The Canadian Investor - Mailbag episode - Investment mistakes, ESG and more!

Episode Date: December 7, 2020

In this episode, Simon and Braden give their take on some great listener questions. Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Tickers of stocks discussed: CRM, WORK, TD, WSP.TO, BIDU, KMI, HSE.TO, ZEB.TO, Anchor voice message: https://anchor.fm/the-canadian-investor/message Twitter: @cdn_investing Getstockmarket.com https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/digital-currency/cryptocurrency-guide.html Norbert’s Gamit: https://stratosphereinvesting.com/blog/how-to-convert-cad-to-usd-norberts-gambit-questrade --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee 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. Welcome back to the Canadian Investor. My name is Simon Belanger.

I'm joined by my co-host Brayden Dennis. Brayden, aside from the cold, you're fighting. How's it going? It's going well, man. Yeah, if you're listening and I sound sick, that's because I am. But as we discussed earlier, Simon, you can be sick in 2020 and not have that virus going around. So I'm clear on that front. But yeah, it's been a rough week.

But, you know, I'm here. The show must go on. The show must go on. The show must go on. And so today we're going to do a mailbag episode. The show must go on. And so today we're going to do a mailbag episode. But before we get started, I wanted to mention just a quick thing on Bitcoin and cryptocurrency. I talked about it a few episodes ago.

And just when it comes to taxation, so people are aware of the implications. So if you're investing directly in cryptocurrency or Bitcoin, just be aware that it's essentially the same as a non-taxable account. So if you buy the cryptocurrency, you sell it at a profit, you'll have to pay taxes on capital gains. So capital gains is pretty simple. If you make $100 in profit, you'll be taxed on 50% of that at your income tax level. So it's really important to understand that because there are tax implications if you do a lot of trading. And that also applies to trading within cryptocurrency. So if you're buying one cryptocurrency, for example, you're buying Bitcoin, then you sell it to buy Ethereum and then you resell it to buy Bitcoin again. All three actions right there are taxable events.

So make sure you keep that in mind. I will add a link to the CRA. They actually have a really good page on cryptocurrency, how it's taxed. It was created last year in 2019. So it's really, really complete, gives examples. So at least you know what you're getting into. So now before we go to our mailbag episode uh brayden i didn't talk about uh with you about this before the episode but uh

did you see the big news about um salesforce acquiring slack i think it was made official yesterday yeah this is a big deal um and i'm seeing various takes on this, but it's definitely, I think it's a good move for both companies. I think they're stronger together. I know some people love the Slack platform. I know a lot of people thought the bear case on the stock was that Microsoft Teams was just going to dominate it. And while I think that was a little overstated, I think Slack was a little undervalued, which I think is a slightly contrarian view from most people on Slack stock. But I think a lot of people are discounting how much the tech community uses the platform, loves the platform, and uses it to run their business. So not everyone's in the Microsoft ecosystem.

So I think it's a good move, and we'll see, we'll see how it plays out. Yeah, yeah, it's same for me. I mean, I'll be interested what how it plays out, and especially now you have to like, to two huge companies that are fighting for the enterprise, enterprise solutions in Microsoft and Salesforce. And obviously, it'll be it'll be really interesting to see how that develops in the years to come. I think it's probably a good thing for Slack, just like you, to be acquired by Salesforce and the fact that Salesforce has a good track record with acquiring companies in the past. I think I would give them the benefit of the doubt there. For me, of course, if Slack stayed as a standalone company,

I think it would have been hard for them long-term to compete with Microsoft just because Microsoft can push that so easily in their ecosystem. But now teaming up with Salesforce will be interesting how it plays out going forward, for sure. Microsoft has a bigger competitor now. That's for sure. They do. And you know what? Mark Benioff's a genius, man.

He's one of the best entrepreneurs in the States. He's worth close to $10 billion. And he knows what he's doing. He sees Slack as an opportunity to challenge big bad microsoft so uh let the games begin yeah he's almost as rich as you brayden yeah well i got a couple a couple billion a couple more zeros but he's close i got a couple more zeros um in other big acquisitions here in canada uh today wsper WSP, the engineering firm that I've talked about before on this podcast, I own the stock, up 12% today on the news that they're buying Golder

Associates, the Ontario-based massive environmental consulting firm. And this is a $1.5 billion deal. And this is a $1.5 billion deal.SP is now the largest environmental engineering firm on the planet. So this is now a $12 billion in market cap business, WSP. This is a really big engineering firm now. So it's a good story out of Canada. Yeah, I knew. I just saw, I got an alert that their stock was up, but I was so busy today, I didn't have the time to look into it.

