The Canadian Investor - Hot Stock Tips & 2024’s Best Performing Sectors

Episode Date: September 23, 2024

In this episode, we answer a listener’s question about what to do when you get a hot stock tip. We discuss our approach when hearing about hot stock opportunities and the key financial metrics we use to decide whether a company is worth researching further.  Plus, we revisit the concept of "luck" in investing, explore how to position yourself for good fortune, and break down the importance of conviction and fishing where your fish are.  Lastly, we analyze S&P 500 sector performance in 2024, highlighting unexpected leaders like utilities and financials.  Tickers of Stocks & ETF discussed: SPY, XLU, XLC, XLK Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See 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. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the astute Simon Belanger. Buddy, we have a full slate. buddy we have a full slate and i was downtown toronto with a podcast listener that i ran into and he said hey i have a bunch of questions and i said how about you leave a question

on our fancy voice message player that we don't give enough love to, and I want to highlight it and get it on the pod. So here it is from Steve. We'll play that clip now. Hey guys, Steve Kendall here. I recently attended the Money Show in Toronto where I came across a lot of hot stock tips from random people. When you hear about a hot tip, what's your first step in researching it? What initial factors do you consider and what would make you dive deeper into the company?

Finally, what key criteria will push you toward actually investing? All right, so you want to take this first? You got some notes here. Yeah, so I'll start off. I think it's a great question. So, you know, I think hearing hot stock tips happens all the time. I mean, on Twitter slash Shags, I'm always, you know, a lot of people mention different types of companies. And, you know, I try to respond as

best as I can. I think you do. Like we try to respond to people as much as we can, can always get to it. But there's kind of three main things that I like to look at first thing, because I've said it before and I'll say it again. And I think you can probably agree with that, too. Like we have busy schedules different for different reasons for you. You know, you have a startup on top of the podcast. For me, I do the podcast part time. I have my regular job. I have, you know, a daughter soon to be second daughter.

So it's managing all these different things that I don't have time to waste on a company that, you know, I'll put an hour or two and then just to realize that, okay, it's not a good fit for my portfolio. So for me, there's three main things. First, are sales growing? Two, is the company profitable on an earnings basis? And three, does the company generate free cash flow? Now, granted, this is a general kind of, this will work for most companies. If it's a REIT or utility, for example, it will be different. So I'm gonna be using slightly different metrics

to look at a first glance, like funds from operation or adjusted funds from operation for a REIT, for example. But then if that checks out, then I will go on, for example, like I'll go on ChatGPT, which I think it's a great tool. You've got to always double check what it spits out. But for the most part, it is pretty accurate. It does hallucinate from time to time. And I'll just try to get a sense of what the business does just to have a general idea of what it is.

And if I still like the company at that point, then I'll start digging a bit deeper into the metric and into what they do, because of course, ChatGPT will give you an overview of what they do, but it's usually you can get more information. Finchat.io can also give you some information there using the AI.

Now, there's a lot of different things I'll look at, but I'll look at the market cap. I will look at their margins. Are they growing? Are they shrinking? I'll look at their financial health in terms of debt interest payments. I'll look at the share outstandings, some metrics per share, like free cash flow per share, earnings per share as well. That will give me a good idea in terms of dilution. That's why I look at these metrics here. If they pay a dividend, I'll look at the payout ratio. I'll look how, you know, as a dividend, how long has it been paid for?

Is it a special dividend? Is it a growing dividend? All these different kind of things. I'll also try to find a peer that would be in the same industry and compare them because especially if it's a company or an industry I'm not super familiar with, I find that comparing with peers really helps put things in perspective. Because if not, it's kind of hard to gauge whether it may be a bit overvalued, undervalued. I'll listen to multiple earnings calls. I'll definitely look at what kind of KPIs, so key performance indicators, are in place for that business so I can kind of go back into the future, sorry, in the past and see how that's evolved and what's really driving revenues, growth, earnings, and so on. And then I'll look at what the future looks like for the company and the industry as a whole.

