The Canadian Investor - Finding great businesses with Barry Schwartz

Episode Date: October 7, 2021

In this episode of the Canadian Investor Podcast Braden interviews Barry Schwartz. Barry is the chief investment officer of Baskin Wealth Management. Barry explains their investment philosophy, how it changed over the years and how they focus on the qualitative aspects of businesses to find great ones. Tickets of stocks discussed: FB, TFII.TO, MCO, FSV.TO, AMT, SBAC, MSCI https://baskinwealth.com  https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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Thanks for coming on again. Brayden, thanks for having me back. So we can take this a number of ways, of course. I think a good place to start is perhaps define the investment strategy at your firm and what you guys are trying to accomplish as investment professionals largely. and what you guys are trying to accomplish as investment professionals largely? We are trying to continue to evolve and learn. I think that's the most important thing you have to do as an investor is not just sit back and think you know everything, or even if you have a good day, a good week, a good year, and think that your strategy is the one that's working for

you. But our strategy has evolved over time. No question, I think every investor starts out looking for the home run, the Grand Slam type stocks. And then they discover that it's very hard to do that. And even if you get one of those, 99% of the other ones turn out to be the dog's breakfast. So we've evolved over time to think about the best way that we would like to invest for ourselves, for our families, for our clients, is to own great businesses, to be patient with them, to not be traders, but to think and act like business owners, all the Warren Buffett great great stuff. And to be less focused on the quantitative and more focused on the qualitative. And that's where we are today. When I started my career 21

years ago at Baskin, we were mostly Canadian companies. We were mostly smaller cap. We were buying a lot of commodity companies and that did well for us. Then we evolved out of the financial crisis, looking to improve the portfolio to buy larger companies and to buy more US companies. So I'm really proud of the fact that I think we're one of the few Canadian firms that probably owns the majority of their clients' portfolios with US companies. And definitely for the last 10 years or so, that's been the right place to be. Probably the better place to be would have been all US companies and NASDAQ, but that's a whole other story.

Yeah. Let's double click on two things there that I thought are definitely worth discussing is, one, you said a shift more to quality and focusing on what are just the greatest businesses out there. And then two, a large shift from a Canadian firm owning primarily Canadian names to owning US names with global opportunity. And we talk about that so much on this podcast. Do you want to just highlight how that shift happened, not only from quality, but also to largely primarily US holdings? Absolutely. So I think prior to 2009, the right place to be was in Canada. And if you look at the 10-year return 2000 to 2009, the TSX market was the right place. Why? Because of the commodities and we had just explosive growth and companies like Podash and all the energy names. And that blew up as a result of

the financial crisis and really never recovered. Had some fits and starts, I think, in 2011. Maybe we're seeing some of that recovery now in 2021. But when I look back at the types of companies coming out of the financial crisis and what was quality, they're not the quality names that you see today. If you remember 10, 12, 13 years ago, the best companies were like GE and Exxon and IBM. IBM. Yeah. So, like things are- You couldn't get fired for buying IBM. Yeah. Or Johnson & Johnson. You still can't get fired for owning Johnson & Johnson, but

holy boring companies. But I think that business models have changed and so people have learned about them and evolved with them. I guess my only regret is not owning more of those type of names in 2011, 2012, 2013. When you talk about a Canadian firm with Canadian, pretty much 100% Canadian clients with Canadian dollars to invest, it is nerve wracking to put a lot of money in the US, right? First of all, you know, many of our clients face currency risk. There's the unknowns about the US and, you know, it's enough just to know what's going on in Canada. So, but I give us credit, our firm credit for ignoring those, what I call noise risks and focusing on business risks. So when you look at, when you're looking to become

an owning quality businesses, there's just more of them in the US. It's just the better place to go fishing. Yeah. So that's really the genesis of how we came about. And I think one of the evolution here was we became less afraid of paying up for a good business. And so I'm always fascinated by rare goods, whether it's books or wine or art. Why can't the same be for companies? Maybe there's 100 great businesses out there in the world. Maybe that's even too many. Why shouldn't these businesses command higher valuations? Why shouldn't they always trade at all-time highs? And so that's how our thinking has evolved on a broad basis. So as the CIO, can you walk me through your role in the investment process,

