The Canadian Investor - 6 Stocks Simon Sold

Episode Date: January 6, 2025

In this episode, Simon starts by giving props to Braden for one of his bold predictions coming through on the last day of 2024. Simon then goes over the stocks he sold in 2024 and how they’ve performed since he sold each position. We wrap up the episode with Braden going over the metric he uses the most for screening for companies. He goes over the pros and cons of the metric and why he uses it so often. Tickers of stocks discussed: AP-UN.TO, ASML, EQIX, HD, SHOP.TO, PSCT, SFTC.TO 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.

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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 show. My name is Brayden Dennis, as always joined by the noble, Simon Bélanger.

Dude, how you doing? We are now recording in the new year. So the boys are back and you know the show goes on yeah yeah I mean it's fun to to be in 2025 hopefully it'll be a good year at least for me at least I hope that it'll you know start better than it finished for 2024 without going to tell for on the personal side of things yeah no no me as well and you know but know, but I hope it goes like the market did last year.

Yeah, you know, it was a good year for the market. That's for sure. You and I recorded and Dan recorded our 2024 bold predictions and recap. Yeah. The show is set to air that day. And I'm just like wanting to record a little like segment, throw me a bone on my bold prediction. What happened? You know, I mean, I was like, hey, have at it if you want to do that and edit it and put it on,

but I was like, hey, let's just talk about it when we record. I think it'll be, Let's just talk about it when we record. I think it'll be, you know, it will work well. Well, I mean, your soft choice, corporation being acquired in 2024 literally happened on the last day. So December 31st. So I mean- The morning of December 31st.

Yeah. I guess that's what you risk, right? When you do, you record episodes in advance to try and get some time off during the holidays, this can always happen. But I mean, that's pretty rare for an acquisition to be announced like the last day of the year, basically.

Like, I don't know if there was, there must have been some kind of- Some people were working over Christmas. Yeah, exactly, but there must have been some reason why they wanted to push it in 2024. I'm not quite sure why, but there had to be a reason. There had to be a reason, because like, yeah, some people were not home for the holidays

to make sure this deal went through. Or they were home, but in a separate room and not talking to anyone. Yeah, the home office door was locked, locked shut. No, I mean, the bold prediction to recap for those who didn't listen, it is the last episode on our feed and we do them every year.

They're fun. We did our bold predictions for 2025, you, I, and Dan. And my 2024 one was that Soft Choice, the company, the TSX listing, I don't know, a billion and a half roughly of market cap based on top of my head, would get acquired. And then I did some kind of like, no, I didn't get it as we record, but look at all the reasons why you can tell

this company should not be public. I mean, they issued like a what, a $4 special dividend on a $16 stock at the time. And then they're, you know, bringing all the cash back to Sheryl's. It looked like it was being treated like a private company. Boom, 31st lock it, cash it, you know. I was looking for a win, dude.

You were on a hot streak. I was, I was due. I was due for one. No, it's a good prediction. I mean, it's hard to get it. Like, that's pretty bold because getting an acquisition, unless there's like really, you know, a lot of rumors out there that there might be a potential acquisition. But this one seems like I'm not familiar with Worldwide Technology, which is a company acquiring them at a price of $24.50 Canadian per share. Sounds like some private equity.

Yeah. That's what I was going to say. I mean, this seems to be like right up the alley for private equity because they're profitable and typically that's what they'll go after and try to put some efficiencies in and try to make the business even more efficient, lever up some it's usually the playbook and then five, 10 years down the line. I mean, I wouldn't be surprised five, 10 years down the line if they're back public after- Or switching hands from private equity firm

to private equity firm, that happens a lot too. Yeah, exactly. But these types of companies can be, they can be passed around like a hot potato every five years for kind of in perpetuity almost, which is honestly kind of sucks for the people who work there. Yeah. And look, I mean, I've been very critical of private equity. I think that's an understatement, but I think it's, I think you have to be fair too. I was listening to a podcast during the holidays with a private equity manager and they had

a very different approach where yes, they'll do buyouts like this, but usually they view it from, they actually have a long-term view. So they'll buy businesses that they want to hold for the long term. If they do happen to have an exit strategy that's too attractive to pass on five, ten years down the line, that's fine. But they're also happy with holding the business and their biggest hedge is their management team. So they've done that a lot and they know how to be more productive, be more efficient, but also they invest a lot in employee training. So get them better at their work and things like that, which is not something you think about private equity typically.

