increased in the quarter in part because of their $1 coffee offering and hockey showdown promotion. I wasn't aware of either. The $1 coffee, I probably would have gone and gotten a coffee. But were you familiar with the hockey showdown promotion? No. No. I don't know what that is at all.

[00:27:08] [SPEAKER_01] But apparently on the call, they were saying how it resonated well with Kittian. So, I guess. I would imagine. Not us. Yeah. It's not just comparable sales either that decreased. System-wide sales also decreased 1%. They said that they fared better than most of their competitors in the quickserve industry. However, on the call, they said that macroeconomic uncertainty affected the consumer more than they had expected.

[00:27:36] [SPEAKER_01] And despite that, the stock is performing decently well, which is kind of a bit of a head-scratcher. But I guess we'll have to see how it goes in the coming months and quarters. In the U.S., traffic for low- and middle-income consumer was down double digits. And that's something that they stress. So, low- and middle-income consumers, they said they're pulling back. They said that this cohort was the most affected by inflation and high economic uncertainty.

[00:28:04] [SPEAKER_01] However, they said that traffic for higher-income consumers remained robust. So, it's interesting. And it's also a bit similar to what Walmart has been saying over the last year or so is where they're seeing more higher-income consumers, I guess, downgrading or going down to their store to get more value. And they're seeing their lower-income and middle-income consumers struggle a bit more.

[00:28:30] [SPEAKER_01] So, it's really interesting with these type of companies, especially that they focus more on value. And it makes you wonder if people find McDonald's too expensive. Like, what's the next way down to go? I guess you just, like, don't eat out. You just eat at home, right?

[00:28:47] [SPEAKER_02] I mean, they're pretty expensive, but they also are, yeah. Like, I think they're pretty much the lowest end you can get. I mean, as you were talking, I looked up Burger King and A&W, and it's kind of similar results. I mean, they're all struggling. Like, A&W is pretty much flat, same-store sales growth. Burger King, I think, is actually declining.

[00:29:07] [SPEAKER_02] So, I mean, I think it's just like the prices of these joints are getting a bit too expensive for people, and they're just, you know, kind of eating at home, I guess. The convenience of it just isn't worth the cost anymore, especially when you just don't have the money for it. Whereas the high-income earners, I mean, they might be downgrading from like an A&W to a McDonald's. I don't know.

[00:29:30] [SPEAKER_01] Yeah, exactly. And I'm showing the comparable sales because we were talking about that. And really, to give people a bit of a visual that are listening. So, essentially, you had a big drop during the pandemic, and then things started rocketing up because, obviously, a lot of the stores were closed. And either that or people had to order, which not everyone wants to do.

[00:29:52] [SPEAKER_01] And then you saw same-store sales stay pretty robust up until, I would say, like end of 2023 is really when things started slowing down. And then ever since, I mean, that's what I was talking about earlier. So, since March of 2024, that was 1.9%. Then negative 1%, negative 1.5%, up 0.4%, and this latest quarter down 1%.

[00:30:19] [SPEAKER_01] So, you can see that same-store sales are really struggling here. And just to finish, they are focusing on improving the value for low- and mid-income consumers for obvious reason. They really want to focus on strong meal bundles. Margins did remain stable, but it is something I'd keep an eye on if you're a shareholder or thinking about buying this name. It's something that may get impacted as they're trying to retain that consumer base.

[00:30:46] [SPEAKER_01] They haven't said so explicitly, but logically, if you really can't get value anywhere and reduce other costs at the end of the day, you probably have to take a little bit of a hit in your margin. So, that's something I would keep an eye on. Earnings per share was slightly down year over a year, which is not surprising. And the guidance remained unchanged for the rest of the year. They said that one of the big reasons it remained unchanged is because they had some currency tailwinds.

[00:31:15] [SPEAKER_01] So, they were able to benefit on that. So, overall, I mean, definitely not a great quarter. It definitely brings caution to what we'll see in the rest of the year, especially for the consumer discretionary type of businesses. This is obviously a restaurant. So, I don't know. Like, to me, it is kind of, I guess, essential slash non-essential. Where, yes, it is food, but at the end of the day, people may find some cheaper alternatives.