the inputs from analysts, yourself, a research committee? How does a position catch interest for you guys and then ultimately enter as a holding? And maybe you want to talk about that process. We have a lot of DIY investors who would love to know kind of how this works in the professional space. Well, we have a very tight team here. So I guess I'll just talk about our decision-making. We use an investment committee approach, which is all the portfolio managers, the traders, our research analysts, his name is Ernest Wong, and our chief operating officer all sit on the investment committee. It's not that everybody there is an expert on the stock market or every single company or follows every business to a T closely, but it's there to discuss ideas, to understand the investments that

we come up with, especially when speaking to clients. Clients will want to know, why do you own CN Rail instead of CP Rail? Why did you guys buy Microsoft? And so everybody on the committee should be involved and should know exactly what's going on with companies. with companies. And so we use that as a way of bouncing ideas off of each other. Sometimes there's a consensus right away that, yes, we want to sell this, we want to buy that. Sometimes there's more of an in-depth discussion, going back and finding things. But that's how our approach works. There are some merits to having one decision maker. There's some merits to having 10 decision makers. There's no merits to having 10 decision makers. There's no right answer. The right answer really depends on the culture of the firm and the approach your firm is trying to take. But that's been our approach. As chief investment officer,

I'm more responsible in my day-to-day roles for the analyst team as well as the trading team. It's a little nuanced, but I have to pretty much approve a lot of day-to-day trades and client transactions and so on. But the more fun part of my job is helping to direct how we create our model portfolios. And we have three different model portfolios that we use for clients. We have one that's a little bit more aggressive, we have one that's balanced, and we have one that's an income approach. Because we're managing money for clients of all different age ranges and demographics and liquidity needs. I'm sure your listeners are probably more interested how we come up with ideas. So we've worked hard over time to

try and define what our investment style and approach is. I have a nice little graphic on my website, but what we're looking for is companies that have strong competitive advantages, companies that have great management, that have skin in the game, companies that sell a product or service that people can't live without, companies that have strong pricing power, good reinvestment opportunities. I mean, all the right things that you would look for in quality. And I like to joke, I'm using this line, I've stole it from someone else's. If you can find more than two competitors in the phone book for that kind of business, you don't want to be invested in it. Probably many of your listeners don't know a phone book, but if you look at the phone book or the yellow pages and you looked on their pest control, there's like 8,000 pest control companies. I'm not interested, probably not a bad business pest control, but I want to buy a company that maybe is the only chemical provider to all the pest control companies.

Or if it is one of those super fragmented type industries, who's the good consolidator? Exactly. So, we've worked hard to think about what is a, air quote, Baskin wealth type business. And not every company is going to check the boxes and be exactly perfect. It's not going to have a pricing power and a strong mode and great margins. I mean, it's not easy to do. And especially if you're looking for some income names for- I was going to say, especially if you're looking for income.

Yeah, then that's kind of thrown out the window. But you can still use those basic checklists to help you. So, we've worked very hard to come up with the type of basket ideas that we're looking for. But I think the more interesting way we think about it is, here's a list of like 10 great businesses that our clients own, all right, like Facebook or Visa or Microsoft or Amazon or First Service. And then here's companies that we're researching. Why would you buy when Ernest is coming up with an idea or David recommends an idea? Why would I buy that

over just buying more Facebook? I think that's a good way to think about investing and coming up with new ideas because we all get excited about the next idea. I see Brayden tweet something on Twitter like, this is a great business. I something on Twitter, like, this is a great business. I look at it. Yeah, it's a great business. But there's 40 other great businesses out there too. And people need to know, like, if a company has, if it's in the top 50 of market caps in the US or Canada, chances are they're pretty good businesses, right? You don't get to be a gigantic company by being a lousy business. So, does that answer? Does that kind of-

