The Canadian Investor - 10 lessons over 10 years & Two stocks we like

Episode Date: April 8, 2024

In this episode, Braden dives into his investment journey over the past decade starting when he turned 18. He shares his transition from indexing to selecting individual stocks and reflects on the lessons learned, emphasizing the intellectual joy of managing a portfolio despite the challenges.He discusses what he’s learned over the past 10 years, including the importance of quality over quantity in portfolio decisions, the influence of entrepreneurship on his investment approach, and the evolving understanding of what constitutes a sustainable business moat. Simon and Braden also discuss two stocks on their radar. Simon goes over why streaming mining giant Franco-Nevada is on his radar while Braden goes over the small cap roll-up Terravest. Stocks discussed in this episode: FNV.TO, TVK Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. 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 Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome to the show. My name is Brayden Dennis. As always, joined by the unequivocal Simon Belanger. I'm pumped for today's show because I'm going to do a roundup of like everything that I've learned over the last

10 years into 10 concise points. And then Simone and I both have a stock on our radar. I think they're both TSX names too, which is a rare circumstance. Yeah. Dual listed for mine, but yeah, still. Okay. Well, that's good, right? Because I mean, this is the Canadian Investor Podcast and we sprinkle in a lot of Canadian content, but of course there's a lot of action. A lot of the more interesting companies on US markets, but today we've got lots of Canadian companies. Yeah, there's a behemoth next door. Yeah.

Yeah. Yeah. I don't know if you've heard of them. Okay. So I was at the coffee shop last Saturday as I do. And I like making content obviously online because one, I get enjoyment out of it. And two, it's marketing for FinChat usually. I'm not going to kid myself. That's one of the main motivations. And I did a kind of 10 yearyear reflection, and I had a lot of fun with it. I got tons of good reception from it on Twitter. It's one of those things where I got kind of personal, and you expect some people to be haters in the comments, and it was just like overwhelmingly positive for a platform like Twitter. That's an achievement in itself. Surprises me to the day. Yeah. Yeah, That's an achievement in itself. Surprises me to the day. Yeah.

Yeah, that's an achievement right there. So I'm just going to go through the 10 lessons over the last 10 years of investing. And Simone, feel free to chime in on everyone we can discuss. And yeah, I'll just get into it. So the backstory here is I'm turning 29 this summer. When I turned 18, I couldn't wait to open my brokerage account. So I am one of those people that at a young age was very interested in business and finance. I was an engineering student at the time in my first year of university, but I was pretty pumped to open my brokerage account. And my plan was to own the index. I would say I'm surprised at my wisdom at that age by just chilling, owning the index and learning as much as I can, because a lot of young people, a lot of young men might go to the old stock market casino

pretty quickly. So I was fully indexed for two years. And in 2016, so now I had my brokerage account for two years. I was 20 years old. I was taking my engineering undergrad and I started allocating to a few individual public companies. You and I probably would have met three or four years after that. And so my unaudited returns since then have been pretty solid. 14% companion annual growth rate on the portfolio. That includes all fees. That includes all transactions, withdrawals, money in, money out. It is very intensive. Simone, the spreadsheet that I built, it's pretty good. I know you use it.

Even Dan uses it all the time now. I see him constantly. Dan's like, dude, this spreadsheet's amazing. They're talking about Dan Kent because when he started using it for his Join TCI updates, he's like, are you monetizing this thing? Like you could sell this spreadsheet. I guess kind of because Join TCI subscribers get a copy of it.

It's at the top of every post, but that's not what this is about. So the performance has been solid. It's been market beating, kind of similar to the S&P over that time, which is pretty remarkable that the S&P has done that well as well. And it's not lost on me that it's probably not worth the effort over just simply holding the index. But I do it because I love analyzing businesses, obviously. I mean, this show went for six years before anyone cared about it. Managing the portfolio is something

I want to be able to do as long as I'm able to. It's intellectually stimulating. And Simone, I think we can agree there are worse hobbies out there than managing the portfolio. Yeah. No, I think I agree for the most part with that. I guess for me, it's a bit reverse where I went from more picking stocks to having more index allocation. And I think that that's totally fine. And I reserve the right to one day just say, I don't love this anymore and just go fully index. I think that that's also fine. But right now, I don't have any plans to do that. I find it extremely intellectually stimulating. I love doing the podcast. I love talking about individual companies. So I have so much to learn. These 10 things are

not meant to be a set of rules to live by, but rather a bunch of ideas to chew on. And I've only been doing this for coming up to 11 years. I'm hoping to be able to do this for many, many decades to come. So it's not meant to be a set of rules to live by. All right, number one, the more experience I have, the less portfolio portfolio turnover I desire. I want to trade as little as possible. You saw my joint EZI portfolio update last weekend. I was like, I did nothing. That's it. I'll let the other guys talk. So it's okay, I made up for it. Yeah, you made up for it. And so my bar for quality, as a result of that, since I want to trade as little as possible, my bar for quality has gone up tremendously. Because my mindset on that is, I want to own something so good that an idiot can run it. And I'm going to sleep well at night if the stock market turned off for 10 years and it returned on in 10 years and I still own the position. it turned off for 10 years and it returned on in 10 years and I still own the position. Like that's more and more of my, I get more experience. My mindset goes toward that.

