The Canadian Investor - Building a 15 Stock Portfolio From Scratch

Episode Date: August 15, 2022

In this release of the Canadian Investor Podcast, we go over a 15 stocks portfolio built from scratch. Tickers of stock discussed: BAM-A.TO, BIPC.TO, BEPC.TO, GOOG, MSFT, CSU.TO, TOI.V, EQIX, SPGI, DEO, V, MA, COST, CNR.TO, CP.TO, ADSK, WM, GFL.TO, WCN.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast 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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Bélanger. The Canadian Investor Podcast. Today is August 10th, 2022. My name is Brayden Dennis, as always joined by Simon Bélanger. Simon, we have a sweet episode today. We are going to build a 15 stock portfolio from scratch that you and I put together over the past like 24, 48 hours of just names that we really want to own. This is going to be fun and I think useful.

We're going to go through a bunch of names and talk about why we'd want to own them in this portfolio and the reasons X, Y, and Z. We think that they're great businesses. Yeah, I think it'll be fun too. And we had a lot of good feedback when, remember when I did the dividend portfolio back last December that was yielding 4%. So I still have people asking about that and had someone recently asking what episode it was because they wanted to go back to it. So it tends to be a popular type of episode when we do these kinds of lists of portfolios. Totally. And going through this thought process of like starting from scratch, just kind of fun. So here we go. So you'll kick us off with number one. We'll go back and forth. Some of them we decided together, some of them we decided on our own. And so it's basically a, I would say,

30% portfolio is you and I put together, another 30% that you wanted, and then the rest mine. So of course, this being like 33.33% because it's about one third. So kick us off here with the first one. Yeah, yeah, exactly. And just before I kick us off, I would say like, I think even though 33% was you, 33% me, I think they're all quality businesses. I think we can agree on that. There's nothing junk about the businesses that we put in here. But without further ado. Well, you don't know that I snuck in FaceDrive as number nine.

Oh, okay, okay, I missed that. Okay, sounds good. So the first one on the list, I think this one was that 33% that we both agree on Brookfield. And I'm including here Brookfield Asset Management, Brookfield Infrastructure Partners, and Brookfield Renewable Partners. So this probably comes at no surprise for anyone who's been listening to the podcast for a while. I also think this one was in my 15 dividend portfolio, if I remember correctly. Fits both. Yeah. And the reason why I put all three names here is because you can take a few different approaches

here. I don't think you can go wrong personally. So you can choose BAM if you want exposure to the whole business, including their asset management. They also have within BAM Brookfield property partners that they bought out and now it's just part of BAM. It's not a standalone anymore. You can choose BIP, Brookfield Infrastructure Partners, if you want to focus on an infrastructure play or Brookfield Renewable Partners, BEP, if you want to focus on renewables. Whichever way you go, you're owning a really well-managed business. They all pay a growing dividend, and Brookfield is one of the best companies at identifying value

and selling assets when they believe they've extracted maximum value. I believe they call it as capital recycling, if I remember correctly, the term that they use. So they'll use those sales when they reach maximum value to create more value for shareholders by buying undervalued assets. In Bruce Flatt, we trust. I mean, look at the value creation Brookfield has had. Bruce Flatt joined the business in 1990, became CEO 12 years later. Good Canadian boy from Winnipeg. He wakes up every morning and goes, how can I make Braden and Simone more money? The guy is value creation on absolute steroids. Look, here are the facts. Brookfield's asset

management business, the AUM that they own continues to soar at an unprecedented rate. It's like an absolute growth stock at this point, even though they're managing infrastructure businesses. Currently around $725 billion in assets under management. One day we'll be talking about this podcast about them hitting the $1 trillion AUM mark. Fee-bearing capital is now almost $400 billion, which is up $ 59 billion year over year. Fundraising for their funds is extremely strong. They're going to create more value by spinning off the asset management business into its own listing. Give me that, no problem, unlock value there. They have a unique advantage of being the owner, operator, and investor of real assets,

whether it be real estate, infrastructure, renewable power, private equity. It's just a name I want to own for a really long time, and I do, and I will. Yeah, and I was looking just for fun today. I was looking at the year-to-date returns, and I didn't look at BAM, but BIP and BEP both way outperformed the S&P 500 this year. Yeah, both I think BEP fell quite a bit and has rebounded. It just got bid up too much during the renewable energy hype kind of cycle. But at the end of the day, the market is a weighing machine in the long term, not a voting machine. All right, next up is small micro cap company, Alphabet owner and operator of Google, YouTube, Google cloud platform, and a whole long other list of names here. I'm realizing here,

