The Canadian Investor - Investor managing billions reveals investment ideas (interview with Barry Schwartz)

Episode Date: September 4, 2023

Braden interviews Barry Schwartz, Chief Investment Officer at Baskin Wealth Mgmt in Toronto. They discuss a variety of Canadian and U.S. stocks and how to win long-term. 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 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  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.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. We're back with another episode. One of two while Simon is taking some time off enjoying the summer. But that's exciting because we have Barry Schwartz joining us on the podcast. Two or three time returning guest here. You're like a borderline

celebrity here, Barry. This is my third time. And if you have me guest here. You're like a borderline celebrity here, Barry. This is my third time. And if you have me on five times, I want a jacket or something or a mug. I can't keep doing this for free. I know. Seriously. We'll get you some merch. Don't worry. Send me your address. Yeah. About time. Well, I appreciate you doing this on. Barry, quick intro to you. You are the Chief Investment Officer of Baskin Wealth Management. I don't want to steal your thunder. Give me the elevator pitch on Baskin. The elevator pitch on Baskin is we manage money for high net worth clients across

Canada. And we try to take a no-nonsense, common-sense approach to managing money. We're very plain vanilla in the sense that we like investing in high-quality stocks, high-quality bonds, and we pride ourselves on our transparency and our clear approach to investing. And I try to not do dumb things with our clients' money, and that's what keeps you in business. Better to hit the singles and the doubles and the triples and trying to go for the grand slams every time. And we also do financial planning and really try and think about how to customize a portfolio for each and every

family because everybody's different. So no cookie cutter approach here. And what you see is what you get. I've been doing this for 20 plus years and God willing, another 20 plus more in me and just want to keep compounding my money, my client's money. That's the most fun part of what I do every day, Brayden. Love it. I'm sold. You just scored yourself some extra AUM. Nice. The first time I came to your office, because we're like real life friends, right, Barry? First time I came to your office to chat about about investing career advice, which by the way, thank you for all that. You mentioned one of the first things you ever mentioned to me was your biggest mistakes in terms of

costliness were actually selling winners. And Charlie Munger says, quote, the first rule of compounding is never interrupted unnecessarily. This is of course, harder said than done, like most things with portfolio management. How do you think about this concept today? I still think it's the same approach, but you have to also recognize that I'm managing money for families and individuals, and we just can't let a stock ride up to 20%, 30%, 40% of the portfolio if that ever happened. And we have to have some unemotional processes built into managing money because most of my clients are in the living off their portfolio

mode and they don't want to go through the volatility. And so, yeah, every time we've trimmed Apple over the last, we've held it for 10 plus years, it's been a mistake. Every single time, Brandon, it's been a mistake, but it's the right thing to do from a portfolio management risk process management. I'm not a hedge fund. I'm not a mutual fund. I'm not trying to get the greatest returns ever and become a super billionaire. I just want to, what makes me happy, Braden, is if I have a client that retires and 10 years later, they still have that money or more in retirement and living off their portfolio, that brings a smile to my face. And that's what we're looking to achieve.

And clients will self-select what they're looking for, but we treat it as we're managing people's entire wealth. So you have to do different things in terms of managing. But to answer your question specifically... Yeah. How about this? How about this? CIO Baskin hat off, Barry managing his own money or put yourself in the listener's shoes here. What do you think about this just generally? Well, you got to find it a little silly in some sense that you find it risky when you own some of the greatest companies in the world to trim them or to sell them. When most of us are business owners, entrepreneurs, and we have the entirety of our wealth in one

investment, right? I'm a large owner of Baskin Wealth Management. That's the entirety of my wealth. And that doesn't keep me up at night. Yet, you wake up in the morning, you look at the futures and you're scared, poopless to own too much of quality growth stocks or too much of an apple. So there's cognitive dissonance that goes on with those kinds of things. But the bottom line is you got to think like a business owner and don't give up equity so quickly. I wouldn't be giving up equity in Baskin Wealth Management to some person that kept offering me a lower price every day. That'd be nonsensical. Yet, you give up equity in a heartbeat in the stock market because your brain makes you do it. So those are the risks of investing.

