The Canadian Investor - Lightspeed short report, moats and gambling on stocks

Episode Date: October 11, 2021

In this episode of the Canadian Investor Podcast, we mix it up with some news and concepts. We talk about the following topics: Lightspeed short report by Spruce Point Capital CMHC warning about the canadian housing market Merger of Agnico Eagle Mines and Kirkland Lake Gold US Debt Ceiling  Moats and quality scoring checklist Precious streamers and Franco-Nevada  Gambling on stocks Tickers of stocks discussed: FNV.TO, LSPD.TO, AEM.TO, KL.TO https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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

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Simon, how many hours of podcast recordings have we done to shore up the amount of episodes we have in the bank because you are getting married. So congratulations. When this episode comes out, Simon's going to be a married man. So hit him up on Twitter when you see this, give him a congrats. I'm going to be playing in a golf tournament with RBC on the East coast. I'm absolutely pumped, but we are out here grinding for you to get you guys the content so you don't skip a beat. How are we doing, Simon? We got lots of news and powerful investing concepts to discuss. But how are you feeling this morning? Yeah, feeling good. I always have a lot

of energy in the morning. So I think it'll be a good one. And yeah, like you said, we're just trying to do a few in advance so people will be able to listen to two podcasts a week, even though we won't be recording in those weeks. Is everything ready for the wedding? Pretty close, pretty close. It's not a big wedding. And we got a company that specializes in very small, intimate weddings. So it's been much better.

Hasn't been really that stressful. So almost there. There you go. That'll be a big day. All right, let's get right into it. The hot news is this Lightspeed short report. So again, when you're listening, this is stuff that's coming off hot off the press as a recording. Lightspeed had a short report come out against it by Spruce Point capital which is a canadian-based firm they have made lots of noise in the past and they're making some noise on this one what was your first thoughts on the light

speed short report yeah yeah i mean it's not i wasn't really that surprised to see what was mentioned the short report by a spruce point capital like you said uh some of the big points that they mentioned and i didn't read the full report, but these are the big highlights. They're questioning why Lightspeed was reporting 50,000 plus customers prior to their IPO, and then they stopped disclosing that number when they IPO'd. They're also alleging that Lightspeed shifted from customers to location in an attempt to conceal the inflated customer numbers that they previously provided. They're also saying that they're not very transparent about the competitive pressures. They're also questioning the amount of acquisitions and the price paid by Lightspeed for those acquisitions and really questioning whether they're worthwhile for the business.

They also said that they have weak corporate governance. And the last thing is evaluation seems to be another part of the reason why they're shorting the stock. Obviously, they did announce that they're shorting the stock when they released that, which is pretty common for short reports. My own take is a lot of this is not really surprising. There's a few components that are kind of new to me in terms of the corporate governance, but also the 50k customer and shifting from customer to locations. But when it comes to competitive pressures and valuation, I mean, when we talked about light speed, we did mention that that was the bearish case for the company is there's a lot of big

players here. And the valuation is sky high. So not very surprising on my part. I wouldn't be worried all that much. I mean, if you bought into Lightspeed, these are all things you should have known when you started a position. Absolutely. They pointed out all the things that we already know. The stock's down 20% on this report coming out. Look, if you own Lightspeed and this report was enough to scare you out of the stock, that is unfortunate because everything laid out of substance should have been pretty well known. They have, in my mind, repeated the bear case, which we already knew, which is the stock trades at high multiples.

