The Canadian Investor - Gold, Docebo and investing a lump sum for retirement

Episode Date: June 26, 2020

We start the episode by talking about gold and if we believe it's a good investment or not. We then jump into our mailbag and answer two listener questions. One is about a retirement scenario and investing a large sum of money and the other about Docebo. Docebo is a Learning Management System SaaS company that recently IPO’d on the Toronto Stock Exchange.Enjoy the episode!Tickers of stocks discussed : DCBO.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

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I'm Simon Belanger. So we're back with a full episode this week. Last week we had a scheduling conflict, but we do appreciate all the feedback that we got on Twitter. And we decided today to focus a bit more on some of the questions that we had for the tweet that we sent out if you guys wanted to discuss certain topics. So we'll be touching some of those questions today. We won't be able to answer them all, but we'll do the rest next week. So we do appreciate your feedback and we love that you guys are engaged.

So, Brayden, how's it going? It's good, man. We're back. It feels like it's been weeks since we've done a proper episode. So we're back and we have so many different topics today. We're doing a mailbag episode. Thanks to everyone on Twitter that sent in these requests. episode. Thanks to everyone on Twitter that sent in these requests. So without further delay,

we are going to talk about gold. I find that when people start investing, they go into two camps. They kind of venture into two camps when they're trying to figure out what their long-term strategy is. It's people that are like, oh, gold's an incredible investment. And then there's another camp where they can't even possibly see it as an investment. And I lean to the latter for reasons that I'm going to basically rant about. for reasons that I'm going to basically rant about. So the main reasons that people invest in gold are, oh, it's a store of wealth. It's a store of safety.

And I couldn't agree less. I could not agree less. And I'm going to go into those reasons. Let's talk about performance, Simon. Over the last 100 years, the S&P has returned 36,900%. Not bad. Gold in that time only produced 8,000%, 8,161 to be exact. And the data gets even more leaning towards stocks being the superior place for returns when you talk about the total return index. So now we're including dividends. So gold during that 100 years returned 8,161%. And the S&P total return index returned a whopping 1.4 million percent over

the last 100 years uh which is speaks to the power of compounding um i mean who really has truly 100 years in the stock market probably no one that's ever lived, but that is some impressive numbers. So, okay, let's shorten our timeframe a little bit. Over the last 30 years since 1990, the total return index did 1,551% while gold was 390%. So in the last 30 years, those are the kinds of numbers. And I am actually surprised that gold has almost four times in value since 1990. Because of the shift to technology, gold is not a good currency. It's a horrible currency. And you'd probably agree with me on that. I would even go out and say, I would rather own Bitcoin than gold.

And you know how I feel about Bitcoin. Yes. It's not even like, oh, I've turned to the Bitcoin side. It's just like, that's how little i think of gold as an investment every time i think oh gold's kind of cool i just google youtube videos about warren buffett talking about gold and he slapped some sense into me hey i mean i yeah i

don't i totally agree with you on that i mean there, there's a lot of points against owning gold and for sure it's underperformed stocks in the long run. That's unequivocal for sure. So I'm interested to see what your stance is as a store of wealth. Does it provide safety? Do you believe in those things because all of the things that people buy it for i just like want to facepalm and i'm sure someone could debate the

crap out of me and make me look stupid but just go look look at anything Warren Buffett has to say. He talks about it as a shiny thing of gold that does nothing and creates no value. And for me, that's it. That's all gold is. What do you think, Simon? Yeah, I mean, I agree with all that you said. I'm going to add a few more things.

