The Canadian Investor - 2021 returns by sector and selling a loser

Episode Date: September 13, 2021

In this episode of the Canadian Investor Podcast, we discuss the following topics: Why it’s hard to sell a negative return stock How the various sectors and subsectors of the S&P 500 have performed so far in 2021 What to do when a business you own is acquired Tickets of stocks discussed: TTD, AMZN, GOOG, FB, ABX.TO, MO https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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I am here with Simon Belanger. As always, my name is Brayden Dennis and Simon. Perhaps for the last time, we mention the company we've been really hard on as they announced they're potentially filing for bankruptcy. Good old face drive on the TSX Venture. This news came out and I made a good joke about them on twitter but at the end of the day there were people holding this thing so you have a nice little section on the podcast about it here yeah yeah exactly so obviously there's been a lot of drama going on with phase drive and i'm sure people kind of know the gist of it by now but i was watching some of the news that came out that one of the co-founder disclosed

that the company told them that they were potentially going to file for bankruptcy shortly. And this just made things more evident for PhaseDrive that it's really going nowhere and it's really going to zero in the very near future. For me, when we looked at the financial statements, I had a hard time just with the current CASBAR and seeing them going beyond much past Q3, probably filing some point in Q4, which is pretty close at this point. But on top of that, this new information came out, the information coming out from leadership, management, everything is not good when it comes to to phase drive. And I was scrolling on the Yahoo Finance app, and there's this discussion section. And it was pretty sad to see because some people just were saying they put their life savings in this company, they've lost over 90% of their investment. And you

see people on the board just telling them, look, it's better to recoup some money than losing it all. And some people just, you know, they just want to hope for the best and just hold. And you kind of get into, you want to understand why they're doing that and why they're not seeing what everyone else is seeing, that this company is going to zero. And when I thought about it, here are some reason I think, and I've listened to investment podcasts

that look more at the, not podcasts, but investment audio books that look at more of the psychology of investing. And this is what I came in terms of conclusion. And obviously, I got those concepts from those books. So one of the first reasons is we tend to not want to admit to ourselves that we were wrong on our assessment of the company. I think it's just human nature. You do not want to admit you were wrong. We get into a psychological trap with an arbitrary end point as well for example someone won't sell a stock if it's down 50 because they want to wait until it breaks even which might never happen and being emotionally invested in a specific investment and purposely only acknowledging

the positive and not the negative yeah well put i, you can't bat a thousand on this stuff. You can't be right 100% of the time. And it's okay if you're wrong. That's the whole reason that you need to keep coming back to the thesis. And this is why I think it's important and something that I do myself is I write an investment thesis, whether it's three, five sentences on why I'm investing in the company. It can be really simple or it can be really complex. But those three or five reasons, we need to come back to and go, did this play out or was I dead wrong on predicting that future? And if you were dead wrong, I guess you have to make some decisions about what you want to do with the position. But this is why we keep track of

an investment thesis. We don't react to share price movement, but we should be validating that we were either right or wrong, and then make decisions from there. Yeah. And that's so important. And I do have four questions that I ask myself when I look at selling a position. So the first one, would I add to that stock right now? So we talk about buying when the market is, there's a big correction in the market, or if a specific company that we like, there's some short-term turbulence, but we're very bullish on the long-term thesis for the company. So these are all bullish signs in terms of the company you

might be interested in, because especially if it's short-term, then obviously you'll want to add to the stock right now if it's gone down 20, 30%, because it's just a great opportunity to buy the company at a discount for the long-term. But if your answer is no at that question, that's already a bit of an indicator right there. The second one, has the investment thesis changed for the worse? And right back to what Brayden was saying, it's really important to write it down. Hell, sometimes I don't remember stuff that I did like a few months ago.