So just to be fair, I mean, not all PE funds are created equal or private equity partners are the same. So I just wanted to mention that. Yeah, for sure. No, there's a lot of variation. No, that makes sense. For the record, nope, no insider info, nothing. My brother worked there, I think like out of school, I don't know, like 10 years ago, for a short stint on the sales team,

long before they were public, but that is the only reason I know of the business actually, is because of that. But no, no insider knowledge, nothing. All right, let's move on to my first topic of the day. It's short and sweet. I wanted to remind folks, as we come off two hot years in the market,

people get particularly more speculative, more confident. As confidence grows, people go further and further out the risk spectrum because this investing thing is easy. That happens, that kind of hubris, the blog posts come out that they're smarter than Warren Buffett, there's the same cycle every time, right? And it's a reminder about the mathematics of excessive risk, excessive speculation.

It's not sexy for math nerds. And the math does not reward excessive risk. And that is because losses mathematically suck a lot more than gains on a like for like numeric number. For instance, if you lose 20% of an investment, to break even, you have to gain 25%. As you go further along bigger losses,

you need bigger gains. If you lose 50%, okay, so your $100 stock goes to $50. To get back to 100, if you only gain back 50%, you're only halfway back. You need to gain 100%, AKA double, from 50 to get back to 100. So this is just really basic math, but as you get further and further and further out the risk spectrum and take bigger downside risk, if an investment falls 70%, for instance, you have to more than 3X from there to get back your investment, 233% to be exact.

So a lot of gamblers, bettors will understand this type of math at a casino, at a poker table, they use Kelly criterion of sizing certain bets in certain way. And the reason for that is because if you take big Ls, if you lose that bank roll, getting it back is really, really hard. And it's not just hard emotionally, it's hard mathematically. And so it's just a reminder, a lot of seasoned experienced investors will know this math.

It's super important. It's the reason why going super far out the risk spectrum is not actually sexy. The math doesn't always work out. Yeah. And I think, unfortunately, I think there's a lot of investors just because of their age, right? They've started investing in the last five to 10 years and they haven't seen the consequences of this. So if you were investing prior to 2008, 2009 for the great financial crisis in the US but essentially affected the world, you saw a prolonged bear market, you would have, you know, you would probably still remember this stuff because you, it would have taken you years to get back to where you were at

because the market essentially went way down and it took some time until it recovered fully. Whereas in the last, well let's just look, well since then, I mean, there hasn't been any major kind of drawdown. There's been some here and there, but typically it recovered quite quickly, whether we're looking at the COVID crash or even 2022, right? Sure. If you've suffered some pretty big drawdowns in 2022, some people may have had 70, 80% depending if they were like high growth stocks or even like, you

know, really risky asset like crypto. But if they stayed invested they probably made it back in dense um in the you know 23-24 but again that's not something that should be like your game plan going forward because if we enter a bear market for a prolonged period of time you're facing you know 30-40 percent down and the markets trade sideways for several years that's where it gets really dangerous because a lot of people may end up selling at the lows not keeping those investments people could end up being in trouble financially whatever it is that's where I think it gets really dangerous is because there is this overconfidence

for a lot of people investing right now and they haven't lived through these prolonged periods of downwards or sideways. Yeah, picture, go back in time on how you felt on some of those really volatile, really down days in 2020 with that crash in May. May would have been probably the big dramatic swings. Picture- It was March, March.

March, not May, sorry. I think we hit all time highs, not only recover, but all time highs by June of that year. So that's a flash in the pan. Think of that kind of emotion that you might've had at that time, but for three years, right? Or longer, where it's just kind of,

you know, things don't look great, humming and hawing, kind of trading sideways, no one has a lot of confidence. This is what people should expect. You know, this happens all the time when you're a market historian. This happens all the time When you're a market historian this happens all the time through the data so Picture that remember what it felt like and remember that it next time it may not just be three months before we're back

You know at all-time highs again. Yeah as Do-it-yourself investors. We want to keep our fees low 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 QuestTrade.com for details. That is QuestTrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building.

And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning, Duolingo-style education lessons

that are completely free. You can search up Blossom Social in the App Store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking,

sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the App Store and I'll see you there. 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 on the way.

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 I That is airbnb.ca forward slash host. I was listening to a money manager, maybe like a few months ago. I can't remember, I'd give credit if I remember, but I always remember what he was saying is he's been doing it. He's in his, I think late 50s.

So he's been doing it for a long period of time. He was doing it during the great financial crisis. And he said, he knows some clients that are no longer with him but he still stays in touch and some friends that just recently returned to the market after basically exiting after the great financial crisis. So they missed out on all these gains and now they're coming back in probably at the worst possible time because they missed on all these gains, but they're seeing everyone have fantastic returns.