[00:31:44] [SPEAKER_01] So, it's really, I think, a good barometer, in my opinion. It'll be interesting what happens for the rest of the year. But if you own companies that are in the consumer discretionary space, whether it's food, whether it's goods, keep a close eye on it. Because I think you're starting to see a little bit of warning signs from several different businesses that are saying the consumer, especially in the U.S., is starting to slow down.

[00:32:10] [SPEAKER_02] Yeah, and I mean, I think it's kind of an element where, I mean, when your prices rise like this, you probably have to maintain value. And that's pretty tough to do with, you know, how much just all the McDonald's input costs effectively have gone up. I mean, price of beef, things like that. Like, yeah, I don't know. It's probably going to be a tough go for a lot of these quick service restaurants moving forward. Except Tim Hortons.

[00:32:37] [SPEAKER_01] They seem to be killing it. But, yeah. Well, probably, honestly, like Tim Hortons, especially because so much of the revenue comes from Canada. They are probably, I haven't gone, like, I haven't paid attention. I will next time I go because I do buy their coffee once in a while. Not because it tastes great, just because I find I'm the most wired after their coffee. So, that's why I go and buy it. But I haven't noticed it specifically.

[00:33:06] [SPEAKER_01] But I'm sure they do is they can probably try to really bank on the buy Canada sentiment. Yeah. I think they would probably push that real hard. So, that's probably playing in their favor. But having said that, we'll move on to a completely different type of business. REIT. So, Rio Can company. We've talked a little bit at times on the podcast, but it's been a while. So, do you want to go over what they reported? Yeah.

[00:33:33] [SPEAKER_02] So, this is one I actually haven't watched in quite a while, probably since the pandemic. So, I figured it'd be interesting to kind of dig into how the retail space is going. I do know that Rio Can is making some pretty aggressive investments in the residential space to kind of diversify away from that. But I mean, it's still, you know, it's a blue chip retail REIT. So, it's probably going to be a bit of a barometer in terms of activity in that space overall.

[00:34:00] [SPEAKER_02] Funds from operations effectively flat year over year. And the company's reported book value now sits at $24.89.

[00:34:09] [SPEAKER_01] Yeah. Do you want to explain quickly what FFO is, fund from operation, just for people that are not as familiar with it?

[00:34:15] [SPEAKER_02] Yeah. So, the funds from operations would effectively take all the operating expenses and everything out of the REIT. It's more of a, it's a better way to judge rather than earnings per share. Yeah. It's kind of a barometer that they use for REITs. I know a lot of utilities report it as well. Just in regards to the income statement, there can be a lot of, you know, one-time costs, overall expenses, things like that.

[00:34:41] [SPEAKER_02] So, FFO is kind of a more streamlined way to kind of judge the overall operations of the REIT. But the one thing is a lot of them use adjusted FFO as well, which they can kind of pick and choose what they include and what they don't include. It's not a gap metric whatsoever. So, we actually seen that. Yeah. Yeah. FFO isn't either. We've seen that a lot with Algonquin Power.

[00:35:08] [SPEAKER_02] They had, you know, their, before the dividend was cut, they had adjusted funds from operations. I mean, the dividend coverage was like 60%, but when in reality, I mean, the adjustments, the dividend wasn't sustainable. So, it is important when you look at this, you kind of figure out what they're excluding, things like that. And it'll give you a better idea as to whether or not you should probably utilize that ratio or not. But in terms of book value, so it sits at $24.89. So, the company's share price is in the low $17 range.

[00:35:38] [SPEAKER_02] And I know for the most part, these REITs, they usually trade at a discount to book value, but this is actually a pretty large discount. And I mean, clearly the company thinks this too. It acquired over 3.2 million units on the quarter. So, it spent around $60 million in buybacks. And it pretty much outright states it's doing this because it doesn't believe its unit price reflects the true value of the company. It looks like the company has gotten pretty aggressive on the buyback route.

