The Canadian Investor - Canadian Housing & Tech Implosion

Episode Date: May 23, 2022

In this release of the Canadian Investor Podcast, we cover the following topics: Recent Canadian housing stats and looking how rising interest rates impact a mortgage monthly payment Pullback for multiples of SaaS companies A look at Bitcoin past bear markets A dive into Thermo Fisher Scientific Tickers of stocks discussed: TMO, INTU, NOW, ADSK, CRWD, TTD, ZI, HUBS, LSPD.TO, SHOP.TO, ASAN, SNOW, S 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 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. Check out the Yes We are Open Podcast from sponsor MonerisSee 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. Live from the great white north, 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 Belanger. The Canadian Investor Podcast. It is May 18th, 2022.

My name is Brayden Dennis, as always joined by Simon Belanger. Before we get started today, just a reminder, if you are not following or subscribing to the podcast on your current podcast player, one, you might miss a few episodes, but it really helps us. So if you just go and make sure you're pressing that follow button on Spotify or the subscribe button on Apple Podcasts or whatever player you're using, we really, really appreciate that. Simone, we've got a fun episode today. You're going to talk about real estate. I'm going to talk about SaaS and much more.

I've got a deep dive on Thermo Fisher later as well, so it should be a fun one. How are you doing, buddy? Yeah, I'm doing well. I'm excited. I've got softball later tonight. The summer season is starting, so I'm pretty excited. Question for you. for you are you still drinking like six cups of coffee a day no no so i reduced that to about one and a half two wow okay i don't mind sharing it with people so i had like a bit of a scare earlier this year where i had some irregular heartbeats which ended up being because of a lot of stuff going on anxiety the lockdowns and all

that and then that was just a a bit of an eye-opener to reduce my caffeine intake it's it's going much better now but i know wanted to mention something because i know a lot of people can can relate to that so i i've reduced it by quite a bit my cap now is two coffees a day two coffees a day okay because the reason i know that you significantly cut back on your coffee intake for those reasons like i've known that but i like sipping on a coffee when we record these podcasts so now i just crush decaf when i just want a coffee and i don't need like i don't need four cups a day although i do think that black coffee you know one or two a day is actually good for you but yeah you can't be doing this yeah my trick is actually i do one

shot of espresso with hot water so an americano and there's about a quarter of the caffeine of a regular coffee and it still gives you that coffee taste that's my trick oh there you go of a regular coffee and it still gives you that coffee taste that's my trick oh there you go okay before we kick it off today join tci.com is our patreon page you can see our personal monthly portfolio updates and you get a shout out for subscribing so we got a long list here because we just launched it naturally jay trish phuong britney rachel justin david kyle johnny adam Rachel, Justin, David, Kyle, Johnny, Adam, Tyson, Sean, Stephen, Barry, Joe, Travis, and Greg. Thank you very much for supporting the show. You can do that at join TCI.com. All right, Timon, kick us off with a update on Canadian real estate. I know we talk 95% of the time about stocks, but of course, people want to know about real estate too.

And we're seeing some things getting shake up in the real estate market here in Canada. Yeah so there's been some recent interesting data coming out of the Canadian Real Estate Association so the acronym here is CREA. I'll be talking about them quite a bit because they're the ones usually coming out with this data. We normally talk about this during our news and earnings release, but the data came out on the same day that we recorded, so we didn't have time to adjust our notes. I just decided to do a segment here, but a little more thorough than just the news and notes. Here are some of the highlights that came out. Volume of home sales dropped by 12.6% compared to April of this year. Overall activity levels dropped 25.7% compared to the peak periods reached in 2021.

