The Canadian Investor - Constellation Software’s AI Outlook and More Trouble in Private Credit

Episode Date: March 16, 2026

In this episode of The Canadian Investor Podcast, we break down Constellation Software’s latest earnings and conference call, including what management had to say about AI, software pricing, acquisition strategy, and why the company may be looking more closely at public market opportunities. We then shift to the growing stress in private credit. We discuss new data showing record default rates in 2025, redemption pressure hitting major private credit funds, and what recent moves by BlackRock and Blackstone may be signaling for the broader market. We also talk about the incentives behind private credit funds, liquidity risks, and why many investors may not fully understand what they own. Finally, we wrap up with Canadian Natural Resources’ latest results, highlighting strong production growth, free cash flow, dividend growth, and why elevated oil prices continue to support the Canadian energy sector. Tickers mentioned: CSU.TO, SABR, BLK, BX, CNQ.TO   Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! 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 Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai 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.

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If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian investor podcast. I'm Simon Belanger. I'm back with Dan Kent. We're back for our regular episode, probably more of a newsy episode just because of last Thursday. What I'd previously come out with Go Easy, it was hard for us to not dedicate most of an episode to it. With some pretty big news with the stock being down pretty massively after that special kind of release.

But today we'll be talking about a couple different things. So consolation software had its earnings and earnings calls. So you listen to the earnings call. I think there was some good information provided there, so we'll go over that. After that, we'll talk a bit more about private credit. So there's been some more development, especially around some of the biggest players in the world when it comes to private credit. So we're talking here, Black Rock and Blackstone. So more developments around that.

So we'll be talking about that. And then we'll finish about, if we have time, look at the earnings from Canadian Natural Resources and possibly WSP. I'm not sure if we'll have time to get to that, but well, that's what's on the slate today. So let's get started here and talk about the Constellation Software Conference Call and full disclosure, both Dan and I own the stock. Relatively small position, at least for me, I think for you it's not that big either, right? It's probably one of my larger Canadian holdings, or at least it was obviously when it was at $5,000. It's not so much anymore, but I quickly went over earnings this morning. I'm more so focus on the conference call because I think that's probably what a lot of people were interested in.

Like we had Topicus and Lumen report as well, which kind of, I don't know, set the tone, I guess you could say like a lot. There was a lot of kind of upwards price action for Constellation heading into the earnings. So the conference call is kind of the more interesting element. But earnings were pretty solid. So revenue grew 18% cash from operations, 16%. And organic growth came in at 2%. It was 6%, I believe, before adjusting for currency. Organic growth came in at 6%.

That's currency adjusted in the maintenance and recurring revenue segment, which is, it's a majority of the company's revenue. So this is kind of the more important element there. And then the other interesting thing, and I haven't had a chance to look at Sabre, but they took a 12.7% position in Sabre, which is a public VMS company. It came out. I believe this was probably six days ago. I think it was just before earnings. It's definitely a step away from what Constellation usually does, which is private VMS companies.

And just judging on the call, they're going to kind of look for more of these opportunities moving forward. But I'll get to that in a bit. In terms of the call, they mentioned that they are well positioned to navigate the AI environment. And they spent, they had mentioned they spent 2025 kind of educating or training a ton of their developers on how to use AI. and back when they issued the AI call, I can't remember when that would have been.

Probably like six months ago now. Yeah. Maybe not six months ago. Didn't they like do it? And then like a week later, Mark Leonard said he was stepping down as CEO. Yes. Something like that.

Or it was a reverse. It was one of the two. They were very close. Very close together. Yeah. But back then, like they didn't really know what the situation was in regards to AI, like what can be developed and proved upon in terms of their software. and the difference between then and now is they're kind of starting to see ways to develop models and agents within their, you know, obviously the underlying companies ecosystem.

So there's a bit of progress on that front because I know when that AI call came out and they pretty much said, we have no idea. I think that, you know, a lot of people were upset on that front. But, I mean, they were just kind of being honest. And now they're, they're seeing, you know, more paths to growth, I guess. And the interesting thing here, he said that the development part, the development part of the software will be table stakes, meaning like that's the bare minimum. He said the edge here will be, and by he, I mean, Miller, like CEO, he's most of the one talking on the call. He said the edge will be deep relationships and understandings they've built with customers and the VMS market in general. I tend to agree here.

I mean, I know we've been speaking. Like, I pretty much completely vibe coded a fully functional research terminal. and like, I don't know, I think I spent 40 days on it, 40, 45 days. The one thing I'm noticing now is as I move it to like a live environment. Production, yeah. Everything is breaking. So I can see why like on a on a VMS front, like obviously, Claude is very good at fixing the issues. But I mean, on my front, if you think about something breaking, you know, people don't get access to their portfolio or their data for a day or two.