And another thing I'll look is also the return on invested capital. See, these are all things, of course, this is not everything I look at when I review a company, but it just goes to show that if I'm going to take the time and dig deeper into the company, there has to be that basic kind of criteria, that basic test that I can look at like 5-10 minutes max that I can get a good sense whether this company is worth spending more time or not into it. If it doesn't meet that, then sorry, but there's thousands of publicly listed companies.

There's other companies I can put time in. there's thousands of publicly listed companies. There's other companies I can put time in. The basis of your process, as you alluded to, is to get to know really fast if it's going to be a no. I think that that's super, super important, especially if you know your style and you are fairly seasoned in your style and what you're looking for in your time horizon, then yeah, you're trying to get to know really, really fast. I think you touched on a couple of things that I'm definitely looking at right away. I mean, I'm investing in quality companies, right? So I believe quality companies have a growing top line. in quality companies, right? So I believe quality companies have a growing top line.

They have a ability to have unit economics continue to flow to their company over time. You know, whether that be the top line, the margin profile, market share, these kinds of things that I want to see at a high level. And like you said, mentioned with AI, I love going into the Finchat co-pilot and just be like, explain what this company that I've never heard of does like I'm five because Finchat is trained on every single knowable thing in the public domain about the company and not just like some crappy Motley Fool article, it's really, really powerful to go from zero to one. And this is why people use stock screeners, right? If you want to have a universe of companies that meet those criteria, that's why people use stock screeners. It's like, okay, if I know I don't invest in companies that don't have a growing top line or consensus analysts think it's going to at least grow over the next three years,

consensus broadly. Okay, I know those things. So let me eliminate everything that doesn't meet that criteria. I think that's a much better way to build a universe that doesn't create a list of stocks that, all right, I'm going to buy all 87 of these that meet the criteria. This is where the investing process begins. But if I know these are the things that I'm not going to go after and they're measurable via numerical screening, then these are why these tools exist. Yeah, I guess the only one that you have to do on top is like, you know, just learn quickly

about the company. Yeah. Yeah, so that's the only the other one you have to do. And obviously FinChat.io is a great, it's an awesome platform. You know, not everyone will have it and we understand that.

So there's also like free versions for ChatGPT, right? Like, what is it, the version of Chat? Like, you get the older version, I think, right? And then you don't have to pay for it, something like that? You don't have to pay for FinChat. No, no, okay. I mean, you can trial it, and then you have certain – I mean, you just can't use, like, unlimited prompts, right?

Okay, okay. No, but, like, other AI tools. I wasn't sure because I've had, you grandfathered me into the best access. I wasn't sure. Okay. No, I mean like that's why we made the tool, right? Is like if you go to chat GPT,

it's like you have such outdated information. It's trained on a data set that's not like institutional quality, right? But yeah, I know like, you're trying to go, the genesis of the, you know, the genesis of this question is how do I go from zero to one on a new idea? And I would create a checklist like Simone just did. And then yes, try to find out really quickly, like what does the company do? What industry are in there? Like, is it going to be in my circle of competence? Like get to that

really quick. And if not, do I see a path to me understanding the company well enough? Yeah. And I think too, it's important to like, remember is those are our criteria, but you know, to like remember is those are our criteria but you know i know some people on twitter that i follow that are more like deep value investor so for them you know growing top line may not be the most important thing for them is unlocking some deep value maybe some businesses that the markets are not very fond of for various reasons. But like I think Buffett mentioned, when he started investing, trying to get that last puff out of a cigar butt, for example, which is fine, right?

And I think people that do that well can make a whole lot of money. So that's why I think it's important to find the criteria that matches with what you're looking to achieve. I find a lot of hot stock tips fall into two categories. One, junior miners that are about to, quote unquote, literally find gold or do something.