So in terms of a lot of people will say that it's an inflation edge. And if you look at statistics on that gold compared to inflation, it's not, it's very debatable whether it is actually an inflation edge or not. So if that's your reasoning behind owning gold, make sure you do some research on that because I've looked at some graphics and sometimes there's been periods of high inflation and gold has not kept up with that sometimes it has so there's not a definitive answer in terms of being an inflation edge the only asterisk i would say is right now with all the qe that's going on so quantitative easing that's going on

around the world all the various governments printing money. You know, it'll be interesting in the next three, four, five, six, seven years, the effects of that and how gold will react. I don't know how it will. And it's hard to compare to the past because the level of easing that's going on is unprecedented. So that's something else I wanted to add. unprecedented. So that's something else I wanted to add. It performs the best during times of crisis, but usually those are fairly short lived. It's like Brayden said very clearly, it underperforms stocks in the long term. It's not very convenient to own gold as well. There could be some fees associated with that if you're keeping in a safe in a storage vault. So you'll usually pay a fee to keep it there. One of the issues as well with gold is it can be hard sometimes to know the purity of it. So someone might claim that it's 100% pure gold when in fact it's not 100%.

So there is definitely some risk in owning gold. Some people might mention that you can invest in, I think there's a gold ETF. I'd be careful with that because usually even though they're tracking the price of gold, those are usually, they're usually associated with options. And we saw what options did with the price of oil earlier this year. One of the reasons why that oil ETF went into the negative was because they had to get rid of those options. If not, they would have owned the oil that was basically worthless. So I don't want to get too much into detail for that, but that's some of the points that I would mention in terms of owning gold. One thing you guys may want to listen to is the episode we had with the host

of bitcoin rapid fire he does talk a little bit about gold in the store of value and like braden said i think personally for a store of value i lean towards bitcoin it has a lot of advantages a controlled money supply as well so for me in terms of value, that's the one I would lean towards over gold. Yeah, and that does not mean go buy Bitcoin instead. It's go do your research on what you think makes sense. Exactly. We are just, Simon and I, we fully just do not like gold. Have you ever owned gold?

Ever? Like paper gold? Like as an investment, not like your grandma gave you some gold. I don't think so. Aside from that, I mean, it's like small pieces of jewelry, but not for an actual investment. No. Okay, cool. Cool.

Yeah, me neither. Anywho. And you meet a gold bug and it's like, oh, God. It's like talking about religion or talking about politics at Thanksgiving. Like, oh, God, you're in for a treat of an absolute argument that you're going to just shake your head. Anyways, better than us telling them to listen to it. Go listen to the Oracle of Omaha on Talk About Gold and you will be like, yeah, yeah, that's really silly. Okay, Simon, we have a question from Todd T. Cook, 1980.

I'm assuming that's a picture of his son with a trophy playing hockey in the dressing room because you were born in 1980 by the, I'm guessing from your Twitter handle. So Todd asks, I'd love to hear you two discuss how you'd handle this scenario. $50,000 to invest for 25 years until retirement. What would be your game plan? Stocks or ETFs? How many stocks? High dividend, high growth. How did dollar cost average? Over what period and how much each time? Well, very good question, Todd. and how much each time? Well, very good question, Todd.

All of those questions are just, what would you do with 50K investing for 25 years? So, Simon, I went first on the last one. Give us the hot take. This is not financial advice tailored to you, Todd. So, disclaimer, but this is what we would do. Yeah, so great question, Todd. And again, I want to thank everyone who replied and asked us some questions. So I'll try to break it down. He asked a few different things in your questions. And I think the second part of it,

he's asking about Inch House or your favorite company, Braden? Yeah, he was also asking about Inch House. We can talk about that later, but let's talk about the plan. Yeah, we'll get back to that one another episode. In terms of whether you should buy stocks or ETFs, that's not something Braden and I can really answer for you. I think that's something you have to ask yourself. The reason why I say that is if you're not willing to put the time into keeping up with the companies you're investing in, at least

once a year, go through their annual report listening. I know you guys hear me like I like to listen to the conference calls like every year from the CEO. And if you're not willing to do that work, then you'll most likely want to really focus more into ETFs. And if that's the approach you want to take, a good book that gives it a really simple approach. And we had this gentleman on our podcast as an interview, is The Millionaire Teacher by Andrew, what's his last name? Hallam. Andrew Hallam. So he gives some really simple strategies for ETF investing that do not require a lot of times. Having said that, you know, you can always do a part of it in