So obviously, I have a company that I invested in four, five, six years ago. It's really good to know why I invested in it. And just as a reminder, when I have a company that I invested in four, five, six years ago, it's really good to know why I invested in and just as a reminder when you have it written down. Three, if the company is going through a rough patch, is this temporary or longer term? And that's where you can really find value, but also value traps. So that temporary versus long term is really important. And four, would that money that I would make by selling the position be better invested in another investment? And remember, forget about the past and where you purchased the company because the market

doesn't care where you purchased the company. They really don't care. They're looking at it right now and its future prospect. And what are the prospects looking going forward? And I think those are probably for me the four biggest questions. If I don't get a satisfactory answer for that stock that I'm considering selling, then I will go ahead and sell it if you know, it meets all these requirements. And I'm fine with holding adding more, the thesis hasn't changed, there might be some turbulence.

It's short term. Then I just double down and add more to that position. I think the fourth point that you mentioned is extremely, extremely important and something that I bring to someone if they're asking about selling a position. Because if you bought it at 50 and it's trading,000 and you really don't want to own the thing anymore, the fundamentals of the business have not gotten better. They've actually gotten worse. Realistically, the company's worth less money because of reasons X, Y, and Z. You have to ask yourself, is there a position that is better suited for this

money right now? And if yes, then just make a decision and do it and move forward. The waiting for it to get your money back so that it goes back to the price that you paid is complete investor psychology human error. There's no real place for that in investing. There's no point of waiting for it to arbitrarily come back to the price you paid. When at the end of the day, that's the market price right now. So if you think that that capital that you could cash out for right now, could see better returns in something else, in an index fund or in another company, then that is the correct thing to do. Because hey, you could be waiting a long time for some company that is not panning out, the fundamentals are worsening over time. And all of a sudden, you're holding on to something that's flat going down, that's a melting ice cube. Or it really does sharply decrease more after that. That is another

possibility. At the end of the day, you have to focus on the business. If a stock, in my example, went from $50 to $35, but the business fundamentals have not significantly deteriorated, it is just a re-rate on the stock price, then that is completely different. So at the end of the day, we are focusing and investing in businesses, not stock prices. Yeah. Yeah. Well put. Did you have anything else to add to that section or are we going to... No, I think let's move on to the next section of the podcast today. Simon pulled up some research on which sectors in the S&P 500, which is, for those who don't know, the 500, for all intensive purposes, largest companies in the US. There is a selection process done by Standard & Poor's, but let's call

it the largest 500 companies. And this index is very often referred to as how the stock market is performing so far. So he pulled some numbers on 2021. Yeah, exactly. So I pulled that. I found that it was a research report done by Yardeni Research, and it's as of September 3rd, 2021. The data, so it's still pretty accurate at the time of recording, might be just a little bit different. But the goal of the exercise was first to show that within a sector, there's a lot of subsectors that don't necessarily perform the same as the whole sector. as the whole sector. And second, to give you some ideas on potentially which area that you should be looking at, if you're especially wanting to find some value plays, that could be an indicator that some areas are where the market is a bit more bearish as well. So and you can definitely translate that to similar companies or similar sector in the TSX, right? So I found this

Richard, that's why I pulled the data here. But obviously when we're going to talk about real estate, for example, there are some REITs on the TSX that are listed. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty,

it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. So let's start by real estate because I just mentioned it. So it's up 33.5% this year so far. The biggest, I would say subsector, the biggest return would be real estate services, which is up 57%.

And the lowest one is hotel and resort REITs, which are up 10%. So I'm not surprised seeing this, especially the hotel and resort REITs, because yes, they're doing better. But there's still, I think, a lot of challenges when it comes to that. Yeah, I mean, real estate services of 57% is quite bonkers. I'd be interested to see what that breakdown is. But as a whole, I mean, we are talking about US stocks here with the S&P 500. And just like here in Canada, we have had a red hot real estate market with low interest rates, low supply, a lot of demand, and a big mix up in what people really want out of where they live.