And then two, which kind of fits in a similar style of investing, of pharmaceutical or experimental startups, for a lack of a better word, that are pre-FDA approval. And if they get the approval, boom, stock's going to go crazy. And that's true. If they do achieve those things, the stock will go up. You will make a lot of money because it goes from a maybe story to a probably story that's usually a good way to make money in the stock market but that's not the way that I want to make money because if it doesn't go the other way or you're left hanging you can heavily underperform market and lose a lot of money and that's that's not what i'm trying yeah i mean i learned that the hard way with uh junior miner where you know it was one

story i've told a few times on the podcast where i invest in a company that just found diamonds up north and it's one thing to find deposits it's another thing to extract the deposits whichever they are whether it's gold thing to extract the deposits, whichever they are, whether it's gold or diamonds, whatever it is, or other precious metals. I think that's important for people to remember because these are two very separate things, requires a whole lot of financing. That's why I like a company like Franco Nevada because they finance, they make a lot of small bets and then some work, some don't work out, but they end up not having to take a whole lot of risk because they spread out the risk. And that's how the best investors in the space, as you just mentioned, they make various small bets. mistake is they will make one big bet on one junior miner, one big bet on one pharmaceutical

company that they think will have an approval. And the probability, yes, like you said, if it works out, you'll be rich, but what's the probability of it working out? And the best investors spread out their bets a bit like venture capital, right? If you're looking at VC firms, you won't find a firm that just has one bet. That's right. And they're looking for something they can buy at a 10 million, like the seed investors, they're looking for something they can buy at a $10 million valuation that can become 3 billion. And you only need to find one to make your whole career. So if you know that that you know that's the model then you know work backwards from there the idea of a hot stock tip is very different than the idea of a

stock tip like when i think of a hot stock tip it's inherently very very speculative yeah you don't get some hot stock tip you go simone i gotta come here come here i gotta i gotta tell you something i'm in the back of a i'm the cab driver i'm the cab driver let me tell you let me tell you about microsoft it's like that's not a hot stock tip it's almost uh it almost implies that you have like uh privilege information right yeah yeah yeah which can be very enticing trust me like yes it can be very enticing yes another thing is i noticed at that i mean i could only pop into that conference for a very short period of time um because i was in between meetings and i was downtown the There were a lot of very speculative investments being represented there by their investor relations team. There were booths set up about some speculative junior mining companies traded

on the TSX venture and their sales pitches, hey, look, we're about to explode. Buy our stock. There were a lot of those booths set up. Be careful, people. Not all of them are scams, but a lot of them are. So just know that. And I have no problem calling them out like they are scams these people are scammers yes they operate public companies the tsx venture man oh forget about it man such a such a grimy place the first question i would ask him would be like okay like what financing have you secured that would be the first like for extraction or export like for production because that is one of the most important.

They're looking for financing via you. They are, yeah, exactly. So if the answer is no, then again, if they say, oh yeah, Franco Nevada is actually backing us, then there might be something to it. I'd wanna validate that. But yeah, you just have to be careful, right? Sometimes, you know, if it's too good to be true, it probably is.

Thanks for the question. And I wanted to bring that up because you can go on to our website. And if you're on the CanadianInvestorPodcast.com, you'll see links to all of our episodes and show notes and the Patreon and all that stuff. But on the right side, if you're on your browser as well, there is a little button on the right side of the screen called send us a voice message. And you can just talk into your phone or talk into your computer. Just try to be in a quiet place with somewhat decent sound quality

to make it onto the show and we'll put you in there. It's a little bit more fun than email. And then you can be on the show. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything

I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering

these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. All right, sir. Next topic. I wanted to revisit a topic that I did last year in March. The good old show doc that we have, which is we're now on version four, which is like 700 pages. So this is the definition of the show goes on. I did a segment called the four types of luck. And I wanted to revisit it because I think this is only really two types of luck that are relevant for investors, and I want to rename them. So I want to perform a remix on the 2007 Andreessen Horowitz piece called Luck and the Entrepreneur, the Four Kinds of Luck. Those four kinds are one, blind luck, two, motion, three, recognizing good fortune, motion, three, recognizing good fortune, and four, directed motion. All right, so what do those mean?