Yeah. Yeah, no, it does. And I like how you touched on the hurdle rate for new ideas is the best ideas that you already own. And that's a powerful concept, right? I think so. It's the best ideas you already own. And you can't, like I said, we all get excited about the shiny new thing. We want to try something new. I found, and I think my partners and my colleagues will also agree that the more you own something, sometimes the more you fall in love with it as well. business, for example, TFI International. I'm not going to say that it was a great business when we bought it or that I understood it was a great business and we bought it. I'm still not saying it's a great business, but the management is so great. This is a trucking giant in North America now. So, sometimes as you own something, the longer you own it, the more you learn about it, the more you say, wow, this continues to do great things and these guys deliver. So that's how we think about new ideas and where they come from. TFI has been such an incredible performer.

And if you listen to this podcast, you'd know that I was talking about it two, three years ago. know that I was talking about it two, three years ago. And it's one of those Canadian gems that we seem to have. If there's one thing that there's a couple of things we have, we're obviously overweight materials and energy and banking, of course. But if there's one thing we do have, which can lead to another question is some solid income yield close and good consolidators, pretty good roll-up strategies. And we've seen some of them be so successful. Yes. Yes, we have. And everybody may or may not know the names. Obviously, First Service, Colliers, Boyd Group, TFI International, Constellation Software, just these companies, a company that trades on the TSX, not necessarily Canadian, but Waste Connections, GFL,

and the garbage sector is also looking to become a roll up. So I think one of the ways to make money, I know one of the ways to make money is to own, it may not be the sexiest, growthiest, exciting industry or business, but the management clearly has the capabilities, the economies of scale, the balance sheet. There's just dynamics in the industry that allow it to be rolled up and to continue to be consolidated. And so that's a fantastic way to make money. The easier way to make money is just to buy the greatest business in the world and worry less about execution risk and acquisition risk. But I think those are the two ways of rinse and repeat making money, good acquirers and good operators. 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. 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. I think that's a good segue to, you know, what are those

best businesses in the world? I keep a spreadsheet personally of what I think that list looks like. And it's probably too long of a list. Maybe I need to be more critical. But what is that short list for you? You know, what is the best businesses on the planet today? I think the best business that I've ever seen is probably Moody's. Without a doubt. Yeah, it's incredible. But Moody's is interesting because it's now 60% credit ratings and 40% data analytics, information technology, that kind of stuff. The analytics platform. Yeah, which is still a good business. But the credit rating business is the best business the world has ever seen. For a small amount of money, companies can get credit ratings,

which allow them to issue their bonds and save money by paying a small amount of fee because that gets them better pricing for their bonds. And there's so much value for investment managers like me who do manage a bond portfolio on behalf of clients. We use the ratings from Moody's and S&P Global to determine what type of companies we're going to buy for our clients in our bond pool. And there's so much value in those ratings on both sides of the platform for the issuers and for the buyers. And so, it's the best business. The margins are incredible.

I think you're always going to need bonds rated. And there's still potential for bond ratings to increase globally, right? I don't think many other countries are as well developed, for example, as North America and Europe in their bond ratings. And so it's still a pretty good runway opportunity for them. I agree. it's still a pretty good runway opportunity for them. I agree.

And at Stratosphere, we've been looking at bond issuances in 2020 and 2020 alone. And it is at all-time highs. And it just makes sense given the environment. And so Moody's is benefiting from all that. Yeah. Low interest rates encourage companies to refinance, just like the housing market, right? When interest rates drop, you refinance your mortgage. I think the other best business in the world is American Tower. For listeners that don't know, cell towers are how we are able to use our cell phones, right? So, every telecom provider puts their equipment on the cell towers.

