The Canadian Investor - E-commerce & “Markets in Turmoil” - Earnings Roundup

Episode Date: May 12, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Etsy earnings Mercado Libre earnings Nurtien earnings Constellation Software earnings Topicus earnings Loblaws earnings Shopify earnings Brookfield infrastructure partners earnings CNBC Markets in turmoil segment Air Canada earnings   Tickers of stocks discussed: ETSY, MELI, NTR.TO, CSU.TO, TOI.V, L.TO, SHOP.TO, BIPC.TO, AC.TO   Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital   Check out our portfolio by going to Jointci.com Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

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I am Brayden Dennis, as always joined by Simon Belanger. We are going to run through some earnings results because it is that time of the year and lots of companies we care about, lots of companies we own personally, and many Canadian names on this list as well. And ones that I know you guys will want us to talk about. So I think that this will be an entertaining one. Simon, let's just get right into the action here with an e-commerce name that you follow and own in your own portfolio as well. Yeah, yeah, definitely. So everyone knows I own Etsy. They released their Q1 2022 earnings. Pretty, I would say, good overall. There's some good,

some bad, but nothing too surprising seeing how a lot of e-commerce stocks have been really been hit pretty badly by weaker than expected guidance. And I will talk about that as well.2% to $579 million, gross margins were down 400 basis points to 70%, net income was down 40% to $86 million, free cash flow was down 62% to 56 million. Active sellers were up 62.8% to 7.7 million. And active buyers were up 4.9% to 95 million. You know, it's not, I think it's not great, like I just mentioned in terms of numbers. But the guidance was really where I think a lot of investors weren't thrilled. They're guiding between $3.2 billion and $3.4 billion in GMS in Q2. And they're also guiding between $540 million and $590 million in revenues for Q2. And then Etsy CEO Josh Silverman said that they are expecting some headwinds in the short term and a decline between low and high

single digits in Etsy marketplace GMS year over year. Have you heard about that? I have seen guidance across all of these e-commerce plays. Not the best. I haven't dove into Etsy's results, but I'm listening to it now live with you. Okay, perfect. So just to put things into context, it doesn't necessarily mean that they will have a decline in revenue, but a decline in GMS is not great because that is clearly their main business. That said, it's a big part of it, but it's also because there was a lot of pull for growth that they experienced in the past two years for obvious reasons because of the pandemic. Etsy also has services revenue segments, which have grown 10.6% year over year.

It's for things like promoted listing, Etsy shipping labels, and pattern by Etsy. They did comment, actually, they did not originally comment on the conference call about recent sellers protest that we talked about on the podcast a few episodes ago. Was that for the take rates? Yeah, for the take rates. But I listened to the call. I was expecting them to comment on it at some point. But at least the analysts asked a question. It was actually funny because the operators said, oh, there's a question from this person, but actually I'm taking it from like about six different analysts that have the same questions. And they were asking about the recent seller protests. I didn't put any notes on this

because I was listening to the call while I was stretching earlier today. But essentially what they said, they said they were a bit dismissive about it that's kind of the tone that joss really had i mean not in a really bad way about their sellers per se but they said it represented less than one percent of the sellers that put their stores on vacation mode it had no material impact on their sales and revenues for the quarter. And they really mentioned again that they're using that money to invest in the platform and trying to get more overall sales to the platform. And especially because some of the sellers are quite dependent on Etsy. Some are not, but most sellers generate a big portion of their revenues from there. So they kind of reset that during the call. So it was interesting to see. I would have

liked to hear Josh talk maybe about more transparency about the fees and showing the sellers where they're actually putting their money to really help them grow their volume. But aside from that, I mean, it was interesting just to hear him answer that question. Yeah. We're going to be talking about a few e-commerce names. I'm going to talk about one next. We're going to talk about Shopify later. And we saw what happened with last week with Amazon. I mean, look, the comps are difficult, The comps are difficult, but this is a different beast, in my opinion, where, yeah, okay, difficult comps is one thing, but to actually have a decline year over year or in sequentials on gross merchandise volume or what they call GMS for Etsy, it's the same thing. That's concerning to me. And I mean, it is just one quarter, but you're hoping that the pulled forward growth

is helping your business, not like a one-time bump, right? And that's the big concern. That's the real concern for these types of situations. Not that comps are hard. I think Shopify and Amazon are like, okay, comps are hard on the retail. And this is, I think, a little bit different. And one that you're going to have to think about, I think. Yeah. Yeah. And one thing that they did say is that there's still a lot of untapped markets for Etsy. So their two primary markets are the UK and the US. And for example, they were talking about France on the call saying that there's a fairly low penetration rate compared to them. So they do see some opportunity. It's