I mean, with some of these VMS situations, it would get quite. ugly if stuff like that happened, but they mentioned that... I do wonder how feasible it would be, and we've talked about that, you and I may have mentioned it too, is for some companies, especially trying to get more efficient, like, is it worth for them to go ahead, build that in house while simultaneously still using Constellation software, but they build it in house, they get it running, and then once they tested it out, everything is good, it goes live, and then you essentially have just an engineer that's a contractor that you just pay to be on call and ready to fix it whenever it happens. If not, it just gets paid to do

nothing. I would assume that there'd be a lot of software engineers that would be more than happy to have that kind of gig where they just have to be ready to jump in at moments notice, but, you know, 95% of the time they get paid to do nothing. I guess it just depends on the cost. Yeah. Like just because these subscriptions are very, very, very tiny amounts. Yeah. Of revenue for the company. Like, it's probably the equivalent of like, actually, it's, it might even be less of like somebody like us canceling Premiere Pro. Like it, it's such a minuscule amount of revenue that like something would have to be very, very convenient for me to do so because I mean, the cost savings just aren't really all that material.

So. But I guess where it comes down is like, How do you weigh that? Like, you have to think that it's a non-zero percent of clients that will do that. Now, it has to be decided what percent of clients would be interested in exploring that. And I think that's what's really, that's a million dollar question, right? Well, and the thing is, like on that front, he did mention that clients, well, I don't want to say that clients aren't developing it on their own because he does not say this. But what he says is that clients are coming to Constellation to learn how to integrate AI in their businesses and are using Constellation to do it.

So he says they don't know how to do it safely and they're seeking out somebody like Constellation to help them. So he did mention that. So obviously what you are saying is happening. Now whether or not they roll out of somebody like Constellation for like their own platform. Again, I don't know. I think it, yeah, it's difficult to say it's not happening at all right now. They mentioned this, but it could, I guess. In terms of capital allocation strategy is largely unchanged.

And I think on the quarter, they did spend quite a bit. But they did mention they are adding a process that analyzes the chances of AI disruption of the business being acquired. So it's being put in the models. And if we go to the Q&A period, so that was kind of just a recap of what Miller said, If we get to the Q&A period, they asked whether or not Constellation is seeing larger reinvestments back into its business because of AI development and how they're going to control the monetization of it. The answer to this was pretty simple. They said it depends on the business. And also with the decentralized nature of it all, like they don't really control this.

Like the underlying companies are, you know, they kind of do their own thing. And they also mentioned, Miller mentioned that they have not seen any material revenue gains from AI developments and capabilities. but they also haven't reported any losses. Like there's really been no level of disruption yet. And another one, and this is actually one of the main fears for a lot of this is price increases. Because most of the time these software companies, that's how they grow a lot, especially consolation, price increases. So you have your annual renewal.

They bump the prices. They charge you. And a lot of the analysts were, well, I don't want to say a lot. One of the analysts was concerned that this leverage is gone because of AI. that people are going to actually be able to software company, or sorry, the clients of these software companies are going to be able to negotiate lower prices. He says this isn't happening.

He said, actually what he said was there's no feedback at all on it. But again, like it would kind of need, so it would need to be a situation where the underlying business would need to report the consolation that this is happening, which they would, I would say.

So the likely answer is no, they're not having any difficulty pushing price increases through. As of right now, Like obviously we're still pretty early into this. But right now they haven't mentioned anything. They mentioned share buybacks. So the analysts were saying like why, why are you not, you know, buying back shares with your share price down this much? They said they started a committee that formulated a number.

So a number that they're going to buy shares back at. But the impression that I got is they're nowhere close to that number because they said they see ample opportunity. to add in terms of acquisitions and they said they're not going to the impression that i got is there's no buybacks they're just happening if there's they don't have good like actually productive things to do with the money yeah or the stock gets so cheap like the impression i got is you would need to see the stock much much lower before they'd ever just kind of by the the tone of what they were saying about the buybacks it was quickly brushed off so they asked if the little the useful life of software for acquisitions has changed.

And they mentioned that nothing has changed outside of the outlier that I mentioned earlier. Like they take the downside risk and the upside risk in regards to AI. They blend that into the models. And if there's a high level of upside or sorry, downside risk in regards to AI, the price he'll pay will go down. If there's upside potential, the price they'll pay will go up. So they mentioned that pricing on the private market has not changed at all. So he said competition is still crazy high for acquisitions, but he mentioned that the public market, they're going to look more towards the public market because those valuations have gone down substantially.

I mean, you can look to many publicly traded software companies. They've gotten absolutely wrecked. And they also mentioned if, or sorry, they asked him if private companies were more willing to sell because of the potential disruption. So if you're like a private software company and, you know, you haven't been disrupted yet, but there's fear that you're going to be in the future if you'd be more willing to let go of it now. And he said no. He said nothing has really changed on that regard. They're still, you know, remaining pretty stingy on prices and selling.

And then the other interesting question is an analyst asked if they would be willing to move to a more centralized model because of the AI disruption. And they said they're not really interested in this because a lot of their companies run successfully in a lot of countries due to being able to to act quick, make decisions that are, you know, kind of best for the underlying business. And as soon as you add an overarching, like centralized model, you take away a lot of that, become slower, less flexibility, things like that. And I mean, again, I think people who are looking for some sort of definitive, bullish signal from this call probably won't get it. But there's a lot more positive comments now than that special conference they held.

