The Canadian Investor - Episode 2 - Self-directed accounts, ETFs, Uber and Dollarama

Episode Date: December 9, 2019

In this episode we talk about opening a self-directed account. We also explain how ETFs works, what to look for when considering an ETF and some ETFs to get started with. We finish with a discussion on Uber Technologies ticker:UBER and Dollarama ticket DOL.TO .--- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. Welcome to another episode of The Canadian Investor. I'm Brayden Dennis, joined by Simon Belanger.

And today we are going to talk about how to get started in the market. A lot of people come up to me and ask, where do I start? I understand that mutual funds or active management is costing me a ton of money and is really hurting my retirement goals because of these insanely high 2.5% mutual funds, and then they tack on other fees where they can. So we're going to tackle that topic today. Everything from choosing a brokerage and funding it with the first couple bucks to going out and deploying an ETF indexing strategy, which I think is the smartest way for someone to at least get started. There's lots of people will tell you that you can just index the rest of your life.

I agree with them in a lot of ways. So let's kick right into it. How are we doing, Simon? I'm doing great, Brendan. How are you? I'm good, man. Let's get into this. So how did you, I'm actually curious because I don't know this. Did you start, like when you started investing, did you go ahead and just pick a company that you liked and then bought their stock? Or did you go with like an ETF approach? So, yeah, so it's actually quite different. So I started when I was about 19, 20. So really at the forefront of I think it was one of the first brokerage houses back then that was done online.

And I did a mistake that probably a lot of listeners will resonate with. So a friend of mine, his mom told me about this diamond company up north in Canada. So they had found diamonds in this mine. So that was validated and everything, but they had not started production yet um so i heard about that i was excited put a thousand dollars which at the time was a lot of money for me um and then i just hoped that the company would uh quadruple then just uh yeah like just go through uh through the roof it was a penny stock at the time so they they ended up having some issues with getting those diamonds out. They couldn't get financing, ended up filing for bankruptcy, and I lost all my money. So I did definitely learn the hard lesson then.

I actually am happy I did it because I know not what to do now. But if I had known back then that ETFs and index funds and what I know now, I probably would not have done that. Yeah. It's the, it's the classic throw everything on a mining company. It's funny. It's funny how many people have started their first stock with some high flying mining company,

like some junior exploration company that you can, I mean, I guess cause the story is there that you could potentially triple your money in like a day because it happens all the time with these like exploration mining companies but obviously not a prudent investing strategy and i find so what's so funny is peter lynch has a really really funny analogy in one of his books that i've read um can't remember which one off the top of my head right now, but he has a really funny analogy where he talks about how people, when they're going to go buy some new appliance, like some new fridge for their home, they find out which, you know, what's the most energy efficient. They find out all these specs to save, you know, the equivalent of 50 bucks. But then when they're investing, they just like,

it's like they're in the casino and put it all on black. No, I can't understand it. No, I totally agree with you. And in my case, it was more like, you know, a friend of a friend or like obviously my friend's mom. I didn't do much research. I just got excited. I saw the share price. And I think this is a big mistake that a lot of people first do is they'll see the share price and they'll just like, oh my God, it just needs to go to $2 and I'll double my money, which, you know, it's a lot, it's more complicated than that. Not overly complicated, but there's other things you should be looking at outside of just the charts and the share price and so on. But yeah, one of those mistakes, did not do any research, got excited. I was guessed a little bit of FOMO and then, yeah, lost all my

money after that. If some of you are interested, you can just Google Tahira Diamonds and see what comes up. Watch its journey to zero. Yeah, exactly. I mean, if you can find stuff, that was early 2000. So, yeah. Yeah. No, it's so common, though, with some of the really small cap mining companies. So what people can do is, unfortunately, a lot of people, especially here in Canada, their money is with big banks, like that's where they have all their savings accounts. So they finally have some money to invest and they go to the bank and they go to the teller, their advisor, and they say, hey, I want to start investing my money. And they will funnel you into, because they're actually incentivized to, funnel you into

