The Canadian Investor - A Big Trend to Pay Attention To - Earnings Roundup

Episode Date: February 24, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Disposable income compared to the price of homes January US and Canada CPI numbers  AirBnB earnings Nutrien earnings Shopify earnings Canadian Tire earnings DraftKing earnings Equinix earnings Air Canada earnings We finished the episode by answering some non-investing questions from twitter.   Tickers of stocks discussed: ABNB, AC.TO, NTR.TO, SHOP.TO, CTC.TO, EQIX https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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

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I'm Brayden Dennis, as always joined by Simon Belanger. We got a jam-packed episode, earnings slowing down, but we're here to deliver our results and what we think is particularly interesting in the markets. It's family day here in Ontario and a couple other provinces, but you're a Fed employee, so you're working today, right, Simon? Yeah, that's correct. We're federally legislated, so we do not have the day off unless we take it as vacation. Got it. Well, there you go. Before we get into it, we have a couple of coffee shout outs. You can support the show

by going to thecanadianinvestorpodcast.com. You'll find links to all things about the show, and you can write us a note as well. Shane Christopherson bought a coffee. He said, a cup for both of you at Rookie Investments on Twitter. Love the pod. Thank you for doing it and love Stratosphere. I didn't pay him to say that, by the way, Simone. Brandon bought a coffee. He said, never miss a show. Thanks, guys. Debra Richard supported the show and Russ supported the show. He said, love the Canadian perspective. Keep up the good work. We love to see it. We really do. Simone, I just dropped this in the notes because I saw it on Twitter. Let's just chat about this really quick. It shows a side-by-side

comparison of US and Canada home prices indexed back to 1975 shown next to disposable income. Now, this is particularly interesting. So back index to 1975, home prices in the US have just a little under doubled, if I'm reading this graph correctly. And in Canada, it's like three and a half times while disposable income has doubled. The US disposable income and home prices have both been relatively close to double. But disposable income in the US on this graph, according to this data, has increased faster than home prices. If you look over on the Canada side, it tells a much different story with home prices. Far way off the graph, it looks like a line that goes just straight up with home prices. And this is what we've been seeing.

Yeah. Yeah. I mean, it's not surprising. I mean, just looking at that, it's definitely a bit alarming for the state of home prices in Canada, and especially people that are overextending themselves just to purchase a home. And I know most of our listeners are aware that the market is pretty high right now in Canada.

It's pretty frothy, but I'm pretty concerned that some people do get overextended. And I've talked about my personal experience before where we actually had a internal cap, my wife and I, where we would not spend more than a specific amount, even though the bank had actually offered to provide us a mortgage like 25% more than that amount we had in mind. So I think that's just a reminder here to make sure you have a good margin for error when you're buying a home. So if anything happens, anything goes wrong, you can actually take it and not be forced

to sell potentially at a loss, right? Yeah, man, it's crazy seeing these numbers compared to disposable income. I think that that's what gives people concern. And especially right now with what you're going to talk about, would this be now December numbers or is this January numbers for- Those are January number. Yeah. Yeah. Oh, that's right. Yeah. It's February 21st, Simon. Wow. It's moving fast here. Okay. So we got US and Canadian inflation print numbers. Do you want to kick us off there? Yeah. I mean, obviously it's top of mind for everyone. So it

definitely segues well with what you just mentioned with house prices. So CPI rose to 5.1% on a year-to-year basis. For those who are new to the show or not familiar, so CPI is the Consumer Price Index, just the official government measure of inflation. So this is actually following an increase of 4.8% in December. For the US, the increase was 7.5% in January, and there was a similar increase in December. It surpassed 5% for the first time since September 1991. I always like to drill down a bit more in those numbers just because these are the headline figures but I'll oftentimes just look at the numbers just have a better idea of what's happening. Last time we looked at it, I drilled down a bit more by category. This time, I wanted to have a look which province is the most affected. So the highest increase was PEI

at 7.1%. I am sorry for those who live in PEI. Ontario wasn't that far behind at 5.7%. And Quebec, Manitoba, and New Brunswick all had increases of more than 5%. In terms of items, quick overview is that gasoline was the main culprit here with 32% increase year over year. That's not surprising. We've seen gas prices go up pretty steadily throughout 2021 and they're still quite high right now. Food and shelter increased 5.7% and 6.2% respectively. These inflation figures are definitely high. They're not low, like I said, first time since 1991. But for me, every time I see these figures, I'm definitely happy that I'm invested in the stock market and that I also have investments in Bitcoin.

Yeah, I think that that's a good tie-in, right? So the rest of the episode, we're talking about exciting companies we care about. I'm going to talk about Airbnb, Shopify, Canadian Tire, a couple of US names, Equinix. And then we're going to shift gears to some completely non-investing questions from Twitter, just because I think they're fun to mix in every once in a while. And what's interesting about a lot of these businesses, a lot of them have pricing power and are able to be at least inflation resistant. I think that's pretty much important across the board with every single company that we talk about and more so than ever. Man, filling up a tank of gas these days just feels like you're getting punched in the stomach.

Like, that's not a good feeling, man. Oh, I know, I know. I mean, we don't fill it that often because we don't use it all that much, but we have to put premium in our car. You notice it even more. So it's definitely, we've seen it at the pump too. What, premium like a buck 70 right now?

