The Canadian Investor - Canadian Stocks We Like

Episode Date: November 28, 2024

It's a TSX stock roundup as Braden and Dan discuss results from Canadian companies. Tickers of stock discussed: ATD, WSP, L, TVK, SHOP Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca 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  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. 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 Belanger. The Canadian Investor Podcast. Welcome to the show. It is Tuesday, November 26. My name is Brayden Dennis. Joined by Dan Kent, our third amigo here. I don't know if the two of us have ever comboed up on the earnings episode, but here we are. We just did the 2024 bold predictions.

So we've never been on an episode together. Outside of that, three of us. Yeah. Oh, unreal. Well, you know, feels natural. And the listeners have heard us both. So now they're getting a new combo here. Dude, we have Canadian earnings Lollapalooza. I don't know if we intended on this, but I'm

looking at the notes and we have a bunch of TSX stocks here that we're going to talk about. They're Q3, whether that was two weeks ago, a week ago, companies we we like companies we follow companies you probably know and love so um that's that's going to be today's episode and i haven't done one of these in a long time like i like retired from these but it's kind of fun to kind of just keep up to date with what's going on yeah there's a lot of uh there's a lot of like i guess i would say economically sensitive Canadian companies reporting right now. I mean, CouchTard will go over. Loblaw is a big one. Canadian Tire, if we get to it. Even something like Shopify. I mean, a lot of companies that kind of give an indication

of the Canadian economy, the Canadian consumer. So it should be a pretty good episode. Without further delay, let's get to Loblaws. But this is, you're talking about Shopify. There's kind of been no one more critical of Canada than Toby, the CEO and founder of Shopify as of late. I don't know if you've seen him go on rants. He's really trying to make a change with what's going on in Canada, and I salute him for it. But he's vocal, man.

It's interesting to see him. He's always been pretty vocal. I don't know. I haven't been keeping tabs on what he's been saying lately, but he's typically been pretty vocal. Yeah, we can talk about it when we get to Shopify. Let's talk about Kushtar. Yeah, so Kushtar just reported it would have been after the close yesterday.

So this is a company that's struggled for quite some time now. I mean, it's pretty cyclical, just generally based on the economy, especially the consumer itself. So they reported headline misses, again, on both top and bottom lines. And on a year-over-year basis, earnings are down by 9.8%. Revenue is up by 6%. But the difficulty here is SG&A, which is effectively like selling expenses, overall expenses. They're up by 12.5%, which is obviously more than offsetting the boost in revenues. a half percent, which is obviously more than offsetting the boost in revenues. So merchandise gross margins dipped in practically every geographical region of the business and same

store sales declined by 1.6% in the US, 1.5% in Europe, Europe and everywhere else. Effectively, they bunch them into three different areas and 2.3% in Canada. When we look to overall same store fuel volumes, they remain relatively flat in Canada and Europe while they fell by around 2.2% in the United States. Fuel margins continue to dip as well. Those are down by 7% year over year in the US and 2.1% in Canada. And I mean, overall, it was a pretty weak, but probably much expected quarter from Custard. People are traveling less, they're pinching pennies, they're spending less. I mean, overall, it was a pretty weak but probably much expected quarter from Custard. People are traveling less. They're pinching pennies. They're spending less.

I mean, the impact to convenience stores comes from multiple angles. For one, less fuel means less merchandise purchases, as the vast majority of consumers will buy this merchandise after fueling. But secondly, I mean, stores are are meant for convenience i mean when times get tighter somebody might you know run to the grocery store for creamer eggs whatever it may be over you know paying a higher price for that convenience the company raised the dividend by 11.4 percent on the quarter so this is actually the smallest level of dividend growth we've witnessed from kushdard since the start of the COVID-19 pandemic, like peak lockdowns back in mid to late 2020. And I mean, overall, it's a pretty strong long-term hold, I would say, but it's just a cyclical stock that is obviously going to be cyclical.

And I didn't put any notes in this either. That's a pretty healthy dividend hike. Yeah, but they're typically... The smallest as of late is pretty insane. I mean, they're typically, Custard is known for quite some time. Like they make pretty chunky 20% plus raises annually. And I mean, their dividend coverage,

I think it still makes up only 10 or 15% of free cash flows. I mean, I guess the one other thing I would mention, I actually didn't get any time to jot any notes down about it, but it looks like the 7 and I deal is dead in the water. I believe they're going to be taking the company private and Custard kind of said that they won't be doing any sort of hostile takeover attempts or anything like that. So that looks like it's done. I think they're taking the approach of how business is done in Japan. They don't take lightly to aggressive, hostile takeovers, especially if a company is so important in Japan to 7-Eleven.