And, yeah, I mean, I actually, I can't, I think it was a, maybe on the bold predictions or when Braden came on and we spoke about consolation in like the kind of three person episode. It's possible. Yeah. Yeah. And I mentioned, I said like, do you think this company will start doing conference calls again? And the general consensus then was like, no, but it didn't take him very long to kind of, you know,

put one back in place. I think they have to now. Yeah. I think it's smart. Like, um, just because there's so many, there's big question marks around the company compared to the past, right? Like, first of all, AI, there's a big question mark there, like we just talked about. But also the fact that Mark Leonard, Gandalf himself is no longer the CEO.

I say that because Braden Wall always say he looks kind of like Gandalf, but he's no longer CEO. He's still on the board. But again, there is some big changes at the leadership level. So I think it's a good thing because it does give some more information to investors. I know sometimes it's more noise than not having quarterly calls, but or even doing it twice a year, they could very well do that.

Like they don't, they're not obligated to do it. They could give like a semi-annual update. That's possible too. But I guess they'll, it looks like they'll do the quarterly one so far. Yeah. Yeah.

And I know Leonard was heavily involved in the Sabre acquisition and their new strategy like permanent engaged minority shareholder. HEM strategy. Mm-hmm. But I know this has been going on for quite a while. Like I'm pretty sure that whole Sabre think he was still CEO when that first started to happen. So yeah.

I mean, I don't know. They don't seem to be all that worried. It seems like they're kind of leaning more towards the, the bullish side of things now. Yeah. While being pretty level-headed about it, just kind of let the situation play out. I mean,

you'd rather this than the company come out and just, you know, kind of blow it out of proportion to the upside that, you know, know to get the share price upwards and then ultimately the results don't show that and then you know you'll see more volatility in the future but but boy has this stock been volatile huh holy crap yes it's been obviously more to the downside but even like recently it was going up and then as we're recording this on today it's getting hit yeah and today's getting it around like six seven percent so it's just i feel in the past it was never that volatile so you're clearly saying oh seeing a lot of stuff happening with consolation in the market, I guess being unsure.

There's also, it's also not a very liquid stock, right? So I think that's the other reason where you can get, you know, the, if you ever buy this stock, you definitely want to buy it more on a limit order basis. The spread can, well, especially when it was going crazy, the, the bid ass spread was very high. Oh, it's not unusual to see like a spread of like $50 to $100 between, you know, There was, at one point, it was 300, like back when it was falling quite a bit. So yeah. So yeah, just to make, just wanted to mention that.

If you're interested in the company, like highly recommend doing a limit order. So you actually have a price you're comfortable with. If you do market, it may or may not work out for you. So, I mean, it won't be crazy. It might just be like a, you know, a two, three percent difference. But still, still possible. There is an old saying in investment. It's not about timing the market, but time in the market.

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maybe ours could be that for someone else. Hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood, while giving us extra money to put toward all those Vancouver meals and our Rocky. And the nice thing is flexibility. We can decide to host our home only when it works for our schedule. Your home might be worth more than you think. Find out how much at Airbnb.ca slash host. If you're a DIY investor ready to take control of your portfolio, BMO all-in-one ETFs simplify the process. Whether you're new to investing or looking to streamline your existing holdings, These all-in-one solutions are designed to help you invest smarter.

With management fees on popular portfolios now reduced to 0.15%. You get professional diversification at a lower cost. Check out the asset allocation ETFs at bemoetifs.com. Okay, anything else to add before we move on to the fascinating world of private credit? No, and this will be interesting, guys. I haven't had a chance to read this. Yeah, so it just seems like there's private credit news every single week now since the start of the year. Actually, like since late last year, there was a lot happening.

But anyway, so we'll get started here. So Fitch, the rating agency said that private credit default rates hit 20, hit a record 9.2% in 2025. The previous record was 8.1% in 2024. So Fitch monitors 302 companies with outstanding private. credit debt. Smaller companies with $25 million or less in earnings made up the bulk of the defaults here. The defaults were either bankruptcy or instances where borrowers had to restructure their debt with lenders. Sounds a little bit the last one like go easy, but although go easy, I don't think it would be considered it's not private credit, but nonetheless, they also said that

most of the defaults were floating rates or variable. It has not helped that rates in the U.S. have actually stayed higher for longer. Because if we remember, they started what hiking rates, and I'm just going on memory here, and back half of 2022, mid-2020, is when, yeah, I guess like, or that's when inflation really started. The second quarter of 2020 is really when they started hiking pretty rapidly. And I guess they did the bulk of it in like two quarters, right, if I remember correctly. Yes, they were going up like.

