The Canadian Investor - Beaten Up Stocks That Have our Attention

Episode Date: October 13, 2022

Semiconductor stocks like Nvidia, AMD, ASML and TSM have been getting crushed since the start of the year. Companies associated with those chipmakers have been trading down since the warning of AMD last week about weaker demand in the short term. We also review some of the recent macro and inflation news. We look at an alcohol and marijuana company and discuss whether the big cannabis news from the US will have a long term impact on them and the industry as a whole. Tickers of stocks discussed: NVDA, AMD, TSM, AMAT, LRCX, ASML, KLAC, AVGO, BAM-A.TO, CGX.TO, STZ, MTY.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with 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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a great long weekend. I don't know if I can have any more food. I think I'm cut off of food for at least another 24 hours. Yeah, it was good, but it was cold turkey for me because the baby started crying when dinner was ready. So what I did is I let my wife eat first. So I brought her for a car ride because she slows down and chills out when she sleeps in the car. So I did a 20 minute car ride. And then when people were finishing eating, I had my turkey. So you went cold turkey. Yeah, pretty much.

I had turkey before we just started recording leftovers. So I think I think I'm out now officially out of turkey and leftovers. But you got to love it. The next like four meals turn into the exact same meal because it's too good not to eat and there's too much of it that you can't not eat it. So you're just forever eating mashed potatoes and gravy until it's all gone. begins tomorrow, so they say. Simone, let's talk about a few things today. And first one I have on the list is semiconductor stocks have been getting absolutely ripped apart. They're trading like they're left for dead. I'm going to go through a couple of names here and how much they are down from their peak. NVIDIA stock down 65%. AMD 63%. Taiwan Semi, ticker TSM, 55%. Applied Materials, AMAT, 54%. LRCX, 54%. I think that's Lam Research. Yeah, MDX, 54%. I think that's Lamb Research. Yeah, Lamb Research, 54%. ASML, a name you and I love, cut more than in half from its peak at 53%. And Broadcom at 35%. And the list goes on. Of course,

there's another one. Pretty much the only one that's been resilient is Texas Instruments, but they have a long other list of business lines that they do. And so they're not only trading like they're down in a cyclic, because these things are historically thought of as very cyclical. Right now they're trading like they're left for dead. Are you seeing some opportunity here? Yeah, the one I really have my eye on is ASML, like you just mentioned, just because they're the only maker of EUVs, which is extreme ultraviolet. Essentially, you need that.

You need these machines that are very expensive to make. And they make a pretty penny on them because they're the only producer. So it's a pure monopoly here. And it just... Lithography is the term. Lithography, exactly. So it allows to put more and more transistors on these semiconductors. And the more transistors you have, the more computing power you have. That's essentially the basics, right? And they are the only one who has

that technology right now. It's a monopoly, like I said. So I think they're very attractive. They're based in the Netherlands and their cash flows have been just amazing. They're spending a lot of money in research and development, which is something you want to see because you want them to keep innovating. So very interesting play. I'll probably be looking to start a position soon. I just need to do a bit more research. I know Braden and Stratosphere had a great breakdown. I've been listening to some other podcasts on semiconductors as well, who did a bit of a breakdown of ASML2 looking at the numbers. There's a few risks, but I think especially with seeing how in this new environment,

countries want to be less reliant on global supply chains. I can see a lot of investment benefiting a company like ASML. The other one we were actually talking about is Taiwan semiconductors. They are, I think they produce 90, 80, 90% of the top performing chips in the world, like the highest end of chips. And they really spend crazy amounts in capital expenditures, which is required to keep their kind of number one position. I think last year was something like 40 billion. I don't have the numbers in front of me, but I think it's in that ballpark. And the only reason I think that the stock is really being slaughtered here is the whole Taiwan question, right? So you have a lot of tension with China, the US obviously saying they would defend Taiwan if China were to invade. So I think

the political tensions here are what's really dragging on that stock. On top of that, with AMD last week saying that they're seeing some weakness in the PC segment in terms of chips. That's right. There are so many hesitancies, like you just mentioned, and then you mix in geopolitical issues. You mix in a terrible market and you mix in people in the space hinting at real cyclicality and a downturn for demand for semis. So you have this perfect storm of just unloved security. And that's when things get really cheap is when it's really ugly. And it's really hard to make a move on something that's really ugly. And that's when things get really cheap is when it's really ugly. And it's really hard to make a move on something that's really ugly.

