The Canadian Investor - Episode 21 - Books and movies while you’re stuck at home

Episode Date: April 7, 2020

If you’re stuck at home and don’t know what to do, don’t worry, we’ve got you covered! We talk about some of our favorite investing books, movies and tv shows. Tickers of stocks mentioned : LK, TDOC--- 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 Berlinger. What is up, listeners of The Canadian Investor? I am Brayden Dennis, joined by my co-host, Simon Berlinger.

Is the pronunciation getting better there, Simon? Yeah, man, it's getting better. At some point, we'll have to do a french episode yeah i might be doing a lot of the talking though yeah french episodes i guess i'll just be i'll just be a listener of that one because i think i finished grade nine no no no i did grade 10 french when it wasn't mandatory because it was a ski trip it It's the only reason I did it. So my French is just horrendous. So guys, I hope everything is going all right. Working from home, doing whatever you got to do.

Essential staff, we are so, so grateful for you. Seriously, everyone in the healthcare system, cleaners, retail, grocery, logistics. Forgive me if I'm forgetting some. But seriously, thank you all so much. It looks like everyone's doing their part. There actually has been some reason to believe that what we are doing is really working. The cases in New York are very, very rapidly decreasing that exponential growth that we were seeing out of there, which was getting pretty scary. So if we keep doing this, maybe we can enjoy our summer.

What's going on, Simon? How are you doing over there in Ottawa? Going well. I mean, at least the weather is getting nicer. We have a nice backyard, so we get to enjoy that. We've been walking the dog a few times a day always keeping our distance the dogs are loving this man i know i think he's gonna go in depression when we go back to over here yeah uh but yeah like we'll walk down the street and it's funny we'll spot someone coming we'll just kind of cross on the other side of the street. But no, people have been pretty good. And I'm hopeful, too, that the more, you know, more people stick to it, the quicker we'll be out of this and kind of go back to normal and hopefully get to enjoy the summer to some

extent of normalcy, I would say. You would hope, man. I have my cottage. That's what we call it in Southern Ontario. It's a cottage. I know the people out West call it cabins. Northern Ontario call it camps. But you get the idea, the lake house. And that is my summer, man. So I just hope that we can all be up there and enjoy it. So let's talk stocks. Stocks are up quite a lot today for the reason mostly I think that I mentioned 10 seconds ago, which was that the things we are doing are actually working in terms of flattening the curve. That's exactly what we're trying to do.

There are reasons to be optimistic this morning when data is coming out that we are making a difference. That is a positive. So that is a positive. And Wall Street is acting accordingly. However, that means nothing when on Thursday, job reports were twice as bad as we were expecting and the market was up. So who really knows? It's awfully confusing, but I think net buyers of stocks will do very well right now. How are you looking at the market right now, Simon? With some confusion? No, for real.

Rightfully so. Yeah. I mean, I think I can't remember who said this, and I'm sorry if I'm not giving the credit to the right person. But, you know, short term, the markets are really like a voting machine. But long term, it's like a weighing machine. And I feel like we're really seeing that voting machine in full force in the past few weeks to a month. A lot of the times it doesn't really make sense. I know I was looking at some companies on my watch list. Some of them, I mean, I'm just kind of scratching my head. Like, really?

Like, it's up 15% today based on this? They're not out of the woods. Like, they're still probably going to be struggling for a few more months, if not more. So I'd still be careful with this. Just, you know, I think, again, we reinforce it. Continue dollar cost averaging to minimize the effects of those swings on your portfolio. Personally, I could be totally wrong. I think there is still some pain to come, unfortunately, from the health perspective as a society, but also from the economic perspective.