something for me that I'll just keep an eye on. It's not a very big position for me. Like, you know, I've been pretty upfront about my strategy in the past. It hasn't really changed where I do have some growth names, but the anchors in my portfolio are definitely the stable blue chip dividend paying companies. So I do have oftentimes a bit more leeway to give to companies and just see where things go and not make any knee jerk reactions. The KPI I find most important and we track on Stratosphere is active sellers. And that seems to be doing well. But if active sellers are going up and there's only so big of a pie of actual transactions happening on the platform, then you got to watch churn on those sellers. So that's, again, how does that translate next quarter? And how does the guidance affect

active sellers? I think is going to be an important question. Let's talk about Mercado Libre, ticker M-E-L-I. Mercado Libre, their e-commerce empire continues to dominate in South and Central America. And there are a few key things here. They have a extremely fast growing fintech business called Mercado Pago and their e-commerce business. The region is still heavily unbanked. And so their fintech platform and payments segment is really, really at the forefront of that. And ultimately, you know, providing a great technology for people who need it. And that's important as well. And their e-commerce penetration is still lower than North America in that region, but it's growing extremely fast. Adoption has been just wild. And anecdotally,

I agree from going to the region. This is a perfect example of a secular winner that's executing well. And the multiple has gone from 22 times sales to about eight times sales in just a few months, like six months tops, right? And most of it happening maybe in the last trailing 45 days. But let's talk about the results because that's what matters. days. But let's talk about the results because that's what matters. Revenue of a little over $2 billion, up 63.1% compared to the same quarter of last year. Payments volume was $25.3 billion, which was up 72%. So that payments volume continues to grow at above 70% year over year. Gross merchandise volume, GMV, a term you're going

to hear a lot on this podcast, almost hit 8 billion and growing at above 20%. So really nice. Unique active users remains above 80 million people. Now they track something called revenue uniques. And so that's climbs to 2760. That's a nice number for what looks, what feels like a still nascent region and company, right? This is not like some Facebook that's been, you know, maybe I'm not going to speculate where they are in their maturation curve, but in user growth at the peak of it. And they continue to refine that ARPU number. Look at the monetization from MercadoLibre already, like really excellent stuff there, $20.60 in USD. If you do look at their statements, there are currencies all over the place. There's so many different countries they do business in, and they all have different currencies.

E-commerce revenue continues to grow, but it was sequentially down from Q4 to Q1. Now, there's some seasonality there in the Christmas season, but play devil's advocate. Last year, Q4 to Q1, it did grow sequentially. So this is one of the first quarters that didn't grow sequentially on the e-commerce business, if you're following me there. However, the acceleration on the Mercado Pago fintech business is blowing it out of the water there. 72% revenue growth. So even despite the slowdown in e-commerce revenue and when i say slowdown i mean very small they had their best quarter for top line sales of the company's history so there's a lot to like here man yeah and i mean uh if you want to buy it today it's

down 17 percent on the day it's uh it's crazy what's going on with tech stocks, huh? Yeah. And so they reported, let me see here. They reported on Friday, right? And I guess that was Thursday. They reported on Thursday. And the stock's been just getting absolutely hammered since like each day. It's now a market thing.

Yeah. And almost nothing to do with, well, it's a factor rotation thing, right? Everyone's right now a slave to factor rotation. And all comment is the things that everyone's trying to run out of might be, you know, impossible to time the bottom, but some of this stuff's getting oversold in a major way. Yeah. Yeah. I think there's a lot of growth stocks that are becoming very attractive. And I think the market is really focused on, you know, what's happening right now, what might be happening in the next year or so. There's a lot of pull forward demand that happened for these companies. We talked about it with Etsy, Shopify, Amazon, probably even Mercado Libre a little bit as well. And for whatever reason, I think the market thought it would stay

like this forever. I don't know. It's kind of the sense I got around the peak last year. And now it's kind of the opposite. It's like, oh, it's not going to it's going to start slowing down massively forever. So I think the truth is most likely somewhere in between. I think there's still some big tailwinds for these type of businesses going forward. It might be a bit rougher in the short term, next year or two, but we say it all the time, we're long-term investors. Yeah. And it's the old analogy of Mr. Market, right? And Mr. Market has highs and lows and bipolar in its way of thinking in the short term. And we've gone from, yeah, oh my God, look at this incredible secular shift to, oh no, there's inflation and a incoming recession.

And to my answer is there's always an incoming recession. There's actually multiple, multiple, multiple incoming recessions in my lifetime. These are normal cycles. And so, you know, it's maybe just listen to the AGM from Buffett over there. He's got lots of thoughts on how to remain long-term and keep investing in great businesses. 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.