And that's why the stock's really cheap. ASML for me as well is the one that I would be most willing to throw fresh capital into right now personally. Of course, never consider this podcast as any summative investment advice. Do your own research. Simone are just thinking about the things that we're seeing and the value of that business. You're right. It is a monopoly on EUV lithography. It's a bottleneck on the global supply chain from this wonderfully well-run company in the Netherlands called ASML. And the tech is so cool. It's quite incredible what they have built. So you and I are both eyeing it. I've mentioned it so many times on the Stocks on our Watchlist segment. And you and I are both quite lethargic to make moves because

we want to make sure we're putting in fresh capital and something that we'd really understand and really like. And semiconductors are, for guys like us that are not in industry like that, you have to do the research because it's hard to understand. It's not easy. This tech is not an easy business to understand. It's not a trucking company. It's not simple. It's very complex. Yeah, exactly. And you have NVIDIA AMD. So those are chip designers, essentially. So they'll design the chips and then a manufacturer like Taiwan Semiconductor. Send it off to TSM. Exactly. And then Intel, we didn't talk about it. They're a bit different. They're kind of a little bit of everything at the same time. But make sure

you do your research because there's different parts of the kind of supply chain that you can get exposure to depending on what company you're actually interested in. Intel is down 63% from its high. Oh boy. Yeah. If you bought the shares anytime in the past 20 plus years, you've been unhappy with the results other than that fat dividend that they pay out. Yeah. And Brookfield has a joint venture with them, I believe, for Brookfield infrastructure partners. I'm just going, I remember, I Brookfield Infrastructure Partners. I'm just going, I remember, I think it was announced a few months ago, they're both putting a lot of investments in that. And again, I think Intel- Because the US is very motivated to bring in infrastructure back on their soil. Yeah, because they've seen the supply chain

disruption. And obviously, the Taiwan question is putting it even more to the forefront. And you can even add to that that Russia invading Ukraine kind of brought these things at the forefront as well. When you have a dictatorship, you never know how they're going to react. That's right. Simone, let's shift gears here because I sent you a little screenshot from a Twitter DM. I got a wonderful listener of the show, said some very nice things about the show. So thank you very much. Gar, Garci, Gargi. I'm not saying that right. That's okay. She asked me about some clarification on the Brookfield asset management

spinoff. We've touched on it before, but let's give some exact examples. They've said, they've said that this will be happening. The spinoff will be happening this year. And so, you know, it's going to be pretty soon here. Yeah. So let's talk about this. Yeah. So essentially, so Gargi, and our apologies if we're butchering your name.

You can butcher mine a few times. I'm used to it. I did it for a year. I butchered his name for a year, and I probably still do. So it's all good. So essentially, like you said, they'll be spinning off the asset management part of the business. And what will happen is they'll have a Brookfield Corporation, which will be kind of the new BAM, if you'd like, how it's traded, the mothership.

And then the asset management will be kind of standalone, but they'll still keep a majority of shares. Now, for each four shares that you own of BAM, currently you'll get one share of the new separate asset management business. So what it means, if you have 100 shares, you'll have 25 shares of the new asset management business. If you own 50 shares, like Gargi was asking in our examples, I don't know if Gargi has 50 shares, but if you do, you'll get 12 shares plus some cash since you won't be able to get a partial share. And I can confirm that because they did something similar with Brookfield Infrastructure Partner when they did the C-Corp. So Brookfield Infrastructure Partner Corporation.

I had that in my own shares where I didn't have enough for like one additional share. So I got like a couple of shares plus some cash. And you'll see that, I think the last thing you'll see that as a dividend or a corporate action, depending on your broker. So I just wanted to add here in your, like exactly what you're going to see. So in your example there, say you have, we'll keep it even numbers. So we don't get the cash, whatever. So if you want a hundred shares of BAM, you're going to get 25 new shares for the asset management pure play. So what you'll end up with is 100 shares of a new ticker called BN, which is Brookfield Corporation, which will trade on the TSX and the NYSE just as it does now. So BAM, the mothership becomes BN, Brookfield Corporation, and the new spinoff shares will be BAM, the mothership, becomes BN, Brookfield Corporation.