And the cell towers are big and ugly. I mean, everybody's seen them and they know what they look like. The telecom providers have to pay rent to companies like American Tower. There's another company called SBA Communications. Yeah. And these are businesses that you can't really compete against. You can't really easily put up a Seltower anywhere you want. And the economics of the Seltower business are so fantastic. If you have one renter on your Seltower, you're doing like an 8% return. Not bad. If you have two renters on your Seltower you're doing like an 8% return. Not bad. If you have two renters on your cell tower, you're doing like 16% return. Holy smokes. If you have three renters on your

towers, you're doing like 20 plus percent return. They're never going to rip down that equipment. In fact, as we move to 5G, you have to leave on the 2G, the 3G, the 4G, and now add the 5G equipment to the existing towers. And after 5G, there's more Gs coming. So I think it's a pretty good business. The only risk- Each tower reaches, continuously has better returns and has like a maturation curve as the technology evolves and more renters are on the towers. For sure. Now, keep in mind that there are not as many renters as there used to be. In the US, I think Sprint just got acquired, right? So, we're down to only a couple renters. In Canada,

of course, we got Bell, we got Telus. But in Canada, of course, we haven't yet privatized our cell towers. So the cell towers are owned by the telcos. The big opportunities for American Tower and some of the other ones are outside North America, where there's still many more telecom providers, you know, like India or Africa or Europe. There's more than two or three cell and telecom providers. So those are two of what I think are amazing businesses. A third one is one, unfortunately, we don't own is MSCI, which is a provider of index data, ESG data. I mean, this ESG thing is going to be unbelievably huge. Pretty much anyone managing money professionally for other people will probably be required to only buy companies that have good ratings on ESG. And good ratings on ESG means these companies are thinking about the environment, the society, the governance, right?

How does their board look? Are they inclusive? And those things have to be rated. And MSCI does the rating. And so MSCI, I think, now provides data on something like 3,000 different indices. And if you want to use that, for example, that information in a marketing package, in a brochure, if you want to use it on your website, if you want to use it in your benchmarking, you have to pay MSCI. And every year they raise the price. And pretty much

incremental margins on that business are close to 100%. So I should probably own that stock, but the multiple is quite expensive. Yeah, and they all are. I think the basket of S&P, MSCI, and Moody's will challenge any other basket you can possibly think of in terms of quality and returns. I mean, even if you look back, these companies have performed, if not better than some of the FANG names, but a little bit quietly in the background, right? So it speaks to how impressive they are in the execution over time and how sticky and people need this credit rating agency and they're, you know, now this ESG rating agencies. There's only a few names in town and there's really no way to work around the rails that they've built, if you will.

So you see that I gave you three ideas that are not anything to do with big technology, but everybody's technology now. So like if you're not involved in technology or looking to improve your technology or looking for software, becoming a software company, you're in trouble. Even the industrial companies are all becoming software companies. We've seen like Deere, for example, right?

They're now having GPS tracking on their tractors. They're having software to help figure out when to plant, when to go out and collect. So everybody is evolving and everybody wants to get into the razor blade business. And that's exactly what software is. It's the razor blade business. Every month, every year, pay us and increase the price. It's beautiful. That's right.

It is really a wonderful model and we've seen everyone pivot towards that. All right. Let's chat Canada. It is the Canadian Investor Podcast. You run a firm in Canada. And I think that, you know, there's a couple interesting discussions that we can have here, but right out of the gate, and I know you and I probably both have some hot takes around why this may be and what the cure for it is. Why are Canadians so obsessed with dividends? I think everybody's obsessed with it. I wouldn't say it's necessarily a Canadian thing, but maybe it's a function of what's available here and what has grown to be what's worked. So if you go back many years, obviously, it was the bank stocks and the telcos and the pipelines and the utilities and the material companies.

