The Canadian Investor - Huge Rebound from an Airline Business & Interest Rate Hikes - Earnings Roundup

Episode Date: June 2, 2022

In this release of the Canadian Investor Podcast, we cover earnings and news from financial markets. Tickers of stocks discussed: WSP.TO, COST, ADSK, TWTR, CRM, TD, RY, CAE, BABA Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

Welcome back into the show. This is the Canadian Investor Podcast, made possible by our friends and show sponsor, EQ Bank, which helps Canadians make bank with high interest and no fees on everyday banking. We also love their savings and investment products like GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs, which offer some of the best rates on the market. I personally, and I know Simone as well, is using the GICs on a regular basis to set money aside for personal income taxes in April of every year. Their GICs are perfect because the interest rate is guaranteed, and I know I won't be able to touch that money until I need it for tax time. Whether you're looking to set some money aside for a rainy day or a big purchase is

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Today is June 1st, 2022.

My name is Brayden Dennis, always joined by the great Simon Belanger. I can't believe it's already June. That is wild. Simon, I just put on so many kilometers. I was visiting the wonderful folks in Alberta, Canada. I was all over the place and the Rocky Mountains are looking as good as ever. And it was a wonderful time, but I'm going to be back and recording the podcast here with you today, buddy. Yeah, glad to have you back. I've been to Alberta before, especially calgary and the area

surrounding canmore and bamf so i know it's uh it's really nice out there it is pretty and uh if you ever get a chance to do the drive from jasper to bamf or vice versa in that direction the ice fields parkway is uh one of the most beautiful drives in the world so uh it was it was wonderful um it is june 1st which means that our portfolio updates on the patreon were posted as of this morning so go ahead and check that out uh that is join tci.com to see myself and simone's personal portfolio updates we have been active dude. We have been really taking advantage of this drawdown. Of course, with every market drawdown, it can always get worse. But you and I both have the philosophy of this is the time to be adding more aggressively. Like,

I look for every dollar I can find in every couch cushion when markets are unfavorable because in the long term, it's a good time to buy businesses. All right. You get a shout out as well for joining. So let's do it here. We got Joe Nell, Steven, Sean Bodley, Tyson Jasper, Johnny Tran, Kyle, Justin Carter, Rachel Montgomery, Brittany Jewel, Fong, and Ng. We appreciate you guys very much. And there are more on this list. So if you subscribe recently, we'll get you on there. Don't worry. I'll kick it off here with a Canadian name. We'll go back and forth here. You got Costco coming up. We got some news on the Bank of Canada just raised rates, so more tightening coming, and you'll round out with some bank earnings later. So good mix of US and Canadian names today, but

I just want to talk about WSP, ticker WSP. It's only listed on the TSX. Another gigantic acquisition for this engineering firm. they just recently carved out woods environmental and infrastructure business for 1.81 billion this adds 830 million in revs they paid 14.6 times ebita so i think a fair price the market seems to think so as well with the stock being up eight percent today um so sim, they bought Golder last year, and I've been talking about that quite a bit. And Wood is another huge engineering firm, and their environmental division is obviously quite large. WSP is a powerhouse in this environmental services, environmental engineering segment now. And I do have an environmental engineering degree, as you know.

These two gigantic firms they acquired, literally everyone I went to school with now works at WSP by the time this deal closes. They will have 20,000 employees in the environmental and infrastructure services segment, makes up about one third of their revenue. And so yeah, that news just came off the press this morning. Huge acquisition, again, another almost $2 billion deal. So they're rolling up large firms, small firms, medium firms. And you know how I feel about rolling up services.

When they say they're synergies, I actually believe it. Whereas a lot of businesses that roll up and say they have synergies, I'm more hesitant to believe it than not. But with professional services, it actually works really well. Yeah, yeah. I think some companies are just also better than others at rolling up companies whether it's services or you know goods and services and i think you know i you know this one better than i do but it sounds like they've done a really good job at integrating them in the past yeah this has just been a really undercovered compounder. And so if you're a Canadian, it's on the TSX and it's only on the TSX. There's a couple of gems out there in this scenario, and I believe that this is one of them.