So I think that's the other thing that's pretty dangerous is then some people will get out of the market, then they'll try to time the bottom and then they never do and they just miss out on gains. Yeah, that's crazy. That might feel the worst of all, right? But it just shows how much it can sting, right? When you have these big or your snake bid

because you never invested in the stock market, you did, and then look what happened. You lost like 30, 40% in the span of a year or so. So you're like, okay, you know what? I'll just go out, wait 10 years, and then you get back in or 15 years, whatever the time is. Yeah, and I think that's why so many people have been drawn to the stories of wealth creation

in this country, in the real estate market, because you had an entire, maybe two large cohort of generations that had large amounts of their net worth invested into an asset that appreciated at a very nice clip with no interruption to the compounding because they weren't panicking they weren't getting a mark to mark on their house every you know few hours or few seconds, like you do with a publicly traded stock. So those types of wealth generation stories are so prominent in public markets for those who are patient, for those who are willing to take the long view and not jump off the roller coaster

every time they see some volatility, this is what people should come to expect. And look, I've been saying this for a long time now. Look, I am so confident people will not get rich like their parents did in the sub 40 year old generation of buying real estate for 100 grand parents did in the sub 40 year old generation of buying real estate for a hundred grand and it appreciates to 1.8 million in 25 years. That's not gonna happen.

The conditions are very different. The conditions are so different. The two million dollar detached standalone home in a major market is not going to 20 million in the next 10 years. All right, like that's just not an outcome that's going to be realistic. So, you know, act accordingly. No, I totally agree with that. I mean, the circumstances of our parents, you know, buying real estate are much different than they are today. Interest rates were much higher back then for sure, but the price to income ratio was much much much lower.

So over time as they paid down those mortgages and also interest rates steadily went down, it was like just the perfect perfect situation. And as you get population growth, money to basement, all at the same time, kind of perfect situation for having these assets just pretty consistently appreciate over time, just with some small blips here and there. Yeah, and it's so interesting seeing the dichotomy between what macroeconomic thinkers will call a recession versus how people on the street feel right

now. I mean, because the definition of recession, two quarters in a row of negative GDP growth, but you get the regular folk who have faced a ton of inflation since the beginning of the 2020s and a lot of inflation on the goods that they are regularly having to purchase, food, home, shelter, stuff like that. On top of, you know, the economy, okay, seems fine, seems all right.

We're not in that recession, you know, at least in the US. But people's wages have just not kept up. Their vision of buying this dream home is just impossible. They're not getting the benefits that they're seeing that the macroeconomic experts are saying that the economy is doing. And so there's been such a dichotomy in those two things.

And I think that's why folks in surveys feel as bad as they do, in my opinion. Yeah, and I mean, when you hear these stats too, they're always in the aggregate, right? Even if you hear certain stat, it's always averages. Averages can skew one way or another, but typically in recent years, we've seen averages being pulled up because of the top,

whether it's the top earners or whether it's the top spender, whatever it is, they're the ones that are pulling up the averages and I think the best way to explain it what we've seen over the last few years at least definitely in Canada but even the US is we've seen a bit of a K shape recovery so and people can just think about it think about the letter K and then you know the let's just say I'm simplifying it but the top half are doing quite well and then the bottom half with the K the leg down are getting worse and worse so I think that's probably the easiest way for me to explain it is this is what we're seeing more and more in the top half or I think

it's more like the top 20% are pulling up that bottom 80% a whole lot and that's why the numbers don't seem as bad or we may not be an official recession. But I think that's more academic terms. If you talk to a lot of people, even people that are decently off, a lot of them will tell you they've made cuts and they had to adjust their lifestyle. I think there's a lot of similarities to that and the market, right? You have these top 10 companies continue the story that they've had over the last 15 years, which is they keep getting better and outperforming everything else.

And that story continued in through the last few years with no real signs of slowing. You get concentration in other industries too. Target, Costco, Walmart, are now their share of grocery sales in the US and Canada continues to tick up in terms of the entire market, or at least in the US with the Target, Walmart, Costco. They're seeing concentration and the big get bigger. You know, that's a very similar story for how people feel out there. No, that's a good point. But I think we'll go on to the next segment.

And this one, I think it was a fun little exercise. I don't know why I thought about doing that, but I figured I'm still kind of slow on the news front, although we don't usually do news on Monday news and earnings But I decided to look back at the stocks that actually sold in 2024 and for the ones I sold I'm looking at the ones I really exited the positions not the ones I may have kind of trimmed a little bit because it was just getting Too ahead of itself for example. So the first one that's on the list here is Allied Property REIT. So for those not familiar it's Ticurap-un.to

it's a office real estate real estate investment trust so office REIT. If you're new to investing I know we get a lot of new listeners so I'll try to explain all the the terms and not take for granted that everyone is on board with these terms but essentially it's a company I bought in late 2022 and my thesis behind this was that more and more businesses would require their employees to return to work You know, obviously government workers as well

But given that allied has some high quality type a real estate so some newer buildings or older ones that were renovated with some brand new amenities for example so they're in higher demand and my idea was that you know what they have some of the best properties so as businesses want to encourage their employees to return to work you know they should look at offices like Allied offers because you know who doesn't want to return to work. You know, they should look at offices like Allied offers because, you know, who doesn't want to go to work if they're into working out when there's a gym, you know, right there for you when you go to your workplace.