Like, what is it? Yeah, I think it's around there yeah in ottawa yeah yeah oof oof that's that's an expensive tank of gas my friend all right let's talk about airbnb they reported their fourth quarter airbnb so really quick news they were also added to the nasdaq 100 that is a badass index to be a part of. So congrats to the Airbnb guys. What an awesome story that has been. And I'm going to keep highlighting Airbnb here on the show. And the reason for that is there are a few businesses that capture global secular trends that I find extremely interesting. And they're a bit of a

bellwether for a trend, which I think is going to continue to accelerate. And I think that they are the leader here. So that trend is live anywhere, and particularly the live anywhere digital worker, the term that's come out, which is called digital nomads. This is a real thing. It's a huge community. And the last two years have helped really accelerate this trend. Simone, I've backpacked Europe, I've backpacked Asia, I've backpacked South America over the past years. And I've been on the road for months at a time. And you meet all kinds of remote workers, entrepreneurs who own internet businesses, freelancers, designers, software

developers, you name it. They live on the road in hostels, or if they want to level up their stays, they're staying in sometimes longer stay Airbnbs and just kind of hopping around. Now, where I'm going with this is I'm particularly interested in tracking these longer stays on Airbnb, not like the week-long vacation. I'm talking about people booking a place to live for four or five months at a time before hopping to this next destination. So I'll get back to that in a second, but here are some highlights for their 2021 full year. Revenue is up 77% in 2021, coming at $6 billion on the top line. Now, I don't care about that number. 2021 over 2020, don't care. They do compare it nicely though to the 2019 numbers right on their IR site. So their revenue is up 25% over 2019. That's the comparable heck she care about.

And thanks to Airbnb for actually including this metric, like the travel type companies that don't include that metric year over year, red flag. We all know that the 2019 is the right comp to look at. So I think that goes without saying. Total nights booked was actually down 8% from 2019. So we still are in a little bit of a recovery from that perspective. I think there is additional competition that could be affecting Airbnb as well. But the thing that worries me a little bit, I don't own, disclosure, I don't own any stock, although I do think it's a great long-term business. I don't own any stock. And something that concerns me a little bit is that revs were up 25%, but nights booked were down 8% from 2019. Now, this is like this kind of complaint, which is Airbnb flexing take rates,

flexing ridiculous cleaning fees and taking take rates on that. I feel like this isn't the actual correct long-term play, but hey, I'm not the CEO of Airbnb. They're a public company, so they got to show results. They had 55 million in net income for the fourth quarter, but still not profitable for the full year on gap. Although they were generating $333 million in EBITDA. For those not familiar with the term, earnings before interest taxes, depreciation, and or amortization. All right. So let's get back to the data that I find interesting, which is this trend that I'm tracking. The average trip length increased by approximately 15% this year. Stays of more than seven days representing half of all nights booked, which is interesting. So more than a week, not just this like two or three night Airbnb weekend vacation. It's actually

more than seven days is half of nights booked. So that's interesting. Long-term stays of 28 nights or more, so a month or more, remains the fastest growing category on Airbnb and accounted for 22% of nights booked. So 22% of nights booked on the platform are people booking a month or more. So that's a really interesting takeaway and surprising. And that number is going to continue to grow up. It's at 22% now. I expect it to be 30, 40% in one day. I really do believe that. And they mentioned they're building out new features to accommodate this new trend, which is people can put in, literally, Simon, you can put in, I'm flexible, meaning it will show you places to go and random dates to go for people who are literally flexible on where they go and when they go.

This is the new wealthy, right? This is the new total freedom wealth, time wealth, and it can be inexpensive places. So you don't even have to be like money wealthy. I'm going to keep following the story. And I think that it's a perfect measuring stick to keep following with these Airbnb results. Yeah. Just to go back to what you mentioned. So in terms of the revenues being up compared to bookings actually being down, do you think it might just be the value of booking that are just up? Well, yes. So they have a take rate on the total gross value, which includes the cleaning fee.

So yes, hosts are charging more as well. It's like a perfect inflation proxy where marketplaces or even networks like Visa are completely immune, like inflation resistant, because they're taking a take rate on the transaction right so i would think that that's coming out a lot in the top line growth as well so that's a good thing to call out however eight percent and 25 is a pretty big disparity yeah like mine is eight percent to up 25 yeah no that's a good question yeah i just wanted to point that out because it probably obviously has an impact i'm not sure to what extent. So that was interesting. I mean, for me, I see Airbnb.

It's weird, but anything less than like five days, typically I'll just go for a hotel just because I like the hassle free. Not that like a lot of Airbnb places are pretty seamless, but still I find hotel. It's just I like the feel shorter stays. It's just everything's kind of hassle-free. But Airbnb, as soon as it's more than five days, then I kind of switch and then I'll go into Airbnb mode. Interesting. Yeah, I think that a lot of people would agree with that, especially if it's like one or two nights. It doesn't make sense for the hosts to do that really. And that's why you'll see like, okay, it's 250 a night

to stay at this person's Airbnb. And they'll have the cleaning fee of like something similar. And then next thing you know, the total price is 500 bucks for the night. And it's like, okay, hell no, I can go stay at a nice hotel for a fraction of that. But the reason for that is because the hosts still have to clean it. They still have to pay even if it's just one or two guests and they don't have the kind of scale that the hotel benefits from, which is they have a ton of rooms and cleaning service full-time staff. So there's kind of like operating leverage built in there. And so, yeah, I think that that's one of the problems that they have to deal with structurally and how they actually like what the product market fit for the product is, is still being built right now in 2022. That's how I think about it anyways.