Number two, most portfolio outperformance comes from just a handful of decisions. You see this power law at play with most long-term track records. You see it with your performance. You see it with my performance. You see a lot of concentration build and high conviction names. My example here is obviously Constellation Software, which I've been a shareholder. I've been lucky enough to be a shareholder of that and the spin co's for as long as I've been smart enough to own them. And most outperformance comes from just a few handful of decisions. For you, it's been a few individual names. Bitcoin, for sure. Like, there's no question.

There's power laws. Like, there's an actual distribution curve that plays out in almost every portfolio. So this is normal. Number three, Buffett talks a lot about this, but he says he's a better investor because he's a businessman and a better investor because he's a businessman and a better businessman because he's an investor. And being an entrepreneur has made me a better investor in three ways. One, assessing management teams. Two, being more patient through the ups and downs because there are many of them. And the real life of running a business is more

nuanced than a stock price go up, stock price go down. And then three, which is kind of related to that, assessing real risk, not share price volatility, because I find that to be a terribly poor measure of public company risk that the finance industry has leaned on for so long. Real threats, real threats to the business and their competitive advantages, real chances of me losing my money because the company is no good anymore. I think I've been better at assessing that style of risk and not share price up, share price down. Yeah, I think I definitely agree with that too. And obviously for you, it's FinShad, but we also run the TCI podcast network. And there's decisions we've taken that maybe we could have seen a bigger financial benefit short term, but it would have definitely

not been a good benefit longer term. Even like certain type of advertisers or even you know been asked countless times of you know stock promotion and those are decisions that we said no we don't want to do because i think like people trust us and value our insight and i think longer term i think it was the right decision to do and i think assessing management that way as well you constantly see management teams that are so focused to short term. And, you know, I was having a discussion with obviously dividend FinTwit, which is very passionate about their dividends. But what I noticed more and more is a lot of these dividend, you know, favorite stocks and, you know, BCE kind of comes to mind. But management oftentimes are

kind of just so focused on keeping that dividend and don't have a long term focus for the business instead of, you know, what I think. And I think you agree with that. A lot of the time it would be cut the dividend, get the business in order, and it'll be a much better business. And I think the total returns will actually benefit from it longer term by doing that. But unfortunately, a lot of management teams don't have that courage. That's exactly right. Who wants to be the guy who makes that capital allocation decision and the stock price drops 10% that morning because of you? That will happen. But you're right. If you're to zoom out and see, okay, what's probably going to be best for the business and better on a total return type scenario, long-term thinkers get to win in the long-term. Optimists and long-term thinkers get to win long-term. Short-term

thinkers get to win in the short-term. But what game do you want to win in? I want to win in the first one. I don't want to win in the second one. But what game do you want to win in? I want to win in the first one. I don't want to win in the second one. So align yourself to that. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you

have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questtrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because

brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right, number five. This is actually probably one of my favorite ones. And a lot of self

reflection in my portfolio has come to make me realize this, which are technology moats are a lot less sticky, are a lot less durable than my younger early 20s brain thought. The moats and the real deep competitive advantages, companies that are really, really solid are typically entrenched in really boring industries and have been more enduring because of that. Think of the card networks, think of railroads, infrastructure, credit ratings. The credit ratings have been the same duopoly since like the early 1900s and started actually in the late 1800s with the railroad credit agencies, which was Standard & Poor's and Moody's. And so those types of moats are very boring compared to a technology moat. But as we've seen, Moore's law has proven that technology changes really, really fast. And the high growth, high tech business with a huge headstart,

a huge headstart, they're way ahead of everybody. They got this, they got that, they got this, they got that. It is a bulletproof idea until it's not, right? Like, I don't have any really better way to say it. It feels like a bulletproof investment thesis until the landscape of technology changes a decade later and it's a dinosaur all of a sudden. Yeah, and the one that I would probably add to that, the ones that really end up doing well in the technology space, at least from my perspective,

is the ones that in the technology space, at least from my perspective, is the ones that have that technology advantage, but also the network effect to go with it. And that's one thing I've realized. I've realized over the years that network effects are more powerful than I thought, because, you know, how many, let's just take Twitter, right? Whatever you think about, you know, Elon Musk or X, right at this point. I mean, the reality is there's just take Twitter, right? Whatever you think about Elon Musk or X right at this point. I mean, the reality is there's just not really any great alternatives. And whatever people, even those who hate Elon Musk, a lot of them end up returning to the platform because if they go on threads or Truth Social or whatever. Yeah.