So that's good. Good to know. Yeah, the deal hasn't closed at all, but I don't see why it won't happen. WSP's been making acquisitions in engineering firms all over the globe for a long time now. So this is a big one, though. And I think it makes sense. I can see a lot of ESG flow capital going into these types of businesses. And I think WSP is going to benefit from that. Okay. So now we'll move on to our mailbag question. So, or the mailbag portion of this episode. Let's start with the first question. So the first

question is from Ross. Ross is asking, basically, he has some questions about his broker. So we'll go ahead and let Ross ask his question. Hey, guys, love the show. My question is, what is the best Canadian brokerage for buying U.S. stocks with respect to fees? I currently use Wealthsimple Trade. I know I'm getting burned on the extra currency conversion fees. However, with my investment approach, the $5 fee plus currency conversion of Questrade would also add up. I tend to make regular small biweekly purchases of stocks every paycheck. I aim to hold these stocks for a minimum of three to five years or more, so I don't sell often.

Can you help me make sense of the math on the long-term effect of these fees? Good question, Ross. First of all, good job thinking about fees. about fees fee thinking about fees is kind of what brought many people to the diy investing world and that's because people were tired of paying high fees so i mean anywhere you can limit your fees that's a good thing so you said you're you're using wealthsimple and you're trying to figure out what makes sense for buying U.S. stocks. So it looks like Wealthsimple has the free trades for Canadian stocks. They're also missing a lot of U.S. tickers. Last time I checked, they don't even have Disney stock on there.

It looks like they're adding them all the time. So as of recording this, that might no longer be true. But there's a lot of stocks that just don't, you can't make purchases of. Another thing, Wealthsimple is they don't, you can't drip any shares. So the dividends can't reinvest for you. You can't have like a dividend reinvestment plan drip. But that's another side note. So you're looking at this as $5 a trade and there's the Questrade, sorry, there's the Wealthsimple conversion rate fee as well. So what I think is the best way to buy U.S. stocks is actually using Questrade, one, because they have all the tickers. And you can do what's called Norbert's Gambit, which is basically you're not

going to pay that fee. So what Norbert's Gambit is, is Simon, I posted a link in the notes there, you can post it. I wrote a whole guide on how to do this. Essentially, what you're going to do is you're going to buy a Horizons ETF called DLR. You're going to journal it over to the states called DLR.U. This is now going to make it in US dollars. You then sell it in US dollars. So you only pay the one sale ETF fee. And then all of a sudden you have US dollars with no conversion rate fee. So if you're moving a couple thousand dollars, this is the best way to do it, in my opinion. If you want to just pay that fee, you know, the conversion fee, I mean, go ahead. That's fine. If you're moving a ton of money, I recommend using Norbert's Gambit, which is kind of like the elite way to move

Canadian dollars into US dollars. This is what I personally do. So there's a guide I wrote about this, you can look at it. At the end of the day, you know, there are fees to investing when it comes to making trades, if you want to buy US stocks. So don't worry about it long term, What's going to matter more is making good decisions, holding onto your stocks for the long-term, thinking like an owner and don't interrupt that compounding period. That's going to really make a difference for you.

Yeah, and I totally agree with what Braden just said. And I wasn't as like as well versed on walt simple specifically so i didn't know they had limitations on the amount of uh like securities that are listed on there um if you want to understand the impact of what it can have long term uh you can just you know look at like essentially the dollar value that it's costing you in fees every time that you convert that money. And then just extrapolate that money with a compound calculator and you put a certain investment return percentage and you can have a look of what the long-term impact would be of paying those fees if you want to wrap your head around it. We got another question here. Stefan from Ottawa.

He's wondering about some investment mistakes. So here's Stefan from Ottawa. Hey, guys. My name is Stefan. I'm from Ottawa, and I have a question for Brayden and Simon. What are some investment mistakes, if any, that cost you a significant loss in capital in the stock market? Whether it be speculative plays, overlooks in your research and due diligence, or even some YOLO bets, as they call it. You too give the impression that your worst investments are simply missing out on certain names that skyrocketed legitimately.