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Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so

many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at Airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now moving on to a company that had a pretty, pretty good quarter. I'll just say that. So was that a larry david pretty pretty good pretty good yeah it's a side note it's a great show um we're up to date love that we're up to date on all the episodes but yeah it was an awesome quarter by nutrient so q1 2022 we've talked about it pretty often

obviously the macro landscape has been hurting a lot of companies at least you know recently and Nutrien is one of these companies that has hugely benefited from the ongoing global macro landscape I talked about it I think it was January February right just before the war between Russia or the invasion of Ukraine by Russia started. And I said, Nutrien is a name that could really benefit from that. And clearly they have with a lot of fertilizer coming from Eastern Europe, but more specifically from Russia and Belarusia. And they did very well. So revenues Revenues were up 64% to $7.7 billion. Earnings were up 941% to $1.4 billion. Earnings per share was up 831% to $2.70. Free cash flow was up 281% to $1.81 billion.

Expenses and costs of goods sold were up 43% and 28% respectively. However, revenues were up so much that it clearly outweighed that. They repurchased 587 million shares during the quarter and announced a dividend of $0.48 per share. That's an increase of 4.3% over last year. I wouldn't be surprised, honestly, if they do increase the dividend even more this year. Do you have any comments on that before I talk about the guidance?

Are you not entertained? Are you not entertained? You know, it's one of these, it's not only one that's, you know, been part of a really good cycle for commodities, but the demand for their stuff in particular the next big player in the space almost equal market share was russia right almost identical market share of what nutrient sells from russia no it's very very similar yeah i can't remember recall the exact market share and

i think there may be some just on memory and I could be just complete out in left field here. But I think there might have been some producers in South America as well. Yeah, okay. I think like respectively, it was like low 40% each for potash and stuff like that. And it could be throwing this number and have no idea. And that's most likely the case. But again, here, we know that the impact from Russia is good for the types of things that Nutrien does. Oh, yeah, exactly. And for them, obviously, the prize going up, which has been for fertilizer in general, has been really good for them because that's their main business. So guidance was amazing. We've been hearing a lot about revised lower guidance from companies discerning seasons. We just talked about

Etsy, but there's also been revised lower guidance pretty much across the board. Nutrien also revised their guidance, but way, and let me just underline, way for the year obviously i'm not surprised but the increase of the guidance is just mind-blowing so their full year earnings per share guidance is now between $16.20 and $18.70 in february they were guiding between $10.20 and $11.80. That's an increase of 58% in their earnings per share guidance on the low and the high end. So it's really, they're clearly seeing it. I don't know if they're being a bit too ambitious here or not, but clearly the geopolitical landscape is not going to be changing, probably not for any time soon. So I think it's probably a safe bet on their end to say that they'll be benefiting at least this year from much higher prices.

Yeah. You've been right on this one, by the way. Oh my goodness. I just look at commodities here and I look at just the performance compared to what I call high quality companies, set their own prices, have pricing power, grow compound free cash flow per share consistently for decades, not just a few years. And everyone wants to get long this stuff, right? Everyone really wants to get long this stuff right now. And it could keep working it could keep working what would the contrarian do is i guess my question probably short short commodities like i wouldn't do i mean i wouldn't even go out suggesting anyone do that even like you got it that's an extreme sport yeah shorting a commodity and during a super cycle is like

just prepare to lose like a significant i'm not saying it's the right plan i'm just saying the contrarian play i mean the play for commodities really was you know late last year or you know mid 2021 when a lot of people were still not sure how the economy would recuperate before inflation really started picking up. That was probably the time. I mean, in terms of great companies, I've always said that for a commodity play, Nutrien has always been really high up there for me just because of what food is dependent on what they sell. And as humans, we need food. The premise is very simple. And there's not many players in that space. So in my mind, it's quite different from a lot of other commodity plays. So that's why I've always kind of liked it.

I do have it in my parents' portfolio, which is more dividend focused. So they've done... You get paid a fat yield. Oh, yeah. Yeah, they got a really low cost on their shares too, especially when it was down a bit. So I dollar cost average for them. So they're pretty happy right now. Yeah, I bet.

Wow. Nicely done. All right. Let's talk about Constellation Software. They reported their first quarter. You can buy shares for less than $2,000 today, Canadian, which is nice. That doesn't happen very often, by the way. I have exactly one stock that is in the green today, and it is Topicus.

Only one. And Constellation and Topicus, you know what? Despite the sell-off in tech, they have actually held up quite nicely compared to the absolute destruction. held up quite nicely compared to the absolute destruction. And I think that their policy on no stock-based compensation definitely helps. All right, CSU. Let's go through CSU first. So revenue is $1.43 billion, which was up 21.7%. 3% on the organic line item, free cash flow available to shareholders, which is Mark's term, which was $324 million for the quarter, up 20.4 percent. So it was a record for pretty much free cash flow and revenue. Now, capital deployment. We're talking about records.