There's just not. Mastodon. There's been all of these like try to yeah telegraph i don't know there's a bunch of them yeah yeah because why would you want to go on a platform that there's almost no one there that's the whole point right the network effects and there's network effects in other ways obviously but i think that's just an easy example you're so right and there is a long list of dead bodies of companies that have tried to disrupt those huge network effects companies. And people switch over and then they realize like, they find themselves back on Twitter. They find themselves back on those, you know, those big network effects. So I'm totally aligned, right? Like those tech companies have really, really hard to disrupt network effects versus like a technology advantage or being so far ahead. You know, the competition's 10 years behind them.

But Vizine Mastercard, the perfect example, different kind of network effect. Yeah. Different kind of network effect, right? That's like a tech company-ish and they have this amazing two-sided network effect. Yeah. Different kind of network effect, right? That's like a tech company-ish and they have this amazing two-sided network effect. Yeah. Good luck if you show up with your Discover card. Yeah, exactly. Exactly. All right. Number six, most of the biggest winners that I've witnessed during my time as a market pundit and chiming in and trying to see what works and what doesn't is from management teams that value optionality. If I look at the mega, mega winners, I've seen that management has created winners out of thin airchanging leaders, world-changing type entrepreneurs like Jeff Bezos value optionality from day one.

On his mission, he's like, okay, we're going to start with a category like books because it made sense. And he has so many reasons for it. But he always knew that the everything store was the real vision. knew that the everything store was the real vision. And then he's like, oh, wow, we built this absurd compute infrastructure to be the everything store. Let's spin that out as its own separate cloud compute. They kind of invented cloud computing. Next thing you know, you have this hundred billion in run rate, high margin, wonderful scale company inside of Amazon. And I've seen this time and time again with the management teams that value optionality and can create new business lines and can create new products and services that didn't exist before

leveraging what they already have. Those have been the world changing wealth creating type assets. Yeah. Yeah. I mean, I don't have too much to add there. I think that's completely true. I think it's also a fine line sometimes with those conglomerate that we saw in the 1990s and 2000 that end up getting in too far out of the core business, but I think there's enough that's kind of close with your AWS example and Amazon that ties in both together. But yeah, I think you're right. If well executed, I definitely agree with you. Yeah. Of course, it always needs to be that level of execution. All right. Number seven. This is one that is very controversial, it feels like, where value investors really feel like they need to always be getting a great deal when buying a stock. And I have found that the best

companies in the world tend to both be very highly valued and yet underrated at the same time. And yes, these can coexist. Like you can have something on a trailing multiple that is super highly valued. Everyone knows it's a great company and still be underrated in their ability to compound. And in five years, you look back and go, that stock was actually cheap. You know, like it takes a flipping of the mindset around value and valuation, a little bit more forward thinking, assessing quality a bit more. Those two things can coexist. And it took me a long time to realize that they can coexist,

that stock can have a huge, a high multiple, highly valued and underrated. It took me a long time to realize that those can coexist at the same time. Yeah. And a lot of it, I think a lot of the time you'll find the best points to invest in those companies where there's just some shorter term uncertainty and the market kind of overreacts. I mean, there's countless examples for that. I added to Lululemon recently and that's my kind of thesis with Lululemon is the market is kind of overreacting from a shorter term basis and not thinking longer term. Obviously, it's still it's not cheap. I mean, if you're comparing it to, I don't know, like if you think

you're going to pay like five, yeah, if you're, if you're thinking you're going to pay five times earning for a Lululemon, it's not happening, but it's still, it's a better value than it was. And considering the growth, I think it's, it's a great play. That's why I added to it, but that kind of goes, I think it's a underrated company right now. I think people are undervaluing the power of the brand and the potential has to grow in China. Yes, I will say China, but again, I think it's a sensible play to make in terms of growing in China and the type of brand they have. They have over 100 stores there now.

Yeah, yeah, they're growing quickly, but it's still, I think it's as big right now as the Canada revenue. But again, when we compare China and Canada, it's not apples to apples. Yeah. Slightly more people. Just a couple more people, I think. Yeah. Number eight, my most complex ideas have rarely worked out. And that's not me saying that they can't work out. Some of them certainly have, but the batting average is lower. When I've had to have three moving pieces all collide in an investment thesis, and they just don't seem very obvious, and you couldn't explain them to a five-year-old in terms of your investment thesis. Those ideas can work.