Airbnb being towards longer stays, like you just mentioned, kind of shifting a bit more towards that, realizing that a bit like I mentioned, for a lot of their hosts, it doesn't make sense to rent it for less than probably like five days, because then you have those cleaning fees, and then the hotels will probably... And the hassle too, right? Yeah, exactly. And the hotels will probably just target that shorter stay, and then Airbnb, VRBOs, and the other competitors will kind of target those longer stays. 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

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year over year to $27.7 billion. Earnings were $3.2 billion, which was up close to 600% year over year. Free cash flow was up 135% to $4.3 billion. They also reduced their long-term debt by $2.1 billion and deployed another $2.1 billion in dividends and share repurchases. They increased their quarterly dividend by 4.35% to $0.48 per share. The board also approved the purchase of up to 10% of Nutrient's outstanding common shares. I mean, clearly this was a great year for Nutrien. If you're a shareholder, congrats. It's definitely a very strong year. Like I mentioned, it is a commodity play and commodity prices, specifically in potash and nitrogen, were way up in 2021.

That's in response to record global demand of 70 million in 2021. And they expect it to continue in 2022 due to geopolitical climate factors. And my apologies, I didn't write the actual measurement in terms of the 70 million, but I'll have to go back. But just to give people an idea, these numbers, they were outstanding. And the production of potash is actually, it's spread out around the world, but Nutrien actually represents about 20% of the world supply of potash based on the numbers they provided. They're really a strong player. And another bullish sign here for Nutrien is that

a lot of the fertilizer produced in the world is produced in Russia. So that it would be something to keep an eye on, especially if there starts having some sanctions on Russia and some of its partners. It could really benefit Nutrien because then it might force a lot of purchasers to switch their demand over to competitor like Nutrien. But overall, it was a very good year for Nutrient. And in terms of commodity plays, I'm not usually a fan. I know you're not, Brayden.

But if there's one that I do like, I do like Nutrient because the premise is very simple here. The world has to eat and fertilizer is a big, big part of that. The thesis is quite simple and it's the ultimate macro play, right? It really is. They sell potash, nitrogen, and phosphate, right? These are required in global civilization. And it's an interesting thing about the Russian take there as well. I didn't realize they made 20% of the potash supply in the world. That's a big amount, man. This is a really well-run company, right? There are tons of commodity businesses

in Canada that are extremely well-run. That doesn't mean that they're exceptional businesses in terms of being able to set their own prices, but don't get us wrong. Don't hear what we're not saying. This is a really, really well-run company and they're deleting the share count, right? They're going to remove 10% of outstanding shares, 4.3 billion in free cash flow. That was a good year, man. And one that I haven't looked at in a while. I know that I looked at it quite a bit after the merger. Was that like 2019? Maybe earlier. 2018 or 2019, around there. It's been a few years now. So yeah, it was the potash company of Saskatchewan with, I can't remember

well now where you're really asking. January 2018, Nutrien was at its own listing. So that's about right. That sounds about right there. Yeah, there you go. But yeah, I think to me, it's a really good dividend play for people looking for a dividend. They obviously have room to grow it. But again, it's still something that's a little tricky in terms of commodity prices, but they are pretty bullish in their outlook for 2022. They think it's going to continue going forward. All right, let's switch gears to Shopify. Oh boy, everyone wants to know. Everyone wants us to have this discussion. Every time you pass Royal Bank and MarqueeCap, you're doomed. You're absolutely doomed. RBC

must own the TSX. If you pass them, you are absolutely cursed. A side note that Royal Bank is now 200 billion in MarqueeCap on TSX. I know they hit it back in January, but to be honest, I just didn't notice. So when I checked today, $200 billion in market cap for a Canadian bank. That is incredible. Canadian banks, on a side note, are pushing all-time highs. They've been on a tear. I remember when, how long ago was it, Simone, when I had a segment called, the Canadian banks are ripping and they're still ripping. Very little is going wrong in the share price while everything else is destructing. So congrats to Canadian bank shareholders. You guys are crushing it on a total return basis. So good. Now, Shopify had full year revs of $4.6 billion

in top line sales, which was an increase of 57% year over year. They had half a billion in net income, which is pretty decent when you net out their unrealized gains. I think it's close to like 3 billion in gap net income, but that's because they have unrealized gains on public securities because Toby's a bit of a stock picker. So there you go. Subscription solutions was up 26%. No, this number was a little light. I haven't seen much on the headlines, but this is actually the number that's disappointing to me. Merchant Solutions revenue was up 47%. Now, they beat on the top line, they beat on the bottom line, and the stock fell even more. Shopify was already on a 50% drawdown. I thought this was very attractive for long-term

shareholders, quite attractive. I said on the show here, I'm like, I'm finally do it. I'm buying shares. It looks reasonable finally. And then boom, these results come out and drops another 25%. Now the results were not bad. They're actually quite good. However, they guided for slower growth. quite good. However, they guided for slower growth. Quote in the press release, we do not expect COVID triggered acceleration of e-commerce in the first half of 2021 from lockdowns and government stimulus to repeat in the first half of 2022. It's like, yeah, obviously, obviously the market is hilarious to me. In what world did I buy Shopify shares expecting COVID-type growth to persist forever? Absolutely zero chance. Yeah, you know, it actually, this is exactly what PayPal mentioned when they released their

earnings, the exact type of language that they would be affected by lockdown starting to not happen anymore, the economy reopening more and more, and the lack of government stimulus as well. So it's funny that Shopify is also saying that, but I mean, I guess it makes it a more valid excuse if they're both stating that. Well, let's keep in mind, these are different businesses, right? Shopify was a clear beneficiary from businesses, SMBs having to have an online presence. You went from it is a nice thing to have to a must have in the matter of like six months in 2020. And so Shopify grew immensely. And then

in 2021 and now and moving in 2022, they're going to benefit from that a lot. Now, the stock market doesn't like poor guidance. However, this trend of e-commerce is not going away. Sure, it was pulled forward, but the long-term story is well intact and they are the brand. They are the cognitive understanding of the best platform product-wise. You got to build an e-commerce store? Shopify. The partnership ecosystem, the product development agility at Shopify, the integrations moat that they're building, the developers, the seven public companies that have IPO built on Shopify. That is an incredible stat. And so the stock fell even more. And Simon, I believe you have an announcement to make.

