The Canadian Investor - 6 stocks to own forever and investing on margin

Episode Date: May 24, 2021

We start this episode with some recent Canadian stock news. Braden then talks about the similarities between baseball and stock investing. Simon explains how margin investing works and we finish the episode by going over 6 stocks that we would hold for the next decade and beyond. Ticker of stock discussed: CP.TO, CNR.TO, HEXO.TO, NRTH.V, CSU.TO, TCEHY, V, BEPC.TO, SHOP.TO, ETSY Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Getstockmarket.com Candian Investor Pod Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

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

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Simon, what's going on? Is it as hot in Ottawa? Probably not as it is in Toronto right now. It's pretty hot. Yeah, we've been pretty fortunate for the temperature. I think it's around 30 degrees with the humid X. So, yeah, pretty nice. I'm not complaining for the long weekend.

To my Albertan friends, it's apparently snowing there right now, which is a bit of a tough scene. That is a tough scene. I love my fellow Albertans, but, oh, man, I'm happy I'm not there right now. All right. Speaking of Canada and across Canada, things keep getting the story. The plot thickens with CNR and CP for KC Southern. So do you want to give us a little update?

Yeah, yeah. with cnr and cp for for kc southern so do you want to give us a little update yeah yeah so um you know who knows reality tv shows when you've got the cnr cp bid for kansas city southern you got exactly um so yeah a bit of an update so uh basically what the canadian national is um trying to do is because their bid was higher than cp and kansas city southern has selected their bid was higher than CP and Kansas City Southern has selected their bid. Well, part of it is contingent on a couple of things. First of all, they need the approval from the U.S. Surface Transportation Board, the STB. There's no guarantee that this will be approved by the U.S., by the STB so what they're proposing to do is to basically have a trust where the where Kansas City Southern would be put in and once the transaction closes until the STB actually approves it or not however if

they don't approve it it will cost Canadian National two billion Canadian that two billion comes from a one billion dollar fee that it would pay for the STB and a seven hundred million dollar breakup fee that CN would have to pay to Canadian Pacific because of the I guess that proposal in the agreement that was agreed upon with Kansas City Southern originally. There's been a lot of shareholders that have voiced their concerns, and they don't really like now the bid for Canadian National to purchase Kansas City Southern because of those contingency.

There's not been much update since this was announced, I think, three or four days ago, earlier this week. Personally, as a shareholder um i think this is pretty starting to get pretty risky so um i'll see where it goes but i'm definitely a bit concerned with uh the developments as a as a shareholder for sure yeah they were already paying a really high price like a huge premium to kc southern and i get it it's a credit of like the network that it creates would be quite powerful but the price doesn't seem right and the market is agrees with what i'm saying i think cnr is down like 13 percent uh since the news which is

a lot for a steady railroad so yeah yeah yeah interesting what's happening yeah it'll be interesting to see the development i mean it's uh it's part of my portfolio it's not my biggest position so obviously um you know i'm keeping an eye on it uh but definitely worth keeping an eye on because obviously if they go ahead with that and it doesn't get approved they're're losing $2 billion Canadian. So I think it's a bit worrisome about that. But management seems to be kind of headstrong and want to go ahead with it. So we'll see what happens.

Next on some more news, there's been some development in the cannabis space in Canada. We talked a few weeks ago with the merger being completed between Afria and Tilray. Well, XO is also picking up some marijuana companies as well. So they recently announced a couple of days ago that they will be purchasing or acquiring 48 North Cannabis. Their ticker is NRTH.B on the Venture Exchange. Of course, it's a $50 million all stock deal. It's interesting because currently 48Nord actually has a market cap of about $33 million. So it hasn't budged much since the announcement. So it's kind of interesting to see that. And it's not the first acquisition that Xo has done since the beginning of the year so

what we're really seeing here it's some market consolidation so some of the biggest players are starting to acquire some smaller players in the space and that is what a lot of people were predicting when marijuana got legalized because there was a lot of hype and most people are more most experts were saying that they would not be surprised if down the line we see a lot of consolidation that space and it really sounds like it's starting to uh to happen right now it seems like a must with what has happened so far and all the different players for consolidation so this is uh it was pretty easy bet to see that there'd be a lot of consolidation in cannabis and we're seeing a lot of that play out right now yeah yeah and it sounds like they didn't pay that much of a

premium for it overall they did a little bit like i mentioned compared to the market cap but a 48 north had about 17 million in revenue in the trailing 12 months. So I mean, I don't know if it'll be really positive for XO or not. Obviously, it dilutes a bit more, so we'll see what comes of it. But it'll be something interesting to keep an eye on if we keep seeing some consolidation in this space, because there are starting to be some big players and they're just kind of scooping up the small one. Yeah, the consolidation is interesting for a couple parts because, yeah, these companies get bigger and more well capitalized, but also that the unit economics might improve.