And the new spinoff shares will be BAM, Brookfield Asset Management. So this is the confusion around the tickers, is you're going to have new shares named BAM, which are not the same as the current BAM. The current BAM is the mothership. That's turning into BN. The new shares are going to be BAM. So current BAM is the mothership. That's turning into BN. The new shares are going to be BAM. So there you go. You got to own one share of BAM just so you can save the ticker. So it's...

All right. So the big question here, Simone, is the people want to know, and I want to know, what are we going to do? What are we going to do with the shares? For me, I'll say personally, I'm still thinking about what I'm going to do. So for me, Brookfield Asset Management is my fifth largest position. Those shares will become BN and I'll have this new position BAM, which is going to be a pure play on the asset management segment. Now, I appreciate keeping it simple. And in my approach to Brookfield has always been just hold the company that owns all the subsidiaries. And that's what I'm very likely going to do. But realistically, what I'm going to do is I'm going to get the shares. And I'm going to think about it. I'm not going to do anything. You know, there's no one telling me I have to do anything. And so they're both going to sit in my brokerage for a while until I decide what I want to do. What I very am likely going to do is sell the pure play asset management spinoff shares and roll 100% of the proceeds into BN, the Brookfield Corporation. That is what I'm very likely going to do.

going to do. I'll let everyone know on the podcast kind of how I'm thinking about that, but they're likely both going to sit in my brokerage account for a month or two before I really decide what I want to do. Yeah, I probably won't do anything. I'll just keep it as is. I don't mind. Just keep it as is. Yeah. I mean, you know, I like having a kind of, most of my exposure to Brookfield is in the pure plays, whether it's renewable or infrastructure. So I really don't mind just having, you know, the pure play here. At the end of the day, I see it mostly as just one business, but I want to have a bit more concentration to certain part of the business. That's why I chose that approach. But yeah, I mean, I can't blame you for your approach and people want to keep it like me. I don't think

you can go wrong either way. Yeah. You're like, I want exposure, but I also like, I'm treating it like a menu. I'm like, I want some extra of this exposure to the renewables or the infrastructure saying, you know, you're going for all you can eat sushi. And you're like, yeah, but give me five times extra salmon avocado rolls, because that's the best one. Pretty much. Yeah. salmon avocado rolls because that's the best one. Pretty much. Yeah, that's it. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual

RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit Questrade.com for details. That is Questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host

to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, let's talk about a Canadian company called Cineplex. Now, Cineplex, I learned today, apparently they have recently started, or actually, I don't know if it's recently, but I was looking on their investor relations,

and I only saw three press releases in their history that they've done this. So looking on their investor relations, and I only saw three press releases in their history that they've done this. So maybe I'm blind, maybe I'm not, but they have been reporting their monthly box office revenue. And they said for the month of September that we just closed out, they saw 52% of box office revenue compared to their September 2019 pre-pandemic levels. So almost exactly half of box office sales this September compared to pre-pandemic levels. That's not very good. That seems quite horrible, doesn't it? One thing I'll say is I actually just Googled it because I had a feeling. I'll give them a little bit of a pass on it could it's the type of movies right exactly the movies so 2019 ad avengers end

game the lion king star wars the rise of skywalker frozen 2 toy story 4 captain marvel spider-man and aladdin so a lot of blockbusters in 2019 compare. There were some this year, but definitely not as many. So it's still not good. I'll just say that, but I wanted to give them a little bit. Yeah. Fair enough. One month is not a fair representation because, you know, there's different movies and blockbusters that are out, right? Speaking of blockbusters, it looks like they rolled Avatar back in the theater, which I'm like kind of inclined to, to go see that again, because that's such a good movie in the theater. But so here's the last three months. Okay. Speaking to what you mentioned, which was adjusting for how much it can fluctuate.

It was 64% of 2019 levels in the month of August and 85% in the month of July. So again, those comps are difficult because maybe there was a bunch of movies and there was a week period in July of 2019. So it's hard to say they're perfect comps. I recognize that in the data set, perfect comps. I recognize that in the data set, but it's an opportunity to give my hot take, which is, I think we can get to a stabilized normal result somewhere that looks like July, maybe 80, 85% of 2019. I actually think that that would be a great result and a good reality long-term for this business. Many investors took extreme sides of playing trends in 2020 and 2021. It was like on one hand, people are thinking every single interaction is going to happen virtually. You're never going to go to a theater. You're all going to stream it. That was an overshoot because people crave this in-person experience.