expensive active management with the bank's mutual funds or other funds that they're incentivized to sell that have extremely high management expense ratios, which in layman's terms just means fees so they have really high fees and it's just not your best interest so what you can do is open up a discount brokerage service so all the big banks have their own discount brokerage service you're looking at ten dollars a trade CIBC I think is 695 a trade or you can go to Questrade. And I'm even seeing some $0 trade now come out from Wealthsimple. So this is where you want to be because even if it is $10 a trade and you're more comfortable with just doing it on the same platform of your bank,

say you bank with TD or Rell Bank, that's fine. Even the $10 a trade, as long as you're not day trading, your fees are going to be significantly lower than these management fees on the mutual funds. What you can do is you can go online. You can register for an online discount broker service. I personally use Questrade. $4.95 a trade, I think, is a great deal. I know a lot of people are using Questrade. And this is really where you should start. We can go into exactly next what you should buy or what I think is a good place to start at, which is index exchange traded funds or index ETFs. That's a really good place to start. Yeah, before we go into more detail, Brayden, can you give us some example of different indexes? Because I know we're talking about it and for us it's like it's very obvious what it is, but if people are getting started, they might not fully understand what an index is. Yeah, absolutely. So the easiest way to explain it is the example of what is called the S&P 500.

So the S&P 500 is an index that was built to describe the performance of the 500 largest publicly traded companies in the US. So the S&P 500 just means an index of the performance of all 500 companies that are tracked in it in the US so you're going to find the the Microsoft's of the world the Johnson and Johnson the Coca-Cola the Google the Amazons they're all going to be in there and the 500 largest companies make up the S&P 500 so what you can then go do is buy an index exchange traded fund, which tracks all 500 companies. So the beauty of the index fund, so one of the main advantages is they'll usually have very low fees. So the reason for that is they just mimic the index. So there's very little active management required. Mainly the most of the trading is just related when there's adjustments

with the index, whether there's new companies that are added, some subtracted. So the fund management has very little to do aside from just mirroring what's going on with the index. So usually that's why their fees are so low. And that's a big advantage for people investing in them because the lower the fees, the more of the money that you actually get to keep. Yeah, exactly. So there's a couple studies that have found in Canada, since we pay such high fees on active management, that just going to a ETF, low cost, broad based index fund strategy instead, which we're talking about, can save investors over $300,000 in investment fees by the time they reach their number in retirement.

So $300,000 on average is not insignificant. That's a lot of money. Yeah, exactly. So for the listener, it's a good way to see what differences it makes. It actually go online and Google compound interest calculator, play with the amount of years and then play with the 4% or even compare that with 4.5% over 20, 25 years, whichever the investing period that you're looking for. And it's kind of staggering the actual difference it makes in the long run. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them,

you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY, do-it-yourself investors. Blossom is an essential

app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and

podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Yeah, it is impressive. Especially when you get into, if you start investing at 20 and you throw out a 40-year time horizon to when you're 60 and you're retiring, the amount of money is so significant. When it's hundreds of thousands of dollars

for a $1.5 million portfolio, percentage-wise, that is just despicable. I don't know how they've gotten away with it for so long, but they have. Yeah. And for those that are looking to invest a little bit on their own, but I know a lot of people that do some investing on their own, but they're also someone who manages their money. So whether it's a financial advisor, financial planner, it depends. Everyone's different. The one tip I would give to people is if you're going to have a financial advisor, financial planner, make sure

just they're straightforward for their fees. You understand what you're getting for those fees and that you're comfortable with the answers. So if you're not comfortable with the answers they're giving you or you think the fees are too high for what you're getting, then by all means, either switch and do everything on your own or go see someone else that would better fit your needs. Yeah, exactly. I'm not here to say active management is the devil or anything. It's more so what is the value that it's providing for the fee that is being charged. And I'm seeing a lot of people in the active management space now reduce their fees quite a lot to what I think is now to be able to be hands off with it is providing a lot of value. I'm just challenging the two and a half percent, 2.75% that I have seen. And this isn't even 10 years ago, like this is like recent funds.