But I think I've evolved my thinking in terms of risk. And the risk is really... I said it off the top. I try not to do dumb things. And you can just buy the S&P 500 and hold it for life. And I think you're going to do really, really well. And that will avoid you and keep you from doing really dumb things like using leverage, buying speculative stuff, trading, locking up your money in some kind of alternative or taking flyers. So to me, there's two sides of the coin. It's really be cognizant that you own businesses and why would you give them up so quickly? And also be cognizant that you're putting your hard work money into your investments to grow for your retirement and your family. And why do you do foolish things as well, right?

So I think those two things can really, if you think about it, can really do wonders for your retirement portfolio. Absolutely. It's that fighting activity. When the world tells you to do something, the world tells you that stock that everyone loved last year is no good, no more. Or that shitty Facebook business that is left for dead in 2022 is the greatest thing since sliced bread in 23. You got to fight it. We are human. So let me give you a quick example. I was talking to my colleague, Ernest Wong, who's our head of research today. And we were talking about Hyatt Hotels.

We bought Hyatt Hotels in 2018. We were excited about the thesis. Hyatt was going to become a franchisee of its hotels like Hilton, like Marriott. And as it becomes a franchisee, the returns on capital increase, the free cash flow increases. It was just a great thesis. And then, of course, COVID hit. So then you could have been wiped out. We just didn't know how COVID would have played out in terms of business and leisure travel. It could have been an easy zero. So, you know, it's easy to say, of course, you know, don't trim your winters, don't do a lot of activity, but context is everything. Absolutely.

I mean, you know, in a vacuum, all these things sound great in books and in podcasts, but, you know, life is a little bit different. But I do think that it's important to revisit those things conceptually because we are emotional beings and fighting our behavioral biases is something that usually comes out with better returns. Yeah. I mean, there are tricks and tips to help you with that, right? Studying psychology, studying emotional behavior, but we're just animals. So the best way that I know how to fight that stuff is go fishing for big fish, buy good businesses, stay away from

crap, think long-term. Those types of things, we always repeat. It sounds so generic. Cliche. Yeah, cliche. But those things work because what you're really trying to do as a long-term investor is fight those human behavior, emotional biases that get us all. So if you're starting... You play golf. I see you're a pretty good golfer. Not right now. I'm in a slump, but that's besides the point. Yeah. So I always think about... We don't call them the ladies' tees anymore, right?

That's inappropriate. But if you want to challenge yourself, you play from the blues. If you wanted to make things easier for yourself, you start from the red T's, right? And so same as in investing. You can make life easier for yourself as a long-term investor by shooting from the red T's. So by doing all those things that every long-term investor says, you know, Terry Smith from Fundsmith, he says it right. I don't overpay. I buy good companies. I don't do a lot of trading. I don't overpay. I buy good companies. I don't do a lot of trading. It's so generic,

it's so cliche, but those things work as long as you follow along with that long-term mindset. Love it. So you kind of hinted at it before. I mean, we're actively trying not to be traders of businesses, but sometimes the thesis change, sometimes the reality changes. You mentioned it there with the hotel biz. When directionally in your process is the time to part ways with a business? Well, I like to think that we're always researching new ideas and new companies. And if we find something that we think offers a better long-term rate of return than something that we currently own without causing a significant tax problem, that should be the consideration. So just going back to what I think about is it's pretty simple. I want to double my money over five years on an investment. I want to have a 15% compound IRR before tax, before fees. That's what I want in terms of an investment when I'm looking

at a stock. Of course, I'll settle for low double digits. I'll be pleased as punch to do that. And so why do we come up with that number? Well, we come up with that number because over the long term, the S&P 500 has had a total return of close to 10% compound? And so what's the point in picking and being an active investor if you're just trying to do 10% a year? Like you don't need me. So we're trying to buy investments that will earn a better rate of return than 10% a year. So therefore we're looking to double our money