[00:36:05] [SPEAKER_02] So, they've repurchased around 7% of total shares outstanding over the last three years. However, the difficulty there and we looked at Loblaw as how they bought back and their share price has done nothing but gone up. I mean, Rio Can's bought back and all their share price has done has gone down. It's down over 25% over that three-year period. So, I mean, buybacks are tough. Obviously, they're made for the long term, but it hasn't really worked out all that well right now.

[00:36:32] [SPEAKER_01] And one thing I'm showing here for Joint TCI and people just so they're listening. So, just to your point. So, it's still primarily a retail REIT. I have their slide deck. It's they get about 85% of their rents from retail. And then office is about 10.5%. And then residential is 4.4%. But you're right. Like they are trying to get that residential footprint up. I've seen a few projects in Ottawa that they own. Some nice projects.

[00:37:01] [SPEAKER_01] Some a bit of a head scratcher because one of them is near a, like I would say, class Z mall. I would say it's not a nice looking mall at all. It's a really old mall. I don't know if they'll be renovated. But the new building for the residential is quite nice.

[00:37:19] [SPEAKER_02] Yeah. I mean, they have the money to lay out into these expansions. I mean, I think with the residential space, especially when you're talking like multi-unit complexes, like location is pretty key. Especially when you're talking about being able to charge higher rent for those places. Occupancy is pretty strong. So they're sitting at 97.1%. I believe even during the middle of the pandemic, the occupancy never really dipped all that low.

[00:37:48] [SPEAKER_02] I think they stayed like above 93%. When you look to something like office REITs, I mean, those REITs had occupancy rates that dipped massively. Oh yeah. In that regard, they- Still low. Yeah. Still low. I think Allied is something, I think they're still like, I don't know if it's 70% or 80%. No, no.

[00:38:07] [SPEAKER_01] They were higher than that. But yeah, it depends on where in Canada it's located. Yeah. The last time I checked, because I used to own it, but I sold it over a year ago. They used to be, I think around like high 80s, which was like top, like basically best in class in terms of occupancy, just to give people a bit of an idea. Yeah.

[00:38:31] [SPEAKER_02] Yeah. So 97%. I mean, that's, yeah, that's pretty good occupancy rate overall. And it was never really all that impacted. And I mean, the company seems to be doing pretty well in terms of leasing spreads as well. So the leasing spreads would effectively refer to the increase in rent on renewals or the increase in rent on brand new leases. So their blended rate, which would just be the average of the two, came in at 14%.

[00:38:57] [SPEAKER_02] So that means, you know, on average, Rio Can is earning 14% more on its leases than it was the prior ones, renewals and new leases. And when we separate them out, renewals came in at 11.5% and newer new leases, 19.7%. So, I mean, to me, they're not only maintaining high occupancy, but they're also, you know, able to increase rents quite a bit.

[00:39:23] [SPEAKER_02] Residential net operating income came in at 7 point or sorry, 6.4 million, which is up 49% year over year, but it's still a pretty small portion of the business overall, as I mentioned. And the company expects to generate funds from operations in the $1.79 to $1.82 range this year with commercial net operating income increasing around 3%. So net operating income is effectively, you know, a measure to show how profitable an income producing property would be.

[00:39:50] [SPEAKER_02] So it would take the revenue generated by the property and then, you know, subtract all of the, all of the operating expenses, which I now realize that's pretty much what I said was FFO. I'm, I've mixed that up when you asked me what FFO was, I explained net operating income. FFO was like pretty much, sorry to go back there. FFO would be, they take out like sales and gains from assets. And depreciation. Yeah.

[00:40:16] [SPEAKER_01] Amortization. So, and then I think adjusted FFO, which will vary depending on the type of read, which can be very useful. You just have to understand the adjustments that they do. So just make sure you read that because AFFO may mean like one thing for like, it generally is the same thing, but they'll make different adjustments sometimes. And then adjusted funds from operation. Usually I think they'll factor in, I think a cat maintenance capex as well into that.