You guys are awesome. Love listening to these insightful episodes. Thank you and stay safe out there. Okay, great question, Stefan. So yes, we do talk about investment mistakes and a lot of the time we do talk about stocks that we missed out on. But fear not, I have made my fair shares of mistakes investing i've taken some pretty big losses so i'll just go over a few of them but i have like there's more than that in my

portfolio the reason it's easy to look at investment mistakes with investment that you've lost on your capital invested it might also be considered a mistake if you've actually profited from the investment, but it has lagged the index that you're tracking. So personally, I like to look at the S&P 500 in terms of my investment returns, how they compare to that. So it doesn't mean that you have to put things in perspective. So just some examples of what I've lost when I was investing. So when I started investing when I was about 18 or 19, I've said this before, I invested in a junior miner named Tahira Diamonds. That was probably like 20 years ago now. And I invested about $2,000. And it was just based on of a friend of a friend who said like,

oh, they found diamonds in this Northwest Territory mine, and, you know, they're gonna make a killing. It was a penny stag. I got all excited, put my money. Well, don't you say a few years later, they couldn't get financing anymore. They never got diamonds out of the ground. Filed for bankruptcy. Lost my $2,000, which obviously at the time was a lot of money for me because I was 18. Another example of a mistake I made earlier this year. So I had invested in JD.com. I still made a really good return. I beat the S&P 500 with it.

I sold it at $40 a share just before the pandemic started because I thought that they would have some issues with logistics with the pandemic. But also I was a bit kind of scared or if you'd like about like the uncertainty of investing in China. And I wasn't sure if I could trust the numbers of JD.com. So that was the other reason. So I ended up making about 80% returns on that investment because my cost was in the low 20s. But if I kept it, now it's worth in the 80s. So that's an investment mistake in my book right there. I lost about 50% in Usky Energy a few years ago. I invested in that, sold about a year ago. I've talked about it before.

I don't really believe in oil stocks anymore, so that was the main reason. I mean, I'm glad I sold. It would be even lower right now. So in hindsight, I guess it was still a good decision to sell that. I did sell some Teladoc maybe a year, year and a half ago because I needed to pad my emergency fund so I sold in the in the 70s if you look at their stock right now it's close to $200 but again I don't really see that one as big of a mistake in hindsight it's easy to say that it was a mistake but at the time I think it was the right decision for me and I was at peace with that decision regardless where the stock went. I lost 35% in investment in Kinder Morgan which I sold recently

in September for the same type of reason as Esky Energy and I also lost 50% on Baidu when I started investing a bit more seriously about four or five years ago. I didn't really do my due diligence on that. And then the stock dropped. They completely shattered their guidance. And I decided, again, with the China factor that I wanted to get out. So those are some of my mistakes. There's other ones. But the big thing for me is that my winners really outweigh my mistakes.

And I've been beating this S&P 500 since I've started investing and tracking my returns. 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 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. dot com for details. That is questtrade.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, 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, Brayden, do you have a few? I know I probably, it seems like I have a few more than you do. Yeah, well, I have a couple, but I just wanted to touch on what you just said because you mentioned five mistakes you've made, and some of them were you sold some stuff too early you interrupted the compounding unnecessarily which charlie munger

says you should never do and then three of them are you lost money on commodity businesses and this just speaks this just speaks right to a hard pill to swallow is that canadians are is overweight banking and commodities. And commodities as a business is just not as superior to businesses that have pricing power. Businesses that have pricing power are just better. It's just how it is. are just better. It's just how it is. And if there is a massive rebound in the price of the commodity and you do well, that's great. All power to you. But when it doesn't perform and the price of that commodity that you cannot predict goes down, that business just can't perform well, can't improve cash flows, can't improve earnings because they don't have any control on their input and outputs. And that's just not ideal

long-term. So I think there's a learning lesson there. For me, I'm a little bit luckier because I started purely with index investing so i got some experience in the market like a couple years without even buying a stock that was not tracking an index so i'm like a really old man like here i am at 18 years old and i'm like due diligently only investing in index funds that being said uh you know a couple years later, I was like, I feel like I can pick a couple names, sure thing. And you know what I did, which you see a lot of new investors do, is hit a stock screener and sort by the fattest, fattest of the dividend yields you can find. This is classic. New investors sorting for low PEs and high dividend yields.

