The Canadian Investor - How This Canadian Small Cap Stock Turned Into a Multi-Bagger

Episode Date: June 9, 2025

In this episode of the Canadian Investor Podcast, we breakdown Questrade’s new securities lending program and what it means for retail investors. Next, Dan takes aim at the sell-side analyst world, explaining why most price targets and stock ratings should be taken with a big grain of salt, including the built-in conflicts of interest and poor historical track record. Lastly, we take a closer look at Secure Waste Infrastructure Corp (SES.TO), a growing Canadian industrial name with strong free cash flow, expansion potential, and a rising dividend. Tickers of stocks discussed: SES.TO  Questrade’s new securities lending program Get your TSX Meetup tickets here! Get your Calgary Meetup Tickets here! 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 Asset Allocation ETFs | BMO Global Asset Management 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.

It's the small things that make us Canadian. At BMO ETFs, all of our tickers start with Z. That's right, Z, not Z. From ZSP to ZEB, we know how to build solutions for the Canadian investor. So the next time you invest in ETFs, consider AZ instead. Visit BMOETFets.com for more. Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker.

At the end of the day, you have to remember that it's a business. Just my reminder to people who own safety rules, don't be surprised when there's a cycle. If there is uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome to the Canadian Investor Podcast. I'm back with Dan Kent. We are back for a regular episode, our Monday release, where we will talk about concepts,

but also sometimes we'll be looking at some businesses, where we do some semi deep dive. So there's a bit of everything today. We'll be talking about Questrade's new securities lending program. I had a few people reach out to me asking that we talk about that on the podcast. So here it is. You'll be talking about sell side-by-side Analyst rating and price targets, right? Yeah and some of the the things that people should be careful when they see those and then we'll finish the episode with a

Semi deep dive on a company that I was not familiar with but discovered using a screener that I use on Finch Chat, so it'll be a be a fun episode that we have planned again, pretty jam-packed with content. Yeah, the last deep dive is a company that I actually looked at briefly but not too too much because I you know initially didn't like some things but I mean it looks like it's done quite well over the last while so that should be a pretty good segment. Yeah, stay tuned. Listen to the full episode to know which company we're talking about. A few housekeeping items. The first one is for those interested in joining our meetups,

we have one in Toronto July 24th. For the closing bell at the Toronto Stock Exchange, there are limited seats or limited tickets available. So make sure if you're interested, you're in the GTA area or you want to make the drive down to the Toronto. Make sure that you register. The tickets are going there's a lot of people already registered for it. There's also the Calgary event that will be happening on July 8th. Same thing make sure you register for the tickets. They are $40 each for both events. I think it's pretty reasonable considering what we're offering. We're still probably gonna take a hit in terms of a small loss for those events. So it's not like we're making money on these. It's just trying to cover

our costs for the most part. And then the last housekeeping item is that we are relaunching our YouTube page. We will have some content for both the Canadian Investor podcast but also the Canadian Real Estate Investor with Dan Foch and Nick Hill, which by the way if you're not listening to that podcast it's great. There are some links in the show notes if you want a link to the podcast feed and the YouTube page will have some short clips as well as some actual shorts so some clips of maybe like 10 to 12 minutes. So for those who are not on Join the TCI and are not seeing us the full videos you can still

Subscribe to our YouTube page and get to see our beautiful faces and Dan's Oilers cap That he's wearing proudly after they won in overtime last night. Yeah, and hopefully by the time this is published They'll be up to nothing. So fingers crossed. I'm not an Oilers fan per se. I don't love them or hate them, but I do wish that they win the cup. So we bring it back to Canada because probably a lot of our listeners have never seen it won by a Canadian team, which the last one was what 1993? Yeah, so over 30 years the Montreal Canadiens that won the last one was what 1993 yeah so over 30 years the

Montreal Canadiens that won the last cup I would love it to be the Montreal Canadiens but I'll take any Canadian team at that point yeah I just want it I want it to end it's very stressful for me I don't know why but it is I can't help it okay well now that we're done with the housekeeping item let's get started so Quest trades new securities lending program so as as I mentioned Okay, well now that we're done with the housekeeping item, let's get started. So Questrade's new securities lending program. So as I mentioned, Questrade is a show sponsor and I will go over this, but I will go over the pros and cons and they do go over these pros and cons on their website as well.

So make sure you keep that in mind. You have like everything or like most things in life and investing. There are some trade-offs, whatever you want to do. So make sure you're aware of that, but I'll go over most of these and. The benefits of it, whether it might be worthwhile for you or not. So the lending program allows you to lend shares to other investors in exchange for a fee. The fee that you receive is split 50-50 with Questrade,

obviously because they manage that. It's only available in a tax-free savings account, so TFSA, a cash or margin accounts. They may have it available on other types of accounts, but eventually, but for now now these are the only accounts. Little asterix here, if you have a margin account you can only do it with stocks that you actually own outright that you are essentially not bought with margin. Questrade handles finding a borrower and there is no number of shares required however Canadian securities are not currently available

for this and like I mentioned earlier just to be specific in the types of account RSPs, RESPs, locked in retirement account, life income fund, LIFs or RIFs, retirement income funds are not eligible for this program. The payout is paid once a month and is deposited automatically in your account. You still retain ownership of the shares while they are loaned out, which means you can still buy and sell shares whenever you want. If there is a dividend payment while the shares are being loaned out, you'll receive a compensation payment for the same amount so you don't miss out on those dividends. You can opt out of the securities lending program at any time. Little note though on the compensation payment, there may be