So that was my thesis. At the end of the day, it didn't really materialize. I ended up selling the position on May 21st, 2024 at $17.27 a share. It's been 8% total returns since I sold. So I wouldn't say, you know, from a returns basis, probably I'm fine with it. No issues there. The reason why I sold is pretty simple. Management kept, I would say the three previous quarters before I sold, I noticed that management

started changing their tune and saying that they weren't so sure when occupancy would start getting back up. They were pushing it back out and back out and back out, which I'm not blaming management per se. I think it's just a reflection of how difficult it was to project and if businesses will actually return to something a bit more similar to pre-pandemic but then you add that to the fact that the economy was slowing. So after a while I said you know what I think that money is better invested elsewhere. I just

don't know where this is going. It could take years before it recovers. It might never recover. So I decided to exit that position. So yeah, I mean, I think I'm still quite happy with that decision. And I know there are some listeners that own the name, so I will look at it a bit closer when I do some earnings and use when their next earnings comes up in the next couple of months. Yeah. When you're buying it, I mean, the price certainly seemed right. And the quality of the assets are class A, great location. I see them all the time, nice buildings, modern, the kind of look that people are looking for with a modern and open concept type office,

the right amenities, the right vibe per se. But it's really hard to make money even when you have a gem amongst a secular trend working against you. That is one thing I've learned in the market is it's impossible. It's really hard to outsmart a secular trend working against you because even if you're right, you're wrong. Yeah, no, exactly. And I think on top of that, what made it even more difficult is there's more and more businesses that have gone back to the office, but they're actually choosing to have offices more in the suburbs because a lot of their employees will live in those suburbs and it's

actually more cost effective for them to do that. So that is another aspect. But look, I think I just wanted to show that because sometimes, you know, you make a bet on a certain company or you take a position and it doesn't really quite work out how you thought it would. And it's fine to, at least in my perspective, it's fine to pull the plug and divert those funds to something else. So the next one here is ASML, which is one that I sold March of 12, 2024. I had bought in late 2022 when all of tech I think was having a really rough time. I think it was late 2022 if I remember correctly.

I bought it, I remember I bought it for like I think around $400 a share. It was a great deal. And then I sold it for let's just say $1,000 per share on on March 12th mainly because I just thought the valuation was overstretched I thought the market was disregarding any kind of geopolitical risk but also cyclical risk when it comes to ASML and for those not familiar as ASML does these massive machines that are required they do EUV which is extreme ultraviolet and DUV which is extreme ultraviolet and DUV which is deep ultraviolet and these machines are required to basically

create or make the most advanced chips on the market today including the Nvidia chips. And what I ended up doing is I bought back the shares around 705 a share in October. I avoided a 30% decline. You know, it's a bit more of a medium term or I would say some trading, I guess, but I was just going on my view of the company that the valuation was stretched and that the market was not pricing in a lot of the risk associated with them. I still like the company. I just felt like the market was ahead of itself here. This was a good trade. I'm just happy you got back in. It's just one of the premier publicly traded companies in the world, in my opinion. Yeah. Yeah. I mean, it's, I ended up working out. It's not something I do very often,

but I just went ahead with my conviction there. Equinix I sold on March 21st, 2024 for 812 a share. I was definitely. Yeah, exactly. And I was definitely in the profit and there's been 20% total returns since I sold. So I think that's probably a bit better than the market since that date I would think, slightly better. I basically.

I would guess slightly better than the S&P but still under the QQQ Yeah, yeah, I think that's um, yeah, that's a good way to put it I sold in part because of the information I have read in a short report for Indenberg research Some of the information was actually you could verify by you know reading and then going back to old financial statements from Equinix and the biggest issue here is I just had trouble trusting management because Equinix is a data center REIT so it's a real estate investment trust that builds these data centers and the problem here is that they will use metrics that are non-GAAP

so non-GAAP just means that are not generally accepted metrics but that's fine this is very commonly used for REITs but because they are non GAAP you also have to trust management to some extent and for me that trust part was no longer there I think there was also if I remember correctly the Department of Justice had also started a probe into them around the same time so there was definitely some smoke it's done well since but again I still have some questions on that. So despite the pretty good returns, I'm more than happy with having sold that around that time. It's probably the best data center that you can own. And it's funny, you and I sold at the