I'm saying it thinking that it was my selection here and your name's on it here. So take it away. I just assumed I was the Google guy at this point yeah i mean obviously this one i knew you would add anyways so i put it just slipped out preemptively and i knew you would have more comments than than i would but it's one name i'm definitely thinking of adding to my portfolio especially since i've sold pinterest just to have a bit more direct exposure to that ad play i think it's in my view, it's the best ad business out there. And I think you'll corroborate that. And honestly, forget Meta, Pinterest, Twitter, Snap, Roku, you can go down the list. Google has shown that it can be really resilient. And it's ad business doesn't seem to miss a beat, even when other businesses like we've seen

recently, the names I've mentioned, most of them have been struggling. And before I let you kind of expand on some numbers here, did I mention they own YouTube? I think we've mentioned it before. Look, Google search just keeps getting it done. Revenues grew 14% year over year, which I mean, is not going to create absolute life-changing wealth on those growth rates and the market cap that it's at. But look even at its size on a two-year compound annual growth rate basis. Google search, just the business of selling ads on their search platform, revenues grew 38% since the second quarter of 2020. On a two-year CAGR basis, YouTube ads grew revenue at 39% since the second quarter of 2020. On a two-year CAGR basis, YouTube ads grew revenue at 39% since the second quarter of 2020.

So on that two-year stack, it's unbelievable. Now you also have this other growth lever of Google Cloud Platform, aka GCP. They grew revenues at 36%, which is a slight deceleration. I mean, I wasn't even that impressed when you consider what Azure and AWS is performing, but I mean, still, they're the number three player here in the cloud hyperscalers and it's worth monitoring still. It does lose money, this segment, but I do think that they can flex some pricing power over the next five, 10 years on people like me. I am leveraging so much GCP power and their APIs completely for free. It's kind of insane. I don't know when they're going to knock on my door and go, dude, you can't just send off 10,000 API calls to our system a day and not pay us. So I'm just waiting

for that to happen. I think that they're under earning in this segment. Oh yeah. I'm sure they'll monetize it some way sooner or later. That's right. Next up is Microsoft. So two back to back tiny companies no one's heard of. Now, I love that you picked Microsoft one here and then just left the notes for me and took Google. Very smart, Simone. It's funny here because I own Google.

You don't own Google. You own Microsoft. I don't own Microsoft. But here we are. We're comfortable enough to talk about each one. Well, the reason I did that is I started working on the notes and then I wasn't finished. You went in and then you worked on the names that I haven't put any notes. That's right. Sure, sure. Okay, fine. Okay. So if you look, Microsoft is just a massive business with every foot in its, like, it has just

its tentacles in every segment of technology these days, whether it's operating systems, productivity tools, enterprise solutions, cloud, AI, machine learnings, video games, video game hardware, advertising, social media with LinkedIn. It has just become a gigantic business, both organically through the decades and through their latest acquisitions over the past five, 10 years. Look, it's really hard in this portfolio to go wrong with any of the big four tech names here of Google, Microsoft, Amazon, or Apple. I think that there's more questions around Facebook or meta moving forward, but Google, Microsoft, Amazon, and Apple are just so entrenched these days. Total revenue

for the fourth quarter 2022, so they have that weird fiscal, was $52 billion from Microsoft and an operating income of about $21 billion in operating profits, an operating margin of around 40%. At this scale, at these margin profile, and it's just become a utility for business. Then you have this Azure cloud hyperscaler business. It's posting year over year growth of 40% and maintaining that level. It is a strong contender against Amazon Web Services. They already can leverage those corporate relationships and strong integration that they have with these, you know, Fortune 2000 type large companies. They have that kind of distribution advantage already in there. It's just like hard not to talk about extremely high quality, durable business and not talk about Microsoft.

Yeah, I think those are all good points. And one of the most impressive things for Microsoft, in my view, is how they can really leverage their existing business consumer base into new products. And the one that really comes to mind recently, there's been other example in their past, but it's how they've been able to integrate Teams to their existing clients. Because my day job, I use Teams, you and I for the podcast, and Dan and Nick for our real estate podcast. We use Slack. Slack is great. I think Team is really good too. But I think a lot of organizations tend to gravitate around Teams because they already have the Microsoft Office Suite, and it's very easy to integrate with it, right?

But obviously, those are both great tools. I think there's good things and bad things about each one of them. And now the biggest question mark aside from the Office Suite, or I'm sorry, their business offerings, is the acquisition of Activision Blizzard. It looks like the market is still pricing it as most likely to happen, but I think there's been some regulatory scrutiny. We still don't know whether it'll be approved or not, but just by the price that the market is placing on it, it seems to be trading a bit higher than originally it was announced,

so the market must be thinking there's a good chance here that it will happen. But it'll be interesting if it does happen, how Microsoft will be able to leverage that. First with, I'm just thinking of their Game Pass subscription because that will make it even more compelling. And of course, a lot of people were speculating when the acquisition was announced that Microsoft was putting or

pushing towards the metaverse. Whatever that means, that's why, you know, it's still a bit ambiguous for a lot of people what it means, myself included. So I would just say meta's got some competition here. And of all companies, I think Microsoft can definitely afford a lot more than meta to make these kind of bets because the rest of their business is so solid. And Meta, I mean, we've seen them having lackluster results recently. And the fact that they're investing so much in the Metaverse, there's a lot of question mark. Like you said, I don't think we can go wrong with any of the four big tech that you mentioned, but there's a reason why Meta is not on here too. I think it's important. I touched on it and you touched on it here.

