The Canadian Investor - 30 Stocks For Contrarian Investors

Episode Date: January 27, 2025

In this episode, we explore where value might be hiding in today's high-valuation market. From overlooked oil and gas plays to global opportunities in Japanese railways and Chinese big tech, we break down areas of potential interest for savvy investors. We also discuss the pitfalls and potential in pharma, defense, and precious metal miners, as well as the challenges pandemic darlings face in a post-COVID world. Plus, Braden dives into the concept of quality in investing, inspired by Dev Kantesaria of Valley Forge Capital. Discover why the intersection of growth and predictability defines great companies and how this framework can help you identify enduring opportunities in any market environment. Tickers of Stocks/ETFs discussed: HAL, TVK.TO, CNQ.TO, TOU.TO, ENB.TO, TRP.TO, KMI, MPC, JNJ, PFE, MRK, LLY, NVO, KVUE,PPH, IHE, ZHU.TO, LMT, UNP, 9020, KWEB, BABA, FNV.TO, WPM.TO, ABX.TO, NGT.TO, GDX, GDXJ, ZGD.TO, DOO.TO, 7309 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  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management 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 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 or February. 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

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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 Bélanger. The Canadian Investor podcast. Welcome into the podcast. My name is Brayden Dennis. As always joined by the fervent Simon Bélanger.

Looks like we have a Mark Carney enters the chat as of today. That is that, that's the hot off the press here recording Thursday, January 16th. I think, you know, we all knew this was coming, but it's official. Yeah, it's official. I mean, I think he had done,

we were talking before recording, had done an interview with Jon Stewart on the Daily Show. And then he had, I think he had made some announcement that was pretty obvious that he was running for it. He said, I'm running without saying I'm running. Yeah, essentially. I think now I'm not an expert whatsoever in politics or liberal party, but it feels like it's going to be between him and Chris Schifrilin.

That's the sense I got. I don't think there's anyone else that seems to have a shot. It'll be Karney, Poliev, and yeah. I mean I think it'll be, yeah, it will most likely be him because he can say that he wasn't part of the party. Right. I think that's probably the biggest selling point because everyone has seen the polls and what it looks like. I think a lot of people will go behind it. Running a US election 2.0 here, like we already saw how that went. Yeah, yeah, someone who was already in the party

that people are tired of. As the sitting vice president, yeah. Yeah, that's my prediction. I could be wrong, but I would think people want change and people in the Liberal Party, I think, will see that. So they'll pick Mark Carney as someone that was not part of the party. That's my prediction.

Let's talk about it in three months, see if I was right or wrong. No, I think there's a very high likelihood. Dude, so New Year and the benefits roll over. So, you know, like, oh, I should go to the RMT, go get a, you know, use up the benefits, right? My old massage therapist who was this like four foot two woman who like was strong as an ox and she was incredible,

going to her for like two years. She just like quit. I don't even know why she was a young, probably early thirties tops if I was to guess. Oh really? So I don't know, she said she was doing something else. I'm like, okay, good luck with your next thing. So new person today, okay?

First one, you know, it's a little on the chatty side, I would say. I'm trying to zen out, not my favorite. Okay, so you're a no chat guy when you get massage? Yeah, I'm okay to chat to the Uber driver, the taxi driver, sure. You know, we'll chat, we'll talk. But the massage, nah, dude, I don't want to talk. I want to Zen out, right? She's like, so what do you do? And I'm like, oh, like the founder of this financial data company and I run this podcast thing, kept it really short. I'm keeping

it just a few minutes, right? She goes, oh wow, like with Trump coming in, do you think the market's gonna go up or down? And I'm like, mid-Mistral, this is like two hours ago. And I'm like, oh no. Like, how do I hit the escape hatch out of this convo right now? I'm just like, honestly, not sure. Might go up, might go down.

Don't know for sure. And she's like, I think she got the hint. But this is the ultimate market gauge sentiment. The RMT asking where the market's going. We're in for a big year. Load up. Load up. Go all in.

We're going for a big year. Yeah, I mean, I think there's a lot of that happening and that's a good indicator. When you have people getting interested in the stock market that you would not typically expect. I mean, maybe she's been investing for a while, but maybe not as well. And when you get people you don't expect talking to you

about the stock market because they know what you do that is a good sign that the markets may be nearing the top or there's a lot yeah exactly there's a lot of euphoria these kind of signs I feel like they're popping up more and more nowadays. Oh it's too good you know heads head through the little hole and I'm just like oh oh no, like get me out of this. Also, like how do I tell her I don't want to talk? They need an option on the app like Uber where you can ask for no talking. I discovered that a few months ago. I had no idea it was an option.

You can do that on Uber. And in San Diego, I had a particularly chatty Uber who wanted to do trivia the whole way on our 30 minute drive, which was fine. I was happy to do it. I like trivia. I'm fine to do it. But a notification came up right away before he picked me up and said like, hey, do you

want to talk or not? So I guess he's known as being particularly chatty. Oh, okay. And the Uber app asked me. So I thought that was kind of funny. We're gonna talk about the definition of quality, something I picked up, and then you're gonna, something we said last week

about where to find value in this market. I think that that'll be quite interesting. We are coming into, you know, one of the limitations of the podcast is, you know, production, recording recording with news, there's just naturally going to be a day or two of lag. But we got to the inauguration and the day before the last day

for a TikTok ban potentially as well too. Those are two big news items. The TikTok ban is a particularly huge news item. There is a significant amount of advertising dollars that goes into that platform and that ecosystem. You know, Mark Zuckerberg and the Meta family of apps are licking their chops at the idea of a potential ban there.