So that was like some irrational exuberance. And then there was also this irrational exuberance of piling into things that were going to be reopening plays that are somehow just due for some big rebound. You know what I mean, Simone? It's like, well, it's like a forced order of thinking. It's like, look how much airlines went down. Like they're going to recover everything and more. And whether they do or not, who knows, right? But the real thought process I have here is that both sides overshot and the truth probably lies somewhere in the middle. And the difference here with movies being that pre-2019, this was already changing. The dynamic was already changing in the world of streaming. Consumers were already given other choices.

But then all of a sudden, they were just funneled into those options when they had no other choice. So both sides feel like overshoots with the reopening plays and the stay-at-home plays, because we've seen the stay-at-home plays because we've seen the stay-at-home stocks get crushed. The truth settles somewhere in the middle without knowing the movie business so well. I think 80% of 2019 box office seems like a reality and overall, I think actually a decent result for this business. No, I think that's a pretty fair take. I mean, especially now we have options for movies, right? You can get the early release, you pay like 35 or $40 and you can like rent it at home before it hits like the, you know, DVD and air quote release or whatever. So yeah,

I think it's a hybrid. And I mean, I still see some people and on, you know, what you're saying, I know it's not us, but you know, are are still some people are still nervous to go in public. I've had people tell that to me specifically for cruises because you're stuck on a ship with a bunch of people that they have gone or would have gone before the pandemic. And now they will never go again on a cruise. So I think there's also a little bit of shift in behavior there as well. But I think I agree with you. I think, you know, 80%, 85% is probably a good outcome for them. Right.

Because it's like, you know, airlines, people still want to travel. There's no replacement for them getting like, you know, if I want to go to Europe this past summer, I didn't have another option. I didn't have a teleportation device. Like I'm taking an aircraft. I've taken the boat. Yeah, I'll swim. I didn't have another option. But if I want to watch a screen and entertain myself on a Saturday night, you know, make popcorn at home and watch at home is another option.

So people were given other options. So I don't think that it's the same as some of these stay at home plays. And I see online, you know, we just talked about wall street bets and the whole meme stock mania. We did a revisit of GameStop last week on our little episode. I'm seeing it still with AMC. Like people are like, it's going to come back. This is just madness. It's mania is what it is. And so I think that it should be treated as such. Yeah, no, I totally agree. Now we'll move on to the next segment. I mean, it's hard to not talk about a little bit of macro news. Seems like there's macro news. I make headlines every single week now. So my segment was called Tiff Speaks. So Bank of

Canada Governor Tiff McLean reiterated that his focus is getting inflation down and to expect more rate hikes. I think that was to kind of quell the speculation of a pivot that people have been predicting for what, like three, four months now. And central banks have been pretty much steadfast on the fact that it's not happening. As usual, McLean said he didn't specify how large the interest rate heights would be, but that their focus remain on inflation. He says that there's a narrow path for a soft landing. So for those who are not aware of the term soft landing, it basically means slowing down the economy to very slow growth or no growth at all. So it's basically best case scenario when you're hiking rates that aggressively.

But the reality is the more they increase those rates, the more there's a risk of a hard landing and inflicting some real pain on the economy, including job losses, continued decline in home prices and increases in corporate or personal bankruptcies. And, you know, people may be saying, oh, you don't see it all that much. Well, especially personal bankruptcies. I was listening to a bankruptcy lawyer and he said that there's always a delay and people tend to wait until like basically there's no other option. So people tend to really try and stay on top of it. And when they really start missing payment and there's no other option, that's when they usually seek legal advice. And on Friday, we saw how much macro is affecting the markets because we're seeing kind of this upside down world right now.

I know it's a bit of a play on Stranger Things, Netflix. But normally, I think, you know, you would agree with that. If you see good job numbers, markets tend to like that. But right now, we're seeing good job numbers and the market's actually going down because the logic is the more jobs means more people are employed, would then have money to spend, which is good for businesses. more people employed, would then have money to spend, which is good for businesses. If we were not living in this kind of environment, this would be good. But because we are, the Bank of Canada and the Fed see that as being even more inflationary. So essentially, they want to reduce job growth or even stall it or even negative territory to really show them that what they're doing on inflation is actually

working. And for context here, Friday, the US added 263,000 jobs, which is down 16% from August, but still strong. And Canada on the other end added 21,000 jobs, which actually reverted a three-month downward trend. So there was downward three months in a row, and this actually came in higher. Yeah, so it was actually negative for three months in a row, and then it came in actually positive. But keep in mind, there's still like- So it wasn't just a downward trend. There was actually net negative in absolute jobs.