I've just found that the batting average on them working and the outsized returns, even to the upside if they do work out, has been lower. do work out has been lower. If I look through the track record, I look at every trade, every investment thesis over the last 11-ish years, those have been mostly duds. When I've had to have three or four moving pieces, it's like you need the solar eclipse to happen or something. It's perfectly shaded over the moon. Like it's a lot more difficult to pull off, I have found in practice. Yeah, you're making me jealous with this list. I'll have to do a Twitter thread on what mine is. Hey, next week you do your 10. You should do your 10. Yeah, no, I think you definitely inspired me. I think for me, I think I would go down the kind of deep value investing. For the most part, I've had some successes doing that. But unfortunately, when you get into deep value, oftentimes there's a bit of, sometimes it doesn't always work out.

And the one, I mean, there's one of my holdings right now that I am debating. I'm waiting for the next quarter and I'll kind of re-evaluate and I'm down 25% or so. It's not a big position, but that's Allied Property REIT. Again, I still think the premise is there, but I'm coming back to is that money better invested somewhere else and it will have better returns going forward. So for me, my thing is probably, yeah, the deep value, not the cigarette butt, but because I don't think it's that, but the deep value investing. Well, that's a good example of, by the way, I think you should stick to your guns on that one but that's neither here nor there the the market also has to agree with you and that can take years with these with those deep value plays like that's what

i mean by there's so many more moving pieces that rely on not only you being right the timing being right the turnaround being right and the turnaround being right, and the market actually rewarding you. Yeah. Sentiment, I would say plays a big part in it. Yeah. There's just a lot of moving pieces. Anyway, so they can work, but my batting average has been lower on more complex investment ideas. All right. Nine, I often get distracted by ideas that I'm psychologically long or short. And what I mean by that is like, I'm rooting or betting against some company without any capital on the line. This does nothing for me. This is a complete waste of time.

Takes energy. Yeah. Yeah. I should be turning over rocks, making a decision and moving on. And I think that that's more my personality anyways, but I get distracted and there's many more decisions worth spending time on. And I look at these companies that I'm like, not even long that I'm like cheering on and like, I'm like, see, look, I was right. It's like, yeah, but you didn't even put any money on the line, you dork. That's what I'm thinking to myself. And so make a decision and move on because there's so many decisions worth spending time on than kind of being in and out of psychologically long or short stocks, right? I'm trying to compound my capital, a high investment, a high return, and doing that doesn't add to that goal. Yeah, I mean, I can just think for me, the way I can relate to that is, you know, all those poker sites, you can do like play money.

And I always found that so stupid because like people don't play the way they would play if there's no money on the line. People are just like completely reckless. And I mean, I think it's the same thing, right? If you don't put money behind an idea, I mean, would play if there's no money on the line people are just like completely reckless and i mean i think it's the same thing right if you don't put money behind an idea i mean it's easy to say but you're not putting anything on the line and i always found that you know funny because they're like oh train playing play money i mean sure if you want to learn the basics of the game of like raise called fold and how the game works sure but if you can learn the

rules but you won't learn the rules that's about it yeah so that's uh the way i kind of relate to that one yeah it's so true because if you're right like to look back to your analogy if you're right you're like oh i'm a genius but if you're wrong ah there was no money on the line who cares right like that's not reality, right? And I do this with my investment ideas that I'm just like psychologically long or short and it's a waste of time. I need to do better.

All right, number 10, doing nothing for extended periods of time is okay and likely even optimal. Frequent portfolio activity is the nemesis of compounding with the way that I invest in my style of investing. It is the nemesis of compounding. And so number 10 relates to number one, which is I want to do less. And number 10 is doing nothing is actually not just okay, but perhaps even optimal. And I have a, there's a period there. If you, you can see on my screenshot there, there's a period in, in 19 when I had just a monster

summer. I had like six months in a row that were like up 4%, up 5%, up 3%, up 4%. It was like some of my best market performance, sorry, some of my best outperformance. Not just performance, but like against the market, it was not doing that great. I was on a five, four month backpacking trip. I don't even think I opened my broker once during that time. And so of course, there's some luck at play here. Of course, that's not the law here is that I shouldn't look at my portfolio. But that is pretty telling that doing nothing is actually sometimes very optimal when it comes to making decisions. Yeah. No, I think a lot of the time, you know, less is more.

of the time, you know, less is more. And especially right now, I mean, I'm finding as a whole, and I've been pretty vocal on that and been proving wrong with the way the markets are going. But and I'm still investing and I'm not like, you know, I'm trimming on the edges certain things, but I still think the markets are pretty richly valued currently. And I find it harder and harder to find some really attractive play and these kind of environment i think it's perfect kind of environment to just you know sit back and relax totally i mean the most like the hall of the goats of investing the hall of fame of investing of course include warren buffett and charlie mer. And they've laid out the path to success, which is read all day in their office. Like what profession would put you at the hall of fame, like the Tiger Woods, the LeBron James, the Michael your sector of investing and the least activity is optimal.