This shatters it. Capital deployment of almost $1 billion in acquisitions in the quarter, which was up 137% compared to last year. Now let's dive into that capital deployment number, because if you've been following this podcast, this is a number I track, obviously, because they're a serial acquirer. But also, the question around, can Mark Leonard, the founder and current CEO, and his decentralized group of acquisition teams, can they deploy capital not only at scale, but can they continue to accelerate? Because that's the really important question. And they have absolutely done that to a T. I mentioned this every quarter, but I keep saying

this. They say, okay, they need to do this to keep growing and they do it. On March 2nd, they announced that they're doing $700 million carve out. This acquisition alone is more than half of the acquisitions done in dollar amount last year. And last year was a record amount by double. Like it's incredible the amount of acceleration and scale and the things that they're willing to do to keep pushing the envelope. And that's why they've decentralized themselves into these tiny pockets of acquisition teams, because it's impossible if you do it under one house and one under Brella, there's this kind of problem in how you can actually deploy it properly. And so Mark got ahead of that curve and started building the

company in this way. So it was a record quarter for the metrics that matter, and I'm really happy about it. All right, for Topicus. Now, Topicus is an operating group of Constellation that decided to do a spinoff and list their stock on the TSX Venture. That is ticker TOI. It was a so-so quarter on the surface level, but I don't think it's that meaningful

when their capital deployment announcements It was a so-so quarter on the surface level, but I don't think it's that meaningful when their capital deployment announcements have basically all happened since the quarter ended. Now, for example, if I buy a company in April, if you're my shareholder, Simon, you know about this acquisition in this example, but the numbers haven't come out on their Q1 report. And if we look at that, they only did 13.2 million euros in acquisition deployment in the first quarter. But since then, the company had deployed 43.4 million since the quarter ended. 3.4 million since the quarter ended. And so that's good. They continue to do impressive organic growth. That average organic growth continues to be nice. It was 6% this quarter. And the most important segment of the business, which is the maintenance and other recurring,

aka software subscriptions, they just call it maintenance and other recurring, that was up 17% year over over year so that's really the segment that actually matters for this business yeah i don't think i have anything more else to say it's it's you know it's it's business as usual which is good you want business as usual because if it's been anything like the past you know years since ipo you want more of the same from constellation yeah yeah no it sounds like it was an overall pretty good quarter for both them and topicus i mean congrats for having a a position that's in the green today that's why i was kind of distracted i was trying to find one in my portfolio see if you had i did not i do not all in the red do you have your watch list

in stratosphere yet i don't yet so but i will add yeah just go on the not. All in the red. Do you have your watch list in Stratosphere yet? I don't yet. But I will add it. Just go on the homepage, put in the symbols, and then you can see what happens. Update it every 15 minutes. Yeah, I'll wait until there's a better day until I put it. For a nice green day, you feel great. Yeah, exactly. Now moving on to another Canadian name, completely different business, Loblaws.

Revenues were up 3.3% to $12.3 billion. E-commerce sales decreased 9.8%. This is not surprising given how popular curbside pickup had become during the pandemic and obviously the multiple lockdown periods. Net earnings increased 40% to $437 million. Earnings per share increased 44% to $1.30. Free cash flow was slightly up to $758 million. That was up 3.7%. They repurchased $148 million worth of shares during the quarter. Increased their dividend compared to last year by 11% to $0.40.5 per share. It's the 11th

consecutive year that they increased their dividend. I don't know if that qualifies as a dividend aristocrat in Canada. Do you know, like, I remember seeing a thing like that. I think it was like 10 years or something. Yeah, no, it's not as high as the s&p which is like 25 years yeah that's it yeah no yeah it's lower it's like five or eight or something it's arbitrary but this is definitely one of them okay law laws has been a good story those guys have done a really good job so the tci definition of dividend aristocrat for canada has been for Loblaws. Let's just say that. Yeah, they just stamped a stamp of approval. You know, it's actually official that the TCI podcast runs like the indices for all of Canada. That's our new business venture.

And overall here, expenses were pretty stable. So I wanted to check what it looked like for Loblaws because I don't know if you remember when I did Metro on one of the earnings calls a couple of weeks ago. That was one of the things that really stood out is that our expenses, if I remember correctly, were even like slightly down. For Loblaws, they were up a little bit. Cost of goods sold were up 2% and SG&A were up 3.5%. So pretty... Still seems so low. Yeah, very, very good in my opinion, considering the inflationary environment we're in. That's good for Loblaws and it's definitely in line with what we talked about when Metro came out with their earnings. Again, I don't

know if it's a fact combination of factor, whether it's reduced hours, maybe improve efficiencies for certain type of areas. I know one that's pretty close to me. I know they added some more like self-serve checkout counters. Right. So maybe that kind of reduces their costs overall. So I'm just spitballing here, but it might be a combination of factor, but these are definitely businesses that you'll want. If you own Loblaws or Metro, definitely keep an eye on those expenses because I can definitely see some cost pressures going forward if we continue seeing the CPI figures that we're currently seeing. If you want to own a grocery store, this is the one to own, man.