The number of new listed properties was down 2.2% versus April last month. The average home price went down 6% to $740,000 compared again to last month. In the CREA release, the senior economist noted that interest rates on fixed mortgages essentially went up 1% in the span of a month. It may not sound like much, but here's a quick breakdown of what impact it can have on your monthly payment. A lot of people may hear 1% and just think, oh, why would 1% make such a big difference in housing? Well, in a lot of scenarios,

people were looking at a rate for five years fixed around 3%, and now they're looking at 4%. And I wanted to show the difference between that 1% gap, that 100 basis point increase month over month and what it does. The first scenario here is someone looking to purchase a home for $500,000. They put a down payment of 10% or $50,000. There is CHMC mortgage insurance that is included here in the calculation in the numbers I'll give. It's amortized over 25 years and then five years fixed rate. So the 3% mortgage rate equals a monthly payment of $2,195. The 4% mortgage rate monthly payment is $2,440. So we're seeing an

increase here of about $250 in increased payments. It's quite a bit of money when you think that it's essentially just your disposable income that goes towards that. So that's something to keep in mind. Before I go to the second scenario here, any comments, Brayden? When you said volume of home sales dropped 12.6%, yeah, that's the number I've seen get thrown around as well. I haven't read the report. Does that include, is that just all sales? Does that include like condos and stuff as well? Yeah, I believe their data includes everything. Yeah. Okay. Wow. That's, I mean, that's a lot, but it's off a pretty high base, right? And so, yeah, I mean, I'm not surprised, right? Especially in these scenarios, you're going to go through another scenario

with a higher purchase price here. I saw just anecdotally myself, people going way, way in the upper range of their budget. And when they were actually closing on something and they're in a bidding war, all of a sudden they're like 250k above their budget like at a minimum here in the gta and that's that concerned me quite a bit as just someone watching from afar and not like not in the weeds on that and and so i'm just kind of

not surprised that this is i think it's going to make a pretty big impact like from a macro perspective in the country as well yeah no i i totally agree and i think it's going to make a pretty big impact, like from a macro perspective in the country as well. Yeah, no, I totally agree. And I think it's important to understand too, a lot of times people are looking to buy a home, they'll have a budget in mind, but then they're actually approved for more. And then what we've been seeing in the current market, and I've talked to a few realtors that definitely convey that same sentiment is then people will have a budget, they can't find the home they want for that budget. And then they essentially end up going up to pretty much the max that they can be approved for a mortgage. And that's where it gets really scary.

My buddy, I'm not going to obviously say who it is because it's confidential. He slings a lot of houses. He's one of the most successful real estate agents I know, probably the most successful real estate agent I know. And he's always asking me, he's like, what is the instrument I short the house, the listing prices I am putting up on these houses right now? It makes no sense. It's based off no fundamentals. And so it's kind of funny to hear someone who's kind of in that and is a real estate agent being like, dude, this is something's got to give. Yeah.

Yeah. No, that's a good question. There's definitely some ways to do it. I'm probably not. I just told them that's an extreme sport. And one, I don't know how to. And two, it could blow up in your face. So I don't want to be the one to tell you anything.

Yeah, exactly. Because there's factors you just can't control there. Now, the second scenario, if you have a bigger budget, so you're looking at a $1 million purchase price, I know for a lot of areas in the country, this might sound like a lot. But for people like you and I, even Ottawa, it's not uncommon to see 1 million purchase prices in the neighborhood I live in actually like 1 million. If you're looking for a standalone you'll get one but it's usually not renovated or anything like that now I use a different percentage for the down payment just because you avoid CHMC and it's only the CHMC insurance is only available I believe under a million dollars so I went ahead and just put a 20% down payment for this one. So $200,000.

So this means you have a mortgage of $800,000. If it's amortized over 25 years, five years fixed rate. So 3% mortgage rate equals to a monthly payment of $3,786. And then the 4% mortgage rate equals to a monthly payment of $4,208. So that's almost, that's $450 and different. And again, I think it's important to stress here that it's disposable income. I know the banks and the financial institutions that provide mortgages will look at your, I'm sure they have calculations in the background, but usually they'll look at your gross income, but then they have some calculation to see if you can afford it and whatnot.

But that's a real difference in mortgage costs, and it's only the mortgage costs. It does not include any other costs that may have increased significantly in the past year, like heating, electricity, or property maintenance costs. electricity or property maintenance costs another thing that's putting pressure on home prices and they did mention that in the CREA release is that the stress test that the banks had to use is either one of two things so it's either 5.25 percent or the actual rate that you're approved for plus 2% well given that most rates now are 4% or higher for fixed rates, that means that now the new stress test threshold is around 6%. So that's making a big difference for people to see if they're able to be approved. Hopefully, the whole point of this was just to put things into context.