Blind luck is like, all right, Simone, I'm going to roll a dice five times and the outcome is just completely random. I'm going to flip a coin, heads or tails, blind luck. This exists in life. We all know it. Motion is like if I really want to get a meeting with the CEO of some company and it's kind of just luck if I send a bunch of emails and see who responds. showing up where some of those people might be and trying to like get a meeting or trying to get a coffee. That's like motion. You're like, you're kind of in the mix, you know, you're, you're,

you're somewhat creating your own luck, but it's not directed. Oh, no. Also known as stalking, but yeah. Stalking. Yeah.

Motion is like stalking basically, but it's random stalking we'll talk about we'll talk about targeted stalking oh yeah you got you have to look surprised actually you know what that's more like targeted stalking third is recognizing good fortune which is like okay i have an opportunity i'm gonna jump on this it's it's lucky that it happened to me but i'm i'm gonna jump on it i'm gonna recognize i have good fortune here. And four is like directed motion, which is directed stocking. Since blind luck is not an investment strategy and motion without a plan wandering lost in the markets is also not a good strategy, as we just talked about in the first segment here of the podcast.

Let's focus on three and four, but I want to rename them because we're looking to control our destiny as an investor. Luck is a thing. We all know it's a thing. Yes, some people get lucky. Some people have better forces of nature in this scenario. But we know if we're doing this for 40 years, what can we control? What can we do to influence our luck as an investor? And if I look at recognizing good fortune, I want to rename this to conviction as an investor. Recognizing good fortune only happens with conviction. I think this is so underrated in your process.

If there is a huge market sell-off on a stock or a nasty drawdown, it is so hard to take advantage of opportunities without prior conviction. It's like 25% sell-off happens March 2020, and you've never looked at a single security in your life. you cannot recognize good fortune. You haven't built the conviction. I strongly believe if you have not done this already, I think you need a list of ideas that you might not own right now, but you deeply understand. And if an opportunity comes along, you'd be happy to own it. For me, that's like 10 to 20 stocks that I think are firmly in this list. Examples of that are Costco, FICO, the credit score company.

Fantastic business, but everyone knows it's a fantastic business and it's just like really expensive. And so that would be a bunch of like positions that I might be working on. And then I have another 15 that I'm kind of just flirting with as new ideas. But what do you think of this concept? You can't recognize good fortune without prior conviction. Yeah, no, I think it's absolutely true. At the end of the day, too, if you're looking at really good businesses, they rarely go on sale. And if you're looking at, you know, companies, oftentimes if there's a big market correction, they're going to fall along with the rest of the market, maybe not as much. But if you don't have prior conviction or if you don't know the company well, you won't

be able to pull the trigger because, you know, it's kind of hard to pull the trigger if you've seen a drawdown of, you know, within a couple of weeks, something is down 10, 15 percent. If you don't have conviction, if you don't know the business well, it's going to be really hard to pull the trigger. So I think it's it's a valid point. I mean, if not, I mean, you'd see it and you're like, OK, something's clearly wrong with this company. Right. So I think it's that's the easiest way for me to explain it. Yeah, because sometimes there's some broad news headline that is moving the stock. Let's look at that CrowdStrike example on recent memory. But sometimes things just go out of favor.

And you're like, why is the stock down? It's like, there isn't a concrete example. It's just the ebbs and flows. There's not a concrete reason, my apologies. There's just the ebbs and flows. There's not a concrete reason, my apologies. There's just the ebbs and flows. Things go out of favor. Things move on factors in the short term. But in the long term, it's a strong weighing machine and not a short-term voting machine. All right, let's talk about number two, directed motion.

So I'm renaming this to fish where the fish are, because I just want to start with a quote here from Munger. It really helps if you know which hunting ground to look in. In fact, we all do better hunting when we hunt where the hunting is easy. I have a friend who's a fisherman. He says, I have a simple rule for success in fishing. Fish where the fish are. And that's where you want to fish, where the bargains are. It's that simple. If the fishing is really lousy where you are, you probably ought to look for another place to fish. That was a Q&A session he was doing for the Daily Journal Corp. And there was tons of funny anecdotes he used in many of the questions here.