So, you know, I would not be surprised if Meta smashes expectations over the next six months, if TikTok does get banned. That's my opinion. The expectations will get revised up and I bet you they'll still be too conservative. That's just my anecdotal opinion on advertising on TikTok right now.

I think it'll, they'll sell the assets. I think they will. There's just, I think the numbers I've seen float around is like 40, 50 billion in terms of value. Polymarket, I just checked a couple hours ago. Polymarket had it at a 65% chance that it would get banned. So that leaves, I guess, all the other options at 35%. This is just Polymarket. I might actually, yeah, I might actually place a little bet on that. I think it's, I don't, I think there's just too much value.

There's some companies, yeah, too much money, too much value there that there will be some buyers. And not only that is- But this also just depends on the Chinese government wanting to accept that. Like is there any amount of money that gets the deal done? I guess that's the big question. Elon has a lot of influence and he definitely,

as Trump's here, at least so far, and he's got a lot of interest in China. So I think he could potentially move the needle there. But if I had to bet, I feel like that's a bit on the, you're getting pretty good odds for. 65%. Something else, yeah, to happen. It peaked at 75% yesterday, that it would get banned.

Okay, see? So I think there's probably some stuff happening. That's just my perception, obviously when you look at odds and probabilities, anything can happen, but if I had to place a bet, definitely with those odds, I would go on the side of. Betting on capitalism. Any other outcome. Yeah, exactly. Any other outcome, capitalism coming through because there's just too much money to be made and I feel like the US will also try to as much as Zuckerberg has been cozying up to the Trump administration recently, I think the US and the Trump administration, which is a bit more free market, they'll probably value not a ban if it's US controlled somehow to avoid

having too much power into one platform. Because let's not kid ourselves, there might be on the margin people that'll go on X on Snapchat, but most of them will probably go to the most obvious platform, Instagram. That will probably take up most of the subscribers that were with TikTok. Correct. So that's my prediction. That would be the largest net,

single entity net benefit would be Instagram, of course, owned by Meta, for sure. Well, you know, recording this on January 16th. It comes out on I think the 19th. Yeah. You'll know if we're wrong or not. Hey, hello future self. You already know. 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 money sense 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 RSP 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 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. So not so long ago, self-directed investors caught wind

of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians. And we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for, low fees, an incredibly robust suite, and truly something for every investor.

And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF, one single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker,

keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. All right. Let's get into the best definition of quality question mark. So it is no secret that I have a bit of a man crush on Dev Kandasarya. Like, let's just, let's call a spade a spade. He runs Valley Forge Capital and he's well known for two things in my view.

One, absolutely crushing the market, of course, you know, winning helps for sure. And two, doing so by just holding a handful of high quality stocks for a long time. And I mean just a handful. It's one thing to be all stoic for us, you know, and just say, I'm cool with deep conviction, right? I'm cool with that. But we're talking about several billions of dollars with Valley Forge Capital here. You have here the portfolio that they have as of the latest 13F.

So it's 35% FICO, the company, Fair Isaac Corporation, ticker FICO, which is the monopoly on credit scores, basically. 20% S&P Global, 16% MasterCard, another 13% Moody's. So those four companies are like, you know, another, sorry, 6% of Visa as well. So Visa, MasterCard, that duopoly.

Moody's, S&P, that duopoly and credit ratings and everything else they do with analytics and data and stuff. And then FICO, kind of an amopy on credit scores. It's like this portfolio is the wide moat financials portfolio and I freaking love it. The rest of the portfolio is rounded out by Intuit and ASML, okay?

So very high quality businesses, they're all large, large businesses. And it's crazy how much he's kind of crushed the market with such large market cap companies too, over that time horizon. It's pretty impressive. But the big question is, what is quality? So like, to you, when I ask you like, what is to you a quality company?

That's a good question. If I had to put it in words, there has to be certain aspects around it. I would say it's a company that will have growing revenues, at least stable margins, but again over long periods of time. So it's able to do it over long periods of time, sustain it, growing profits, growing free cash flow, manageable debt, and a good moat where maybe not a moat but definitely, well yeah, I would say still a moat where there's, it's hard for new entrants to get into there. So that would be the highest quality companies simplified. That's the way I would think about it.

Yeah, totally. Definitely. It's got those like metrics and numerical fundamentals that tell the story of the, you know, the moat and the competitive advantages and the secular tailwinds and the secular trends of their industry being behind them. And it's fairly easy to say, okay, yes, this company structurally is great and the industry leader, this one's fairly mid and the poor industry when it comes to unit economics. It's easy to kind of just black and white, throw things into buckets. And I think it is a skill to get quick at that. But when I heard Dev Kansarya be interviewed by my friend Clay on the Investors Podcast,

interviewed him and Dev said this, he said, my definition of quality is the intersection of growth and predictability. I thought that that was like, you know, cause you can kind of word salad, like about how awesome these companies are, but the predictability part in my view, encompasses all of those things you mentioned, right? Yeah, yeah.

It's basically what I said, but more eloquently. It's a lean explanation, right? Cause predictable growth for long durations is achieved by great companies. Growth on its own can be achieved by any company, right? Growth on its own can achieve by any company, large companies, giant companies, but predictable growth for long periods

is achieved by great companies. And so this thought really stuck with me, the intersection of growth and predictability. For example, a company that I own, and my God, I wanna buy more, but every time I see the valuation, I die a little bit inside. Intuitive Surgical, okay, this is a business where

it is the most predictable grower I've ever owned, honestly, because they install a certain number of DaVinci systems in hospitals and at an accelerated pace over time. So they typically grow the installed base at around 12 to 15% year over year, which is not gangbusters growth or anything, but they've been doing that for a long, long time, these installations of these DaVinci robots.