And it's just like, it's just, they're not providing enough value for what they're charging. So that's really what I'm challenging in this industry right now is those fees for the value, like what makes sense, right? Yeah, exactly. And in terms of VTFs, I know we talked about index funds. So there's the S&P 500, the very famous one, but you can get index funds that are really following indexes around the world. So you don't have to limit yourself to the S&P 500 or the S&P TSX here in Canada. So you can get funds that will mimic those indexes, whether it's in Latin America, China, that will mimic those indexes, whether it's in Latin America, China, Europe, it doesn't matter,

you'll be able to find some. There's also some ETFs that are actually actively managed, but oftentimes those ETFs will have lower fees than traditional mutual funds. So Brayden, for you, what's the limit in terms of if you're looking at an active ETF, what's the expense ratio that would be the threshold for you? For an actively managed fund, I'm thinking it's got to be less than 0.6% for an active ETF. I see a lot in the 0.4 ranges if it's following some sort of strategy. It's got to make sense, right? If you believe that strategy can truly outperform the market by X percentage, then there's got to be that delta, you know, the management on the active management can't be, sorry, the fee on the active management can't be so high that it doesn't make sense anymore because they're facing almost free with the broad-based index ETF. Like to get an S&P 500 with Vanguard, you're looking at 0.05%.

So that delta can't be so big that it doesn't make sense anymore. So I don't know. I'd peg like 0.6%. I don't know what you've been seeing recently, but. Yeah, I think I would say around there too. Definitely, I would never touch anything that's above 1% for the 0.6%. I mean, it depends what people are looking for, right? If someone's looking for exposure in a very specific sector, I know I've seen ETFs that are solely focused on internet security, for example.

So those are very niche ETFs. So the management fee may be a bit higher for those. But definitely, I think I'm on the same page as you. Anything above 0.6 percent at least thread with caution if you're interested in investing in that ETF yeah you bring up a good point like the really really niche sector specific ETFs it could make sense even if it is sitting at like one percent MER it could make sense because if you really are really bullish like you're really excited about some niche sector like internet security for

instance um but and you want to play you know five or six names that are in that space to just kind of average out your risk instead of just picking one instead of incurring all the transaction costs of buying all six of them, it might make sense to just pay that management fee of 1%. But it really depends on how much money you're investing. If the $10 times six is more expensive than the 1% on your capital. So that would be a case by case, I would say. Yeah, exactly. And the time you're willing to put in and definitely if for those who are interested in like looking at niche ETFs, definitely don't put all your savings in there that like just dedicate a small portion for it. That would be my best advice. Yeah. So Simon, if I had to ask you um for some broad-based index so i say i'm i'm i'm just

starting i just opened my brokerage account and i need to get a index etf portfolio off the ground that holds canadian securities u.s securities some international securities potentially, some stocks traded out in emerging markets like China, Brazil. Do you have some ticker names that we can get started with? Yeah, so I'll give you guys a few that I kind of like. One of them is pretty well known, you'll know that one and maybe I'll let you look at the Canadian ones a bit more closely. So the first one would be VSP.TO. So I'm sure you're familiar with that one. So the Vanguard S&P 500 index and that one is Canadian edged. So it's listed on the TSX and it mimics the, it follows the S&P 500. So that's a good starting point. Whenever investing, I would also recommend doing a dollar cost average. So if you're either, you know, investing on a regular basis, a set amount, that way, if dividing it into three, four, five chunks. And then in a set interval every month or other month, you kind of invest a quarter or a fifth of that amount.

So that would be a good starting point, especially if you're looking for exposure in the U.S. A couple of emerging markets that I do like. Yeah, go ahead, Braden. I was going to say, Simon, is VFV the non-Vanguard hedge, the non-Canadian dollar hedge one for the S&P 500? VFV, I believe that's what the ticker is. Let me have a look. Yeah, I believe so.