some tax implications on that. So not a tax expert or anything. So make sure that if you do opt in and you have questions on taxes, you consult with a tax professional. That's always a good thing to do. From a risk perspective, it does seem like it's a low risk proposition since Questrade holds 100% of your shares market value as cash collateral. So they take care of that because it would not be covered by the Canadian Investor Protection Fund, CIPF, which was the coverage that's in place for brokerage. Now some of the pros you can earn income from investments you already own so some of the income investors that's something that could be attractive for them. Quest rates hold a

hundred percent cash collateral to those shares lent out which keeps this a very low risk proposition. There's no minimum value so it's accessible to anyone. You can sell buy shares whenever you want. So you don't, you kind of keep a lot of that flexibility. In terms of trade-offs, I mean, you can't vote while your shares are lent out. So I don't really vote for stocks I own, but some people may want to vote. I think you're in the same boat as me, but it is a trade off. You can opt out if there's an upcoming vote of the lending program that you'd like to vote and you can opt back in.

So, if that's something you want to do, there are some ways to go around that. And like I said, you lose some protection for the Canadian Investor Protection Fund coverage. But like I said, Questrade mitigates that by keeping 100% of the market value of the share loaned out as cash collateral. But again, it's still not the same as like the CIP of the Canadian Investor Protection Fund.

So that is a trade-off here that people should be aware. But it is something that's relatively new. It could make sense for some people. For me, I'm not sure. I've not really kind of thought about it all too much. Maybe I'll try it out with just a few holdings that I have. I really haven't decided yet. But it is a nice offering for them to have that to give some people some additional opportunity to generate some income. Yeah, when I was with Well Simple, like I moved everything over to Questrade now,

but when I was with Well Simple, they had this. I opted into it. I never really made all that much. I mean, it was maybe a couple of bucks a month, but I mean, I guess it would depend a lot on what you own. And I know a lot of people kind of thought of this like, oh, you know, I don't really want to opt into this because oh, you know, I don't really want to opt into this because like, you know, I don't really want

to loan my shares out to somebody who's like short selling something that I own. But I mean, in my, like the way I kind of thought about it, like if it's not me, it's just the next guy. So I kind of opted into it. It wasn't a huge moneymaker, like from a taxation perspective, I never would have been in a situation where it impacted taxes.

I mean, there were some months where I would make like $0.50. But I mean, I guess a lot of it depends on how big your portfolio is and what you own. I know a lot of the money I would make primarily would be on most of like small cap Canadian stocks that would actually get probably you know a lot more maybe short sell activity than you know something like a blue chip holding or something but yeah. I would assume that there's probably more demand for anything that's more volatile.

Yeah exactly. So there's going to be some bigger premiums for that so that would make sense. Yeah. Yeah it wasn't a big money maker for me but I mean again it could be for other people. I'll probably opt into it. I mean two bucks is two bucks. Exactly, yeah it's half a coffee now. Yeah exactly. You can't say no to that but no that's it's not overly complicated that's why it was a very short segment and that's what I figured a couple people asked. So make sure they have a full-on Frequently asked question as well. So make sure you read that if you're not sure

They also explain how it works depending if you only have a few shell shares Of a company ABC and then as like let's say a million shares like who gets priority and so on In this kind of market, I like having some cash on the sidelines. It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQBank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month

into your EQBank account. Your cash stays liquid and ready to go when it's time to invest. And if you're not in a rush to access your funds, EQBank's Notas Savings Accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers zero dollar commissions on stocks and ETFs. But Questrade isn't just about commission-free trading. You can also get USD accounts so I avoid forced currency conversion fees when trading US stocks.

Plus get access to their advanced edge trading platform available on desktop, web, and mobile. I've been using Questrade for many years and so has Simon. And their platform makes trading seamless, whether you're managing a long term portfolio or making active trades. Don't miss out, start trading commission free stocks and ETFs today. Visit questrade.com to learn more. Between meetings in Toronto and conferences in Vancouver, I'm not home as much as I'd like. So I've been thinking while I'm off enjoying someone else's Airbnb, why have I not put my own place up on Airbnb to earn a little extra income and help me pay for the trip?

With Airbnb's local co-host network, I can find someone to handle everything. Bookings, guest support, even the cleaning. It's a simple way to make extra money while I'm traveling without the hassle of hosting it all myself. If your place often sits empty while you travel, it might be time to let it work for you. Find a co-host at airbnb.ca forward slash host. We'll move on here to your segment about sell side price targets compared to buy side, difference between both of them

and some of the issues specifically with sell side. Yeah, so I kind of decided to do a segment on this because I do get a lot of questions and commentary on our premium platform for this. Members are always excited about upgrades and get quite concerned about price downgrades. Sell side research, especially when we look to price targets and ratings, like a specific number price target, or it could be a buy, sell, hold, outperform, things like that. It's kind of filled,

there's a lot of conflicts of interest. There's a lot of incentives overall on this side of the business. And I mean, to be completely honest, most all of it, like these targets are, you know, gonna be something that you really don't wanna pay too much attention to, and I'll get to a bit of data on that later on.

And the one thing I do want to say before I start this is this is not necessarily an attack on sell side analysts whatsoever. It's just more so explaining, you know, the conflicts, heavy conflicts that are in place in the industry and why most investors would be better off. I wouldn't say you necessarily have to ignore them, but if you're making decisions based on these targets, I mean, it's probably going to be more detrimental to you than beneficial. Well, you're being nice. I ignore it completely.