And they're going to probably be doing that for a lot, lot longer. University of Toronto just got like one of the first couple in Canada and now today, right? And there's what? Six... No, almost 10,000 installed in the world today. It's not crazy over the next five years for that number to, you know, easily jump up to 20,000 and double and continue to 30,000, continue to 40,000. And you see in the recurring revenue base that it just ticks up with that KPI like clockwork because there's recurring revenue on the business.

So I think that's why it's so highly valued and why people are so sought after as an asset. It's going, okay, yeah, it's not growing 30, 40% every year, but it's probably gonna compound double digits for, I don't know, the next 10 to 15 years. And there's just not that many businesses that you can say that about. And I think that's why it just gets such a premier valuation. And the biggest challenge with investing is finding those high quality companies at reasonable

valuation because they tend to not trade cheaply. Correct. And sometimes they don't trade cheaply, you invest in them, five years later you've had phenomenal returns, I think with you. A la Costco. Yeah, Costco, intuitive surgical. The problem with that is there's also going to be a lot of instances where you buy high quality companies but you pay

way too much for them and then as good as the company is it trades sideways for two one year two three four five years that's that's pretty common too if you buy something extremely richly valued and that's always the trick or the tricky part with investing in general, but especially when you're looking at good companies, it's not hard to find quality companies typically, is just hard to find them at the right valuation. Well said. It is not hard to find them.

It is hard to find them at the right valuation. I guess the thing is, is like, I really like the framework that Terry Smith has, which is just buy great companies and try not to overpay. It's like, again, another one of those one-liners, because there's no perfect formula or silver bullet for valuation, but try not to pay is just, try not to overpay is just directionally correct enough to work.

And I like that mindset. No, I think that's good move on to some the opposite of Moving on to some value so we're to find some value in the market because the markets We've talked about it a lot in the last year I would say markets are not cheap You can use a bunch of different indicators, valuation metrics, whether you use P ratios for the aggregate market, the Buffett indicator

that looks at the total market cap in the US compared to US GDP. Like almost everything is either at all time highs or at the very top percentiles of high valuation. But once you start looking at different areas, there's definitely some areas where you can find some value. And I'll mention a lot of names here. Just be aware that some of the names I'm more familiar than others. So make sure you do your research for all of these names, even those that I know well. These are just some ideas of where you

can look for value. And there's most likely names that I'm not mentioning in these areas that are probably even better than the ones I'm mentioning. So just wanted to mention that. But the first one that came to mind is oil and gas. It's really struggled over the last few years. It's not been terrible, I would say. It's just been underperforming the market and there's different ways to play this. One that comes to mind you could look at the Picks and Shovels play, a company that you own, Terravest, TVK.TO listed on the TSX. That is a way to play it if you're in if you

want to invest in Canada. Halley Burton would be an example with the US. Yeah you want to add something that you made a good... No be an example with the US. Yeah, you want to add something that you made a good- No, I'm giving you the Dr. Evil. Come join me, the Terravest land. I think you'd be a suitable- Terravest is not trading cheaply. I think you'd be a suitable shareholder. Hallie Burton, ticker HAL, is an option in the US. Again, you're betting on the picks and shovels, and it's a really interesting option in the US again you're betting on the picks and

shovels and it's a really interesting way to play it because you're betting on you know the US with Donald Trump I think it's pretty safe they've been very outspoken about that drill baby drill loosen really regulation when it comes to that the problem with loosening regulation is you increase production and if when you increase production you increase production and if when you increase production you increase supply and often times it's going to put some downward pressure on the prices so it's not, doesn't necessarily mean that some of the oil and gas plays will become more profitable.

So it's always a little bit tricky if you're looking at the producers but if you're looking at picks and shovels you don't care. As long as they're drilling more they're gonna need your equipment so that is an interesting way to play it here but again you can look at some of the producers whether you want to look at more petroleum or a gas company like Tourmaline but of course Canadian Natural Resources would be another one for oil and gas in Canada both of them there. Turmaline is actually very interesting because if you start looking at the price of natural gas which is almost doubled over the the last six

months I was looking earlier as I was trying to bring up some prepare some charts for the podcast I like to be prepared and I'll show this here for the joint TCI listeners in terms of the price and natural gas has just, this is over the last six months. It has more than doubled in price. I did not, I wasn't really paying attention. This is pretty significant move. And I've been buying Tourmaline as it was cheaper. I do own Tourmaline. I own Canadian Natural Resources, so full disclosure. Termaline is just up 11% that month. And they have a history when the price of natural gas starts increasing and they're just pumping free cash flow. They have a history of paying special dividend.

That's why I love this company is they have a small regular dividend and then when prices go up and their free cash flow increases, they will oftentimes pay down debt and then they'll do a special dividend. And they bought a company not too long ago, so I'm sure they'll be using that to pay down debt, but they'll probably use it as well to pay a special dividend going likely sometime this year, especially with these higher prices. So that's an interesting play as well to pay a special dividend dividend going likely sometime this year especially with these higher prices so that's that's an interesting play as well because thermal lines still has not increased all that much in that time period some other ways to play the oil and gas space would be pipelines like an Enbridge so ENB.TO TC Energy TRP.TO or Kinder Energy, TRP.TO, or Kinder Morgan in the US. There's tons of pipelines.