And I came up with a little MLP, like a limited partnership business called McKenzie Master, which now trades for 92 cents. It's a penny stock. It yielded 23% because it's an MLP and they have to pay out almost all their earnings into the dividend. The stock went up like 11% in the eight months I held it, and I've got like a 20% dividend yield. And I realized that I was completely idiotic and I didn't know what I was doing. And so I actually, this was not an expensive mistake, but it's like, what on earth was I doing? I had no idea what I

was buying. Zero quality to the name. I think it's gone down to 92 cents now. So I got lucky, but know what you own and don't go to a stock screener and store by dividend yield. This is a horrible idea, horrendous idea. A couple other mistakes. I don't know if I can call them mistakes, but I bought Allied Properties, which is a fantastic real estate investment trust. They own the best properties here in Toronto, well-run company. They pay a nice growing distribution yield, very quality properties. And I just don't want to be in anything pure play commercial real estate in an area of the world that has the most condos and real estate space for sale in the world.

No one wants this right now. So it's on the wrong side of a secular trend, and I just decided to cut bait on that one. Now, my biggest mistake is something that I never bought, which means it didn't cost me anything. mistake is something that I never bought, which means it didn't cost me anything. But this is my biggest mistake is that in 2015, I thought Shopify was overvalued. I couldn't have been more wrong. And I was vocal about it. I was like the worst guy to talk to a party about stocks, because I would tell you Shopify is overrated or overvalued when everyone is making a whole bunch of money on it. And what I've learned,

like the biggest learning lesson from really, really great businesses with really, really high growth rates and very strong management, like Tobias Lutke. He's the man. I mean, he's unbelievable CEO of Shopify and has a good vision. And it's just a flat out mistake that I thought this business was overvalued. I wasn't looking at the importance of the difference between a business being highly valued and overvalued. Those two things not being equal, I think is my biggest 2020 takeaway. And I've had years to buy Shopify and here I am. I still don't own it. So, you know, hopefully I don't continue

to make this mistake, but it's hard. At 55, whatever it is, times sales, it's hard to understand. But I think before when it was, you know, 10X smaller and the revenue growth rate was just astronomic, I think it was a mistake. So there's one for me. Yeah, and I mean, for me, like you touch a great point too.

As long as you learn from your mistakes. So there's a reason why I don't really invest in energy sector, but specifically cyclical and like natural resources is because there's so many things that are out of your control, their commodities. So I mean, I learned from it. And a lot of these mistakes that I did were related to that. So that's one of the reasons I don't really touch those anymore. So I think we've we've covered this question. So not to worry, Stefan, we do have we've made our fair share of mistakes. And like we said, as long as you can learn from that, that's the important thing. We've made our fair share of mistakes. And like we said, as long as you can learn from that, that's the important thing. So our third question is Philip from Sudbury.

So Philip was wondering why we didn't have Canadian stocks in our 15 stock basket from last week. Canadian banking stocks. Yeah, that's right. 15 for Canadian banking stocks. So here's Philip's question. Hey, guys. My name is Philip. I'm from Sudbury, Ontario. I just listened to your episode about the 15 stocks to start with if you're a beginner,

and I consider myself a beginner. I have a basket of about five to six stocks. But I'm curious as to why you did not mention any banking stocks. So I know that Canadian banks are kind of the staple of the Canadian economy. And for most banks, you know, they count as a steady dividend and steady growth and all this, and they seem fairly stable. I'm just curious as to your reasoning as to why you chose not to include some in your episode and what your general opinion is on the Canadian banking sector. Thank you. I'm going to start this one, Simon. This is a really good question because I thought about this and I thought, you know what? I think there could have been room for a Canadian bank there. But let me just go with this first thing to think about.

These are just some great ideas that Simon and I think are fantastic businesses. And I want people to understand that that's a pretty growth-oriented portfolio for people who have long runways of growth. Now, if you're looking for something like a bank that pays a fat, juicy dividend yield that's stable, growing, good business, that probably serves a great purpose in many, many kinds of portfolios.

And the point of this is that not everyone's playing the same game as you. And you need to measure the measuring stick by what game you are playing. If your goal is to get a nice dividend yield and you don't need huge capital gains, then banking stocks are money. They're perfect for that. Canadian banking stocks are probably type 1A of this type of income that you're seeking. These are great businesses for that. So understand that not everyone's playing the same game.