And it's really interesting watching it all play out. Yeah, exactly. And obviously, if you look at these type of reports, I know we've talked about data reads. So data reads, just so people know, they tend to, they'll be usually labeled as specialty reads, which encompasses not only data reads. So keep that in mind. The next sector is communication services. That one is up 29%. So I'm going in order of which one's the most up for the year. So we can already see tech is not the top two, which was a little bit surprising in some respect. So communication services advertising is up 34.7% and interactive home entertainment is the lowest one, which is down 10%. So I know you want to add a bit more

on advertising. So I'll give you the floor for that. Yeah. Well, depending on this breakdown in that advertising bucket, you would be looking at Google and Facebook as well. So the technology companies like Google and Facebook, let's not forget, they make their money from advertising. The core advertising business of Facebook makes up almost all of the revenue, like very tiny sliver is in other services. But for the most part, it is an advertising business. And same with Google. That is a primarily advertising business. Now, they're pulling on all sorts of other growth engines like cloud and all the other stuff they do in that massive conglomerate that is Alphabet.

But these companies have been crushing it. And I wanted to have a quick segment here on advertising because I still think they're cheap. And I've been very vocal about that. I still think Google, Facebook, and what I'm about to touch on, Amazon, are quite cheap, even as trillion dollar companies, which is really hard to wrap your head around. Okay, so with advertising, digital ad spending is set to grow almost 70% by 2024, from about 58%. So that is growing to 70% of total media. Sorry, not growing 70%, but becoming 70% of total media ad spend. Now that's significant, right? So advertisers are shifting from print, linear TV, and these other traditional forms of advertising for their digital counterpart. Now, there's a lot of reasons for that, that secular trends that are helping push this,

which is mobile phone penetration, data consumption, and data availability speeds and even cost help a lot. Growing online activity and now connected TV and streaming is becoming another large advertising opportunity. So I believe that Google and Facebook, these advertising giants that are going to benefit from that 58% in total media ad spending to 70% by 2024, where do those ad dollars go? They go to Google and Facebook. So there's some other players here that I'm going to mention. Everyone knows about Google and Facebook being the advertising giants. Now, Amazon in their other segment that they have on their income statement, the revenues have grown from 1.7 billion in 2014 to a jaw-dropping 21.5 billion in 2020. So that represents a 66% compound annual

growth rate from 2014 to 2020. Now their advertising business, from my perspective, is just getting started and it's already doing 21 billion. Roughly 90% of Amazon's ad revenues are derived from e-commerce channel advertising, which is a niche that they have basically made for themselves. So their massive network of prime and non-prime customers with their third party sellers has placed Amazon in a position to control over 75% of the e-commerce channel ad market, which is worth about $24 billion. Walmart is the second largest player in this realm, but it captures far less in the market, only about 6.5%. Now, another idea here in digital advertising, and especially which I'm going to touch on is that growth of connected TV and streaming is the trade desk ticker TTD. I have discussed this opportunity

in the past. Now, I do not believe it is priced as attractively as Amazon. Given Amazon's opportunity with everything else they're doing, Amazon Web Services, north of $50 billion in run rate right now, that company on its own with Amazon Web Services can be worth over a trillion dollars, in my opinion, in the next few years. But the Trade Desk, ticker TTD, is a beast. It is the largest independent demand side platform which serves ad buyers. The connected TV opportunity for the trade desk is massive and I want to highlight it here. In the shift away from traditional linear TV, connected TV is actually the fastest growing media segment across the entire board. segment across the entire board. According to eMarketer, pay TV viewers in the US have been steadily declining while total hours spent on connected TV devices was up 80% in 2020 versus the year prior alone. Now there are 180 million connected TV viewers in the US alone, which is pretty crazy to think about.