And, you know, it's just like fish where the fish are, right? Like directed motion in luck is like directly trying to make your own luck, right? Trying to stir the pot up so that there's enough happenstance moments where you're in the right place at the right time. Some of investing is being in the right place at the right time, catching the right macro trend at the right time,

the right company, the right management team, the right space, the right industry, the right secular trend. Where's the pond that has those things? Don't look for trout in a pool full of salmon, right? It doesn't make any sense. So I think this one is self-explanatory, but I'd like to add to it a bit here, which is fish where your fish are. Fish you like, fish you understand. Because both require some outside forces of luck. But if you're a fisherman who has conviction in your process and you are fishing where the fish are, the fish do still have to bite. And so to add one more thing to the Canadian Fishing Investing Podcast here, I've come to realize that luck is surface area

and luck is real and you can't beat the chaotic randomness that exists in the universe. I mean, just look at fluid dynamics and turbulence. It's literally mathematically trying to understand random chaos in the universe. This is how the universe physically operates. But as to point one, blind luck is a thing. However, it can also be said that luck is a surface area. If it is lucky, if a fish swims into your net, but what if the net was five times larger? You've created more surface area for luck to occur. So now we're influencing probabilities. So don't just fish where the fish are, fish where your fish are, fish you understand.

If you really, really understand cybersecurity, fish in cybersecurity. If you work in that field, fish there. There are so many generalist pension fund, endowment fund billionaires who wish they had your knowledge. So take advantage of it. Yeah. Just careful for a conflict of interest. Yeah. Well, fair enough. No, I think that's a great point. I mean, in terms of, yeah, you can definitely create a lot of your luck. Of course, there's always going to be some black swan events, whether it's broad for the market or, you know, it could be just for a specific company, something really unexpected happens and,

you know, it's pretty unlucky. The probability of that happening was very low. But for the most part, I think yes. If you put yourself in the better position, it should work out for you with a long-term investment horizon. It's like your days of poker, right? Poker is a game of skill and luck of course yeah there are factors of randomness in the deck

of cards that are completely random and unknowable about what's going to happen in the future but over one hand of poker i could beat the best poker player in the world over one hand of poker. Yeah. But I will not win more than 50% of hands if I play them for 2,000 hands. They'll smoke me. They'll crush me. And so that's the same thing with investing. It's like, yeah, things move up and down daily. But if we're talking about removing the randomness over a couple decades or multiple multiple years now we're actually like in the business of making money here yeah exactly and i know like just an example for

poker some of the most dangerous players are the ones that are very very aggressive but the top player is what you know some inferior players won't realize is that they'll just notice them playing a whole lot of hands, right? Raising, raising, raising. But what they don't notice is when they put a whole lot of chips in, they usually have the best end. And the bad players will see that and sometimes they'll get frustrated and then they'll be like, oh, I got so unlucky. This like super aggressive guy ended up having aces and he's always raising. And I had like, you know, queens, like how can I fold and so on. But they weren't paying attention and realizing that this player, yes, he's playing, he's very aggressive. But when all the chips go in, he tends to have the goods. But it's just it's just an example right they might say that this player is lucky but the player was actually using the image as his advantage and the other parallel to there is the best players don't want to risk blowing up if you blow up your whole your

your whole stash of chips you're done right like right? Yeah, if you're in a tournament. Yeah, exactly. If you're in a tournament, you're done. So the risk of blowing up is serious. They know when to make calculated bets mathematically to avoid blow up. The same way that putting 80% of your portfolio in a speculative pharmaceutical company has a risk of blow up. It has a risk of wealth creation, but it has a risk of blow up. And if we're trying to compound over a long time

and we have a blow up and we have to reset, then in the poker analogy, we're out of the tournament. We're out of the game. The guys can keep compounding, we're out of the tournament. We're out of the game. The guys can keep compounding and we're out of the game. And say I've been compounding for six years and I have a blow up, I'm out of the tournament. I have to start again. Those are killers in poker, in investing. So don't blow up. No, Exactly. So I could go with tons of example for poker, but in it is an investing podcast, although poker does have a lot of parallels. 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.