Very quickly. 50 basis points almost every time, at least, yeah. Yeah, and I know we were talking, 2023, 2024, like a lot of predictions saw rates coming down pretty aggressively over that time span and even last year. And yes, they're slightly below 4% in the U.S., but they're still pretty elevated. So if you have floating rates or variable debt, if you're a business in the U.S., clearly it stayed higher than you probably thought it would be when you actually got it in, let's say, 2021 or 2022. Redemptions are now starting to hit larger funds as well. So that is one other thing that's happening for private credit. So last week, BlackRock limited withdrawals from its 26 billion HPS corporate lending fund.

The redemptions actually hit 9.3%, but BlackRock actually sets a cap at 5%, which is pretty typical for these private credit funds, so 5% per quarter. The 9.3% would have been a total of 1.2 billion worth, but instead BlackRock will distribute a, distribute roughly 620 million. Now, BlackRock TCP, which is a smaller private credit fund, had to write off $25 million worth of a loan completely. What's a bit alarming here is that loan had been put at good or par or like 100% value or 100 cents on the dollar just a few months prior. So it's, yeah.

Oh, man. Yeah, just some kind of weird stuff happening where you're seeing these writeoffs like that's who knows how widespread it is. I don't want to put some panic here. And I'm trying to get a more of a reasonable approach when it comes to private credit. But the other one here is Blackstone. So probably the one of the top, the largest publicly traded companies when it comes to private credit in terms of fund manager. And Blackstone is an asset manager, just like Brookfield asset management's an asset manager. BlackRock's an asset manager. The big is different is BlackRock has a very large kind of public market asset under management.

And that's the bulk of it, whereas Blackstone has a lot of private asset under management, not all of it being private credit. But I just wanted to make sense here. And what ends up happening is these companies, like, they make pretty much all their money on the fees they generate from that. So BlackRock will have their, I'm sure they're above 10 trillion, 11 trillion. I can't remember exactly. Oh, BlackRock?

Like close to 14, I think. 14. Okay, so I couldn't remember. But BlackRock, essentially for them, they generate fees for them. Blackstone, same thing. Brookfield asset management, same thing. But BlackRock, their overall fees, if you look at all of their assets, it's much smaller, but they have such a large asset base and they have a lot of institutional money that, you know,

they, yes, they have a smaller fees, but they also have been purchasing private credit funds quite aggressively over the last couple years. So it's really, I just wanted to mention that when people see private credits because it's really important because the fund managers, like these are the companies that are well known and they get a fee out of that. And whenever you talk private, think about like 2% plus a performance fee that they'll get. So they're getting compensated quite well. And it's really important to remember because that fee is worth a lot of money for them. and it does drive, like you'd be putting your head in the sand

to not think that it is an incentive and it probably is a driver on how they react to certain things and we'll be talking about that a bit further down. Yeah, and like BlackRock's, they've gone very aggressive into private equity, private credit. They made an acquisition.

I can't remember the name of the company, but it's like a private equity, or sorry, private credit, private equity, like data company, which like kind of highlights, you know, because a lot of the stuff, the transparency is, it's very, you know, you can't really see a lot of stuff. So they're, they're kind of getting into that space as well. I didn't like, I just looked at Blackstone's price. They're down like 50% from 20, 24 highs. Like it's, yeah, crazy. Yeah. So I'm just looking at, so just to give an idea here. So I'm going to show Black Rock.

So for those wondering, I know there are some people listening that own Black Rock. just to make sense of it. I own it as well. I've owned it for a while. Yeah, you own it. Yeah, exactly. So I just wanted to just to show here the difference. So people also don't panic.

Yeah, it's a very tiny. Yeah. So BlackRock's total asset under management is, like you said, $14 trillion, latest financial results here. And then you have their alternatives, which includes the private investments. So the private investment is around $423 million, a billion, sorry. with a B in asset under management. So it's definitely a small portion, but again, it can still impact pretty badly if they

start taking like big hits in there because it can, they could be on the hook, right, for certain things. So you have to keep in mind. The more interesting thing is to look at the trajectory of growth on that chart, which it looks like minuscule now because obviously, but if you exit out of AUM, like, Yeah. It's exploded in the last, like in size over the last while. Yeah, exactly.

So it's grown at if you and actually let's just look. Because it stayed pretty stable up until I would say like 2018, 2019 as really when actually more 20. No, actually a few years, the last few years. Yeah. Looking back 2021, it was around 190, 200, 211 in 2023. and then it's doubled since. Kind of like right when a lot of these brokerages started coming out with the ability to invest in private credit, private equity.

Yeah. Yeah. So. Yeah. I mean, you know, BlackRock is, there's very smart people there. Larry Finch listening to him, of course, you can, you know, he's a very smart man. I'm not saying that, but it just goes to show that sometimes even really smart people can make some in hindsight maybe not the best bets but we'll have to see right there is an old saying in

investing it's not about timing the market but time in the market the most successful investors aren't usually the ones trying to catch every top and bottom they're the ones who spend the most time in the market i've been a quest trade user for over five years and the reason i stick with them is that they remove the friction of regular investing with no commissions on stock and and ETF trades, you don't have to wait until you have thousands of dollars saved up to make a move. You can contribute small amounts regularly and keep your portfolio growing consistently, removing the stress of trying to time the market. And they keep making it easier to build a well-rounded portfolio.