over five years, 15% compound rate of return. So if we found something that we thought had, I don't know, 20% compound rate of return and we if we found something that we thought had, I don't know, 20% compound rate of return, and we did the math on something that we currently own that we couldn't see as high a return, you got to weigh the odds. So I mean, it really should be math, number one, to make your decisions. Of course, life isn't so simple. You may have a tax issue. You may love that stock. It may be the wrong time. It may be going through a temporary problem. You never know. But that's really the sell decision that should be number one on your priority. And I guess number two is if the business no longer makes sense because something has changed

in the world, whether it's disruption, competitive position, interest rates, inflation, you name it. So those should be the reasons to make the sales. It shouldn't be because you want activity or you're bored. It should be fundamental as a long-term investor. And that's how we operate. I don't trade stocks. I'm not going in there every day and saying, oh my God, Amazon's up 2%. Let's trim a little Amazon and buy some more Moody's. We don't think like that.

We want to either A, own more of it, B, own less of it, or C, get rid of it and switch it for something else. Love it. Great answer. 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. Which stock has Barry Schwartz personally held the longest? A name that you currently own to this day. Yeah. So in my RSP, which is my longest running investment account, there's National Bank of Canada. That's been my investment in there that I've held probably since 2004.

So probably going on 20 plus years. I have added to it many times over the years. It's not my largest holding on a holistic basis, but it's a nice size position in my investment account. And I wish Braden, I would say to you that 20 years ago, I had the approach I have now. We're always learning. We're always trying to compound our knowledge. So I don't have any other investments that I've held for 19, 20 years. Wish I would have just put a lot more money in my RSP at that time into Berkshire

Hathaway or something like that. I was also a lot younger and certainly didn't have a lot of money in the RSP at that time at age. I'm 49 now, so 30 years old. It's not like you have a lot of room to make a lot of money in an RSP. Well, that is still no small feat. Yeah. Not many people can say that they've held a particular security for two decades and one that's been a terrific compounder. Still happy to hold it today if you want to talk about it. My best performing investment in my RSP is Microsoft, which I looked because you sent me a few questions to talk about. But Microsoft, my cost base is like $25 Canadian. So I think I started buying that around 2012, 2013. When the business was the most unloved in the Steve Ballmer area,

right about there. Yeah. David Baskin and I researched it at that time. And we just said, the worst comes to worst. It's a utility with a beautiful balance sheet. And it was a nice dividend yield at that time. I think it was like almost 3%. The stock had gone nowhere for a long time. And we just said, well, we'll get some dividends. The valuation is quite low. I never could have envisioned the cloud and all the wonderful things that have happened since.

Right. You had this period from basically... I'm just looking at Microsoft right now. You had this period from 2002, basically after the bust. Not even. 2000, actually, all the way to 2012 with the stock. Literally did 0% traded flat the whole way. And this is a very common characteristic of these mega winners, right? Yes. The business may be compounding, but it's trying to catch up to that silly price that it traded for. True.

And I love listening to people who knew nothing about Twitter. They just know price, right? They don't know the context at the time with Mike. Well, if you buy NVIDIA now and you overpay because it's so expensive, you may pull a Microsoft or a Cisco and do nothing for 10 years.

Who knows, right? You have to constantly evaluate the business and the sustainable growth and the profits and what's going on. Microsoft deserved to do nothing for 10 years. Maybe a lot of it was starting high valuation, but a lot of it was the business wasn't growing. Right. At the same way. And also, the businesses, because of the cloud, they weren't then what they are today. Just dramatically different businesses because of cloud.

Distribution and margins are entirely different. Yeah, exactly. So it's... I was listening to a podcast with Chris Mayer. He's saying like, why are people... I just interviewed him 45 minutes ago. Amazing. I mean, he says like, why are people comparing 16 times earnings 10 years ago to 16 times earnings today on the S&P 500 or whatever? Why? It makes no sense. The makeup of all the companies are so different. It's whatever. It's a nitpick of our business. Yeah. Go ahead. What, you don't like global distribution at no incremental cost?