But I think if you're a shareholder of Kushtar, you want to get to yes or to no quickly yeah and whatever it is you just don't want this drags i think that was my take on the deal was yes it looked like they were biting off a lot but not more they they can chew the risk to me was you're here, the year is 2026, and you're still going through regulatory hoops with no real clear path to if this is for sure going to happen, which ties up a lot of capital. It changes their entire strategy around dilution. They were going to have to raise a lot of debt, issue a lot of shares, tie up a lot of mind share for the management team. So you want to get to yes or no quickly, whether that's happening or not happening.

Get to an answer. Yeah. And I mean, it looks like it was no. And I know, I mean, it's pretty much no at this point in time. And I know the company had said that they didn't want to dilute too much. So that would have meant that I would imagine a huge chunk of that would have come from debt and i mean they were effectively at the point i believe seven and i went i think they're like the offer is like 53 billion us now which would be pretty much larger than kush tard overall as a company so i mean if they were to go over and above this it

would be it would be gigantic and i mean like you like you said, like, you know, the hostile takeover, especially from a foreign company, this would be, like I had mentioned it before, it would have been the largest acquisition in Canadian history. I can't really think of anything else that's been acquired for that large of an amount of money.

And I mean, it was just, there's a lot of moving parts, but it looks like it's finally going to just come to a resolution now. Moving on to another Quebec-based acquirer and very successful stock for shareholders. You are now a shareholder, by the way, which is nice. Welcome to the club. Good old WSP.

I was a shareholder pre-pandemic, sold, and then bought back in recently. That's a tough sell. I know. Look at that chart. Yeah. Hey, you know what? Hindsight's always 20-20. I bought some more of WSP, which only trades on the TSX, actually. So there is no other listing in the US.

I bought some more of it this morning with some proceeds of another Canadian stock that I've held for years and years. And I hate selling winners, but I think I've squeezed a good amount of the juice out of this one. And I'll provide some more info on that one in December after the joint TCI updates are live. But to kind of summarize, by the way, I've been using Finchad a lot for summarizing quarters. I wish I had this capability when I was doing the pod with Simone because it's pretty freaking good. So they had net revenues of 3 billion, which was up 10% from this time last year. Total revenues of 4 billion, which is up 11% year over year. Organic growth at 7.2%,

which is quite nice. Staying sticky at that high single digits average. Honestly, really nice, given all the M&A activity they're doing for a services, engineering, consulting services business that largely serves infrastructure projects. Seeing this kind of organic growth post-pandemic spend when it comes to infrastructure, seeing that consistently stay persistent is really good. I think that that's why the stock has reacted the way that it has over the last couple of years. Adjusted EBIT up 12% and the margin continues to tick up. I'm going to talk about the margin in a second here. It's pretty spectacular. The backlog's now at a record almost 15 billion, which is pretty impressive. And they raised guidance as well to include the big power

engineers acquisition, which they expect to add to their EBITDA. So they're expecting over 2 billion in EBITDA for next year. Now, recent acquisitions in the quarter, they did Proxion, Communica, Public Affairs, a ingenieros, which is Spanish for engineering. And technically in Q4, since power engineers closed in October, that was a really big talk. I listened to the entire conference call last week, and that was a really big talking point, right? It was a big 4,000 employees in North America acquisition. Power Engineers is, as the name suggests, power and energy firm. And so that was a really big deal. They've been eyeing that deal for a long, long time and it finally came together. So they seemed pretty excited about it. I enjoyed in the Q&A of the call, Dan, where he's like, I enjoyed in the Q&A of the call, Dan, where, you know, he's like, can you break down like the entire integration strategy and all these like hard hitting questions about the power engineers acquisition?

See, I was like, dude, like it closed like four days ago. Yeah. Give us a second, man. It's so funny., these analyst calls. I looked over the quarter, but I have not watched or listened to the call. I know it was a pretty solid quarter. I mean, I know their Asia Pacific segment is kind of struggling right now, but North America, it's chugging along very well.

So global now, as the name suggests. I just wanted to pull up, dude, look, you can see on the screen here, this chart of WSP operating margins since 2015. And of course, this is a service business. So operating margins are single digits, but it has ticked up so steadily quarter after quarter from high 4% to 9%, just like clockwork. And this is the kind of thing you want to see. It's like, yes, doing acquisitions is great. Yeah, up and to the right. Yes, doing acquisitions is great, but you listen to like a Brad Jacobs from XPO Logistics. He's coming out with this book called How to Make a Billion Dollars, which is absolutely an absurd title and I love it. But about like how to really integrate these things so that there's operating margins of the mothership just go up over time. over time. And it's clear that they have that ability. It's clear that they have demonstrated that. And to have this kind of chart be visual for operating margin consistently move up, like their playbook is working and they're doing a ton of acquisitions. I think they've done over a hundred now and it's so fragmented. It's one of those really nice to see fragmented global opportunities.