[00:40:44] [SPEAKER_01] And I think they'll kind of straight line rent, which adjusts rents for the duration of the leases. So those are some of the adjustments they'll do. Yeah. So it's a good thing. I added this net operating income explanation in here. I should have taught you. I was like trying to pull the slide deck and find some Rio can information. So that's my bad. Yeah. Yeah. I crossed those two up.

[00:41:04] [SPEAKER_02] Apologies. So the company's payout ratio in terms of FFO was around 61%. So this is the best in the industry by, by quite a bit. So if we look to a company like smart center, which is, I'm pretty sure there are a retail read with like a lot of Walmart anchored properties. Like they, they're kind of located in a lot of areas where, where Walmart exists. I believe Walmart is also a major tenant, but they're sitting in the high 80% range, which

[00:41:32] [SPEAKER_02] for a REIT is like, I mean, it's not necessarily concerning, but it's getting to the point where it could start being concerning. I mean, even when we look to a company like Allied, they reported, I believe 97%. Yeah.

[00:41:47] [SPEAKER_01] So in terms of, so what were you looking for? Like occupancy rate or?

[00:41:52] [SPEAKER_02] No, the payout ratio in terms of.

[00:41:55] [SPEAKER_01] Oh, the payout ratio. Yeah. I'm just trying to see. I don't have it right here. Let me, I have Allied, so keep going. I'll try to find it.

[00:42:02] [SPEAKER_02] Well, I mean, smart centers occupancy rate, if you could get that would be pretty interesting because I didn't look that up. I only looked at the, uh, the distribution payout ratios, but I mean, really if.

[00:42:13] [SPEAKER_01] So 80, yeah. So 88 for Allied. Yeah. For the FFO payout ratio. I don't have the, uh, an AFFO 96%. Yeah.

[00:42:24] [SPEAKER_02] Yeah. So you're looking at, I mean, 96% is, is definitely a tad concerning, but I mean, 60% that distribution is, is, you know, you'd never say never, but that's, that's more than safe. I mean, it's, uh, it's coming in quite a bit low. I mean, a lot of REITs pay out, you know, 70, 80, 90% of FFO. So that looks pretty good. I mean, the company's debt levels are still a bit high with a debt to EBIT of around 9X.

[00:42:51] [SPEAKER_02] Uh, this is bordering on the high end of the company's guidance. I believe they guide to eight to 9%. Uh, lower rates and bond yields should help to a degree only around 8% of their debt is floating rates. So they haven't really got that much relief on that front with, uh, declining rates. And I mean, I'm, I'm far from an expert on commercial REITs. I mean, the only one, the only REIT I own is Granite and they're, uh, an industrial REIT,

[00:43:19] [SPEAKER_02] but I mean, it looks like a pretty solid quarter from, from Rio can. I think just investor sentiment for REITs, I just remains in the tank. Yeah. Not just for Rio can, but just, I mean, REITs in general. Yeah.

[00:43:32] [SPEAKER_01] No, I, so I'm looking, um, as you were talking, I was also looking at Allied. Oh boy. It's, uh, oh my, I, I'm happy I sold it because it's not looking great. So as we were talking about it and this was not planned, I kind of just, um, was looking at it. So yeah, the FFO payout ratio, I've said 88%. It's actually up from 77% a year ago.

[00:43:55] [SPEAKER_01] And then if you're looking at the AFFO adjusted funds from operation payout ratio, it's 96.4 up from 83.8 a year ago. So this is, I know we have some listeners that own it. I mean, I thought it could have been a good turnaround play, but then I started hearing things from management where not that they were doing a poor job, but I could tell that they just couldn't forecast and they were really uncertain about the future just because of

[00:44:24] [SPEAKER_01] the macroeconomic environment. It was very obvious just, uh, the way their tone actually shifted after conference calls. And now I'm kind of looking at it and this is a bit alarming for me. If you, like, if I would own this company, I think just looking at the payout ratios and without, maybe there's a valid reason. I'm not quite sure. Um, maybe there is, and people can let me know that, uh, the dug in into the name more than I have recently.