Soon, you'll be able to trade precious metals through Questrade, giving you even more ways to diversify. Questrade makes the whole process seamless, allow you to focus on what really matters your investment strategy, not trying to avoid fees. Ready to invest, head over to questray.com, open and fund your account with code TCI and receive $50. Conditions apply. My wife and I are planning a big spring trip to Vancouver. It'll actually be my first time visiting the West Coast.

We're looking for a place on Airbnb close to the water so we can wake up to those ocean and mountain views every morning. We can already picture ourselves walking the seawall, exploring Vancouver's neighborhoods, and then making our way toward the Rockies for a couple of unforgettable hikes. Finding the perfect home base on Airbnb will make the trip perfect. It also got us thinking about our own place while we're away. If another family's home can be the backdrop for our first West Coast adventure, maybe ours could be that for someone else. Hosting our home on Airbnb would let travelers make their own memories in our beautiful neighborhood, while giving us extra money to put toward all those Vancouver meals and our Rockies excursions. And the nice thing is flexibility. We can decide

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Simplify your investing today at BMOetifs.com. So just to continue here, so back to Blackstone, because I went a little bit on the tangent, but I just wanted to explain a bit how the fee structure works. The Blackstone Credit Fund, Private Credit Fund, B-Cred, which is their flagship private credit fund, was hit with Redemptions Request totaling around $3.7 billion, which was 7.9% of the fund, like BlackRock, they had a 5% quarterly redemption cap here. But they did things differently. than Black Rock.

And I think it's important to remember because Blackstone is very heavy into private markets. I think it's most of their asset under management is private. So to keep investor confidence, Blackstone's senior executive chipped in just a little $400 million of their own money. What a shame. To meet all of their redemption requests. Now, keep in mind, like these are very wealthy people. And you may wonder, like, why would they do this?

Well, first of all, I think it's good to remember that Black Rock private credit is still a relatively small portion of their overall portfolio. Clearly, I'm sure they get higher fees from that than the aggregate of their portfolio, but that's beside the point. But Blackstone, I think it's a much more crucial part of the business and keeping investor confidence is really important for them. So I think you have to remember, they take, again, fees like I mentioned earlier, if they start gating. fund redemption. What happens? Well, do you really think inflows will be going into the fund if, you know, they're trying to sell funds to new investor and say, oh, by the way, you may not be able to take out all of the money if you ever want to redeem. So that's not great. So if they gave the fund, it likely just kind of cuts off fresh money from coming in. And instead of doing that,

they probably just figured that it was better for them and the business to chip in some money and avoid that scenario because remember if they put in money they probably figured out that keeping inflows coming even though it costs some money up from now still ensures that they can keep getting some of the juicy fees they are getting like they're not stupid people I'm sure they looked at all the options available to them and it's Yeah, I know it's a bit weird. Will it work? I don't know in terms of restoring confidence.

All I know is there's a lot of bad press happening right now when it comes to private credit. And it's starting to create a really bad scenario now for private credit. So there are some bad loans, like I mentioned earlier in the private credit world. There's no doubt. There's some good loans as well. And to be fair to private credit, a lot of these loans are done for private equity where the loan to equity ratio is. around 30%. So that means that the private credit firm will lend 30% of the fund for like 30% of the money for a buyout and the private equity firm will put in 70% of the equity for or cash for

financing. So if the underlying company has issues, the private credit firm gets his money first because it has priority over equity, right? So I think that's good to remember because if there starts being bad private credit debt, it means that private equity is facing some trouble too. Yeah. And probably even more so. Worse. And yeah, worse. I think that's really important because we're seeing private credit a lot, but I think a lot of people are just dismissing that it's just private credit and not private equity. But there's a lot, they're kind of tied at the hip in a lot of situations here. And the issues we're starting to see is essentially a run on the banks with that's what I was going to say yeah yeah so you're starting exit yeah exactly because

now you're starting to see investors accredited investors for example especially non-institutional are starting to see all this bad news about private credit and they decide that they want their money back from their own private credit investment or even institutional maybe the fund is just winding down they're getting their money back it's a 10 year period you know all the loans come due they get the returns, blah, blah, blah. And maybe the institutions like, you know what, instead of reinvesting that money in private credit, maybe we'll just kind of buy some treasury bills for the time being

and just see how things play out for the next year or two. This is not great because it would reduce liquidity for those type of funds. So it's, yeah, it is starting to feel like it could be a bit of a doom loop. I'm not saying it will be. I'm not trying to put panic here. I'm just saying that it could start putting a lot of these private credit fund manager in a really tough spot. So you can see increased fund gating, which I mean, I think this is highly probable because of what we're just seeing with BlackRock and Blackstone having to chip in money. I think you'll see more and more of that happening.