So connected TV ad spend is expected to increase from about 8 billion to over 18 billion by 2024. Ad buyers are now looking for an omni-channel approach to reaching potential customers with their advertising spend. They want to have touch points with customers across various channels, increasingly more digital channels, and the Trade Desk lets advertisers do that through their platform, including this new fast-growing segment called Connected TV, which is still relatively new in the grand scheme of things, yet it has already had this massive adoption with smart TVs, connected TVs being built right into the operating system, or you get additional services or products like Roku, Chromecast, Apple TV, Amazon Fire TV,

et cetera. So you're seeing this connected TV in an S-curve adoption already so far up with 180 million connected TV viewers in the US alone. Yet the opportunity for it to be monetized is still early stages. So it's lagging this massive opportunity. And that's why I think the trade desk is particularly interesting. Yeah, no, well put. So now we'll go on to the next sector, financials, which is next on the list. The financials are up 29%. Investment banking and consumer finance are actually the one that really outperform within

that group at over 40% returns. Not surprising for investment banking, especially with all those IPOs, all that debt financing, obviously someone has to do those, the investment bankers do. Overall, that sector, most of it is above 22% in return, so pretty close to that 29%. The one that's really lagging is reinsurance, which was only up 9% on the year. So I know we're not usually big fans of financials, but look, we'll have to give it to them. They've performed quite well this year. I'm shocked how well the banks have performed through this environment. And we go through reasons why that has probably happened, but I did not expect that

to be quite honest and candid, but here they are. They've done exceptionally well. The investment banking is no surprise. We have already seen so many IPOs in 2021. I was looking at it earlier and by halfway through the year, we had already seen way more than a normal year of IPOs. And it had only been 40% of the year complete. And it was already a very, very high year for IPOs. So we'll track that through to the end of 2021 on the IPO front. But it is tracking for an all-time high as an IPO. And it's not really surprising. Companies are trying to tap public markets, and why wouldn't they? Yeah, exactly. And people may start recognizing a bit of a theme here is the

best performers of the index tend to be the ones that struggled a bit more last year. There might be a few exceptions here, but for the most part. The next one is another one that struggled a lot in 2020, which is energy. It's up 27%. The best performers were actually integrated companies and pipelines, which both had over 25% in returns. Oil and gas drilling, though, is barely breaking even for the year. I'm not surprised if I were to invest in oil myself, it would probably be either the integrated oil companies or pipelines because they tend to either pipelines or have stable contracts for the most part. And integrated companies have different ways of having profits, whether it's refineries, whether it's gas station, whether it's production,

oil and gas drilling. On the other hand, you're very dependent with the price of the oil barrel, just the price in general of oil and gas. And you have a lot of high costs. So there's been a lot of bankruptcy in that sector definitely last year. So I'm not surprised to see that. Yeah, if you're an energy investor in Canada, which I know tons of you are and lots of Canadians are, they pay great yields, stick with the integrated companies and the high quality assets. There's tons of them out there. I was looking at CNQ in particular as being extremely cheap, even still after such a rebound.

Some of them are very cheap. I will admit to that. Am I investing any of them? No, not personally, but they are cheap, so I can understand why the appetite is there for them. When it comes to drilling and exploration, we are talking about an extreme boom bust with the types of securities that exist in that basket and not anything that i'm particularly interested in yeah well put and now the next one uh one that i probably expected a little higher on the list information technology

so it performed well overall the one laggard here was home entertainment software, which was about 0% for the year. Everything else was 17 to 30% in range. Again, I think it's just important to keep those into context because, of course, information technology was not as affected by the pandemic and with people working from home. They took a pretty big hit early in the pandemic, but they recovered quite well last year. And some of the ones that performed the best is system softwares and communication equipment. Those are the two. And the last one, semiconductor equipment, all three performed over 30%. Probably no surprise to you, Brayden. All three performed over 30%. Probably no surprise to you, Brayden. I mean, yeah, that's such a huge basket when we're talking about information tech as a sector. And like a lot of these software companies will be pulled out into other sectors because, like you mentioned, with advertising, I mean, Facebook is an advertising business. Google is an advertising business.

So some of those do get pulled out. But even where we're saying, ah, it performed decent, and it still has a 22% increase on the basket overall. So that is still excellent performance. Some of the IT tech cloud providers and some of the stay-at-home software stocks did get extremely stretched in 2020 and are performing not as great in 2021. I think that's a valuation thing. And at the end of the day, some of these companies have massively benefited from that long-term, whether it's brand awareness, customer reach, or, you know, that land grab that they have given perfect example of that is Zoom communications, for instance. And, you know, that could be presenting an opportunity long term.