Yeah, I also bought some shares. I mean, one share. I started with one share. You bought one share. Yeah, I bought one share. So I started that last week. It's probably down a little bit since I bought it. But after the earnings, I had a look. It clearly was the guidance, obviously. And I find it a bit funny when, especially right now, when you see clear benefactors from the pandemic, like a Shopify, even PayPal, right? Maybe not to the same extent, but a lot of PayPal merchants are really do the

bulk of their revenues online. I find it funny that the market didn't see this coming. And it kind of reinforces our belief. And I think the obvious thing that the market is very short-sighted, might look six months to a year, maybe two years in advance. Maybe. Yeah, maybe. But obviously, this pulled forward growth would slow down at some point. So I think that to me was a good buying opportunity for Shopify to start a position. I'm nowhere near where I'd like to have a full position in terms of Shopify.

And the other thing that you didn't mention that got me really excited for Shopify is they recently announced a partnership with JD.com that will allow their merchants to actually access a lot of consumers in China. So I think that's really exciting. Clearly, it might make some people a bit nervous because of the whole China thing, but it does unlock a lot of potential consumers for Shopify users for businesses. Take in the fact that if you look at the partnerships that they have built over the past five years, TikTok wanted to build out shopping on the platform. They use Shopify. Walmart, Shopify. The Facebook, Instagram shops, Shopify, and the payments infrastructure on that platform, ShopPay. Are we really recognizing that kind of product validation from these extremely well-capitalized, talent-rich, very talent-rich companies in terms of software dev are choosing Shopify instead of

building this stuff out themselves? Now, if you are accepting take rates from these talent-rich companies, that is the definition of product validation, from my opinion. Now, the one thing that is actually going to really hurt Shopify merchants is the Facebook targeting. The lack of Facebook targeting is really going to hurt Shopify merchants because this cheap ads, excellent targeting for your Shopify store, that's going away. Your return on ad spend has gone down. It's not like you're not going to spend money on Facebook anymore, but your return on ad spend has come down quite a bit. And that really will hurt Shopify merchants over the next year or two. And so I think that that is more concerning than

anything that the market is calling out. Now, we seem like such chumps for not owning this business. We talk about it so much. I'm not saying it's some crazy value stock, but we were disciplined enough to not buy it at 55 times sales. It seemed a bit frothy for this wonderful business. But hey, you picked it up at 16 times sales. I think I paid 20 times sales. It's not some cheap value stock, but it's not some ordinary business. This is a wonderful business and it's run by great people. Yeah. Yeah, exactly. I think well put there. Now we'll move on to another Canadian business before I start with Canadian Tire. So I was looking up, so it is 70 million tons of potash. So I just wanted to

clarify because I said 70 million and obviously that was some kind of measurement unit. So it's tons. Some unit, milliliters. Now Canadian Tire, full year results, sales were up 9% to 16.3 billion. Their e-commerce sales reached 500 million, which represents about 10% of retail sales. Sport Chex and Marks Warehouse both grew their sales by more than 15%. And they were clearly the two brands that performed the best for Canadian Tire. And what they're really trying to put emphasis on, I notice, is their loyalty program. So Triangle Rewards, which they say added 2.4 million new members in 2021. I shop sometimes at Canadian Tire. I always say no to that stuff. I don't know

about you. Dude, I just say no to all loyalty cards, but I really, I got to start doing it because some of it's pretty good. Now, before you get into the actual earnings here, because some of it's pretty good. Now, before you get into the actual earnings here, Mark's Work Warehouse, I don't know if I'm becoming like dad mode, but that is good shit, man. Mark's Work Warehouse is excellent and very reasonably priced. You can get some nice clothes there. I'm a big fan. Yeah, I think you're becoming dad mode a bit for sure. I think for me, I tend to see a lot of their clothes similar to what i'm looking for in terms of mountain equipment co-op so i tend to that tends to be my what happened to that brand though i was talking to my girlfriend the other day and i was like what

happened to mech where are they i think they're gone i mean we'd have we're just kind of spitballing here based on memory i think they got bought by a private company. So it used to be a co-op, and now it's just got bought by a private company. I could be wrong. I mean, we can revisit that in another episode. But I remember... We don't know what we're talking about. No, exactly.

So feel free to let us know if we're completely wrong here. Oh, they let us know on Twitter regardless. Yeah, exactly. So now back to the numbers for Canadian Tire. Gross margins actually increased from 34% to 35%. So it's not a huge increase, but always nice to see, especially with some of the inflationary pressures we've seen in the past year. Earnings were up 46% to $1.3 billion. Free cash flow was down by almost half to $1.2 billion. They declared a quarterly dividend of $1.30 per share, which was increased last quarter by 10%. And they've been pretty good at increasing the dividend. So I'll say that to Canadian Tire. They've done it on a pretty consistent basis. I was looking at their history. And in November, they also announced that they would be repurchasing up

to 400 million worth of shares. That was a good year for Canadian Tire. Again, I've said it before and I'll say it again. It's not a business I would be investing in because I don't see a lot of expansion outside of Canada. That's my main thing with them. But they've done quite well during the pandemic. I didn't think they would do this well, especially with some of the hiccups they have with their online e-commerce. But clearly, they've improved that experience and it was a good year for shareholders. There are tons of excellent retailers in Canada. There are, and they have absolute dominance in Canada, in the borders. They're good operators. They have good margins. The financials are solid.