Selling good loans below par value because it's the only way that they can actually get fund to money to feed those redemption, especially even if they gate it and they still want to keep. keep them at 5%. I mean, if they don't have the money on the books, they have to find it somewhere and trying to merge private funds to public funds, like a bit like Blue Owl had tried doing. So it can definitely put some of these fund manager in tough spots because then you have to also remember where is their incentive. Their incentive is to keep the fund running as long as possible to get those fees because if they wind down the fund, they're not going to be collecting fees. Like the incentive are pretty perverse when you think about it. You, yeah, Black Rock hasn't chipped in anything, have they in terms of redemptions? No, they have. Just black stuff. They just,

they gated. Yeah. Basically, they stopped. They went from, I think it was 9%, I said. So instead of allowing the 9% they, they, they're allowed to do. So, and they're allowed to gate that. It's in, like, they're allowed to do it. Like, it's just, I think, yeah. Yeah, I think a lot of, especially retail, I was looking at, you know, Weld Simple, the private credit, and there might be other ones. And it's not, again, I don't want, like, obviously QuestRates a great sponsor for us. And I'm not, you know, going after Weld Simple or anything like that. But there's more and more of these products available for retail investors. And I was kind of scouring through Reddit for Weld Simple specifically.

And, you know, Dave, so far I can see, like, the last post were like a few months ago that redemptions, you know, people are still able to get them. but what I'm seeing is that a lot of people are saying like the returns have been complete shit have not been like couple of percentage and I think a lot of people a lot of retail investor that put money into that just thought they would get like outsized returns like oh you know here's this investment normally for institutional investors or accredited investors but you know now you're so lucky like oh like invest in that and they've just been underperforming the market without with a downside of not being liquid like very very illiquid and that's a big big disadvantage.

I think people don't realize how much a disadvantage is. I think they are starting to realize, but it may be too late for some of these funds. Yeah, I was looking through because for the Well Simple one, I had some people on our Discord kind of reach out to Well Simple and they they post the response, but it's in French. So I don't really. I know I read, but anyway, they were saying, Send it to me. I'll read it. Yeah.

They were saying, because I know software's been a big issue. Like there was a lot of controversy on software being a huge chunk of these portfolios. And a lot of them being payment in kind where effectively they're, they're just kind of paying the interest in maybe not even cash. They can do it in other ways as well by taking on more debt or even like issuing equity or anything. But I know they did mention that like Well Simple's private credit front, or yeah, private credit fund is like 5% software.

Don't, this is just somebody responding on our Discord. So I mean, don't hold me to this, but they said about 5% software. And they said they don't really publish the payment and kind numbers, but they said it's, it's pretty strong. But yeah, I mean, this $400 million like to bump up the redemptions, like people are going to know this. You're pretty much like, it's like running into a burning building when everybody else is trying to get out. Yeah, but at the same time, some people, I think the reality is, and we talked a little bit about that, I don't know if we did on the podcast or just you and I, but I think the reality, the more that the longer I'm doing this and the more I see people posting is just a lot of people have no idea what they own. No.

It's just like, it's a bit mind-boggling. Like they will, and I remember in early episodes of the podcast, Braden and I, like, I remember in early episodes of the podcast, Braden and I, like, Like you would mention something and I think it's so hold true. Like people will research a new TV for hours on end. But they'll basically look at a company, a stock, an investment for like five to 10 minutes and then they'll put tens of thousands of dollars in it. Yeah.

Which is, yeah, it's a bit mind boggling. Like I, yeah, it's, yeah, I mean, and even like pretty sophisticated investors, like I had someone after the Go Heasy stuff say like, oh yeah like some really smart people were like just going hard at this company like over the last year or so so yeah there's a lot of big yeah big personalities that owned go easy but yeah it was a very highly owned stock a very a lot of people talked about it I think like it comes down to I mean it's the same situation with go easy I mean you take a lot of people just take these pitch decks

at face value like they look at a a private credit fund that's returned 9% annually. And they're like, oh, sounds good, click the buy button. Maybe, and we've talked about it. I know some listeners won't, like, are not very familiar with poker. But I think to me, like the fact that I play live poker, it's a big edge for investing. Oh, it is. Yeah, it's a lot of the same.

Yeah, I think it's a huge, yeah, it's a huge edge for investing because in, in poker, live, but also online, but mostly live is you have to make decisions, the best decisions you can with incompletions. information. And the reality is investing is the exact same thing. You have to make the best decision you can with incomplete information. And when you play poker, sometimes people are trying to give you false information to whether it's false tell, whether they want to make you think they have a strong end when they don't or vice versa. And you can really make a case that a lot of it, like, you know, if you looked at all the red flags for Go Easy, but even like private credits as well is sure you don't have all the information but you if you take a moment and start and think about all the the information you're provided it's incomplete sure but think in probabilities like

just you know oftentimes take a moment and think okay like all these weird things are happening the company's saying a but bcd efg is happening that's contradicting that where am i putting the most probability okay maybe the company I'll put it, like, at a 30% chance of companies being truthful, but I also am putting a lot of weight on the other stuff. And I think sometimes it's important to just take a step back and think about that because you are investing, especially when specific companies or funds with incomplete information. But you have to make sure you look at all of the information and then you take the best decision you can based on that. Yeah, and I think another good point in that regard is you have to. collect the information that you can collect.