There's just a few big players. And then, you know, it might be a more investable space for me in the next coming years as this industry shakes out it's been so unpredictable up till this point but some of this consolidation might make it a little easier to decipher what's going to happen and make some of these names more investable for me anyways. Yeah, no, that's a good point. And personally, I actually, I find the ones that will be the most interesting and I can't say there's a clear winner in that space just yet. It'll be the ones that can actually have a really strong brand name, especially in derivative products. So not the flower itself, but a more premium, you know, there's all different kinds of products that are available with marijuana or THC in them.

So I think the ones that do a bit more of a premium product will have higher margins and will have more profitability. We'll see if I'm right or not. But if one emerges as that kind of premium product, that's the one I personally be more interested in. Yeah, it's a good point. The brand loyalty is going to be incredibly important in this sector, but it's really hard to pull off because of the regulation, which we've talked about a lot. The branding and the packaging, differentiating your product in cannabis is very difficult because most consumers don't notice a

difference either. No, exactly. And it'll be obviously the elephant in the room is the U.S. So we'll see how that develops. We still don't know what's going to happen on the federal level, but I think, you know, it's an interesting space just to keep an eye on, even if you're not super interested in investing in it, because there's a lot of moving parts happening yes sir all right let's switch gears i have a segment that i've wanted to do on this pod for a while but kind of just forgot about it or the time was never right we had other stuff to talk about but i'm really pumped to talk about this and it is the parallels between baseball the sport and investing so i'm going to give you a little story here when i was an engineering student i would build these mathematical models for different stocks and businesses i was interested in

and some of these models got overly complicated i I iterated it a ridiculous amount of times. It's actually not, fun fact, now evolved into the stratosphere score on my website. So it actually derives from like 10 years ago when I was building these models. And I rank all my ideas from this, and this is kind of how it started. Now, in engineering school, my buddy Noah, he's still one of my best friends to this day. He is a huge baseball fan and he loves the math behind the baseball. He loves the analytics and he complex fantasy baseball Excel models.

I'm talking like crazy complicated and very cool. And he is way, way smarter than me and way better at math than me. And I'm pretty good at math and he's like runs circles around me. And he would actually help me a little bit with some of these more complicated parts of my model when it comes to investing. And what he was trying to do in fantasy baseball was look for undervalued and underrated players. So he could draft them or trade for them in fantasy baseball. Now, this got me thinking way, way back when on some of the awesome parallels between baseball and investing. And I'm going to go into what those are. So drum roll, please.

The five parallels between baseball and investing. All right. Number one, baseball players are streaky. And Simon, I know you're a baseball fan so feel free to jump in during this like i'm happy to have an open i was gonna say that's true except for one player mike trout but aside from that yeah players are streaky except for mike trout that guy is just incredibly tough machine oh my god he's insane okay so overall except for mike trout baseball players are streaky they go hot they go cold even the best players in baseball they play every single day they play 162 games um and in short time in short time, in short timeframes, players can feel overvalued or undervalued to their true value as a hitter in some of these short timeframes because they're so streaky.

Now, it's way more valuable to take a bigger sample size of a player's performance when they're at the plate. You know, a one week or few games is really not important when they play 162 of them. You need them to be consistent and it's much more valuable to see their performance over a long period of time. So just like investing, baseball players and companies see regular short-term volatility, but the long-term story is what's important. So just like players and their streakiness, stocks are volatile. All right, that's number one. Number two, because of this natural volatility of a player's performance, smart managers, owners, they'll look to acquire players when the market

is undervaluing them. I think that one goes without saying how that parallel to investing is very strong. Number three, consistent small ball. So small ball is when players have a great batting average, they hit a lot of singles, they have good on base percentage, like they take a lot of walks. These are the types of players you want on your team. And just like companies that string along long term compounding, you want a long runway for growth. And these companies that are continuing to hit singles and doubles for you year after year now you might want to think about having a player or two in the cleanup spot with a high slugging percentage so they can hit some home runs they have such high upside when they can hit home runs but they they strike out a lot. So just like in my portfolio,