ETF and a part of it in stocks. You don't have to do one or the other. If that's something you're comfortable, say you're comfortable with keeping an eye on five companies and the rest you put it in an ETF. That's something you can definitely do. In terms of how you want to invest that $50,000, let me give you an example. Let's say in terms of stocks, I would definitely recommend not having more than 20 individual companies for the same reason I just said, because it's just so hard to keep track and stay on top of them and you'll notice if you have smaller position companies you might notice that you kind of don't really keep track of them really well I've noticed that myself in the past so

I personally like having about 15 that's kind of the sweet spot for me I also have some ETFs but for the 50k i'll give you an example of how you could do it so let's say you have 50 000 and you want to spread that over 10 holdings i'm saying 10 holdings because it could be stocks it could be etfs it could be just a variety of both so that means it's about it's five thousand dollars per holding so what you can do in terms of investing is just divide that into, let's say, four installments. So $1,250 every time you invest for each holding. So an easy way that you could do it is those 10 holdings is week one, you invest $1,250 of holding

A. Week two, you invest $1,250 of holding B. Week three, $1,215 of holding C. And then you repeat that until you invested the first portion for your 10 holdings, and then you restart. So that'll actually help you spread out your $50,000 investment and not invest it in one big chunk. The one big chunk, you're basically trying to time the market if you just want to invest it all at once. And if you don't time it properly, you'll probably regret it. So by dividing that into installments, you're really dollar cost averaging that $50,000 sum. And in terms of how to dollar cost average after that over a period of time. That's also a question for yourself. Look at your budget. Once you've invested the full $50,000, whatever you can afford,

you can every month say you can afford $100, $200, whatever it is. While you dollar cost average every month, you pick a stock, you pick an ETF, and then every month you put that same amount. And you don't have to really worry about trying to time the market. So that's my two cents about the $50,000. In terms, the last part of your question, high dividend versus high growth stocks, I would tend to stick a bit more to really solid companies. Solid companies don't necessarily have to be high dividend or high growth. They could pay a small dividend and still have good growth. But definitely, I would look at investing in solid companies. Your main focus should be the best total returns that you can achieve for that 25 year period. And I can totally relate to that

because I'm 1985, the year I was born in. So I'm in the same age group as you. So yeah, Braden, do you have some comments on what I just said? 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. I agree with pretty much everything. The number of stocks, yeah, 15 would be a sweet spot for 50K. Keep in mind, you're only one person managing this money. And if you're going to own a whole bunch of stocks and dollar cost average them, then you're just racking up a ton of trade commissions as well. So I don't know which broker you're using, but something to consider if it's only 50K and you're going to be owning 15 stocks, maybe it's best to separate it into three and do five stocks, five stocks and five stocks versus 15 stocks three different times. So I'd probably do the first one of picking your five best ideas and then doing your next five best ideas or going back into those same five. I mean, it really, the concept of diversification is good. It's great. If you want instant diversification,

just go buy an ETF. So maybe you can do that. What I would personally do is I prefer to own the names of the highest quality possible. And if I can't think of ideas that are even better than the highest quality possible company, then I'm just going to continue to move more and more capital over time into those high quality names. So when you ask high dividend or high growth, I mean, you can definitely pick dividend stocks, but make sure the dividend is growing. You got 25 years. If you're going to be withdrawing on this money, say this question was reworded to, I'm taking out this money in five years instead of 25. I'd say, okay, maybe, yeah, you want that high dividend

yield during retirement and to be able to withdraw on it and to be able to collect income, then yeah, go for a high yielder. You can just go ahead and pick up a high yield ETF stock and you'll get a lot of the banks. You'll get a lot of these consumer staples that pay up to 5%. You'll get a lot of these consumer staples that pay up to 5%. So that would be that answer. But this isn't that answer. This is 25 years. So you want to be going into high-quality growth names. Absolutely, without a doubt.