Yes, the prices overall, you know, have gone pretty crazy during the pandemic. And it's but it's just important to put things in perspective here. And I know a lot of people want to buy a home. It's a goal for them. People want to buy a home, start a family. You know, it's kind of part of a lot of the life path for a lot of people. But keep in mind that if you really stretch yourself out, you might be able to buy the home, but you know, you fix in that rate, it's for five years, and then you're looking five years down the line. If the interest rates are way, way up, you could be in for trouble. So I think that the moral of this story is just making sure that you have a reasonable budget and you don't stretch yourself

out too much because if you have a certain lifestyle to follow and you have certain things you want to do in your life the bank doesn't care they just want to see if you can afford your mortgage and that's it i look at this and i'm just like add so much extra stress if you are stretching yourself thin. That's all I can think about this. Like in your example there, that's like a car payment. That's a car payment every month or more. Or that's your DCA contribution to your investment portfolio.

That's your dollar cost average you put in. If that evaporates so that you can get some shoebox in toronto i mean it's concerning to me i mean and i just i just never want to go i'm gonna go i'm gonna go live in costa rica for 15 a day and keep in mind the last thing i'll mention here this is one percent increase one percent yeah no we're just talking about like rates being so low already but this is what happens when people go crazy with low interest rate environments. This is the short-term, long-term credit cycles and why there's like this boom and bust consistently in the way we run like a monetary policy. It doesn't repeat itself, but it rhymes over and over again. As do-it-yourself investors, we want to keep our fees

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I'm on there. I encourage you, go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas, and using the analytics tools. So go ahead, Blossom Social in the App Store, and i'll see you there all right let's talk about uh sass sass multiples in particular sass valuations to make it a little bit more simple you want to explain to people in case we have some new listeners what sass is quickly i do i absolutely do i have right here software as a service sass thanks for that that, by the way, Simone. SaaS, what I refer to is just software as a service. And what that means, software as a service, is basically people

subscribing for some software. And typically, when they say SaaS, it means that it's a cloud-based application. Like true SaaS means that it's a cloud-based application. There are about 90 in this study. There are about 90 SaaS, public SaaS companies. So they have their public stock listed on the markets. Their multiples have imploded. The state of the implosion of SaaS multiples and high growth tech, these kinds of businesses, it can't be understated. This is like, I've never really seen as an investor myself, this kind of multiple compression this fast. Like it's, it's, it's truly like tech bubble vibes, but in a small corner of super overvalued software as a service stocks that just went way too high. And there was so many IPOs,

that's a good, that's a good, probably a good gauge for it. Like they're all just IPOing at 50 times sales. And so it just became the norm. So median public equity SaaS traded for 50.8 times sales at their trailing 12 month peak sales multiple. So that was the median of these 90 companies. If you take the median of their peak sales multiple, I know it's kind of confusing, but whatever their highest peak multiple was over the last 12 years for every company, what's the median of all of them? It's 50.. High. That's all you need to know. High. Very, very high. Okay. It has dropped significantly to less than 10X across these 90 companies. It's around 8.99 times sales right now. First example here, you can see on the show notes here,

Simone, there's a long list of them, But SentinelOne, the cloud security business, cybersecurity business, went from 108 to 6x. Snowflake went from 93 to 5.2. Asana, the work management platform, went from 73 to 9. Again, that was another fairly new IPO. Snowflake was a fairly new IPO. SentinelOne was a fairly new ipo sentinel one's a fairly new ipo shopify not a new ipo but one from 42 to 7 light speed 31 to 3 like i'm trying to look on the list here any other crazy ones bill.com 69 nice to 15 so it's still i don't know all the tickers but uh yeah i recognize monday monday is like an Asana competitor. Zoom Info's kind of held its multiple. It's still above 15.