When I talk midstream, it would be pipeline companies. Another play would be refiner. One that comes to mind is Marathon Petroleum, ticker MPC in the US. They're I think the largest refining company in the US and their stock has been under a lot of pressure over the last year. So these are all companies that I've seen, you know, there might not be at the bottom the barrel, but they've definitely underperformed. And I think the market is still not really investing in general in this area. The market is still, lack of better word, high on AI and big tech.

I think that's what we're seeing right now. So now, in my opinion, and I could be wrong, and this is not investment advice, now's the time to look at these names, even if they've gone up a little bit in the last six months. Yeah, the natural gas producers are really interesting to me if I was to dial into one of these, I think, especially with the potential of unleashing

Canadian resources a little bit more freely in the next era. Yeah, yeah, I think there's a lot of, I mean, there's a lot of promise in this space. Again, when you look at commodities, it's always a bit tricky, but again, I gave a lot of different options. The pipelines, they'll make money regardless.

They'll just make more money when the prices are high, but they'll make money regardless. So there are ways to play it and being less affected by commodity prices like the picks and shovels and the pipelines. But again, if you want something a little more cyclical, maybe higher upside, then you can look at some of the producers.

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 RSP 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. So not so long ago, self-directed investors caught wind of the power of low cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see. Because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite,

and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the U S let's just look at ZEQT, for example, the BMO all equity ETF, one single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings,

I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. This next segment of companies I think is one that definitely needs a look. I think is one that definitely needs a look. These, some of these are just like the most unloved, least sexy post COVID hangover, can't grow into those 2021 growers. So yeah, this one's interesting. Yeah, so this one I'm sharing again for joint TCI subscribers.

So pharmaceuticals company. So that'll be obviously in the US because what we have maybe two publicly listed in Canada or one I can't remember. It's not a big space in Canada but in the last six months and especially in the last three months with the US with Donald Trump being elected almost three months to the day not quite maybe more like a week after that. But nonetheless, there's been a lot of pressures on these companies. Looking at the last six months, Johnson & Johnson is down 4%, J&J, Pfizer obviously with the

COVID vaccine, it was a poster child for that, is down 11%, Merck is, and Novo Nordisk are actually both down 20%, and Novo Nordisk for those not familiar it's a GLP one so the weight loss drug so their stock really went way way up. They're still trading like relatively high valuation but it's come down quite a bit. Eli Lilly is down 38% again they've seen some pressure a bit more pressure with Eli Lilly ticker LLY because their free castle has gone it's definitely gone down I was looking they've increased I think their RND and capex quite a bit in the last couple years. I don't know these

companies quite well just because I find this space extremely complex but again I think this is a result of Trump being elected, announcing that RFK would be leading the Department of Health and Human Services. You can look up RFK Jr. He's been very vocal about making some significant changes on the influence of big pharma over regulators. He's been very critical of vaccine makers and once overall the public health system in the US.

Clearly, there's a lot of uncertainty like you talked in your first segment people or investors like predictability. This is not the case with this sector. So you are taking some risk there is some uncertainty but these companies a lot of them are just gushing tons of cash flow and if you're looking here at Johnson & Johnson, it's trading at very low valuations. It rarely trades this cheaply. You're looking at it on a trailing basis, 17 times free cash flow and 24 times earnings. And that's on the low end. Even if you factor in the fact that they recently spun out their kind of retail segment with CanView. Even despite that it's trading at pretty low valuation. You rarely see that for that company. Something to keep in mind there is a

bunch of different options. If you're looking to do the work you'll definitely want to do the work for these companies. They're pretty complex to understand. There are some ETFs that you can look at. BMO is one of our sponsor. They have a broader healthcare ETF, ticker ZHU. If you're looking more pharmaceutical specific then you'd have to look at some other option. Most of them are US listed. So you'd look at IHE which is I believe BlackRock US pharmaceutical ETF or VanEck with PPH. Those are some options if you don't really want to do you know dig into these companies and just have broader exposure.

If you want to dig into the companies, again I'm not an expert but here are some of the things that I know you have to look at and understand. Understand what drugs are driving profits, whether they still have patents on those drugs, if so when they expire. You'll want to understand how much they spend on R&D, how much they plan to spend on R&D, their drug pipelines, what step of the process each of those drug and how promising they are. You'll want to also look at, obviously the regular financial things like that you'd look at, but it's understanding that part, especially what part of the process they're at

that I find pretty complicated. And it's definitely beyond my circle of competence here. The, I'm just looking at, I was pulling up Pfizer cause it's just been such a dog. Revenues peaked in July, 2022, kind of a peak of vaccine distribution at $27 billion for the quarter. Their June quarter, two years later, was 13 billion. So, you know, significantly less, you know, a clean 50% cut and it's on a 56% drawdown. So if I go to the drawdown chart here,

yeah, it's on a nearly 57% drawdown for this company. It seems. It's paying a pretty good dividend, too, if you look at it. It's like 6%. Wow. I thought it would be around 4%, not 6.3%, yeah. Yeah, it's juicy, but it's also like scumbag Pfizer. I mean, like with these companies, right?

Like it is, like you mentioned, there's a lot of- Hold your nose and invest. There's a lot of research. There's a lot of research you're gonna wanna do like primary research on the products. And there's so many of them with these mega conglomerate pharma names that I agree with you.