Yeah. And I think it's just going through this, it's interesting for me just to remember that, you know, when you see like like different funds and things like that, that tout their returns from the previous year, just keep in mind that, you know, depending on what the sectors are, if they had a really good year, the prior year, oftentimes, it'll be more difficult to get good return the year after doesn't mean it's not a good investment long term. But a lot of these names, they had a terrible 2020. And now they're kind of gaining back some steam in 2021. The next one on the list is healthcare up 20%. It's actually one that had the most consistent results, I would say across the group in terms of the

subsectors, healthcare equipment and services were both up over 21%. Biotech was the laggard of the group, which was up about 13%. But you can see that the spread is not very high for those. So I think healthcare has performed all right in general, but there is the variance between the top and bottom is much lower. It's interesting looking at this group because some of these businesses have been greatly benefiting from certain environments. Then the ones that I track are like Stryker and Intuitive Surgical, which are surgery-based businesses primarily doing in the business of surgeries that are not mandatory. Now we're seeing some of them really come back. Intuitive Surgical is the one that I know the most, the robotic company. So it would be somewhere in there in that mix.

And that is such a cool company. But nothing more for me here on healthcare. Yeah. So the next one is materials. I know we have a lot of people that like commodity businesses. So for the most part, they would be in here with the exception of oil and gas, obviously. So for here, this one was really interesting. It was the one that had the biggest difference between the one that didn't perform as well. But that's every year,

right? And that's what we talk about so much, is it's so boom bust with these commodities. That's it. So the best performer, which is not a surprise to me, is steel. So companies related to steel. One that people may be interested in looking into is Nucor, which is listed in the US, has a different way of doing steel. I mean, I'm just going based on memory here. So this is really long time ago. But worth to have a look at Nucor and UCOR. The worst performing in that group. I was very surprised on that one. Which was gold at barely breaking even.

Actually a little bit down on the year for gold producers. So that one is you see steel up 114% and then gold not even reaching zero. And then you have a bunch of stuff in between, I would say the second most would be copper, which makes sense. Again, a lot of construction related with steel with infrastructure. There was been a lot of demand, we saw how prices of wood have gone up. And now they're stabilizing more and have gone down. But it does make sense. But it was interesting to see just the wide range here. Yeah, very interesting. And such a wide range on these performers.

We saw the price of lumber 3x in months and then come back down to life. It's a bit more reasonable now. more reasonable now. I am surprised during a fiscal monetary policy like we've seen with gold performing at 0%. That's very surprising, Simon. I think we can both agree on that. Now, Barrick Gold and maybe Kirkland Lake Gold, those are good companies and they're the solid ones and potentially could be extremely attractively priced here. I don't invest in commodities. I don't own materials for the reasons that we've talked about a million times, but those might be worth a look. If you are a gold bug, they are attractively priced. They do provide some actual steady cash flows which is hard to find in this sector so maybe kirkland and barrack are deserving of a look here i mean barrack is down

probably 15 20 on the year as you were talking i'm like oh i'll just look it up just for fun so it's ticker gold right i think abx.to barrack i think it has a different ticker on the US exchange. I'm pretty sure it's dual listed. Anyways, you'd look that up while I... I'm looking it up. While I go on to the next one. Yeah, Barrick Gold on the New York Stock Exchange is ticker gold, which is a pretty elite ticker if you're a gold producer. And for the TSX's abx.to so that's why that's why we had we were both right there you go we're saying the same thing the same thing that's it but yeah that one surprised me the next one is industrials industrial same as materials so up 17 percent the biggest winner from that group was electrical components and equipment, which was 32% so far, actually a bit