There is a lot of competition and point of sale. They have moved to a combination of organic and acquisition-based growth fairly early in this growth trajectory. I mean, hey, Simon, you could have listened to our podcast on Lightspeed and you would have known all of that. But from my opinion, I mean, no need to panic as always with anything in investing, avoid knee jerk reactions. Lightspeed's product is really solid. And Spruce Point, frankly, doesn't have a great track record. They shorted and accused GFL of all kinds of stuff when they went public. And look how that has turned out for them. I'm not a Lightspeed shareholder for the reasons that we've laid out in the past, which is it trades at crazy multiples and there's a lot of competition. I can't speak to the other acquisitions, but they pointed out a pretty obvious bear case. If investors in Lightspeed didn't know there's a

lot of competition in point of sale payments, then I don't know what to tell you. I can't help you there. Yeah, no, exactly. And obviously, we even talked about some of the recent acquisition and that they paid a pretty high price for them. So that's also not a surprise. And obviously, Lightspeed came out with a statement saying it was inaccurate, mischaracterizing their operations, and that investors should really consult credible sources such as the regulatory filings in the US or Canada. So, I mean, it's pretty standard kind of blurb, I would say that they came out with. If you own the stock, I mean, make sure you know the business and make sure you just you keep an

eye on it and make sure Lightspeed keeps delivering on their guidance, their promises in the quarters and years forward. Yeah, well put. All right, housing. The CMHC gave Canada's housing market the highest risk rating that it can possibly assign. First time it's done so since 2017, which is not that long ago. Canada's housing agency said the country is now at high risk of a sharp correction in home valuations as the continued appreciation in prices becomes unmoored from economic fundamentals. Any thoughts here? I mean, it's not really surprising. Obviously, the housing market has been on a tear at the same time as like, as long as there's going to be a lot of money being pumped in the economy,

whether it's in Canada or the US, the US has a big impact on Canada. So that's why we keep mentioning it when it comes to this kind of stuff. People are going to flock to assets and housing is one of those assets, you have low interest rates on top of that. You have a unbalance between the offer or the supply there and the demand. So clearly, obviously, the housing is on fire. Whether it's due for correction or not, it's really hard to say. A lot of these things are just big tailwinds for the housing market. So if we see a sharp rise in interest rates, we might see a downturn. But again, yeah, that's kind of my take for it. It's really hard to know where it's going to go. Yeah, well put. I'm just bringing it up because a lot of people think that

real estate is a safe haven of assets because it largely has been here in Canada. We saw what happened in 2008 when there was a debt crisis with housing in the US. We didn't get hit like they did, but that's what happens when you have some sort of debt crisis. And this is really every time someone has been trying to predict Canadian housing market, they've been wrong. And we've talked about this, whether you're predicting economic indicators, the stock market, or something like housing, predicting it is very difficult. So just focus on what you can control. Worrying about the housing market is not something I would spend another second worrying about. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host.

forward slash host. That is airbnb.ca forward slash host. Simon, gold miners Agnico Eagle and Kirkland Gold have agreed to merge. It is largely a merge of equals as they're about both roughly 11 billion in market cap on the Toronto Stock Exchange. Under the deal announced Tuesday, Kirkland Gold shareholders will receive 0.79, so call it 80% of an Agnico Eagle common share for each Kirkland Lake Gold common share held. A Eagle will be led by a combined board and management team, including seven directors and six from Kirkland Lake. The Eagle CEO, Sean Boyd, will become executive chair of the board, while Kirkland's CEO, Tony Makuch, will become the chief executive, not CEO, just the chief executive. You don't get the chief executive officer. The transaction creates a company with a strong platform of people, assets, and financial resources to continue to build and operate a long-term sustainable and self-funding

business. Boyd said in a statement, it's a pretty big merger, Simon. Yeah. Yeah. I mean, obviously the mining, it's a pretty big merger, Simon. Yeah, yeah. I mean, obviously, the mining sector has always been pretty big in Canada. I don't get too excited about mining. Personally, I do like one type of business in the mining industry, which is streamers, which I'll be talking about a bit later in the segment. So we have a bit more mining content, which I know a lot of people listen to do like these type of businesses. So you'll be well served in this episode. But that's my take on it. No strong take one way or another. They're both good gold producers. I mean, I don't invest in gold producers, but Kirkland, Barrick and Agnico have been the high quality names. So just like oil and gas or any commodities, stick to the high quality names or else you can get into lots of trouble.