Yeah. I mean, like, I'm not going to lie. When I see like a big upgrade, I kind of, you know, but I mean, it's not going to be, I'm not going to go chase a stock that, you know, has seen some, some upgrades as of late and I'll get to why, and you'll probably, you know, understand why by the end of this, but I mean, even the, even the analyst who strives for,

you know, 100% objectivity is going to have some pressure placed on them in this side of the, in, in this business overall. And just a quick overview on what a sell side analyst is. You'll primarily see them working for brokerages or investment banks. Their job is to forecast earnings, research public companies, et cetera, for all their clients. And on the flip side, on the buy side, I guess I would say,

they are primarily analysts that would do research for institutions that are investing in securities on their own account or for clients. So think of sell side analysts producing reports for the public or clients of say the firm or brokerage with the main driver being they want to generate more revenue for the business through investment banking, through trading commissions, etc. Where the buy side analyst is doing research to generate higher returns for a mutual fund they work for an ETF, a pension fund, a hedge fund, etc. So it's a pretty common direction among sell side analysts to eventually move into the buy side. but just to kind of go over the potential conflicts and why these price targets are, you know, not the best thing to ever base investment off of. Sell side's almost like a kind of a bit more marketing. Marketing. Like it's almost, yeah, they're trying to, yeah, yeah, yeah.

You'll go why, but yeah, they're definitely like trying almost to sell you something. Yes Oh, yeah, a hundred percent because I mean that's ultimately what drives the revenue for the businesses they work for and there is Substantial conflicts of interest when it comes to sell side research overall I mean for one if you could imagine a sell side analyst working for an investment bank who is trying to acquire businesses, they're going to be inclined to be more bullish. I mean, the last thing you want to do is issue a sell rating at a low price target on a company that the investment bank is trying to add as a client. And I believe this was a massive, massive, it was a huge deal during the dot com bubble,

so much so that they had to put regulations in place. I think to actually like separate out these segments of the business so that there isn't direct communication between the two. But I mean, there still is pressure now, even though they kind of put up those walls and kind of try to make these a little bit more objective. And the one interesting thing here, and I don't know if you can show this chart, but RBC Capital Markets did a very interesting, you know, a bit

of commentary on this. This is actually pretty recent. It's, I believe it was March 2025. So out of 1485 ratings that RBC Capital Markets had provided. It had provided investment banking services to around 436 of those companies. So out of those 436 companies, 66% of them were given buy ratings, 33% effectively holds and just 1% sells. So out of all, you know, the companies that this, you know that the bank does work with, there's very few sales. I mean, you're talking about one out of 100 companies that would ever grade a sell.

Yeah, and we were talking about this right before we started recording. Like a lot of the time you'll see sell side analysts, they'll put a, when they put a sell rating is because it's blatantly obvious. Very obvious. And the company's already trending down pretty negatively and they'd look almost like stupid to put a buy or a hold at that point.

Like it's pretty much to that extent that they'd have to put a sell rating on a business. If not, they'll usually just go for a hold, right? Like even if they're, you know, a bit pessimistic, they'll kind of place it as a whole to not look too ruffle the feathers yeah yeah and I mean like it they do say on this you know end of the business that a hold is effectively a sell because of how many buy ratings they issue like it's again and as I mentioned here the big money made you know among these investment banks brokerages is with companies and institutional clients.

So there's a natural bias here to kind of maintain the status quo, not jeopardize the relationships of the bank's existing clients, prospective clients. So these ratings are generally not always bullish, but they are bullish overall. And I mean, the second conflict you get into here is the incentive for commissions overall. I mean, there's little doubt that trading activity fuels profits for many banks, brokerages. So there's incentive to encourage people to buy stocks,

buy more stocks. So how exactly would you go about that? I mean, primarily being bullish. If you think about it, if you're logging into your brokerage account and see a bunch of sell ratings from analysts and lowered price targets, are you really going to buy it? Want to buy stocks? Like not really. I mean, on the flip side, what if you log in and see a bunch of bullish reports and a bunch of upgraded targets, which kind of incentivizes it in that regard. And the other interesting thing is, and what a lot of people might not know, is the situation in terms of the conference calls.

So, investor relations teams typically handpick analysts that get to participate in the conference calls. So, I mean, if you can imagine being on the IR team of a company, which analysts are you going to choose? Likely the ones with bullish targets and strong relationships with management. And I mean, you can also imagine the difficulties of building a strong relationship with management if you're bearish and downgrading the price. Yeah.

And you'll usually they'll be able if they have good relationship, they might get additional access to the company, to management outside of these calls. So it is something that, when you have these big investment firms or investment banking firms, they wanna keep those relationship intact, which obviously, let's be honest,

it affects the integrity of their analysis. Not that to say that it's not, there's not some value in terms of the analysts and the reports that they will do per se, but again, I think you have to take them with a little bit of a grain of salt because, yes, it will tend to be biased on the positive side. Oh yeah. Well, this is why like, if you've listened to a lot of conference calls for the most part, no matter how bad the quarter was, they're relatively upbeat. I mean, sometimes there's hard questions asked,

but for the most part, they are upbeat. And, you know, naturally companies are not really gonna wanna be bothered with giving too much air time to, you know, bearish analysts when time is limited. So generally, I mean, the incentives for these conference calls, I mean, the more bullish you are, the better relationship you're gonna have. And ultimately there's more money