And so where I'm getting at this is that now, you know, they're sub 10x now, which is kind of crazy compared to where they were, right? I saw this the multiple compression coming fast but I didn't think that it would it would go like sub 20 sub 15 in just a two quarters right like yeah pretty much yeah it's been about six months yeah because it was about maybe yeah maybe a little more but it was November-ish yeah when the tide started to come in in November and when the tide comes, you see who's wearing pants and these multiples were not wearing pants. Now, there was a bubble going on. I think that that's true. Here's the thing. Some of them have actually become quite attractive. The bubble was built on high growth rates and unbelievably good business models, which I believe both of those to be true. High growth rates, I mean, that's not just my opinion. These are extremely fast-growing companies, and I do believe they have unbelievably good business models. Recurring revenue, insanely good margins, scale infinitely, relatively fixed

cost structure, tons of operating leverage. All the things you could ever want in a business model is kind of SaaS. It kind of is. And they are still great business models, but the market got a little bit smarter. They realized some of these never seem to be profitable. There are lots that are profitable, but a lot of them, like, at what point does operating leverage kick in your global business, right? You're a $50 billion market cap company. You know, at some point you need, you need some real money and stock-based compensation is a really big problem. And it's kind of a necessary evil for them to attract high quality tech talent. And so both of those things are not good for

investors over the long term. So I'm going about this in a different way. I've listed all the reasons why that's the case. I think they got a little ahead of itself. I still think they're wonderful business models. When the market zigs, you got to zag, man. You got to zag. That's how you make money in this game. And all this stuff has gone from extremely sexy, you know, Ark Innovation owns it, to huge drawdowns, regardless of fundamentals. And some of these will be gigantic winners from this point moving forward. And some are going to fail, such as life, right? Some of them are going to fail. But there are some really high quality businesses in the mix here, like wonderful.

Off the top of my head, ones that come quick that are like, have actual sticky products. They have wide competitive advantages. There are network effects. There's integration modes, which I find really important. They actually generate free cashflow. Would you look at that? So stuff like that. Intuit, ticker into. ServiceNow, ticker now. Autodesk, ticker ADSK.

CrowdStrike, the cybersecurity business, ticker CRWD. The TradeDesk, ticker TTD. ZoomInfo, ticker ZI. And HubSpot, ticker hubs, which i'm getting now familiar with my own business and this this platform is like gigantic zoom info is an interesting company actually i don't know that one all that much all i know about it is that it got a huge boost because people were thinking it was because the tickers actually yeah oh yeah i guess it's a zi but was the ticker originally zoom something happened right well i think people were like typing in yahoo finance like zoom and then this was like the first result and people were buying it thinking it was zoom communication they thought like oh i'm gonna buy zoom stock during the pandemic everyone's using this and they were buying zoom

info that's right yeah i'm pretty sure it got a actually a pop around the time that zoom went uh public went public and it's not the first time that's something like that's efficient right the market's efficient people can't even get the right tech they're buying the wrong business hilarious but regardless zoom info is an interesting company they uh kind of creepy, actually. It's basically data on every single person. So if you're trying to like, if I'm trying to figure out your identity, because I want to sell you something, I want to give you a cold call, a cold email. I'm like, Simone Bellagio, who runs the Canadian Investor Podcast.

I have this podcast startup for Canadians. This is great. I need his info. And Zoom Info will have it. It's kind of creepy. Okay. Okay. Yeah. And just to wrap this up, there are more, of course, there's also like big tech, which has fallen quite a bit. All of those companies I listed are customers of big tech cloud giants like Amazon, Microsoft, and Google. So all I'm saying is that it got a bit ridiculous, but you got to zig when the market zags and you got to think, you can't have groupthink. And if you're someone that is like, I'm not buying this junk, it trades for 80 times a zillion nosebleed times sales, doesn't

make any money. Some of them might be interesting all of a sudden. And that's just to keep an open mind. That's all I got to say. Yeah, I think you forgot one name. Was it the Steer or FaceDrive? Oh, the highest quality of companies, FaceDrive. So delivery as a service. Did FaceDrive re-listed, rebranded? Yeah.

Another Ponzi scheme begins, those scumbags. Yeah, yeah. No, exactly. I'm just sorry. It was too easy to answer. No, it's good. It's good. Now for our next segment, looking back at Bitcoin past bear markets presented by ShakePay.