I don't anticipate the numbers being much better this week, next week, and probably not for a month or two in terms of employment. So that's going to have a ripple effect, even if you factor in the government programs in the US and in Canada. So true to look at the market being up in a major way like today and thinking that, oh, we're somehow out of it or, you know, that's not true at all. Cases will be going up over this week, over next week. That's just going to happen. But if we do the things that we need to do, then we can flatten that curve. So I like that quote you just brought up, the classic Benjamin Graham quote about it being a short-term voting machine and a long-term

weighing machine. That is a great quote from Benjamin Graham, the author of the book, The Intelligent Investor, and one of the mentors of Warren Buffett when he was studying at Columbia University. So very, very cool. And this transitions well to what we're going to talk about. So what are we going to talk about today, Simon? Yeah, I was going to say really, really good segue over there. I'm thinking, man, I'm thinking here. Yeah. So we came up with this idea today to just switch it up a little bit, not talk about specific businesses. But Brayden is going to come up with four books that you guys can read if you're looking for things to do while you're stuck at home during this social distancing or physical distancing period. And I'm going to talk about four movies slash shows that you guys can watch while you're at home.

So from my end, I know they're all available on Netflix and for the books, obviously, you'll probably have to buy them, but there might be some audio versions of the books if you're interested with that. So let's get started. Brayden, since you started talking about The Intelligent Investor, I'll let you start off with your first book. Yeah, sure thing. So for me, I go in waves of being like a binge reader. Like I'll go a couple months where I'm crushing tons of books. And then I'll go on a binge where I'm listening to strictly audio books

and strictly podcasts. So I don't know, I have these kind of modes where I'm reading actual paperback copies and then going into podcasts. And I don't know, I just switch it up every once in a while. But the three books that I'm going to talk about, sorry, four books I'm going to talk about, I'm looking right now at my bookshelf at and are books that I think are very important for your mindset more than anything. And they're also written by legendary investors. So obviously, The Intelligent Investor by Benjamin Graham, not going to lie, first book, a lot of people recommend that this is the first investing book you read. I kind of disagree. And the reason for that is it's very hard to digest it. It was written in the 40s. And yes, it's legendary reading, but it's pretty hard for someone who's just getting into the stock market to read The Intelligent Investor.

That's just my take. So the idea that it should be the first book you read, I think it's quite silly. I do agree that it is the kind of Bible of value investing, however. So there's so much on this book out there that I'm not going to get into details. Let's talk about two other ones that I think are more fun to read because Peter Lynch and Joel Greenblatt are very, very good writers in the fact that they talk to you in a very casual voice and make investing something that's kind of fun. If you're ever on YouTube, just look up Peter Lynch's speeches to grad students.

He's done stuff for the military, I think. Obviously, for his company when he was managing the Fidelity Magellan Fund. He's just a witty, funny guy. Really, really witty. His book, One Up on Wall Street, is really great. He has a bunch of really, really easy to digest stock investing books and then yep go ahead sam oh oh that was okay i was just scratching but i keep going you look like you had something to say you're fired up about uh one up on wall street no no i was just listening

to you yeah but i know it uh it's a good book. And same thing for The Intelligent Investor. Read both. Sure thing. So then another one that's really, really easy to digest is the little book that beats the market. And it really is little. Like, I think I read this book in like three hours. Really easy to understand. And he talks about the whole book is basically about the premise of the magic formula, which ranks stocks on their return on invested capital and their earnings yield, which is just the inverse PE. He just insists on buying low PE stocks with high return on invested capital. Now, it is an incredible oversimplification

of investing, even though it's back-tested and proven to be very effective. I think the concept that the main takeaway is, is to look for undervalued securities with great profitability metrics, with return on invested capital being one of them. So I think it's kind of silly to think that I'm just going to strictly invest off like factor investing with two metrics rather than use that as part of a greater strategy. So overall, I think it's a very powerful book to understand his mindset, the contrarian mindset that he has and looking at metrics and kind of keeping a numbers perspective is very important. But the magic formula, of course, there's no true magic formula to finding great,

great stocks. And then another one I just wanted to throw in that's not investing related, but is very relevant to right now. A lot of people I know are looking for side hustles, for things to do to build a business online while they have all this downtime to reinvent themselves and learn new skills. The $100 Startup is a very good book and is one that provides all of these different case studies and all of these different worksheets right in the book

that you will actually have to bring a business idea almost to something at the end of the book that you have a pretty decent idea of how you're going to market it, how you're going to build it, what the product is, what the price is. So it's just a good book. And the author, his name is escaping me. I'm'm gonna pick it up once you start talking about movies and i'll let you know but uh let's uh let's hear some movies simon okay yeah perfect so i think most of the books you mentioned i read i think the last one uh i did not did not read so it'll be good to get that author so in terms of movies that people can watch that are investment related, the first one, it's probably my favorite one of the four I have drawn out. So it's The Big Short.