basically exact same time and for completely different reasons. Yeah. Mine is on the technological side. I just know what's happening in cloud. And they're doing direct connect to the big cloud providers and kind of bypassing sharing metal, which is basically a term for sharing rack server space in a co-location type area like Equinix

and interconnections, which are basically, I'm Netflix, you're some big, you know, infrastructure provider, we're gonna actually directly interconnect our hardware inside a facility like Equinix. Interconnections, co-locations, all that stuff was really starting to stagnate once the technology came from the cloud providers to kind of bypass the need for that. And so you saw

them in the data, I knew what was happening in the tech, it was time to move on. Yeah, no, exactly. 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 QuestTrade.com for details. That is QuestTrade.com. Calling all DIY do-it-yourself investors, Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building.

And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning, duolingo-style education lessons

that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there, I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools.

So go ahead, blossom social in the App Store and I'll see you there. 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. So the next one here is Home Depot. I sold on August 22nd for 366 a share, 10% total return since I sold. So I would say that's a pretty good, probably close to in line with the market in terms of total returns since that date.

The main reason I sold this was simply because Home Depot, despite being a mature, high quality business, was just a really small part of my portfolio. And I did an exercise last year where I just wanted to reduce the amount of names that I had. And it was just too small of a name, and because it's a more mature business, I just figured that, you know what,

it's very unlikely that it will grow you know enough to make it worthwhile to actually have an impact on my portfolio and I also wasn't really wanting to add to the position so it made that it just made the decision easy and at that time I just told myself it wasn't 1% of my portfolio unless I wanted to add to the position I was getting rid of it and unfortunately Home Depot fell in that. So the next one here is Shopify. So I sold on August 22nd at $74.57 a share but US dollar so it's not as bad as it may sound in Canadian dollar.

But nonetheless 51% total returns since I sold, so of course, if I had to turn back time, I would go and not sell this. But again, it's the same reason as Home Depot. As much as I like Shopify, it was below 1% and I just... I wasn't sure exactly where Shopify would be going on a long-term basis. I think there's a lot of bullish cases, but I think there's also some more bearish one where there could be some competitors that really come in and disrupt them.

So it was more from that standpoint. Again, I should have kept it, but it is what it is. I still am very happy with my performance this year. So at the end of the day, I think I wanted to show this too, just to show that it's fine sometimes. you won't always get your decisions right by the end of the day that's why you're diversified and you have a full portfolio and that despite that I'd still had some really good returns this year. No I mean this is super helpful and transparent for the people right like and transparent for the people, right? Like no one, you can not bat a thousand

over an investment career, let alone a year, let alone a career and still do exceptionally well because your wins have far outpaced your losses and with the correct conviction, your wins, like the losses drown out in the success of the wins. with the correct conviction, your wins, like the losses drown out in the success of the wins. Yeah, exactly. And I think it goes back to what we talked about too long ago

is you're gonna have regret when you invest, just get comfortable with it. Like just accept it and move on. You can't change the past. I think that's the best tip I can give to people here. And the last one here is actually a fund, so PSCT. It's the Invesco Technology Small Cap ETF, ticker PSCT. Sold in late June for $46.11 a share.

4% total return since I sold, so clearly this one I think happy to have sold it. This is similar. I bought it right around like when markets crashed in March of 2020 and it was still a decent position to start with and ended up being a company or a fund that I've made money on but it did not keep up with the rest of my portfolio or the market. So it became a very small position and I just didn't have as strong conviction or I didn't have really strong conviction one way or another regarding small cap tech companies going forward. And that being such a small position at the time I sold it, it just logically for me, it just made sense. Even if I just looked at it from like cleaning up my portfolio standpoint.

And this is very similar, I would say with the last three of what I did in 2022, which was working off the framework of Chuck Ackery's focus fund, what they describe as workbench positions versus core positions, which is basically the concept of workbench position, like Home Depot, Shopify there for example, for you. It's like, I like the businesses, but they're so small and I have no intention right now of adding capital to them.

So what do I do with them? You know, do I just, in itself, that means that I don't have intention of adding capital to them. So what do I do with them? You know, do I just in itself, that means that I don't have intention of adding capital to them today. And they're meaningless. They have like such a not meaningful contribution to the returns of the portfolio. So it doesn't need to be necessarily in there. And I really like that framework because the workbench position means something that like, I like the business, but there's nothing fundamentally broken with it. It's just, I don't like the price right now,

or some reason is holding back my conviction. And I've had several names like that happen for me, where it's like intuitive surgical is like my forever workbench position. It's like, love the business, love the story, but my goodness, the price is just always out of reach. And that's probably been a mistake for me. I should probably just keep kept adding to it.