If you think the entire sector is too cheap, then you know, probably a basket of them at low cost is the way to go. At least for me. Yeah. No, I think for me it would be as well because it is pretty complex. I'm sure there are some people

in the pharmaceutical space or have studied with that. If that's the case for you, you have a hedge on Braden and I by far because you understand how these companies work way better than we do. If that's the case for you, use that knowledge to your advantage. Understand whether one of the ones we mentioned maybe has way better prospect than another. I don't know. I just don't know these companies that well. And I find that pretty complex just understanding not only the science behind it, but the whole regulatory approval. If it was me, if I had to pick one, I would pick the picks and shovels play of Thermo Fisher, the devices company. No, it's not as cheap. No, it doesn't

pay a 6% divvy, but it's a 210 billion US market cap company, trades at 24 times next year's earnings. So that's come off a lot. This was a really, really pricey stock. I think you can get it a lot more fairly here. And this is kind of a best in class business in my opinion. Yeah. Another one that would be maybe not quite picks and shovel that I had looked at a while back and I'm just going on memory here is West Pharmaceuticals, WST. They do a lot.

Yeah. So they do medical devices and it would be another company that could be interesting for people looking at this space. The life sciences basket, you know, the Boston, the Edwards, the Thermo Fisher, Donahue, which is the big roll up, WST, that's where I'd primarily wanna live. And they've come off quite a bit, most of them anyways.

But yeah, the pharma, if you're looking at pharma and you have that knowledge or you're ready to put the work into it, it looks like there's value there. Just looking at it without being an expert. The next one here, same reason I think, similar reason than pharma that it's down. So defense stocks, again, if you're wanting, you don't want to invest in these type of companies,

that's fine. It's your money. But again, these are looking pretty cheap. And the reason why I'm saying it's similar reason is because there has been some pretty critical words by the Trump administration, Trump himself, by accusing defense companies of overcharging the US for military equipment. I know Elon Musk has also been pretty critical as well, saying I think the F-35s are not as good as some manufactured in China or some other countries that have their own fighter jets. One name speaking of the F-35 Lockheed Martin, ticker LMT, has seen a 20% drawdown in the

last three months, which essentially again lines up with Trump winning the election. It is one that is very, is trading quite cheaply right now if you're looking at it just on a AP basis. Lockheed Markets rarely trades this cheap. So it's definitely towards the bottom of its evaluation if you're looking at the P ratio on a trailing 12 months. Again, some uncertainty with the whole Doze Department. Maybe they'll try to be more efficient or at least in the procurement space for the fence contract. Maybe they'll try to trim some of the margins that are given to these companies. So clearly there is some uncertainty in the

space. Lockheed Martin is not the only one that's been seeing some drawdowns, but it is a pretty well-known name in a company that is rarely this cheap. So someone that'd be interested in these type of stock. Defense stock has definitely been on a draw down, especially since the Trump election. I think it's mostly trading with historicals, in terms of valuation. I mean, I think it's on the bottom end of the historical for sure.

Yeah, it's trending lower. Maybe I'm interpreting, there's definitely more, it's not high, that's for sure. Yes. I mean, it usually trades mid double digits, I feel like, which is kind of where it is now. But does it ever trade cheap? Does it ever trade expensive?

No, not really. It is a high quality company. The fact, let's be honest, there's never been a single president in history that has spent less on defense than his predecessor. So I don't see that trend changing in America anytime soon, honestly. Yeah. And add that to the fact that Trump has been pretty vocal about allies increasing their military budgets. And where do you think allies get their equipment? They're not getting

their military equipment from China. They're getting it from US defense companies for the most part. So if Canada increases its budget, which will likely happen because I'm sure Trump will be putting some pressure on Canada to do that. My prediction is we'll probably see that in the next couple of years. What do you think they're going to be buying for fighter jets? They're going to be buying F-35. They're not going to be buying for fighter jets, they're gonna be buying F-35s. They're not gonna be buying something else. No, the big primes will be the benefactor there.

Yeah, yeah, exactly. Now, one that's interesting, I heard on another podcast a couple of weeks ago, I'm sorry, I should have written down the name of the guest that was happening, but he said, what they look at for value, and was really it was true I started looking at it is wonderful businesses outside the US because a lot of businesses and railways are probably the best example here railways are wonderful businesses they are not

trading cheaply in North America it's not just the US the Canadian railways are not cheap. They're definitely trading on the higher side of their historical valuation. They're cheap compared to Big Tech, don't get me wrong. But in terms of railway, they're not trading cheaply. And then if you start looking at, let's say, Japanese companies, Japanese has some publicly traded railway companies, and they're looking pretty good. They're not looking bad at all. So you have East Japan Railway Company ticker 9020 and on the Tokyo Stock Exchange, never understood why they use numbers but they use numbers there, is trading at 13 trailing P

and forward P. So compare that with Union Pacific for example. I think the Canadian railways are in that same vein. Union Pacific's trading at 20p. So there is a big gap and these type of companies have moats in Japan as well. You can find a ton of great businesses outside of North America with deep discount. The problem is they're not without the risk. So you can take on currency risk by doing that. You're obviously going to take on currency risk. You are taking on currency risk if you invest in US stocks as well. That's always going to be a risk there. Of course, it's worked out pretty well for you if you're Canadians, that currency risk. But it is a risk, right? It could go the other way as well. You can

also take on some political risk, country risk depending on where the company is located. I'm talking about Japan so clearly I think the political risk shouldn't be too bad there but again it's also not that far from China. We don't know what's gonna happen in the next few years, it's not that far from Taiwan either. They're in that region. Of course they're a close ally to the US. What I'm saying here is there will be some additional risks. So yes, you will likely be getting some discount on a lot of great businesses outside the US. Basically identical businesses,