Yeah, but at the end of the day, that didn't matter too much because there's so many vacancies right now. So even if there's less jobs created, if you have a higher number of the workforce leaving the job market, you're still stuck with, I think at last I checked was close to a million. It may be a bit down from that, but we're still seeing massive labor shortages in Canada and the U.S. as well. Interesting. Okay. Yeah, I'm sure. I started laughing when you said declaring bankruptcy, not because it's funny, but because I pictured Michael Scott in the office when he's like, how do I declare bankruptcy? I remember. He's like, I just say it? He's like, I declare bankruptcy. And they're like, no, that's not how it works, Michael.

So good. All right, let's talk about Constellation Brands, the owner of alcohol brands and most notably Corona Beer and Modelo. But everyone knows Corona Beer here in North America. So this is Constellation Brands, ticker STZ, not to be confused with Constellation Software, which is ticker CSU.TO, a software acquirer, very different businesses. All right. So let's look at their results here. Sales was up 12%. Operating income was up 21%. Earnings per share was up a nice 33%. So those are the headline numbers.

I do think that it was a pretty strong quarter and you've seen just amazing results from the beer segment. Corona and Modelo beer, extremely popular iconic brands, especially Corona here in North America. Do you see here in the document, we have graphed out just the beer segment on stratosphere.io. If you type in SDZ on the platform, which is their ticker. And you can see here, that looks like one of the nicest compounding bar charts you can find in the history of bar charts. And this is their beer segment. It's done nothing but go up on a long view. Now the stock has been a monster on a long view, but it's done basically nothing in the past five years ish. And I have some reasons for that, which I'm going to get into. But before we do that and dunk on their

terrible investment that they made, do you have any comments here on the actual results reported? Yeah, I mean, I think it's pretty much that has been beer really helping out their overall results because wine has been pretty much flat. I know it's not as big of a segment, but it is pretty flat here. Aside from that, I mean, their numbers may look bad in terms if you're looking at gaps, so generally accepted accounting, they may look really bad. But keep in mind that it was because of a big impairment, because you'll be talking about that. So that's one of the big reasons. So I would take that with a grain of salt. And I will say something, the current CEO was not the one who made the canopy

growth kind of, you know, acquisition or not acquisition, but the big bet on canopy growth. So he's pretty much dealing with what was left behind. So I'll just say that. Yeah. When did that transition happen? Do you know? Cause it was, it would have been between a couple of years ago now. Yeah. I think it was me. Let me have a look here. Yeah. 2019. That's right. 2019. Okay. So basically right after the deal, right after the deal closed, they're like, all right, here you go. Bill Newlands, Bill Newlands. They're like, all right, here you go. Here's the dumpster fire deal with it. Okay. So let's talk about that now. So, I mean, from a results perspective on the beer segment, it's been nothing but greatness. I mean, Corona has just

been, I mean, it's a historic rise really for the popularity of the brand and their sales. It's been unbelievable. And I can tell you with complete confidence that I contributed to that on Thanksgiving on Sunday with a six pack of Corona and some limes watching some football on the couch. So I was helping out, but it is recording of impairment after impairment since they bought Canopy Growth Corp, bought shares on a premium of the public market price, which at the time traded at quite the premium. So in August of 2018, Constellation Brands bought 38% of the company at $48.60 per share. Today, that is in Canadian dollars, those figures. Today, it trades at $3.50. So they basically incinerated $4 billion at the peak of cannabis stock mania. It basically has depleted all credibility in the C-suite there since. I mean, I know it's

different guy at the helm now. I don't follow what the rest of their C-suite does, but this business needs to convince investors that they're prudent to capital allocation. That is step number one for every business. It's like, convince me that you're good at spending money on growing the business or rewarding shareholders. Now, it's not me saying that I don't think cannabis and cannabis drinks can be a big part of their business. I think that it could. And I think that they're pretty smart to experiment with it. But the bet that they took with the amount of capital, given where the mania was, because it was mania, Simone, August 2018, all the way up until legalization in October 2018 2018. Like, you know, it's the cab driver test. You ask your cab driver