They're competitive distribution advantage. You want to integrate and you want to pivot your workloads to the cloud. Well, you already work with our enterprise sales team for doing that with Microsoft. Here, come on, come join the Azure platform. You don't need to go out for a competitive bid to Google Cloud or to Amazon. Come on, give us more market share. And that's just such a distinct advantage Microsoft has. 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

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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. Moving on to another tech company, but this time a Canadian listing. And actually I'm going to talk about two listings here, Constellation Software and Topicus. I'm talking about them the same because they're the same company. They're owned by the same people. Their ownership structure is heavily complicated, but they are two different listings. Topicus used to be an operating group of Constellation Software, but I'm going to talk about them here as one. Now, I need in this

portfolio to own the most unique serial acquirer on this planet, led by the most unique CEO on this planet, Mark Leonard. He is the most mysterious, brilliant writer, like this guy is Gandalf the Grey. Who knows anything about him other than the conference calls you get to hear for him for the consolation quarterly results? I mean, people don't even know where he's from. The only thing people know is that he was given $25 million to manage in Toronto from the Omer's fund, and he has turned it into about $45 billion in market cap. I was going to say, you know, I'm sure Elon Musk would probably have something to say about that,

about the most mysterious CEO. Like, I mean, he's out there, but... Well, he puts it all on the table, man. Yeah, but you still wonder what's going on in his head. So I feel there's some mystery there. So I was maybe, yeah, that's what I was thinking. Good old Elon when you were talking about that. Maybe the most weird guy goes to Elon. Yeah. But Mark Leonard, like there are two photos of him on the internet.

People don't even know where he was born. Like apparently he's like this six foot seven ex-rugby player from South Africa. Cannot even be confirmed. He just keeps very, very private. So year after year, Constellation continues to demonstrate the most prolific M&A, mergers and acquisitions machine, small niche software companies in the entire world. They have a unique advantage of geographical area advantage. Buying up companies in a unique position inside of Europe, for example, they'll buy some European company that serves a very specific language and a very specific business need in that

country. Say there's some German regulation that companies need to comply to, and there is this German software company that specializes just for that region, just for that language, and just for this exact regulation in that country. Who's going after those deals? Not big roll-ups. It's not going to move the needle for them. So what they have done is created this extremely decentralized acquisition machine, and they own 800-ish companies. Soon they're going to own over 1,000 software companies. If you look at capital deployed year by year, just five years ago, it was 173 million. In the trailing 12 months, they have almost deployed $2 billion. So the concerns about rolling up companies fast enough to justify the market cap, those concerns just don't exist in my mind today anymore.

This is probably the best Toronto Stock Exchange stock ever. And I don't see any reason for not wanting to own it in the future as well. Yeah, no, I mean, one of these days, I'll start a position. And before I go on to the next name, as always, of course, this is not investment advice. If you're interested in any of these companies, make sure you do your own research on them. But these are some names that we do like. Now, the next name here, Equinix. So Equinix, we've talked about them at length here. I know you did, I think, a deep dive at some point too.

And this is a great play if you want a data center REIT. So REIT is a real estate investment trust. Are you a data or data guy? How do you say it? Data, I would think. Yeah. You're data? Okay.

Yeah. Because I heard data. I'm like, dude, some people are data people. Some people are data people some people are data yeah i mean i don't even notice i'll be honest that's why i guess i didn't notice either yeah and you have here a company that has of course significant tailwinds and is the market leader in a growing space and they're growing at a nice clip here and did i also mention they pay a dividend so dividend lovers here they do pay a dividend is growing at a very clip here. And did I also mention they pay a dividend? So dividend lovers here,

they do pay a dividend is growing at a very good clip. I think on memory, it's around 10% per year, and it currently yields about 1.8%. So it's very, you know, it's not nothing. It's not a huge yield, but you can really expect for it to keep growing over time as well and growing its business too. We released episode 175 on Sunday, June 5th called The Perfect Dividend Stock, where I did a deep dive into Equinix. Look, Equinix just reported their 78th consecutive quarter of revenue growth. This is the longest streak of any S&P company that exists today. the longest streak of any S&P company that exists today. Their network effects and co-location and interconnection is highly, highly underrated. You don't think of network effects when you think of physical infrastructure like data centers. And this is network effects on steroids, a wonderful business, one I'm hoping to own within the next 30 to 60 days and one that you own quite it's one of your

biggest positions right yeah I think it's my top five or six I would say yeah I think top five yeah okay there you go another really high quality name large cap company why buy the S&P 500 index when you can buy S&P global the company that administers the index. No, owning the S&P 500 is a great idea. So all jokes aside, S&P Global, the company ticker SPGI, is one of two premier credit rating firms. There is S&P Global and Moody's Corp. I think either one is a great choice here. I own both. I treat them like a Visa MasterCard situation. I own both of them equal weighted, although I think I lean more and more into S&P Global with fresh capital here. And that's why I gave it the spot here. They have such an advantage with their index business, the data analytics software businesses. They make tons of money off ESG, and they're going to make more off ESG in the future. They pay a growing dividend, and they just announced two plans to accelerate their buyback