Like they're not out there doing a lot of stuff. They're just kind of thinking and doing very little activity. It is so contrary to almost every other profession. And so I think that there's some valuable learnings there. Well, you can even relate for those who are into like sports right and let's just say hockey because we're Canadian podcast but a lot of older players and they're younger than me but still older players let's say in their 30s you'll see that the ones that remain good are actually oftentimes way smarter with and conserve their energy and they're much more efficient in their play compared to their younger

selves even, because the experience they've gained, they know how to conserve that energy. And they also realize at that age that their body might not be able to do exactly the same things that they were five, 10 years ago. And that's always something I get fascinated with is how intelligent the older players and efficient and smart they can be. So there's a wide receiver for the Seattle Seahawks named Tyler Lockett, who is a journeyman wide receiver now. He's just so consistent. He's been money and he's a smaller guy and he's just been money. Him and Russell Wilson had a connection for so so so long and he's still great to this day if you look at ty lockett you pull up just the highlights of his career he almost never gets hit

ever he will run out instead of taking on some big linebacker or he will literally just go down and not get smoked by an oncoming safety. Because there might've been maybe one yard forward, but it's not worth it to him and his team to get injured or threaten his career because he's a very important piece to that team. So that just reminds me of Tyler Lockett. If you look up a compilation of just all his highlight plays, he never gets hit. It's pretty spectacular. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online

broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go

on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking,

sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store and I'll see you there. All right, let's move on to stocks on our radar presented by our wonderful show sponsor and friends, EQ Bank. If you don't have an EQ Bank account yet, dude, it's money. Because for me, for instance, I got to put a bunch of money away at tax time. And my GIC, I just got a notification that it matured, which I timed up right to do my taxes next week. So it's great. It's just money. The returns are good that even just in the cash savings plus account is so good. So Simon, take us away with your first name here and then I'll go after. So this is the name.

So it's Franco Nevada, ticker FNV.TO. I talked about that. It must have been a couple of years ago. It's been a while since I talked about them. It is a mining play. It's a precious metal streaming company with a focus on gold. So the business model is different than traditional miners. They get revenues from royalty and stream investments. So essentially what that means is

they finance mining companies, their development and expansion efforts and in exchange for a percentage of their future production or revenue. And as part of the financing, usually they'll receive a percentage of the future production at an extremely reduced price. Just to give people an idea, in their most recent year, they were paying an average of $296 per gold equivalent ounces when it was selling above $1,700 or actually $1,900, the average price that it was selling. So it just goes to show that it is a very interesting model. They do have a lot of diversification. So in terms of commodity, two-thirds is about as gold. So the rest is between silver, which is 10%. And then you get oil as well.

So they have some exposure there, which around 10% as well. And the rest is just a mixture of other mining and natural gas. They also have a pretty good diversification. So 88% of their operations are located in the Americas. So that includes obviously North America, Central America and South America, and the rest is in the rest of the world. In terms of assets, they're also very well diversified in terms of total assets. One of the big issues, and if you're familiar with the name or if you pull up the stock chart, you'll see that there's been a significant drop in the price a couple months ago. Well, that was because there was a ruling that the Cobra Panama mine

was found unconstitutional. Oh my God. You want to say that for me? Unconstitutional. There you go. Unconstitutional. I got it. Okay.

Do they have a French version to that word? Unconstitutional. Yeah, I think I'm just coming off of that cold. I'm still having trouble pronouncing certain words. You got to use the Francophone excuse. Yeah, that's your go-to. And the mine was operated and it made the news by first quantum.

So you may have seen that braided on BNN. It was kind of all over the place when it was happening. And operations were halted in November of last year. And Franco Nevada has essentially written off the mine, although they are still exploring legal avenues. And obviously they were backing here. So this was a streaming deal that they had with First Quantum.

This came as a blow because it represented 20% of their assets. So it's definitely a significant blow. Because of that that their guidance for 2024 is about 18% lower than 2023 however it's important to note that the guidance is based on gold equivalent ounces also known as geo and that actual revenues could be higher or lower because it'll be dependent on the price of gold or the price of the other commodities that they mine. Now, GEO is actually just a metric used for mining companies in order to compare various metals mined to the price of gold and have a common metric for their whole operation because

very few miner will be producing like just gold, for example. So gold equivalent ounces just levels that out. And just to give people, like I said, how good of a business model it is, like I mentioned earlier, references. So there was $296 per geo last year, and they were selling at an average price of $1,976. So definitely something very interesting about the business model. What's especially nice to see is Franco Nevada is that they are backing quite a few projects that will hopefully come online in the next few years. They also have a pristine balance sheet. They have no debt and $1.5 billion in cash. And if you're familiar with miners, and I know you don't know that much

about miners, but I think you don't know that much about miners, but I think you know enough to know that they're typically very leveraged. So they're typically seen as just a leveraged play on whatever commodity that they're extracting. Yeah. I have just pulled up a pretty cool chart on FinChat. So I was just curious about volume. With these companies, I'm always curious about volume growth because the other element of pricing with these commodities is up to the macro. And I'm always just really curious about actual volume. So I grabbed every single equivalent ounces sold for everything that they do, gold, silver, PGM, iron, oil, gold, gas, gold equivalent, gold, silver, PGM, iron, oil, gold, gas, gold equivalent,

