The Canadian Investor - Commodities Are On a Tear - Earnings Roundup

Episode Date: March 10, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Bank of Canada raises its benchmark interest rate Crude oil is reached $120 based on the WTI price Federal government makes an announcement on the Shaw acquisitions by Rogers Growing list of companies are exiting russia Commodities are outperforming the rest of the market Park Lawn Corporation earnings Teladoc earnings Autodesk earnings Etsy earnings Mercado Libre earnings Block earnings We finished the episode by answering some non-investing questions from twitter. Tickers of stocks discussed: ADSK, PLC, TDOC, ETSY, MELI, SQ 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.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. 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. Today is Monday, March 7th.

I'm Brayden Dennis, as always joined by Simon Belanger. How are you hanging in? Because I have currently one position in the green today. I don't know if you've if you happen to check, we are recording at the close of March 7th, but the market is feeling as bearish as it has been in quite some time from my perspective. I have a few actually, Brookfield are doing quite well, BEP and BIP are doing pretty well today. And they're pretty big positions for me, so I can't complain too much. Yeah. There you go. Those rock solid utilities hanging on.

Yeah, I know. They've been performing well, I guess, with all the news that's going on, especially from energy perspective, I'm sure is helping those two parts of the Brookfield family. And for the rest, obviously, I do have some growth companies and I'm definitely feeling it in my portfolio like you are. Well, you and I don't own a commodity portfolio and that's what's doing well. That's what's, we're going to talk more about that. I have one position of 17 in the green. That is my largest position,

my beloved Constellation Software. Hold it out in there, still above $2,100 Canadian. So bless Constellation Software. We had news last week, last Thursday, we had news of a rate hike. Thursday we had news of a rate hike. I ironically released the day of the release of our podcast episode of me talking about on the previous Monday how I'm like, I don't know, I don't see, I have it as a less likely scenario that rates are hiked. It shows you one, this is impossible to predict. And two, I know nothing about macroeconomics. So take it away. Yeah, yeah. And I was saying that it could very well be possible because it's just an additional variable in this whole calculation for central banks. And I really didn't know which way they were going to go. But obviously, what's happening in Russia can have kind of two impacts, it could impact the economy, but it could also, you know, creating a recession

or something like that. But it could also create even more hiccups when it comes to supply change and price pressure. So I think the Bank of Canada is taking these stands that it may exacerbate inflation and make it potentially even worse. So they announced last week, like you said, that they were raising the benchmark interest rate 25 basis point to 0.5%, which is still to essentially historical lows. Let's keep in mind, we were, I think if I remember correctly, around 1.75% or 1.5% before the pandemic started. So we're not even close to where we were before it all started. But the Bank of Canada Governor Tiff McLean met with the press on Thursday, which was a day after that the announcement came out for the interest rate hike. And he was saying that they're forecasting stronger than expected growth in Q1. And they revised their outlook for inflation up compared

to what they previously expected even just a few months ago. And they did mention, McLean mentioned, that their main focus right now is to keep inflation in check and that several more increases are to be expected. He mentioned that the Bank of Canada can't control the impacts that the Russian invasion of Ukraine might cause on supply chains, but they can't control the cost of borrowing. Consumers may not like it, but if the cost of borrowing increases, it should lead to lesser demand for goods and services, which should lower inflation. And home prices. Yeah, yeah, we'll see.

I'm actually, I don't know with home prices, just because there is usually a bit of a delay, right? Because most people have a fixed rate. So you won't see the pressure of potential higher rates on the current homeowners until maybe three, four years down the line, depending on when their fixed rate is ending. But it could put a pressure on new buyers that are looking to borrow, which obviously they won't be able to borrow as much if interest rates are going up. Well, I think a lot of people are doing variable as of late. I think that that's been very common as of late. Now, speaking of all this, right, like rates going up, rates are still so low.

They're still so low. And there is still so much to be optimistic about as an investor. If you look across the market these days, it's so easy to have some pretty good ideas, from my opinion, based on where some stocks are trading on historical multiples and forward multiples, given their growth rates and given how low rates are historically, it actually tells me that stocks are cheap today. And this goes to the episode that I talked about last week. When have we been saying that? It's been years. It's literally been years. I've always said, you know, there's lots of great opportunities out there if you look hard enough.

And today, I think you'll find lots of good opportunities without even looking that hard. Stocks today look very attractive to me personally. And that goes against whatever you will see on CNBC and whatever bearish sentiment I'm seeing on Fintuit lately. And it just, you know, people follow the crowd. Yeah, and I mean, higher interest rates could definitely put some more pressure on growth stocks. So that could definitely happen. But I agree with you.

There's a lot of growth stocks, growth companies that have amazing prospects in the future, 2, 3, 4, 5, 10 years in the future. And they're trading at some more reasonable valuation. I think for the most part, they're still considered what people would say, you know, pretty high valuations can frothy, be pretty frothy, but it's still probably, you know, for the most part, about 60 70%. In some cases down from their high, at least a lot of them are down at least a good half from their highs. So it'll be interesting what impact it does have. And the last thing I wanted to

mention is a lot of people that know the bond market way better than I do are arguing that the actual real interest rates, if it was really market based, should be about 6% to 7% to really curb inflation. So whether, you know, I don't, I think it's pretty unreasonable to expect the bank to go that high, but just food for thought here. Obviously, I'm not an expert on bonds, but that's what most experts do say in the field. Now, as this is all happening on the macro side, there is a interesting force that we're seeing out there. And it's affecting all of us. And we can see it with our own eyes and with our wallets.