So if you guys have not watched that movie already, I think it's on Netflix. I'm pretty sure it is. And it's really about the 2008-200 2009 financial crisis, what led to that. It's also, it has quite the cast and it's pretty cool to see Christian Bale. Um, um, I think it's the guy from The Office. What's his name again? Steve Carell. He has a great performance. Steve Carell.

Yeah. Ryan Gosling and Brad Pitt. So they all kind of play roles that we're not really used to seeing them in. So that's really cool. And it goes over how they started shorting the housing markets and banks in the U.S. before the whole financial crisis happened and the excess that caused that. I think there is a scene in the movie when you guys watch it, you'll see where there is a adult, let's say exotic dancer, to put it lightly, that has about, I think, four or five different condos and mortgages on her exotic dancing salary.

And that's when the character played by Steve Carell actually realizes that they might be in big trouble in the US with the housing market so it's definitely a good watch especially right now with all the uncertainty going on just just to know a bit more what happened especially if you're a bit younger and you don't really remember that it's really interesting to watch so the next one on my list is the China hustle so this one is really interesting to watch. It's more, it's a documentary. And it goes over how in, I think, late 2009, 2010, around that time, how a lot of Chinese companies were listing in the US on the stock exchange, and they were listing in a

reverse way where they were using companies that were still listed but no longer operating so they could bypass the actual regulatory filings that they need to do with the SEC in the US. So what ended up happening is a lot of these companies were fudging the numbers because of that. Because in China, with the Chinese government, it's really hard sometimes to get the actual figures, what's actually going on. And it's easy for the companies there to make up a lot of, make up sales, make up profits and things like that.

So that's a movie I would recommend to anything, anyone looking to invest in China. If to anyone looking to invest in China. If you're looking to invest in China, just remind yourself that it's not the same regulatory process that we have in North America over here for these companies. So there is more risk associated with that. And that got reinforced last week with Luckin Coffee, which had ballooned their sales. Their COO actually inflated their sales by, I think, something like 70% or something like that. And it just got discovered through an internal investigation. So it just shows that even today, even after that documentary, there's still some risk in investing in China. I'm not saying don't

invest in China, but just be aware of the risk that could be associated with that. 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 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. Find a co-host at Airbnbbnb.ca forward slash host. That is airbnb.ca forward slash host. That is definitely scary. 70% like my God, the China hustle is really, really good. I watched that documentary. I think Netflix is doing a really good job with those docu series in general. Obviously the tiger King one is taking the world by storm, which, by the way, is insane.

That show is nuts. Anyways. We powered through that one. It was so good. We just couldn't believe it. You're like, how does this exist in real life? Oh, yeah. But Channels is really good.

All of those over-the-counter securities that were listed in the u.s or those chinese basically shell companies that research that was done they would go to these manufacturing plants that i have with air quotes on manufacturing plants right now and they were just abandoned warehouses or like basically no operation happening at all and these these short sellers were like whoa what is going on here this is not a real business this is completely fudging of numbers so yeah what corporate fraud that was yeah and it's really interesting the way they do it because the Chinese government is very protective a plant and the owners know that they're coming so they basically turn all the lights on make sure it looks like it's operating and so on

and the investors are like oh wow this is nice and then as soon as they leave they shut everything off so it's um it's really interesting it's just if you know if you're looking to be entertained but uh looking to know a bit more about investing in China, that's a good start. I'm not saying, like I said, don't invest. Just be aware of the risks. The next one is a docuseries. I know, Braden, you like that one, too. It's Dirty Money.