And so that's where our market has come from. And a lot of those businesses lend themselves to being mature and cash flowy and dividend focused. So that's really, I think, how we got our views to dividends. Plus, the most important thing is the Canadian dividend tax credit, right? The benefit of owning dividends here after tax was, I'm not so sure it's as attractive now, but definitely in the past, owning Canadian dividend stocks was attractive. Also, probably for some of your older listeners, there were years where Canadians weren't allowed to own more than 30% of their other RSPs in foreign investments, right? There was a cap. And so, you had to buy Canadian stocks. You had

to have 70% of your RRSP. You know what? Kudos to those that bought the banks, of course, because the banks have done incredible. And we all know the stories of people that bought bank stocks when they got married or they got them as presents as kids and held on to them for 40, 50 years. And they've 100 bagged their money 100 times plus dividends. And their yield on cost is like enough for a vacation every year. For sure. So I think years ago, I honestly thought the best way to invest was buying companies with dividends.

And I thought that dividend growth was the tell for a great business. I now know that dividends are a function of capital allocation strategy. And it's great to have a company that grows its dividend, but dividends come from capital. They come from the cash flow, the profits. And so, you know, don't necessarily, it doesn't really tell you much. So, you want to look at the, you know, you want to look at what's happening with the cash first, how much is the payout ratio, what type of business it is. And then I think you get a better idea if a dividend grower is a great business. I think I used to work backwards in looking at dividend growers first, but now I look at the business first.

And if the dividend is growing, that's great. That's a plus. There's no yield right now, obviously, in bond yield, in bond world. I don't know what bond yield is, but bond world for our portfolios, it's very tough, Braden, to get income from fixed income, which is a joke. They should just call it fixed, fixed no return. Fixed no income. Fixed no income. So, for example, I'll just give you – we bought – there's a new issue from CGI, the Canadian IT provider and great business. Consulting firm.

Yeah, consulting firm, exactly. They did a seven-year bond issue offering 2.1% yield. So that means if you buy that bond, you're going to make 2.1% a year per year over the next seven years. No inflation protection, no chance of that interest income to go up, and only downside risk if interest rates go up against you. People are even more attracted, Canadians today, to dividends. But unfortunately, the dividend yields have all gone down because the stocks have gone up because everybody's looking for them. And the dividends that are high or attractive, probably the business is no good. So we're in a conundrum here.

But so I think that's a long answer to your question. I think that's where our ideas as Canadians came from in terms of dividends. And there's nothing wrong with owning a basket of Canadian dividend payers, just be careful about the business quality I guess. Like I've mentioned a million times on this podcast is, look, I like getting dividends, I like getting paid dividends as much as the next guy, I like companies that grow their dividends as a plus as well. Don't get an Excel spreadsheet out and rank companies based on their dividend yield, you'll basically fall into a yield trap.

That is a very common mistake we see from beginner investors. That's why we continue to touch on it. Dividends are great. Don't get me wrong, but don't fall into yield traps. It will ultimately you'll underperform the index. I think we all have some kind of that leftover DNA from the income trust days in Canada before the Canadian government under, I think it was Stephen Harper and Jim Flaherty said enough with that. What broke the camel's back was when Bell Canada wanted to convert into an income trust. For those who remembered or haven't heard what these things were, they essentially – companies were paying out dividends or return of capital or income of 7%, 8%, 9% and using the REIT structure essentially avoiding paying a lot of income. Yeah, tax haven.

And a lot of businesses were income trusts. Cineplex, the movie theaters, even a garbage company. I didn't know that. Yeah. Even Waste Connections, which was Progressive Waste Solutions, which was BFI Garbage Trust, was an income trust. And then it got stupid. There was a lot of dumb businesses that had become income focused. that had become income focused, cyclical businesses that were involved in the construction industry, involved in housing supplies, involved in engineering and stuff like it made no sense.

But it made sense because they were taking advantage of the fact of the tax haven and the demand and needs for the income and the fact that your stock got a great pop converting to an income trust. So I think that's kind of where some of our love of dividends has come from, but probably mostly the Canadian banks. So when you look now at the list of dividend growers in Canada, I think it's a much better list than it was 10 or 15 years ago. All the income trusts are gone. No one's falling for the crescent points in the arc energies anymore. Like every – oil is too volatile and come on, that's a joke for these companies. Too many people have lost their shirt to do that again.