Crude oil topped over 120 on the WTI. That is the West Texas Intermediate. I paid $1.72 to fill up my car on Saturday, just north of Toronto. I have seen pictures on the internet of over $2 per liter in Vancouver, which apparently is a historic high. And as of recording today on March 7, looks like that's going to continue to head in that direction. General sentiment I hear around here is with the commodity supply getting rocked, we are going to see this new inflationary pressure. And not to mention, wheat, corn, and potash is going parabolic because those are large Russian exports, which you mentioned last week. Expect that grocery store bill to continue on its trend inflationary-wise. Just a really quick reminder and tip for self-direct investors.

Contribute to your account and stick to the plan with what you can. And I know it's easy to say, easy for me to say, but I know a lot of folks financially are stretched with these inflationary pressures that we have seen. And now we get these external forces that are going to also increase the prices of things we interact with on a daily basis. However, if you stick to the plan, I believe there are some awesome opportunities in the stock market, even just a broad market like S&P 500 fund. Contribute what you can in the budget. I use a regular bill payment from my bank account, go straight into my brokerage, goes on the same day, and then I buy stocks on the first Tuesday of every month. And just with what you can, because it's really easy to just say,

I can't invest right now. It's really easy to say that. And I think most of us can if you really, really try. Last week, you talked about money-saving tips. I get it. It's tough. But if you have that regular bill payment with what you can, maybe you have to reduce it a little bit, then do that. But if you stick to the plan, keep dollar-cost averaging, you will be amazed at the results. Yeah. And to just add to what you said,

inaction is the easiest action. So by doing what Brayden said, and you said these automatic bill payment, you don't require any action on your part to do it. Once it's set up, it does it automatically. And it's much easier to do that than having to do it every week because, or every every couple weeks or every month, whichever the interval is, because when you have to take an action to do it, you might still be able to afford it, but you might just have forgotten a given week, for example, or a given couple of weeks. So just setting that up automatically is a great way to making sure that you're doing it on a regular basis.

is a great way to making sure that you're doing it on a regular basis. So now we got some news last week that the federal government said it will be blocking the wholesale transfer of wireless licenses owned by Shaw Communication to Rogers Communication. For those of you not aware, Rogers made an offer to purchase Shaw last year. The deal is still currently being reviewed by three Canadian regulators, including the CRTC. And industry minister François-Philippe Champagne says that the federal government won't permit the whole transfer of Shaw's Wireless business to Rogers because they have competition concerns. And earlier this year, Rogers leadership was expecting saying they were expecting that the deal would close in Q2 of this year. And I've dunked enough on that leadership.

But I just have to say that making these kind of predictions when the federal government has traditionally been extremely sensitive to competition in the wireless market is pretty reckless, if you ask me, because you don't know what the federal government will do. And honestly, if anything, they are very reluctant with consolidation in that space, because I know we were talking about that before the podcast. Voters are very price sensitive when it comes to their cell phone bills. And that's really important for the government. The regulatory environment is very sensitive on telcos. I think that that's been quite obvious. Just from a thing that I have from my sources is that apparently through the grapevine

I have been hearing that there's been a lot of turnover in the telcos talent-wise. This does not surprise me at all from Rogers, for instance. And I hear from my sources that they're all going to Telus. I hear Telus has been elite at stealing talent from Rogers and Bell over the last two years. This is just in my inside source, my inside track. And it has been a significantly better asset than the other two. And I'm like borderline, very impressed with Telus these days, you know, and also looking at the spinoff of their digital consulting business.

You know, I'm impressed over there. They've been creating value and investing in the right things over time. Whereas the other two, I don't know if I can confidently say that, especially not with the Rogers. And so just a little hot tip from my sources. Yeah, you should start a new business, Brayden, like Dennis headhunting, Teleco headhunting. The Teleco headhunting business. Yeah. And I just, I pretend it's all secretive. And then little do they know, I'm like announcing on this podcast, like all the ins and outs. Yeah, that wouldn't go very well. No, I mean, I think as a general rule, whichever field you're in right now, if there's qualified labor, there's a lot of competition to attract

talent. Now we'll move on to the next piece of news. I'm sure everyone has seen this. I feel like it's on the news every single day. There's a growing list of companies that are either scaling back or completely halting their operations in Russia. BP was one of the first one. It said it would be abandoning its stake in Russian oil giant Rosneft. Rosneft accounts for around half of BP oil and gas reserves and a third of its production. It is divesting the 19.75% stake it has in the Russian company, which will result in charges of up to $25 billion. ExxonMobil followed suit and announced that it would pull out of key oil and gas projects in Russia, namely Sakhalin-1, and halt any new investments in russia boeing and airbus have stopped supplying parts and service support for russian carriers google has paused all ads sales in russia that includes

both for their search engine products but also youtube twitter and meta have both taken down russian state media run accounts twitter pause pause ads in both Ukraine and Russia, both Twitter and Facebook have now been banned by the Russian government. And I'm going to rattle off a list of companies that either reduce or completely stop their operation. This is not all of them. I did this list on Sunday. I know there's been new names that were added to that just today, for example, and I know I'm missing some. So definitely, you know, don't tweet at us to say we missed some companies. But these are just some of them who have either reduced their operations or completely stopped. Toyota, Volkswagen, Volvo, Airbnb, Disney, H&M, Ikea, Nike, Apple, Dell, Microsoft, Visa,

MasterCard, American Express. And I'm sure we'll see more companies following suit. For me, I'm kind of lukewarm on this. I still come down to, look, it's terrible what's happening in Ukraine with the invasion of Russia into Ukraine. But all these economic sanctions and businesses pulling out of Russia, I still worry the impact on everyday Russians that it will have. And I know it's supposed to put pressure on Putin, but I'm not sure if it's going to have the desired effect or not. And I think a lot of, unfortunately, Russian people will suffer in all of this. And probably a lot of people that do not agree with the war at all either.