I'm hoping that these growth year names hit some home runs, but there is a chance that they strike out. So I want to be aware of that. Now, because of that, i want most of my lineup to be players with a high on base percentage or obp take walks hit singles doubles steal bases and play good defense i want the core of my portfolio to be those compounders that i have high conviction in i want a couple home runs, but I'm not going to build my whole portfolio around that. Number four, now maybe the most important number four, wait for a fat pitch. A fat pitch is very, it's referred to in investing all the time. So I'm not the first one to make these comparisons of baseball and investing. So waiting for a fat pitch to come across the plate is what baseball players do to limit grounding out, flying out, hitting foul balls too early in the count.

But when a fat pitch comes across the plate, something they can really barrel up on the ball, a player will swing hard. Now, in investing, you're going to have these opportunities. You got to be opportunistic when fat pitches come to the plate. So when you have a ton of conviction with what you're doing in your portfolio, and a fat pitch, like a market decline, huge sell-off happens, for instance, last March, when the whole market was losing their minds, investors going crazy, stocks losing 10% value a day across the whole market. When the World Health Organization announced that COVID-19 was a pandemic, I deployed cash like no one's business. COVID-19 was a pandemic. I deployed cash like no one's business. I deployed a significant amount of my net worth, which is really not a lot, but I deployed it in March. Was it scary? Yes. Was it hard? Yes. But was it a fat pitch? Yes. It was like a watermelon coming across the plate. Pretty easy to smash it,

even if it's coming in at 95 miles an hour. And that's what I mean by a fat pitch. Number five, the numbers tell the story. Baseball is so analytical. Base baseball is the most statistical game in all of sports no question there's not even anything close to it you can't fake results there's some players who play on small franchises they're out of the spotlight who consistently finish the year with a solid batting average great obp pretty decent. They steal the odd base and they get it done defensively. And they're underpaid or undervalued compared to some of the superstars who play for these big franchises. So over the long timeframe, they statistically provided so much value for the team. And you can't make this stuff up. You can't fake long-term success.

You can't fake these numbers. Financial statements reveal the story and validate the narrative over a long period of time. So consistently growing the top line, creating a durable business model, gushing out cash, that validates the narrative that may exist out on Wall Street. So over that time frame, there's going to be lots of ups and downs, but the numbers are going to speak for themselves when their career is all said and done. Yeah, well put. If people are interested in a movie or a book

that really illustrates that on a more simple level, obviously Moneyball. So if you haven't seen it i'm sure you have braden it's a it's a pretty fun movie to to watch and just billy bean exactly just and the movie is played he's played by brad pitt and it really illustrates how they went for on base percentage at the time as one of the key metrics they would be looking at because other teams weren't looking at that and they realized that provided a lot of value and teams were undervaluing that. So that just brings it more to the forefront. Obviously, now with analytics, it's way more complex than that,

but that's an easy movie to wrap your head around. And one thing like a team like, for example, the Tampa Bay Rays, they have a very small budget when it comes to players. So they have to make really strategic decisions. And oftentimes what these teams will do is they'll take a financial gamble. It may look big, but in terms of baseball money, it's not that big. But they'll offer these long-term contracts to really young players before the players have really proven themselves as super consistent because they see so much upside and they have the data to show them that there's a high probability that that player will reach the ceiling so therefore it does make sense for them to maybe invest a bit early maybe lose a bit of the returns early on but long term really

getting a great return on the player yeah there's a couple interesting parallels to what you're saying there too right is because yeah first of all to touch on moneyball like what they did with the athletics like what they did with the a's with such a small budget was find undervalued players you You know, the market, the baseball market was paying home run hitters and undervaluing guys that were getting on base and, you know, winning ball games. And then too, with the, with the Rays, like what you're talking about, they've, they've done so well and their franchise, like no one even shows up for the games. And they've done so well.

And they've obviously won the World Series and done incredibly stuff with small ball, getting on base, stealing bases, playing good defense. And another interesting analogy I just thought of when you were talking was it's almost like they're investing in microcaps. it's almost like they're investing in microcaps. Yeah. When you mentioned, you know, before the street knows about them, putting a big contract on them. Yeah, exactly. Just basically taking a calculated gamble.