So understand that not everyone's playing the same game. And if you want to be in businesses that make sense for your goals, then do that. That makes sense. These are just really good ideas from Simon and I. But I mean, I own TD Bank. You could throw that in the list, no problem. What were you thinking, Simon? Yeah, I mean, a lot of the things you said so a lot of the the companies we were looking at were looking you know far out into the

future um we did have some exposure to the financial markets through obviously some of the payment processors um and i mean there's some reason i didn't pick any um so i'm gonna go through quickly. First of all, they tend to be cyclical. So they kind of come and go with the economy. Not all banks are created the same. So we did an episode, it has to be about a month ago or so. We were talking a bit more about the banks in general.

And, you know, there's all different types of banks. Some have more exposure to mortgages. Some are more commercial banks that will lend to different sectors of the economy. Some are more focused on investment banking. So depending on how the economy is doing and how their loans are doing, the bank will be, you know, or the returns will be kind of tied to that. Right now, the reason also I'm a bit reluctant for banks is there's definitely some risk of defaults for their loans. There's currently, especially in the consumer banking, there's a lot of deferrals. So I read a very, very interesting article recently that came out or data that came out from Equifax Canada. And it said that more than 3 million Canadian consumers had deferred payments

on debt one way or another. So deferral, what happens is they don't show as delinquency because they're deferred, but the interest still accrues. So people are still on the hook for those loans. So it kind of skews the data right now. So that's definitely a risk for banks in general. So it kind of skews the data right now. So that's definitely a risk for banks in general. Like Braden said, I do own TD as well. I do like TD because it does have exposure to the US, Canada. It also has an investment division.

So it gives you a bit more diversification there. The last thing I was going to say, if you hold a kind of Canadian all index ETF you're going to have a lot of exposure to Canadian banks and like Brayden said energy as well if you're looking to just hold the seven banks in Canada I found an interesting ETF it's ZEB it's a Canadian ETF the management expense ratio is not super low, so it's 0.6%. But it has pretty much all the seven big Canadian banks. So there's only seven holdings, and they're very closely equal weighted. There's a couple percentage point in between each.

But if you're looking to get exposure through that, that would be an option. And it does have a pretty juicy dividend yield at 4.8 percent yeah you could you could certainly go that route we've talked about the banks they have you know that core retail banking segment and then you got to look at all of them and think okay they all have that core retail banking segment what else is it that they went and pursued for growth um i personally think the biggest two td and royal bank are the best businesses because of their capital markets and u.s exposure but you know uh you could just go with the zeb is that the ticker you mentioned and yeah and just own all of them but like like like simon said if you own the canadian index like a

vanguard vcn the etf 17 of vcn is only two stocks which is royal bank and TD. So you're seeing that weighting being very high on some of those top names because their market cap weighted. So last time I checked, Royal Bank and TD Bank make up 17% of the index. So if you can understand that math, then you'll know that if you own a Canadian index, you're going to own lots of banking. So if that's what you want to do, you know, think about the game that, yeah,

think about the game that you're playing. And if that accomplishes your goals, we have another question here. Let's just let this one play. This is from Sean. He's got a question for us. Hey guys, regarding your last podcast, I noticed that a lot of your top stock picks are actually traded in the States and in U.S. dollars. And from my understanding, if you're trading within a tax-free savings account, you're not going to be benefiting from the perks that that account can provide.

from the perks that that account can provide. So I guess my question would be, would it be better to trade a stock in U.S. dollars through your Tax-Free Savings account or trying to find a Canadian equivalent of that company and trade that company in Canadian dollars? Thanks. Yeah, good question, Sean. I just want to really quickly clarify. You mentioned tax efficiency of holding U.S. stocks in a TFSA. So let's just clear that piece up immediately.

taxed on the dividend in a TFSA for US listed stocks. I'm going to repeat that. You are only taxed on something called withholding tax on the dividend of 15%. So if you own a stock that's U.S. listed in a TFSA that pays a dividend, 15% of that dividend will be taxed in something called withholding tax. So it's only 15% of the dividend. Capital gains are not taxed. So the TFSA is actually very tax efficient for both Canadian and U.S. stocks. Assuming it's not a super high-yielding dividend stock, I don't think you have too much to worry about. And I think that it's a good place to hold U.S. stocks in a TFSA. Generally, it is a TFSA.