So I think it's important to keep that in mind. I know Ukraine has been getting a lot of support and rightfully so. But I just wanted to mention that part as well. I have two main thoughts there. rightfully so. But I just wanted to mention that part as well. I have two main thoughts there. One, that it went the way that I expected, which was that the state would actually ban Facebook from the people who live there, not the other way around. I was seeing calls for Facebook to stop their operations in Russia. And I'm like, wait, what? That is so counterintuitive to what you'd

actually want, which is the spread of the truth information between the citizens. And I was like, if anything, it's going to go the other way, which is what happened. They want to control the narrative and censor as much as they can. So that makes sense to me, even though I obviously don't agree with that. That's horrible. Now, all of these companies, I saw a graphic of, you know, those graphic where it shows like millions of different logos into these like complex webs. And it showed all of the major brands that you would and I would know that have just completely canceled their operations. I'm using the word canceled because it's the one that feels right of them doing business in Russia. Even if it may make zero difference, it's like,

we got to protect our brand and cancel Russia. Now, do you think that it makes a single difference? Other than the Visa, MasterCard, American Express, that's like pretty, those are like large kind of sanctioned vibe type things. But a lot of them are like, okay, you just hurt the people who live there who have already been living in a dictatorship. Man, I just, I don't agree.

I don't wanna see the point of this. I really don't see the point of this. And I think that you see it the same way as me. However, when I look at like Visa, MasterCard, American Express, if you look at the Visa press release, it said, we are stopping all operations of the Visa network in Russia. That was the headline. That was the press release. in Russia. That was the headline. That was the press release. If you look at the details, it's still going to work if it's a visa issued by a Russian bank. Now, MasterCard, it looks like it's a little different, but that to me would make up most of the transaction volume, right? I would think so. Yeah. If you're a Russian citizen, yeah. You'd think, right? So with everything, look at the details because they're

important. All the information is in the details that they have to actually disclose and not in the headlines. We have got so caught up in our world of only reading headlines without looking at some of the details. And yeah, so I have many long list of thoughts here. But it's unfortunate that a lot of people who want nothing to do with this war, which is the 4800 people in that country that got arrested for protesting this weekend. They don't want this and they're the ones really paying ultimately for this. Not Vladimir Putin. He's not going to miss a meal. And so a lot of it doesn't sit well with me. Yeah, I'm actually meaning to read I saw on TSN, I haven't had a chance that came out today. It's a political expert who weighs in on the Russian NHL players, what kind of risk they're facing if they do speak out against Putin. So I'm very looking forward to read that just to get that additional perspective when people are quick to denounce players for not speaking out, for example, quite enough. But anyways, yeah. Yeah, right. It's like the generalizations being made. These days,

we're so radical one way or the other, and it comes out in a lot of unfortunate ways. 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, 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the

asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. All right, let's talk about first team, all

Canadian, Rick from Saskatchewan. And his portfolio is on fire. This portfolio is on fuego. Let me tell you about Rick, okay? He lives just an hour outside of Saskatoon. By the way, I have a couple Stratosphere customers from Saskatchewan. I think they're my favorite people ever. They are the nicest humans ever. So Rick, he's held TD and Royal Bank since 1992. And he bought those shares when he had his first kid and he never sold a single share. He did love his pot ash corp and agrium, which merged together to create the new powerhouse nutrient, which he owns in size, by the way. Of course, he's from Saskatchewan.

He loves grabbing his Tim Hortons on the way to beer league with the boys, although he secretly likes McDonald's coffee more. We won't tell anyone. He has a soft spot for Canadian oil. He understands we have to eventually move off oil for his kids' kids. But in the meantime, why would we buy it elsewhere? The demand is still there. That makes zero sense and is actually more environmentally intensive. Rick's a smart guy. He's owned Suncor since the crash in 08. Rick is

a simple guy. He doesn't sell stocks for no reason. He's patient. He only checks his brokerage every few months. Now, he was pretty late to tech, although he did buy Apple stock last year because he noticed that all of his kids who are in their late 20s are heavily addicted to their iPhones. Sounds like Rick is related to Warren Buffett somehow. There's some correlations in the types of investments that Rick and Warren Buffett own. Banking, a little bit of oil and apple. You're right. Now, Rick from Saskatchewan, not to be confused with Rick from Red Deer, who's also a legend.