Yeah. Yeah. Although, I mean- Pretty special. The CapEx of Microsoft and some of those companies is significant. Is no joke. Yeah, no joke. But yeah, you're absolutely right.

Amazon spent a couple bucks in 2020 there. Crazy. Okay, wonderful. So this is the Canadian Investor Pod. We've seen the numbers on what Canadians are holding in their brokerage accounts on a DIY basis. There's significant home bias when it comes to equities. Why is it so important to fight that bias and hold equities in the US or internationally? I think we've been on the pod here now for 20 minutes and only talked about National Bank and a bunch of other names. Why is this so important? Well, I'm biased, Braden, to owning great businesses. So I screen, I want to own the best businesses in the world wherever I can find them and not overpay. There's not a lot of them

in Canada. So for me, I'm hard pressed. And my best Canadian ideas are really just US companies in disguise. Why is there home bias? There's home bias for a lot of good reasons. There's a home bias because the Canadian dividend tax credit. There's a home bias because for 10 years prior to the financial crisis, the S&P 500 was lousy and the TSX did a lot better. So there's some, I wouldn't call it recency bias, but history bias of liking the TSX better. There's a fallacy that the Canadian banks have been unbelievable performers. have been unbelievable performers, maybe prior to the last 10 years. That was true, but not recently, of course.

And Canadians love their dividends. Yes, they certainly do. They'll hold Enbridge and TransCanada Pipeline and say, I'm loving that dividend, but not recognizing that they're not great businesses, they're not even good businesses. They got good assets, no question, but it's not the type of business that I'd be throwing my money at. So we're just born and raised on dividends. And so that's where the bias comes from. It's a yielder bust for Canadians. It's like, whether it's real estate investing or dividend investing, it seems to be yielder bust. And we've talked extensively on this podcast about how we think that is a dramatic mistake,

especially for people who are 28, have 40 years of compounding and they're buying some junky 8% yielder. It's worse than that because a lot of Canadians have been... We were in a 40-year bond bear market where interest rates, you can hear it from your parents. And my parents, their first mortgage was 18%. And they were buying Canadian savings bonds. I don't think you can buy those things anymore. They don't exist, right? And we're getting 15%.

And interest rates just went down over the years. And it made those companies, those bond proxies, the Canadian dividend payers, so much more attractive. Right. And things now have changed. so much more attractive. And things now have changed. And so I don't think people really understand that a lot of dividend payers are really leveraged bets. And a lot of them are one slip up away from cutting those dividends and then working their butts off to get those dividends back up again. And they forget. We have short memories. TransCanada, 20 years ago, again. And they forget. We have short memories. TransCanada, 20 years ago, cut its dividend. The stock took a decade plus to recover. So you're betting a lot of them as a bet on interest rates

and things have changed in the last year. So unless interest rates go back down to those low levels again, Canadians right now need to really think about that home bias and how it's going to impact their portfolios. Not to mention, I mean, you mentioned something really important there. It's like the Canadian ones you like are basically US businesses that trade on the TSX. They have global exposure, or at least at the minimum US exposure, maybe like thinking like waste connections or something. And no, that's a really important distinction, right? Because it's a global economy and you and I want businesses that have exposure to billions of people. Well, the internet was the most revolutionary thing the world has ever seen.

And instead of being able to sell to your local customer in downtown Toronto or across Canada, able to sell to your local customer in downtown Toronto or across Canada. Now you can sell your goods across the world. So there's a reason why Shopify became the largest company in Canada. There's a reason why Constellation Software is soon to become, in my opinion, the largest company in Canada. These global businesses, the software revolution is huge and it's still there. And so I'm not saying to completely abandon your dividend payers. And it may make sense for you. And if you're comfortable only getting the dividend for a decade, then so be it. But if you want to achieve better rates of returns, you got to think a little more globally. Shopify had the RBC curse hit it, right?

It's like as soon as it passes RBC and market cap, the Reaper comes knocking on the door. Well, it got stupid. It got silly. I mean- It got so silly. It got so silly. And then it probably fell to silly prices in 2022 as well. It's a hard company though to understand for Canadians. And anyway.