right now. They already buy back lots of stock. their buyback right now. They already buy back lots of stock. I expect the share count to be deleted over the next five or so years. Unbelievable margins and they keep expanding over time. If you look on a free cash flow per share, which is I think the holy grail metric of compounding, they have compounded at about 15% historically on a very long view s&p global is a fantastic business and a very wide moat especially on the credit rating agency business that they basically run a duopoly ish with moody's yeah i mean i i don't have too much ad here i obviously i know the business but i don't know it as well as you do. It's an intriguing name. You know, I think they should be doing well, you know, going forward. Just like you said,

I think those are all good points. I don't have too much to add here. Now, the next name, I don't think we've talked about this one on the podcast before. I had to look it up. Like, I'm gonna be honest, but that's good. Keep it fresh. Keep it fresh. So this one is called Diageo. I think, you know, hopefully I'm pronouncing it correctly. It's ticker is D-E-O. It's listed in the U.S., although it's an ADR in the U.S. and then it's listed in London, the U.K. Diageo owns well-known premium alcohol brands like Johnny Walker, Tanqueray, Smirnoff, Guinness, and Bailey's. They own more than 200 brands that are sold around the world. This is a slow growing company. It won't blow you out of the water, but it has a good balance sheet and they pay a 2% dividend that has been growing over

the years. They are listed, like I said, in the US, but they do report in British pounds. So you'll see some currency fluctuations here in the numbers. The reason I wanted to include this is because of the stability. This is the kind of company that really did not miss much of a beat during the pandemic. Revenues were slightly down, but not much. I also think it's a company that will be doing well even if we enter a recession because, you know, let's just admit it when things aren't going quite well for the economy, most people need an escape. And I think they should do well. The other company I kind of considered because I was looking for more of an alcohol related

business here was consolation brands, consolation brands, I do like most of their business, but the stake they have in Canopy Grote is still a bit of a stain on them. And the price they paid, granted, the CEO is no longer there that made that acquisition. If they had not done that, or at least if they had paid a much reasonable price, I may have used that one. For those of you not aware, Cons aware consolation brands owns a variety of brands including corona i don't know this name particularly well but i know those brands some of them i know really well if you know what i mean okay i personally if i was to go this route

i would personally pick lmvh and by this route you mean lvmh lvmh and by this route, you mean- Sorry, sorry. LVMH. LVMH. And by this route, you're thinking luxury market, right? Luxury market alcohol is just, has forever staying power for some reason. Not to mention everything else they own is a giant conglomerate of a bunch of premium brands. And, you know, recession or not, you would think premium brands would get hammered in tough economic times. Nope, because very wealthy people seem to not be affected by these things as much. It's not a fun thing to talk about, but it is the reality. And so I probably would pick LVMH only because I know it better. That is Louis Vuitton, Moet Hennessy.

Okay, we have another one here. I just realized that you're recording. Are you in your basement? No, no, no, no. I'm still in the daylight. I'm not in a dungeon yet. Is that just a new shelf? Yeah, it's just a new shelf. Yeah. Oh. Yeah. Yeah. It's just a new shelf. Yeah. I was like, damn, dude, your basement's nice.

Yeah, no, no. It's not nice. Trust me. It looks like crap. Oh, okay. so you're gonna be down there soon yeah i'll be done you're gonna be down there soon for the baby yeah i'll have to figure something out for the echo because it's a little bit echoey but you know dude blankets yeah that's what i'm gonna try yeah build a damn fort no well because simone's gonna be recording in the dungeon of his house as soon as the baby's born just to avoid some noise. Oh, you're going to have some fun, buddy. Yeah. What's up next here?

Yeah, what's up next is two companies that you're in love with that I also like, Visa and MasterCard. Obviously, Visa and MasterCard, they dominate the payment rails in our everyday lives. I don't think you can go wrong with either owning both, but I also think there's a case of just owning one and then getting the exposure there. Very similar business. Obviously like they tend to, I think their returns are very, very similar over the long periods of time. Right. And their quarterly earnings will be like MasterCard reported 13.8% growth and MasterCard like 13.9% growth. Like they are identical businesses for the most part,

like for generalizations purposes. Yeah, exactly. And look, I remain really bullish on crypto. Obviously, crypto is in a bear market, a pretty significant bear market right now. And if there's really something that can dethrone these two companies, it will be crypto. Although I will say that mastercard has invested a decent amount recently i think visa as well but mastercard has been a bit more kind of ambitious towards their crypto they've been leaning on mastercard and visa for distribution especially with card network and stuff yeah exactly but i'm also here very pragmatic and i want exposure to these payment rails in case I'm wrong about