He's kept his portfolio pretty simple. In March of 2022, the Saskatchewan native is having his moment to shine. Things are looking fruitful in the prairies. 40% of potash production was coming from russia and 39 of it from his humble canadian province and this is global supply by the way this looks pretty good for the nutrient company this looks pretty good with overseas supply destroyed now oil is ripping i do have to mention though he's paying an arm and a leg to fill his Ram 1500 with gas right now. With prices approaching two bucks a liter, he read his

morning paper and it said that it's on the rise. But hey, look at the oil stocks. No problem. The wonderful Canadian bank shares Rick has owned since 1992 are all-time highs. It pays him an egregious dividend yield on cost. Him and his wife started building a new dream house in 2019. Now he wanted this dream house because now his two oldest boys are in the working world and his youngest and by far the brightest daughter, she is in fourth year from microbiology. They wanted their dream home which just finished construction. Rick is a handy dude so he helped out the contractors here and there but mostly just for fun because he hurt his back pretty badly last year simone he picked up the new pandemic hobby which is a game of golf addiction

now the old house that he just listed for sold for 1.6 million i know that's a big house in skatchewan but it did after he listed it for 800K, he got 16 offers. Now they're moving to the newly built home at the end of the month. His portfolio is on fire. Suncor stock on a trailing one year is up 48%. TD is up 20%. Nutrien, 78%. Plus all those dividends.

Not to mention, since the past two years of working on their own home, he made a bunch of money off the old house and the land he bought after the new home is constructed tripled in value since they started construction. This is the story of Rick from Saskatchewan and his Canadian core portfolio on absolutely fire while the rest of the young guns are getting destroyed in tech stocks. That's my monologue for the day there, Simon. Yeah, I mean, I've been Nutrien, I've been beating the drum on it for what, the past month or so? You have been. I got to give you credit. You've been beating the drum on Nutrien.

I mean, it seemed like all the stars were starting to align. They had like really good demand last year for potash and nitrogen. And then obviously with what's happening with Russia and even before the invasion, we were starting to hear about potential sanctions. And that's when I was like, oh, Nutrien is really well placed if there's sanctions on Russia. And it's been on fire. I feel like it's up 5% every day when I check. Yeah, well, I mean, look at the supply landscape, right? They're about equal parts with Russia. Now, that's 80% of the supply globally, right there, Russia and Canada.

And so Canada is uniquely placed in a lot of ways. I think that's the wording you used when you were texting me. They're uniquely placed in a few of these key areas for commodities. Now, if you've owned commodities and you're absolutely having your moment to shine right now, good for you. I will reiterate the reason that Simone and I don't own them. It's because over a long period of time, if you zoom out, they've got crashed to the index. The Suncor stock that's up 48% on a trailing one year, it's done nothing for a long, long time now, even after this run. Yeah, you've got your dividend

stuff, but the reason it has not performed great is because the commodity has not been favorable over, you know, what, like 10 years? It's having its moment now, but it hasn't been a favorable commodity. And when the commodity is not favorable, the business is not favorable to own. And I have no ability to predict the prices of those commodities in the future. And so that's why I don't own any of them. Yeah, exactly. Now moving on to some actual earnings. So I worked on the ones I'll be. And now moving on to some actual earnings. So I worked on the ones I'll be talking about about like 10-12 days ago. So I had to reread them just to refresh my memory, because we ended up doing a special episode on the whole Russian invasion of

Ukraine. So the first name on the list here, Parklawn Corporation, they released their full year results. For those not familiar with Parklawn, it's a cemetery, funeral home, and cremation business. They've used a roll-up strategy over the years to grow their business. Their revenues increased 14% to $369 million. Earnings per share increased 73% to $1.10 per share. Their free cash flow increased 17 to 56 million their average revenue per call grew nine percent a call is essentially just a debt call meaning it's a revenue related to one deceased person so depending on the type of service that they do for the uh i guess the family of the deceased person. Obviously, their profit margins will vary depending. Typically, the cremation is the lowest margin,

but then there are some that will be higher margins. During the year, they completed a total of 10 acquisitions, deploying $125 million USD. They continued their growth by acquisition strategy. Clearly, the company announced in December that it was moving from a monthly dividend to a quarterly dividend. However, the amount per share on an annual basis will remain unchanged. Their dividend hasn't changed in years. It's just been a flat kind of dividend over the years, but it's been a fairly steady grower. It's still a very, I would say, small cap.

I think they're a bit over a billion in market cap, so still a pretty small business, but I mean, almost comes back to similar to Nutrien, right? People have to eat. In this case, unfortunately, it's part of life. People pass away. Yeah, it's one of the only sure things around here and there have been some awesome performing TSX grow by acquisition companies in that like kind of sweet spot I don't say like kind of mid caps for the TSX disregard race said with mid cap because constellation software is obviously 45 billion but if we look at like constellation if we look at TFI International, we look at OpenText, we look at WSP Global, we look at Parkland, we look at First Service. The list goes on, right?