And the service consulting business is good if you know how to run them. So I've been long this talk for a long time. You are as well. It's just a fantastic Canadian name that market cap continues to surprise me every time I look at it. Because in my mind, it's still just this small, nimble, awesome Canadian growth story. But it's $32 billion in market cap on the TSX now. Yeah, it's kind of slowly becoming, you know, well, what would that be? $32 billion? That would have to be top 10, top 15 in Canada unless I'm way off base there.

But it would have to be pretty close. Not top 10. Top 25 probably. Yeah. I don't know. I'll just look it up but i mean yeah no it's um yeah 32 billion puts them yeah at around 25 yeah i mean if you think about i mean if even if you fast forward like five years ago they were worth what's maybe eight or nine so they've had uh they've had a very good run over the last five years. And I mean, obviously, like you said, margins up and to the right, obviously, which, you know, boost profitability, especially for a company that grows so much through acquisition. I mean,

it's, it's kind of, it's definitely optimal. And I mean, it's a way to, you know, grow profitability through not, you know, just simple organic growth. I mean, it's a way to grow profitability through not just simple organic growth. I mean, they've shown they can execute for years now. I mean, you typically, like you see in the chart, you get like a few, maybe a year or so where operating margins will kind of flatline or kind of go through some struggles, but then it's just, like you said, up to the right. It's a pretty fantastic stock chart. I mean, the Canadian success stories around these acquisition machines have really been a lot of the TSX growth. Constellation, WSP, the spinoffs from Constellation, Brookfield,

ESP, the spinoffs from Constellation, Brookfield, TerraVest, everything happening with First Service and Colliers. There's more. There's a bunch. Waste Connections. Waste Connections, yeah. I mean, even if you look at, like, it's been struggling as of late, but if you look to, like, a Boyd Group Services. Boyd. look to like a boyd group services boyd yeah like just high acquisition uh company just compounding crazy amounts i mean like i said they've struggled quite a bit recently just because of inflation and

you know labor issues and all that type of stuff but uh yeah there's a lot of solid solid success Kush TAR, GFL, TFI International, WSP, CCL, OpenText. TMX would be another one. TMX. TMX. Scooped up a few companies over the last while. Yeah. Yeah. Pretty good.

Yeah. It's been a great place to hunt. Yeah. It's been a great place to hunt. Definitely. Yeah, it's been a great place to hunt. Yeah, it's been a great place to hunt. Definitely.

As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people

that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. 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 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. 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. All right, moving on to Big Bad Loblaw. Yeah, so Loblaw actually,

it reported a pretty solid quarter from a headline basis, but I would say it's one of the weaker quarters in quite some time. And I mean, keep in mind when I say weaker, I mean like relative to the last two, three years. So, I mean, Loblaw has absolutely killed it in terms of overall growth over that time frame just because of, you know, there's been a massive spending shift among Canadian consumers when it comes to groceries. And it just overall, you know, discretionary and even like, you know, staple spending. That's why we've seen Dollarama do so well as well. I mean, I believe over the last five years, Loblaw is up 180, 190%. They're even up 50% this year. I mean, they're still continuing to drive, you know, a lot, a lot of activity. And same store sales this quarter grew by only 0.5% on a year over

year basis on the food side of things and 2.9% on the pharmacy side. So when we look to same store sales growth last year of 4.5 and 4.6%, I mean, obviously this is a pretty steep decline. The one thing to note is that last year's results included Thanksgiving, whereas this year did not. So they had about a 1.3% impact to same-store sales in that regard. And I had mentioned this back when I went over Dollarama with Simone and how same-store sales growth had been decelerating. And this was mostly due to, I believe anyway, the massive, massive shift of people into cheaper alternatives in 2023. So it would be very hard. I believe Dollarama had reported something crazy, like 15% same-store sales growth. And then the next year they reported four and everybody's like, oh, well, it's declining.

It's not as good as it was. You know how hard it is for a company like that to, you know, get to that 15% level and then, you know, still grow it on top of that. It's pretty good. So the fact that- It's like when it comes to growth and something pulled forward, no good deed goes unpunished.

You know, it's like- Yeah, exactly. You have some amazing pulled forward growth and then you still report pretty solid results off that base but it's hey four equals less than 15 15 yeah exactly and i've been dollar there was a lot of talk around dollarama with that too and i'm like well it's when you grow same store sales at 15 i mean the next year if you can grow that over and above 15%, I mean, that would be crazy. And I mean, for a company like Loblaw, you're never going to get, like, gigantic same-store sales growth rates from this company.