They're very profitable. They're tucking in, making some of these interesting acquisitions. Canadian Tire is another example of this. Dollar Ram is a perfect example of this. Canadian Tire is another example of this. Dollar Ram is a perfect example of this. They just lack scale. These retail plays are so difficult outside of Canada. Branding is everything. And it's so, so difficult. It's the same thing with quick serve restaurants.

It's the same way I look at retail and quick serve restaurants. There are a few outliers that can actually see international expansion, but it is exception to the rule, not the rule. And that's exactly where it becomes really hard as an investable idea for me. And we've talked about this a million times, but some of these retail plays in Canada, they're excellent operators. They just lack scale. That's all. Yeah. No, well put. Now moving on to a completely different company.

We haven't talked about this one all that much. DraftKings. They released their full year result. Their ticker is DKNG if anyone is interested in looking them up. So let's go over the results and I'll explain why we saw a 20% drop in the stock price after their earnings release. Well, first of all, their revenue more than doubled to $1.3 billion. So that was clearly good. They had a loss of $1.5 billion, which increased by 23%. Their negative free cash flow more than doubled to $434 million. Their monthly average payer, that's a term they

use. Not a player? No, that's what I thought it would be, like a player, but it was payer, increased 31% to $2 million for the fourth quarter compared to last year. The average revenue per payer increased 31% to $67. One of the line items that stood out was their sales and marketing, which doubled for the year to $981 million. What to me this is showing is that their customer acquisition is becoming increasingly expensive. That's because there's a lot of competition in online sports gambling right now because it's really a land grab that's happening. So I've seen a lot of commercials. I've heard whether it's on the radio, TV, whether I'm even like browsing on the internet, there's tons of competitors in the space offering

different kind of promotions because they know that a lot of states in the US are opening legal gambling markets and they're trying to just grab as much as they can of that market. So what DraftKings said is they're hoping to convert users that were using the illegal sports betting market and convert them to the legal market. That's the biggest reason, my opinion, why the stock was down. Their losses are increasing because, like I said, they're in land grab mode. My problem with that strategy is despite the fact that it's obviously clearly expensive, I don't know if their users will stick on the platform once those promotions are done. I've mentioned it before, I've played quite a bit of online poker. I was mostly playing on PokerStars, but I also had accounts on different platforms because

sometimes they would just give you a really worthwhile promotion and it just made sense to take them up on it. And the last thing I'll mention here is since their IPO debut, which was a SPAC in 2019, their share has been on a roller coaster ride. It started at $10 like SPACs normally do, hit a high of $74 last March, and now it's down to $17 a share. Oh, I didn't realize it's $17 a share at DraftKings now. Oh, yeah. Oh, what a fall from grace. Oh, boy.

Yeah. I mean, I think it's just a reminder that there's not really any proprietary reason for users to use a specific platform. Maybe the interface is better on one than another, but I think for the most part, users will be driven by promotions. If there are some, you may get some loyal users, but I just don't know how high the payer retention will be. Yeah, the payer, not the player. I know. I got a little bit of insight into this just because I'm such a fantasy football nerd and DraftKings is DFS, which is Daily Fantasy Sports. Now, the two big players in DFS

are DraftKings and FanDuel. These two companies are very well capitalized and willing to spend whatever it takes on customer acquisition. That's why you're seeing the SG&A line explode, right? So the sales and marketing line exploded. You're right. They have these promos that you go on that's basically free money because they know that the customer lifetime value is well worth doing this acquisition. So maybe it plays out, but I think that there's a bit of a duopoly happening in DFS, which could be a good thing for FanDuel. I mean, are there more players going to come in? I guess so. But like you mentioned, sports betting as a category has tons of competition and the switching costs don't feel high at all. They don't feel high. Daily fantasy sports by nature is,

so tonight the game's on and I'm going to pick a bunch of players that I want to have on my daily fantasy sports roster. I'm going to throw a few bucks into this tournament or a cash game, however much money you want to gamble on this. And then the game happens that night at 7 p.m. and the game's over. And then you have no tie other than the money in your wallet, but you could have multiple wallets, right?

Like you could have one on FanDuel, you could have one on Bet365, one on... And so the category of sports betting, I think you're calling out correctly, which is can be a great business, FanDuel, you could have one on Bet365, one on... And so the category of sports betting, I think you're calling out correctly, which is can be a great business. But what's the switching costs? I don't think there are any. Yeah. And I like that you mentioned FanDuel because I think they have an upper hand here. And my reasoning is they have a lot of levers they can pull. So FanDuel is actually owned by Flutter Entertainment, which also own a company like PokerStars that I just mentioned and is the far and beyond the leader in online poker gambling. And they have other properties as well.

So Flutter Entertainment can actually leverage a lot of these other properties. So I think personally, if I had to bet on one of the two, I'd bet on Flutter because they have more than just FanDuel. Yeah. I look at these and I'm like, who is the payments infrastructure? Who's the software infrastructure? Who's providing APIs for these companies? Those are the ones I want to own. Why am I losing the name of it? The TSX. What's the TSX payments company that does a lot of their customers are online. Nuve. Nuve. Nuve. Thank you. Yes. That could be an interesting play on here. If you look at their customer list, that is their bread and butter is payments infrastructure for

online gambling. That seems more interesting to me because the competitive landscape is just hard for me to understand right now for all the reasons that you've mentioned. 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

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it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Let's talk about Equinix. You own this thing in size, right? You own Equinix. Yeah. Yeah.