[00:44:51] [SPEAKER_01] I used to know it quite well, but, um, there's definitely some alarm bells here because when you're getting at that payout ratio that high, I think, uh, a dividend cut is definitely a possibility here.

[00:45:03] [SPEAKER_02] Yeah. They're definitely bordering on the fact that, you know, you know, before like a couple of years ago, this was kind of a company that was, it was well covered and they had kind of a lot of room for flexibility. But now, I mean, you're bordering on the fact where probably nothing else can go wrong. I mean, they added, they sold off those, what'd they sell like data centers and everything and they got a bunch of money for that.

[00:45:25] [SPEAKER_01] Yeah.

[00:45:26] [SPEAKER_02] And they were supposed to pay off debt, but I mean, that has gone up 20.

[00:45:31] [SPEAKER_01] Yeah. They, they did. Um, they did, but again, I think it's, um, yeah, dead. They had to refinance some debt and I'm looking here. The interest coverage ratio is going down, which is not good. Means that you have less cash to be able to cover your interest costs. Uh, it's gone down actually quite significantly. So these are all things that are, yeah, definitely a pretty alarming and it's kind of reflected, I guess, in the stock price too.

[00:45:58] [SPEAKER_01] Um, you're looking at, it hasn't performed well. It's yielding like 12% when it comes to allied. So yeah, not looking that great. I wasn't expecting to talk about it, but, uh, I guess we kind of, we kind of looked at it as you were talking about Rio Canon, trying to compare the both of them, which obviously had different operations.

[00:46:18] [SPEAKER_02] It's gone from, yeah, 2.6 X interest coverage ratio, which is relatively tight. Even at that point, like I would imagine they use some sort of adjusted EBITDA to get this interest coverage ratio. That's usually what they're calculated off, but it's gone from 2.6 to 2.3. Debt has increased by 20%. So yeah. Uh, I mean on the flip side, like Rio can seems to be operating quite well, but I mean, there's

[00:46:45] [SPEAKER_02] just, there is, there's no love for, for REITs right now. It's a, it's a tough environment for sure.

[00:46:52] [SPEAKER_01] I know exactly. So, I mean, it may be if you can pick the right REIT, um, it does not look like it's a very love sector right now. So it may be worthwhile for those who are contrarians to look at some of these names, but again, you want to buy some of the quality. I don't know Rio can well enough to know it, but it does sound like they have, uh, you know, just seem like it has decent quality. And especially if they're trying to diversify a little bit away from retail might not be

[00:47:22] [SPEAKER_01] a bad thing. So we'll move on here. Uh, don't want to bore people too much with, uh, real estate investment trust. Speaking of real estate, if you haven't listened to it, uh, Dan Foch and I did a full episode that was released on Wednesday, uh, May 6th, where we did a view of real estate across Canada and the state of real estate in all the major cities in Canada, whether you're looking to invest in an investment properties or purchase a home.

[00:47:50] [SPEAKER_01] So if people are interested in having that and, uh, listening to that, getting some more context, just make sure you don't miss that episode. Really had a fun time with Dan. And if we, if people really liked it, uh, maybe it's something Dan and I will try to do every quarter or a couple of times a year. And, uh, so now we'll move on to, I guess, uh, a more fun topic, especially if you're young spin master corp, which is a toy maker for those who are not familiar with them. It is a Canadian company.

[00:48:17] [SPEAKER_01] It's a great ticker toy.to. So I think, uh, yeah, it doesn't get much better than that in terms of tickers revenues increased 14% to 359 million. Toy revenue was up 21%. Entertainment revenues were down 14% for those wondering entertainment revenue. Uh, they own amongst other things, uh, like the Paw Patrol franchise. So there's these Paw Patrol movies. If you have kids, you're probably familiar with that.