Outside of, like, COVID was a bit of a different story because, like, during the lockdowns in 2020, you had double-digit same-store sales because, you know, everybody got laid off. Shoppers was printing. Yeah, exactly. That type of stuff is abnormal. Typically, you're going to get 1% to 2% same store sales growth with a company like Loblaw. And I mean, it's getting back to that level. And a lot of people were kind of pointing to those numbers, but I don't think it's an issue over the long term. I mean, they continue to grow profits at a double digit pace. Earnings are up 10.6% year over year. And the company spent over 429 million in terms of capital expenditures to open new stores and

make its current stores more efficient. So as a result, we're seeing gross margins grow. We're seeing, you know, margins overall grow. Their operating margins have more than doubled over the last while. Gross margins are 30.9%, which is a 30 basis point bump. And the company bought back 2.65 million shares in the quarter, totaling 450 million. So this was over 80% of the company's free cash flow generation on the quarter. This was over 80% of the company's free cash flow generation on the quarter. So for joint TCI subscribers, I attached a chart highlighting the company's buyback activity over the last decade. It's bought back a crazy amount of shares over the last 10 years.

And one of the key focuses should be the fact that from 2016 to effectively 2021, this company bought back 18% of its shares outstanding. So it spent around, I believe it was $4 billion buying back $74 million or 74 million shares in the 49 to $65 range. So I mean, Loblaws is now at $180 a share. So I mean, you can see just the benefits of scooping back those shares through that flat price period. So I mean, you can see just the, you know, the benefits of scooping back those shares through that, you know, flat price period. And I mean, even in 2022 to 2023, the company was buying back a ton of shares as well. And its stock price typically hovered in the, you know, 105 to $115 range. And now they're, you know, again, upwards of $180 a share. And I mean, they're definitely not slowing down here. So the question now is, you know, again, upwards of $180 a share. And I mean, they're definitely not slowing down here. So the question now is, you know, are buybacks at all time highs,

or at least close to it still financially the best way for the company to spend cash flow? It's spent most of that capital on buybacks when it was around 11 to 13% times through free cash flow. Now it's trading at 16x. So. So it's, it's difficult to say. I would probably argue that it still could be solid. It's not like they're opting out of, you know, free cashflow spend on improvements internally. They just are generating so much at this point in time that they can do both. And, uh, they boosted their earnings outlook on the back of just strong momentum and it now expects double digit earnings versus high single digit earnings. And like,

I think what you see here is just Canadians just can't afford to spend any money on groceries anymore. I mean, we've seen a company like Loblaw is up, I believe it's, you know, 180% over the last five years where a company like Empire, which is Sobeys,

I believe Safeway as well. Like those expensive stores is like, they've effectively returned. I think it's 30% over the last five years. Yeah. Loblaws has just killed it from a discount perspective. Yeah. And just their different brands. They serve different segments of the market and just provide so much smoothness through the different cycles

yeah whether it be i guess no frills being their kind of premier discount that's their cheap would be no frills yeah but i think they're even they're running some kind of i don't know why i can't think of the uh word for it they're testing even further discount stores that are like going to be even cheaper than no frills in ontario and we'll see how that turns out but yeah they uh from a discount presence they're they're the strongest ones you can think of so i mean and everybody i believe everybody on average is only like the average canadian is only around nine kilometers away on average like everybody from a loblaw store so i mean reach it's just it's close to unstoppable yeah i mean i'm just looking at their brands 14 0's serves like a higher end even loblaws

itself is quite expensive but then zayer is kind of in the middle but then they have the real canadian superstore the no name-name brand, of course, no frills being on that lower end in terms of price. But I'm just looking at all the portfolio. And of course, this doesn't include like Shoppers Drug Mart and the Life brand, the in-house brand there. The quality and consistency of the stores is what's so good about Loblaws. Quality and consistency of the stores is what's so good about Loblaws.

Like if you go into No Frills, their house brand of president's choice is good. Like it's so key. You look at the Costco playbook. It's so key to have a good in-house brand that customers are like i've never had these frozen chicken wings but everything else that i've had from that in-house brand is good easy buy like easy buying decision right that's so important yeah and i mean it's like especially when it's cheaper i mean like you said kirkland just just kills it it's like one of the most notable like i would i would say like no name brands out there and i mean like loblaw even takes it takes it further i mean they got like there's there's a lot of you know angst against this company as well i mean they

you know the boycotts all that type of thing which effectively did nothing just because i think like canadian consumers are so tight right now like they just they're not willing to spend more on groceries just to kind of you know stick it to these these major corporations and as a result like they've just you know like how many of the average consumers know how many of the average consumer really know that all of those brands are in their portfolio? Yeah. Right.