in having that better relationship rather than being bearish. And this next one is actually one that I just read up on when I was doing the segment. And it was a study that was done and maybe we can throw it in the footnotes or something of the show to kind of see if like anybody wants to actually read the study. But they highlighted a strong correlation over a 15 year timeframe in which analysts tend to be more bullish on stocks heading into earnings depending on their overall ownership

among actively managed funds. So the study effectively came to the conclusion that the likelihood of a stock being labeled a buy or a strong buy and a higher price target grew in tandem with the amount it was owned by actively managed funds. So for every percent a stock was held by mutual funds, the probability of a stock getting a stronger rating was 3.87% higher. So on the flip side, for every percent owned by mutual funds of a particular stock,

the odds of getting a sell rating actually fell by 1.32%. So the more these companies are owned by actively managed funds and the larger allocation allocated to those actively managed funds, there was a lot of actual statistical data that said that they were getting higher ratings. Whereas if it was largely owned by actively managed funds, there was actually a correlation that they're less likely to give a sell rating. So, and the other interesting thing is these upgrades more often than not came within a month of the company reporting earnings. So there's a strong correlation to a company reporting earnings and this activity

actually going on. So this study was done, I believe it was from 2002 to 2017. So I mean, that's what we're looking at eight years ago now, but I would imagine you could probably, I don't think anything has changed over the last while. Yeah, I would argue that it hasn't changed or has gotten even worse, but that's just my personal opinion. Yeah, like this one was actually the most alarming to me. I mean, especially, yeah, it's not objective. And I mean, that's a lot of data. That's 15 years worth of data. So, they've come to a conclusion based on you know a pretty decent sample size in terms of data so she talked about potential conflicts there's numerous other conflicts but just for the sake of you know keeping this shorter the results so not only is there

you know the extensive amount of conflicts but there's actually results that show that these targets are borderline useless. So back in 2012, they did a study among 11,000 analysts across the globe and they found that just under 30% of analyst price targets actually came to fruition after a year, which is typically the time span of the targets are assigned. So there'll be a one year price target, 18 month price target. And yeah, they did a study and less than I think just under 30% of them actually came true. So I mean, realistically, I would not be surprised if you gave somebody a basket of 100 stocks and told them to pick price targets on those 100 stocks

if they wouldn't be able to come up with 30 of them being right. So I mean, I don't know. That's just me. It just seems like throw a dart on a dart board with a bunch of price targets and I'll probably have a better chance of being right. Yeah. I mean, 30% like I could like, I would say that's like borderline attributed solely to just luck. Really. I mean, as I mentioned, you give somebody 100 stocks, they're probably gonna pick 25 to 30 price targets that are accurate a year later, doing very little to no research.

And keep in mind too, those price targets will typically be higher, and we've been in essentially a bull market for the last decade and a half. If not, yeah, roughly, they can have almost two decades. So, I mean, that 30%, I can make an easy case that it would not be 30% if we get into a extended bear market or sideways, it'll probably be even lower than 30%. I think that's just an important

piece for people to remember is that, yeah, when you're a constant bull market, pretty much over the last two decades, like I just said It's much easier being right on the upside When that happens and they're still not doing that great of a job at it Yeah, like if you picked I mean over the last few years here if you picked, you know Just any sort of semi bullish price target you were probably right the vast majority of the time. So Yeah, I mean I think the point here is to just take everything you get from these reports and you had mentioned it with a grain

of salt. I mean, historically analysts are often way late to the party. The sell recommendation often doesn't come until all the smart money has exited already. I mean, if you look to a lot of consensus price targets and compare them to side by side to actual pricing charts, you'll find the vast majority of pricing downgrades and ratings downgrades come long after the stock has taken a dive. I do have this chart at Tesla. I don't know if you can show this, but often, you know, when price targets kind of get their highest proves to be kind of one of the literal peak of its pricing there. And then it went through a huge six month decline. And then, I mean, even when we get back to if we look to early 2025, the price targets,

they hit peaks, the stock dove another quite a bit. So I just think these two are the ones that are going to be the most important. And I think that's the biggest thing that we're going to 2025, the price targets, you know, they hit peaks, the stock dove another, you know, another quite a bit. So I just think, you know, these targets, you can look at them, but I really wouldn't put much emphasis at all into your actual decision making. Like if you see a rating upgrade and it makes you want to buy a stock, I just think that's not really the right way to go about it.

And if you want to, you know, if you see a downgrade and it kind of makes you want to sell a stock, I mean, again, I think that's, you know, the downgrades are a little more of an indication again, because I think they're given so little, but again, they're often, you know, late to the party. I mean, we can look to this chart. As soon as they started downgrading Tesla severely, it was at the bottom in January 2023. That's when you would have got

all the downgrades. And if you actually sold the stock based on those downgrades, I mean, it went back, it recovered in price within a matter of six months. No, no, I think that's a really good overview. I mean, anything else you want to add? I mean, It's a really good overview. I mean, anything else you want to add? I mean, my summary of all this is, you know, don't really pay attention to it. That's what I do. I rarely ever even like notice them anymore. I just don't really look at them.