Once that I just let it ride, and it's just kind of been this forever workbench position. It's done well enough where it's not meaningless. And another thing, Simone, you like to the listeners, like you're, you're, you're pointing out these things you've sold. Some have been better than the market. Some have been worse. You just did 54.81% in 2024. Yeah, something like that. Yeah, something like that. Yeah. And 41 the previous year, you have a 30% average return since 2020 on an annual basis.

You know, we're doing all right. My average CAGR since 2016 is 16%. The 34% last year, 20% on average in 2020. So, you know, I think your Bitcoin position has just crushed everything. But you know. It didn't hurt, that's for sure. It didn't hurt, right?

So it's like, you're pointing out these things that you've won or lost, or like the Shopify was basically what you returned last year. So, you know, it's a pretty good. Although Shopify did that in like four months like four months and a half but it's fine like at the end of the day I'm very you know I'm at peace with these decision I think that's just I think just to show people like it's fine you

won't get it all right like the best investors I mean Buffett makes mistakes like everyone makes mistake you just have to be comfortable with those mistakes and look at the bigger picture. Obviously, if you're down in 2024, you should ask yourself some big questions. I'll just say that, right? There are some obvious things where if you're down in a year, last year or the year before, something's not right in your portfolio. Yeah. Something's wrong with the approach over trading something. You could have been in cash and beat that.

That's the reality. It's just, yeah, that's why I'm saying it. I know we don't try to make unilateral statements, but literally if you were down 2023 or 2024 or both years, you're doing something wrong. Like you are doing something wrong. You could have been in Canadian government, US treasury bills, and you would have had better returns than that with no principal risk. There was other risks associated.

Broad-based index fund, net of fees, you're at mid-20s. Yeah. But even not that far, right? Just cash. Just cash, yeah. But when the index is doing those numbers, yeah. Yeah, no, it's, but no, I think it was just a fun exercise to do

and I encourage people to do it, right? Revisit what you did. Maybe there's some lesson learned that you can take from it. Maybe next time you'll take those decisions a little differently. But it was fun to review. Didn't sell that much in 2024. But those names were the ones I went through my brokerage and I looked at the ones that I completely exited. Are you happy content or have lessons learned for the future on the amount of activity you

did in the year? I'm pretty happy. I don't think like I have more activity than you. I think we can agree to that. But a lot of the times it's more like on the margins that I will do some trimming. So it's rare that I'm going to exit out of like a big position all at once like I might trim a little bit Here and there and that's mostly what I've been doing So I'm I'm pretty comfortable with there are some months like you've seen it and join TCI subscriber

I've seen it where I do almost nothing. That's most months for you, but yeah But a lot of the time subscribing Thanks for subscribing to the Patreon. I did nothing again. But most of the time is just on the hedges, right? It's just like, just trying to trim a little bit, rebalance to some allocation that I'm more comfortable with. Yeah. Makes sense.

I like thinking about that because, you know, you talk to a guy like Chris Mayer from Woodblock House Capital, the 100 Baggers author, it's like the first thing he said to me. He's like, I have a good year when my activity level and portfolio turnover is as close to zero as possible. It doesn't mean do nothing. It doesn't mean like never sell

if the writing's on the wall. It just means like that means I did my job extremely well three years ago if I do no activity today. Yeah. That's a really good way to think about it. Yeah. And I mean, look, at the end of the day too, it's good that I encourage everyone to track their portfolios like we do, because you can really look back and try to learn some things in previous year. And one thing you didn't say in my returns is 2022 I had negative 40%. And I'm transparent, right? I will not, I think you know me, I rarely even divulge my returns like aside from Joy TCI and I had negative 40% and one of my learnings from that is to rebalance a bit more and you

know when things look frothy you know put a little more you know aside in cash equivalents through US treasury bills to act as a hedge for my portfolio and that's what I've been doing that's that's a learning I had from 2022 Yeah, the 2022 the S&P 500 was down 18.17% I crushed it if you're looking at It's a bigger number just forget the Exactly in front of it. I was negative 21. So pretty much in line with the market that year.

But it goes back to what you were saying in your first or second segment. It took a lot for me to make that back in the next two years. I did and then some. But again, if 23, 24, I didn't have those returns, it would not be looking as good. So I think it's just, I want to play devil's advocate

even on my investments. No, it's a good point. All right, we'll do our last topic of the day, which is I wanted to do something that is really practically useful and just the stats here, right? Like long-term listeners of the show, love you guys, appreciate you guys.