less than that, 31%. Everything else was up in the teens. So we're thinking here about industrial machinery, construction machinery and heavy trucks, aerospace and defense. So just not surprising this one either, but it's a very wide group. So I think it's also understanding that the results vary by subcategories. So now the next one is consumer discretionary, which is up 12.6%. The biggest winner here was specialty store, which have performed the best at 33%. Casino and gaming was the worst performer at breaking even for the year. I am not surprised for that one. You know, we're still seeing restrictions in the US with the Delta variant. I know like obviously casino and gaming is mostly indoors when you're looking at that. So I'm not

surprised to see that they're lagging in terms of consumer discretionary. 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, 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb

or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. CA forward slash host. Yet online gambling is exploding and performing exceptional as a group. So I wonder where that goes into the mix because gaming stocks on the tech side, on the online side have all performed exceptionally well. And even like companies like on the TSX, like Nuve, exceptionally well. And even like companies like on the TSX, like Nuve, the payments company, that is their niche is online casino and gambling. So I wonder where that gets thrown in. But it's like everything else we've seen across the board, Simon, is this digitization of pretty much every

industry. And the casino companies that have gotten ahead of that are the ones that are going to perform like well in the future and you know they were they were skating to where the puck was already going at the at this point and and they're going to benefit from that yeah if i had to guess i'm pretty sure the casino and gaming part of the snp 500 is probably heavily weighted toward legacy casinos and gaming. Probably, yes. That's why it makes a lot of sense. But you're totally right.

Everything's kind of transitioning towards online. And we're even seeing, you know, legislation changing in the States, changing now in Canada as well. A lot of it was being done offshore. So yeah, it's probably potentially a big tailwind. The next one on the list is transportation, which is up 10% for the year. So now we're getting into some of the lowest returning sectors for 2021. One of your good calls, Brayden, trucking up 45% plus, and I know

you'll elaborate a little bit on that. And the laggard here is airlines and railroads which are both they're separate but they're six and seven percent i've owned railroads they've actually performed quite well in 2020 it's been kind of steady as she goes so it's not surprising for railroads airlines i'm surprised they even had that man that could have returns for the year i'll be honest but that's my take on those i'll let you talk a bit more about the trucking yeah transportation is interesting as an industry because we're seeing you know extreme highs and extreme lows from those different subsectors within it and hey look i i mean i have talked about tFI International extensively on this podcast, but it does deserve another look here. I mean, trucking as a group, like you said, is up 45% in the S&P 500. And TFI International has had that U.S. listing now, TFII, on the New York Stock Exchange.

And they've had their TFII listing on the TSX for a lot longer. But I mean, last mile delivery has been absolutely massive. TFI International bought a bunch of UPS's assets, the UPS freight business. They bought it. And I was looking at the press release and everything. I couldn't believe the price they were paying for it. It was such a good deal. And they continue to do this over and over again. How they buy distressed trucking assets at these prices and have them integrated and profitable and doing good business in their network in less than six months is something special. And I mean, when you buy grow by acquisition companies, you have to find the ones that are really good at it

because it doesn't always work. Like grow by acquisition just really does not always work. And there's examples of it working extremely, extremely well. And there's examples of it kind of sucking when a company moves from an organic growth business to a grow by acquisition, kind of anything for revenue growth and it fails miserably. So this has been a giant brainstorming across all these industries. But TFI International has actually pulled back 5% in the last few days. So it could be an interesting entry point for fresh capital. The multiple on earnings

has expanded dramatically. And this is the market recognizing what I have been saying for so long, which is this is a cheap sector overall. And it has. I think TFI used to trade for like 12 times earnings when I was buying it, maybe even less than 10 times earnings when I was buying it and telling everyone and their dog to buy it is now trading at 22 times earnings. So we've seen a complete double on the multiple and now they're increasing profits, increasing revenues. You have this twin engine effect driving some stellar returns. So I like trucking long term. I really do. driving some stellar returns. So I like trucking long-term. I really do. The electrification and self-driving opportunity presents some significant benefit. So if you're thinking long-term and you

think that this industry will hugely benefit, you don't have to pay absurd hyped up valuations for electric and self-driving cars in other parts of the market. If you look at their two largest costs and difficult pain points, the bare case on is how do you hire enough drivers and fuel being such a large cost? It does go into the fuel surcharge, which I'm not going to get into, but those are two massive inputs into the business and could potentially be almost erased over time. So I think it's an interesting opportunity. Yeah, yeah, we'll put next one, next sector. So we have two left.