Loblaws is the grocery store to own. Call it now, stamp approval, Brado Capital on Twitter. No, I'm serious though. These guys have done such a good job. The in-house brand is fire. The no-frill story is amazing. I think I've been pumping their tires for a couple episodes recently randomly. And this is the grocery store to own in my opinion yeah yeah it sounds like it yeah yeah it sounds like i'm convincing enough shopify shopify all right let's talk about shopify how down from the let me hear it let me go and somebody's how down from the highs oh i would i think like 75 80 80%. Oh my God, 80%. Yeah, because it hit almost 2K, right? Peaked on November 19th.

Or more than 2 grand a share in Canadian dollars. Yeah, well, in CAD, it hit on November 19th, it hit $2,140. It trades at $442 today. Yeah, it's slight pullback. I mean, we're laughing, but we both own it and we're not down as much we you know got on the way down but you know we i talked about teledoc right like i'm down from the highs like significantly so obviously don't take it as us laughing if you do own it and you bought it at a pretty high valuation i think it it's still a wonderful business. It's just the valuation just got really stretched.

No, that's us laughing at all the money we lost. Okay, so revenue was $1.2 billion, which was up 22%. They did report a loss in net income, earnings per share, and operating cash flow. Monthly recurring revenue was 105 million, an increase of 17%. So that's the monthly recurring line item on the subscription solutions. Now, I think I've talked about this before, but this is probably one of the most important line items to track because it really replicates the Shopify ecosystem and not so much just that GMV line because that GMV line is very like,

it eventually they reach a point where the company is so big that it is impacted by macro factors. So when there's a slowdown in retail spending, that GMV number obviously gets affected. But the MRR number on the subscription solutions really defines the health of the Shopify ecosystem and is really important for tracking how many people are actually signing up and using it and paying for the solutions that Shopify offers. And so for a quick breakdown, merchant solutions is 71% revenue and subscriptions is 29%. So we're pretty close to a 70-30 split. And the number I was just talking about is that 30%, that's subscription solutions. Quick line item, Toby is back to making a fool of himself on Twitter today.

He's complaining about analysts and the stock price and Toby, my man, stop. I hate seeing CEOs comment on the stock price. Just worry about the business. Don't worry about the stock price. Stop, Toby. My guy, please stop. He's clearly feeling a lot of pressure. I'm speculating that he is feeling a lot of pressure from internal factors at Shopify because of the SBC. That stock-based compensation has been such an important part of the compensation package for people taking jobs at Shopify. You get your shares given to you at $2,200 Canadian that are now worth $400. That sucks quite a bit. Now, Toby, one last thing. Stop complaining, man. I love you, dude. You're great. We do have nothing but high praise for you on this podcast. Stop tweeting complaining about Wall Street. I'm getting a little tired of it.

Okay. So it was a pretty tough first quarter for every e-commerce business, right? Like across the board, we just talked about Etsy. The stocks have faced absolute destruction, including Amazon. And the long-term story here for Shopify remains intact. From my perspective, we were very vocal last year that it made no sense to buy the stock. It was overvalued. You and I kept saying it's overvalued. I love this business. It's overvalued. I love it. I can't buy it. It's too expensive. And I don't know what your cost basis is, but when I was buying shares, it fell from like 2,000 to 800. I was like, this thing seemed been so immune from multiple compression. I'm not going to time it, but I don't see it following even more. Have I been wrong? It's been hammered even more, right? We just talked about how the trades are 400 and something. And I think a lot of the selling is justified. I mean, when you have something priced to perfection and the story isn't perfect anymore, this is what

happens. But of course, when you basically double revenue back to back yearsback years. Here's some data right here. Revenues went from 1.5 billion to 4.6 billion from 2019 to 2019 years. A ton of that growth pulled forward. Obviously, everyone had to pivot online. You have a small business. What are you going to do? How are you going to sell it? How are you going to build a site? How are you going to get the fulfillment? How are you going to use the ecosystem? You're going to go to Shopify that had the absolute brand name to do so. It is completely ridiculous to think that it wasn't going to be pulled forward. So a 22% boost off these elevated levels actually proves that there's a lot to like here. I think it's more than the Etsy

thing. Okay. Because Etsy is guiding for lower GMV. I think that's a bit spooky, but a 22% boost off elevated levels is a lot to like, but is important for us to probably reset our expectations. Of course, it wasn't going to continue doubling every year. of course. I think with these certain names, these growthy names, Shopify hit like 50 times sales, dude. It was insane. I think the speculators and whatever retail was gambling into has mostly washed out, I think. And of course, trying to time a bottom is impossible in a loser's game. But you look at some of these high-quality businesses, and there's a lot to like.