I mean, I would say this is the equivalent of somebody who sits down at the poker table and throws on a YouTube video playing. They're not really making it. Which happens all the time. Yeah. They're not making an attempt to collect all of the information. They're not really, and I think a lot of people bought into these funds with that idea. I mean, they trusted a pitch deck at face value, you know,

giving specific returns and the returns haven't been there. And now, you know, all this is happening. People are, are running to the door. And yeah, now, now you can't get your money. And it's not like these, it's not like these, uh, companies did anything wrong. Like this was all in the conditions of your purchase. Yeah. Oh yeah. It's in a liquid. It's not liquid. It's difficult to get your money out. The returns are not guaranteed. The portfolio is not really all that well displayed. They're not doing anything wrong. It's just a lot of people maybe bought into it without knowing all this. Yeah. And remember what Buffett said? I don't know the exact quote, but it goes something like that. Like, it's okay to have an investment and say, you know what? This is in the too hard pile.

Too hard pile. Yeah. Too hard pile. I'm not invested. It's just too hard. I can't really understand it. I'm not. I'm not going to touch it. And that's completely fine. Buffett does it all the time. There's a reason why he doesn't have a whole lot of tech plays with Berkshire. And I'm obviously I know he's not CEO anymore, but I think a lot of it, you just saw for him. It was in the too hard pile. But I think you can, you know, I think that's really important because if you can build conviction yourself, then you're relying on other people. And we saw it on, I think on Twitter with the fallout of Go Easy.

There's some pretty famous personalities that were big on that. And people were clearly following them. And people got absolutely wrecked. So I just wanted to mention that. It's not to harp on the Go Easy thing again, but I think it's a good. good lesson learned, especially if you lost some money, that's okay. It's just, I think it's really important, like, yes, they're public markets. Yes, management teams are supposed to be transparent. But the reality is, you know, when they're saying something and you're seeing other things

that are contradicting that, like, I think you should at least acknowledge it, but take a step back. But let, before we get going, not to make this on go easy. Again, let's finish up with, A good quarter here, Canadian natural resources. It is a name that I own. You know, with the Middle East conflict, it's been doing quite well. Year to date, it's just been really good. If you bought this when the Venezuela regime change happened, you'd be crushing and you'd beat up like 40%.

I actually almost added to my position because I was like, man, it feels overdone. It just feels like everything I'm reading, Exxon Mobil's CEO, just saying that it's going to take years to get the infrastructure in check, even though the same type of oil they're extracting is similar to what the Canadian oil sand producers are producing. So it could be sent to U.S. refineries, but basically saying like it's not investable right now and stuff like that. So it would have been a good spot to buy it. But I did it, but it's still like a four or five percent.

Close actually five percent, I think now position for me. So it's a pretty decent position. It's up. It's up 53 percent since the bottom of that. I don't know how anybody could think that they could get like heavy crude from Venezuela over Canada. Like it was crazy. I mean,

I don't really own energy names. They're just too cyclical for me. But yeah, yeah, I mean, yeah, it was it was kind of nonsense in that regard. And, and yeah,

like Canadian energy dumped off and now it's just going through the roof. No, exactly. So, um, and the beauty, you know, you can say about what you want with Canadian energy.

And yes, the trade war with the US. But I will bet a lot of money to say that if oil prices remain elevated and it all, it looks like it's not going to come down anytime soon. Like I'm not an expert. This is just me saying that. And, you know, feel free to say I was wrong. But you had strategic reserves. I think the international energy agency said they would like release the largest reserve ever to try and calm prices.

It just announced and the price is still high 80s, low 90s. And you can also make a case. is that, okay, so it's released now, it's putting more supply in the market, but what the hell happens when, you know, if this goes on for a while, then they'd have no more levers and they are kind of stuck where now you get into a situation where if you want to stockpile again, you're reserved, you're creating more demand and putting more upward prices, upward pressure on prices. So it does feel like they're at least going to stay in like above 80 for for some time here because it doesn't seem like the conflict is going to be ending anytime soon.

But anyways, yeah, go. No, no. I got nothing to say. Nothing. Okay. So revenues were up 9% to 39 billion. Earnings up 77% to 10.8 billion. Free cash will up 4% to 8.4 billion.

They increased their total production by 15% compared to last year. Natural gas production on its own increased 19% versus 2024 level. And I'm mostly talking about the full year here because we don't talk about. it as earnings as much. They completed several accretive acquisition throughout the year, including Palliser Blocks, Southern Alberta, Liquid Rich, Motney, and increased ownership of Albion Mines. They mentioned that they have the best operation cost for mining and upgrading in the industry. If you don't know what mining upgrading is, it means taking oil from oil sands. Think of those pictures of like large open pit operations and then upgrading them to synthetic crude oil.