That's what they do. And they do a measured approach. And obviously there is risk. However you look at it, when you're investing or baseball, there's always going to be some level of risk. And you look at it when you're investing or baseball, there's always going to be some level of risk and how you manage that is really important. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using

Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Yes, sir. All right. Talk to me

about margin. I get so many questions on investing in margin. You wouldn't believe it. Talk to me about investing on margin, please. Yeah, so we've talked about margin before, but I think we just, we never really went into it, did a bit more of a thorough explanation how margin actually works. So the first thing that you need to know about margin, it's essentially an asset-backed loan. So meaning you have a loan which the bank uses your stock. I'll use stock mostly just to talk about this. They'll use your stocks as collateral. So the amount you can borrow from your margin will change frequently just based on the value of the underlying assets because obviously stocks when the market are open will change in

value if you have something that's very liquid on a basic on a second to minute basis, right? on a second to minute basis. So that's how they'll determine. One thing that's important to know is it's not a free loan. So you pay interest on your margin. So since the margin is a loan, when you pay back the money that you've borrowed, you pay it back plus interest. It's not free money. So keep that in mind. The benefits. So there are some benefits of margins. So we personally, I don't love investing on margin. I know you don't, Brayden, but there can be some benefits. But I will also talk about the downsides afterwards. So you can really magnify your gains by using margin. Here's an example to help people wrap their heads around it. So you buy 100 shares of company ABC at $10 a share, so it gives you $1,000 investment. A year later, the shares have doubled. You have $2,000, so you have a total of $1,000 profit. So that's just investing normally, no margin.

You invest in margin. So instead, you buy on margin and invest $1,000 of your own money plus another $1,000 on the margin. You invest in margin. So instead, you buy on margin and invest $1,000 of your own money plus another $1,000 on the margin. So you have a total of 200 shares at $10 for a total of $2,000. A year later, the total value is worth $4,000. You repay the $1,000 you borrowed and the $100 in interest. That's just an arbitrary number I use. So it leaves you with a profit of $1,900 instead of $1,000. So that's how margin can really put fuel on your game. And that's why a lot of beginning investor will get into margin trading because they tend to only see the upside of margins. Especially when they're coming into a bull market and everything does nothing but go up. Exactly. Margin is money.

Yeah. And in one space that there's a lot of margin, it's not only stocks. I know stocks, a lot of most brokers offer margin, if not all, but crypto, the cryptocurrency world, so Bitcoin and so on, there's a lot of margin trading. So that's, I'll talk about the risks of margin, but one of the things that margins can do, especially when you look at crypto is you'll see bigger market pull bags because of all the margin calls so let's get into the risks of margin so if you don't have a margin call so let's just get into that situation first so you magnify your losses by using margins so that's the first thing that you have to keep in mind so yes you magnify your losses by using margins. That's the first thing that you have to keep in mind.

Yes, you magnify your gains, but you also magnify your losses. In the same example I taught before, you buy 100 shares at $10 each, and the price falls to $5 per share, let's say, a year later. You have a $500 loss without margin. So if you buy that same $2,000 that I said before, $1,000 with your own money, another $1,000 with a margin, the price falls to $5 per share. Then you have a total, you have $1,000 left for a loss of $1,000 plus $100 in interest because there's always that interest on the loan. So your loss is $1,100 instead of $500. So that's an example how it can magnify your losses. This is not the worst case scenario

though. The worst case scenario is when you get the dreaded margin call. So when you invest into a margin the value of your investment portfolio is used as collateral against the loan and that value fluctuates on a minute-to-minute basis like I mentioned. However, the actual amount that you've borrowed if you're investing on margin is fixed, so that's where the margin call can come in. So if the value of your portfolio drops below the minimum equity requirement then you'll have a margin call. So an example to wrap your head around that, say your broker has 30% equity requirement. So you buy $5,000 worth of stock ABC with your cash and another $5,000 on margin for a total of $10,000 of investment. If the value of your $10,000 investment of ABC