[00:48:46] [SPEAKER_01] They also have digital games revenues with that was down, uh, up, sorry, 4%. Gross margins were down while operating margins fared better than the same quarter last year. Earnings per share was negative, but less than last year. And keep in mind, this quarter is always their weakest quarter. Um, their strongest quarter is Q3, which I was a little bit surprised, but it's always seems to be Q3 followed by Q4, which is the Christmas season. But then you start thinking about it.

[00:49:13] [SPEAKER_01] They may get a lot of purchases with like the back to school stuff, which would make sense. Oh yeah, that's true. Yeah.

[00:49:19] [SPEAKER_02] Yeah.

[00:49:19] [SPEAKER_01] So the more I was thinking about it, I'm like, okay, that, that makes a bit more sense. And on the tariff front, um, this is why I wanted to listen to them because if you have toys at home, if you have kids, where do, where are the toys mostly made from Asia and more specifically China? So I knew this one would be very interesting to listen to on the tariff front. So they actually mentioned the tariff ward 38 times on the call. So, but we better not. I think.

[00:49:49] [SPEAKER_01] Yeah. Yeah. It's, uh, it's a pretty, I mean, I mean, it's fair that they did because it is a big, big issue for the business. Now they continue to monitor the situation closely. They withdrew their 2025 guidance due to uncertainty because there's some big impacts to their U S business. Specifically, they are shifting a large part of their production outside of China for the production. That remains in China.

[00:50:16] [SPEAKER_01] Their strategy is they'll be focusing on selling those products outside of the U S right now. They said that about 50% of the production comes from China. And then the rest comes from a mix of India, Vietnam, Indonesia, Mexico, and Europe. Their goal is to have 70% of the toys sold to the U S produce outside of China by the end of this year and even higher next year. So they clearly have some plans in place here.

[00:50:41] [SPEAKER_01] And they also said that they have close to 10 years of operation experience in most of the other markets. I just mentioned where they have production outside of China. So they say it gives them a pretty good hedge against competitors because they already have those supplies chains established, those relationships in place, which is something, I guess, a positive here in the U S. They said that they are in discussions with their retail partners for price increases, the increased costs.

[00:51:10] [SPEAKER_01] They just can't fully absorb it and neither can their retail partners. So they will need to pass some of those increased costs to consumers. And one thing that helped them is they have a robust inventory levels, which is positioning them well in the short term, because keep in mind things that you already have inventory before tariffs won't get tariffs. So it won't get tariff.

[00:51:35] [SPEAKER_01] And that is something for if you own a company that is that has some kind of inventory that will be tariff. And especially that does business in the U S because right now the U S and their tariffs is the biggest thing you want. That's something you should be looking at because the higher their inventory means that they probably have a decent amount of goods that they can still sell without the tariff impact.

[00:52:01] [SPEAKER_01] Clearly in the past, maybe it would not have been so good because then it may mean that some of the stuff may become stale. They may have too much inventory, but right now I think it's actually going to be a pretty good advantage for the companies that has these light high levels of inventory so that they can still sell to their partners without the tariffs in place.

[00:52:23] [SPEAKER_02] Yeah. Because if you've seen like a company, like say a Ritzy a few years ago when they had that inventory issue and you eventually have to mark it all down. Yeah. Because I mean, it just, I don't know if it would be the same with like, well, I guess toys probably.

[00:52:38] [SPEAKER_01] Well, right now, I mean, instead of marking it down, you can probably just keep it regular price because it's going to be more competitive than the stuff that has a tariff on it.

[00:52:47] [SPEAKER_02] Yeah. Yeah. So I would say, yeah. Cause what is it? Yeah. The tariffs are, I mean, the one thing you can take from this and all these companies is like, there's a lot of people looking to shift production away from China now. Yeah. Like even on the call with a Ritzy, they mentioned that, you know, they have about 25% production in China and I believe by like something like 20, 27 or something, they, they want to bring that down to like 5%. Yeah.

[00:53:15] [SPEAKER_02] Yeah. So, I mean, I would imagine that's going to be a huge shift.