It's these grow by acquisition TSX listings that have all done so well. Like we have some really, really solid capital allocators. And I don't know exactly what the market dynamic is for why they've all like all as a group and so good. But this is another one of them, right? Like this is another one of those. The roll up works. Yeah, they're definitely expanding in the US too. They've had US operations for a while, but they're definitely continuing that strategy in the U.S. And the cemetery and cremation business and funerals in general, it's very fragmented. Super fragmented. Yeah. And that's the kind of the theme, right? Even with GFL, for example, that's typically been an industry where it was super fragmented as well. But yeah,

that's one I definitely keep an eye on. I owned it for a while. And then when the pandemic started, I sold it a bit before it started because I wanted to deploy some capital in potential other businesses. But I'm not saying that I won't, you know, reenter the equation at some point in the future. If you look at these roll up strategies, like you said, the key word there is a lot of them are very fragmented. And they're looking to these like mom and pop entrepreneur stories are looking to one, financially secure their future by taking a huge, huge check for selling their business to one of these large publicly traded roll-ups. And there's a lot of synergies that come with you acquiring them. But if you look around, the number of them is still gigantic. The number of these independently

operated, fragmented, use the GFL example or this funeral example. The GFL example is there's tons of solid waste collection, mom and pop shops that run like one or two towns waste collection services that are looking to potentially exit the business to sell to GFL. We look at niche vertical market software companies, the founders want to do something else, they want to make their next company, they sell to an operating group of Constellation Software. If you have a family-owned engineering firm, there's tons of them, and they have very specific talent and expertise in the engineering firm they do. WSP might approach them and buy their company from them, and there's many more targets left. This is still super fragmented. Those are the types of rollups

that I want to own. Moving on to Teladoc, I know the folks around here wanted to hear what you have to say about their recent earnings, yet not so nice looking stock chart. Yeah, yeah. So Teladoc released their Q4 in full year, which ended on December 31st, 2021. Full year's revenue grew 86% to $2.03 billion and total visits increased 38% to 15. I'm going to say I'll have to revisit my number because I think we deleted some of the notes by accident here. I'm always messing with your document. I'm sorry. Yeah, I know. So anyways, the total visits increased 38%. Let's just leave it at that. Very good results overall for Teladog, but keep in mind that the Livongo acquisition closed on October 30th, 2020. So this means that a good part of that growth obviously came from that

Livongo acquisition because only a small portion of 2020 had factored in Livongo. Everyone knows I own Teladog, but I think it's important to know that a good portion of that growth was in organic. They produced $185 million of free cash flow this year versus $57 million last year. So that's more close to at least two and a half times around there what they did last year. They increased their gross margins by 400 basis points to 68%. Their access fees revenues, so these are fees paid by insurers on a subscription basis, grew 104% to $1.7 billion. Visit fees grew 15% to $254 million. Visit fees are paid on a usage basis. U.S. revenues grew 94% to $1.77 billion and international revenues grew 44% to $258 million. So the majority of their business is still definitely in the States and they are guiding pretty well I have to say for 2022. states and they are guiding pretty well I have to say for 2022 they're guiding for 25 to 30 percent growth in 2022 which would bring their sales between 2.55 billion and 2.65 billion and one

of the things that they mention is that the pandemic has actually normalized virtual health care visit and in my view Teladoc should really continue benefiting from this trend going forward, not only from a primary care lens, but also with a chronic care and mental health lens as well. The Livongo acquisition, I think, is really starting to pay dividend for them because now they're seeing more and more clients and patients using more than just one service from Teladoc. And especially guiding 25 to 30 percent in revenue growth in 2022 when they're comparing now to 2021, which was a full year of Livongo. That's extremely bullish for me, for Teladoc.

And right now it's definitely down a lot. It's down more than 70% from its highs and it's trading around five to six times sales. So I still own it. I owned it when it went to more than $250 a share. I did sell a bit because I needed to pad my emergency fund. And that was a logical one to do because evaluation was quite stretched at the time. So I do understand if you bought it at pretty high prices, you may be feeling the pain, but just, you know, look at focus on the business. And to me, the business is still looking quite promising here. If you scan the market, there are tons of stock charts that look like Teladocs. However,

tons of stock charts that look like Teladocs. However, if you compare that to say their top line sales or just even the qualitative factors, they look very different than something like this. So there is a key differentiator between some stocks that have just gotten absolutely decimated they traded at prices that didn't make sense relative to their growth rate let's use blackberry as an example like trades at the same sales like what was it in the summer we were like yeah six seven times or something like that yeah yeah we're like who buys blackberry at seven times sales and doesn't expect any growth. It makes no sense. That was our comment with like, okay, even if there's a turnaround, potential turnaround, why am I paying high quality growth stock sales numbers on a low margin declining software business, like low margin for software, declining sales, potentially melting

ice cube. Management says they're going to steer the ship and they've been there for 10 plus years and they're still, I'm still waiting for the ship to steer. And so there are many companies like Teladoc kind of getting bucketed into that. But if you look at the business, I mean, come on, it got stretched. You and I both know a telehealth play during a pandemic is going to probably get frothy, right? Like we can all. Oh, yeah. Yeah. And I mentioned it, right? I owned it. I kept owning it. And that's one of the things I mentioned. The valuation was stretched. So whenever you're looking at nosebleed valuation, it's always a big risk, right? We saw it with Lightspeed as well. That was one of their biggest spare thesis for them is just the valuation was completely crazy amongst other things. But yeah, you have to keep that in mind. I know it sucks if you bought towards the peak. I mean, it is what it is at this point, but just focus on the business for sure.

what it is at this point, but just focus on the business for sure. Now let's talk about Autodesk. Now I know we're a couple of weeks behind on some of these earnings releases. However, it's a nice thing because the release of earnings season has basically come to a screeching halt. And we get to talk about ones that we didn't talk about that we find interesting. Potentially, maybe we own some of the shares and we think are interesting businesses. Now, full year revenue for Autodesk was $4.3 billion, which was up 16%. It generated $1.5 billion of free cash flow, up 10% year over year. This is one of those really profitable type software businesses. Total subscriptions of 6 million, an increase of 14%. Now the AEC product family, which is architecture, engineering, and construction had revenue growth of 17%.