So this one, they just came out with season two, I think a month ago, a month and a half ago, I would say. That sounds right. Yeah. So I watched them all. I watched the first season probably a couple of times as well. So there's some really interesting one. They're about some big scandals that happen, a lot of them in the US, but some of them internationally. I know there's HSBC with a big money laundering scandal, Volkswagen with their diesel emissions. There's also one about payday loans that you'll watch

and you'll basically tell everyone, you know, never to use those services, even though you might know that beforehand. But they're good. They're about, I think, an hour each, if I remember correctly. And yeah, they're good to like kind of just watch. And if you have other people in your family

that you want to watch it with, they're really, I think, a lot of different people that don't necessarily need to be interested in investing to be interested by that. That series is really, really good, by the way, in general. I'm on the second season right now. I haven't gotten through all of it yet. First season was really good.

And then one of the episodes is about Trump now, about all the fraudulent things that he's done. And now he's the president of the United States. So very questionable stuff. That series is really good. The Volkswagen one was also one that hit home for me because that diesel gate, that was my first car, was one of those volkswagen golf diesel uh the um the hatchback yeah the tdi yeah that's the yeah that's the car

i had i actually love that car um but my god it was like wow someone has installed software to lie in this this is just like so so corrupt so we ended up getting a bunch of money back on it and uh yeah that was a big big deal yeah every time now i go buy a car that's diesel i kind of hold my breath a little bit after seeing that that documentary and seeing how like the fumes are way way worse to humans and i think they they can cause cancer too so anyways i'm not a i'm not a doctor but well i can tell you right now i'm an environmental engineer not a big deal and um essentially diesel has really really bad nitrous oxides, like NOx, which is nitrogen monoxide and dioxide, NO and NO2. And it creates particles less than two and a half microns. And what those do is they go

in through your lungs and they cannot be filtered out naturally because they're below that two and a half microns. And it never leaves your blood cells, like your system. It's just kind of in there forever. So you have these cancer-causing nitrous oxides that are not filtered out by your lungs naturally and really have no way of leaving your body. So those are really, really bad for you. Well, thank you for validating that i should keep hoping my breath when i see a diesel car i've been waiting this whole podcast to flex that knowledge on you man

i'm not just a one-trick pony here um so the next one is kind of a fun one so i'm sure you guys everyone has heard of these shows before so the last ones to watch are series so dragons den and shark tank obviously dragons den a more canadian focused one uh shark tank there is a kevin o'leary that's on it so i guess there is some canadian content um those i do like to watch especially if you're learning to invest and learning some of the terms that we're talking about like price to sales price to earnings um just to not like the amount of debt and so on. You'll see that the dragons, when they get a pitch from a business, you'll see them roasting the people quite a bit on valuation.

And those are things that we talk about all the time. And it's a great way to just use that knowledge in an easygoing kind of environment because you see, you know, it's entertaining. You see these products, you see these entrepreneurs that are trying to get investment from the dragons and you see sometimes what they have to give in terms of a portion of business, but also the different kind of pieces of the business they can give. I know sometimes they'll have convertible debt. Sometimes they'll have straight up equity. Sometimes they'll just tell them your valuation makes no sense. You're trying to get 25 times sales and you're not even a tech company and

things like that. So something you can watch with other members of your family, because, you know, even if they're not interested necessarily in investing, I know I watch with my fiance will watch that and she just likes seeing the pitches and i like yeah obviously some of them are ridiculous but i do like to watch it just to get the sense like how they view valuation so that's a fun series to well a couple of series to watch and there's a lot of episodes so you'll probably have more than enough while you're stuck at home. I've watched so much of Dragon's Den through my day. It's fun. It's light and you do get to talk about some valuation multiples because some people go in there and they're valuing their business at a ridiculous sales multiple. And that's all that

show is about, right? Because it's venture capital, which means that you are not expected to be net positive cashflow, actually creating any real earnings. So companies looking to acquire you or venture capitalists looking to give you a cash injection are looking at a sales multiple. That's basically the whole valuation. You know, just like publicly listed stocks that we talk about, price to sales is definitely a metric I look at. Price to sales in stock investing, low price to sales companies have actually shown really nice performance long, long term

because they have tons of revenue because that's the numerator. And then their valuation might be low that's the denominator so i just flipped that around actually the numerator would be price and the denominator would be sales so there you go um this was fun man because usually every episode i have like 10 different financial statements up on my computer and like talking about all the numbers of each company that I want to talk about. But you know what? This is light, some reading and some, you know, watching a little bit of Netflix.