SCO. Their operating costs, and it's really the bread and butter of like Canadian natural and Suncor, I think, right? They're the two biggest there in that field. And their operating costs for that is around $22 per barrel. They say it's the best essentially in the industry. So yes, it is very profitable. Just think about the price of oil right now. They also saw record production in Q4. The reserve, which includes proved and probable reserves, improved 4%. And really important, to talk about probable reserves. So you'll see sometimes like when the whole Van Nuizuela thing happened, they were quoting these reserves,

but these were probable reserves numbers provided by the previous regime. And it's always difficult to kind of like say if they're proved or not, right? So you have to take the probable with a bit more of a grain of salt, but nonetheless that improved 4%. And it's crucial when you're looking at producers because you want to make sure that they have a long runway of reserves, right? Like, it's not good if the price of the oil barrel is 100, but you have nothing to produce, right? Yeah.

So you have to make sure it's pretty simple, but sometimes I think people overlook that. They increased their dividend by 6.4%. In terms of guidance, they guided for production increase about 4%. That's the midpoint for 2026. They talked a bit about the Middle East situation saying that for them it doesn't change much in terms of how they run their business. They have a long-term plan. They're sticking to it and that they can't get affected by the ebbs and flows of the market. They did say, though, that Canada really needs more LNG export capacity, so liquid natural gas, and it's approaching full capacity right now. So

this is clearly affecting the price that Canadian LNG producers can get. So clearly a message, I think, to the federal government and various governments involved. Obviously, I think the oil and gas companies have been pretty vocal about that. But, no, hopefully, especially with Donald Trump, I think what we're seeing is a lot more people realizing that, yes, we have to really start building more export capacity. From a national strategic standpoint, it's really important. Obviously, you want to think about the environment, but I think there's a way to kind of balance both as best as possible.

Yeah, and I think they, I don't know if you mentioned that the delay. I don't know what they delayed, but they delayed like a $8.5 billion project or something like that. No, I didn't mention it. Yeah, it was, this was just a few days ago. I'm trying to look up the, they pretty much want clarity around carbon pricing before they, before they expand. Yeah, $8.25 billion jackmine expansion north of four. Yeah, that's right. So, I mean, yeah, you need better clarity for these companies to invest.

I mean, for the most part, they're kind of dishing money back to shareholders. Yeah. Isn't the Alberta government in negotiations with the federal government on that? I think they were like starting to negotiate some different carbon pricing. I thought that had been resolved, but I guess not. No, I'm not sure. Yeah. Not sure.

But yeah, they're Canadian natural is killing it right now. It's funny. I was going to say, you know they're doing well because there's a hockey reference, but they maintain salary on Nazim Khadry. Because the owner of CNRL owns the flames too. And the flames, CNRL is a very... You mean CNQ? CNQ, yes.

Yeah. Yeah. Yeah, CNR. Did I say CNR? Yeah. Or that, okay, so CNRL. Yeah, you said CNRL a few times. Oh, yeah, yeah.

That's okay. Canadian Natural is a very, very cheap oil producer, like, especially working in the space. Like, Suncor and Imperial were. known to dish out a lot more money while Canadian Natural was kind of cutthroat cheap. So yeah, it's just funny because the flames do not retain salary. And they did. So times must be good. Yeah.

Yeah. Yeah. Yeah. Hockey. Montreal was in on that apparently, but they wanted more salary. Yeah, they wanted more salary retained. And I guess that's why they. There's a line.

And I think the player, from what I read, the player was putting a lot of pressure. You wanted to go to contender. and I guess there was a trade done but it didn't happen apparently Codry was like not too happy and then I guess they probably made it happen to get something good in return but also like you know not look like a bad organization right so yeah well the lowly oilers beat him last night there you go but who's who's the best Canadian team yeah can you remind me not emminton that's no it's Montreal yeah it is

Montreal. Yeah. So the best Canadian team, who would have thought? So we'll have to see. I will wage that Montreal has a better chance than Edmonton to win the cup in the next five years. No. Edmonton has a better chance than the next two years. If they don't do it, Montreal is waiting.

Yeah, possibly. I was just saying, like, the Pacific Division is so bad that Edmonton gets, I mean, not exactly a free pass to the conference final, but not even close to his hard a path. So, yeah. Yeah. But anyways, let's hand it here. You didn't come to hear us talk about uninformed hockey trades. So let's call it a day. Thank you, everyone, for listening.

We will be back on Thursday for our news and earnings episode. Like I said in the previous podcast, make sure you subscribe to our YouTube channel. We will be doing some more lives. We had about 25 people, 30 at once. I think there was like 3, 400 people not looked at the actual recording. So we'll do it a bit, do more of that. at least for sure when there's more earnings and possibly do some Monday morning live, maybe like 15, 30 minutes or something could be fun.

So stay tuned for that. We will mention it on the podcast when we've decided maybe when news and earnings start picking up again. I think now they're coming down a little bit. But again, Monday seems like there is news happening every single weekend. So maybe we could save by Trump and company. But thanks again for everyone listening. We'll be back on Thursday.

The Canadian investor podcast should not be construed as investment or financial advice. The host and guest 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.