It's like when, remember when there was that Bud Light protest about all the woke stuff that, you know, it's like, don't drink Bud Light, drink a Modelo instead. It's like, uh,

Anheuser-Busch owns. Yeah. Same, same thing. So, you know, I, I'm not saying that every consumer is unintelligent and uneducated but there is a good chance that not everyone can list every single portfolio brand underneath a conglomerate like loblaws yeah so yeah i mean there's also like an element of

i mean you you might get one person goes and goes into like a sobeys for a grocery tip and they're like no way because i mean i used to shop at sobeys exclusively i never went to no frills we had like two and i don't know if i've been to sobeys in a year i go to no frills no frills costco because it's just so much cheaper i love no frills yeah yeah and i mean it's like it's so much cheaper and i mean yeah you gotta like bag your own groceries and stuff and like it truly is like no frills but like i don't care about any of that stuff just give me the lowest cost on you know effectively the same items and i mean you can see that in the results like empire

struggled so hard whereas loblaw is just killing it. Yeah. It's like a lot. There's some, with every industry, there's a corner of the market that doesn't care about price at all. Yeah. There's always a corner in every industry, no matter what it is. But for most consumers, it looks more like airlines than not, which is they say they complain about having the shitty small economy seat but when it comes to being online and picking their seat or picking which

airline or picking which time to fly all brand loyalty flies out the window it's the most convenient at the lowest price. Absolutely. And that's it. And that's it, right? And so most businesses look like airlines, then people are willing to admit. There's only a few luxury categories that are true luxury. Yeah. And they're the outliers, not the rule. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select

ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. 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 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. 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. All right, another one, TarotVest. Moving on, more Canadian TSX names. Okay, kind of insane. I don't know if you follow this name much. Me and Simone have talked about it. I introduced it to him. I brought up on the pod. I don't know. It's kind of like the i need a we need a bot that just like instantly recalls all of our notes from the transcripts of the show but i would say this is a one that got away for me for sure we used to it was heavily talked about in 2022 2023 i never bought

it i believe it was something like maybe 20 or 30 dollars when i first started looking at it but but never bought it yep yeah 20 30 oh wow okay so that's yeah that's significantly earlier than when i got it and it's still been i mean that would have only been a year ago though like maybe 18 months ago or yeah probably i was looking at wsp's ticker on my screen still. Okay. No, that would have only been a year ago. Only a year ago. Okay, so that's my average price then, around then. Well, I'm here to tell you it's not too late.

The stock, yes, it's gone on this crazy run, and it's not as cheap as it was. I mean, I think it's trading at around 20 times backwards operating profits now, trailing operating profits, but it was 10 a year ago. So the multiple has doubled, but the business has grown significantly too. And there's one thing that I really want to point out. So yes, it's not as cheap as it was, but it's two and a bit billion in market cap CAD. So it's still relatively small. And I think there's a lot to like about Terovest, by the way, ticker TVK.TO.

I think there's a lot to like as long as Dustin Hall wants to keep building this machine. As long as Dustin Hall wants to keep building this machine. And him being in his early 40s, and the way he talks about the company on the investor day, there's a lot to do in these end markets that they're addressing right now. And I mean, the guy's like an engineer PhD in physics with a CFA. You know, it's like the perfect he's and just the way he carries himself you're like this is the perfect combination of like a blue collar guy but with that white collar chops to pull off incredibly accretive mergers and acquisitions like that's the exact kind of rare human being you want running a company like this.

Yeah, because like doesn't the company make like storage vessels? Yeah. Things like that? Yeah, exactly. To recap, storage tanks, they're manufacturers of HVAC, propane tanks, storage tanks, transport vessels. You know, when you see these like compressed gas vehicles go on the highway, boilers. The key material in these niche end markets is not that they're tanks or something. It's that the main input for the manufacturing process is steel, which they get major economies of scale on.

And so they've been a serial acquirer of these businesses. And so they've been a serial acquirer of these businesses. I think they have 400 some odd targets that they've identified. That number, I don't know for sure, but that's the number that equipment that you'd expect. But I'd like to just take a broader view instead of talking about the earnings as just why is this working so well? And I think that you'll find this quite interesting, which is the business has transformed. And you got to look at the revenue segments to see this. And then I'll go on like FinChat and just like click the two revenue segments and stack them out and see percentage of the business, how it makes up over time to really see this visually. So products revenue means I make a storage tank and i sell it to dan that's revenue services revenue is i sell that tank to dan but dan you got to get the tank serviced once a quarter once a