NGL, gold equivalent, other, and stacked them on a bar chart over time. And you can see they've gotten into many different things. And I mean, it's compounded at a pretty good rate over the last 12-ish years. It looks like 2022, 2021 were monster years. Yeah, yeah. And then you're seeing that what seeing that's that what's come offline in 23 here so maybe a little pullback in the short term yeah exactly which was due

because of that mind the crowbrae panama obviously so that is kind of a short-term headwind but i mean they have a really strong track record they intend on financing their new projects with cash flow from operations as well. It certainly trades at a premium to minor, but I love the business model, less risky. And I mean, the returns has just been quite amazing. If you're looking at the last 10 years, I did pull a chart here in our document from FinChat as well. And if you're looking at the last 10 years, I mean, the returns are just slightly better than the S&P 500.

So these are total returns. And that's with the stock doing nothing since 2020. Yeah, yeah, exactly. It's been kind of going up and down and clearly has had a pretty significant pullback because of the whole Cobre Panama mine. But I think it's just, I love this one. I mean, I probably should have bought it

the time I talked about it. You've talked about it time and time again through the years, yeah. Yeah, exactly. You're psychologically long. I'm psychologically long, but I think it's a great play,

especially for those who want some exposure to precious metals and maybe don't want to own gold directly or don't want to own gold directly or don't want to own a gold specific ETF because there are some that are backed by physical gold, for example, or you want to own gold but also have exposure to a bit of oil, a bit of silver, so other types of metals.

I think it's a great, great play for that. And again, they should be resilient because they have, I mean, you don't see that very often, companies with zero debt. You do a bit more in the tech space and other areas, but in a kind of mining plate, you don't see that very often. So it's one that I may be adding to my portfolio very soon just to give me a little bit more of exposure. Not crazy amounts, but I do want to get a little bit of exposure towards mining. They're best in breed as far as I know. I mean, look, the multiple for a commodity name is very high. So the market definitely recognizes this is really well run. The balance sheet is pretty

damn good. And I mean, it just comes down to, for me, I like the idea. I like the thesis. It just comes down to me i do you don't do commodities two things that you're a lot that you said you like right now yeah i do never fashion now i have hashtag never fashion so i love lulu i'm wearing this stuff right now and two never commodities so i'm just i just exclude myself uh arbitrarily these names, but that's okay. But that's what's great about investing, right? You can tailor what you invest in on what you have the most conviction in. And we have some similar, I think, philosophies, but we also have things that we defer and

that's completely fine. And I think that's what we want to teach people is try and discover what works for you. That's right. That's exactly right. Because if you don't know what you own and don't have a lot of conviction in what you own, even if you're right, you're not going to be able to hold the name or hold it with conviction, even if your investment thesis is right. And so that doesn't work. I've seen it time and time and again, just not work. All right. Another Canadian name here, TerraVest. So TerraVest is a TSX stock that has been a monster. It's up 500% in the last five years. It's up nearly 40X since 2012. It's just

absurd. And if you look in the last, since 2012, and I call that out because that's really when the current CEO took over for the business, revenues on the top line have compounded at 20% and operating income has compounded at 17%. And you hear me and you go, oh, thanks for telling me now. I missed the boat. You know, the stock's up 40X, up 500%. Thanks for telling me now. Well, maybe not. Not so fast. This is only a 1.2 billion in market cap TSX stock.

This is probably the smallest market cap of any stock I've ever brought up on this segment. This is a small business, maybe small to mid on the TSX. Because the TSX, it's whatever. This is actually a sweet spot I like to hang out with in Canadian stocks because at this size, it's very rarely looked at by institutions. It's just constrained out of basically every fund in the US at this point, maybe like a few small cap discoveries funds, but there's not a lot of eyeballs on this, not a lot of analysts looking at this. And so that's me counterpointing the fact that it's been a monster is maybe the second best time is now, who knows? I don't know. Now, I got interested from a pal on Twitter who's been banging the drum on this stock for a while now. And based on his track record, I'm not ignoring

him anymore, okay? Based on his track record, when he bangs the drum, I'm not ignoring him anymore because he's been so concentrated on the Constellation software names as well. And so that's how I know him. So he basically owns TerraVest and Constellation in names as well. And so that's how I know him. So he basically owns TerraVest and Constellation in size. So credits for my segment here to a portfolio manager of plural investing called Chris Waller. I've taken a few parts of his write-up bits and pieces to create and explain this segment. So not claiming that this is my work, credits to Chris Waller, portfolio manager of pluralural Investing. TerraVest Industries is a serial acquirer of the least sexy industrial businesses, as you can think of as their bread and butter.