but they're located outside the US. Even just look here in Canada, right? Like there is so many businesses that trade at a deeper discount if they don't have a US listing. Yeah. Yeah, but you just, you want to have a bigger margin of safety

for those companies. So it's not because you get a slight discount that it'll be worth it. You want to have a pretty significant discount compared to the US counterpart to make up for that additional risk. But I thought that was a great idea and it is something that I'm starting to put

a bit more on my radar and it gives you diversification geographically as well. There's just so much more de facto flows as soon as it these companies have a US listing or at least domiciled in the US. I mean look at the look at Constellation, right? Like Mark Leonard has specifically said no, we will not do a US listing because we want basically the least amount of eyeballs on it so that the employees can continue to acquire shares at the lowest price possible. Not that it treats a deep discount or anything, but I think it would have an even more rich

multiple if it was on the US, like on a nice year, for example. The only thing here is like, it's not a fundamental risk, but it's a risk of returns, which is, I got caught with this a lot as a, you know, less experienced investor, saying, look at the discount it trades at. You know, if I hold this for several years, it'll eventually catch a bid

and eventually trade like its peers in the US. Uh-uh, uh-uh. That is not how this works. It doesn't magically all of a sudden have some intrinsic value where it's gonna get bid up to the same multiples that its US counterparts may trade at. So I just really resist having that as part of the thesis because you'll be waiting, you'll be waiting,

you'll be waiting and it never catches the bid that you're thinking it will. Yeah, and that's where the having a substantial margin of safety is important. You really wanna have a steep discount and that's why you, these are typically companies you wanna follow for a little bit Of time so you get a better understanding

Okay What's the kind of range of discount that I'm getting compared to their US counterparts and then when you have a good idea you Can really pounce on it when it gets lower than it normally is trading in terms of that discount which leads me to a Subsection of that one that I've talked about before and it's Chinese big tech So a lot of Chinese big tech company you can make the case that they're high quality companies But because they are trading in China You know, there's some issues with that and I'm just gonna share here the crane share. It's pretty well known Internet ETF It's pretty well known Internet ETF. It's down 24% since September. The reason why I use September is pretty strategic because I did

talk about it on the podcast. In late August, I was saying, oh, you know what? Chinese big tech is looking super cheap right now. Despite all the issues with investing in China, investing in big tech in China, the unpredictability of the Chinese government and how they can act unilaterally and I think it was within a week after that they announced some stimulus, some pretty major stimulus and then Chinese stock and especially tech stock really went up and since then it's down 24%. So it's almost back to the level that it was when we had discussed that during the summer. So that's the reason why I wanted to look at that. I mean these companies are trading incredibly cheaply but there is risk. So I talked about some of the risks there. There's also the risk that you never fully know whether their financial

statements are accurate. To be fair you never fully fully know if any company is going to be 100% accurate, but there is much higher risk when it comes to investing in China. If you take Alibaba, take your Baba, it's trading at a 17p on a trailing basis and 9p on a forward basis and compare that to Amazon Amazon which I know it's not the exact same comparable but the closest comparable to the US and that's trailing at a 47 trailing p and 37 Ford p. Clearly there's different growths I understand but it's just to illustrate the discrepancy between the two that clearly there's a big big discount. Could it go lower for Chinese Big Tech or Alibaba? Of course it could. Of course it could. But it's an example of some deep discounts in other countries and that's why I chose

Alibaba as an example here. So I just... Baba is one of those things where it's like they can't keep getting away with this. It's like, how is it still so, still sliding lower and lower? Okay, so since March, 2021, revenues have continued to climb higher, you know, from this is in, this is not in USD, this is in WAN. So 717 billion, or I guess trillion, and I guess, holy moly, this currency,

to, these are such big numbers, I'm just gonna convert it to USD here. Nice little handy toggle on FinChat. So, 109 billion to 131 over that time. So growth did slow, but it's really high margin growth. And the forward multiple has compressed 45% during that same timeframe. It's crazy.

Yeah. Can you guess what their forward EV to EBIT is, like forward operating income multiple? Say maybe eight, nine? Oh, you're close. It's at seven. Okay. Yeah, I was gonna say, yeah.

Well, I looked at the Ford P earlier. So I figured it would be in that range. But my God, that's like, man, it's just the, is this the biggest value trap of the last five, 10 years? Or the best opportunity in front of us that we'll be looking five years down the line, be like, my God, why didn't we pounce on it? Even if it was just a percent of our portfolio,

it could go, I think it could go both ways. Shit. If sentiment shifts a little bit towards China, who knows, right? Trump is a bit unpredictable, but who knows, maybe there ends up being a bit of a detente that happens between the US and China. And then all of a sudden, you start seeing the prices of equities in China reverting back to a bit more normal valuation, at least on a historical basis for them. Nothing's impossible. That's what I'm

saying. It may not look like at this point, but it is look it's trading cheaply. So whether it's a value play or value trap, I think you'll have to decide, but it is. So their cloud business is now is now generating nearly 400 million of EBITDA per quarter based on this number. And top line revenue is nearly 4.2 billion per quarter. So it's a pretty healthy, you know, call it close to 20 billion USD a year run rate. Is this just like the premier slash only option for cloud computing there?

Like that's what I would want to know. If so, if so, then this is at some point going to be a slam dunk. The cloud business is doing almost 20 billion in run rate. Right? Like it's no AWS, it's no Azure, but it's pretty close to Google Cloud in size. Yeah, yeah, it's hard to say, but again, we're talking about where to find value. You have to decide whether it's a value trap or value play.