Well, like you had mentioned, they're kind of a marketing machine, I guess, in a way. I mean, they're made to encourage people to buy more they're made to you know kind of Management relationships, I mean money for the underlying companies and again, it's not all sell-side analysts like some of them are very good, but there's issues in the industry and Overall, I mean the less you pay attention to these, probably the better your returns are going to be. Yeah, and it's not necessarily that the analysts may not be good or I'm sure some of them

are not that great and like any, any kind of profession, you'll see that but even if you have some good ones, that's what we're talking about. Like think about journalists, right? Everyone has read a story, heard a story about a now independent journalist that used to be with a big publication, a well-known publication, whichever one it is, they did a well-resourced story, they sent it to their editor,

and then it never got published. Because it ruffled some feathers, there was some interest that they just didn't want to, some hidden interests or things that, whether it was the big advertiser, whatever it was, they just couldn't publish it or the editor just did not want to publish it because they thought there was too many,

too much risks for the publication itself, even though the right thing would have been to publish it. And I think you can get in that same kind of mind frame here where the analysts may feel like this is a strong sale, but above their head, they're like, well, no, you're putting that as a whole because we have a relationship we want to maintain here and it's just not happening.

So I'm sure this kind of stuff happens all the time I mean, I wouldn't be surprised because the incentive are aligned like that. Oh for sure I mean even if you look to this is kind of a different area but that thing that happened with TD Bank where you know a lot of those people were kind of incentivizing people to Buy funds like buy buy the funds when they had like credit card debt and stuff like that. Oh, yeah Yeah, the CBC investigation. Yeah. And they had a lot of people, like a lot of those people that quit the job

because they didn't like doing that. But there's a lot of people who, you know, probably gave into that pressure and kind of, you know, led people the wrong path. I mean, it happens everywhere. There's pressures everywhere because ultimately these companies are there to make money Yeah, I know over the years one thing I've learned about Wall Street is they are very good at marketing Yes, when you start hearing about certain kind of products a whole lot and I think right now there's a whole lot about private equity private credit and how it's the

next best thing get into alternate assets, and I don't wanna go on a rant because I have a bit in the past, but I think a lot of it is a whole lot of BS because they're trying to sell that because they'll make money either way. They'll make money on fees. And that's one thing you have to remember. And you have to remember what the incentives are.

Obviously, we invest to grow our wealth to make sure that our purchasing power not only stays the same but increases over time. But at the end of the day, you're listening to this, it's your money. You're the one that wants, you have the best interests at heart for your own money, and keep that in mind like other people

most of the time they just they're looking after their own interests and that's why we try on the podcast to give it as much as you know, we try to give it a nuance because sometimes I think that's the issue is people will see a lot of information out there and there's a lot of crap to lack like a better words because those incentives are are not well aligned so whether it's you know sell side analysts or you see some youtubers that are being compensated to shell a product you'll see that kind of stuff a whole lot so you just have to remember where people's incentives are coming from. Yep well said it's good good time to wrap that up. Yeah good time to stop my rant.

In this kind of market, I like having some cash on the sidelines. It gives me the flexibility to jump on opportunities when the right stock goes on sale. But just because the cash is waiting, it doesn't mean it shouldn't be working for me. That's why I use EQ Bank. They offer some of the best interest rate among Canadian banks, so my money's still earning while I wait. You can even get a boosted rate by setting up direct deposit for your payroll and depositing $2,000 or more per month into your EQBank account. Your cash stays liquid and ready to go when it's time to invest.

And if you're not in a rush to access your funds, EQBank's Notas Savings Accounts and GICs are great ways to grow your returns even more. It's a smarter way to park your cash. Visit EQBank.ca to learn more and keep your money earning even while you wait. As an investor, I'm always looking to reduce my fees, which is why I'm excited that Questrade now offers zero dollar commissions on stocks and ETFs. But Questrade isn't just about commission free trading.

You can also get USD accounts, so I avoid forced currency conversion fees when trading US stocks. Plus, get access to their advanced edge trading platform available on desktop, web, and mobile. I've been using Questrade for many years and so has Simon. And their platform makes trading seamless, whether you're managing a long-term portfolio or making active trades. Don't miss out. Start trading commission-free stocks and ETFs today.

Visit questrade.com to learn more. Between meetings in Toronto and conferences in Vancouver, I'm not home as much as I'd like. So I've been thinking while I'm off enjoying someone else's Airbnb, why have I not put my own place up on Airbnb to earn a little extra income and help me pay for the trip. With Airbnb's local co-host network I can find someone to handle everything.

Bookings, guest support, even the cleaning. It's a simple way to make extra money while I'm traveling without the hassle of hosting it all myself. If your place often sits empty while you travel it might be time to let it work for you. Find a co-host at airbnb.ca forward slash host. So let's do the semi deep dive for all of those who stayed with us all until this point. They're like, okay, what's this company that you guys are talking about?

So the company that we'll be talking about and Dan feel free to chime in because we've been talking a little bit about that one is Secure Waste Infrastructure Corporation, ticker SES.TO. This one, I mean, I kind of found out about it just by using a screener. So I went on FinChat and I used a market cap between 500 million and five billion Canadian listed.

5% revenue growth over the last three years, free cash flow positive, positive on, well, is profitable was another thing that I put in the screen. I think I added a few more things, but those were the biggest one here. And whenever you use a screener, I think it's important that if you use a screener,

sometimes what you'll see is like, you'll end up like hundreds of names, depending on what your criteria is. So one thing that I'll tend to do is like I said, 5% revenue growth here, maybe I'll increase that to 10%. So I'll kind of increase the parameters to make sure that I narrow it more and then I have maybe 10, 15 names to look at

because I don't have time to look at 150 names. Of course, 10, 15 names to look at is maybe like, I'll look at it for five minutes, five, 10 minutes each name, I'll look at the numbers and then I'll decide whether I want to do a deeper dive on that actual name. So that's the way I try to be as time efficient as possible.