I think of all the ones that you mentioned, Dirty Money and China Hustle are really, really good. 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.

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. Yeah, I totally agree. I mean, I've watched them over and over. I would say still The Big Short is my number one on the list I just gave. But they're fun things to watch if you guys need to be entertained a little bit and learn at the same time. I think those are all great things. And the books that Brayden gave are also really good books. And I think most of them are available on an audiobook. I know The Intelligent Investor is for sure.

Have you seen Billions? It's a bit harder. I have. I started, but I think we're into season three maybe. We kind of stopped and got distracted by walking dead very very fitting is it is it hbo or amc that one billions i think you can get it um if you have the crave right yeah yeah crave tv you don't need the hbo i think subscription to watch i think it's a basic crave one but no that one is good obviously it's more like hedge fund focus but it's still still fun to watch yeah it's a drama about a hedge fund uh and it's yeah it's it's good

um all right man anything else you want to talk about anything on your mind when it comes to the market these days uh i feel very at ease i invested so much cash last week. And then it's just, you know, it feels good, man. I've been waiting for a drop in the market. I've been waiting for discounts. And these companies that I thought were trading at outrageous multiples, which some of them were, now are very, very attractive. And some companies that have very, very stable, predictable revenue, predictable cash flow, like the technology companies we talked about a couple episodes that have almost all of their sales on subscription revenue, business to business, like enterprise cloud software.

They are not going to see a loss of business from this. Seriously, if anything, they have tailwinds as people need to migrate all of their stuff to the cloud so there are always still good opportunities even when i don't think i've ever been so pessimistic on the economy as of right now there are still so many businesses that look incredibly attractive right now uh yeah exact exact same thing for me so i mean i haven't invested all that much in the past like week and a half two weeks but uh definitely have put quite a bit of money to work and bit like you just mentioned uh either technology-based companies or companies that have really stable cash flows and i still have some money to invest so we'll see what happens in the

next weeks, months. Continue investing a little bit at a time and try to build some position in some really, really solid companies. So aside from that, do you have anything else or you want to sign off? I must know and the people must know. What are you up in Teladoc right now? I mean, we can always do another episode. That was one of the things I thought about, like our best performing stocks in this correction, if you like. But I think Teladoc, I've had it for about three or four years now. I think I'm up about 500% on it.

So it's been a pretty good performer, but it's probably up a good 25, 30% easily since the beginning of the year. So that's in good contrast as compared to the market. I think it's up a lot more than that in 2020. Is it? No, I thought I saw something on Instagram that Teladoc was up like as of beginning of last week, like 100% this year. So I wouldn't be shocked.

That would be. I mean, well, you got nice. That's how often I check it. I don't know. I think it could be true. I think it's about 150 now. And it might have been like around 85. So 80, 85 at the beginning of the year so i think you

you might be right maybe i'm just selling myself short yeah maybe i didn't realize you've held it for that long that's a bag holding for you three four years ago no one knew about teledoc and here we are all right guys thank you so much for listening always, go to getstockmarket.com, throw in your email. I will send you a list of North American stocks that meet the metrics that I am looking at all the time. All these companies, market cap, PE, price of sales, price to free cash flow, revenue growth, dividend growth, return on equity, return on invested capital, earnings growth. And then obviously the metric that I've been working on for many, many growth and then obviously the metric that i've been working on for many many years and perfecting the stratosphere investing score for my premium members is also available there so go to getstockmarket.com and we will see you thursday

simon what are we what are we thinking we could do. Yeah, I mean, we'll probably record on Thursday. I'm not sure if I'll upload it right after, but we'll get another one before the end of the week since. Yeah, I know, huh? Yeah. All right, guys. Seriously, thank you for listening. Stay safe. Stay inside.

And we will see you later this week. Bye-bye. 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