I think that one is non-Canadian hedge. Yeah, that's okay. So that's what you're looking at. So VFV or VSP, you said, right? Yeah, I believe so. I think that one is not Canadian Edge. Yeah, that's okay. So that's what you're looking at. So VFV or VSP, you said, right? Yeah, exactly. And in terms of management fees, they're very similar. I actually thought the Canadian Edge would be a little higher, but I think they're the exact same. They're the same. That's great. Yeah. So those are great starting points. In terms, I am focusing personally a bit more on emerging markets right now. So some ideas, I'm looking right now at India. So India, I'll give people two interesting

ones to look into. The first one, if you're looking to invest on the TSX, it would be ZID.TO, so the BMO India Equity Index, CTF. So that one is, BMO actually has a bunch of funds that are targeted towards emerging markets. The expense ratio is a little higher for that one, so it's 0.69. But again, it's not unusual for emerging markets to be a little higher in terms of expense ratio. If people are looking for an alternative that's lower in terms of management fees or expense ratios, one that I do like is the Franklin FTSE, so FTSE India ETF. The ticker is FLIN. This one, the expense ratio is 0.19%, so very reasonable. It is listed in the US, so you would have to convert to US currency for that, but it is

smaller volume as well, so you may want to put a limit order when you do purchase it. But that's one that I've been looking at and actually dollar costs averaging in the past months. 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. That is questtrade.com. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked.

The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers

and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the app store, and I'll see you there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the App Store and I'll see you there. I can give you guys another one for emerging markets while I'm at it. So the last one that in terms that I've been dollar cost averaging recently myself is another Franklin one. So again, listed on the US stock exchange. So that one is the Franklin FTSE Latin America ETF, so FLLA. So that one focuses on Latin America. And again, the expense ratio is 0.19%. So those two, well, those three, so whether you're looking for a bit more India exposure or Latin America, those are good starting points. And of course, there's the Vanguard if you're looking for something that's following the S&P 500 in the US.

Yeah, that's a good start for those geographical regions, and especially like in the US, VFV or VSP are a great way to get exposure to the S&P 500, the indexes we talked about before. exposure to pretty much the whole world and for the lowest possible cost available right now between Vanguard and BlackRock so the three are so for the Canadian total stock market this is VCN so it tracks the entire Canadian stock market I think it's a market cap of over like 100 million gets included. And this will hold a couple hundred Canadian stocks. And the ticker is VCN. So I've actually laid out exactly how to open an account and the three broad-based index funds to open on my website, stratosphereinvesting.com. I have a free video course you can go see.

So the three ones that I recommend for very simple stock exposure are the Canadian one, VCN, and then the equivalent in the US. This is the US total stock market. So this is ticker XUU for less than 10 basis points, so 0.06%. And this one's great because similar to a VFV, which is all 500 in the S&P, this is actually a couple thousand of US stocks. So it's tracking mid cap companies as well, and some small cap companies. So smaller companies in the US are also tracked in this. It has shown that if you also track small cap and mid cap in the index that you'll have better long term performance. So I think the ability to grab a couple thousand stocks with one ETF ticker is incredible. And you're going to get all of the U.S. market there.

And then again, for international total stock market ticker XEF from BlackRock as well. This one gives you exposure to Europe, Japan, Australia. Those would be the main ones. So this is giving you exposure to broad-based index ETF portfolio across all of the world, pretty much. So with the Canadian stock market, the US stock market, and the European and Japanese, Australian markets, with three clicks of a button, you are going to have stock returns on average of the whole world. If you do want some Chinese and Brazilian and emerging market Asian Indian as well, I do recommend Vanguard's emerging markets ETF called VEE. So that would be another option if you want.

I'm going to even throw in a fifth one. I know I said I was going to keep it super simple, but if you want exposure to Canadian real estate, so real estate investment trusts that are publicly traded, VRE is a good way to diversify your portfolio even more. Yeah, those are great ideas, Braden. And definitely there's a bunch of ETFs right there. And these are just kind of some of the ones we're looking at. One of the things I would like to mention as well, like we talked about expense ratios earlier, but something to keep in mind is if you're investing in several ETFs, especially some ETFs that may overlap, make sure you double check the holdings for certain funds, especially if you're looking at investing in two, three different emerging markets ETF. The issue with that, especially if they're just emerging markets, you'll actually have a lot of China exposure. And you'll most likely see there's going to be in terms of holdings, especially the major holdings, they will tend to overlap. So it'll give you some a bit more concentrated exposure in