if he owns canopy growth corp stock and he's like, you know, all in on it. Right. And so they lost the credibility there. Now the fundamentals still look good. And the core business is doing damn good. You know, like I see Corona's all over the, they're everywhere. Like everyone's buying Corona beer, but the lime in it, it's great, right? It's like consistently going to be good. The beer snobs will disagree with me, but screw it. I like it. And the market seems to agree with me. This beer segment, I did not realize until I visually graphed it out how strong it has been. Yeah, yeah, yeah. Their beer segment, I think it's always been pretty much their strongest segment. And look, I mean, I think management, that's why they changed leadership was they lost trust in the CEO, right, with making that acquisition at the peak. And no, the good news is there's not much more impairment left because that's the good news, I guess. Well, it's true, right? If you're looking...

You can't impair down zero. Yeah, if you're looking at the stock right now, I mean, I think they sold off some assets recently too. I think they sold off Tokyo Smoke, if I remember correctly. Ah, yeah. Canopy. So they are selling off what's not... Is that the retail distribution play? Yeah, it's a retail distribution.

So keep that in mind. I know they also had warrants that are pretty much useless right now because it would value the stock of Canopy way, way higher than it currently is. And I think, you know, in hindsight, I'm just going on memory here, but I know Molson had a partnership with Exo for drinks. So I think they took the more conservative approach, right? They did a partnership and I know they have some of their drinks. I've tried a couple when they were available and I think that was a prudent way to go to not FOMO into that, but do a partnership with one of the major players. And Molson's stock is definitely not performing that well. I'm not saying buy Molson or anything like that. I'm just

saying I think they took the more prudent approach here. So you're telling me you did some boots on the ground research with the products. Exactly. That's it. Yeah. Hey, that is wise and something every investor should be actively partaking in. Yeah. So I guess nothing really adds more to add here. I didn't realize they were doing so good and And I didn't realize like, we hadn't revisited this in a while, like the actual numbers, because they bought 38% of the company with warrants, as you mentioned, to buy more at $48 and 60 a share when it was already elevated. So I think they paid like a premium of like $8 a share, like when this was announced. And so.

Yeah. Yeah. I mean, I don't know the exact number, but. How did they justify that? I just don't know. Yeah. But at the same time, if it's a business you're interested in, obviously do your research. But at this point, I mean, this is kind of an afterthought. Obviously, they still own the business, but they've been, I don't think there's much more

to impair at this point. I'm sure there might be a little bit, but most of it, you know, when you impair 1 point whatever billion, most of it in a quarter and the total of the company is worth 1.5 billion market cap. I don't think there's that much more left. show how much market share medello and corona beer have grabbed but i was told that overall beer sales from a macro perspective have not been going up and like seltzers have dominated you know the sexiness for alcohol investing and so i don't know if this is a corona and medello thing or beer is still growing like i i don't know i don't know that answer i think it's the first one i think i remember reading that there was a little bit of a shift where you know six seven eight years ago people were shifting over towards craft beers more and now potentially there's kind of maybe a reversal of the means i don't know i'm just kind of

speculating here but definitely you don't hear craft beers I find from a business standpoint. I'm not saying I'm sure there's a lot of people that still drink them, but they're not grabbing the headlines as much as they were even like three, four years ago. I just looked it up. Beer has in the US has steadily ticked up in sales year after year and expected to grow quite nicely all the way out to 2025. Oh, there you go. So forget what I said. It's just in the US though. So anyways. Yeah, we'll leave it there. I think that this is a good transition though. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online

broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb

in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. I tweeted last week as the news came out. So for those not

aware, Joe Biden essentially pardoned thousands of Americans for simple possession of cannabis on the federal level. And it's important to understand if you're looking to invest in marijuana and cannabis and your premise is that the U.S. market is a huge market. Well, there's kind of two ways to look at it, right? So a lot of states are legalizing it on the state level, but the federal level, it's still criminalized and it's at the same level as something like cocaine, for example. So you have to keep in mind that until the federal government, the U.S. legalizes it, it puts a lot of barriers in companies because they can't really get