It's one of your larger positions. Yeah, yeah. It's definitely, I think of my individual holdings, it has to be just going off on memory in my top three or four. Yeah. Okay. Equinix, ticker EQIX. It's one that I don't own, but probably should. They hold and operate the most important real estate for the 21st century. It is the largest data center operator in the world, hundreds of data centers worldwide. operator in the world, hundreds of data centers worldwide. Revenue for 2021 was 6.6 billion, which was up 11% compared to last year. Adjusted funds for operation up 12% and earnings per share full year were up 33%. They have 419,000 interconnections, which I'm not going to get into the tech right now, but this was up 7%. And gross profit per data center was about 13.55 million per data center of gross profit.

Very profitable. Now, those numbers I just gave, revenue up 11%, adjusted funds from operation, 12%. This is what they do. They are guiding for another 10% of revenue growth next year. They are guiding for another 10% of revenue growth next year. This is that stalwart of low double-digit compounding, like 10% to 14% wide moat, long-term secular trend behind it. Nice dividend growth. They hiked the dividend 10%, and they're guiding to hike it another 10%. If you look at their presentation, they're literally like, yeah, that's going to be up 10% next year.

Oh, and by the way, it was up 10% last year. Oh, and the year before, oh yeah, it was up 10%. I'm not kidding. It doesn't fluctuate. It's exactly 10%. This is the kind of business that it is. Here's an excerpt from Stratosphere. So on every company we cover, Equinix being one of them, we have a sick report on Equinix. It's very good. We have at the top an updated of where the business is now in very simple layman's terms. Here it is, quote, the business is growing at around 10% a year, just as I said. We would not be surprised if this growth is maintained and if not accelerated from years to come. At today's share prices, we think Equinix offers good value for long-term investors. Now, what's not to like?

It's the infrastructure for the cloud providers. This is a great business to own. The moat of interconnections and collocation is really strong. I know it's one you know and love as well, but it's boring, but still a little bit sexy because it's a play on cloud computing, right? Yeah. Yeah, exactly. I think personally, it would fit a lot of different portfolios, whether you're young, you have decades and decades before you actually will start drawing on the funds, whether you're retiring and you need the income, you're still looking at some good growth, like you said, in the low double digits, they're increasing, they've steadily increased their dividend. It's not a super high yield right now. It's never been a super high yield. But just the

fact that they increase it high single digits to low double digits every single year, you're going to see that income come in over time. And you're also going to see some good capital appreciation if you hold it long enough. It's still more volatile than a typical REIT, I would say, but it's definitely less than some of the growth names out there. Now, it's on a very rare 18% drawdown right now. I mean, lots of stuff's getting absolutely crushed more than that. But this is one of those ones where if it dips, it doesn't dip that often. So this could be a good entry point. And I like how you phrased that. But this is one of those ones where if it dips, it doesn't dip that often. So this could be a good entry point. And I like how you phrased that. Equinix can fit in almost

any portfolio, right? It's a real estate investment trust, long-term appreciation, dividend grower, but it has a lot of that super high quality, high moat growth at a reasonable price type factors as well. And I think that that's well put. It could fit into almost any portfolio. Yeah, yeah, exactly. Now moving on to a company that is very different, Air Canada. They released their full year result. It was definitely another challenging year for Air Canada here. I don't think it's any fault of their own. They were just the victims of ongoing COVID-19 restrictions. CEO Michael Russo mentioned the following, which sums up pretty well,

in my opinion, what happened with Air Canada. The unpredictable course of COVID-19 made 2021 extremely challenging for Air Canada and the global airline industry. So obviously it was, I think, picking up and then Omicron hit and things kind of took a seat back again. But it is encouraging that before Omicron hit, their ticket sales actually reached 65% of pre-pandemic levels, which clearly shows that people are looking to travel once again. They had robust advanced ticket sales in the fourth quarter. It grew to almost 400 million, which they mentioned is a good sign of things to come. Revenues were up 10% to 6.4 billion. And keep in mind, this is versus 2020. So it's not based on pre-pandemic level. Passenger revenues were up 2%. Passenger revenues represent about 70%

of Air Canada total revenues, just to wrap our heads around it. Cargo revenue was one of the very nice spots on this earnings release. It grew by more than 60% to $1.5 billion, which was a record for Air Canada. It actually now represents about 23% of their total revenues. Their net loss was $3.6 billion, which was 22% less than last year. They were free cash flow negative, which is no surprise to the tune of $2.6 billion. That was 25% less than last year. So things are improving for Air Canada was still a challenging year. Clearly, air travel was better than 2020, which is not really hard to beat. It's still way down from 2019. But to me, I think it'll be interesting to follow Air Canada in 2022 for on a few fronts. So

is passenger travel going to continue to increase and get closer and closer to pre-pandemic levels? That's my first thing I want to keep an eye on for them. Are they going to keep increasing their cargo sales at the same pace as this year? I don't know because it was a really good year. 60% increase I think will be hard to match in 2022. But I would probably think that it'll continue going up. 2022, but I would probably think that it'll continue going up. And how will increased price of oil impact their profitability? Because fuel, airline jet fuel is made of oil. So it's going to have an impact on their profitability here. Are they going to increase their prices accordingly?