Yeah. All right. So what is your Mount Rushmore of businesses today? And I'm not going to just cap you at four, just generically. Let's throw out valuation. Don't care what it trades at. Don't care if it's a good investment. We're talking strictly quality here. Yeah. So I mean, I think Apple is the best business in the world at the moment. And I know a lot of people will complain about the valuation and the growth has slowed. But I think you got to look a little longer term, right? Because it's the cycles of when iPhones and new products are released. It's also being impacted by currency. The US dollar did very, very well against other currencies the last six to 12 months. But the bottom line is Apple. I mean, it's the top of the funnel. Everything starts with Apple. Google pays it like $15

billion a year for search to be the number one default search on your iPhone. And it's worth every penny for Google. Absolutely. Right? They could probably raise it by worth every penny for Google. Absolutely. Right? They could probably raise it by 50% and no one would care. No, I mean, no. And Google, it would be worth it for Google. So everything starts with the iPhone, in my opinion. Everything starts with the power of the mobility that Apple provides and it's a global company.

And I think they've been very disciplined on capital expenditures. You see, Apple didn't fire all the people like Meta and Amazon and Google. They didn't have to lay off anybody. They said, we're just slowing hiring in some areas. Slowing hiring. They're so disciplined. They've returned so much money to shareholders through buybacks and dividends. And now it's generating a hundred plus billion dollars in free cashflow. It's just unbelievable. And that's- The services, what's the run rate on the services business? It's pretty close to a hundred billion one of these days too.

Yeah. I mean, you tell me- I'm going to check while you're talking. The more, I mean, there's still, the world's a big place. There's more iPhones that they can continue to win more customers globally. And once you buy one product, there's more products they can sell you. And so that's the flywheel that everybody's trying to think about is what is the long-term potential for Apple? It's still really early, early days. It's still really early, early days. So that's number one for our Mount Rushmore. I mean, I love Amazon. I love Costco. I love Berkshire Hathaway. I love Constellation Software.

And I love them because it's a melding of really good business platforms with a combination of smart management, owner-operated approach, and still long runways of opportunity. Berkshire, perpetual cash machine. There's no end to it. It's now almost an $800 billion market cap company. Where does it stop? They can just keep buying up things around the world with the free cash flow because they don't pay out dividends. So Costco, still so much more white

space for Costco to add stores around the world. I think they only have three or four stores in China. It's just getting started. Constellation Software, I'm sure you've talked about it a billion times with other guests. No, no one on this podcast has ever heard of it. So I don't need to go into it, but... They've never heard of it. Yeah. It's still white space. I mean, are these companies going to compound at the rates of return that they did over the last 10, 20, 30 years? Maybe not. But I wouldn't bet against them still delivering outsized, excellent returns for your portfolios. And Amazon, I mean, I was so excited to finally see the leverage, the operating margin leverage from the retail business kick in.

We always said, Ernest and I were talking about it. It's just like they had to spend like crazy on COVID. They had to meet the demand. That's slowed. It's normalized. You're going to just be patient. You're going to get that leverage. It's going to show up in profits in retail.

that leverage. It's going to show up in profits in retail. It's only been one quarter, of course, but we think Andy Jassy is the right guy to come in to really focus on sustainable profits. And that's why the stock is run. So those to me, Braden, are our favorite names. But I don't know, I could name another 10, 15 names. I have a Mount Rushmore with a lot of heads on it. Well, that's good because I'm going to later ask you about one CAD name and one US name that's maybe not a mega cap to discuss. Sure. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using

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

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

You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right.

So you've been investing your own capital for decades now and for clients for a long time. You've seen crashes, recessions, panics, euphoria, decade-long bull runs, massive disruption, and the like. The iPhone, the Uber, the Airbnb. Blood, sweat, and tears, man. Blood, sweat, and tears. Yeah. Among all of that change, what stays the same human behavior and so you know human behavior never changes and the same questions the same concerns the same i mean it's okay so on Brayden, human behavior is what keeps me in business, right? Because if everybody was sophisticated and everybody had the emotional tolerance of a stoic, they would invest their own money and do nothing.