stock drops to $8,000, then you have $3,000 of equity in your account. You just take the value, which is $8,000 minus the loan, which is $5,000. So you have $3,000 left. That's the equity in your account. So in this situation, you just divide the $3,000 in equity divided by the full value of your account at that time. So $3,000 divided by $8,000, which means you have 37.5% equity. If you have a 30% equity requirement, you're still okay. But if it goes down lower and you end up falling below 30%, that will trigger a margin call. So what happens if you get a margin call? There's really two main options that you have at your disposal. The first one, your broker will usually give you some time to add some money to your account so you can meet the minimum equity requirement in terms of percentage. If you don't have enough money then you're

you're screwed. That's what it is. You get margin called and your stocks are sold off to pay the loan and that's really the worst case scenario and that's the situation where people borrow too much on margin they can actually get completely wiped out with a margin call. And that's really the reason why we tend to stay away from margins because of that reason in the end. If you're looking to invest in margin, just make sure that you keep an eye on it. You keep a really good eye on it and you know exactly when you're about to get a margin call because you can actually either move some money around or be preempted and potentially

sell some stocks to pay that loan off. But there are some risks, so make sure you understand what you're getting into when you do borrow money on margin. When the good times are good, it's really good on margin. And when the times are bad, it's horrendous when you're on margin. And notice the difference in words there. Okay, so if you're investing on margin and it's a bull market, it goes from good to great. If you're investing on margin and it's a bull market, it goes from good to great. If it goes bad, it goes from bad to terrible, like horrendous, like whatever the worst word you can think of is, is because it amplifies your losses actually more than it amplifies

your gains mathematically. it amplifies your gains mathematically. And over a long period of time, if you go through volatility on margin, and same goes with if you have a leveraged ETF, this is why you should never hold leveraged, like three times leveraged ETFs for a long period of time. It's because you suffer from decay, where the losses are much worse than the gains. It's like the old, you know, lose 50, you have to make 100. You can't lose 50% and make 50%. You're only halfway there. If you have $10,000 and lose 50%, you have $5,000.

Now, to get back to $10,000, you can't just make a 50% gain. That would only get you to $5,000. Now, to get back to $10,000, you can't just make a 50% gain. That would only get you to $7,500. You have to make a 100% gain to get back to where you started. And that's the math of losses. And it's not working for you. It's working against you. Yeah, exactly.

And I mean, you can search the internet about some kids or young people that just got into investing and you'll see stories going both ways obviously people tend to cling on to the ones that say like oh I invest in like a ten to one margin or whatever they whatever they got with their broker or you know crypto whatever it is and they made crazy gains but you can also find if a lot of stories with people just basically saying they got wiped out because oftentimes they just don't understand how margin works they go ahead they click whatever they need to do on

robin hood to get the margin account then they're like oh i have this much buying power and i only have a small amount that i deposited this is awesome keeps going up keeps going up then you get a quick market correction margin call is triggered they don't realize it everything gets sold and then that's it so it's a I mean it's definitely something to be careful with it is a tool that is available to investor personally and I know you're the same, Braden. I don't use it. But if you do use it, just make sure you use it with caution. Keep an eye on it and know exactly, you know, what the, you know, like I mentioned, the equity requirement is and just make sure you stay on top of it.

You can't leave, you know, leave it and forget it because you'll probably get, you know, it will hurt. hurt. All right. Let's talk about six stocks to own for the next 10 years. Simon, you want to just go back and forth? Like I'll do one, you do one. We've each prepared three, prepared three, three each. And this is a hard exercise. And I encourage you to do it yourself as well. Whether it's three, four or five. And it'll force you to really think about your conviction in some names that if you were to own them for the next 10 years, not be able to even look at your brokerage account, would you sleep fine at night? And I think I would be very confident with these three that I have. And it's a very valuable exercise, I think. And it's probably a test to, if you don't, I'm going to put you on the spot.