Yeah. Now we'll go on to Costco earnings. Like you mentioned, I was really interesting about this one because like we talked about recently, retailers and how there may be some value to uncover there. We didn't know how Costco would fare because it's been a pretty tough earning season for big box retailers. I'm thinking Walmart and Target specifically. But there are other ones that are facing some headwinds here. Net sales increased 16.3% to $51.6 billion.

Total revenue was up 14% to $51.6 billion. Total revenue was up 14% to $52.6 billion. Keep in mind here, total revenue includes membership fees. U.S. and Canada saw sales up 16.6% and 15.2% respectively. Other international was up 5.7%. and just a note here US and Canada are their two biggest countries per location so that's why they do single those out. E-commerce sales were up 7.4% which is really solid considering they had a lot of pull forward growth like any other retailer. like any other retailer. Membership fees increased 9.2% to $984 million. This is great to see, especially it just tells you that they are able to get more of those fees and they have not increased their fees just yet. And I'll talk about that a bit later here. Net income was up 11%. bit later here. Net income was up 11%. Gross margins were down a bit more than 100 basis point to 11.9%. Obviously not great, but kind of in line with some of the other retailers here.

Costco opened one new location during the quarter and relocated two other locations. If all goes as planned, they should have 27 new stores for the year, which would include three relocations. Overall, I think it was a pretty, I mean, I think it was an okay quarter for Costco. It was clearly better than Walmart and Target, for example. The two main takeaways for me is that margins have contracted pretty significantly. This is obviously not great, but something we saw with the other retailers so not overly surprising the second takeaway is that people seem to be turning to Costco to try and get more for their money that's not surprising either because people are feeling

inflation and it was clear with their total sales being up mid-double digits and membership fees being up almost 10% that this seems where people in general are going to get more for their money. Now, I'm sure the question on your mind, and we've talked about this before, is Costco typically increases its fees every five to six years. And we did mention that when we talked about pricing power, I think a couple of months ago when we did a segment on that. And their management is well aware. And on the conference call, they tackled the fee increase questions pretty quickly. So I'll be quoting here what they said. I want to take just a minute and address the question that we've been getting a lot recently regarding the timing of potential membership fee

increases. Historically, we've raised fees every five to six years with the last three increases coming on average at about five and a half year time frame and our last increase coming in June of 2017. As we approach the five and a half year mark, there will be more discussion with the executive team, obviously on that subject. So clearly it is top of mind for them. They've been getting the questions. It is something they're examining. We talked about it before. I have looked at the renewal rate the year after increases and it barely buds for costco so it is definitely a lever that they will be able to pull this year well i'm assuming they will pull it this year i think they will pull it this year and the fact

that they even said you know there's going to be more discussions i've noticed from the calls they're pretty black and white on what they won't do what cost cost goes but that's kind of like their culture it's like we will not increase the price of the the hot dog like as just an example like the cherry pick one um so yeah i think that this is going to be coming um sooner rather than later in the next couple of quarters. And I mean, it's just a lever that they can keep pulling. I mean, the membership fees being like that segment being up almost 10%. Like, think about how good that is without even flexing that pricing power that they're able to do. And so, I mean, it's an expensive stock for a reason, best in class type of retailer.

And, you know, no quarterly report really, especially on the top line, should ever really come as a surprise for Costco because they released it every single month. So if you're not familiar with that, then you can go on Costco's investor relations website and they post their sales by geography every single month, not just every quarter. And so there really shouldn't be that many surprises from investors. Yeah, yeah, I totally agree. All right. Let's talk about Autodesk, ticker ADSK. They just released their 2023 Q1. So again, a bit of a weird fiscal schedule. For those who are not familiar with Autodesk, they are the CAD computer-aided design software, their main flagship products being AutoCAD and Revit. So if you are an architect or in engineering,