We've been doing this for a long time, but January we get a lot of new listeners typically. And I wanna do something for them. If you're new listeners to the show, thank you, appreciate you. The episodes come out twice a week. We've been doing this for years and years now. Number one investing show in Canada, not a big deal. And I wanted to talk about a valuation metric that I use a lot because this is a really common question from new investors. They want to look at the PE ratio. They want to understand

how to value companies on a more deeper level. I wanted to talk about my most single, most used valuation metric, forward EV to EBIT, aka forward enterprise value divided by earnings before interest and taxes and why it's my favorite. So first, no valuation metric is perfect. There is not one metric that is perfect, bulletproof, and achieves financial nirvana. However, this is by far my most used quick valuation metric and most of them are just supposed to be quick because it is not catch all valuation work.

There's more to it than that. But it gives you a really quick idea when it comes to valuation. So what is forward EV to EBIT? Well, as the formula suggests, it's enterprise value divided by earnings before interest in taxes. And to break that down even further, similar to the very famous common price to earnings

ratio in a lot of ways, valuing a company in a ratio to its profits, except enterprise value instead of market cap on the numerator accounts for debt and cash, aka, you know, net debt and EBIT instead of earnings, which is earnings before interest in taxes, while slightly different than operating income for most businesses, looks a lot like operating income, EBIT does. And so I'm typically using the forward EBIT number. Hence, when someone says a forward valuation multiple, they just mean forward on the denominator here, forward earnings before interest and taxes, which just means the consensus analyst number for next year. And this is fine, this is all dandy,

you can use trailing 12 months if you want. If it's a company that has sufficient analyst coverage, I like looking at the 12 month forward number. I tend to personally look at both. Just because there is, yeah, like I know some people prefer one or the other. I like to look at both mostly because the past is done, but it happened, you know that was it, right? Like, so there is some value to that.

The future, obviously you're investing for the future, so there's a lot of value in looking at projections. But again, projections, even if there's a lot of analysts, they can be wrong. So it's always a little tricky. Sometimes it depends on the business. I would say some businesses will be trickier than others. Yeah.

Correct. Yeah. And especially with EBIT, I'm going to get into the flaws with that number in the second. For example, there's a long list of companies that you just can't use this number for. And it's helpful to know both, especially when you know both quickly and see if the forward one is less,

then you know that means that this is a, at least the investing community thinks the business is growing, because even it's gonna be higher next year. And I know in no way use analyst estimates as absolute truth because the future is unknowable. We all know that. But just one year out and consensus

across many different projections gives me a fairly good degree of confidence. I don't really even use analyst estimates beyond 12 months at this point. Like what's going to happen with a growth company two years from now? Like there are so many moving pieces and it's just helpful to know directionally forward, the forward multiple, because if the business is growing fast, it's going to help me normalize

the valuation and reward forward growth. And if it's a shrinking business, it's gonna elevate that EV to EBIT number because that denominator is gonna be lower and that's a higher overall enterprise value divided by EBIT. And so that helps me screen out some value traps in some cases as well too, if it's gonna be really high because next year,

you know, the business is falling apart. So what the business is falling apart. So what the metric is good at is getting a good idea of the valuation while looking at the net debt and getting a more normalized forward operating profit before interest and before taxes. That's it. Now, the pros of the metric is, and probably my, you know, favorite reason for using it so much is it's great for screening. It's wonderful for screening.

It's probably my favorite broad market screening number for businesses I tend to gravitate and look at. It's great for comps generally for those types of businesses. When I say comps, I mean comparing one company to the other. EBIT is typically smoother than net earnings. And while no means a perfect number and probably not as good as a true earnings power number as free cash flow, it's a lot smoother. Free cash flow is chunky and not necessarily a great screening number.

And using a forward EBIT number can help account for the growth or shrinking of businesses. So great for what valuation metrics are for, Sivan, which is a quick idea, a quick hit, a quick idea of what the company trades at relative to operating profits while looking at some, you know, net debt, for instance. And that's great, you know, they're not some bulletproof method. It's not to determine if a company's overvalued and undervalued in one quick snapshot, but it provides you what you need,

which is a quick idea of what we're dealing with. All right, the cons. It's not useful for some companies at all, at all, for companies like banks, which enterprise value is a flawed metric because of the debt. And their top line is interest. So earnings before interest in taxes doesn't make any sense. It doesn't make sense on the numerator or the denominator.