Simon, one last point here. Yeah, one last item of news. So I'll probably go on a little rant as the U.S. announced that they had struck a deal, the Senate, to raise the debt ceiling again. I just find it pretty funny. We see this, it sounds like every year, oh, will the U.S. raise the debt ceiling? Because if not, they won't be able to pay their federal workers and their debt and so on. So their interest on their debt, I mean, to me, it's just very funny because it's really an artificial thing that's said by the U.S. government. I mean, it me, it's just very funny because it's really an artificial thing that's said by the US government. I mean, it's always raised.

So is there really a debt ceiling? That's my question behind it. It seems very like a newsworthy item for a lot of mainstream media. They'll kind of make a big deal out of it. And then it always ends up being raised. I mean, it's just there. I'm not quite sure where it's there at this point if you're going to raise it every single time.

So that's my little rant on that. Yeah, and it deserves a rant. I mean, where is the incentive for them to act in any other way? And I can't find one. You know, it's becoming a bit of a Fugazi, Fugazi, this US debt ceiling. You know, it won't be the last time. All right, moving on. I wanted to do a segment on my moat and quality scoring checklist. So I cover about 50, 60 companies on Stratus here. We write in-depth reports on all of them and come up with a quant

and quality score for every single one. These are the things that we look at from a quality perspective. There are 14 things on this list. Then after I will go through Google, which is the highest ranking by quality and moat perspective in our database. Now, of course, with everything qualitative, it is very subjective. There's no metric I can pull out that says, yes, Google has X on this quality. It is really subjective. And this is what my team and my analysts think for Google. But let's go through the list first. Number one, switching costs. Switching costs, very important, is how much friction is there from a company to switch to a competitor. There's a lot of switching costs on software. Think of a cloud product. It's very difficult to change your database or cloud provider while continuing your operation. while continuing your operation. Network effects. This is the whole concept where the more people who use the good or service actually makes that good or service better. Think of Facebook. Facebook is useless if there's only 10 users, but if there's a couple billion

like there are today, then it becomes a useful product. Efficient scale. This one has a whole multitude of examples, but do they have efficient scale? I think that this is an important one to check off for Canadian companies because a lot of them lack scale. Durability. Now, very subjective again. How durable are they from competitors? How durable are they from a changing landscape in technological advances? Outside of moat onto some other qualities, do they have recurring revenue, predictable cash flows? Number six, pricing power, which needs to be double tapped on. I talk about pricing power all the time. It's so important. I prefer to own companies that can change and raise their own prices and not have to fight the commodity type businesses or businesses with lots of competition that basically are competing for the same product and they don't have any pricing power because

there's too much competition. Bottleneck businesses. Now, this is one that was introduced to me by Chuck Ager. And what it means really is put simply in the way I think about it, is that you become a bottleneck and it's very difficult to replace the same value that you create in the ecosystem. If you were to go away, that would cause a real issue in the marketplace if you were to go away. And what happens if you're a bottleneck business is that because it is very difficult to replace you, people start to innovate on top of you and provide additional revenue streams by new companies and new players actually operating on top of your ecosystem. So think of everyone wanting to use Facebook's platform benefits

Facebook because that's more advertising dollars. If people want to innovate FinTech companies on top of Visa and MasterCard, that just benefits from them. People are so worried about this buy now, pay later thing. And yeah, it could move around the rails in some cases, but most of the time, those payments are still moving through the payment networks, Visa and MasterCard. So they're bottleneck. Do they have a secular trend? Is this an industry that's growing? Do they have that nice tailwind behind them? Optionality. Does this company have optionality to pursue new markets? Look at Amazon Web Services. This is basically now a trillion dollar company that was invented out of nothing due to optionality. Capital intensity. If all else is equal, it'd be nice to have businesses that don't

require a lot of CapEx because the businesses that don't have a lot of CapEx produce a lot of free cashflow. But in some cases, capital intensity can actually provide some moat. Organic growth. Is a business actually generating organic growth? Their current business, is it generating new sales, new customers, more cash? And then the ability to do a credit acquisitions. That's number 12. Number 13, do they have a founder led CEO or at least a CEO with a fairly long tenure and a good track record respected by employees? That's number 13. And number 14 lastly, is do they have a stable geography or regulatory environment? That one's pretty self-explanatory. Let's go quickly through Google through these first 14 items. Google, do they have switching costs?