you are well familiar with their products. So total revenue for the quarter was up 18%. Again, they're so consistently in that high double digits, you know, mid 20s range. So this is in that range. Free cash flow is $442 million for the quarter. So quite a bit of cash gushing out um i do believe they have that uh two billion in free cash flow a year target for 2023 that that's the target that they set out like in if i recall andrew the ceo put that out in like 2018 um don't quote me on that but that's the number that's the the the free cash flow North Star they've been guiding at for their five-year target to 2023. And if you do some quick math, they are really close,

given $442 million in free cash flow. So that's up 33.5% year over year. Total billings was up 16%. Again, that's a very important number. It's very similar to their total top line. Again, that's a very important number. It's very similar to their total top line. Okay, so by segment, this is where things get interesting, right? That AEC, that core market, that architecture, engineering, construction segment, that was up 17%. AutoCAD, they specifically call out AutoCAD because it's such a big product for them, up 21%.

Manufacturing, 14%. And media, 24%. There's another category called other, but it's very small. I do want to see that manufacturing segment really come alive. I mean, I think there's so much opportunity there in 3D modeling. And I want to see it a little bit higher than 14%, personally, especially on, you know, what the opportunity is. I think it's probably one of the biggest opportunities out there, but look at the AutoCAD segment, dude. Like it's amazing. Is this the most sticky software dare I say in history? And I mean that like it's hall of fame numbers, durability here, like AutoCAD and Microsoft excel put them in the uh the hall of fame of sticky software autocad came out in 1982 and they're still growing sales in the segment at 21

year over year uh really impressive um now i i pulled up a chart here from Stratosphere, which shows stock-based compensation year-over-year and net share repurchases. So a lot of these tech companies, they get a lot of bad rep lately for stock-based compensation, and Autodesk does a lot of stock-based compensation. But what we wanted to highlight here is that they actually net repurchase a lot more shares than they issue. So shares outstanding does trickle down year over year, which is very rare for these types of companies. And so again, many years, it's kind of net net share repurchases and stock based compensation. But as of late, when their stock is trading down, you can see on this visual here, Simone, the buyback machine has really been ramping up, especially last year and in the last trailing 12 months. My final comment here with Autodesk, and full disclosure, I do own shares. You can see my

portfolio at jointtci.com. My final comment here is to the Autodesk management team. It is not too late to go back to your old logo. Okay, like, you can just come out and say, Hey, okay, our new lore, our new logo, it's boring. This new logo sucks. The old one was great um and that i personally braden am available for consulting deals on branding uh so feel free to hit me up now that's my only uh last comment here on autodesk yeah yeah i just had a look i mean it's it's all right it's nothing great it's boring yeah i like the old one it had a nice little gradient uh it was modern it wasn't like it wasn't like an update for me at least they didn't mess up the name i find sometimes they'll redo logos and they mess up the name like they'll change the name the whole branding at the same time the name as well doesn't

make sense at least okay we did half of that yeah only only yeah only 50% of that. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly.

Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the App Store and join the community today.

I'm on there. I encourage you go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Bl social in the app store,

and I'll see you there. Well, now some news again, some Twitter news, because the saga continues. There was a proposed class action lawsuit against Elon Musk and Twitter that was filed last week by Twitter shareholders. The lawsuit alleges that Musk violated corporate laws in several ways, which is not surprising, I'll be very honest. They allege that he benefited from not disclosing in the required time frame by the SEC that he amassed more than 5% stake in Twitter, that he benefited from not immediately mentioning the plans to come board member in April, that he purchased shares based on private discussion with Twitter executives, which they allege would qualify as insider information. And the last thing they allege is that he's trying to place doubt on

the acquisition by saying there are more bots than Twitter had estimated in order to try and negotiate a better acquisition prize. This last one here, it's something I had texted you about. I don't know if you remember. I'm like, a couple of weeks ago, I said, oh, I feel like Musk might be trying to play an angle to get a better deal on Twitter here. Yeah, I agree. There's this whole bot thing and like, he won't shut up about it.

There's that first thing that comes to mind is that he's trying to just completely back out of it. That's what, or get a better price. I think just completely back out personally. Like, I mean, I don't know.