Now, here's another concept here. How much bonds would I own in your scenario? Absolutely zero. I would be fully invested in equities. Even in the five-year scenario, I'm fully invested in equities. I would much, much rather be in equities than bonds, for sure. And people keep asking me, for sure. And people keep asking me, Brayden, why is the stock market so divorced from reality right now? You know, there's a pandemic, social unrest, and the stock market just chugging along, not today, but it has been. And my simple answer to that, and the most simple answer to that, the main reason, in my opinion, is where else are people going to be allocating capital? Bonds are absolutely garbage right now. The yields are terrible.

And, you know, stocks is a better place to be for returns. Even if you may think it looks terribly divorced from reality, I would not disagree with you. But equities are the place to be. When I say equities, I mean stocks. Most people would know that. So I digress. 25 years, pick 10, pick 15 stocks of the highest quality growth.

If you're looking for high, high quality growth, Stratosphere membership platform, perhaps it's for you, Todd. Anyways, I digress. Simon, I think we have answered Todd's question. I think we were on the same page there, man. We have answered Todd's question. I think we were on the same page there, man. High-quality growth stocks will be the winner in the next 25 years.

Speaking of growth stocks, today we are going to talk about Decibo or Decibo, however you want to pronounce that. This new tech software-as-a-service company only IPO'd in October of last year. So we don't even have a full year of data, but we will give you our take. It trades at 16 times sales and is almost 1 billion in market cap. So it's still small trading at a premium price, It's still small, trading at a premium price, 16 times sales. The market loves this stuff right now. Software as a service with recurring revenues of 90%. Wow, yeah, the market loves this stuff, especially business to business. They have some really high-quality clients in technology, consulting, manufacturing.

clients in technology, consulting, manufacturing, names from BMW, Heineken, Walmart, Randstad, HP, Uber, HubSpot, Bloomberg, Thompsons. And what they do is it is a cloud-based learning platform for enterprises. Real-time tracking of results, optimizing time, reducing costs. Geographically right now, they have five offices in Europe, Asia, and North America. 71% of their business is in North America with around 2,000 customers across the world. That is the lowdown. What are you seeing in the Chibo, in this small software as a service, growing like a weed company? Yeah, so I did some research too, and I just want to give a shout out to Evan, who's the one that asked us that question, at HealEvan. So thank you. I'm not sure if it was you, Evan, that put it in the TCI index.

But anyways, it brought it on our radar. So big thank you for that. So, yeah, some of the things I noticed, I wasn't really familiar with the company all that much. I did some research. I wanted to see how they're like their software compared to competitors. And I found e-learningindustry.comcom so they ranked the 20 best learning management systems so LMS that's what we'll be referring to and they ranked second on there I wasn't sure if it was biased or not so I did some more research and on multiple review sites of companies and users that uses it they had an average and a lot of reviews of 4.5 out of 5 stars. So it seems like the people who use this software really like it. One of the risks of Decibo is its size. So yes,

there's a lot of upside for Decibo. It's about what, 1 billion market cap, if I remember correctly, Brayden? It's just short. It's like 960 million. Okay, so short, so it's still considered a small cap. Well, it's in a field that has some pretty massive companies that are well-established. I'll just give you two examples. Adobe is in that 20 best learning management system. Adobe ranked first with their platform. SAP ranked third. I know PeopleSoft has some with Oracle. So there's a lot of major companies that are also in that

field. But it really seems like their platform is sticky because they have a 56% increase of recurring revenue on a year-over-year basis management says that typically their contracts are a year are based on a yearly basis and most customers opt for a two to three year contract with them they have most customers will renew after that so that's always something good to hear. One of the other downsides, like Brayden said, is because it just IPO'd, we don't have as much information on the company when it comes to their financial statements because it was private before that. So what happens in those cases when a company is private is you just don't have access as much transparency for those years that they were private. They have a good balance sheet, a lot of cash, they are still losing a bit of money but nothing

too alarming. So those are kind of the points that I got. Definitely a really interesting play for software as a service. 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. I totally agree. It is an interesting play. And it's done incredible since our IPO in 2019 of October of 2019 up 160% basically.