You wouldn't have any clients. I complain about human behavior, it's what keeps long-term investors in business, right? It gives them the opportunities, but nothing changes. The same questions, same concerns always come up, and it all has to do with the volatility of stock markets, right? Stock down, stock must be bad. So, Ernest had a meeting with one of our clients where he went through a lot of our stocks in our portfolio. And the client said, well, this one's bad. And Ernest said, why is it bad? Well, it's bad because you bought it for me at $250 and now it's $220. Well, it's not bad.

It's bad because we overpaid in a certain point of time for you. But we've held it for other clients for five years and doubled our money. So just be patient. And we like it here. And we like it here. Portfolio management, I hate to say it, but if you're doing it right, you shouldn't have every stock going up at the same time at the same percentage. That means your portfolio isn't diversified. The whole thing about diversification is you have different investments and sectors doing different things in different time periods, but hopefully over the long period, reducing risk because they all do different

things. You should have stocks in your portfolio that are down, but you shouldn't have a lot of stocks that are down a lot you shouldn't have a lot of stocks that are down a lot. And over a long time. And over a long time. That's a different thing. So yeah, to me, nothing has changed with human behavior. And yeah, there's more computers now and the trading is more violent. But still nothing has changed in the way I should conduct and we should conduct ourselves as long-term investors. Stay the course. Look to own companies that we think can reinvest their cash flows at high rates of return. Have sustainable growing profits.

Managements have the incentives to invest alongside you. I mean, these are the common sense things that I think are going to deliver strong returns for investors. And among all of that noise, intrinsic value is compounded by the growth of free cash flow per share. On a long enough time horizon, that doesn't change, right? No. Free cash flow per share is what you want. And I'm happy when people say, I want free cash flow, but it's free cash flow per share. And if you can see that growing over the long term by double digit rates of return, you don't be surprised if your stock goes up by double digit rates of return. And when I look at Apple, not a lot of growth this year, but new iPhones coming out, they're buying back stock like crazy.

Did you like 90 billion of share repurchases last calendar year or something? Something insane. You can see double-digit growth in free cashflow per share in Apple. And I don't care what the starting valuation point is. You can make 30 times earnings, 40 times earnings, 20 times earnings. If you get double-digit growth in free cash flow per share, you're going to get double-digit growth in compound returns from the stock price over a long period of time. So buy those kind of companies.

Love it. All right. This is a section presented by our wonderful friends at EQ Bank. It's called Stock on our watch list. And now it's going to be stocks on Barry's watch list. I want a one under the radar name. I can't, no,

no mega caps, no Amazon, Costco's for on the, the, the TSX and the U S markets. Yeah. So we don't own a lot of non mega largeega large cap names, but we do own a lot of Canadian companies. So one... They don't have to be small caps.

One that we've owned for a long time, I don't think people really talk about is the TMX Group. It's an exchange business. It owns the stock exchange, the venture exchange, also does options trading. It also owns some analytical businesses. So all the data, when people quote stock prices on TSX stocks, that comes directly from the TSX. And people pay money monthly to get access to that data. It also owns a number of software businesses and makes a lot of money. It's an extremely profitable business. The profit margins on

an exchange are north of 60 plus percent. Very, very profitable business, obviously constrained by the fact it's all focused on the Toronto stock market. But we've owned it for quite a while. And I don't think it's had a down year in a long time. It's very defensive because good times and bad times, there's always stock market trading. In good times, there's less trading, but maybe more new issues. And they make money on, if you want to list your stock on the TSX, and the bigger you get, the more fees there are. And in bad times, there's obviously less new issues and less secondary offerings, but more trading and more options. And so it's a well-diversified business.