Exactly. And those businesses are terrible to be income only focused. So it's improved a lot. I think there's a lot better businesses that are Canadian dividend payers or dividend growers. But I think if you have a majority of them, you're really narrowing yourself to a subset of companies. Some of them are not great quality. Some of them have a lot of interest rate sensitivity. Of course, all you had to do is look at what happened in 2020 when COVID hit. Some of those businesses got really slaughtered. 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. All right. So how do you tell clients, you mentioned there's been a big shift, you guys are buying primarily US securities, although there's Canadian names in the portfolios. US securities, although there's Canadian names in the portfolios, how do you explain to Canadians why they should be very open to owning US stocks in particular or international stocks? But let's just say for the sake of this discussion, US stocks, how do you tell people or discuss Canadian home bias and why you think it's so important for us to own some of these US names? Well, I think it just comes back to what you're trying to achieve, right? And so, our goal is to own great businesses. Our goal is to find the best business models in the world that

we can invest in without taking on a lot of risk, without investing in countries or industries that we don't understand or aren't comfortable with. So I think it starts there. And then we tell the clients that there's just not enough names in Canada for us to create a diversified portfolio of the highest quality businesses. portfolio of the highest quality businesses. And even the names that we're buying on the Toronto Stock Exchange in Canadian dollars are essentially US businesses. Constellation Software, First Service, Waste Connections, Brookfield Asset Management. Are these really Canadian companies or are they just Canadian listed companies? Canadian listed companies with global scale. You got it. So, I think clients get a lot more comfortable with that after having those discussions. And also, after we discuss with them why the US is a better place to invest.

It just lends itself to better businesses, more potential customers, a platform to use globally, right? It's harder to be a global business in Canada. That said, Shopify has obviously been one of the only few that is exception to the rule. But, you know, okay, Canadian Tire, for example, like seriously, it's never going to escape Canada. You're going to do okay, I guess. You're going to make GDP plus type returns. I'm bullish on Canada. I'm bullish on our population growth, on our economy. We're going to do okay. But you're never going to get a scalable return out of owning a Canadian tire or a Tim Hortons when it was on its own. tire or a Tim Hortons when it was on its own. I think Tim Hortons being in part of this restaurant brands is exact right thing. And shareholders should be happy that has happened. Not so sure

that the stock has worked so well recently, but that's what I would be thinking about is, don't you want to get access to global platforms instead of a Canadian tire where 90% of their business is people walking in and the stores are only open such and such hours and you're never going to get a sale to some person in the US or India versus you can own Amazon, which is a store that's open 24-7 all the time around the globe. So once I think we walk them through the potential upside, then clients get a lot more comfortable investing in the US. The big risk is the Canadian dollar, Brayden. That to me is the only risk investing in US stocks. If the Trump presidency proved anything, I'm not sure it matters who the president is in the US, right? Even with all the ups and downs and worries in the US elections and the US politics, the stock market seems to do well under most presidents. So I think the biggest risk for Canadian investors, if dipping into the US, is the currency. And yeah, it can make you look real

dumb in the short term. The Canadian dollar has been bouncing around 79 to 72 cents now for the last four or five years. But we could always get left off. And in a short period of time, you could be down a lot of money on the conversion risk. Yeah, that's really well put. And when it comes to currency, you and I are trying to invest and put our capital into things that we can control and structure a portfolio in the ways that we can control and at least make some sort of reasonable predictions about the future. And currency conversions is just not one that I or you believe to have any real predictability to it. And I think you described it well. I mean, if you're owning just Canadian,

if you just look at the Canadian index, you're basically underweight pricing power and underweight scale. So this transitions really well into this next question, which is, there's lots of interesting companies only listed in Canada, like Constellation Software, like Kushtar. And I tell listeners on this podcast, there are some fantastic companies here. But as we just discussed, there's a major theme between these great performers is that they have scale outside of Canada. How do you think that some of these Canadian companies or even Canadian investors can really understand the opportunity outside of Canada? Say they've never even left the country.