It's been a really wild ride if you're invested in crypto in the past six months. Bitcoin is down 55% since its reach its all-time highs on November 10, 2022. During that same time span, the Nasdaq is down 27% as a whole. We all know it's been much worse for some names. I mean, we just went over some of the names in our previous segments that you talked about, and some of them are down way more than 55%. I think it's important here to put context. I recently came across an article from Don Petis posted on CBC, and it was, and I'll say in air quotes, but an analysis. But clearly, it only looked at things from one lens

and did not provide much context for the recent crypto bear market there was a lot of things wrong with the article in my opinion he mentioned first that bitcoin was down nearly two-thirds since its peak the actual number is around 55 to 58 depending on when the numbers were taken in the past week. He also failed to mention that some well-loved growth names like Shopify, which we both own, is down more than 75% over the last six months when they actually published that article. I'm all fine if people want to be critical of Bitcoin and crypto, and that's fine. You're allowed your point of view. You're allowed to think what you want. And it's just

i really wonder if he actually has taken the time to understand the technology behind it and the fact that it was labeled in analysis was pretty laughable in my opinion i honestly did some more thorough research i think when i did papers in high school hey let's go see more dude yeah i love i love the heat yeah it's, it just kind of bugs me. Like, you don't have to agree with me. You don't have to agree with Brayden. That's fine. You don't have to share the same views, but at least attempt to look at both sides.

I think that's where I come from. There's a lot of people that I follow and people that follow me that don't believe in crypto and Bitcoin. And I totally respect their opinion. But most of them are actually reasonable, I would say. So, you know, either they don't understand the technology or, you know, they need a bit more time for the technology to be proven, which is all fair. So that's why I just wanted to get that off my chest. But in terms of historical... Having an open mind is pretty much everything, not just like investing. I think that it's important to make money investing as well.

I think it may be one of the most important character traits in investing is being open-minded. But the real superpower is being able to change your mind when presented with new facts. Yeah. And it's not easy. And I'm sure like even I know sometimes I notice myself with having certain bias and I have to check myself for that. And it's not easy when you have certain ideas, obviously. But I do try to even, you know, sometimes look at the opposite thesis to see if someone was completely against an investment I make, whether it's crypto or something else, and try to understand their point of view so I can put whole in my own thesis.

Yeah, no, I think that that's the right thing to do. Yeah. So now here's a view for those, especially those who are in crypto and may not have experienced bear markets of Bitcoin specifically here. You can make a case that there was actually another one that happened in 2021. That's not included here after the china mining ban but it was short-lived compared to the big ones that i'll go over so the 2011 2012 bear market and obviously bitcoin was in its infancy here was just a few years removed from its creation the $2.10 from June 8, 2011 to November 18, 2011. So that's a whopping 93% down from the peak. Needless to say, if you bought Bitcoin at the all-time highs at that time and you're still holding, you're probably listening to this podcast on a beach right now. You're off the grid. You're

off the grid. I mean, you are a multimillionaire, if not more at this point, assuming you invested probably more than a few hundred dollars at the time and you just huddled all the way until today. But it took until early 2013 for the price of Bitcoin to reach $29 again again so just to keep that in mind and then the 2014 2016 bear market the price of bitcoin went from a thousand one hundred and thirty five dollars in december 2013 all the way down to a bottom of 175 dollars in january of 2015. this was a drawdown of 85% over that time span. So if you bought at those new all-time highs of $1,000, $135, the two major things that happened here. So Bitcoin was definitely gaining some prominence compared to the previous bear market. But I don't know if you remember this one Silk Road marketplace.