crypto because if I am clearly Visa and MasterCard will be the balance in act here so that's why I think you know even if you're a crypto believer like me or Bitcoin you know you can still own Visa and MasterCard as a bit of a hedge against you potentially not being right in the long term, because I'm humble enough to know that, you know, I can be wrong. And, you know, I'm not cocky enough to or overconfident enough to think I'm dumb enough. Yeah, exactly. To think that, you know, there is no thesis that could potentially, you know, not pan out for the crypto world. I agree. It is the kind of event that takes them out is like one of these decentralized protocols

like Bitcoin. I wholeheartedly agree. However, like you said, if it doesn't, you gotta own a piece of these companies, dude. Like almost like 75, 80% EBITDA margins. They consistently grow. There's still a giant appetite for digital payments everywhere around the world, especially like in third world countries and developing nations that are just finally picking this up, moving from a cash-based society to a digital payment society. And everyone at Visa and MasterCard could just take the day off and nothing would matter. It's just such a good business. The network just runs.

It is wonderful. And the margins just print money. Now, looking at the current situation, cross-border volumes are back in a big way. That helps. Great inflation-resistant business. You know, if everyone raises their prices 10%, Visa and MasterCard is collecting more on that increased prices. In the past 12 months, over $14 trillion in volume and $187 billion transactions were processed on the Visa network. Volume doubled since 2016. And when I think like, maybe I'm getting old where like every, like that seems like so recent, but 2016 is not that long ago, man. Volumes have exactly clean doubled since then. And so to think that, oh, this is a slow growing business is just not true. And its appetite for more growth moving forward, I think, is still strong.

If you go around the world, a lot of the world still needs this type of digital infrastructure. What you may take for granted here in North America just may not exist in a lot of parts of the world. So there's still really strong international growth opportunities for them. And with cross-border coming back, they make so much money off that. Yeah, I mean, 2016 is a while back. Weren't you in high school back then?

I was in diapers. I was in diapers. Well, I'll let you go for the next name because obviously I'll have to- I love that. I love that quick shot on my age. First of all, no know i'm 14 yeah sounds like he's 40 but he's yeah yeah look i look 40 are you saying i look how does the lighting here on the zoom obviously don't look 40 no i know i'm just kidding but

dude these pot lights are just so aggressive i look like they are strong I look like I'm an angel. There's like a halo above me. Let's talk about Costco. Costco is, in my opinion, the best brick and mortar retailer on the planet. This is number coming in at number nine on our list. There's no order to this whatsoever, by the way. Probably just an equal weight portfolio, but names that Simone and I really want to own. if we have a long time horizon and we're not tinkering in and out of stuff. I think Costco's bargaining power and network effect coming from its membership model is truly the best. Today, Costco has 117 million global members across 829 warehouses. The company's expanding in South America, Europe,

Asia, where Costco today just doesn't exist. In China, I think they have now their second warehouse open. People are waiting for days to get their membership, camping outside there like it's some big hype event. People can't get enough of it. Costco does not grow like a traditional retailer and especially not like a traditional grocery store. It grows like a nice, well-established tech company at double-digit rates on both revenue and net profits. In Q3 2022, their fiscal, they grew 16% and 11% on revenue and net profit. They have a unique advantage of negotiating and pricing power with suppliers. They're able to just move so much volume and optimize for really, really low gross margins on what they sell for their customers,

and then make a lot of their money and margin in the membership model. This network effect and feedback loop is truly one of the best flywheels of all businesses I can think of. It goes like this. More members, lower prices, more members. More members is lower prices, more members. So the lower prices bring in more members. The more members they have, the more negotiating and pricing power that they have on their suppliers because they're just moving so much more in bulk. It's just a tremendous flywheel and you don't see it very often with retailers. Yeah. And I'm surprised you didn't mention the fact, and that's why I wanted to add here is how they retain such a good portion of their membership base. So for those

who are not aware, typically Costco will be right around a 90% renewal rate. And even when they have a membership fee increase, that renewal rate actually stays at 90% which really shows how valued it is for their members and it's something to really keep an eye on because that's the most important metric in my view for Costco is how many new members are getting but the percentage of member they retain because their margins are very low like there's no question about it they have low margins but those membership this is what they make their money on this is what they make their profits on so when you look at Costco that's really that metric you want to be looking at in my view and the last thing here is I love Costco but the only thing I think that is a knock on them is they tend

to trade at a pretty high premium. And oftentimes, it gets a little high in my view. I mean, you'll never get it on the cheap. So that's something to keep in mind. But I think finding a good entry point is always a bit tricky with Costco. Totally. And in the last 12 months, I have not found any good entry points for the name, honestly. It's so expensive. It trades at historic highs. But I think the market finally has understood that they can just build more warehouses and keep pulling very easy growth levers that they can project, you know, low double digit

rates for quite a long time. And if you model that out, you can come up with an intrinsic value that makes sense. Because you can't model many companies like Costco, where you're able to project that growth rate persisting for that long into the future. Not many analysts are comfortable doing that. But with Costco, it's like, okay, they just need to open 12 to 14 new warehouses a year, which they've already been doing. And there's a lot of footprint that they are not in. And so I think that it's just fairly easy for people to understand the growth levers that they can keep pulling. Yeah. And probably if I were to swap Costco with another retail name, I would probably go for Amazon here.