How are they going to actually try and adjust that based on the demand and so on? So there's a lot of moving pieces here for Air Canada to keep an eye on. I have almost no idea about airline cargo, but I just checked CargoJet to see how their stock was performing. And I know that it dropped off a cliff when Air Canada was supposed to get into this business and it recovered well because it was a bit of an overreaction from the market. But I wonder how much that's affecting a cargo... This is a clearly meaningful contributor now to Air Canada. So good on them. Yeah, they must have seen an opportunity and they look i'll give it to them that it's probably a good way to offset the uncertainty of like passenger travel right for sure for sure who

knows i hope there won't be any further lockdowns and stuff like that i think everyone's kind of on the same page when it comes to that but who knows right i think i don't know i hope not but from an air canada perspective i mean they have to hedge that somehow and i think the cargo space probably it provides some safety in that regards at least some counterbalancing yeah very interesting i saw the tsa check-ins which is u.s data that it's very close to pre-pandemic levels for domestic travel in the States. It's like right there with pre-pandemic levels. So people are willing to go. And I think the Canadians are ready to go too.

Yeah. So it's going to come. It's a bit of a challenge because I've been looking to travel in the States. But the biggest thing is the test you have to take and come back, right? I think that's the biggest. Are they dropping that? They're dropping the PCR, but you still have to get an antigen test, I think if I read correctly.

So we're looking to travel, but probably stay within Canada because then you get stuck in another country. You have to stay there. I can't do my regular job outside of Canada. So it creates that extra level of certainty. But we're definitely looking to travel at some point in the next few months. Yeah. Yeah.

This year, I got two trips to Florida planned. I was supposed to go earlier, but I didn't go. But I'm going soon. And then I'm going to Portugal in July too. I'm pumped. I'm ready to go, man. Yeah. I'm ready to too. I'm pumped. I'm ready to go, man. Yeah. I'm ready to go.

Let's go. I'm ready to go. Let's go. When we went to Quebec City for a honeymoon, it felt like a trip around the world. Oh, that's incredible. You love to hear it. Okay. Are we done with the serious stuff now?

Yeah, yeah. Now for the not too serious stuff. All right. So I ran a little question yesterday on our Twitter. Follow us at CDN underscore investing. That is at CDN underscore investing. Follow the podcast. And I said, give us some questions that are not investment or finance related. We'll pick a few. And here they are. All right. Damien from Twitter asks, I don't even know if you've looked at these or not, but who is your favorite pro athlete? And they can be currently playing or retired, Damien says. Do you have a favorite pro athlete? Probably have two. So I'll go one retired and one active. So one retired,

I was like a big Paul Correa fan when I was a kid. I still have his rookie card. I have tons of cards of him. I was a big fan because he was really skilled, smaller player, but still managed to be really good in an era where smaller players had a hard time succeeding. It's too bad that his career ended the way it did because of concussions. The other one is Rémy Métallier. He's a mountain biker. if you want to look him up you want to see what a very skilled mountain biker is especially downhill the stuff that the guy does is is amazing because i'm into mountain bike a lot he's probably the active one right now is he one of those extreme sports videos i watch on youtube and just go how on earth are these people

this good at this yeah one of those yeah he's one of those but the thing i like about him is he'll teach people and he doesn't push people to do something they're not comfortable so he's very you'll help anyone yeah he'll help anyone on any level so i think it's i really like his approaches as well yeah all right i'll go with two as well playing or retired is like kind of a gray area i hope he comes back with a vengeance seeing tiger woods swing a golf club like seeing him swing a golf club is the most satisfying thing ever when he came back after all that and won the masters i was just like like sitting there. I'm like, I'm not crying. You're crying. He's just so dominant. And it's almost like you wish things could have gone so

differently in his timeline, but watching him play golf is the most exhilarating thing ever. And then for hockey, this is a random one. And I tell people this, they're like, what? My favorite hockey player of all time is Rick Nash. Now, Rick Nash, he was a very good NHLer. He wasn't great. He wasn't exceptional, but he was a very good NHLer. But I love the way he plays. So hard on the puck, big, strong guy, can score highlight real goals, but he's also gritty. And he was electric in international play. Like for Team Canada, for some reason, Rick Nash was always one of the best players on any of the teams he played at.

And so, I mean, like who likes the Columbus Blue Jackets? But Rick Nash was my favorite NHLer. Yeah, I like the Tiger Woods. I have to say, if I had to pick a third one, Tiger Woods would have been it because I could not care less about watching golf. But when Tiger's playing, I will watch. Exactly. He's just so good for the game and his swing is so silky. It's ridiculous. All right. Adam Coates asks, if you could live on one item of food for the rest of your life,

what would it be? I'll go first. I could smash a burrito every single day and be fine. There's so many food groups in there. Come on. So, I got all of them. I could dust a burrito every single day. I'd probably go with a pizza. Pizza every day. Oh, that's a cop-out answer. Oh man, I just love pizza. Like, it just, yeah, I was trying to think. It is good. Yeah, that's my go-to. Victoria, my wife, probably thinks I ate way too much pizza because if ever we're kind of looking for something to eat, it's like, well, do you feel like pizza?

And if ever she suggests it, I take her up on it right away. Yeah. I'm recording this podcast for the first time here, literally in my sister's basement down here. It's family day and my dad's coming over with some pizzas right now. And so chicken pesto pizza is on the way. Oh baby, that's a good pizza. I don't know if you've ever had chicken pesto. Oh yeah. All right. Winnipeg investor says, who's going to win the cup this year, Simone? Who's going to win the cup? Not Montreal, I can tell you that. Not Montreal. Montreal is 10 and 33, seven OTLs.ls oh that's uh pretty bad do you have a pick

i'm not sure i'll let you let you say yours and then i'll give mine i'll spark some idea dude it's so hard to like unless you're looking at the state like so many teams i'm a homer i think the leaps are very good however if i'm not gonna go that route for another Canadian team, the Flames are sneaky good. The Flames are very sneaky good. They're 29-13 right now. I do think it's the golden night's year to finally win this thing. Ever since they have come into the league as a team, they've been exceptional. They've been knocking on the door repeatedly, conference finals, Stanley Cup finals. And now that they have Jack Eichel playing, they threw Mark Stone on the shelf. He's going to come back. They're going to do what the Lightning did last year.