How important is that scale? I know you gave an example about Canadian tire, but that's everything, right? It's everything now in this type of economy that we're in. We're in a digital economy and everything can be done digitally. Every business now has the potential to have 7 billion customers. Maybe not in China, but you have the potential to not. So even Joe Blow's retail store at the corner of Young and Eglinton has the potential to be a global business by working with Shopify or working with Amazon. So don't you want exposure to 7 billion potential customers and growing versus 35 million in

Canada? So that's what gets me excited about global platforms. And like we said, there's just not enough companies in Canada that have that type of exposure. Shopify, but that's kind of it. And, you know, obviously a few others, but the bottom line is there's just more opportunities to find those type of companies in the United States, which is the, you know, there could be opportunities to find those in China, but I'm staying away for, I'm happy I've stayed away from those things. But so that's what I think people need to think about when they're looking outside Canada is don't limit yourself.

And I think that's really the theme of today's, when you start as your investor, you limit yourself and don't limit yourself. Be open. Don't be that person that says, I don't understand this. It doesn't make sense. I'm not going to invest in it. You know what? We all have amazing brains. We have lots of exposure and access to the internet and knowledge.

Lots of stuff to read. I probably won't be an expert on probably some pharma company or genetics business. That's fine. But I can learn about a lot of different business models. And there's a lot of great explanations and things to read about. So I don't buy that as an excuse. So don't limit yourself, figure out what you're comfortable investing in and slowly get comfort. That's how we did it.

We didn't like all of a sudden flip a switch one day and invest in 70% of our portfolio in US stocks. We got comfortable. We said, okay, this is working. We got comfortable paying up for stocks. We got comfortable investing in technology. And then you build on that cumulative knowledge. Yeah, that makes sense. We live in this golden age of opportunity with information exchange. And you can basically hyperscale your knowledge to at least a competency level that makes some of these things investable in a short period of time. And I think people even just two decades ago

would dream of being able to have that advantage as money managers. Yeah. And the friction costs have come down too, right? There's no cost now to trading. I see that, for example, CIBC just launched these. I think they started with Amazon where you can buy Amazon in Canadian dollars for a fee, of course, 60 basis points a year. Good luck. But that eliminates the credit risk – sorry, the currency risk. And maybe some people are worried about US estate taxes, for example. That could eliminate it too. So, you know, there's pros and cons, but I think technology is going to improve your ability to get more information and to buy some of these things outside North America easier and in a more

understandable fashion. Before we wrap up today's conversation, my last question for you is we have lots of DIY investors here that, you know that some are very advanced investors. Some of them are even CFA holders. And some of them are brand new to the game and just trying to get an edge and figure out what they should do with their portfolio. What is the best piece of wisdom that you would tell perhaps your younger self or investors just getting started with managing their stock portfolio? Just keep buying. Just keep buying and investing and never stop. And don't let the emotions of the day-to-day market noise get the best of you. Don't treat the stock market like a casino because it isn't. You want to have fun with the casino, go to the casino and start buying better businesses

and be patient. I feel like as we've gotten more patient with our company, our results have improved. We're still going to get a whole bunch of them wrong, like everybody is. If you bet, what did you say, if you bet 60%, you get 60% right in investing, you're a genius. about 60%. You get 60% right in investing, you're a genius. That's what you got to hope for. But if out of that 60%, if you can get a few that you hold on to that keep going up over the long term, you're going to have enormous returns. This year is an amazing example, again, of drawdowns and pullbacks in different companies, right? Amazon's not doing anything. Apple's not doing anything. But it was up last year 80%. Everybody's looking to chase, oh, that's not working. Get me out of it. Why? So focus on the fundamentals is also very key,

I think, for a do-it-yourself investor. But when you start looking at better companies, you'll get more comfortable with being patient with them. And I think that's a good approach to start thinking about. But that's my approach. And I certainly can't tell anybody how to think or how to invest. And I sure had my fun years ago, even before working in basket wealth management, fooling around with the internet stocks.