financing from banks and things like that. So it's much more difficult to actually have that business and in a state by state basis. So once there's federal legalization, obviously it will open a lot of avenues for maybe some Canadian cannabis companies, we'll see. But it has to go through the House of Representatives and then the Senate and then obviously the seal approval from the president. So there's a lot of barriers still in place because typically Republicans are not, you know, I'm generalizing. I know some would be in favor, but they're not usually in favor. And Democrats, again, same thing would be a bit more in favor. So what will happen in the upcoming elections, the midterm, and even the future presidential

election would have a big impact on this. So when the news came out, it was hilarious. So all the Canadian cannabis stocks were up like 16, 17%. And I tweeted, I'm like, you know, I don't know why they're all up because a lot of these companies will probably not be alive when it is legalized in the US. And of course, the next day, Canopy Growth was down 25%. It's actually been down even more since. So I think I just want to mention this because it's really important to not FOMO when you see news because sometimes it has absolutely no impact.

Yes, it may be a step towards eventual legalization. But, you know, I'll say maybe it was going to be one of my bold prediction is that one of the major players in Canada that's publicly traded for cannabis will go bankrupt next year. I think that that's very, very possible as an outcome for sure. Either that or be bought like pennies on the dollars because they have no other option. Yeah. Wow. So today's episode has been about just sin stock after sin stock. Look at this. If you're new to the show, that's not typical, but we're going on to earnings next week. So we're going to have lots to talk about in the next coming weeks. You're going to want to be listening into the show over the next three weeks because, oh baby, look at the earnings calendar. So you and I know and the listeners

know that we focus on business fundamentals. The stock price in the short term may be divorced from the reality of the business. And as the great Ben Graham said, in the short run, the market is like a voting machine tallying up what's popular and unpopular. But in the long run, the market is like a weighing machine, which assesses the real substance of the business. So when we get into assessing real business results, when do we get to do that? When is the yardstick? When is the measuring stick? When does it come out? And that's when we get earnings reports. And so you're not going to want to miss Thursday over the next month and early November, because look, we have Apple on the 26th, Microsoft on the 24th, Google on the 24th, Amazon on the 26th, Tesla on the 18th, Visa and MasterCard, all the big US companies. We got the Canadian ones like Shopify on October 26th as well. And so we are fully slated for like so

many to talk about. Simone, I know that people really liked our live reactions on the podcast. We'll have to do one of those where it's like maybe on the 24th or 26th when these big tech name comes out and they report at the close. And you and I have to just kind of dissect the results live on the show. I think people really like that. So let's do that again. Yeah. Yeah, I think that's fun. Yeah, we'll see if our take matches what the market is thinking.

I think it will be extremely interesting to see what happens because if you start seeing some of the big companies reporting and they're kind of bearish on their guidance, I think there could be a lot of good opportunities for those who have a little bit of cash on the sidelines and want to, you know, add a bit more to our dollar cost average strategy. It'll be interesting because we're starting to get nuggets of companies like we talked about AMD, right, of things kind of slowing down. So it'll be interesting, very interesting what will happen at Q3 as a whole. I'm sure there's going to be companies are smashing earnings. in a Q3 as a whole. I'm sure there's going to be companies are smashing earnings. Some, you know, maybe okay, but it'll be interesting to see where the overall trend is going. Yep. Very fair. Let's round out with some actual results. Speaking of earnings from a Canadian

company here, one that I used to own, one actually made a good amount of money on it. I haven't owned it in years, but let's round out today's show with some Canadian earnings. Yeah. So MTI food group, Q3 2022. MTY. MTY, yeah. Sorry. MTY food group. Caffeine is wearing off. That's my excuse. So for those not familiar with MTY, they own a variety of restaurant brands. A lot of them you'll find in your like shopping mall food courts. They own brands. People may be familiar with like Bataan Rouge, Sushi Shop, Scores, Mike's, Mr. Subs. These are all brands. I mean, they own, I think they must own at least like 30 or 40 different brands. There's a ton. Yeah. Yeah. It's like the food court roll up location. Yeah. Yeah. The food

court roll up basically. Yeah, exactly. And they had a pretty good quarter, I would say. I mean, I think, again, same things that we're kind of seeing with a lot of companies right now. So revenues were up 14% for the quarter. Operating expenses were up 21%. So that's kind of that gap between the two, you want to at least kind of stay in line between operating expenses and revenues. I'm not sounding the alarm. I don't know this business overly well, but it's not a trend you want to see going for companies that you own. You want to see those expenses at least in line with revenue. Net income was down 8%. Free cash flow was slightly down for the quarter, but essentially flat for the first nine months of the year. So that's really good to see, especially thinking that last year they must have seen some headwinds with some of the restrictions or war.