I don't know about you. Amazon, you mean Amazon Web Services, the company? Just Amazon. No, I'm just making the joke because no one cares about the retail business anymore. I know, I know. But I would probably go with Amazon if I had to pick an alternative here. 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.

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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. Now the next one, I'm going to give two names again because it'll be pretty straightforward. So Canadian National Rail or Canadian Pacific. This is another one here. I don't think you can go wrong with either one, although for me it's pretty simple. Either you own both or you ask yourself a very simple question. Do I want the company with the better growth potential or do I want the company that will be returning more money to shareholders? If you want more growth, then CP is probably the one for you with the acquisition of Kansas City Southern, which by the way, still hasn't been approved by regulators. However, I'm going to have gray hair by the time that

I know, but you're going to be on your fourth kid. Yeah, well, I know. I don't think we're getting to fourth. Yeah, good thing I caught that. But I've been keeping an eye on it, and there's been some information that's starting to trickle out saying that the Surface Transportation Board, also known as the STB in the U.S., seems to not have any major reservations against it. They'll have, I think, a preliminary report at the end of September. So we'll have more information then. I think the idea was to have the whole acquisition approved by regulators by the end of the year, but obviously that could take longer. This is not a small acquisition and the U.S. has typically been very, I should say, intense when it comes to the merger of railroads. Now, the other case here, obviously, is Canadian National Rail. So Canadian National

Rail has a really impressive network and CP will have one as impressive, if not even potentially more, once they close that acquisition, assuming that it gets approved. But Canadian National Rail's network is quite nice. So it goes east to west in Canada and then all the way to the Gulf once they close that acquisition assuming that gets approved but canadian national rails network is quite nice so it goes east to west in canada and then all the way to the gulf of mexico in the u.s now they're obviously not expanding like cp is but since their new ceo tracy robinson became ceo in early 2022 i think it was late January, if I remember correctly. They've really been aggressively returning capital to shareholders via share buybacks and increasing dividends. And I'm a shareholder. I'm happy to see that because Hubert was the previous CEO. I think

he just it was not a good decision to try and make a bid for Kansas City Southern. And really, I think the best avenue here is just improving their operations, growing slowly, returning money to shareholders like they're doing. And keep in mind, if you're looking for a dividend, Canadian National Rail also pays double the dividend that CP does. It's really depending whether you're looking more for growth or more returning of capital to shareholder total returns, which one will do the best in the long term. It may very well end up being a wash. That's very possible. But these are kind of the biggest to me. Those are the two questions. What are you looking for in your real company? When I look at these,

I have a couple names that I pair as one position. I equal weight them. So say I wanted like three to 5% of my portfolio on one of the rails, I'll just go like two and a half, two and a half. And I don't have to be right on both of them. And I think over time, the winner will concentrate itself more and weight it accordingly.

You know what I mean? Like I will let the winner run and command more market share in my portfolio over time and start them as equal weighting. I do that with Visa and MasterCard. I do that with S&P Global and Moody's Corp. I was going to say I do it with Constellation and Topicus, but that's not true. I guess just those names, but I don't see anything wrong with doing that here. And I also don't see anything wrong with owning one of them individually. And the reason I don't see, like, I don't have a big concern with this. And I just kind of say, oh, it's a wash. It's because we're dealing with really high, durable, extremely wide moat businesses

here. We're not talking about some junk co that could, you know, could be great, could be amazing. It's like, there's huge disparity in the results coming out. It's just not true with these companies. Freight volumes are at record highs today for these companies, both of them, which I find very interesting. Now, this is infrastructure that has sat in the ground for a really long time, and it will continue to. It is the ultimate Lindy effect. So the Lindy effect is a theorized phenomenon by which the future life expectancy of some technology or idea is proportional to their current age.

Now, this doesn't exist for all types of technology, but I certainly think it exists for real. And so basically you have like X axis and Y axis. X axis is its life and y-axis is like its expectancy to continue to exist in the future. And rail is high and to the right on that graph, meaning it has a very long existing life of technology, like railroads are not new technology, and its life expectancy for humans to keep using it is also very high. So it sits at the top right of a Lindy effect chart. And that's why it's like just really hard not to own some of these names, even though I don't. No, well put. And I think, you know, people probably notice a pattern.