It's just so, there are some things that he has done that definitely don't make a lot of sense and could this this class action lawsuit I mean they could definitely make a really good case that some things were done quite illegally um the thing is is like the way he carries himself now, and this is not a detractor from anything he's done. Okay. He's, you know, I do believe he is a net, net positive for humanity. Even, you know, his wealth is just ridiculous. But the things he's working on are really important.

He's carrying himself in this, like, I don't give a shit attitude constantly now. And it's really kind of getting a bit too much, I think. And I do actually think that he's trying to back out of the deal because the financing is a lot different when Tesla trades, you know, 50% lower in a couple months. Yeah, yeah. I mean, I actually would disagree with you. I don't think he's trying to back out of the deal. I think he was trying to get an angle to get it at a better price personally, because I think it's part of when Musk,

one thing that seems to be clear is when he has a vision for something, he does not back down. And I think he does have a vision for Twitter to being more open source uh whether you know he's the right person to accomplish that that's a complete other discussion and obviously he could decide on a whim to completely change things but it sounds like he has a really a desire to make twitter a more open platform. And he's really focused on that.

Whether, like I said, whether it goes through or not, I'm not sure. But it feels like a passion project for him. And that's why I think it'll still go through. In terms of the lawsuit, it'll be interesting whether that goes actually forward into courts. Yeah, yeah. It's not the last time we'll cover this story i think over the next couple months and uh so you're taking the angle he wants a lower price i think he wants out entirely but again this is my like uneducated guess on the whole thing i haven't been following very very

closely uh quick message here quick uh quick update meta platforms inc aka facebook will officially change their ticker on june 9th so in a week and a half you will uh be searching up meta m-e-t-a to find their public security very interesting all right we got a uh something hot off the press press here from the fed the bank of canada what was the news here yeah so the boc announced that they were raising their benchmark interest rate by another 50 basis points so now that will bring it to 1.5 percent they mention in their statement that the global economy continues to face headwinds due to obviously supply chain constraints, the war in Ukraine and Chinese lockdown that we've seen in the past

couple months. They also mentioned that housing activity is moderating. And it also sounds, of course, to no surprise that they are trying to get a handle on inflation and also that inflation is much higher than they had anticipated so they're really trying to get a handle on that so i think we should expect some more increases this year most likely 50 basis point that's what i've been seeing is people are banking it on at least a couple other increases of 50 basis point this year. Tightening, tightening, tightening. This is what we are coming to expect here. I mean, oh God, it's such a tough situation, these people.

This is not a job I want. Is there a salary you could possibly pay me to have to do this job? Probably not. I would not want to do it either because, yeah, like, Kent was Paul Volcker, right? That did it in the States in the 1980s, 70s, and 80s to get lit on inflation. And I remember reading that, you know, he was steadfast at getting inflation down, but he was not, he's not stupid. He was like, he did realize that it was putting people in very difficult situation. And he caused a recession essentially by doing so. But in his

view, the high inflation was worse than, you know slowing down the economy and i think governors of central banks obviously bank of canada included are really faced with a hard choice here because at some point you know if they're really steadfast on getting inflation down you almost have to keep raising interest rates until it does go down and And when you do that, the adverse effect is that, you know, variable interest on credit cards, on unsecured loans, on things like, you know, a line of credit, these things go up and people who have a lot of debt gets really severely impacted and businesses tend to invest less, hire less, and then you have this kind of cycle that starts happening. Yeah, you have this dynamic of short-term credit cycles,

long-term credit cycles. And the way I view it, right, is it's like a series of short-term thinking leads to really hard decisions having to be made eventually. Eventually, the tide comes in. Eventually, the tide comes in and you see who's wearing pants. Whatever has been going on, no one's been wearing any pants. All right.

Salesforce, ticker CRM, their stock jumped this morning more than 10% on their quarterly report that they reported last evening at the close. Revenue was up 24%, $3.6 billion in operating cash flow, which was up 14%. The main segments for the business all did quite well on this report and guidance lifted on almost all of them. So things are good. Core sales, you know, the sales platform revenues up 18%, service up 17%, platform and other was up 55%. This includes Slack. So this is actually quite a bright spot.