Absolutely. You're not going to get the great results if you use another search platform. That provides a lot of friction. And if you're using Google Cloud's platform, good luck. That's not going to happen. If you're using YouTube and you're a big YouTuber, you're using Google Cloud Platform, good luck. That's not going to happen. If you're using YouTube and you're a big YouTuber, you're not going to switch to Bing Video. No chance. You're not switching to Vimeo. No chance. Number two, network effects. Absolutely, as Google has network effects, their AI and algorithm gets better the more people who use the search function. That's why Google search is so effective, gives you the best results is because the more people who use it, Google's results actually get better over time. That's the power of artificial intelligence.

Number three, efficient scale. I don't think we need to even really touch on that. Do you think something, do you think Google has scale? I think they do. I think they're all right in that criteria. Are they durable? Hell yeah, they're durable. Across all their business units, very durable. I think it's one of the most durable businesses on the planet.

They have recurring revenue. Yes, they do. Across all the services they provide, the Google workspace, They have recurring revenue. Yes, they do. Across all the services they provide, the Google workspace, lots of recurring revenue. They have pricing power. Yep. They can raise the price of the cloud. They can raise the price of the workspace. Yeah, they can basically flex that anytime they want. And they have benefiting from rising ad costs as well. Bottleneck business, absolutely. You can't create the same results without them. Are they part of a secular trend? Digital advertising is one of the best secular trends on the planet. Do they have optionality? Oh my God. Google's optionality on

crack. Yes, they have optionality. Is it capital intensive? Not really. Not compared to extracting oil out of the earth. Organic growth. Absolutely, they have organic growth. This business grows. Just the core search business grows organically very fast. Do they have ability to do acquisitions? Absolutely. Google bought YouTube youtube that was a good acquisition yeah i would say though that one i would probably put an asterisk for google because there's a lot more scrutiny now on their acquisitions so um that's probably in the past for sure obviously that's undeniable in the past so in my model i have that as part of 14, which is the regulatory environment. I have them at no score there. So I have more so like 12 is like the ability to do acquisitions in the fact that they'll be accretive and actually add value into their ecosystem. Okay, fair enough. Yeah. With tech companies, if you do an acquisition, they can be so beneficial because you can plug

it right into your existing product, which is very difficult for physical products. Do they have a founder-led CEO? Google, not anymore. For regulatory environment, stable geography, this is an interesting one though because if you were to break up Google, Simon, do you think that the market cap of the entire company would be bigger or smaller? Probably a bit, probably bigger if I had to say, just because a lot of people may just want, have a stake in YouTube, for example, and then have more demand for that. Some other people may want more of the cloud business and the traditional search engine business. So yeah, I think it would attract

investors in a different way that may not want the whole Google business might want just parts of it, which are extremely profitable on their own. Yeah, exactly. Well put. And from the regulatory perspective, I mean, big tech is being hunted down with air quotes, not very effectively, but that's definitely going to affect their ability to do acquisitions moving forward they really don't want any big fan companies to do acquisitions except for microsoft apparently they just don't care if microsoft does acquisitions yeah i don't know why microsoft has a lukewarm track record i would say on acquisitions it might be bad they've done remember the good old skype acquisitions it wasn't terrible though

like skype was dominant for a while yeah but i feel like once they bought it it kind of went slowly downhill but that that's a discussion for another day i mean yeah definitely i think google they'll be limited in terms of the potential acquisitions i think amazon's in that same boat i think some of the other which one am i missing for the other big Amazon's in that same boat. I think some of the other, which one am I missing for the other big tech? Apple in that same boat as well. Facebook, Apple, Amazon, Netflix, Google, Microsoft. Yeah. Netflix, I think they probably have a bit more leeway, but a lot of them, I think any type of significant acquisition and even like medium-sized ones, they're probably going to have to fight with the regulators to make that go

through. 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. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away.

Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. So no, that was a great list. So now we'll move on something completely different. Like I mentioned a bit earlier, so precious metal streaming companies. So I've been talking about my streaming companies quite a bit. I've always mentioned it. I prefer those over traditional mining companies. And I'll go over the reason why today. And I'll even do a medium deep dive, I would say, on Franco Nevada Corp, which is one of the two big players listed or dual listed Canada and the U.S. The other one is Wheaton Precious Metal. So the way streaming works is that they make an agreement with a mining company. The agreement will give them the right to certain quantities of precious metals like gold, silver, platinum,

some even have like oil streaming, and all that at a predetermined discounting price. Once the miner starts producing those metals, the streamer has the right to purchase them at that agreed price, regardless of the current price of gold or silver or whatever commodity it is in exchange for this ride the streaming company provides upfront financing to the mining company the real the big reason i like streaming companies more than traditional miners is because their liability is limited to the upfront financing so So yes, they can lose that capital and it will happen. But the cost of operating the mine is the responsibility of the miner, not the streamer. So that's something that I think is really valuable in that field.

So it's kind of like a call option. Yeah, almost. Yeah, it's almost kind of a way to see it. And when I go through the balance sheet of Franco Nevada, you'll see that it's really different from traditional miners. It gives them the right. So basically, once they start producing, and it's it's interesting looking at the financial statement, because they'll list the different mines that they'll have interest in. And then they'll say, okay, we have interest, like 60% of the gold produced 25% of of the silver produced, and so on. And they buy it at predetermined prices.

So it can be really attractive, especially when commodity prices go up. So these companies also will tend to have mining royalties. So the difference between a streaming and a royalty is that the royalty is a fixed percentage of the revenue generated by the mine. Streaming on the other end allows them to purchase the metal at the set price like i mentioned and then sell it on the open market so now let's look at franco nevada corp they have sources of stream and their main source is gold but they also have smaller revenues from streams like silver platinum oil gas and liquid natural gas they have streaming interests in mines in south america central

america the u.s canada and in some other parts in the rest of the world when you go through their financial reports they actually break down by mine like i mentioned what the interest they have for each asset for example for a mine that has gold and silver you may see you know 60% interest in gold 28 30% in silver and obviously the miner will get to keep all of the rest the market cap for Franco Nevada is 25 billion versus 30 billion for Barrett gold and I'll be comparing them a little bit here and there to Barrett gold just so people can wrap their heads around what the differences are between the two. Their dividend has consistently grown since 2013. It was $0.06 a share, and now it's at $0.30 per share, and that's a quarterly dividend. These are all USD numbers, mainly because they're financial statements. Even though

they're dual listed, they always refer to USD, so it just was easier to do that way. Their dividend currently yields 1%, and the dividend has consistently been covered by free cash flow. For additional context, Barrick Gold yields about 2% right now. So from what I can see, they seem to use a combination of cash on the balance sheet, plus the issuance of new shares to acquire new streaming interests or finance new miners the share dilution is actually very minimal i had a look so they had 186 million shares outstanding in 2018 and 190 million in 2020 so that's really interesting so mainly they finance it with cash that's what it means for q2 2021 the price at which they sold all the various metals that they have the right to was up across the board so that kind of that's is that a surprise

to you brayden i think commodity prices are have been going up this year since last year shocker so which is good for them obviously so gold was up 6.1%. It's actually the lowest increase. Which is very surprising. Yeah, it is. Gold was only up 6.1%. Only 6.1%. Everything else was up even more. Oil was the highest at 137%.