Yeah, I mean, if you're running a screen and it comes up with 100 companies, you probably got to narrow down the screen. But I mean, screen is a great, especially once you get it to, you know, a handpicked element there. I mean, you're talking about saving a lot of hours in terms of overall research. Yeah. Yeah. And just tweaking those. I think that's the most important thing. Yeah. So I'll refer to them as SES just because that's their ticker. So SES provides infrastructure solution for industrial customers. So they operate primarily in Western Canada, but also have operation in North Dakota. So really, their operations is Saskatchewan, Alberta, BC, and then a little bit North Dakota. They have two main operating segments, so waste management services, which is responsible for about 80% of their revenue.

So things like wastewater disposal facilities, industrial landfills, waste transfer station, metal recycling facilities. So those are the type of services they offer. They also have energy infrastructure services so crude oil gathering pipelines, terminal and storage facilities would be example of that but again primarily waste management is their their primary line of business. The company was founded in 2007. It is in quarter in your wonderful city of Calgary, Alberta or Calgary as I like to say sometimes. What do you say Calgary or Calgary?

Calgary. Calgary, okay. Nobody says like that. I've never well, I don't know. I've never heard too many people that say Calgary. I do it for fun, but yeah. And employees, there's approximately 1,800 employees. The CEO is Alan Peter Grange. There is some competition Industrial waste management segment. I mean they reference some of the well-known companies like GFL and Also like waste connection but for industrial waste disposal, I guess that it's the main

Those are some of the competition but they're also competing with companies doing their own disposal versus outsourcing so that is one of the competition that they have to deal with. For growth they mentioned that their landfills have significant expansion capacity for growing volumes and on top of that they are the market share leader in the markets they operate so especially industrial right people? People may say, and Dan, you might say like, well, what about a waste connection, waste management, waste management, waste connection? I believe they do industrial, but they do a whole lot of they don't do just industrial, right? Yeah, they're this one is more of like a industrial slash like energy

option. I think like I, I don't know the company too, too much. I looked into it. It would have been a few years ago now and I always kind of preferred waste connections, but yeah, like I don't think secure doesn't do too much like say, I guess you could say like residential waste disposal or anything, which is, I think there is a bit more money in that side of things rather than the energy,

just kind of highlighted by the margins. But yeah, this is, I don't think you can lump those companies together. They operate in the same area, but they're very different, I think, in overall makeup. Yeah, exactly. So it is, obviously, there will be some competition from them, but they're definitely focused on the industrial side. For joint TCI subscribers here I'm just kind of showing the key company statistics while I keep doing there. So on the recycling side the industry is becoming more competitive with new steel mills coming online that rely on scrap metal although they believe there is going to be an increase in demand for recycled steel in North America. They also made a recent acquisition that will help grow that segment. On the energy infrastructure side, competition is more based on location.

Competitors are some of the well-known pipeline companies like Pambina, for the Brookfield Infrastructure partner through their inter-pipeline acquisition, and of course some other players in that industry. That part of the business is supported by long-term contract that provides stable fee-based cash flows and organic growth is projected to drive higher volumes in the future. In terms of numbers, the market cap is around $3.3 billion Canadian, has an enterprise value of $4.1 billion. Enterprise value is basically you take the market cap and you just add in the debt, the net debt of the company. If you see an EV that's actually lower, that means they have cash on the balance sheet

and they have a net cash position. The price to earning trailing 12 months is about 19 and the price to free cash flow is 8. I'm just using the trailing 12 month just again yes you want to project into the future but some will argue that Ford metrics are better the next 12 months. It's just my issue with those it's always very hard to project so what I'll do is I will kind of look at both and just you know maybe sometimes just take in the middle or it's just very hard Sometimes to make projections. That's why you have to take those with a grain of salt in my opinion in terms of revenues It looks pretty good for this business. So I'm going to share this with joint TCI subscribers here

So in terms of the revenues, it's really jumped a whole lot. They made some acquisition in recent years. So in terms of the revenues it's really jumped a whole lot. They made some acquisition in recent years. It went from having about 3 billion in revenue a bit more to now in the last couple years they're above 10 billion in revenue. So it's really really grown quite quickly. Recently revenues have increased 29% on a compound annual growth rate over the last three years. So just to illustrate this. And as you said, the margins are not the best, I would say.

So they're very small margins. We were talking, I thought it was kind of standard for the industry. And then you said, oh, well waste connection is has some margins that are looking you know a bit better than that so I looked at it and for a company like SCS so you have these margins that are about you have gross margins about in the 4% range roughly it'll vary between 3 and 6% in the last five years or so and the operating margins those will vary between like 2 6% in the last five years or so. And the operating margins, those will vary between like two and four and a half percent.

But you're comparing with margins for a company like Waste Connection. I'm just looking at them now that are more in the kind of mid-teen type or low teens, at least in terms of the operating margin. So yeah, so that's what you're looking at. And for the gross profit margins for waste connection, you're looking at like in the forties.