Now the AutoCAD segment, which does serve the core AEC product family, but they separated on their line items. AutoCAD grew 20% on top line revenue. Boring, old, still getting it done, double digit, 20% revenue growth after all these years. It has now been around for 40 years, AutoCAD. Can you believe that? 40 years. Now the media and entertainment segment was up 38%. This is a really interesting one to follow. Guiding for 22 to 25% in billings and 14 to 17% growth and over 2 billion in free cashflow guidance for this fiscal year. That's in line with what I typically see and think and model and project, which is about 20% in billings and 15% in revenue growth. So those both fit right into what they're guiding for producing now 2 billion in free cashflow is what they expect.

Now, what's really interesting is when they modeled out 2022 and 2017, they modeled out 2 billion in free cashflow. That does not happen very often. When you have five-year free cashflow projections from a company, even when I see that, I'm kind of like, what? Why? Why would they even project that far out? They did that because they were telling investors the benefit of the software as a service transition and saying, hey, I know it's 2017. This

transition is sucks. It's painful. We have a bit of churn. The SaaS transition is really hurting us, but it's going to pay off in the long term. And we're going to see 2 billion free cash flow at one point. They always get done what they say they're going to do. That's what I've always liked about this company's management. This kind of double-digit growth is what I'm expecting. It's really interesting how well the AutoCAD segment is doing, and it speaks to how sticky and important this software is in the AAC market, as well as them being able to kind of flick a switch on non-compliant users and make them start paying. And so they're able to pull a lot of growth levers continually on this really, really sticky software. AAC professionals absolutely rely on it. There is new competition coming in. But what's interesting is they're kind of being built on top of Autodesk.

And that's always something really important to pay attention to. Yeah, yeah. Sounds like a solid earnings release for Autodesk. I sent out an email newsletter for Stratisfree. Go to stratisfreeinvesting.com. And when I sent it out, I was talking about AutoCAD and how it's still getting it done. And someone replied to, I can't find AutoCAD stock. And I'm like, oh, it's because it's just owned by a company called Autodesk. Go type in A-D-S-K.

But 1982 is when AutoCAD was released. It was a desktop app running for microcomputers with these goofy internal graphic controllers on these computers that would take up like an entire room and stuff like that. That's crazy how far it's come. Well, my dad's in architecture and he actually went back to school to learn AutoCAD. And I remember one of the early versions, obviously not that early, but in the mid 1990s, you had this like kind of pad where you had this special mouse that was connected to the computer and you had to like select the item you wanted to do on AutoC from this like grid basically from the pad so it was this weird conjunction but he continued using like autocad later on like the more let's just say you

know the versions we're used to seeing a bit more on that run actual on pcs and stuff but yeah i remember that i can believe that so your pops is architect? He's a technologist in architecture. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US.

Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full

disclaimers and more information. Next one here is Etsy, which released their full year earnings. The market obviously loved their earnings because the stock was up a double digit on the earnings release. Gross merchandise sales, so GMS, was up 31% year year over year this is actually an extremely important metric for those who are not used to this space because it shows the value of total goods sold on their platform so it's a good metric to keep an eye on and i know braden has talked about this in the past when you're following companies on a regular basis you want to keep an eye on at least maybe like a handful of like key metrics for that business. And that would be one of them if you're interested in Etsy. Revenues were up 35% to 2.3 billion. Gross margins were steady at 72% year over year.

Their active sellers increased 72% to more than 7.5 million. Active buyers grew by 17% to more than 96 million. And they had 640 million in free cash flow, which was a slightly less than last year, but not by much. So if you take out Forex variations or foreign exchange, it's almost exactly the same as it was last year. And then Q1 2022 guidance is actually looking pretty good. They're guiding between 3.2 and 3.4 billion in GMS. And for comparison, last year, they did 3.14. So a bit higher than last year, but they had a lot of pulled for growth. This is one of those companies because of the pandemic. If you look at their financials over the past like four years, it's actually pretty staggering to see the

increase when the pandemic started. So I encourage anyone who's interested in this business to do that exercise. And revenues, they're guiding for between $5 million and 590 million last year in q1 was 550 just to give a baseline here growth obviously is slowing a bit but like i said they had a very solid year this year especially for q4 which is the holiday period and keep in mind that revenues increased 16 for q4 alone and they had really tough comps to work from based on 2020, which was the first year of pandemic. So I've mentioned it before. I'm a NetSea shareholder. I'm definitely happy for these results.