So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF.

One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. We'll go on here to the next segment. I wanted to look at what sectors I've actually been doing pretty well this year.

I use Sector Speed ER. I've used it before here. Really useful tool. It uses essentially ETFs. The main one would be the SPY that they use to track. So these are just ETFs that track all the sectors of the S&P 500. And it's really interesting. Just I'll share my screen and I'll go over the year to date returns. And well, first of all, I don't know if you realize that,

but all the sectors are up year to date. And I was verifying with FinChat.io too, just to make sure it was total returns than it is, does appear to be total returns here. But in terms of the top sectors of performance, the top one definitely surprised me. Did you expect to see utilities as the top performing sector? Let's just round up and see it's up 25% for the year. Yeah, what is that? Financials as well, that's doing super hot.

Utilities, yeah. Yeah, some names I did not expect to see i also didn't utilities got absolutely wrecked when rates started rising right yeah these are heavy debt load companies that had terrible years when rates started rising for what is traditionally like a, not a very volatile investment. Yeah. Right. And so I think that you're just seeing a huge rebound in the sentiment there

with, with a bit of cuts happening too. Yeah. And probably to the sentiment that utilities will be benefactor from the whole power buildup for AI. So I think that's been one of the, you know, the,

I guess, tell wins or the thesis, I think is probably the better word to use for utilities. Yeah, you make money generally when something goes from a very crummy story to a good story. That has time and time been what's worked. That has time and time been what's worked. Peter Lynch has a really good little talk that he does where he talks about what happens when something goes from a really, really bad story to an okay story and an okay story to a good story. But when it has a very bad story to a really good story, it's when you have monster, monster know, monster, monster years. Yeah, exactly. And what I decided to pull to was just essentially what you were saying, right? Utilities had been

clobbered by higher rates is I decided just to pull a chart. So I included here XLU, which is the utilities. I included XLC, which is communications, just going offhand here. XLC, which is communications, just going offhand here. Communication, yeah, that's the one. SPY, which is the broad index, and as well as XLK. XLK here, looking quickly, it's technology. So you're looking at the return since, let's just say the beginning of 2021, so Jan 4, 2021, up to December 29 of 2023.

So it's really interesting before this year because we're looking at the year to date. Clearly, technology performed really well at 55%. If we round up behind that you add the S&P 500, the broad index at 35%. But then utilities were 13.7% and communication services 12.19%. Communication services is interesting because it includes some pretty big names in there. I believe like you'd have a meta that would be part of that, Netflix. So there's clearly some that have been dragging a bit more on those. I think probably like the legacy companies, like a Comcast. AT&T.

Yeah, AT&T and stuff like that. But just to show what you were saying is those companies were kind of going sideways for a better part of two years and then it's really picked up so far this year. It's so funny because those companies couldn't have more different balance sheets. Exactly, yeah.

You have these tech companies with literally net cash positions. They have more cash than debt, if not no debt. And then you have these legacy communications companies with huge fiber build-out CapEx and absurd amounts of debt on the balance sheet getting hit by rates. These companies couldn't be more different structurally in their balance sheet. Yeah, exactly. And if you're looking here in terms of, you know, you said financials,

and financial includes a whole broad of like a lot of different types of companies. Like you'll have a Berkshire that's in financial insurance companies, like a progressive American Express not insurance but all state is an insurance you'll obviously have banks and what's kind of cool with this tool is if i take financial for example year to date progressive is the top performer at 61 and then if you go you can actually look at the worst performer so you'll have like Franklin Resources, Inc. I'm not familiar with that Global Payments, Inc, Invesco. So you can also look at the best and worst performers. So it's not a bad tool, to say the least, if you're looking at large, you want to look at large cap companies,