Clearly, it's some kind of value. Some kind of value. Yeah, it's going to be one of those two. Okay, we got two more. The next one here, precious metal miners. So gold miners return have lagged those of gold over the last year. Typically gold miners, you're looking at it on a bit of a leverage play on gold. The reasoning is that their cost will stay relatively the same regardless

of the price of gold. Although in the last few years, we've seen that there has been some cost pressures for these miners because of inflation, higher input costs, whether it's fuel to extract these metal, whether it's labor costs, there has been higher cost pressures. But having said that, the more prices of gold increase, the more they will be profitable. That's inevitable. It will happen. And there are some play that are not as leveraged. For example, the one I own, Franco Nevada, FNV, dual listed. Same thing for Wheaton Precious Metals. WEPM is a ticker here.

There are tons of options on the TSX. If you're in Canada, you don't really need to look elsewhere if you want to invest in precious metal mining companies mostly gold mining you have like NECO ticker AEM.TO, Barrett Gold, ABX.TO, Newmount and GT.TO. If you want to look at ETFs then ZGD the BMO equal weight global gold index is one. Van Ecke gold miners ETFs are pretty well known. GDX in the US and GDXJ for the junior miners. So there's tons of option. Those are just a couple of them here for people looking to just have some broader exposure. But it's clear that it has underperformed gold and if we look at historically it's likely to

catch up at some point. Will it? I don't know but it is an area where you can get some pretty good value and especially with these miners, you'll typically get a dividend to go with that if you're a dividend investor as well. This isn't even publicly announced yet, but screw it. VanEck. VanEck invested in the FinChat. Shout out VanEck. Yeah, I mean, I knew that.

I didn't want to mention it. On the cap table. Yeah, so, I'll be happy I mentioned a couple of their EPS. You should let him know and maybe he'll come on the podcast. Yeah, I mean, that's probably a pretty easy task there. We can get him on. He's a pretty big bull on Bitcoin. Big, big Bitcoin.

Yeah. I've listened to him quite a few times and he's not shy about it. I mean, I can respect people who are in that position and willing to go so far and deep into what most of ivory tower asset managers in New York won't touch in terms of being early. And you know, if you're right, you get to be one, you get to make a lot of money.

But two, you know, you get the respect you deserve after being right for when no one wanted to touch it. And he also does it with his own portfolio. I've heard him on podcasts before as a guest saying that it's also, he puts his own money in those assets too. But the last one here, I think is a pretty good one here. It's the Pandemic Darlings. But it's specifically talking about companies that did very well, not because they were selling software and all the stimulus money was going after them like a light speed That got a crazy run up

I'm really talking about companies that were offering for the most part physical products that were in high demand During the lockdowns. I've talked about it before I'm a big mountain biker It's their mountain bike industry is struggling quite a bit, the bike industry in general. There's been tons of bankruptcies and that's an example. But another one that comes to mind is BRP. So do.to. Or another one, again, listed in Japan, ticker S7309, which is Shimano and they make bike components and fishing equipment.

They've been there forever. When it comes to bike components, whether you're looking at a road or mountain bike and I do that pretty well, it's essentially a duopoly. So you have Shimano and you have SRAM. These are the two companies. There are some smaller players but they have, I don't know the exact amount But they must have about 90% of the market share together. So it's a very interesting play They've been around for a lot of time, but these are just two example I'm sure you can probably think of other examples here that a lot of these companies ended up over producing because there was massive demand Right there were log downs. So people who never biked before were like,

okay, well, I can't do anything. I might as well buy a bike and go bike outside and get out of my home where I feel like I'm in jail the whole time. So these companies just ended up over producing because they saw the demand. And then as demand started waning, there's always gonna be this lag effect

where companies realize that. No good deed goes unpunished. Yeah, exactly. They realize that and then it takes time to slow down that production. We've seen Aritzia was victim of that a little bit during the pandemic because they really saw an uptick and there's always going to be a lag. So they see the demand increasing, they ramp up production, and then they see demand decreasing, but they're too late to slow down the production,

and then they can get into trouble. And maybe not even on a production issue, but just the fact that, okay, the demand for the product is still higher than maybe it was two, three years ago. It's a nice growth rate on a two, three year stack, but no good deed goes unpunished where you had tremendous growth and then, oh, you actually didn't grow compared to last year. You had a 20% decrease in sales. It's a really tough comp to go into when you pull forward demand, the market expects you continue to grow off that new base when it's

just not realistic, especially when you're selling physical goods. Exactly. And the most important thing I have to stress when you're looking, especially at these companies, you have to go to quality. Yes. Because I talked about mountain bike bankruptcies. When you don't go towards- Because cyclical.

Quality. We're talking about cyclicals, that's why. Exactly. You have to go to quality because they'll be able to survive and do okay when the cycle is down, but then they'll thrive when the cycle goes up. And these companies are definitely beaten down right now. There's a lot of value to be had. And then you compound that with the fact there's been some macroeconomic headwind. A lot of these companies are consumer discretionary

so it's like a double whammy that's almost happening at the same time. But if you look at quality for these type of companies, I guarantee you you'll be able to find value. But again, it's finding the quality within there because if you pick the wrong company, it could end very badly for you as an investor, without saying the same thing again, but it could end up in some pretty significant loss of capital. Yeah, I like that kind of basket of post pandemic, darling,

cyclicals that just no one wants to touch. That like, ah, there's no way you're gonna compete with the comps that you put out in 21, 22. You're still trying to grow into that. And the stock just has no momentum. It's flat to negative on a five year basis type of thing. I was thinking of like, another names that come to mind a stock that I don't know at all really,