Never going to set the lights on fire, but boring can be beautiful. And a very reasonable valuation is trading around less than 20 times earnings. It's grown those earnings at double digits over the last few years, slowing last couple years, of course, because the market's been insane. And the new CEO is promising to get back to double-digit earnings growth and generates a lot of free cash flow per share. Started to buy back a little bit of stock. Balance sheet's in great shape and it pretty much doesn't need any of that capital. So it's been paying heavy dividends. And it's kind of like a railroad. There's no appetite for a new exchange, right? The problem's already solved, right? It's so entrenched. Yeah. There's been competition. NASDAQ has tried to break in.

There's been these dark... I mean, we can go on in different tangents, but no one has been really able to break the stranglehold that the TSX, TMX group has had over the Canadian market. I mean, its share of trading has gone down over time. But if you're Canadian Natural Resources, you're Nutrien, you want the most exposure, you're going to list on the TSX index. And it's, you know, there's some cyclicality to the business, of course, but we think structurally it's a good growing business. The London stock has changed. London stock has changed. Tried to buy it years ago when it demutualized. It was nixed by the Canadian government.

It would be sold in a heartbeat if allowed. It won't be allowed because it's- LSEG would be all over that. In a second, because you can see the synergies. NASDAQ would too, yeah. And you can see the synergies and it's very profitable. So that's always in your back pocket. Could happen one day.

But we have Canadian clients. They invest Canadian dollars. They live off Canadian dollars. I can't have 100% US stocks, although probably should. So the TSX group is one that we really like. Although, all truth being told, it really should be part of a bigger conglomerate exchange company. Makes sense. All right. And how about South of the Border? South of the Border.

So one that I think is really attractive now, and it's one that's extremely controversial, which makes it attractive, right? So you can't have it both ways, is Live Nation. Live Nation been beaten up to a pulp because of the the taylor swift uh nonsense right what them making heaps of money is beating it up yeah exactly them them making heaps of money her making heaps of money uh yeah he's just talking to a friend and his daughter wants uh tickets to taylor swift in toronto uh tickets are 2400 each he said, that's not happening for you, sweetheart. Oh, my God.

That is absurd. Yeah. Ticketmaster, which Live Nation owns, as well as Live Nation, which is an artist promotion business. They go hand in hand. They've just started buying venues, Brayden. So it's really vertically integrated. For those who know Muskoka, they just bought the key to Bala. Did bala did they buy the key yeah oh i've had some good times at the key i didn't know that they owned that my wife saw the ramones there in 1994 they're imagining

the ramones at the key to bala that would have been a good time unreal yeah there's been some good there's been some great names that have gone through there over the decades for those that know uh the beaches they bought the Opera House. And there's a lot of these venues all across North America that could be run better if they were owned by Live Nation. And so Live Nation- And it really solidifies their Ticketmaster business by owning the actual infrastructure asset. I think it's brilliant.

Yeah. So it's run by a Canadian guy, Michael Rapinoe, Thunder Bay boy, who rose up the ranks at the company and has done an incredible job. But he lets a lot of his other soldiers take the heat every time there's a problem with Live Nation. So it's in the headlines a lot because people are worried about them breaking up Ticketmaster and Live Nation. Joe Biden even mentioned them because, oh, the fees are not transparent on tickets. I mean, we all hate that experience. It's an easy business to hate. Absolutely. Yeah. But it's a global business. And what gets me excited is North Americans attend a lot of concerts. But outside North America, it's still a huge runway of growth.

People in Latin America, they just don't attend stadium concerts like we do here. And Live Nation has figured that out. They've bought festivals. They've bought artist promotions around the globe. And, you know, I'm not going to say it's a monopoly, but it's a business that if you're an artist, you know, let's say you and I come up with a great song and we go and want to tour. We're only going to make money if we tour. And if we want the most exposure, we got to sign up with Live Nation, right? No one else is going to promote us to as many fans

as Live Nation. It's turnkey in a way that the venue is run as well. Yeah. So it's easy. It's a misunderstood company. I mean, there's no marks in investing for complexity. But I think they've done a good job. They have held a lot of investors days to make it clear how they make money, how they don't make money. It's complicated because they actually don't make money from any concerts that they run. They have to make it up on selling merchandise and sponsorship and advertising and maybe beer and parking. And of course, the ticket fees. So it's a weird business to look at, but one that we can see decades of runway of growth and nothing can disrupt a live experience.