Oh, yeah. Yeah. So for those who are not aware of what Silk Road was, and I think there's some documentaries out there that you can find pretty easily on you know i've watched all of them those are right yeah exactly uh basically silk rose was a dark web exchange where people could pay in bitcoin so people could you know buy you know illicit drugs um a lot of different thing i think there was also like you know sexual trade being done on there i think drugs um a lot of different thing i think there was also like you know sexual

trade being done on there i think it was a lot of different things that were traded and then what is it about nerds doing crime that is so fascinating yeah the nerdiest guys like not the like gang bangers that you think of that are selling drugs online when the nerdiest kid you could think of in your high school is shilling out millions of dollars of illicit drugs via bitcoin i'm like this is amazing this is hilarious yeah and obviously thankfully the exchange got shut down here but a lot you know it got shut down but there's also the mount gox exchange that collapsed and suspended trading in 2014 so you had those two events that kind of happened during that time frame and a lot of people think it was one of

the big reasons for the that bear market and then it took until early 2017 for bitcoin to reach the previous all-time high so reached at a thousand dollars again. And then we have the most, I would say, prominent bear market for Bitcoin, the one that happened from 2018 to 2020. This is probably the best known one. I know you're familiar with it. The price went from $19,640 to $3,185. And I'm'm using here the prices i'm using are in u.s dollar just because it's a bit more consistent the this was a drawdown of 84 a lot of people attribute this crash to a huge demand for icos so icos are initial coin offerings so these like out coins or i know some of the people i follow will use the term shit coins, and I think it's appropriate for a lot of them, to be honest. And ICOs were just popping left, right and centers or were scams.

There was a lot of things wrong with a lot of ICOs. But what happened is many exchanges only allowed their users to deposit fiat and then exchange it for Bitcoin. and then exchange it for Bitcoin. And after that, users had to use other exchanges or services that would allow them to buy ICOs with those Bitcoins. So a lot of the demand was because of retail investors trying to get into that ICO craze. And then, of course, it took until late 2020 for Bitcoin to get back to its all-time highs after the pandemic.

So what should you make of this? Well, if you bought Bitcoin at any of the all-time highs in the previous bear markets, you're currently up 50% or more. I'm excluding the China mining ban here, of course. And here are some things that I do that have to help me, some bear markets that I've been a part of, because I've seen some of these. First of all, I don't trade, I do hold for long periods of time, it's not easy to trade an asset as volatile as Bitcoin. And then there's the capital gains tax, if you sell at a profit, that can be a nightmare if you trade a lot. I don't use leverage, leverage can be great if it's a bull market, can maximize your gains,

but it can also accelerate your losses. And in worst cases, it'll completely wipe you out. I don't check the price of Bitcoin every single minute. It trades 24 hours a day, so it's easy to check it all the time. It's easy to wake up at night and check it. I usually check it a few times a day and that's it. But for some, it might be only to check it i'll usually check it a few times a day and that's it but for some it might be only to check it once a week once a month or once in a blue moon that might help price of bitcoin multiple times a day i check it once or twice yeah yeah that's that's surprising to me yeah but okay it's just too easy yeah well it is too easy but still i'm i am surprised by that yeah i definitely check it more than stock prices, I'll be honest.

And then, you know, I just don't panic, though. Like it doesn't really phase me. It's usually because I'll have a bit of money on ShakePay. And then sometimes if I see a pretty quick drop or something, I'll just add a little bit. But usually I do some regular interval DCAs. But the last thing here, learn more about the technology. I found that the more I understood Bitcoin and the technology behind it, the easier it made it to sustain bear markets. And I think you can really relate that to owning stocks as well, where when you understand the

business very well, you don't panic if there's a large drop in the holdings that you have i mean you mentioned unity right that you bought uh you know by a drop 35 or 40 percent and brayden just put all his life savings uh into it afterwards but i doubled it okay yeah just kidding my life savings is not not enough but the last thing I will say, only invest, especially in crypto, but Bitcoin as well, what you can afford to lose. If that means it's 0.5% of your portfolio, that's fine. If you don't want to put anything in Bitcoin or crypto, that's also fine. It's your hard-earned money.

You should decide what you do with it. The last thing I'll say here is the worst that can happen it goes down to zero the upside on the other hand i'm not going to speculate on it but could really be massive if a lot of the premise do come true for bitcoin in the next decade um so i'll end it on that but i think it helps for people that may be living the crypto bear market for the first time to just understanding what's ha what has has happened since the inception of Bitcoin. I don't log on very often. That's just what I do. I don't even know what the price is. I couldn't tell you a single thing and I like it that way. That's just the way I roll.

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Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends.