Yeah, I mean, it's in a like it's the definition of a stock that the market loves right now, which is software as a service, high gross margins, recurring revenue, revenue growth. It checks all those boxes, and it's a tech play on learning and learning software. It is just all the things that the market is loving right now. So part of me is like, oh, wow, this is a great business. Growth is incredible. But you're paying up a lot.

but you're paying up a lot 16 times sales is a pretty juicy multiple uh to be paying for for this company um but it's it's i put this in a bucket of stocks where i just go yeah it's expensive but you'll probably do really well um and that's kind of just sums it up for Decibo or Decibo for me is it's really expensive and you'll probably do really well. Still pretty small company, pretty lean, 400 employees. The compounded annual revenue growth of almost 70%. Again, this is using data from when they were private. It would be audited, but still. So they went from just under $10 million in revenue in 2016

to $41 million at the end of 2019. And Q1, they did $13.5 million. So they're already poised for a pretty good year do you simon do you look at this and go this is just like all the other super expensive fast growing sass or do you think that this sector has even more legs than something like telemedicine, one that you're more familiar with, or other B2B plays that are outside of LMS, like CRM, all that kind of stuff. It's really hard to distinguish which of those total addressable markets is bigger and growing faster? So at this point, you are, yeah, I mean, it's an investment

that you'll probably do pretty well on, but is going to take, this is what I'll say. I'll say this would be part of a really good, fast-growing SaaS bucket approach to selecting a couple of stocks that are in a similar type growth space in tech. And put a little bucket together, pick five names, and this can go in there. And there's a lot of really, really high-quality, high quality, high recurring revenue growth tech plays coming out of Canada. And this could just be one of those. So, yeah, for me, it's the same thing as you. I think there's a lot of potential in that company.

There's also some big competitors. So especially I don't know if Microsoft has that kind of platform, but think how easy it is for them to just, you know, push a platform to their enterprise customers when they already have them on Microsoft Office. So I'm just thinking about Teams, for example, compared to Slack, like they've obviously created Teams to compete with Slack so yeah for me it's that it's richly valued the one thing I do like about them as well that I haven't mentioned is that it was founded by Claudio Arba who is in 2004 I believe and he's still the CEO of the company right now so it's founder led so I always like to see that

in companies he knows the company really well The last point I would make is I would not be surprised if they get acquired just because I can see a competitor just being like, oh, screw this. We're not investing in creating a platform from scratch. These guys are doing a really good job. We'll just buy them out. It shouldn't be your thesis into investing in them but i really given their size and giving how large the industry could is in terms of other major competitors i can really see a company like microsoft like adobe sap people soft i mentioned like Adobe, SAP, PeopleSoft I mentioned before. Any of those platforms, even Salesforce,

just buying them out and just using that on their platform. Last side note, Salesforce already has it in, like they have an option to integrate it in their platform. They have an agreement with Docebo as well. Oh, very cool. The acquired aspect is something that definitely has been popping up in my mind too when I look into this company because acquisitions in tech make so much sense, more than in my opinion than any other type of holding company because you can serve up this amazing platform to existing customers in a modular way which increases

revenue so like someone like a microsoft like you, already has this customer base, this vast customer base. And now you can sell them a modular learning management system with now all of Microsoft's branding on it. And it feels seamless to the customer. seamless to the customer. And that's why you're seeing big acquisition type oriented software holdings, like a constellation software do so incredibly well, because the acquisitions, you can actually extract so much value from them because of that large customer base that already exists. So you could see a huge premium being paid for something like this. Very good point. That should not be your thesis on it, but software acquisitions make so much sense. And that's why you see so, so much of it because you can serve up a seamlessly integrated product to your customers and the application is already so refined and so perfect that it just makes so much sense

versus developing it in-house. So yeah, great, great point. That does it for this week, guys. Thank you so much for listening and thank you for the engagement on Twitter. If you want to hear stuff, the Twitter is search up the Canadian investor or they think the handle is CDN underscore investing. And we will answer your questions there. We will see you guys next 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. before making investment decisions.