Are they not participating in the unit economics on the exchange of tickets though? When the service fees come in, is that not gravy for Live Nation? They're trying. I mean, they run – it's scary for them to – with these resale tickets because they don't want to see – they don't want to seem like they're trying to make more money from reselling than from actually selling to an event. So they are verified fans, right? to make more money from reselling than from actually selling to an event. So they are verified fans, right? So this $2,400 Taylor Swift ticket, they'll make money because they sold it to the person who originally bought it, and then they'll make money again on the resale. Right.

So yeah, they are participating. Yeah. Yeah. And I get why people are up in arms about that because the resale model has created these $2,400 Taylor Swift tickets. Well, the fact of the matter is... But it's a market. It's a market. It's a market. Taylor Swift could play 300 nights a year for the next 10 years and that would lower ticket prices and lower resale value, but that ain't going to happen.

So as you said, it's a market. So I love marketplace businesses, two-sided marketplace businesses, especially when they're vertically integrated. And so Live Nation fits the bill for us. Barry, you have been new to the podcast game. Hey, welcome to the podcast game. What's the handoff? How can people find your show? Thank you very much. Yeah. Our podcast is called Long-Term Investing with Baskin Wealth Management. I am the host and generally, I do the podcast with my colleague, Ernest Wong, who's our head of research. Ernest is an incredible wealth of knowledge on a lot of investing topics as well as companies. He does amazing work here at Baskin. And we talk about the long-term approach.

And really, we do in-depth reviews of companies that we own, of companies that we're following, of topics that are of interest to us, and all with the mindset of acting and thinking long-term. So that's our unique approach about it. It's really just, we had clients who said, I want to know how you guys invest. I wish I was in the investment committee meeting with you guys and hearing what you talked about, what you liked, what you don't like. And so that's the approach we try to take. Just a conversation between us.

We're not trying to have guests on it, not become the wonderful thing that you've created, but really just to talk to our clients about our approach. It's mainly meant for our clients, but always happy. We put it up there for everybody to listen. Hopefully, people agree or disagree with our philosophy and love to hear people's feedback on it. Love it. Well, Barry, thank you for your time. As always, you and I are very due for a beer or lunch in the city. We really appreciate coming on, sharing everything with... It's nice for the listeners, right? To have someone that comes on that also does this

professionally. And so make sure everyone tunes into your podcast called The Long-Term... Long-Term Investing with Baskin-Wealth. Long-Term... I was going to say that, but that sounds like... Yeah. It's a sexy, exciting title. Long-Term Investing with Baskin-Wealth. You can find it on your favorite podcast distribution platforms. And Br you know, Brayden, I love talking investing. It's my passion. It's what I love to do. You know, it's so I always appreciate you giving me a little time

and sharing our approach. It's really appreciated and nice connecting with everybody. I just pulled it up. So I finally pulled it up. On Stratosphere, Apple service, because we tracked the segments and the KPIs, $21.2 billion in revenue in the July ending quarter. Oh, we're talking about Apple service revenues.

Yeah. Not the revenues from the long-term investing podcast. No. Yeah. Well, you guys are doing more than $21.2 billion. Yes, of course. It's interesting. Apple is just an incredible... I mean, just to finish off, these businesses, they've gone so large. They're not going to grow at those rates we saw in the past. But that doesn't mean they're not going to move from stage one to stage two, which is more share buybacks, more dividends, more free cash flow.

Per share? Per share. It's just incredible. So we love these big techs, these mega cap platforms, and I hope to continue on them for a long time. Barry, thanks for coming on. Appreciate it. Bye-bye. Braden, all the best.

Thanks so much. The Canadian Investor Podcast should not be taken as investment or financial advice. Barry, thanks for coming on. Appreciate it. Braden, all the best. Thanks so much.