344 million of Slack subscriptions for the quarter. So that's pretty solid. Given what the purchase price is, it seems quite low. But again, this is sticky enterprise software. For those who are not familiar with Slack, it's like a messaging communication platform for work teams. It's similar to Microsoft Teams, if you use that. I use it for the Stratosphere team team this is how we communicate day to day if you are running a business and still using email to communicate internally to each other do yourself a favor download slack it's free and you know what

i can actually simone we talked about this and we know who, I know who I'm thinking of. You probably are going to know who you're thinking of. I know. Yeah. Someone we work with. Let's just say that. Someone we work with. Yeah. It is obvious to me when I communicate with a bit, this is, this is not like some advertisement

for Slack, although it sounds like it right now. You could use Microsoft Teams, whatever. Teams is good too. Internal communication tool. Okay. It is very obvious to me when a business doesn't use an internal communication tool, because emailing back and forth is just not a good way to go. If you want to email externally, sure, go ahead. But internal communication seems ridiculous. The marketing segment was up 22% and data was up 15%. Now for Salesforce, like the business, the stock, I don't know it well enough to have any particularly hot takes here. It looks

like the quarter was solid. What I do know is that they're turning a lot into like a grow by acquisition strategy. Now the software is extremely sticky for the most part, but there have, there's been so much new competition. This is like CRM software all over the place and specialty CRM software. This is what I think is like a potentially big risk for the business. Again, if you're a shareholder, you probably know more than me. But if you don't run a home renovation business, for instance, there are CRMs specifically for your use case.

And every single vertical, like I just mentioned, like if you're home renos, whether you're a plumber, you're a software company, whatever it is, there are specific CRM platforms being built all over the place to address those specific needs. And so CRM, you know, CRM stock, that's the ticker, Salesforce is still the name in town for a sales CRM. And they're making good strides and enterprise solutions to tackle Microsoft. But they got a long way to go. For me, the problem is the stock-based compensation. The share count has essentially doubled over the past 10 years. Now, if you look at EBITDA per share, revenue per share, it has well outpaced that

dilution. So that's great. You need that. But I just look at companies that have done similar growth stories without all of the SBC. And that's just really hard for me to get around. And that's been the story for me for five plus years every time I look at it. Yeah. And the last thing I wanted to mention here, I know you mentioned the term CRM a lot for those who are not familiar with it is just customer relation, relationship management. So it's just, yeah, exactly. So if some of you may not be necessarily in that kind of office environment, that's just what it means. Yeah, yeah. And like, how do I what's the easiest way to explain that? Like, for instance, if you had if you had like a huge spreadsheet of all your customers, but you wanted something smarter, like if you if you message them, like it documents that and like, you know, there's like follow up sequences, you can pitch them on. Like if they don't respond, then send them this email. If they do respond, do this, right? It's like basically a tool for your sales team to manage hundreds,

if not thousands of customers and stay on top of that list. Because if you're just doing that in a spreadsheet, it gets completely unwieldy. All right. Where are we here? Yeah. Okay. Banks. Yeah. Two biggest Canadian banks in reverse order. So the first one is TD Bank. They had their earnings. Obviously, most of the banks reported last week. We won't do all of them.

I decided to do TD and Royal Bank, the two largest. Revenues were up 10% to $11.3 billion for TD. They went from negative to positive in credit loss recovery. Net income was up 3% to $3.8 billion. Net income for their Canadian retail business was $2.24 billion. It still represents the majority of their profits. I wanted to highlight that. Even though TD is pretty well diversified with their US operation, it's still primarily Canada that drives those profits. Net interest margins was up one basis point for the Canadian retail business. This will be really interesting metric to keep an eye on for just banks in general. Typically, you'll see interest the banks pay raise at a slower pace than what they are lending out, which should increase their net interest margin

in a rising rate environment. So these increases we're seeing from the Bank of Canada should be a tailwind for these big banks. Net income was $1.4 billion for their U.S. retail operation, up 3% year over year. Earning per share was up 4% to $2.07. Return on equity was down 30 basis point to 16.4%. And deposits were up 5.8% to $1.18 billion. They kept their dividend unchanged to $0.89 per share every quarter. The deposits kind of surprised me that people are saving even more despite probably not getting much return even with rising interest rates. So that one actually surprised me a bit, but good news for TD there.

surprised me a bit, but good news for TD there. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com.

Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me,

search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Bloss in the app store, and I'll see you there. Yeah, I mean, you look at what the banks have accomplished over the past 10 years in that in the environment. And I thought, like, I gotta be honest, I thought over the past two years, I gotta be honest I thought over the past two years how on earth are these these companies that are like so entrenched into the way they work gonna pivot to like the new way of work and you know profits at all-time highs seems things seem to be working and I know they're getting their people back in the office because they're saying like that's where we work best and

I'm not surprised by that at all that they're forcing everyone to come back if i was the ceo of rbc i'd probably do the same thing um but yeah i mean it's just crazy given the environment and now now rates are going up i mean bank shareholders keep winning man bank share canadian bank shareholders just keep collecting Ws for how many decades now? Quite some time. So I'm sure a lot of our listeners are happy with their bank holdings because I know they're very popular in Canada. Definitely people love our banks, our Canadian banks, and for good reason.

Now, Royal Bank earnings revenues were down 3.4% to $11.2 billion. Net income was up 6% to $4.25 billion. Earnings per share was $2.96, up 7%. Return on equity was down 100 basis point to 18.4%, which seems to be a little reoccurring here. The return on equity going down a little bit, and it is a very important metric for banks to keep an eye on if you are interested in them. Provisions for credit loss was slightly lower than last year again, same STD here. Personal and commercial banking segments was a shining star with net income up 17% to 2.23 billion. Net income related to their wealth management and insurance segments were up 10% for each of those segments. Net income for investor and treasury services were flat.

And then the big loser here, net income for their capital markets was by far their worst performing segment. It was down 26% to $795 million. They attributed this to lower fixed income and equity trading revenue in the U.S. I mean, considering the markets, are you surprised? I'm not. That's usually how it goes when we're in a bull market. That typically will do well when we're in a bull market that typically will do well. When we're in the opposite, in a bear market, this is usually what happens.

This is big business for them. This is really big business. They're capital markets business for RBC. And it's like in line with how far down the NASDAQ is. So, I mean, take that for what you will. I mean, when you look at both of these companies, right? Like, what's the market cap on Robank right now? Let me see.

I don't know, like 140, something like that. Oh, my God. Higher. Oh, okay. That must be TD then. Yeah. Oh, wow. Okay. Higher. That must be TD then. Yeah. Yeah, yeah, yeah. $188 billion.

And it's on like a 10% drawdown from in January. Well, I was thinking US dollars. No, just kidding. Oh, you're in USD. No, no, no. I mean, I was actually thinking Canadian dollars, but I was pretty close in US. If you said that, I would have been like, oh, you're spot on. You nailed it.

Okay, yeah. So, dude, any company like there's the Royal Bank. Do you know what the Royal Bank curses? Do you know what the Royal Bank stock curses? I don't know. Okay, so it's like this curse that any stock that has a higher market cap of RBC on the TSX is going to have some rough times ahead. It's this long list of stocks that have passed it. Like Nortel and now Shopify, destruction on their stock after they clear and away past RBC and market cap.

Of course, this means absolutely nothing, but it's fun to talk about um is that it for banks yeah that's it for banks yeah okay all right another canadian name here cae all right so also ticker cae i believe it's dual listed i'm like 99 yeah yeah dual listed um so when I say dual listed for those who are not familiar many of you will but if not that just means that it is listed both on the Toronto Stock Exchange and the NYSE or some other when I say I just mean like some US exchange the NYSE or the NASDAQ all right right. CAE. So I'm going to a little definition here. Good old Wikipedia. Thank you for the copy and paste. CAE, formerly Canadian Aviation Electronics, is a Canadian manufacturer of simulation technologies, modeling technologies,

and training services for airlines, aircraft manufacturers, and defense customers. And translation here, TCI podcast brought in translation. They sell flight simulators, and they sell flight training to airlines and pilot training facilities primarily. Now, this business is now in high demand for air travel and the drain. There's a real need for pilots. I don't know if you've been hearing about that. There's a real need for pilots.