[00:53:19] [SPEAKER_01] Well, I think what's becoming more and more clear is that the U S is really targeting China. Yeah. They are obviously targeting other countries, but I, I was talking with Braden maybe a month and a half ago and I think we were talking about the podcast, although sometimes it blurs a little bit. And that's one thing I said is I think one of the concessions Canada can easily make when they're starting to negotiate with the U S after the election

[00:53:44] [SPEAKER_01] is as part of the nose negotiation is just to say, look, we're going to play ball when it comes to applying tariffs on China as well. Yeah. And I think you're going to see more and more countries. That's going to be the, the kind of offering that they're going to do to the U S where it's starting to single out more and more China. Um, so I think companies are starting to see that where the U S is more open to trade deals for countries outside of China, whatever the country is, as long as they

[00:54:14] [SPEAKER_01] return the favor and impose some tariffs on China. So I think that's what we're starting to see. But again, it's not super clear, but that's my interpretation of things despite the U S and Trump being, you know, seemingly like sending mixed messages on a daily basis. So we'll have to see, but that's the impression I'm getting.

[00:54:33] [SPEAKER_02] Well, didn't you see, uh, when they asked him what concession he wanted from Canada, he just said he wants friendship. I didn't see that. No. Yeah. And the lady was like, that's not a concession. And he's like, Oh yeah. They asked him what is number one concession he wanted from Canada. And he said friendship, but yeah, I mean these like, I don't know, like spin master, like they're just going to go from China to some other international, like they're not going to bring this to the United States or Canada.

[00:55:01] [SPEAKER_02] I imagine it's just going to be way too expensive for them, for them to do this. But, um, yeah, if his plan was, you know, to be harder on China, it's definitely working because a lot of these companies are having to make like very quick decisions on their, uh, supply chains. Yeah.

[00:55:18] [SPEAKER_01] Some hard pivots. Yeah, exactly. I keep, uh, every time for the older listeners, I don't know if you're maybe a bit too young for that. Friends. Um, yeah, friends that, uh, the couch episode. Oh yeah. That's one of the classic scenes, but, uh, I think we've rambled long enough. It was a definitely a jam packed episode. Some people may be wondering why we did not talk about a Warren Buffett, the big news that he's

[00:55:43] [SPEAKER_01] going to be leaving Berkshire Hathaway as CEO. Don't worry about that. We are making a full episode essentially on the annual meeting, the Berkshire Hathaway annual meeting that happened just last weekend. It will be released on Monday. So if you're looking for our takeaways, our discussion, our thoughts, obviously on the big news, make sure you tune in on Monday. We'll be dedicating that whole

[00:56:06] [SPEAKER_01] episode to a Buffett. I watched a whole annual meeting granted on 2X speed for parts of it. And then when there were nuggets where I really wanted to listen to, I would like slow it down. Cause I mean, the thing was like six or seven hours. Yeah, it was, uh, so, you know, I, I have time, but I, I try to be more efficient when I can. And I, I get used to listening it to the, the speed up

[00:56:32] [SPEAKER_01] version. So when you get to a good spot, you just slow it down and then you listen to it carefully

[00:56:36] [SPEAKER_02] there. That's the truth. Yeah. It's a, that meeting is a bit of a snooze fest for most of it, but then there's some really important, um, I watch videos on 2X speed all the time. I can't understand Buffett on 2X speed. I don't know what it is. I just can't understand what he's saying.

[00:56:51] [SPEAKER_01] So I have to slow it down. That's fair. That's fair. I would slow it down when it was, uh, stuff that I liked to 1.5 or 1.25. So that, that, uh, and actually when you go down from two to 1.5, it actually like feels real slow than one normal. Yeah, yeah, exactly. Okay. So, um, we rambled enough. Uh, we will be, uh, talking to you on Monday again with that, uh, uh, our takeaways from the,

[00:57:17] [SPEAKER_01] uh, holder meeting. Thanks again for listening. The Canadian investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.