And I did well. And so I don't blame anybody trying to play the, I call them the weed stocks of the day, right? Because the weed stocks of the day right now are the Bitcoin and anything with cryptocurrency and NFTs and all that stuff. But those will be past say one at some point and then they'll be the next weed stock of the day. So try to avoid those also. It's to a very similar tune with what was one of the first things you said to me when we met in person. You were nice enough to people who don't know or are new to the podcast.

We met in Toronto and then I hit you up and then you invited me for lunch, which was very nice. Thanks for doing that. And one of the first things you said to me was, man, don't sell winners. That's what you said. He said, don't sell winners. And that has been an important lesson. And I have come very close to accidentally selling winners. And I remembered Barry's voice of reason.

Focus on the fundamentals. You know, there's a reason that some of these companies should be at all-time highs. And I think that that needs to be put out into the universe is don't sell winners, man. It's a marathon. So just like, what are you trying to achieve by selling something? Does it give you like some good vibe or a good dopamine hit to trim some off or sell it because you've made money? You know, think of that poor schmuck that sold shares of Berkshire Hathaway when it

hit $100,000. Oh my God, it's up to $100,000 a share. I'm going to sell it all and now it's worth like $400,000 or plus a share. Like, what are you doing? Like, leave it alone. If the business is improving, if there's still crazy demand for the product and service, keep it going.

Even if it's only growing 2% or 3% a year, you know, chances are your cost base is very low and it's still going to continue to grow in the size of your portfolio. So, you know, as professional money managers, we do have to de-risk our portfolios by trimming. We can't let anything get too big. Our clients are retirees.

They don't want to have 40% of their money in one or two stocks. But, you know, as an individual investor, you're not subject to those kind of rules. And if you really know and understand the company, then you can be a little bit more frisky with your weightings than a professional money manager, for example. It goes back to that Charlie Munger, never unnecessarily interrupt compounding. And I think that that's an important concept. Barry, where can people find you online? More about you, more about the firm? Thank you very much, Brayden. So people can find us at baskinwealth.com. And we have lots of videos, lots of blogs, lots of information about our firm. I'm a regular on BNN. I'm going to be doing a couple hits in October.

I'll be doing a market call on October 22nd. I'll be on BNN October 4th in the morning as well. You can find me on Twitter at BarrySchwartzBW. And we're quite prolific. We love to share and discuss our thoughts on the markets. Follow me, reply to something, don't be a troll and I'll respond back. And maybe one day, just like me and Brayden met, we can meet one day too. So that's how we do where we manage money for high net worth clients for now. And that's been our approach.

And, you know, I continue doing what we're doing. And that's how you can reach out to me. And I look forward to hearing from your listeners if they have any questions or thoughts about stocks or what we talked about today. Absolutely. Thanks for doing that. And between the Twitter and your blog, there's lots of stuff that you and your team are sharing for everyone to see. And I think that that's awesome, not only from the firm's perspective, but we live in that age now where sharing some of your best ideas can actually be some of the best marketing. I think so. There is obviously risks to that when the stock goes down and,

Barry, you recommended it and it's down 20%. Yeah, welcome to the stock market. That's the price of entry. Hello? That's what happens when you invest in the stocks. But yeah, we enjoy doing it and I think it's certainly helped our business and helped our clients and helped me in particular, be better at public speaking and working to articulate my thoughts about investing and hope people enjoy. Thanks so much for doing this. My pleasure. Anytime. Hope to do it again. Take care. Thank you. For those who are new to the podcast, we do episodes Mondays and Thursday mornings. They're available everywhere on your podcast player.

And as well as a new launch coming out for Stratosphere, our platform is basically there. But you can go see the current platform at stratosphereinvesting.com. You can find 10-year financial statements, all the ratios you're looking for. And then our own research from our analyst team as well. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.