And it was a problem that was prevalent in 2019 and at the end there. And then all of a sudden, it was like, OK, we don't need any pilots. We don't need any anymore. But now that we're's, we're back. We need pilots. And the CAE will probably continue to benefit for that. Revenue was up 7%. And if you back out the revenue they had from ventilators, which is very interesting,

what revenue from ventilators? They actually saw revenues up 25% this quarter on their core business. So that's the important number for me to track, which is like X ventilators up 25%. Earnings per share ballooned up to 143% up. The two numbers that I think are worth following here are order intake and total backlog. Order intake was up 42% and total backlog was 17%. So there I was doing I was looking at this. I'm like, okay, this looks good. What is this? Like, how does this relate to 2019? This

is definitely one of those businesses I want to check. What was life like for this company before? And so since this report was actually their full year 2022, like fiscal, that revenue number comes in at 3.37 billion. In 2019, it was almost identical at 3.3 billion. So it was actually an all time high in sales for this business on their on their latest quarter for the full year. for this business on their latest quarter for the full year. So it has really made a nice recovery and demand forward looks good. Like with this order intake, you know, you could see their fiscal 23 being even better. So things look good for this company and they've been quite resilient. I got to give them props for everything they've done over the last two years

to maintain their business. Really, really impressive execution. Yeah, that's funny. Their ventilator, I didn't know that they produced that. It's almost like the Etsy and masks, right? Yeah, exactly. Excluding masks, this was our growth. Yeah, exactly. The X mask growth for Etsy. Yeah. And I like that you mentioned order intake and backlog. So those are really useful numbers, especially looking not only CAE, but also if you're interested in investing in a Boeing or Airbus, those are really important numbers because, you know, airlines will put in these orders and it won't be filled until several years down the line. so it's always

an important metric to look for for those as well it's like asml as well and we're talking about equipment that you can't just put in an order and you know you'll you'll get it on your doorstep by uh tomorrow morning amazon prime right like this is this is a completely different ballgame. So yeah, there's always that delay. So the order intake and the backlog. Same with the services business, right? Like same thing. You want to track those

because those are going to come out in the future. Yeah. Now our last name, the Charlie Munger special, Alibaba Earnings. Did he move any of those? I think he did move some. Yeah, I'm not sure. I think he moved some, but I think he might still have some.

Anyways, I'm going to look it up while you're talking. Feel free to correct us on that. Revenues were up 9% to $32.1 billion. This is USD because they do provide both. Annual active consumers reached $1.31 billion on a trailing 12 months basis that was up 28 million over the trailing 12 months that ended on december 31st 2021 net loss of 2.9 billion which was more than double that of last year gmV had a low single digit decline. So not great from a GMV perspective, but overall Alibaba said that they face headwinds mainly due to disruptions in supply chain and logistics,

as well as demand softening. This is definitely an interesting one to keep an eye on. It'll be interesting to see if their GMV returns a bit more to normal once the Chinese lockdowns are done with. I think they're starting to ease them from what I've seen, but they're still not completely over. And China has still been preaching a zero COVID type of strategy. So it'll be very interested if the Chinese government kind of continues that you know several months if not years down the line this is definitely just another wild card for Chinese companies and of course coming from the Chinese government you don't know what will happen on a regular regulatory basis but there is you know there there is definitely some opportunities I think that there because they are definitely trading at lower multiples than their American counterparts.

No matter what metric you look at, you'd be hard pressed to find the conclusion that Alibaba stock is not extremely cheap. Right? Like you'd be really hard pressed. But again, it's the wild card that we've talked about so many times, which is this wild card of who knows what the regulatory environment looks like there. And investors have gotten absolutely crushed. And they've tried to buy more as a value stock and got crushed even more. And they've tried to buy more as a value stock and got crushed even more.