I knew we'd have a lot of tech names. So I tried to pick businesses that were a bit more kind of maybe. We have a great mix here. Yeah, exactly. I think that was the goal to have a mix of, you know, companies that will probably, you know, if over the long term compound well, it's growing a bit slower companies, but we'll have a lot less volatility. And I think to me, that's real important because for a lot of people that will help the fluctuation in their portfolio and make sure they don't do any rash decisions when there's a lot of volatility. And it's very balanced from a couple of perspectives. Like we're not trying to

optimize this portfolio for dividends or anything, but like a good chunk of these companies are dividend payers. Like only a few aren't right yeah exactly you know you're not going to get a yield like you would from a canadian bank but some of them are yielding you know two two and a half percent so spoiler alert no canadian banks no yes spoiler not that there's anything wrong with them i mean look there are so many great companies this is just simone and i trying to put together one that we want to own for a really long time. Speaking of the Lindy effect in technology, Autodesk is the Lindy effect, which is really long existing life for AutoCAD and a very long life expectancy

up to the top right for Autodesk's products. For those who are not familiar with legendary software like AutoCAD or Revit, two of their flagship products that have been serving architects for literally decades. Since computers were built, AutoCAD has been making cash. The business has a very deep moat serving the AEC market, which is architecture, engineering, and construction. There's also a really fast growing opportunity for virtual environments, digital twins in manufacturing, media, and entertainment. That's one of the reasons why I like investing in the gaming engine as well, whether it be the Unreal Engine, which you can

get exposure to through Tencent, or the second player there, Unity, which you can buy Unity stock. I like investing in these digital environments because I think that they're going to be extremely important for the future, and the picks and shovels in the alleged metaverse. Now, skilled professionals like engineers often learn AutoCAD software or Autodesk products in post-secondary education, which is a huge advantage. Like if you go to engineering school and you're learning AutoCAD because the market all serves, like, you know, if you want a job, you're going to need to know AutoCAD, right? And so they just have that really deep entrenched moat with the professional community and the education as well.

So this keeps Autodesk's churn at such low amounts, like they have net ads, like each customer is actually creating more revenue each year than churning. The transition to SaaS over the past five years created some short-term pains, but now that that is complete, the growth and the margin profile is so excellent. It is very rare, Simone, that you have a software stock that has been public since the mid-90s and has gone up 2,700% since IPO. There's only a few names in this very distinct category of software stocks that haven't gone to zero or survived the crash of the dot-com bust

or just became irrelevant, didn't innovate fast enough. When selecting businesses for your portfolio, I'm looking for these consistent growers and compounders, but we're also so keen on its durability. Look at the names we're talking about here. The Rails, Costco, Visa MasterCard, S&P Global, Microsoft, Google, Brookfield. These names are very, very durable. Now, in capitalism, capitalism is ruthless, so nothing lasts forever. You can't just set it and forget it and leave it for 100 years and expect that everything worked out. But I do not at this point see Autodesk

products losing their competitive advantage anytime soon. Now, that can change, of course. But right now, they are just so deeply entrenched into engineering, architecture and construction. Yeah, yeah. I mean, I know them mostly I've known him since I was a kid because my dad was a technologist in architecture. So he, I remember they had these like special mouse for AutoCAD, where you had like a graphic of basically a printed sheet, and then you'd bring the mouse that had a little kind of like target pointer on it, and then click on the model you wanted to use, and then it would kind of plug to the computer. So way different than nowadays. But

I remember my dad went back to school because he learned doing plans by hand so he went to college around here and actually learned to use autocad there so definitely you know i corroborate what you just said so it's clearly still happening today it still is happening today now moving on to our last name our last names because they all fall into the same category here i I know you love garbage, Brayden, so I made sure I would... Give me the garbage. The garbage. I don't think you can go wrong here with the three. There's three big names that come to mind.

So there's Waste Management, Waste Connections, that's Canadian, or Dual Listed, and GFL, that's also Dual Listed and Canadian, I believe. Yeah, that's true. Both Waste Connections and GFL are Canadian companies that are dual listed in both, I believe. Yeah, that's true. Both Waste Connections and GFL are Canadian companies that are dual listed in both the US and Canada. Yeah. And Waste Management, obviously the bigger player here listed in the US. So this honestly is another case where I think you're really looking at three solid companies. I think you can just probably pick one or you can't really go wrong with just you know almost equal

weighting all three you're gonna get slightly different growth here waste management is clearly the biggest player and its revenues are higher than both waste connection and gfl combined so keep that in mind you're thinking about different scales here it's still a pretty fragmented space and there should be some growth ahead for all these companies a company like waste management will clearly grow at a much slower pace but they also return more capital to shareholder than the other businesses they have a higher dividend so this again another type of business that will not miss a beat regardless of the economic cycles that's one thing that municipalities will not cut

is waste collection. So this is something you can own and just sleep well at night. That's why I think it just complements some of the names that we have here. I think all the names are great, but clearly, you know, a name like, for example, the one you just did, Autodesk, there's going to be a lot more volatility than a company like these waste management companies. Death, taxes, and humans creating a ton of trash. Surest things in life. Death, taxes, and garbage. Dude, these businesses are just unbelievable because of how fragmented it is.