whatever it is whatever the frequency is and because they are selling regulated selling, regulated, like there's a lot of safety around these things. I mean, you're bringing liquefied natural gas or something like that, right? You need to have a lot of regulation around this stuff, aka services. You got to clipboard check and cash those checks when it comes to these things, right? So services revenue has gone from $4.2 million in September 21 to $250 million. So basically gone from a pure play products business to 75% products, 25% services. And there's a lot more EBITDA and services. So now you've created much higher margin. So now you've created this brilliant business, like an ASML where I sell you this product, but you need to get it serviced. We need to build out these service contracts for you. And we make it

easy for you because you need to get them serviced. It's the law. And so there has some regulatory capture there as well. So the business has transformed. That revenue is a lot more recurring and a lot more profitable. So I think that might help some people understand why this has done so well, because it's gone from zero to basically 250 million in revenue in just two years. Yeah. I mean, you can look by the chart. I mean, next to nothing in even 2021, next to no service revenue. So I mean did what did they effectively change like to actually grow this out like did they just started like offer maintenance or like that's where that's where i'm kind of confused on that side of things like how did they change it that way yeah well a

combination of the existing assets and the assets that they were acquiring yeah there's a lot of learn a lot of learnings for what they're acquiring, right? Like, oh, we're buying this tank company that has, let's just use simple math, you know, they have 75 million in revenue for selling what they manufacture, but 25 million in recurring annual service contracts. Like, oh, that's a materially different and better business than just the manufacturing side.

So how do we take that, do more of those, but then also take those learnings and build them out into the existing assets? Yeah. I mean, they've done remarkably well. I mean, you can just judge by a one-year stock chart. It's been one of the best performing stocks on the index, I think, for the last couple of years. been one of the best performing stocks on the index i think for for the last couple years um and again one that i just i kind of knew about but just like didn't didn't understand on the surface level like you're talking yeah like it's a it's a tank business like the sale of tank like it just didn't really interest me off to off the top of my head i just kind of like glanced over so unsexy yeah and then it just like, one year later, it's 300% higher. Crazy.

I'll dig up the file for you of the investor day that they did and just get comfortable with Dustin's strategy. I'll send that to you. But yeah, it's one of those things where, yeah, the multiples doubled, but you're betting on this management team. It's like every time, you know, you find everyone's looking for the next constellation, right? Everyone's looking for the next CSU. And CSU has always, when it was small and in its infancy and when it IPO'd and a few years after it IPO'd, it's like, are these people cut from a similar cloth as mark leonard if yes who cares if the multiple doubled yeah exactly and the business is at that size yeah the business i mean obviously you know you're going from 100 product revenue to to 75

and 25 recurring higher margin service revenue obviously the multiple is going to change the business is arguably more valuable so yeah it's definitely's definitely, I'm going to look into it a bit more over the next while. And I mean, it's still, like you said, it's only a $2 billion. It's barely out of small cap territory. Yeah. Yeah. And still completely off the radar of any US funds. Yeah. Completely. Right. So yeah, worth a look. look yep it's gone crazy but the the facts have changed and and and these types of visuals that i just pulled up here and you know the stuff i kind of share on my twitter all the time at brado capital you can check it out it helps you recognize the story and the insights yeah all right let's talk about our darling, our Canadian darling.

Yeah. So Shopify, they reported strong earnings. I mean, it would be blatantly, obviously just looking at a chart, like the stock just launched on earnings. I mean, the earnings would have been a couple of weeks ago now, but I mean, it was still a pretty notable quarter for Shopify. Revenue of 3 billion. Earnings came in at around 38 cents per share Canadian. Those were both relatively in line with expectations. Revenue was up 26% year over year and free cashflow margins, which is effectively, it's kind of like a non, it's not, this isn't an actual like, you know, gap metric, but they kind of take the free cash

flows they generate relative to their revenue. So that came in, that actually grew from 16% to 19%, which effectively means they're generating more free cash flow relative to the revenue they're generating as well. So this effectively, this means for every $100 in revenue that Shopify generates $19 of that ends up being free cash flow, whereas a year ago it only would have been around $16. So gross merchandise volume, which is effectively all of the transactions that are put through Shopify's platform, whether or not Shopify processes a payment came in at $69.7 billion. So this is up 24% on a year-over over year basis and is one of the faster growth rates in terms of GMV since the pandemic. And then when we look to gross payments volume, which would be the gross merchandise volume that Shopify puts through Shopify payments sat at 42.9%. So this