If you don't own it, why? But we'll get there. Okay, I will go first. To no one's surprise, Constellation Software, I will be owning for the next 10 years. And Constellation Software has built an empire of software companies. And these are these small niche vertical market software companies. Constellation has acquired hundreds of them. Now, when you're thinking about these types of companies to own for a long time,

you're obviously looking for something that has huge upside, long runway for growth. But with Constellation as well, I mean, it's already so diversified and all to these really high margin critical, mission critical software systems across the world. So it's headed up by the smartest capital allocator in Canada, Mark Leonard. And I absolutely will be owning Constellation software shares

for the next 10 years. And here's a little pro. It trades on the TSX and only trades on the TSX. So Canadian investors get some built-in alpha right there. Yeah, no, I was not surprised by Constellation, I'll be honest. No, to no one's surprise. Yeah, no, I was not surprised by a consolation, I'll be honest. No, to no one's surprise. Yeah, exactly. I guess I win because I have two that I traded on the TSX. So my first one to no one's surprise, like for you consolation, for me, it's probably Brookfield Renewable Partners. I've honed them for a long time. I'm a strong believer in their business and

renewable energy. Also, the fact that renewable energy is becoming cheaper and cheaper and more efficient. So the economics around it are making more and more sense. And Brookfield just has a solid track record of being able to buy underpriced assets, monetize them, and then recycle them when they think they've extracted the most value, sell them, and then rinse and repeat. They do have some assets, some core assets that I don't think they'll be selling for a long time, but they tend to do that and they have a very strong track record. Obviously, the mothership Brookfield Asset Management with Bruce Flatt, is a major shareholder of Brookfield Renewable Partners. I just really love the business.

I love the fact that they're in renewable energy, pays a nice little dividend, around 3.5% right now. It's pulled back a little bit in recent weeks and months. They have a dividend strategy. They're always upfront about it. It's typically in the mid to high single digit increase every year. So to me, there's really nothing to not like about this company. And it's a dual listed on the TSX and the New York Stock Exchange as well. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have

been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is

questrade.com. That's a good pick. It was very difficult for me to leave out a Brookfield name for my three. I knew you'd get one. So I was, I was pretty confident that there'd be one on this list. But if it was a five, four list, Brookfield Asset Management would probably make the list for me as well. We've talked about the difference between all the, all the names, but Brookfield Asset Management owns 60% of Brookfield Renewable Partners. So I also am a strong believer in what they're doing at BEP because it is a major constituent of BAM itself. So I like the pick. All right, moving on. Tencent, China's largest publicly traded co. China's largest publicly traded co

and Tencent is a monster this company is so big and the reason that I'd feel pretty good about owning them for the next 10 years is

a few things here there's three things that I'd probably think about if I had to explain it to a 10 year old would be one, it's a tax on China. It is absolutely a tax on China. They're dominating and streaming in their WeChat, like their social apps, advertising, they're getting into payments and e-commerce. And they are the largest video gaming company in the world, which is a fun fact. So Tencent for sure. They also own the Epic Games, which has the Unreal Gaming Engine. I have Unity as a stock pick as well, not in this list, but Unity and Unreal Engine have a duopoly on the gaming engine. Tencent also has this massive holding company. They own large percentages of businesses

like Snapchat, Spotify, even Tesla, a bunch of large technology firms in China. They just have their tentacles out in all things media, internet, and it is still run by Pony Ma, the founder of the business. The risk, obviously, is the China factor. The China factor, does these companies get delisted eventually? Do this or that happen? listed eventually do you know this or that happen they're out there i'm okay with it i'm happy to own it this company is doing all the right things in all the right places and i want to be a part of it for the next 10 years yeah i mean i i'm a shareholder too you know that of tencent my biggest thing uh with them is the the whole Chinese factor, especially when it comes to the payment space and the digital yuan. So the Chinese government is pushing a centralized currency, a digital centralized currency. And they've been, let's put it lightly, kind of putting their grip more and more on financial institution in China to get more and more control. So that is the one thing as a shareholder that I always have my eye on and

probably the biggest kind of red flag, even though I'm a shareholder, it's always overhanging. But at the same time, that factor probably gives you better value for the company because people put it at a discount because of the China factor. I think, yeah, I think it's pretty damn cheap here, but you're right. It's one of the factors you have to consider if you own Tencent. And if you're not considering that risk, one, you don't understand the business. But two, every business has a risk and that is definitely one, especially if you're owning it over the counter yeah yeah exactly um so the next one is one that uh you're gonna roast me for um it is a dual listed once more so shopify so listed in toronto and in the states

shopify oh i mean i have to it's uh know, it's it started in Ottawa. I think the CEO is from Ottawa U, where I went to university, if I remember correctly, Toby. So, you know, I'm going to be hounding on you until you own some shares because of this, right? Yeah, yeah, yeah, for sure. I mean, texting you every morning for the next two weeks. Yeah. Until I see at least one in your brokerage account. I think, well, we were texting about that, right? I think at some point I'll just like say screw it and I'm just going to buy one share just to kind of have some skin in it. But yeah, for me, it's only it's a valuation thing when it comes to Shopify.