They declared a dividend of 21 cents per share, which is in line with the previous two quarters. And they do tend to increase the dividend pretty much every year. I was looking at that as well. And they do tend to increase their dividend pretty much every year. I was looking at that as well. And one of the last highlights here is they acquired Barbecue Holdings for $207 million US, which incorporates even more brands under its portfolio. Barbecue Holdings has brands like Famous Dave's in the US, if people have been to that. So they're definitely continuing that roll-up strategy.

Overall, I mean, again, not knowing this company that well, I think it's a no cake order. But if it's something you own, or you're thinking, you'll definitely want to keep an eye on those expenses. When you look at the things they own. Some of these places are really awesome. Some of them are like, if you get it at the food court, you just know that the rest of your day might be highly questionable. Yeah. Oh yeah. You're like, oh no, I ate that. The rest of my day is a complete write off. Like there's just no, there's very little chance for me the rest of today, but some of them are really good so i i don't it seems like such a wide variety of quality but hey you know what they've done a really good job they've compounded the stock

immensely i don't know how it's done recently let me i think it's done pretty well when i was looking it fell so much yeah during the pandemic yeah but i think oh my god it fell off a cliff but it's actually and then yeah rebound yeah it's done pretty well since the lows of the pandemics so they people are like people are never going to be in the office or in a shopping mall ever again let's punish this stock yeah yeah i mean it's not been like it's gone it had a pretty good snap back and by the end of 2020 and that's been pretty much flat since so the stock had compounded like immensely well like from from post GFC all the way up, like looked like one of the best Canadian compounders you could find, you know, basically 10 X and it gave up like eight years of gains in like two trading days in March of 2020.

So, ouch. But hey, you know, it's actually shown some resiliency here. It's only 1.3 billion in market cap. So it's something that no one's looking at, like outside of TSX investors, like no one's looking at this thing. No, exactly. And I mean, I think it's a pretty decent dividend play. Like I said, they seem to have a pretty good track record of increasing that dividend. So yeah, if you're looking to, you know, a roll up slash franchise play, you know, that's an interesting play here. And the CEO, oh man, you're gonna have to say his name because he's French Canadian, and I'm gonna mess up his last name. But Eric is his first name. And he seems very competent. I have listened to him speak a couple times. And I even sent him an

email asking him a question when I was a shareholder and he answered me very thoughtfully to my email. And so I appreciated that. I appreciated that very much. It's, you know, it's the Mr. Suvlocky and the Thai Express rollout. So his name is Eric Lefebvre. Lefebvre? Yeah. So the B, you don't pronounce it basically.

It's a silent. Okay. Thanks so much for listening to the show today. We are on Mondays and Thursdays. If you're not new to the show, we'd appreciate a subscribe and a rating in your podcast player. It really helps us. So smash that five stars, and we will keep going. Yeah, and for those who have joined us and haven't listened to all our episodes,

so we fixed it a few weeks ago where you can actually go back and listen to the very first episode if you want to do so. So if you tried it- Please don't. Please don't. If you, you know, if you tried it,

I think it was early, actually about a month ago it was fixed. If you tried it this summer and you're like, oh, I can't see beyond 100 episodes or like that it's been fixed now so by all means you'll have it on your favorite podcast player how many episodes are we at now something 200 and a couple hundred 15 or something like that yeah holy smokes just 5 000 more to go pal just another couple a couple thousand 215 holy that's a lot of that's a lot of time in your year so yeah you've unlocked 212 212 so yeah before i know we were capped at 100 on the podcast players so if you wanted to binge the show and you're like oh no i'm capped out now's your

chance to binge all the show pump our numbers come on you can do it we believe in you no but all jokes aside if you want to leave us a review five stars smash that button subscribe on your podcast player really appreciate it if you haven't checked out join tci.com it is the patreon to support the show you get fun stuff like our little portfolio tracker and tracking our individual positions that we have. It's nice to support the show and then get some additional disclosures about the stocks that we own. And yeah, it's good stuff. That is at join TCI.com. We will see you in a few days. Bye. The Canadian investor podcast should not be taken as investment or financial advice.

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