The second to last one is utilities, up 10% on the year. Water utilities are the one that performed the best at close to 20%. Independent power producers were the worst at 5%. But what you can see is the spread is quite small, which is not surprising for utilities in general, just steady as she goes, you probably won't get life changing while you won't get life changing returns. But you know, you'll get a good dividend from most of them. And probably, you know, you won't, you won't see too much volatility with them.

with them so there's one more here and it's also up so i mean we there is no sector not up this year so far in 2021 yep yep exactly is that a surprise is it a surprise yeah but you know we're looking at eight percent and the top sector um so this last one is consumer staples at 8%. That includes, for example, like drug retail, personal products, tobacco. Actually, all of those were up over 25%. Household products is actually the ones that's lagging over here at break even for the year. I'm not surprised because I feel like if we look at the data from last year, you have like companies like Clorox, for example, in that category that had a killer 2020. I think Clorox just smashed, like just was on fire for because of obvious reason with their products being in such demand. And what you can see too is consumer staple is 8%. And then you look at the top sectors on the list, which is about 34%.

So that was also one of the reasons I wanted to do this exercise because it shows that, yes, the S&P 500 is up quite a bit and the markets are up quite a bit in general. But there are some sectors where they're a bit behind, maybe for valid reason. Maybe some are more undervalued. But to me, it's also an indicator that you can still find value. However, you want to look at it, whether it's tech value in terms of not being properly valued for its future potential or more traditional companies that present some good value. Yeah, well put. And I saw tobacco was in that list. I was checking out some of the sin stocks, if you will, and the tobacco companies. And they are so damn cheap. If I was a true value investor and I didn't care, I said, screw ESG. I'm investing in stuff that's cheap, but still growing a little bit over time.

I'd probably end up in tobacco stocks because they have done absolutely nothing, but their financials and their fundamentals are actually rock solid. I mean, the product itself is extremely addictive, as we know, and that kind of provides some constant demand for this stuff. British American Tobacco, ticker BTI, has a 9.66% dividend yield and is very safe. Trades like 10 times earnings, 86 billion in market cap. This is a huge company. And I mean, is tobacco in terms

of cigarettes probably on the structural decline? Yeah, probably. But they're also coming out with these new growth sectors like with vapes and stuff. So if I was a true value investor, I might be looking at some of this stuff. I probably won't be, but this is the point of going through this is there's lots of ways to be successful. I think you have to do the thing that makes the most sense for you. That's the one that's going to actually be the most successful because you can't borrow conviction in some of these companies, but it's useful going through this and having a brainstorming exercise in these various sectors, names that come to mind we've discussed. And I think this has been fun. Yeah, another one to just support what you said for tobacco,

Altria Group Ticker MO. It's also paying a 7% dividend. Yeah, Altria. It's a solid business. It really is. I mean, yeah, they sell darts, but it's a good business. Yeah. So now to our last segment, I'll let you take over for that one. It's actually a question that we got earlier this week. and we get questions for the podcast all the time. We will get to most of them. We'll get to try to get to all of them. And this one was particularly useful because this question does come up. So Nicholas wants to know from us.

Thank you for listening, by the way, Nicholas. He says, good morning from NC. Simon, I do not know where NC is other than North Carolina. So potentially, Nicholas, you are an American. So we are international. We're worldwide, baby. He says, thank you for doing the show. It's my favorite by far. Well, thank you for listening, Nicholas. Nicholas wants to know about when a company is taken private, acquired by another company, what do you do? Is this good or bad for shareholders, he says.