It's a completely useless metric. If it doesn't make sense to calculate it at all to start with. So that would be a major con. For me, not a major con because I don't really screen for those businesses very often. Well, I'd be careful. Like any kind of business I would say where they have,

like they rely on a lot of debt. Yeah, it's tricky because then you're removing the interest component and interest payment. and we've talked about Bell. Bell's an easy example where it's such a big negative on their earnings like that interest payment and it's growing. That removing it you're really obviously like I'm saying this but clearly like sure use it but look at other metrics if you're gonna use it as on a clearly like, sure use it, but look at other metrics if you're gonna use it as on a business like that, just because it may look,

it may make things a lot rosier than it should be. Right, exactly. Anything CapEx intensive, big balance sheets, it's really good for like capital light. Kind of the companies I like to look at. Not good for financials, not good for insurance companies, not good for utilities,

which is again, this is why I use it the most, because it is the best for my style of investing. This is why I use it the most. Yeah, the additional cons. Using forward numbers means you're using projections, which is imperfect from the most. Yeah, the additional cons. Using forward numbers means you're using projections, which is imperfect from the start. Every prediction and projection is inherently imperfect. So that's another con versus using the trailing EV to EBIT number. So that's some of the reasons why I use it, some of the reasons why it is not perfect. There is no

one metric to magically making money in the market. There's no magic formula, which is a book that has sold millions of copies and is completely useless in my opinion. It's a book I've read and I wish I never read it. I think it's a Joel Greenblatt book. It's a, the little book that beats the market. And it talks about the magic formula, which is basically, hey, here's some metric that if you used it based on the back testing methods,

you would have crushed it. It's like, okay, but that's not useful. Yeah. I'm always very careful like yeah any kind of magic formula and I think it may be a good idea to do an episode on you know we just talked about debt but we'll do an episode on metrics that help you understand the company's debt level and whether it's sustainable or not because there's more than one that you can look at, right? So I think there's, when you review a company, like I think I enjoy looking at the metrics,

making sense of things, making sense of, you know, like the debt, for example, is it sustainable? How is it structured? And all these different things. It's not everything. I think obviously understanding the business, the management team, these are all the other things that you have to look at.

And I'm just throwing a few out there, but these are example of other things. Because I think a lot of people tend to focus too much on the metrics and then forget about the business or focus too much on the business and forget about the metrics. Like you see both ends, right? Like if you see people into these high growth stocks that are losing money but growing quickly, like usually they disregard all the metrics. They just focus on the story.

Right. It's a narrative driven story. Exactly, yeah. That's it. There's some sort of happy compromise there between it all. And I think that's the challenge, right? That's what makes a good investor.

Exactly. Yeah, I think to me, it's just being able to, yeah, being able to blend the two. So yeah, do a good balance between understanding the story and understanding the metrics. And then if both are pointing in the right direction, then it probably starts being a good investment idea. And it can be something that you deeply understand

where as long as those two things continue to remain intact, you will have the gonads to hold it through thick and thin. Yeah, yeah exactly. Because that's where the money is. It's like that Monish Probrei tells a story where he goes, the Seinfeld episode where Alain's on the plane and she's on the plane and she meets this guy and she's like,

no, I can't date him because he just read the like sky mall and like the... Oh, I remember those, yeah. I don't remember that episode and I've seen them all. No headphones, no nothing. Like now the kids are calling that raw dogging the flight. This is like some like internet trend thing, right? So, you know, of course the Seinfeld writers like invented this conceptually years and years ago.

It's like that guy who's able to like do that and not need music, not need headphones to keep yourself entertained, good investor. Yeah, yeah, hey, stay focused. I don't need, you know, good investor able to sit and watch grass grow for decades. The ability to sit and watch grass grow

with the confidence and conviction that everything that you care about is continuing to go on the correct trajectory, even if the share price is not directionally what you've been looking for. That's what makes a good investor, I think. Yeah, yeah, I agree. Yeah, you just gotta remove the emotions out of it.

And it's not easy, takes a lot of practice. I mean, I think you just have to look at things, you know, as cold as you can. Like as bad as that sound is when you start getting the emotions, take the better of you, whether it's the fear of missing out when markets are up or whether it's like a misquarter, but it's something that's a bit more short term,

that's really when you risk making some pretty big mistakes. So I think being cold and calculated, usually in life I would not recommend that to people, obviously, but when you invest, when it's money, I think that's really how, at least I try to approach it. It's not always easy, but just removing the emotions out of it, because that's when, you know, emotions, sometimes you act quickly,

and that's when you, I mean from experience, that's when I make most of my mistakes when I let my emotions take the best of me. Thanks for listening to the pod folks. If you're new to the show, we appreciate that you are here. If you're not, we appreciate a little review on podcasts, a follow on your Spotify player. All of that stuff makes it, it does a lot.

It does more than you think. It takes a few seconds and it means a lot to us. So appreciate it if you do that. And we are here Mondays and Thursdays. Our website is thecanadianvestorpodcast.com. You can follow us on Twitter, X, at Bredo Capital 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

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