certain areas. So that's just something to keep an eye on if you're looking to invest in more ETFs. Just make sure you're cognizant of what the holdings of the ETFs are. You bring up a good point because these ETFs generally are market cap weighted opposed to equally weighted. So market cap weighted means, we'll give another example in the S&P 500, the biggest company in America, it's publicly traded. Currently, as of recording this, is Microsoft. So Microsoft is going to make up the largest percentage of the ETF, followed by the second biggest company in the world, Amazon. So those two companies will make up a big portion. will make up a big portion. And to give a real life example here in Canada, TD and Royal Bank,

those two banks combined make up 17 or right now, let me see, 16% of the Canadian market. So the VCN, the one that I just listed. So over 15% of that one holding is actually only in two companies. So it might hold a couple hundred companies, but don't be confused. You are owning mostly the big banks. That's how it works here in Canada. No, exactly. And one thing, I guess we probably could keep on talking about ETFs for about five hours, but there is all different kinds of ETFs. One other, and I think, Brayden, you've probably talked about it on your previous podcast, Stratosphere Investing, is ETFs that are actually, for example, the S&P 500, but they're equal weight instead of being market cap weighted.

So that's an alternative, too, for people that don't want too much concentration. If I'm thinking about the S&P 500, for people who don't want to be too concentrated in Amazon, Apple and companies like that. Yeah, exactly. That's a good point. So really quickly, we're going to rapid fire through two company requests that we've been given. The two right now are Dollarama, which is traded on the Toronto Stock Exchange, and then Uber, of course, which is IPO'd this year in the US and has had a pretty horrible IPO, but people want us to talk about these ones. So I'm'm gonna give you a quick quick shot on uber here okay so okay perfect awesome so that's uber Wow where do I start so uber yeah so uber one of the big issues with uber is there was a lot of hype surrounding the IPO

which was I think April of this year, if I remember correctly. It was in the spring. So a lot of people were excited about that IPO. The big problem with Uber is it's considered a growth company, but they also lose a lot of money. And when I say a lot of money, I mean a lot of money. So their most recent quarter, I just read today, which came out earlier, I think either today or yesterday, they actually lost a billion dollars in the quarter. So they're still growing the top line. So the top line would be the revenue or the sales by about 30 percent, but they're not profitable and they are not going to be profitable in the near term. So what's kind of happening right now is people have lost a little bit of

their appetite for growth companies that are losing money. So Uber, I think IPO at around $45 a share. And I think last I checked, there were around $28. And then when I say IPO, it's initial public offering. So they've almost gone down about 40% in value. So they, yeah, when you look at a company like that, for growth, a lot of people put a lot of emphasis on sales and sales growth, because you can't value them any other way. You cannot value them on price to earnings ratio, because there's no earnings, they're actually losing money. So for these type of companies, especially a company that just IPO'd, definitely buyer beware, and you really have nothing to fall back on. So if there's, you know, these growth stocks tend to go well when they're crushing, like in

terms of estimates that they put forward. So if they're crushing the sales instead of increasing 30 they're increasing 50 it's all fun it's all everything's going well but if they miss their guidance a little bit they'll usually get completely hammered and this is what is happening for uber and to be honest anyone who've looked and dig into the financial would have seen that as a big big risk because you can't keep losing a billion dollars a quarter and expect that your stock is going to go up in the long run brayden do you have a few things to say about uber i think all the points you have just said are completely true and i agree 100 with them they ipo'd at 415.57 USD. Today, they trade for $28.02. To give you what you're dealing with here, the stock dropped 9.85% today. So this is the kind of company that you're dealing

with. I have nothing more to add. They lose a ton of money. Since is since I'm a rules based investor for my subscribers on stratosphereinvesting.com. This would never meet my screens and I would never make this mistake. I think we can leave it at that. Yeah. And actually, I'll just add something. As you were talking, I just saw this online. Their lockup period is actually tomorrow. So that should be interesting.