And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store and I'll see you there. So go ahead, Blossom Social in the App Store, and I'll see you there. Let's talk about Thermo Fisher. We'll round out today's episode with a deep-ish dive on Thermo Fisher. So Thermo, or what I'm going to call Timo probably,

the way it's the ticker, T-M-O, and I just call him Timo. Timo, you might recognize their logo around. There's offices around the world. I mean, it's a fairly, it's one of those things where you've seen it. You've seen it many times. It's Red Riding, Thermo Fisher Scientific. They offer 400,000 diverse customers across, they have, sorry, they have 400,000 diverse customers across its four major segments and they are the leader in the global laboratory solution space so if you're looking at like instruments and equipment in labs timo dominates this space their products are like deeply entrenched in customer workflows so if you're if you're doing biotechnology research, there is a almost guarantee that almost everything you use is Thermo Fisher in terms of equipment,

processes, and devices, and reusable stuff as well, as well as stuff that you need to keep replacing. Not many companies can keep up with Timo's innovation because they just have this outrageously high level of in-house expertise. They have 130,000 employees. And so it's a diverse workforce. They are the picks and shovels company, which I liked. This is the way my brain usually works. It's like, okay, who's making lots of money, but who is supplying them? Who is the API solution to this software company? And it's just like fast growing cloud companies I was just talking about. I'm like, okay, but who are they paying all their money to? It's Amazon.

And so this is the way I think about it. And they are the picks and shovels in science, okay? If you think about like science, our advancement in science from like a health perspective, from a biotechnology perspective, from a microbiology perspective, Thermo Fisher is the picks and shovels, almost monopoly on the business. So they're end market agnostic, which is kind of the important term there. Whatever the newest hottest market is in science, whether it's biotech, whether it's, you know, some company trying to get drug approval. Thermo Fisher is the one behind

the scenes supplying these companies and supplying their research process. So when I get across my plate some hot biotech stock that someone's telling me about, I'm thinking to myself, okay, biotech is so boom or bust. It is like huge, huge payout if you're right, like huge payout if they get drug approval. But so many of them are duds. That is not the way I like to invest my money. And so every time I hear this hot biotech stock come across my plate, I'm thinking, hmm, thank you for telling me about a Thermo Fisher customer. And so that's the way I'm looking at the world here. Any quick questions before I talk about their competitive advantages, capital allocation, anything like that? know completely that will develop new drugs and things like that or treatments i don't know enough about the field that would be just throwing like darts yeah blindly but i know some people who know

about it quite well what they'll usually do is they'll kind of find companies that have good prospects and then they'll do kind of a basket approach because they know even having the knowledge they'll probably miss out on they'll probably evaluate incorrectly or it won't be approved. There's so many variables that as long as a couple of them out of 10 end up being big winners, they end up having good returns. But they usually have a pretty deep knowledge of the field anyways. Right. And the people that I know that have the deepest knowledge in this field, I am not one of them, by the way, I'm not a doctor. They're all Thermo Fisher shareholders.

There you go. People who know about this really well, because they know it's the picks and shovels, you know, the 10 basket of companies, the biotech one that your buddy looked at. basket of companies, the biotech one that your buddy looked at. That's a list of 10 Thermo Fisher customers. Okay. So their laboratory solutions portfolios has four main segments. It's life sciences, analytical instruments, specialty diagnostics, and lab products and services. And so they're all very similar and they cross sell to each other. And that is one of their competitive advantages is like, okay, if you're, if you're supplying, it's like what you and I talk about where it's like, okay, if you're supplying the hardware, then you can also supply the services and the recurring, you know, the recurring nature or the processes or the software that go with that, that's really hard to disrupt and makes it really sticky. And that's a very similar type of analogy here with all their different segments here on serving life sciences. So Capital Allocation, they do a ton of acquisitions. So they buy out the small guys, they buy back stock in a prolific way, and they pay a respectable and growing dividend.