but you want to kind of drill down a bit more, get some ideas of what's been performing well, what's not been, it's kind of cool to use that tool. Obviously, you know, it's more to grab ideas and get a general sense. But the one that I think will be very interesting to look at, especially with, you know, the much anticipated Fed cut that will likely happen tomorrow, I think it's still 100% that they're cutting. I think it just depends on whether they'll be cutting 25 basis points or 50 basis points. I think that's the debate at this point. Real estate, there's just so many different factors at play for real estate because clearly

lower rates will be a tailwind for REITs, real estate investment trust. But then you can drill down to specific type of REITs. So you have office REITs, on the other hand, that will probably continue to be affected by hybrid work in downtown areas not being used as much as they used to. So if we're heading into a slowdown or recession, you know, is that going to also impact demand for office REITs? Then you also have retail REITs, industrial REITs that might also be negatively impacted by a slowing economy, still benefiting from that interest rate cut tailwind. But there's so many different factors at play for REITs that could dictate how they perform in the

next few years, I guess, kind of short to medium term. Even within retail REITs, right, you can have malls, you can have different class of malls, class A, B, C. So A are kind of the top newest malls that have been renovated, where most people frequent, whereas there's higher traffic, then there's kind of the lower ends one, you also have a company like Realty Income, which tend to have like kind of single tenants for their properties. I think they have a lot of gas stations, groceries, stuff like that. They should be pretty resilient. And then you have these other types of REITs that have pretty good staying power and even grow when you think about like medical REITs, medical building REITs.

You have office tower REITs, data REITs that should see some tailwinds as well. So it's just, I don't know about you. I know we don't talk about real estate super often, but I just find that I find a sector so fascinating because it could go so many different ways depending on the name you're looking at essentially. This website's pretty sweet. I like this. Yeah. And then like even like, right, the real estate one.

So you have Iron Mountain, that's up 69% year to date. Well, Tower, 43%. But then you have like some names that are, you know, in the negative territory as well. So it just, yeah, just kind of a fun little side to get the pulse of clearly it is for uh the snp 500 but you know the sectors that are how is iron mountain a real estate company uh they do storage i think so they do a lot of like data storage type of stuff they also do like shredding and stuff i know yeah they are like considered a read i just think of like shredding and like yeah all the 90s tech i think of iron mountain but dude this

stock's been on fire yeah i know yeah i'd have to i haven't looked at iron mountain but i think they did also like kind of file storage as well so i think it's just info management yeah exactly i think that's the the best way to describe them for sure. Impressive pivot because they did like, Iron Mountain was document management, but like for physical paper for a long, long time. Yeah, exactly. But there's a diversity of name. And I think that kind of goes when you're looking at, I think it's a good discussion for when you're looking at sectors is, yes, there's like these names, right, that are kind of, you know, like people will think of certain sectors and they'll think like tech, right? They'll think, oh, well, surely a meta in Google is in there.

Well, no, it's actually in communication services. So you have to keep in mind when you look at sectors, it may not always be contained the names that you expect them to contain. And I think these are just kind of big categories that I don't really, I guess, SNP decides which sector is which. And, you know, some make more sense than others, but just keep that in mind that, yes, if you end up buying a sector-specific ETF, the exposure that you end up getting might be a bit different than you actually expected if you don't drill down to the actual ETF and the specific holdings and the weighting for each holding of that ETF. When you're pulling up financials, I just wanted to see the performance of total return American Express versus Visa versus MasterCard. Five-year basis, they've all done well, but wow, American Express has really, really done well as of late. It operates as a different type of company, but the brand's really resonating with young people, it looks like. Yeah, as long as they pay the bill, they should be okay. Yeah, as long as they resonate with it and pay for it.

Yeah, because they also own, I don't know if you knew that, but they have like savings account in the U.S. I didn't know that. They have their banking license in the US. So they do have, I think it's primary credit cards, but they do have customer deposits on their balance sheet, like a normal bank would have. But clearly, it's kind of a hybrid. I've always been intrigued by that business because it provides you almost like a hybrid between a bank and a MasterCard slash Visa. Yeah, well, that's exactly what it is.