And maybe Shopify is a fantastic value all of a sudden. I would like Tobii to stop complaining for me to really back the truck up. Yeah, I mean, my cause base is pretty reasonable. I think I just checked it was $730. Yeah. Better than $2,200. Yeah, better than that. But definitely if it keeps going down, I'll probably just add a bit more. It's just a great business. It's still not super cheap on a valuation basis, but definitely more reasonable. And even at 22% this year, I don't know exactly what they're guiding for next year or if they've already announced the guidance or not

but you can expect probably something a bit higher next year now that it's kind of pulled back a little bit on the growth so I think it's definitely something interesting to go forward and it's a Canadian name and they've been investing in the logistic aspects. So there's a lot of stuff to like here. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. 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. is questtrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still

so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host. Now moving on to a company that's not a high growth company, but still growing, still growing slow and steady.

Brookfield. Is your largest equity position? Well, long, well, no, BEP is the largest, but BIP is not far behind. Oh yeah. This is infrastructure far behind. Oh, yeah, this is infrastructure partners. Exactly. So Brookfield Infrastructure Partners, Q1 2022, all figures in USD here. So revenues were up 27% to $3.4 billion.

FFO, which is funds from operation, was up 14% to $493 million. And FFO per unit was up 3% to $0 96 cents per share or per unit. That's the term they use. FFO for those who are new to the show, it's essentially just a metric. It's a bit like free cash flow. So it kind of strips out some things like depreciation and amortization. So it's a better indicator for these type of businesses that are very asset heavy, like Brookfield Infrastructure Partners, but also Real Estate Investment Trust, REIT. So that's why they use this metric a lot. The reason why the FFO per unit was much lower than the FFO in terms of percentage of increase was because they issued shares in November of last year for the inter-pipeline purchase and they also did an equity offering in November. The equity offering in November has not

yet contributed to their financial results so let's keep that in mind and all segments were either flat or increased on an FFO basis so that's very good from a segment standpoint. They did some interesting investments, $750 million investment in two Australian utilities. Actually, pretty much all their investment were in Australian companies. They also announced an agreement to acquire another Australian company, Unity Group, through a a 50 50 joint venture partnership with another infrastructure investor morrison co they will take the uh well essentially the offer will take the company private the cost for brookfield is approximately 850 million unity is a provider of wholesale and retail telecom services to customer and businesses in australia so not

the gaming engine not the gaming engine don't worry not the gaming engine more more in the line of brookfield type of things at least for the infrastructure not virtual infrastructure no that's it they are steady when it comes to dividend increase and this year is no stranger to that they increased their dividend by six percent compared to last year to 54 cents per share they announced a stock blitz surprise surprise and of course it's three for two like what yeah they always for those are not familiar with brookfield They very regularly do stock splits. I still don't fully understand why. And they're never simple.

No. Three for two is very common. So basically what this means is if you own two shares of VIP, you'll get an additional share. And this means that their dividend will be lowered per share to reflect the new number of shares, which will be 36 cents per share beginning September 30th, 2022. So for me, you know, steady as she goes, this is one of the reasons why I don't panic when there are some huge markets drawdowns like we're seeing right now for growth stocks. I do own growth stocks, but there are small portions of my portfolio. And I have these stalwarts like Brookfield that are very steady. It's still down, but it's down low single digits compared to either

double digits or high single digits for other companies. Brookfield Asset Management and its subsidiaries are the ultimate sleep well at night investments. They just do their thing and they buy assets that are undervalued when you don't have to even move a finger. And that's the benefit. Secondary note that's completely irrelevant. Well, it's relevant to Brookfield, but not to the conversation, which is all of this weird stuff they do. I don't really know how to characterize

it. They do these weird stock splits. They have all these different listings. They have 15 different public entities, the C Corp, the.UN Corp, the US listing, the Canadian listings. It is out of control, spinoff here, spinoff there. As a company working on data for public businesses, you always think of like, okay, what are the outlier cases? And Brookfield is the only one I have to think of because they represent every edge case outlier scenario with what if they do weird stock splits? What if they have a whole bunch of listings? What if they do weird stock splits? What if they have a whole bunch of listings? What if they're absolute psychopaths? And so they've been a good edge case for building data. Yeah. And I mean, it's so complex. BIP has been for their, you know,

for one of their subsidiaries in terms of like, if you're looking at the subsidiaries, BIP has done In terms of like, if you're looking at the subsidiaries, BIP has done really well in the past two, three years. It's just been like a steady as she goes. Obviously, I know like if you have BAM, you also have the asset management part of the business. But if you're looking strictly at the subsidiaries, this one has done phenomenally well. And I think they're probably just trying to make it more accessible to retail investors. That's the only logic I can think of. Maybe they have another one, but yeah, it's not trading at crazy amounts either. I think you can get a share for the limited partnership in Canadian dollar around $80 last time I checked.