There's still so much opportunity for M&A. Now, I think waste management doesn't have its foot on the gas like waste connections and GFL is in terms of being acquisitive of this fragmented space. So if I had to own one, no Canadian bias aside, I would own either waste connections or GFL. Dude, look how well Waste Connections has compounded over the past 10 years. Let me look it up. It is absolutely bonkers. Their stock is up. Let me just grab a random point here. Their stock's up about 800% since 2010. And you've got a growing div over the time. They've grown this thing into a $36 billion market cap company. GFL, on the other hand, what's the market cap? I'm on stratosphere.io here, of course, the best way to find financial

data. GFL is $12 billion in market cap. And so obviously the smaller player, it is a much more leveraged bet. Like Patrick DeVigi, the CEO, he started this thing out of bringing together a bunch of local trash collection companies after having a cup of coffee in the NHL. He actually got drafted to the Oilers, I think in the first round, or maybe first pick in the second round. Yeah. And well, I'm just looking at that. He's a goalie. Goalies are all sickos. This guy, you don't want to compete with this guy, man. That and pitchers, right? And baseball. Yeah, exactly. all sickos this guy you don't you don't want to compete with this guy man that in pitchers right in baseball yeah exactly yeah and looking at the returns actually waste connection waste management they're almost in lockstep almost like at least the past five years almost in complete lockstep

probably you know if you factor in the dividend i would think probably waste management a little better but again i don't think you can go wrong the one thing with gfl especially in a rising rate environment i don't know how their debt is structured when it's coming due and all that that's definitely something for anyone looking to invest in that one specifically i'd make sure i know exactly how the debt is structured because that could be a big risk for them especially if they lose some contracts because, you know, municipalities will need to do some requests for a proposal and go out tendering sooner or later. So yes, you know, you want to think they'll win it, but that's just something

definitely a bit riskier out of the three. If you want something more stable, definitely waste connection, waste management was probably the safer bet bet but gfl may outperform if they do everything well it has the widest range of outcomes oh yeah without a doubt it's the one i own again luckily you are still talking about very predictable cash flows i mean it's a it's a garbage collection business. It's basically utility. But no, I think that they're all good names to own. And Waste Management puts on quite the golf tournament in Arizona every year. So props to that.

I should go to the Waste Management Open and be like, I own one share, dude. Come on, let me in. I own your competitor in Canada. Dude, the Waste Management Open is the biggest rowdy party I've ever seen. They have these bleacher grandstands around all. I'm going to mess this up. I think it's the 17th hole.

It's the par three there. And just like tens of thousands of degenerate golfers wait to get a good spot there and they sit out there from like 3 or 4 a.m drinking beers that early in the morning and you could just imagine how rowdy it gets when people are drinking literally from 4 in the morning until the late afternoon it is absolutely insane yeah and then 6 p.m everyone's asleep asleep. Yeah. They're all toast. Yeah, especially because it's so hot there. Yeah, exactly. I mean, it's because I'm, you know, late 30s now. But my God, like if I start drinking that early, like I hit a wall around like dinner time for sure.

Oh, yeah. In the sun all day. Oh, yeah. Four o'clock, like 4 a.m. Oh, God. Yeah. That is brutal. I hope everyone enjoyed our episode here of course there are other names here there's many other honorable mentions there

are tons of names that we personally own and are not on here for one reason or another maybe just we don't want to go through 30 stocks you know exactly, that we each uniquely hold. So if you want to see those in order, you just go on join tci.com and you can see both our portfolios and spreadsheets right there. There's screenshots of it. Simone, I think we're going to add some templates and stuff so you can track your portfolio the same way we do as well. Just to, I mean, like your brokerages are really bad at telling you how you're doing. Oh yeah. One of my positions. Like it should be so easy one of my positions in quest trade like my average cost i bought it before i switched over

no after i switched over to quest rates i bought it with quest rate and i know the price i bought it from and it's all out of whack like i i don't understand like it doesn't give me the correct price i think at some point they i really don't know i don't even think they did a stock split it's just weird they don't have the right price there so yeah it's kind of it's good if you transfer brokerages it is not smooth no it's not smooth but even this one was after i transferred and it's still not showing correctly oh Oh yeah. The ones where I transferred like that, I understand like it's rarely going to give you the right cost basis, but yeah, all that to say the template is very useful. Got it. Yeah. No, the template is going to be very useful. I wish someone handed it to me when I started. So we'll get that on join TCI.com.

We'll get that on there for September 1st. So if you subscribe now, holding myself to it September 1st, we'll have that uploaded for new people joining at join tci.com. That is the Patreon to support the show. Now, as well, use code TCI for 15% off stratosphere.io personal membership there. I like I literally all the stuff off this podcast, every single piece of information for this podcast that I just rifled off is from myself, my analysts, and the data over on stratosphere.io. Hey, Simon, you can see the screenshots. Oh, yeah. I'm not BSing you. It is literally right from stratosphere.io. It's because it's a one-stop shop. I'm not kidding when I say I use it for my

own research, like 30 times a day for searching stuff up. And of course, I'm biased because it's my company, but it's become such a useful tool. So check that out, stratosphere.io. If you want to subscribe to get this premium research, take 15% off with code TCI. We'll see you in a few days, guys. 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.