And the playoffs start and they just have all these guys that they've just held out. And then Mark Stone comes back. They're so good. I could see them winning the cup. I also like the Canes. I like the Carolina Hurricanes as well. I'm going to go with Calgary because they're goaltending. Because I was thinking going through some of the top teams, and that's one of the things, the most exciting teams,

there tends to be some question marks in goal. Maybe except Tampa Bay, obviously. But Calgary has solid goaltending. They just got Tyler Toffoli from the Canadians for some secondary scoring. I feel like they're going to play a style in the playoffs that is going to be really well-suited with Sutter, of course, as a coach. So I'm going to go with the Flames. Yeah. Yeah, I would love that. I would love for the Flames to win the cup. I was born in Calgary, so I'm a Flames fan myself. Now, I got to be honest with you guys on the podcast. I've been watching not that much hockey this year. I don't know why. I haven't been watching

that much hockey this year. I got super into NFL. I never miss a single Sunday. I don't miss a single snap on Sunday. I watch the Leafs games and I tune in for what's on. But man, I got to be honest, I haven't been watching that much NHL. I'll get back into it when the playoffs start though. Two golf questions from me here. Justin H asks, Brayden, what's your golf handicap? Last time this question got asked, I think I was an 11. I broke through. My golf handicap says on my app that I'm an 8.7 now. So I'm a single digit cap. Now 8.7 feels low. Like I think when I start next season, I'll be somewhere around 10. I'm probably around a 10. I think that next season I can get into maybe an eight, but my game definitely trended a lot better. Dave Ahern asks, Braden, is your long game or short game better? This is for golf. Ahern asks, Braden, is your long game or short game better? This is for golf.

My driver got a lot better, but without question, you ask any of my buddies and they'll tell you I'm pretty good with my wedges. So 100 yards in, my putting is streaky, but pretty good with my wedges. So that's it. Simon, Josh asks, are you coming to Toronto to watch a Jays game? I would like it. I would definitely like to see the Jays again because the last time time I saw them was the TCI meetup at the TCI meetup in 2019 when they had Guerrero. And I think, yeah, they had Bichette and Guerrero as part of their team, but they were dumpster fire because they had like those two and the rest of the team was meh. The pitching wasn't great. And then they made they got Ryu in for the 2020 season. So they made a bunch of additions.

Some younger players came in as well. So it was fun to watch them back then. And I'm definitely glad I did. But I definitely miss watching a good Jays team. So if I can definitely make it to Toronto. They're good right now. Yeah. They're good right now.

Yeah, maybe I can go in. That team's good enough to win it all. We can record an episode in person or even have a meetup and gets a few of our listeners from toronto all right tci meetup jays when the season starts let's actually organize that how fun would that be all right that'd be awesome yeah uh yeah that'd be awesome get some some beers, get some TCI fans. We're not allowed to talk investing for three hours. Okay. Reg S, how did you guys cross paths and how did you get the idea to start the podcast? So we answered this one last time, but for people who don't know, dude, every time I

tell this story, I kind of mess it up because I forget exactly what happened. Yeah, I remember. So it started, i had heard brayden because he did a podcast i think it was like stratosphere investing podcast or something like that and i did a podcast that i think like one person listened to and it was my mom two if we include your dad but uh yeah yeah we get my parents on there two listeners a year yeah but i found it just trying to find like a investing podcast for canadians so i found that i noticed that brayden and then some episode i think in a few months if not more you weren't like super consistent so i reached out to you i said oh would you be interested there's

nothing there and i know one of the things you had mentioned was that it's not easing it doing it on your own because it's a lot of just a lot of work doing solo so we kind of were entertaining the idea we were talking on email mostly and then i went for uh training for my work in toronto in 2019 that's when i went and watched the blue jays and while i was there we met up for some drinks talked a bit we had a you know good vibe we decided to give it a try and that's how we we got started it was like a tinder date but for going out for a podcast me and simone just getting beers but no it was fun though yeah it was fun it worked out and our timing could have been better right with the pandemic obviously with people getting even more interested in

investing because a lot of people had nothing else to do. So I think our timing was really good. And it's been two years, more than two years, actually, now. Yeah. Dude, doing a podcast solo was miserable before. It's so hard to do consistently. And so if you're thinking of doing a podcast out there and you have a buddy that wants to, you want to do with anyone at all, it makes it way easier. That's my recommendation. Anything else? I didn't, there's some other ones on there, but people want us to get into, people want to bait us into some like really godless questions on what's going on in this country right now.

And I just, we're here to be talking about investing. That's about it. Exactly. We're not getting into politics. There's enough's about it. Exactly. We're not getting into politics. There's enough news about that. You can get that elsewhere. We're sticking to investing and some sports questions. Yeah, yeah.

We'll field some sports questions. All right. Thanks so much for listening. I appreciate you very much. Today was February 21st. If you're new here, episodes are on Mondays and Thursdays. The episodes come out bright and early too. So if you got an early commute, we got you. And at CDN underscore investing,

thecanadianinvestorpodcast.com is our website. We appreciate you listening very much. Stratosphere Investing is my company. We built a tool for self-directed investors to search financial statements, find news, find peer comparisons, find key metrics and ratios. We're building it all the time. And I spend more time on it than anyone should possibly know. So if you can go check that out, I would appreciate that very much. You can go to stratosphereinvesting.com. And I think you'll like it.

All right. Thanks for listening. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.