is a pretty key KPI because these are the transactions that Shopify puts through its own payment platform, which pretty much allows them to collect the processing fee as well. And ultimately, you want to see more GMV being put through Shopify payments. One thing to know when we go back to 2021, the percent of gross merchandise volume that was processed through Shopify payments was 50%. And now it sits at around 62%. Monthly recurring revenue came in at 175 million. That's a 27.7% year over year increase. And the company's merchant solution still makes up the bulk of revenue around 73% and came in at around 1.55 billion. So the merchant solution side of the business will be the one that supplies things like Shopify payments. They have a physical point of sale platform and just helping businesses set up accounts, things like that. Its subscription service makes up the other portion of the revenue,

which was around $610 million. So this is the higher margin portion of the business, smaller but higher margin. It's growing at a similar rate. So this end of the business effectively allows merchants to set up recurring subscriptions and provides, you know, a front end for the businesses to manage subscriptions for their customers. So like one quick example would be like, if you want, if you were a coffee shop or something and you, and you wanted to set up a subscription so that somebody could, you know, order recurring orders from you instead of like going on and buying it all the time. They allow you to set that up. So the company issued its fourth quarter guidance, which it expects to grow at a mid to high 20% range.

Gross profits to grow pretty much in line with last year's numbers. And free cash flow margins to be similar to this quarter, which is a pretty notable increase on a year-over-year basis. And again, the stock went from like $125 to, you know, 160 plus just on the quarter. And yeah, it was just the boost in margins, just overall, you know, return to growth. It's just, it's kind of killing it now after, after a pretty rough 2023, I would say, just because, you know, again, we talked about it with, with Loblaw, you know, a lot of that pandemic growth was kind of pulled in for shopify and it was uh it's pretty hard for them to keep up it's wild to think that after all this run up and the stock deserves to i mean they keep executing so that stock deserves to be up

after all this run up it shows you how absurd things got in 2022 because we're still on a 33% drawdown from the peak. Yeah. After it's crazy. It's gone vertical up into the right with the latest results. And we're still on a 33 and a half percent drawdown. Yeah. It's I mean,

2021 was absolutely crazy, but I mean, like, I think that was Shopify. Actually, I think the CEO, like he even came out and apologized for it effectively. It's like they guided to way too much growth effectively. Like they essentially said that, I believe they even said that like 2027 growth was going to be pulled back. You know, they're going to see that type of level of growth, like way in because of the pandemic and then they kind of revise that downwards and i mean i

mean if they're issuing that type of outlook like i mean a lot of people you know the stock's going to trade at much higher valuations and uh it just i mean it was trading they realized really quick everyone with a store that rushed to get online that's not gonna happen for three years exactly happen for three for three quarters yeah yeah and i mean it was trading at what was it trading at uh 65x ev to sales during the holy crap and now it's down to sales seven to sales ev to revenue yeah and and by the way it wasn't even close to gap profitable no definitely not it is now it is now yeah there's 65 times the sales with no gap profits crazy yeah yeah it was uh 2020 and 2021 was an interesting time for a lot of companies i mean

it just kind of shows you like a high quality company like shopify i mean it got absolutely wrecked from november 21 it was this would have been split adjusted but it was 214 fell all the way down to 45 42 sorry that would have been the low point and that happened fast that happened over the course basically at the price I sold it at two years ago. It was just kind of at this point where it was like, okay, it's still super expensive. I think I made a mistake overpaying for this thing. Let's see how this competition shakes up because that's still a concern, by the way. They have the best product, but it was pretty opaque at that time. Yes, there's the ecosystem they're building around it,

but how much better of a builder is it than the other ones? I think they've really demonstrated that. They were also offloading the logistics business at the time. There was a lot, growth was slowing down. There was a lot of questions at the time, right? So I understand why the story was pretty unclear. Yeah, I mean, they just keep developing new, you know, stickier subscriptions, keep merchants around. I mean, this was a company that I own.

I think I bought it in 2018. And then I sold it in early 2021. And I was like, this company is, it's way too expensive. And then for a little bit of that like it just kept going up and up and up and up and i'm like oh my god did i make a mistake isn't it yeah but i mean it's back to pretty much but you're not but that's happening and you're not gonna be like okay i'm back in it's 65 times yeah exactly you just gotta like and now if you look at it it's it's effectively backed like split adjusted back to the price that i sold it at so at it it's it's effectively backed like split adjusted back to

the price that i sold it at so i mean it's it's a great company but i mean it just goes to show you like sometimes valuations can get out of control out of control absolutely out of control you know this is a classic example of a founder-led company you know know, between Toby and Harley, they're still so in the weeds. Like I follow them both on Twitter and, you know, you're a great, you know, there's a great founder of this public company when they're like helping customers on Twitter, like customer support, you know, like they're in there, like they care deeply. And as I was hinting at the beginning of the episode, the two of them are all like on a make Canadian entrepreneurship great again crusade right now, because that's who they serve, right? They serve entrepreneurs and builders and dreamers who want to make a