It's a very different business model that they take on credit risk. But holy moly, it's been doing well. All right. How are we doing for time here? I think we could call it an episode here, I think. What do you think? Yeah, let's tease next week's episode. We'll talk about what Canadians have been buying

with the TD Direct Investing Index. And Simone, I am going to do a segment on the business of OnlyFans next week. That's what I got slated up for next week. I am shocked because basically one guy- People can make good money on there, like really good money. Well, I think there's a huge extreme um not outlier outliers where it's like there's a few people who are making like 99 of the money in terms of like a few creators but i'm gonna more

talk about it not only from like the creator side but the owner okay because it. Because it's UK based, it's privately held, but UK companies over a certain threshold of revenue are required to make their financial statements public. So I'm going to dig into their financial statements and talk about it because there's basically one guy who owns the whole thing and he pays himself like hundreds of millions of dollars in dividends every year. Straight to his bank yeah yeah absolutely absurd yeah it's i mean i've heard stories like not to go into too much detail uh but i've heard like a story of you know someone in ottawa i won't go into too much detail that makes uh like makes a very good income out of that but clearly clearly, I think from what I know, it's not PG-13.

That's what I've heard. No, it usually isn't. At one point, they tried to pivot the business to a clean, strictly safe-for-work content. Yeah, it didn't work. That did not work work it's like you can't pivot the brand people know what only fans is and that's exactly it is what it is i know they've been getting flack in terms of i think there's like might be some that are being exploited

for that i don't know i've seen some articles i don't know to the full extent of it but in terms of you know the stuff that's clean there's already like you know patreon i guess would be a competitor if they wanted to keep it like just clean right patreon's more known for that like there's already platforms out there that are pretty well known that are like you know kind of not catering for lack of better word to the adult industry. Yeah. It's a fascinating world. I'll dive into their financials, how much this guy's taking home, the whole story of it,

because there are these outlier businesses that are private that are just unbelievable. They print money, basically, yeah? Print money. huge network effect too like they have this contributor model user generated content it's absolutely wild i saw a post that um the you know the cash me outside girl remember remember she was on dr phil no i don't think i i know you don't remember uh she went viral for being on dr phil for some stuff she said this was years and years ago okay she was like a she was like a kid she was like a kid now she's like 20 or something and she's made i think

she posted her only fans earnings of $57 million last year. I'll pull up the exact amounts that she disclosed on the podcast next week when I go over the business of OnlyFans. But that's the type of money we're talking about for some of these, you know, 1% of the 1% earners on the platform. Yeah. Yeah. of the 1% earners on the platform. Yeah. Yeah.

But I've seen, I've heard anecdotal stories of people in Canada making easily five digits a month, which is pretty good living, right? Even they may not be making a million, but it's more than enough to sustain them. I don't know if you still can, but you used to be able to see

what everyone has mixed it said the amount of subscribers that is on each creator and i went to high school with a girl who was making over six figures a month doing asmr do you know what asmr? I don't know. Yeah. It's like, dude, it's like people whisper into the microphone. Oh, okay. He sounds like, I'm 39. I don't know what the hell any of this means. Dude, there's these weird sub-niches and people are making bank. Like, we got to up our game here.

We're talking about investing podcasts on the mic. Let's make a whispering version. Yeah, I don't think there's demand for an OnlyFans page from us. Oh, and this unraveled pretty quickly. Yeah. Yeah. Thanks for listening to the podcast, folks. Now you're really going to have to listen next week.

But of course, it'll be about the financials of it all. Yeah. And we appreciate you listening to the pod. We are here Mondays and Thursdays as the shout out on the top of the show here. If you go on the website and you go on the canadianinvestorpodcast.com, not only can you see all of our stuff, but there's a send us a voice message button. And it used to get a lot of traction, but it's our fault because we weren't really putting any of them in there.

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