but I'm looking up here, it's actually smaller than I thought, it's only like 1.3 billion in market cap. Winnebago for instance, the RV manufacturer. Oh yeah. Right, like those types of companies. I like the smaller ones too. Here's an example, okay? Here's Winnebago, I'm gonna pull up

and share my screen Winnebago's. I've looked at them before a little bit. You example, okay? Here's Winnebago. I'm gonna pull up and share my screen Winnebago's. I've looked at them before a little bit. You have? Okay. I was just curious to, yeah, mostly in the earnings and use. I think I did it with Dan. He's like, oh man, I completely forgot about this company. But for that same reason, is I wanted to see how it changed

with the pandemic and afterwards. I'm gonna pull up LTMs. Actually, let's go annually. So from 2015 to the trailing 12 months, the top line revenue has tripled, right? It looks like a Rocky Mountain. Yeah, it does. It does.

It grows nice and steady. It's a little chunky. I don't know if it'd be the Dev-Kentiss area predictability growth, but in 2022, they did 5 billion in sales, okay, which is... It's crazy. Yeah, you know, two and a half times higher than it was in 2019, for example.

For Winnebago. For Winnebago. For Winnebago. Five billion in sales. And this is a one billion in market cap company at this point. Now they're doing roughly three, three billion on a trailing 12 months in sales. Which still to a higher than 2020.

Still higher than 2020. And three times higher than it was 10 years ago. So on a compound annual growth rate, you know, you do all the math and it's 12.2%. And so off this new base, you could see them kind of growing at that rate for a little while longer, but it's just left for dead. Like the stock is, who's bidding,

like who's buying this thing? Like I bet if you look at the ownership structure, it's like a few funds and some insiders at this point. Like that's what happens with these companies. Yeah, the CEO owns 1.5%, that's a lot. Yeah. But I had fun doing this. It's funny, because it started with three areas

and then ended up with I think seven now that I talked about. But it just goes to show that there is probably more areas where you can find some reasonable valuation and even some value in these markets. I know we have a tendency to focus on the big tag, the Mag7, what's really pulling the market higher, the nvideas of this world. But there's a lot of companies that are generating a lot of cash flow and they're just not really loved right now by the market for various reasons like we talked about. And if you're willing to do the work and find the companies in those areas that we talked about, the good ones, nothing's guaranteed,

but you probably will have some decent returns going forward. Of course, nothing's guaranteed, it could still go down, but if you do the work, these are some areas where you can find some pretty reasonable valuations. It's just, I think I've kind of mentioned this to you many times, it's just with these, with the international emerging markets play or the trying to value somewhere else or just looking for value in smaller market caps, you just got to have one of two things to

an extreme example in my opinion, which is one, an immense, undeniable margin of safety, or two, an amazing growth rate that you can justify that's four or five times higher than Mag-7, because these Mag-7 names are still growing so fast. It's just such a hard hurdle rate. I think that's what's so difficult and you're seeing that in the market. You're seeing more and more concentration into just a few mega cap companies because those companies have such a high hurdle rate and it makes

sense. It's not like the market's dumb or anything. It makes sense. Yeah. I mean, I would push back a little bit to that with the index fund inflows. Fair. Where people buy systematically the index without thinking exactly about it, which is pushing, it's pushing the biggest companies because the money is flowing in automatically. But it's not like they're in bubble territory,

like, you know what I mean? It's, I hear that. They're richly valued. I hear that argument, but it's like, yeah, Meta is trading at 24 times next year's earnings estimate. Yeah. It's not the tech bubble.

It's different. It's not the tech bubble. There is definitely a lot of hype. I would say my reservation with big tech right now is just the valuation is still getting quite high where there's a lot of scenarios that you don't have fantastic returns over the next five years. And that's my biggest issue with it. There are some that you have, it continues, but the fact it's just a valuation has a lot baked into it already. And granted, it's not the tech bubble I totally agree it's not the same thing they're actually very profitable businesses but that's where I think for me there's there's a bit of

reservation where this you know these companies we looked at it's called most like the polar opposite right there could be some struggles but you're you're kind of looking at it from the other way around is you're looking at it because the valuation is so attractive. Well, you can come join me in Terravest. That's not cheap value stock anymore though. Should have bought it when you said it, but I think it'll help a lot of people. There's going to be a lot of tickers to add in the description, but that's okay. I think people like having ideas and then use them, find some additional names. Put the transcripts through AI and tell them to spit out the tickers.

Yeah, that's usually what I do. Oh, you're a good man. Shasha Petey helps me with it. Shasha Petey. Ah, that's good stuff. It's like Tarjay. Yeah. Thank you for listening to the podcast, folks.

We really appreciate you tuning in. We are here in your ears Mondays and Thursdays. It's gonna be a jam packed couple weeks here at the start of the year with a lot of big news items coming online that we'll have lots to talk about. And you know, our list of topics is never ending. And I'm looking at our document here now, which is getting slow again.

It's page 749 again now, Simone. I guess Google's infrastructure has improved because usually we were capped at around 300 pages before it freeze. Yeah. So. Yeah, all that investment in the cloud. Should we tell, should we tell,

Maya's like the one who edits the shows. She used to be an intern co-op student for us at FinChat in the podcast for those who don't know. But we should say, we should get Maya to take all five documents, which would probably be around like 2000 pages and just get like Canadian investor podcast GPT. Train it on that.

Train it on that. That'd be funny. Yeah, see all our hot takes. No, but thanks, seriously, listeners, The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.