Well, before you keep going, look at it. So I pulled something for those on Join TCI. They'll see, but it's a free cash flow per share of TerraVest. And it's pretty impressive i'll be honest like it's uh i mean it's not a straight line but it's uh it's definitely trending the right way so uh you've got my attention what's the cagger on it i can't see because it's so small yeah it's 36 yeah over the last 10 years so that is um yeah it's not i think i can understand why it's not a straight line just because as you started, I was like, I've never heard of this place. I'm looking through what they do so I can understand why. especially with growth capex, maintenance capex. So they are acquiring

some really unsexy industrial businesses. Their bread and butter is storage tanks and pressurized tanks. So think of like propane cylinders, both that are like stationary, situated in one spot for industrial applications, as well as the ones that go on trucks that you see on the highway, those big tankers that drive by. And so that's around half

the business. The other half is split to roughly a quarter into boilers and furnaces. And the other quarter is oil and gas equipment, which is probably the most cyclical nature of their business is 25% of their revenues in the oil and gas equipment. But when cyclicality hits, they just buy more because they can get really, really good deals when cyclicality hits in that area. So they're acquiring very niche mom and pop businesses and then get to work. I think Chris Waller has here that they buy them for like 11 times free cash, restructure them. And within like a quarter, the price they paid is actually around 7X. And then they optimize even from there. And so they can actually get really good deals, but also paying a price that makes sense for these mom props and can get the deal done and get them happy to transition the business over.

So they're buying fairly low multiples of their cash and then can continue to optimize from there. I have a screenshot here from Plurals Estimates and TerraVest Filings. They're buying usually 100% of these companies, $37 million, million, 15 million, 3 million, 5 million, 28 million. So that's kind of the range there from low single digit millions to 40-ish to the highest one of Highland Tanks for 108 million. So the company has been a bit of a special situation because it was started in 2004, but it's been involved with a Canadian company called Clark Inc., which I believe is like private

equity since 2006. In 2020, they spun out the ownership of TerraVest as a dividend to Clark shareholders, and it's been operating on its own since. These special situations tend to work out when management's really solid. The CEO, Dustin Ha, who is a very private guy, is a beast. In 2012, Dustin Ha was in his 20s. He was hired out of university after completing his PhD in physics. To work as an analyst, he's been effectively running the company since. That's how sharp he is. He came out of his PhD from school, basically not a lot of experience, and they gave him the keys to the castle like right away.

And dude's been a beast since. Like you can see when he stepped in, the business took off. It kind of hummed and hawed until 2012, and dustin ha took over and he's been executing apparently word on the street very private guy but there's like this apparently someone that knows him that is connected into the this twitter group i'm in about the stock apparently he got his phd and cfa at the same time and cfa is no joke no no yeah phd in physics no joke his phd's in physics which is crazy cfa at the same time and he said quote it was fucking easy okay whatever he's not he's not confident about himself at all huh yeah i mean that makes him sound yeah makes him sound cocky but i think he's far from that dude because there's literally only one photo of him on the internet.

This guy just loves to do acquisitions, corporate restructuring. He definitely reminds me of Mark Leonard. It's funny how you say confident, that's good. And then you say cocky, it's like, oh, no, that's not good. It's always the fine line between the two. I say to a guy like this, you're not cocky it's like oh no that's not good it's always the fine line between the two huh i say to a guy like this you're allowed you're not cocky you're confident because you know you're good but you're also good cocky is you you think you're good and you might not be that good uh you're underperforming you're you know how you say you are this dude's been that dude uh so he's been he definitely reminds me of reminds me of Mark Leonard rolling up these like fragmented niche companies that are like one, two player in their space they operate in. And there's one photo of him on the internet, like a ribbon cutting ceremony. That's it. That's all you can get on this guy.