It'll be interesting, the growth going forward, to keep in mind what impact the pandemic had on their results. And obviously, it was a very positive impact. But I think a lot of people have just gotten used to use Etsy as a platform. And a lot of sellers that are selling craft goods are getting used to that platform and the benefit that it can really maybe, you know, add to their current store if they have a physical location. I can't believe they have seven and a half million active sellers. Like I see 96 million active buyers. That seems pretty good. It seems solid. But seven and a half million active sellers

is actually like a number that is hard to comprehend. Like think of the scale of having that many kind of niche craft good makers on the platform. And so they've kind of had that brand cognitive referent that if you are in that space and there's seven and a half million of them already signed up, if you're in that space, you got to be selling on Etsy. I haven't used the platform in a while to buy, and I probably should just to check it out. I wonder still, my like bear thesis on it still is how do these seven and a half million active sellers actually, like how do they not churn? How do they be successful enough to keep using the platform and keep giving etsy that like 10 take rate or whatever it is i'm making it up was somewhere between five and ten percent take rate how do they not churn so that's the number that i need to watch if it keeps going up i'm sold on

the business but i just don't know how it does. And so I think that that's something really to keep watching and monitoring. Yeah, I mean, I think it'd be good if anyone has an Etsy store. I know we have some listeners that do. So feel free to just go on Twitter and let us know what your experience is. And if you're finding it difficult sometimes to get your product notices or very easy if you're coming out with new products. My thinking is that a lot of these sellers are using this maybe not as a primary source, but as a supplement. So whether they do, you know, like these kind of craft goods market that pop up during the summer and stuff like that,

but then also have the store as a supplement source of income. So I don't know. That's my thesis. I could be way off. But if anyone has sells some crap good on Etsy, let us know what your experience is like. That discoverability really matters for these marketplaces. And so it would be yeah, it would be good to talk to someone who's like a small seller and see like what the discoverability is actually like. Speaking of marketplaces and e-commerce, one I've been hinting at a little bit is MercadoLibre, ticker MELI, M-E-L-I. They had gross merchandise volume of $8 billion US, which was up 32%. They sold 287.9 million items, which was up 25%. This is on the e-commerce platform. Net revenues for the

whole company were up 74% to 2.1 billion US. So these numbers are all in US because the currencies they work with, there's tons of them, right? They sell goods in Colombian dollars and they have it in all of Central America. Brazil is their largest country in terms of e-commerce. Now, total payment volume, this is exciting. Total payment volume is up 73%, 24.4 billion. TPV off marketplace, the total payment volume off marketplace was 16 billion, up almost 100%. Now, they also have this credit portfolio that's growing. They're kind of doing all these interesting things for the highly underserved Latin American market. The stock currently today is at its best valuation in history based on

where it's at. Seven and a half times sales when I made these notes is probably even lower now called seven times sales for a secular winner in payments, e-commerce for the Latin American region, which is like low, low penetration so far. Trades at 57, probably lower now, 57 billion in market cap feels right for what could be a several hundred billion dollar market cap company at one point for their dominance in payments and e-commerce across all of those regions. Still down well over 40% off the high. It's one that I said last week is on my watch list. Really interesting business, secular winner. There are of course risks with the regions that they work with, currency being a huge risk across many of those countries. And so that's something to think about.

However, the business is doing exceptionally well, low penetration in e-commerce and digital payments in those countries. And MercadoLibre is by far the front runner and definitely one to pay attention to. Yeah, definitely. It's gotten cheaper today. It's down 10%. So it's definitely gotten cheaper. That's why I kept saying like, I'm making these notes. And it's like, it's even better today.

Like the stock was at its best valuation ever when I made these notes a week ago. It's like the old adage, you know, if you liked it then, you better like it now. You better love it now. And so I do feel that way about this business. Doesn't come without risks. And no high growth stock does. But I think it's one worth paying attention to. Yeah, it's crazy how like, I mean, we are worsening it and it's growth stocks in general. I tweeted something about Shopify a couple weeks ago. And it's funny, some people got offended saying I was just, you know, not asking the right question. Essentially, I was like, oh, you know,

it's down 60% from its high, but yet the business is nothing has changed, right? I was just trying to highlight in a roundabout way, the market sentiment, how quickly it can change about like a business, even though the actual fundamental of the business won't change. But I think this is another example here. Sentiment can change really quickly. And it's the whole sector of stock or old basket. It's not, you know, Melly or Shopify. Specifically, we've talked about it, but it's crazy how quickly it changes, right? It's okay. That guy that called you out tweeted the day before that he doesn't like going on boats so like his opinion doesn't really matter you know if you don't like going on a boat dude come on like

you just admitting you don't like having fun if you're on a boat and not having fun what is wrong with you no but i digress do we have uh one more here on the slate here, Simone? Yeah, one more. So yeah, the last one here. So Block, formerly known as Square, they released their full year 2021 earnings. Net revenues were up 86% to $17.6 billion. One thing that I will mention here is that keep in mind that their Bitcoin revenue more than doubled year over year to $10 billion, but it's extremely low margins. So it may look better than it actually is. I mean, it's good that it went way up, but it's very low margins. Net income was down 25% to $160 million. However, free cash flow was

up close to 1,900% to $713 million for the year. That's a pretty nice increase. One of the highlights was the Cash App with generated gross profits of $2.07 billion. This is a 69% increase year over year, and they're still just in the early stages of monetizing it, which is pretty phenomenal if you ask me. And they closed the acquisition for Afterpay on January 31st, 2022. The total cost ended up being $13.9 billion instead of $29 billion, which was the estimate when it was announced. However, it was an all-stock deal, so clearly Square Block's share price has gone way down since then. So it was a good move on their part to do an all- stock deal because it allowed them to get the business at a cheaper price. I'm still kind of reluctant to say that I like the deal or not.

I'm not sure if it's worthwhile or not paying that much for a buy now, pay later company. But we'll see whether they're able to really reap the benefits of that over the next few years. And then the last thing I wanted to mention here is their GPVs. It was up 49% to $167 billion year over year. Their GPV is actually increasing now towards, well, it's actually almost an even split between companies that have more than 500,000 in annualized GPV, companies that have 125K to 500,000, and then companies that are 125K. So essentially just showing that they're normalizing their revenue. They're not as dependent on smaller sellers anymore.