So it's quite a stark different, but I would assume that again, it's because they're probably more focused on the industrial side. I would imagine so yeah, it's just a complete different makeup of the business. And I mean, that's kind of why I looked at it and didn't really look that much further because I mean, the two and a half percent operating margins

that's pretty razor thin. I would be curious because, you know, waste connections, companies like Waste Connections and Waste Management are very, you know, they're well known to make a lot of acquisitions. And I would imagine if this is somewhat They're well known to make a lot of acquisitions and I would imagine if this is somewhat of a target overall. I mean, it's definitely within a reasonable size for a company. I don't think Waste Connections typically goes out and spends billions of dollars on them, but it'll be interesting to see if they would become an acquisition target or if maybe Waste Connections isn't really interested in expanding this side of the business just

because of those, you know, the profitability is pretty thin overall. And I would imagine pretty cyclical as well. Much more cyclical than say a residential, you know, waste disposal, things like that. Yeah, yeah, I know. I think you could definitely argue that. And even if you look at GFL, so they're looking at gross margins around 19% like anywhere between 12 and 19% and then operating margins anywhere between 2 and 6%. So I guess GFL is kind of in between. Something to keep in mind, maybe the fact that they have low margins and they're really more making money on volume in terms of obviously the revenues. Maybe it's also a kind of disincentive

for competition in more of that industrial space where there's just lower margins. Yeah. That's just what it is. So they might not be interested in expanding in that area. Yeah. And keep in mind, regional, residential, like you're getting contracts a lot with municipalities, right? So that's how they, and having worked for municipalities in the past are not necessarily the most efficient in their operations.

So I can see why it can be quite profitable for companies like that. So that could be the difference where they're catering to industrial, right? So businesses may, yeah, when you own a business, you're a bit more intense on your costs versus the municipality. So food for thought, I'm not quite sure, but that's something just to keep in mind there. Yeah. And the one thing is on the industrial side of things, as I had mentioned, it'll be a lot more cyclical than like a residential waste disposal, which is, I mean mean that's a business that operates no matter what

the environment which is why those you know those major waste connection companies are or sorry waste management companies are so so reliable. No exactly and the company here is very profitable so they generated 200 million in net income over the last 12 months. I'm showing here the net income but also the free cash flow that they've generated. So they generate like free cash flow to a decent tune to be honest. Like their free cash flow is actually more consistent than the the earnings side which is not necessarily surprising because earnings can be a bit lumpier. They've been consistently profitable over the last four years after several years even

pre-pandemic of not being profitable on a net income basis. Although, if you're looking at the free cash flow, they've pretty much always been free cash flow profitable. There's only one year which was in 2017 where they were not. So I'm not quite sure why they weren't. But on a free cash flow with the money coming in and out of the business and that's a metric I do like to look at for most businesses and makes a whole lot of sense here. They generated 435 million in freecast over the last 12 months. They've been

increasing the freecast over the last 10 years like I mentioned and freecast Flow per share has been growing at a compound annual growth rate of 33% over the last 10 years and at a CAGR of 122% since 2021. Very impressive. Free Cash Flow per share here. It's a metric that I do really like just because it takes into account share dilution or share buyback. So as you can see like typically businesses that increase free cash flow per share over long periods of time tend to perform quite well and yeah they are in that category at least like they've increased it quite a clip. I find that pretty impressive. What's your thoughts on the free cash flow per share? Well yeah I was looking at the like the shares outstanding and they they jumped they doubled in 2021. So I would imagine that was an acquisition. Yeah, I believe so and I think if I remember correctly it was an acquisition which they had

to divest part of it because of competition. Oh yeah. Yeah, so I mean they went- Not the whole thing. Yeah. But since then like they bought back, I mean they're not back to pre-acquisition but they went from 308 million shares outstanding in July of 2021 down to 230 today. So they're buying back a ton of shares which ultimately will fuel that as well. And yeah, if you look at the cashflow statement, I mean the company had net income of 38 million and they had depreciation of 45 million. So that's, that's all going to get added back to get to that free cash flow number. And yeah, they're very profitable doing quite well. I mean,

I don't know what that acquisition was, what about like, it looks like it's, it's paying off because they've seen some huge growth from 2021 and on. Yeah, exactly. I mean, their total returns over the last five years is 769%. So it's been like a massive winner on the TSX. Again, like I said, I'm sure some people already are familiar with the name, but very impressive as the more I was digging into it, the more impressed I was. Again, keeping in mind that those margins are very low but still when you have low margins, it makes it less attractive to our competition to get in that same business line. So it's kind of good or bad but there's a reason why there's not that many companies going after Walmart and Amazon because there are just very very razor thin margins.

On the balance sheet side of things, they only have 20 million in cash on the balance sheet and about 700 million in debt. They have a net debt to EBITDA ratio of 6, which means that it would take them six years worth of EBITDA to pay off the debt. Although it does seem high when you look at their net debt versus free cash flow, it is below 2. So it is definitely manageable. I mean their interest coverage compared to they have a 9 times interest coverage ratio using EBITDA. So that's very good. So that means that it covers their interest expense by more than nine times. In terms of debt, part of the debt is variable while part of it is at fixed rate of around 6.75%, which is actually nice to see that it's relatively high because you can tell that the company does well despite that. And I wouldn't be surprised if they kind of continue paying down the debt. I think it was higher than it is currently.

And like you said, the share count is definitely something that's pretty attractive, buying back a decent amount of shares. The return on invested capital is 8.4% over the last five years, which is decent for an industrial company. Obviously, if you're comparing that with a tech company, it probably is not very comparable. But for industrial company, I was kind of looking and that would be considered pretty good for industrial company. Did you want to add something there? Well, the only thing I guess I would say is on the interest coverage ratio standpoint to

just compare it to something like a waste connections they're pretty much double. So I would imagine they need to maintain more flexibility there and I would go back to the residential side of things it's probably a lot more consistent whereas something like this would be a bit more cyclical so they probably need a you know a bit larger of a coverage range. Yeah and when your margins are lowered too, you have less of a buffer. So yeah, I think it is good that I'll definitely agree with you there.