And we have some thoughts about this, and this scenario does happen. There's basically two types of scenarios when the company gets acquired or goes private. And let's discuss that. Yeah, yeah, exactly. And just as a side note, props, I'm also a mountain biker. So I just wanted to mention that before I get started here. So what should you do

if acquired by another publicly listed company? So you have two types of acquisition. The one we talk about the most is a publicly listed company acquires another one. So I'll just go over that quickly and then we'll talk about the private company. When it's a two public company, when the deal is announced, how likely is that to go through? So that should be the first question you ask yourself. Sometimes there will be arbitrage, which could be an opportunity to get in if you like the acquiring company. Just keep in mind because sometimes the market will lower. It won't match the actual stock offer in terms of price because they have doubts for

the deal being voted and passing through. It could be for various reasons. It could be because of regulators. It could be because of shareholders. The other question I would ask is do you want to be an owner of the acquiring company? Because sometimes you love a company gets acquired and you're not a fan of the new company acquiring. So if you're not a fan, then consider selling before the takeover, especially if the price of the company you hold is very close to the purchase price, because at that point you can just put that money towards another investment. And remember, if you do this and it's several months out, you could miss out on some dividends if the company you had paid out a dividend. So while

the company is still standalone, they'll still continue paying that dividend. For a private company, it's a bit different. So what does it mean? It usually happens if a private equity firm, potentially a large shareholder, potentially founders. They want to buy out all the existing shares of the company that is public, therefore taking it private. Usually they'll do that with a premium. The reason why they'll pay a good premium is they want to make sure that the deal goes through and it's approved by shareholders, especially if they don't have a majority stake, for example. It could be a good or bad thing, depending how much you like the business. If you're kind of wavering and you weren't sure

about the business, you see that offer, it could be just a good thing for you because you were already thinking of getting rid of it. You may take a profit or a loss. That really depends on what price you paid for the company versus the premium being offered for the offer the reasons why companies will do that some companies prefer being private because there's definitely less scrutiny on the company and its stock price as well and there's less disclosure for financial information involved for private companies the downside for them is it typically will be, well, no, it will be harder for them to, well, it might not be harder. It might be, but they'll have to rely on private money for financing or private placement for funding. Yeah, well put. So there's two options,

right? There's two scenarios. It's getting acquired by a public company or it's getting acquired by a private company. And when it gets acquired by a public company or it's getting acquired by a private company. And when it gets acquired by a publicly listed company, you have to ask yourself, do I want to be part of the company acquiring the company I own? And that becomes an entirely new question, right? Is do I like the company that is now going to be the conglomerate or larger company owning the one I've owned previously? That's an interesting question because sometimes it may be a very small company you're invested in and a very large company buys it. Now,

the company you own is a very small portion, a very tiny percentage of the larger pie now. So you might think to yourself, okay, well, it's not big enough for me to want to own this larger company as well. So you might move on and move on before the deal actually happens because there's going to be some price arbitrage there and you can move on into another opportunity. So you can sell it and move on to another opportunity or you can be part of the company acquiring it. And sometimes that can be beneficial as well. I know that Slack shareholders had to think about that as well when when salesforce bought the company right so it is an interesting scenario to think about but now it becomes a completely new investment decision do i want to own a stake in that business yeah yeah well put and i mean private you don't

really if it goes through you don't really have much to do. You'll get bought out for your shares and that's it. That's not much. That's, yeah. You move on. You move on. You either made a bunch of money or not. Yeah, exactly. So I think that's pretty much it for this episode, Brayden.

Did you have anything else you wanted to talk about? No, other than, of course, that I'm going to plug Stratosphere. If you have not gone to getstockmarket.com, they're bringing to our website now, which you can check out Stratosphere. You can check out more about the show. But Stratosphere is the go-to place to do investment research on your own. If you are a self-directed investor, that is stratosphereinvesting.com. It is my company. I am building the tools that you guys need to succeed, whether it's my own research for myself and my analysts or software for you to look at 10-year financial statements, buy or sell ratings. What do we got? Industry insights. We got

everything. Go check it out. That is stratosphereinvesting.com. And we will see you next week. Take care. Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.