It is not cheap, whatever metric you're looking at. But again, it's not. It's really not cheap, but I mean, it's growing really fast. They doubled the revenue last year just to give people an idea how quickly they're growing. They have great leadership. They're great at innovating. And that's probably the most important thing, in my view, is innovation when it comes in that space. We joked about, again, when we're texting, I'm like, yeah,

if you don't innovate in the tech space, you end up like BlackBerry. But it's kind of true, right? They kind of sat on their laurels with their smartphones, not thinking that anyone would pick up the new iPhones and the competitors when Android emerges as well. And that really shows when you're in the Texas sector, you really have to continue to innovate. So for me, it's really a company that I would love to own. And it's something that if there's a pullback, maybe not. Maybe I'll just buy it so you shut up and don't bring it up every time we talk about it.

I don't own any shares. I don't bring it up every time we talk about it. I don't own any shares. I don't have a horse in the race. But I mean, if it's on this list, it should be in your portfolio. But at the same time, I'm sure people that have been investing for 15, 20 years, I'm sure we can have tons of people that will say the same thing about Amazon, for example. Right. So, you know, it's always been a rich valuation. Amazon, for example, right?

So, you know, it's always been a rich valuation. And maybe if they bought it 15, you know, if they bought it 15 years ago, they would have a multi multi bagger on their hands. But there was always kind of a valuation stopping them. So I feel like at some point this year, I'll probably just pull the trigger and just at least buy a share. I should probably I should probably just join you on that yeah just it's just so crazy expensive like how many times do we talk about how how awesome of a business it is and how expensive it is i mean you can't just be buying stuff at 50 times sales and expect everything to go smoothly i I mean, sure, it's been the right play for Shopify because they keep doubling their revenue. And you know, that keeps playing out.

But it's really hard for me to buy something that expensive. And it's been hard for you as well. And it should be because that means we're thinking about these kinds of things right yeah yeah exactly all right number three the big visa visa needs no introduction like i don't even know where to go with this explanation visa is a tax on global digital payments wait wait what's visa again well how about this let me let me give you a fun fact about visa visa does not lend any money you might be thinking at home what do you mean they're my credit card visa doesn't lend any money the bank that issues the card the card issuer they lend the money they take the credit risk and they actually take most of the unit economics when you swipe your card if it's like a three

percent fee two and a half percent fee a, almost all of it goes to that issuing bank. Whether you're with a Canadian bank, if you're in the US, like one of the big issues is Capital One for credit cards. They take most of that economics. Visa and MasterCard take tiny, little, tiny slivers of all of those transactions all across their network. tiny slivers of all of those transactions all across their network. They have built the rails that all of digital payments exists on today, whether it's online or in person. They are operating on top of this incredible network effect that they have built. I believe it's the most powerful network effect of any business that exists today. And it is very difficult to disrupt.

If it's going to be disrupted, it's going to be some Bitcoin type decentralized payment network that goes on top. top but as of right now with digital payments and everyone innovating inside of fintech you are operating on top of those rails you have no intention of disrupting them because that's a loser's game people have tried it's it's not going to work um and uh yeah the defensible position they have is unspeakably strong and And I want to be taxing digital payments for the next 10 years. I think it's a huge long runway for growth based on all my experience traveling around the world. Primarily, the world is still in a cash-based society. We might not think it is because you only use your credit card these days, but coming out of the pandemic and all across the world, the rest of the world mostly is still

on a cash-based society, and that will dramatically change over the next 10 years, and Visa and MasterCard will be huge benefactors of that, in my personal personal opinion not to mention cross-border payments is about to pick up when people get on planes and start traveling again so um visa is definitely on the list for me yeah yeah and if people are looking for a more bankish kind of payment processor uh you'll probably want to look into amex because they amex yeah, they offer, they issue their own cards and provide the loans, but they also have cards that are affiliated with banks. So it's kind of hybrid. Personally, I don't love Amex, but if that's something you're looking in,

you know, people are interested in, Amex is probably the way to go. And, you know, I think Berkshire still owns Amex, right? I think they do, yeah. They've had it for a long time. But they need to be looked at as a bank. Yeah, exactly. That's it. I was kind of just comparing just so people kind of wrap their heads around it.