hold US stocks in a TFSA. Generally, it is a TFSA. Simon, that clears it up, right? It's somewhat of a confusing topic, but if you can understand it's just the dividend, it makes it a lot easier. 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. Yeah, exactly. If you're looking to hold a U.S. stock that has a big dividend, then the RRSP is definitely a better option for you because there is a tax treaty for retirement accounts and the RRSP is considered a retirement account. That's right. The TFSA is not. So definitely you'll want to hold those in your RRSP and that's what I personally do. personally do. And just like Brayden said, there's really no problem holding US stocks in your TFSA as long as they don't really pay much of a dividend. If they do a small one, it's really

not a problem. It'll be tax free if you sell at a profit for your capital gains. And you also mentioned your question whether you should be looking for US equivalent companies in Canada. So companies that would be similar in Canada to the US. And that's not a bad approach for certain type of companies. Like we just talked about banks. Obviously, if you're going to hold banks in your TFSA, you should hold Canadian banks. If you want to hold US banks, you should put them in your RSP.

So that's an easy option for that one. But a lot of businesses unfortunately that you find in the u.s you will not find a canadian equivalent and you're really limiting yourself to a smaller basket of stocks if you're trying to do that there's so many sectors in canada that are really underweighted in the canadian market. Tech is not that big in Canada. We do have some tech plays. I know Brayden knows all about them. I do a decent amount as well. But healthcare sector is also underweight in Canada. So there's definitely some sectors where if you want exposure, you're probably going to have to invest, especially if you want exposure in specific companies,

you're going to have to invest in US stocks. Yeah, that's it right there, right? Do not fall victim of what is called in the Canadian capital markets as Canadian home bias, which is the concept that many Canadians are very overweight Canadian stocks. And as a result of that, they are very heavily weighted banking and energy and commodities. You know, these types of businesses that make up a very large portion of the index. businesses that make up a very large portion of the index. So many of the best businesses just don't trade on exchanges outside of internationally or on the US. So that's just a real hard fact that you need to understand. That doesn't mean you can't own Canadian stocks. I own Canadian stocks. I own plenty of them.

I own plenty of Canadian, I own two Canadian tech stocks that only trade in Canada. And I wouldn't have it any other way because I'm getting that alpha because the American investors don't even look at it. So there is many great Canadian businesses, but I would not take the approach of, look at this awesome company here in the States

that's scaled globally. Is there a household name equivalent here? Probably not a good way to go. So you're saying I should not swap my Teladoc shares for a well-held technology? Is that it, Brayden? Zing! There it is. Boom. Good job, Simon. Thank you, thank you. Yeah, those businesses are not aligned. Go ahead and check their gross margins and you'll find about 50% difference. Okay, so we do have another question. We weren't sure if we were going to get to all these,

but I think we're good, Sam. We can keep going. We had a question about ESG, so let's play that. Hey, guys. Love the show. My question relates to the big ESG sustainability push that we're seeing in a lot of companies. I'm just wondering how you

gauge the validity of these companies. For example, a company like Enbridge and their promised renewable energy transition. They're invested in something like 22 wind farms and six solar energy operations. Do you perceive this as following a trend or can some of these large Canadian energy companies actually transition smoothly. Good question, sir. Fantastic question. Simon, do you have any quick notes on this? Because I think this is ESG is here to stay in my eyes. So I'm wondering if you have any hot takes on this.

Yeah, so I started doing research ong uh maybe a month or two ago and um i know at work we were looking as well with my employer we're looking about offering a certain esg fund and the reality is a lot of funds that are labeled as esg are not really that focused on environmental social and governance part um so that's what esg stands for, in case some of you weren't aware. But it's definitely gaining popularity. There are some resources you can find. There's the UN that does have some ESG resources. I don't have the exact website in front of me.

There's another, I think, organization as well that has ESG resources. I don't have the exact website in front of me. There's another, I think, organization as well that has ESG Resources for investors. What you need to really realize is you have to do a lot of digging if you want to look at companies that are trying to do more on the ESG basis. And there's really different ways of viewing it. So you might look at might want to invest, for example, in the oil sector, but you want the top company in the oil sector in terms of ESG. It might not be super logical when you think about it, but that could be the way that someone who's looking to invest in oil but wants to do it in a more responsible manner. do it in a more responsible manner. But again, there's all sorts of sectors that you can look at from the ESG lens. It's really, I mean, it can be quite complex and it can be really time consuming, especially if you're looking into specific businesses and understanding what they're doing. But I think we could even do a full episode eventually on that. I definitely have to do personally have more research on it to be able to elaborate more than this yeah no no worries i i got some higher fiery hot flaming