So it's kind of like the holy grail trifecta of capital allocation. In terms of competitive advantages, their scale of expertise is kind of insane. They have 130,000 employees. They spend about $1.5 billion on R&D in 2021. And so that's an important part of their capital allocation structure as well, because you can't be in this game and not be on the forefront of science, right? It would be silly to run your business like that. And another really deep competitive advantage before I wrap up here is just their customers. I love these types of modes, by the way, their customers have to comply

with certain regulatory requirements, of course, right? It's such a, it's an important thing that people comply with. It's, it's people's lives, it's health, it's safety. And so these pharmaceutical scientists and research firms and biotech companies have to submit manufacturing information to demonstrate that if they're going to manufacture and properly get approval when submitting an NDA, a new drug application, not a non-disclosure, a new drug application NDA to the US FDA, part of that, it requires you to submit the exact details on the equipment that you're going to use, the supplies, how you're going to supply and how you're going to actually manufacture the drug, where it comes from, all this stuff. And once it's approved, say you do go through and the FDA gives you approval,

the process, the company outlined in that new drug application, NDA has to be static. The company cannot deviate from it. So if there are any changes into the process, like all of a sudden you're not going to use this Thermo Fisher system. They have to submit a new NDA to the FDA. You think they're going to do that? Hell no. Hell no. And so it's a really high switching cost. Thermo Fisher kind of checks almost all of the boxes. And the highly complimentary nature, as I was talking about, of their products and services, the deep embeddedness into the workflows of these drug companies, their need for regulatory compliance, their customers stick around forever. They faced high retraining costs, high switching costs. high retraining costs, high switching costs. Moving away from Thermo Fisher, just one seems ridiculous to do. There might not be anyone else in town, but you could actually be locked in legally via your NDA or FDA approval

to keep using it indefinitely. And so, yeah, it's just a high level overview of thermo fisher the the elevator pitch for is it's the picks and shovel on the advancement of science and they it's been a phenomenal stock to own yeah yeah i mean i need to learn more about that space and i i probably i don't really have an excuse i should ask i have my little cousin who's a few years younger than me who works. I won't name the company, but for a large pharmaceutical company, he's a researcher. So he definitely knows quite a bit about how it does. I mean, we've talked about it before, but three quarters of this stuff, I'm like, I

have no idea what you're talking about. I don't either. This is just our research, right? Yeah. This is just the Strauss research. I have to constantly just constantly like ask him i'm like okay so what does that mean what does this mean because he like obviously when you're used to talking about a subject with your peers it's you know there's acronyms and stuff that you're just used to it but that's the one thing that came to mind but yeah it's definitely uh definitely sounds like an interesting company based on what you went over. They IPO'd in 1982. Hey, it's older than me.

Hey, yo. Yeah, it is. I feel young. You'd be up 48,000%. It's not bad. Before this drop off, it's on a drawdown. So maybe a little stocks on your watch list segment here. You'd be up almost 60,000% up until the end of last year. Wow. So I mean, hey,

you faced big drawdowns along the way, remember? Look at this. Yeah, you were down over 65% You were down over 65% in the late 90s there. You were down another 40% in the great financial crisis, but it's been steady since there. It's been a 10-bagger and almost 15-bagger since then. But I just think that these are the types of durable companies that I think are worth owning. I'm not trying to own the boom and bust companies. I have to be right on timing.

I have to be right on the company. I have to be right on the market being ready for it. I have to be right about FDA approval. There's just too many variables. I know I'm not going to get right. And that's why I, my brain goes towards these durable high moat picks and shovels play. And you're not in the field, right? You're nots play and uh and you're not in the field right you're not it's not i'm not in the field either yeah no exactly all right that does it for

this one guys really appreciate thank you so much for listening with uh everything i just pulled off of for thermo fisher that's what you get when you search up Timo in Stratosphere. I just listed the investment thesis, the competitive advantage, their metrics. I didn't even really talk about growth, but you can find their exact financials, how fast they're growing, what their dividend per share is, all that stuff. And you will go from knowing nothing about Thermo Fisher to at least having a very good base, like I think investable knowledge. These things become investable quick, very quickly. And so all you have to do is go into stratosphereinvesting.com

and type in Timo and you'll get that. Thanks so much for listening again, guys. Really appreciate it. We can't thank you guys enough. It's going to be a good summer. Simone and I are going to keep pumping out these episodes twice a week for you guys. And the show goes on. We'll see you in a few days. 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.