ceremony. That's it. That's all you can get on this guy. The management team owns around 25% of the company and acquisitions when done poorly destroy value. But when they're done right, M&A can certainly work very wonderfully. When I'm looking at roll-ups personally, roll-ups just means M&A strategies. They're rolling up a specific vertical. In this case, it's mostly storage tanks. The high tech, high sexy business of storage tanks. It comes down to four things for me. One, does the team have a track record? Yes. Check. Two, is it a good niche and they have expertise in that niche? Yes. Check. Are they expert managers? Yes. Check. And I don't mean just like they have a good tracker to be able to do M&A, but also after tucking it in operationally. And then number four,

do they have lots of targets moving forward? I don't know. I'm not so sure about that yet. I read this from Chris Waller's write-up. We see a long runway for the company to successfully continue its approach. Most of TerraVest's industries are filled with small competitors, some of them which are cyclical, which result in distressed sellers from time to time. There's also adjacent industries where businesses use similar raw materials and production processes. I think there's probably hundreds of targets, probably not thousands, but long runway, I think for a company of its size at this point. Yeah. I mean, it's interesting. I wasn't familiar with it. Obviously, if they haven't looked at the balance sheet, but if they have a strong balance sheet, higher rates for longer is definitely not

a bad thing if you're looking to acquire distressed assets, because clearly there's going to be some companies that did not manage their debt properly. And you can probably take advantage of that. Yeah. I'd like to see what you think about the balance sheet. Hop in and FinChat. This feels like a really Simone name to me. I wanted to bring it to your attention and it's still very under the radar, even though it's track record is just mind bending. So yeah, this is definitely one that's on my radar. I appreciate the people that brought it up to me, but yeah, Canadian name.

I do worry not to sound like too cocky, but with these small cap Canadian names, like we bring these names up on a lot of radars. There's a lot of people like there's a lot of money that can flow into this because of our podcast and i do worry about those kinds of things i feel yeah we have no position in it so no position maybe it's gonna be in one of those uh you know it's gonna be in brayden's mind for a long time and yeah i'm psychologically along this thing yeah and as you were talking i looked up i forgot about like i looked up mark leonard like pictures and i forgot like that he

like he looks like gandalf yeah yeah dude because i remember seeing him with a shorter beard a little bit but like he's always had a beard but that is like that is gandalf level like did he just like kind of embrace the pandemic and just stop shaving altogether oh no he's been looking like that is gandalf level like did he just like kind of embrace the pandemic and just stop shaving all together oh no he's been looking like that like that for a while yeah apparently he's like six seven or something like there's the one photo of he's standing with this woman he's a freaking beast like he's huge his beard is like four feet long down to like his lower chest. And apparently he's just this like monster of a man that's, you know, South African descent, lives in Toronto. Very, very private.

There's only a few photos of him on the internet. Yeah, we'd talk to him. We'd be talking to his beard and that's how I'll tell you. Yeah, be right in there. So yeah, I mean, just some of these managers are cut from a different cloth when it comes to M&A. Dustin Haw, I think, has the chops. He's clearly very skilled, very intelligent. He's very focused. Guy's got a cfa and a phd in physics and since he has been running the company effectively when clark hired him after like because it was part of the clark he's just been a dog so i um i'm really interested in the name mostly because of him and his track record yeah i'll definitely keep an eye on it because i you know me i like unsexy businesses that perform well so yeah that's exactly with storage tanks like yeah

hey you need storage tank it's like honestly a lot of it is like an indirect play on commodities so i i think it's uh there's a lot of money to be made when people look at commodities like a lot of whichever commodity you look like. If you start looking into who are the providers of the equipment to, you know, produce, transport, whatever it is, those commodities, you can oftentimes find some really, really interested in business. Obviously, there's still going to be some cyclicality with, you know, the kind of capital investment cycle for the companies that operate in that space. But you can often find some really interesting companies.

My basic career philosophy is to start exciting companies and invest in boring ones. There you go. That's like my basic career philosophy because it comes back down to like the things that the really unsexy things don't change that fast. And like, you know, their moats actually can be a lot more entrenched. And there's not some really smart kid out of Stanford that's about to come eat my lunch. Like no smart kid from Stanford right now is coming out of a computer science degree. He wants to build the next Uber and Airbnb. Nah, he or she wants to build those companies.

Not storage tank guy. You know what I mean? Like it's pretty protected from the Stanford smart kid. Diversification too. That's another way to look at it. Yeah. Yeah, between your career and your holdings. Agreed.

Thanks for listening to the pod. These are always fan favorites when we do stocks on our watch list presented by EQ Bank. We do them pretty often at this point. So make sure you're tuning in and I hope you guys like that 10 lessons over 10 years. So I'm looking forward to yours as well because it was a pretty instructive exercise. I learn a lot from writing these types of things. It's one of my favorite things about the podcast is prepping for the podcast is you have to – you got to get all introspective, man. You got to get all find yourself mode. Yeah, and put your thoughts more organized and oftentimes that makes you realize things that you weren't even thinking about or you were kind of thinking about conceptually,

but then you put it down, it makes more sense. It's recording this on a Friday afternoon. Hop over to a nice little coffee shop tomorrow. You know, get dialed in. Fresh smell of Java. Do it on a Vision Pro, though. Go do it on an Apple Vision Pro. I have a little rascal running around. I don't have as much flexibility to go to coffee shops. Come on. One hour? You got this. No,

you're probably right. Thanks for listening, folks. We appreciate you. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The host 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.