Their revenues were $656 million for the first six months of 2021, up 50% year over year. But to get a better idea of what they look like, let's look at the 2020 full year and compare that to 2019 full year. When you look at their balance sheets, their assets are mostly royalty and streaming interest. So just so you understand when you look at their balance sheet, they currently have zero debt based on their Q2 2021 report, which is very nice. A big difference with a traditional miner. I don't think you'll ever find a traditional miner with zero debt on their balance sheet. Even a solid company like Barrick Gold does have debt on the balance sheet. They had $1.02 billion in revenue for full year 2020 an increase of 20 versus 2019 their gross profit margins will

fluctuate quite a bit again it's dependent on the price of the commodities but there's definitely a lot more upside versus traditional miners so their gross profit margin were 63 percent for 2020 51.6 percent for 2019 and 40 actually i think I got those numbers a little bit wrong. But I think it was... 51 is probably for 2020, no? No, 63 was for 2020. 51 was 2019. And 43 was 2018.

That's the way I put it. My apologies. My note were a little bit off here. For context, Barrett Gold had 43 percent gross margins for the most recent full year so they definitely have lower margins overall versus a company like franco nevada their free cash flow was close to 500 million in 2020 and 190 million in 2019 again it does fluctuate with the price of commodities so overall for me i do like streamers quite a bit compared to a traditional mining company especially for if i wanted to get more exposure to the mining and

commodity space they're still really dependent on the commodity prices but the business model is so much less capital extensive than a traditional miner. Their revenues have grown nicely in the past decade. They had five years that were flat in the early 2010s, but then it started to grow pretty rapidly and their revenues have more than doubled since 2011. And if you compare that with a traditional miner like Barrick Gold, the revenues right now are actually not yet at the level of 2011. So there's definitely a lot more upside i think personally in these type of companies a lot less risk because it's just upfront financing yes sometimes it won't work out that's okay but because they're not responsible for the

ongoing cost of operating a mine that makes such a huge difference in terms of business model compared to traditional miners And that's really why I like these plus they tend to be more diversified than traditional miners Traditional miners will tend to be very focused on one type of commodity whether it's gold whether it's silver Yes, some mines will have more than one type of commodity But it will often be like very heavy gold and then a little bit of silver, things like that. So all in all, I think it's a really solid company. It's a decent dividend grower as well. And like I said, no debt on the balance sheet.

A lot of things to like about this company. We have a lot of listeners in Canada that love to ask us about commodities. And there you go. Simon just gave you a good idea there. It's good that we mix them in because we usually bash miners repeatedly on the show, especially gold miners. It just wouldn't be something you'd find in our portfolio. So you won't see us talk about it that much. But I mean, there could be a place for it here, and this looks like a pretty solid play. All right, Simon, last segment of the show today I wanted to talk about, which is called, I see you smirking, is called Gambling in the Stock

Market. Now, this can be just a quick short segment, but I think it's important. I get it. It's fun to trade stocks, make a few bucks. You're in one shit co and out the other shit co in a day and a half, and you make some money. Sometimes you don't. But the stock market is not a casino. The stock market is a place for businesses to raise capital and deploy it for their shareholders. If you ever hear buy and hold is dead from someone, usually they are incentivized to sell

you some crappy trading course or signals group. If you watch a YouTube video and you see some guru pop up and he goes, buy and hold is dead. Listen to this. These scams are out there today. They're everywhere. So just have your guard up. Buy and hold is certainly not dead. Every of the greatest investors of all time have all bought good companies and held them for a long time. I don't know if you've heard of a guy named Warren Buffett. You've ever heard of him, Simon? Yeah, I think so. It rings a bell. Okay. Oh, yeah. He's a cool guy. Buy and hold is absolutely the way to invest. So don't listen to that. One more thing here is the point of this is not to tell you, don't do that or whatever.