It used to be the opposite about five, six years ago. And now it's almost evenly split between larger businesses and smaller businesses. This is a story that I actually no longer understand and completely stopped coverage of for many of the reasons that is block. Very, very confusing story for me. I'm like, what is Tidal? Is that a real company? I'm just curious. Is that a real company? Now, I know I'm cherry picking some very, very small parts of the business. However, this is just me saying I don't understand it, so I'm not going to comment on it further than that. Other than the fact this GPV trend down from large sellers is pretty interesting.

Is that a good thing though? Like just asking the question, is that a good thing? I think it's probably a good thing to have it a bit more balanced between all the categories because typically depending on the seller size, depending if there's headwinds, smaller businesses may be more affected than larger ones or vice versa, depending on the type of business. So I think it's just good to diversify the revenue a bit more and not being overly reliant on smaller sellers. But it also shows that they do, you know, we've talked about Lightspeed quite a bit. And point of sale is also a segment for Square, right? They do have those point of sale software.

And it's a very competitive space. I think Square has done a really good job at traditionally that, you know, those small businesses, I mean, you go to a farmer's market and I feel like they all have the Square app on their phone, right? That's the first use case I can remember of Square was like, wow, that makes a lot of sense to have a terminal available for anyone, including like someone just running a farmer's market. You know, like every vendor in the farmer's market to be able to conduct transactions easily with a terminal like that to start accepting visa and debit. Like this just makes perfect sense. I think it had kind of that instant product market fit. And they were definitely the earliest innovator in POS, I think, anyways.

Yeah, that'll be interesting. There's a lot of changes happening at Block. So, and I mean, I totally agree with you. They're taking a bit more of a different direction going forward. It's not gonna be solely Square. They have, you know. They're building, at least so far, it looks like a pretty strong Bitcoin ecosystem. Obviously, it's no surprise

or no secret that Jack Dorsey is extremely bullish on Bitcoin. So we'll see in the coming years whether that pays off or not. It's been a really good investment for me. It's not a huge portion of my portfolio by any stretch of the imagination, but there are some good questions about what direction they're going. So for me, I think it's a company I'm just, I'll still hold, I'm still planning to hold it for the long term, but I'm kind of, you know, every year I'm gonna just make sure I keep a good eye on it, that it still makes sense from an investment perspective for me. I understood Square, I think, for the most part. And not much has changed,

really. I mean, at the end of the day, the fundamentals are the same, they just changed their name. However, what they are planning on doing in the strategic direction looks very different than the current one. And the email that came out from Jack when he left Twitter to work on Block full time and this big name change and the whole thing, he said in the email that a company needs to protect itself from the founder, from the founder making bad decisions. And I was like, oh God. And then he's doing all of these kind of like self-serving Bitcoin type things with his other company. It's a bit of if there's smoke, there's fire management thing for me. And this is where I get really confused on where this company is going. And that's all I

know how to explain it because it just gives me some, it's a little off-putting when a founder says it needs to be protected from themselves from making bad decisions. Basically like, what does that mean, dude? I know where you're coming from. I think he was meaning more that he didn't like the power he had as a CEO of Twitter

to potentially de-platform people. I think that's where a lot of it, you know, he was, I think he was struggling with freedom of speech, but also controlling, you know, things like hatred on the platform and where do you draw the line? And should it be in the hands of a CEO of a publicly listed company to make those decisions? So I think he was probably, he's probably tired of making those decisions too. Yeah. So I would think he was probably he's probably tired of making those decisions, too. Yes, I would argue he was probably coming from that angle. But it's a good point. It's one I'm keeping a close eye on. I want things to continue progressing, doing well.

Obviously, I'm a big believer in Bitcoin. And at this point, if you don't believe in Bitcoin, I think it's a harder case for someone to make to invest in block. To own this one. Exactly. Yeah. Yes. Okay. I totally agree with that because the strategy seems to be kind of, it's like meta now with VR is you can't just own Facebook and think, ah, the metaverse is, you know, it's just some small thing. It's like, nope, they're spending $24 billion on CapEx for the small thing it's like nope they're spending 24 billion dollars on capex for the quarter it's like you know it's not just something you can kind of throw in there anymore and i think that block is a very similar story and he's probably you know sick and tired of

of having that much you know those decisions to be making i mean if you look now we got this war being televised on social media that's how people are mostly finding out of it. Like TikTok and Twitter are basically kind of where people are finding information about it. And so there's a lot of important decisions to be made as the people running those ones. And it's a job that I do not envy one bit, dude. I do not envy that job one bit.

Thanks so much for listening to the Canadian Investor Podcast. We appreciate y'all very much. If you have not given us a rating on your player yet, it's available on Spotify now. If you're on Apple Podcasts, while you're giving a review, write a little message because it actually helps us grow in more ways than you could ever know. Leave a little message, leave a little review, and we appreciate you very much. If you have not checked out Stratosphere Investing, it is the best place for self-directed investors to do their own independent stock research. I truly believe that.

Not biased or anything. And so go check that out. That's stratosphereinvesting.com. We'll see you in a few days, guys. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. at stratosphereinvesting.com. We'll see you in a few days, guys. Take care. Bye-bye.