So the last one for me is I actually went back and forth. I was thinking about railroads, but then with the news I mentioned earlier, I'm like, you know what? I'll change it and i'll put etsy so etsy i've talked about it before um i really love etsy because um it's a really good marketplace for crafts goods i know we have some of our listeners that actually have etsy shops um and it's really a really resilient platform it did extremely well obviously in part because of all the masks that they sold on their platform with the pandemic. But even before that, they actually were able to thrive despite Amazon trying to get in that market.

So to me, if you're able to fight off Amazon, you're going to last for a very long time. And I think that's the single best proof of concept right there and to see how they have staying in power is how they were able to fight off Amazon they increased their fees a little bit but overall merchants seem to be pretty satisfied with the the platform so there's really you know I think there's really nothing to not like about Etsy the only thing probably goes back to the Shopify conundrum that I talked about. It is not a cheap stock, even with the recent pullback. I have a small position.

I started at a very low-cost basis. And definitely, if there is a bit more of a pullback or the valuation becomes a little bit more reasonable, I know it's never going to be one-time sales or anything like that but if it becomes just a little more reasonable i'll definitely uh just add more shares because it's uh it's been such a big winner for me yeah i mean hey it seems like one you probably should average up on etsy's been i i love the pick by the way uh etsy is one of those companies right now that has built an impressive two-sided network

with their platform. And that two-sided network is really sticky and hard to disrupt. And people love the platform. I like it as a shopper. I've used it a few times. I enjoy it. And you have, oh yeah, so you have two e-commerce plays here. I like it.

Yeah. I like it. Yeah. Hey, we said about 10 years, but I'm gonna throw you a bit of a curveball here, Brayden. Are you ready? Sure. I'm ready. So tonight we're recording this on Thursday. Tonight, Montreal is playing Toronto. So what's your prediction for the big game? We had to. That's right. Yeah. Yeah, that's right. We got the Leafs and the Canadians playing tonight.

What is it? 7.30 p.m. Eastern time? That's it. And it's the first time in a lot of years. I think the last time was before we were both born. So, you know, it's also a fun fact about that is that the listeners right now will be listening to this next week.

So they can listen to it on maybe Monday morning next week. And the Leafs will have already won both games on Thursday and Saturday night, which is kind of crazy to think about. So you're going to pick the Leafs, right? Of course. Are you crazy? In how many games?

I think Leafs win in five. I'm going to go Montreal in seven then. Wow. I'm going with my heart, yeah. A couple of homers we are. Yeah yeah i don't think my brain believes me but my heart will go with them with my show my brain says don't do it yeah your brain's telling you no hey man i would judge you a little bit if you didn't take your team so i'm glad you're taking your team all right guys that does it for this so So we did six stocks for the next 10 years.

The list is here, Constellation Software, ticker CSU.TO, Tencent, which is ticker TCEHY, which you can buy over the counter over the U.S. listing, Visa, ticker V, Brookfield Renewable, ticker BEP, Shopify, ticker SHOP, Etsy, ticker Etsy, right? It's just Etsy, right? Yeah, that's it. So we have two large technology holding companies in Constellation and Tencent.

We have Visa on digital payments. We have Brookfield Renewable for renewable energy. We have Shopify and Etsy for e-commerce. When you look at that basket, you can see why we're thinking about the future. I mean, you kind of have to have baked into the future, like some nice secular trends and tailwinds behind them for the next decade. That's probably a pretty solid theme to put behind anything you're going to own for that long. Yeah, we could check back in 10 years just to see how we're doing. Hopefully, I'll be retired by then. Well, you're going to be loaded off these picks.

Oh, yeah, exactly. All right, guys. to be loaded off these picks so yeah exactly all right guys if you want to see more stock picks that i actually do some deep dives lots of due diligence in go to getstockmarket.com you bring it to my business it's called stratosphere getstockmarket.com head over there thank you guys so much for listening uh go leafs go or if you're a french canadian like simon go habs go i'm saying can you repeat that i actually like when you speak french i have no idea what that means just means let's go abs and yeah. Okay, okay. All right. Well, you are my favorite French Canadian, so I'll let it slide.

That does it for this week, guys. Thanks so much for listening. We will see you next week. We're out. Peace. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.