It's saying, if you really want to trade and try, you know, make some money, flip this one into that one, keep it a small portion of the portfolio. If you really must, if you really can't help yourself. And I, I hear and know real stories all the time, real stories, people I know, friends I have who legitimately gamble or have gambled away their RRSP. That's not cool, man. Gambling away your RRSP is not chill. If you want to gamble, go gamble. You can go make a night out of it, throw it on red and roulette, but trading is not investing and investing is not trading. Being in and out of stocks is not what good investors do. I think that just goes to a second point, which is if you've been getting subpar returns with your investing

portfolio, just start trading less. Limit the amount of trades you can actually do. I only buy stocks. I just keep adding to the ones I own or new ones. I rarely sell. I think I've been investing for, yeah, coming around to 10 years here now, Simon, and I've literally made like six sell orders in 10 years. Yeah. Yeah. No, that sounds pretty similar to me. I haven't sold that very often either. Probably less than 10.

Yeah. And I've beat the market. I didn't sell anything. You don't need to, in quotes, take profits because if you're doing that in your registered account, you're going to have to reinvest it somewhere, right? You're not just going to keep it in cash in your TFSA or your FB. So this is just a quick segment with don't gamble in the stock market. If you want to gamble, go to Vegas with the boys or the girls, you know, depending who's listening. Yeah. But I think it's important to take to remember this stuff i'll put kind of a personal twist on this too is i really enjoy

playing poker and i played quite a bit more even online obviously before we did the podcast because now a lot of my free time is researching some topics and stuff for the podcast but you know when you play poker there are professional poker players that can make actually a quite a good living off of it. But there's also people that go play poker that just want to gamble. And those people that just want to gamble will oftentimes put a lot of money on marginal hands or marginal situations with, you know, they may have 15, 20 20 chance to win and just put all their money on that and you know one in five one in six times they will actually win and they'll make money but over the long run it's going to be a lot of money that's laws because the more you put yourself in these bad situations the more you'll just lose money over time. And even, you know, the easiest example,

and I'm sure everyone who has like a basic poker knowledge will know that if you have pocket aces to start the hand versus any other hand, you're at least an 80% favorite. Well, you still will lose once in a while. But if you keep putting yourself in that good situation, you will win long term. And you see that all the time when you when you play poker, and that's fine. Some people just want to gamble. And that's okay. But the really good players, it's almost like investing, right? They have a long term kind of view, they know that short term, it may fluctuate, they might lose some money short term. But if they keep making those correct mathematical decisions, they will be making a lot of money long term. But if they keep making those correct mathematical decisions, they will be making a

lot of money long term. And it's similar to investing for the long term versus just gambling on the stock market. Yeah, there's some takeaways there, right? Because someone going in there who just wants to gamble versus someone who's going in there with a repeatable strategy that can be absolutely replicated game in or game out. And in this case, with investing year in and year out, a legitimate strategy that is repeatable. Because going in one company and out the other in the stock market, in one penny stock crap company into another, that is not repeatable. It's just absolutely not repeatable. It's basically pure luck, especially with short-term market fluctuations. Mr. Market's a moody guy, Simon, so you just really have no idea what you can get yourself

into. However, investing into great companies, holding them for the long term, adding to them, understanding the business, realizing all the qualities one through 14 I walked you through in this podcast, that'll get you going into some businesses that have some real ability to compound and make ultimately generational wealth for investors in and out of one penny stock and into the other with your life savings and your RRSP is not something we condone. So yeah, I think that leaves it there. Simon, we have a couple of weeks off. You're getting married. Congrats, man. I'm going to try to win a golf tournament. Congrats on the golf tournament, by the way, and best of luck over there.

It's what? It's going to be next week, right, that you're playing? Yeah, that's right. Yeah. We're playing in the Cabot Trail, Cabot Links, and Cabot Cliffs, the number ninth ranked course in the world. Thank you very much, RBC. We appreciate you. This is not sponsored by RBC, but they're funding my trip. So thank you very much.

We will see you guys in a few days. Thank you so much. If you have not checked out Stratosphere, go to getstockmarketorstratosphereinvesting.com. They're the same link. Check it out. If you haven't checked out our podcast website, it is thecanadianinvestorpodcast.com. Follow us on Twitter at CDN underscore investing. Thanks so much for listening. Peace. 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.