So it's not like it's out of reach for most people. I know it's been a successful, it's out of reach for most people i know it's been a successful it's been a winner and they have core infrastructure assets so it's definitely steady as she goes that it's truly a toll road business with no like literally literally toll road business okay so cnbc So CNBC, this is a fun little segment. CNBC ran their markets in turmoil segment on May 5th. And they love this segment because they get to paint their whole interface red. They get to like, ah, you know, like the fear tactic. CNBC loves this volatility because it grabs the eyeball. All right. So someone put together,

what were the forward year returns? What happened one year after CNBC ran market in turmoil? And since 2010, since this data started or when they started markets in turmoil, it ran anywhere from four to 10 times a year. And they just ran it for the first time in 2020. return from markets in turmoil has produced a one-year positive return in S&P 500 without a single exception to the rule. The average one-year return from markets in turmoil segment was 40% percent average. So if there is any proxy for timing the bottom, it is when CNBC runs their market and turmoil segment. Again, this is just a fun piece of info. I don't have any reason to believe that this will be some outlier in the data, that in one year from May 5th, you don't make money on a one-year forward return. Again, this is data from going back to 2010, which is skewed because it's been basically a bull market the whole time but my god this is hilarious

and take it for any signal you wish because this is they like running this stuff when the fear and greed spectrum is fully to fear right and that's when you actually make money yeah oh yeah exactly and you know the data you got it from or the tweet is I follow him too. He's a great follower if you want some stats. Charlie Balolo. Balolo, yeah. Charlie, like he just posts like he'll get these random. He has a full team. Oh, of course.

Yeah, exactly. But it's just good. Like he'll post these random things and I've pulled some and we've talked about some for the podcast at times. He's just a very interesting follow for uh yeah for just the data he comes out with and the data usually quite like optimistic you know like it's usually like a rational reminder and so that's why it's usually good and that's why we resonate with the content as well too right like the doomer type content the like doom porn type financial content that's what sells eyeballs but has basically no ability to make it into this podcast

because it's not our style. Yeah. Now to finish it up with one of the pandemic barometers, I dare to say Air Canada Q1 2022. It's always an interesting one because we've said it since the start of the pandemic. I think this is a great barometer to know where the travel market is and the travel and I think leisure as well. Revenues were up 2.5 times to 2.57 billion. Of course, that's year over year. So let's,

you know, keep in mind that's still down 30% compared to Q1 2020. And I will mention here some 2020 numbers just to keep things in perspective. Cargo revenue was up 41% to just shy of $400 million year over year. This one has been increasing since 2020. So I'm impressed with Air Canada how they've been able to shift a little bit with the cargo. I think that was a smart move on their part. how they've been able to shift a little bit with the cargo. I think that was a smart move on their part. Operating expenses were up 75% year over year with large increases coming from fuel costs.

It looks big, but some of this would be due to increased overall flights by Air Canada compared to last year, much higher volume, lower than 2020 in terms of fuel costs, but they were only 10% less than 2020 for 30% less in total revenue so clearly fuel costs will be putting some increased pressure on air canada's profitability as long as oil stays high and obviously that i think applies to all airlines wages is something i wanted to look at. They were also up year over year,

but it's harder to put this in perspective since they had less employees working for them last year, again, due to COVID-19 and reduced overall flight volume. Net loss of $974 million versus $1.3 billion last year. Net loss of $1 billion that they had in 2020 so the net loss was in line with 2020 they generated 59 million of free cash flow during the quarter this actually surprised me quite a bit that's a positive sign since last year they had lost over 1 billion in free cash flow and if we go back to 2020 they were free cash flow negative to the tune of 400 million overall i think you know air canada is still recovering from covid19 it looks like it is trending in the right direction but i do wonder if higher fuel prices will force them to increase

their ticket prices and potentially reduce demand for travel. I think it's going to be tricky for them and airlines in general because we're seeing people who have to make choices now with cost of living just going up. And at some point, if you're having to make choices, maybe traveling, you might push it back a little bit until things kind of come back down to back a little bit until things kind of, you know, come back down to earth a little bit in terms of prices. So, I think it'll be interesting

what approach they take because you don't want to jack up your prices too much that you end up killing demand for it. Yeah, it's a bit of a head scratcher for me because I'm like, I think most people are going be like screw it i've been pressed of traveling and here we go and yeah i mean i was shocked too like when i go fill up at the pump i don't fill up my suv for the same price i used to but i did just book a flight home from calgary for 108 dollars all in like which is that including all the all the fees and stuff or no no i mean no i mean i'm not gonna check i think you know it costs extra to check a bag but that it's been like that for years now and i'm not checking a bag and i'm flying

into edmonton doing a loop driving through the rockies and stuff and then flying out of Edmonton. So I booked two one-ways. But 108 from Calgary, Air Canada. That's cheap, man. Yeah. I mean, it's a bit of a head scratch. How did I pull that off? I don't know. They must have had like a very, you know, a low-demand flight. That's the only thing I can imagine.