takes so it's all good um for those who don't know i'm an environmental engineer um and i still work as an environmental engineer and, unfortunately, has developed into various funds trying to track what they classify as companies that are environmentally, socially responsible and have good governance. So ESG, environment, sorry, yeah, environment, social governance. And what has happened is, you get a bunch of finance folks in one room, quantifying something that's very technical, which is, you know, climate change, and, you know, these kinds of things. So what has happened is these big ETFs that track ESG investing for those who want socially responsible investing,

they don't want to be contributing to climate change through their capital, that's all good. That's in good intention. But if you look, if you are in one of these funds, and if you look them up, Vanguard and BlackRock, they have them as products available. Go into the top 10 holdings, and you're going to find basically the S&P 500 or like the NAS, number one by market cap position is Facebook, then we need to reevaluate the whole thing. And this is seen everywhere. behind that is, well, Facebook doesn't have a lot of high emissions because they don't generate emissions through, you know, large oil processes. And, you know, they don't have these stacks that are emitting carbon. Sure, maybe, maybe that's true, but they are not positive net impact to this problem. They're not making a positive net impact and being leaders in reducing our dependency on carbon emitting economy.

Just look at it and know that it's still very early. It has a lot of problems. To answer your question more directly, you mentioned Enbridge. Some of these companies are on the ball. Contrary to a lot of the ESG funds, a company like Enbridge that you mentioned that you wouldn't find on these ESG funds, because they emit so much carbon by being a natural gas supplier, they're not going to be on there. But they're doing the most net-net to make a difference, because they're investing in cleaner fuels. They're investing in pivoting their business to renewables and to cleaner processes and cleaner natural gas. They're actually making a net positive impact versus some technology company that, yeah, their emissions isn't inherent to what they do, but it doesn't mean that they're making a net positive impact.

So just think about that, right? And think about a lot of these funds and how they're really just a marketing ploy to get capital when the holdings are available in the prospectus. You can go on there if you're in one of the ETFs, check it out and look at the holdings and think to yourself, what's really going on here, right? So that's what I want you to leave you with is think about what is the positive net impact of this business? Are they doing real things to combat climate change or are they just in a business that's getting thrown in this basket because they don't emit heavily so uh that's my answer to the question yeah and i mean i

can really tell you're an environmental engineer because you didn't really touch on the social and governance but no those are two important things. That's a good point. Yeah, the social. Well, hear me out then, is Facebook just a shining star in social governance? No, exactly. Oh, goodness me. Social and governance, and those are really important,

and they can be hard to quantify too, just like Brayden said, especially the social impact. So hard to quantify. The governance aspect, that I find you can spot a bit more. The governance looks all out of whack when it comes to the governance of the business. So, you know, it can be just how the voting works for shareholders could be just the the amount of power that or the remuneration of the top executive, then things like that.

And so those are things that you can probably spot a bit easier and some really good resources i mean there's a site and it's really extensive so i haven't finished digging into it is what i was mentioning earlier so it's a pri so it's a un organization so you can go at unpri.org and they'll be able i'll put the link in the show notes, but they kind of give a good framework how to invest, you know, with a ESG perspective. So they do mention a lot of the things that we just mentioned where, you know, a lot of these funds are not really ESG focused and you can really scratch your head just looking at the holdings and wonder why they're there. But that's an interesting way to start and just get some resources on that. But I think we probably could do a full episode on this, Brayden, to be honest.

Oh, yeah. You'll get me going too, I'm sure. Yeah, exactly. All right, guys. That does it for this episode. Thank you for putting up with my very congested voice. Hopefully next week I'll be back at 100%. Getstockmarket.com, as always, has a link to Stratosphere where you can get all the data from where we talk about all these companies, when we talk about growth rates,

when we talk about valuation multiples, we talk about their financial statements. You can graph them all 10 years out with the stratosphere software uh it's pretty powerful um and also on the anchor link you can get one of these cool recorded questions you'll probably be on the show chances are you'll be on the show so uh those links are all there as well as the Norbrooks Gambit link there for Questrade. If you don't have a Questrade account, you can use SI50. It stands for Stratosphere Investing, but it's SI50. And that'll give you $50 in free trade credit.

And it supports us as well. So, it's kind of a win-win. All right, guys. We'll see you next week. Take care. Bye-bye. The Canadian investor is not to be taken as investment advice. Braden or Simone may own securities mentioned on this podcast. Always make sure to do your own research and due diligence before making investment decisions.