business online and sell things online and boost the GDP of the internet, right? And so, they are aggressively making that vocal on Twitter. And they have some interesting thoughts. And I think that the media and some folks have been quick to immediately shut off what they think because they're billionaires, right? Yeah. It's like, you only care about your business, right? It's so easy to just like attach their incentives to what their political stance is. But it's like, yes, they're billionaires because they've created an insane amount of value for so many people and helped so many people build businesses and and uh you know online companies it's they deserve to capture the unit economics of what they've created yeah i mean do

you imagine like how many businesses shopify saved during the pandemic like when you know every brick and mortar was shut down i mean that was that it was huge value and i mean obviously you've seen it like businesses like their acquisition in terms of like small businesses that went to the platform it just went through the roof and they've stuck around right like it's so effective that they haven't gone anywhere yeah they've went and you know opened back up their brick and mortar stores but the vast majority of of you know retailers are are sticking with it because it's such an effective platform so this episode comes out on thursday november 28th which means black friday being the 29th and they do that they have this really cool like day of black Friday thing that just shows where all the transactions are happening around the world.

It's this globe and it's, it's pretty cool. I don't know how much of it is real, how much has been animation, but they, they go pretty in detail about what's being moved, what the type of products are, how much gross merchandise volume.

I'm just looking at Finch out here in the, this, of course the holiday Q4 is their big one. They did 75 billion of gross merchandise volume in that quarter alone last year. What's it on a TTM? So almost 300 billion of gross merchandise volume on the platform in the last 12 months. Yeah, it's gigantic.

I mean, I wonder, I'm interested to see how much they move this Black Friday. I mean, I think the consumers... It'll be a record. You think it'll be a record? I mean, yeah, I would imagine. But I just kind of wonder you know how consumers are obviously pinched right now so i mean is it going to be as good as you know it is there's just so much more volume moving on shopify that it out it will outweigh

consumer you know it's like paul graham of yator. He basically says the best times to build startups or build companies are in really tough times economically. Because you know really quickly if customers care about what you're doing. If you're actually solving a problem. Or if it's just like frothy excess capital going into your company because there's frothy excess capital going into your company. Versus like you're solving a real problem and customers are like yeah the economy's terrible but you made my day better and i'm gonna pay for it well yeah i mean look back to 2021 i can't remember the numbers like right off the top of my head but me and simone were talking about it and like i believe they had like 20 or 25 tsX listed companies like IPO during that time. And like 60 or 70% of them aren't even trading anymore.

Like it was just, it was frothy. And I mean, yeah, when times get tough, I mean, you're really going to know if somebody truly values your business and whether you provide a pretty sticky need or if people just got money to toss around. Yeah. Well, thanks for listening, folks. That is a good little lollapalooza of Canadian stock discussions. Refreshing for myself too, because we talk a lot about big picture stuff and there's so much to talk about with US markets too. But there are some gems that we try to uncover on the Canadian stock market. And we've covered a good amount of them. I don't know if you're listening to the pod, but I brought up stocks on our watch list for MDA Space. That company is crushing.

I'm sure you guys look at it maybe on stocktrades.ca. It's mda.to. They have won some massive contracts recently and the backlog has exploded so i put this on the stocks on our watch list segment recently and damn i should have bought the stock i didn't but still still won again to keep on the radar. Still only trading at 16X free cash flow. And 3.2 billion in market cap, right? So like- Very small. Still small.

And when these things are that size on the TSX, you just, I don't have that concern in the back of my head, like seeing the price go haywire, like, oh, US FOMO retail got a hold of this. I'm not concerned about that. No. have that concern in the back of my head like seeing the price go haywire like oh u.s fomo retail got a hold of this yeah i'm not concerned about that no yeah i mean typically yeah exactly like there's just not enough interest or you know money flowing into the there's no flows yeah yeah so when something like this happens it's usually uh you know because of fundamentally driven fundamentally driven yeah Yeah, definitely.

Thanks for listening, folks. Coming close to the end of the month here. And, you know, you, myself, Simone, we'll have our monthly portfolio updates on jointtci.com. It is Black Friday for FinChat. We offer two big sales a year, usually one around like a big product release and one around Black Friday for FinChat, we offer two big sales a year, usually one around like a big product release and one around Black Friday. So it is 25% off automatically when you check out on FinChat from Thursday, November 28th to the following Cyber Monday. So it's just four or five days

of 25% off. It's the best sale you can get all year. It should automatically check you out, but if it doesn't, you can use code manually, Black Friday 2024. That is code Black Friday 2024, but it should manually do it for you on checkout. Thanks for listening. We'll see you in a few days.

Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities Canadian Investor Podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.