So for those of you who don't know what a lock-up period, so when a company goes IPO, so initial public offering, they'll usually have a time frame where insiders, so people who own the company before it went public, they cannot sell their shares until I think usually it's around six months. So they have this time frame. And then after the lock lockup period expires, all these new shares become available. And people, if they're afraid that the investment will keep going down, like it kind of appears with Uber right now, you may actually see an even bigger sell-off when the lockup period ends. So that remains to be seen. So this is November 5th today, so it'll be interesting

what happens for the rest of the week for Uber. Yeah, it's going to be a bumpy ride. All right, let's move on to Dollarama, the Canadian company here. I'm sure I don't think they need an introduction. I believe anyone listening would know what Dollarama is. They're the largest retail chain, dollar store retail chain. They're headquartered in Montreal. They have been Canada's second largest retailer of items of $4 and less. What is number one? Anyways, that is very strange. So the stock has done very well. It's up 168% in five years. It had a pullback at the beginning of 2019, but has rallied really nice. I'll just look onto some metrics here. So it trades at a PE right now of 26, so fairly expensive. PEG ratio, so price earnings are then divided by growth of two. Price of sales, 3.84.

So that's the valuation we're dealing with. So the market is pricing it fairly expensive. They do pay a very small dividend with a very low payout ratio. So we can expect that to grow. They're going to grow that dividend. It's looking like the makings of a dividend growth company right now. I like the company. I think they're going to be able to increase prices.

This is what everyone was worried about. Well, how do we sell things that are $7 at Dollarama? But they were saying that about when it was $1. So they're able to increase these prices faster than inflation, and they are doing better than ever. So all of that negativity around how are they going to do this business model with inflation, that does not seem to be a worry at all. The margins are great even on these low-priced products. And yeah, the growth story is there. I like the stock. I don't own it, but I do like the company. Yeah, I mean, I'm looking at it at the same time as you, so I would probably

say the same thing. It looks a little bit overvalued right now. The margin seems, I was just doing some quick calculations, so it seems to have about 15% net margins. At least the last two years, I didn't do all the numbers, but that's pretty good for a company that sells cheaply price or low price products, just like Dollarama. I think it would definitely be something that I would entertain if the price is right. They also have a business model that I feel like is kind of Amazon resistant. It's the type of thing that people will usually, you know, they'll want to have the products that they sell right away. They might not want to actually wait a day for Amazon. They'll just go and pick them up themselves.

So that remains to be seen if it continues like that. But their sales have been increasing at about 10%, 15% per year, just kind of ballparking it, looking at it. And profits have been steady as well. Looking at the cash flow, that seems pretty good as well. So their free cash flow has been increasing every single year with the exception of last year where it dipped a little bit. Yeah, no, you bring up some really good points. I also, for the first time ever, am realizing that their margins are so high for things they sell for a dollar. So that's pretty impressive. So management has been able to get that supply chain

down to a T. So my final thoughts on this would be the fundamentals are great. Everything's really solid. The growth profile is looking good and it's looking ripe for a dividend growth king in the future. But I think it's a little expensive at 26 times earnings right now and three and a half times sales for a company that pumps out a lot of revenue. Fairly expensive. Simon, final thoughts on this one? Yeah, I totally agree with that, Brayden. So I think for me as well, it's going to be on my watch list. And if the price is right and the numbers continue trending in terms of the business in the right direction that's uh at some point in the future i could start uh position them yeah it was a great entry point when i mean a lot of stocks

were great entry point at the beginning of uh 2019 the market falling so much but this one especially had a huge pullback so um if this pullback, similar to this one, were to occur again, yeah, it fell 42% at the end of 2018. Wow. If that were to happen again, I mean, I think the stock would be a great buy. Yeah. All right. That is the end of this episode. Thank you so much for listening. As always, you can find lots of

resources on GetStockMarket.com and can pose questions for us to review different companies like we just did. Thank you so much for listening. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions. Thanks for listening to this episode of the Canadian Investor. To get a list of the top Canadian dividend stocks right now and other valuable investing resources, go to GetStockMarket.com.