And now shares are almost down 70% from their high in October of 2020. It's been ugly since. I just looked it up on Charlie Munger's 13F. He reduced his position by exactly 50% in the latest quarter. Yeah, so he still has some and i mean the chinese government has softened its toned a bit more in recent months so there is some light there uh whether you know it's always a wild card though they may be softening it and you know for the next year or two who knows and then another crackdown will happen like Like you never know, right? It's just I'm,

you know, maybe going forward, they will be much easier on these companies as long as they play ball with the Chinese government. And, you know, Jack Ma doesn't openly criticize them. I think that was probably a big mistake on his part with hindsight 2020. I mean, I don't necessarily disagree criticizing the Chinese government i'm just saying in his position it probably wasn't the the best move to do to do that and you know not necessarily the man went missing after you i'll let you guys put the pieces together there yeah yeah exactly that's uh just out of curiosity here. Yeah.

So almost just minus the 15% of Charlie Munger's portfolio in Alibaba, which used to be, you know, close to 30% after he reduced it. It's basically Bank of America and Wells Fargo. Is it like a couple hundred million dollars? Oh, well dollars holy smokes uh that is that is funny okay thanks for listening friends we really appreciate you it is june 1st so you can go to join tci.com and get uh get our uh our personal holdings updates and it really at the end of the day it's a way for you to support the show simone like i was thinking about this like weird things i think about when i'm on when i was on a hike this past week in alberta i was thinking like how much money could we have gotten from doing shady pump and dumps that have been offered to us through the past couple

years. Like significant amounts of money. Like these are not just like a few bucks to do these pump and dumps. Like these companies are well incentivized to get retail investors caught holding the bag of some crappy co. Yeah, there's tons of it on YouTube. Yeah, if you look, you don't have to search very long on youtube where you'll see some youtubers that have a decent following and

that's what they do yeah and they're doing paid promotion for stock like write-ups or uh or videos being like yeah this tsx venture stock is the next big thing um you see a lot of like junior minors and stuff. And we would never, ever, ever do something that silly because it literally makes me feel sick. And so a good way for you guys to support our work is at join TCI.com. So that's my two cents there. Yeah. And just to add on what you're saying too, is right now, clearly, you know, our portfolios are down the last month. So I know a lot of people are feeling, you know, that it's not fun to see your portfolio sometimes being down, you know, high single digits, double digits on just a monthly basis. So, you know, sometimes it helps just to see that you're not alone in that situation. And

what Brayden and i do when that happens oftentimes we just add more because we find there's some really good opportunities yeah exactly like i was looking at it today i was like i think my portfolio year to date's 20 plus down right and then i looked at it i was like yeah well it's actually in line or maybe even a little better than the nasdaq so if you're if you're holding US stocks, don't feel bad if you're getting absolutely crushed. It's a market drawdown. This happens. It happens now.

It's going to happen again. If you look at where we are today from the bottom of March 2020 on the NASDAQ, even after being down 27% on this drawdown, you're up 80% today if you bought in March of 2020 on the NASDAQ. And so if you look at that, these corrections are completely normal. Because if someone asked me in March of 2020, if I would take an 80 return uh up until june 1st of 2022 i would say that is a fantastic return in the stock market a wonderful return um and so there's some recency bias at play and we're going to talk about that actually on our according to morrissey month yeah i think that that's really important yeah definitely and i mean it's easy and i think it's just important to put things into context that's one of the things we like to do and that's one

of the things that's really important to me it just puts some perspective context around things and oftentimes that just puts things it makes a bit more sense and makes you feel better about your your investments and decisions too thanks so so much for listening, guys. I'm about to go hop on the subway downtown Toronto and go to some event. Hopefully free beers. I'm hoping for some free beers, Simone. That would be wonderful.

And we'll catch you in a few days. Thanks, guys. See you soon. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.