It's good. They do pay a dividend like we referenced. So it is something for some of the dividend investors. I'm trying to get the right slide here. So yeah, they do pay a dividend which has increased quite a bit in recent years. So the dividend as a five-year growth of 8.2%, it is a bit misleading because they did cut the dividend significantly during the pandemic. Prior to the cut, it was paying about $0.27 per share. And then they cut it to just a couple cents per share and then late 2022 they increased

it back to 40 cents a share so higher than that. The payout ratio is actually quite good. So I like personally, I don't know which one you prefer if you look at both but usually the one I like to look at is the free cash flow payout ratio. And that one has been pretty much between like, you know, 12 and 50% over the last six, seven years. So very manageable. You can see that it was probably just a prudent thing to cut the dividend during the pandemic. They probably could have kept paying it just based on this. But again, I think it was just a smart decision to probably err on the side of caution. Maybe BC could learn a thing or two from that, but I guess better never, better

too late than never. But yeah, the dividend looks very sustainable in terms of other things. I mean, that's kind of my general sense. So I wanted to, yeah, to just give an overview. It's not a deep dive per se the last thing I didn't say is the dividend current yields about 2.9% so it's not a deep dive like I said it is a company that piqued my interest I'll probably dig a bit more into it just because I did this research took me about three three four hours so it's not a deep dive by any means but but lots to like even though some people might say, hey, are all the returns already done? Like it's grown so much over the last five years,

which is a valid point, but the business seems to be in solid shape right now. Yeah. I mean, they're not necessarily a big dividend grower, I guess, actually not really at all. You can tell they've prioritized share buybacks like pretty heavily, which I mean, if you think about it, they bought back a ton of shares over 2023 and 2024. And I mean, they're sitting on some pretty healthy returns on those buybacks because back in 2023, it was only six bucks a share and now it's sitting at sitting at 15 so I mean the buybacks have definitely been a better return of capital than you know the dividends so just goes to goes to show you don't

always need a growing dividend but yeah it's been it's been a strong performer yeah exactly so not not the most well-known company and I hope people enjoyed this. Like I said, it was about 15-20 minutes overview just to give a sense of what they do. Some of the numbers looks pretty good. It's a Canadian name. Of course, it's tied a bit to the oil industry, but it's more like a company that services the oil industry. So there's probably some cyclicality there as well.

But, you know, there's a lot to like about that business. Obviously I'm not saying to go out and buy. This is not investment advice. Keep that in mind. It was just a medium dive. It's not a deep dive, but hopefully people enjoy that. And if you'd like us to do more of these types of segments Let us know because dan with stock trades.ca. I know you follow tons of companies as well

So you could probably get a few names that are not as as well known that i'm sure would be interested to our listeners Yeah, this is pretty much what I do all day every day. So if people want more segments, i'm happy to do them. So all day every day so if people want more segments I'm happy to do them so yeah maybe we can try to do those like maybe once a month or call every couple weeks do one of those I do like sometimes just finding companies that I haven't really heard of and just start digging into them I've done that over the years I haven't really started that many position but I have found some interesting companies that just Just starting off with a screener basically. Yeah

I mean they like screeners are the best way to kind of shortlist yourself and you'll end up finding a lot of stocks that You know, not a lot of people pay attention to but a lot of people tend to focus on, you know the big names the the Amazons the Nvidia's things like that, but on you know the big names the the amazons the nvideas things like that but uh yeah and keep in mind a company like this like just the sheer size right so it's 3.3 billion canadian market cap so let's just say 2.5 billion u.s roughly if you were to convert that just to give people just an idea i mean you're really thinking like in terms of the funds that can buy these type of businesses. It's very limited Yeah, it would almost have to be like a small cap focus or kind of mid like it's kind of almost at the Intersection of small cap. I guess it would still be small cap right now. I've billion. Yes

Yeah, I mean cats a small mid cap, but you'll probably just see it in funds That's specialize in kind of yeah small to mid cap. But you'll probably just see it in funds that specialize in kind of, yeah, small to mid cap. So you won't see it a whole lot in terms of funds having this type of company. So it can give you a bit of an advantage when you're a retail investor to invest in these smaller businesses. I'm not saying this one specifically,

but businesses that are below like five, 10 billion in market cap, they'll usually like fly under the radar quite a bit. Yeah, there's pretty much all of the top holding like the top fund holders of secure are small cap Canadian mutual funds, effectively, there you go from what I'm seeing. So yeah, so anyways, so that's, that's the overview. Anything else to add before we, we wrap up for this episode? Nope, that's it.

Okay, well, I think it was a great one. I think people will enjoy this episode. We appreciate all the support that we get, all the feedback, good and bad, as long as it's constructive. Definitely appreciate the feedback. If you haven't done so, if you want to give us a review, it helps us people to find us. And like I said at the beginning of the episode, if you do not subscribe to Join TCI and would like to see us a little bit on video, we will start adding some YouTube clips and some shorts as well.

So you'll have some some additional content as well on YouTube. So make sure you look at the show notes for our new YouTube channel. And on that note, The Canadian Investor podcast should not be construed as investment or financial advice. The hosts and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.