And they're better off, you know, selling a seat cheaper's the only thing i can imagine and they're better off you know selling a seat cheaper and getting some revenue out of it that's the only thing i can think of yeah it's all done by algos and like their relationships with the online booking things yeah like literally booking holdings and google flights and expedia and stuff. Yeah. And for me, I have experimented with all of them extensively. I have done, I've done countless, like literally like me and my buddy, when we were trying to find flights, when we were, when we were backpacking, we would pull up like five different devices and we'd have like Google flights and like sky scanner and Expedia and going direct to the website just so our cheap asses could save like $4. And maybe once out of like 50 flights, did we find anything better than kayak really which is the booking holdings asset kayak

so if you are looking to get flights or hotels i mean this is not sponsored not sponsored at all by the way that i have found that kayak is the cheapest i would and i like the i like the ui of it too as well yeah i had the tendency to go with Air Canada directly just because I, you know, I have an aeroplane card and they, you get a pretty decent, like pretty flexible rewards too. Uh, so I always kind of did that if I wanted to book an Air Canada flight, but, uh, for, you know, if there was a significant difference in price, I'm, I'm fine with booking through somewhere else. Yeah, exactly. Uh, there's a significant difference in price, I'm fine with booking through somewhere else. Yeah, exactly. There's just no loyalty.

It's just straight price. But they've done a good job with what you just said to maintain some sort of loyalty with the point system. That's the best part of those businesses now. And that's why they're like, hey, we got rid of it and we need it back. And so that happened over the past few years. All right, let's wrap this up. I just have here on the top of our notes that, I don't know if you want to just quickly chat about it now, but Robinhood has started to kind of, that story has kind of started to unwind, right? And Charlie Munger last weekend spoke about it because he loves dunking on Robin Hood, by the way. He absolutely thinks those guys are scumbags and does not hesitate to say what he thinks as you can expect.

what he thinks, as you can expect. Robinhood stock has really started to unwind. It's been complete implosion since their IPO at this point now. Trades for less than $10 billion in market cap. Trading volume is going to stop. Retail investors are getting blown up in this downturn. They've been exposed for how they actually make money. The old adage in Silicon Valley, if there's no... You are the product if it's free, right? And so you are the product payment for order flow to the big bad guys at Citadel or whatever. And this story has just really started to unwind. I don't know if you've been following it at all. Not all that much, I'll be honest. But I mean, obviously, the big lines over time, I've not been impressed with Robinhood. I never understood why anyone would actually invest in

them because what – just their model didn't really make much sense that's just my opinion there's also a lot and what's the moat exactly there's a lot of competition in this space by much bigger players who have much longer track records than robin hood you know just thinking about schwab here right like schwab's a big one robin hood added some crypto but again am i gonna use like i know it's not available. I don't think in Canada, am I going to use if I'm American Robin hood or can I just trust Coinbase as well? I like instead I will, I would go Coinbase crypto and Schwab for, for stocks, for example.

Yeah. If you're in the US and if you're in Canada, you're using ShakePay. Obviously. Of course. Exactly. Obviously, shake pay obviously exactly obviously shake pay we use shake pay but no no it's a good question like what's the moat these guys have really gotten what's coming to them i think i think they acted in a horribly unethical way they They screwed over retail investors. I think a lot of them had bad intentions and it's really started to unwind.

So, you know, the market sometimes does do a good job of regulating itself. Unfortunately, if you're a Robinhood gambler and bought Robinhood stock, that's too bad. But I don't know. I just thought that maybe I'd bring it up. We had it on the notes here. Let's wrap this up. That does it for this week, guys. Thanks so much for listening. We really appreciate you guys. If you do want to see Simone and I's monthly updates in our portfolio holdings, that is available at join tci.com. And later this week, we'll rattle off all the new signups and give some shout outs

there it's been pretty successful so far simone pretty good so far yeah a couple more in today and uh yeah responded to a few comments on the weekend from some of the people that joined tci had a little a few comments so always nice to see the engagement too. Yeah, that is join tci.com, join the community. We really appreciate you check it out and it supports the show so we can continue to make great content for you guys. And stratosphereinvesting.com just launched the most electric feature that we have ever done, which is 10 year financial statements, but you can customize what you want to see. And it's going to show the graph below there. And there's like 50 metrics to choose from. Before there was like 15, now there's like 50. So go check that out. This is literally the best feature I think

we've ever launched, like start to finish. And I really like it. That is stratosphereinvesting.com. We'll see you in a few days, guys. Peace. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. We'll see you in a few days, guys. Peace. Bye-bye.