The Canadian Investor - Markets Are Ripping & Gen Z Trends

Episode Date: November 25, 2024

Braden Dennis and Ryan Henderson hop on the mic to discuss some interesting trends and key earnings reports from Q3. Tickers of stock discussed: NKE, SBUX, NFLX Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.  See omnystudio.com/listener for privacy information.

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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. Welcome into the show. My name is Brayden Dennis. And today, I've got a special guest, Ryan Henderson, who leads content and growth of FinChat, joining us on the pod. We've got a couple episodes of myself, some special guests, Dan Kent filling in,

and Simone will be back in action in no time. Dude, thanks for doing this on short notice. The pod goes on. Of course. Yeah. Always happy to join. We've got plenty of topics today, so excited to get through some of them. And you live, eat, sleep, breathe financial markets between your podcast, the job, your own personal interests. So I feel like you can kind of get going on this quickly. Dude, where do we stand today? The markets feel pretty frothy. There's all these indicators of people thinking this game's easy, people thinking they're the next Warren Buffett. I've seen this movie before. Yeah. It feels like getting that same gut feeling that anyone that was investing in 2021 or before that probably remembers it in 2021,

where you're constantly looking at companies, you're doing the work, and then you're looking at the valuation and it just feels a little extreme. It feels hard, a little tough to make the math work, or there's little pockets of excess throughout the market. I think we're certainly seeing that today with some of the recent valuations and just stocks soaring 50% after earnings and stuff like that. So yeah, I'm getting that same feeling. And the particularly junky speculative stuff. Yeah. That has so much hot air under it.

That's what makes me the most nervous. I'm seeing it again happen with VC valuations, feeling a little bit 2021, rush to deploy capital, feeling similar to that. Obviously, the crypto, which I want to separate the conversation from that and Bitcoin and things that have real kind of either store of value or utility because fart coin is not a billion-dollar asset. So, the stock market casino lives on, and we're seeing this kind of find itself in a lot of places. And we've seen this movie, man. We've seen it.

Yeah. It feels a little bit like the SPAC race. I mean, the spot where I'm really seeing it is micro strategy, especially, has just been soaring lately. I think today, as we're recording this, it's down 17%. But prior to that, it's trading at, I believe, three times its asset value or its Bitcoin asset value on the balance sheet. And the real business, the software business they have there is not worth it. So, it's like people are paying extreme prices just to be kind of involved with it when you could just buy Bitcoin outright if that's your goal.

So yeah, it does seem like kind of buying without looking is happening all over. Yeah, because it's a leveraged bet. It's taking fiat leverage to buy Bitcoin. Dude, so I just got back from New York last night and saw a lot of ETF providers, a lot of brokerages at a conference. And some guy was telling me that he just launched this ETF. He has been launching ETFs for 10 years, basically. He's an asset manager. x micro strategy as a etf so it's just micro strategy as a single holding levered up and micro strategy is already a levered bitcoin play so it's like effectively like 5x bitcoin essentially and that i mean the the aum has just gone gangbusters. Exactly. This is what we're talking about. The frothy stuff, the junky stuff, very speculative and high risk. It feels like more and more money is being skewed that way, which just, it's hard not to feel like we're kind of heading towards 2021 again. Yeah.

So just, I guess the takeaway here is, guys, it's a bull market. There's money again. Yeah. So just, I guess the takeaway here is guys, it's a bull market. There's money to be made. There's fun times to be had. There's money to be made. Money is made in bull markets and you get a few really long running ones in an investing lifetime and that's where you got to really stay invested. But it's also a reminder to just don't be crazy. I think Howard Marks had a nice little appearance. I think he was on Bloomberg yesterday. He's basically just like, hey, look, these are the times you got to stay invested. You got to be in the market for these big runs. You got to be in the market for some of these days that just, if you're not invested for those days,

you'll just underperform heavily. But at the same time, yeah, don't be silly. You should have a little bit of scars under your belt from last time this has happened in the past. Don't be silly. All right. So you and I, we have a couple segments today. You're going to talk a little bit about some earnings and some notes that you've put together from companies you've been looking at. And then I'm also going to talk about the dichotomy of performance between what I'm calling the TikTok generation and these big legacy brands and some of the trends and how to not get smoked by some of these trends is like kind of the takeaway. But why don't you give us your first, like what's your, what are you most excited to talk about here earnings wise?

Oh, most excited. I mean, we could talk through some of the streaming stuff because Disney reported earnings last week. streaming stuff because disney reported earnings last week and it's kind of just an interesting topic because the stream netflix reported too already right yeah they reported i think they're usually one of the first big ones to report so theirs was probably two or three weeks ago but okay it's disney reported solid numbers i mean gave out – I don't have all the specifics here, but they gave out long-term guidance that – I think it was 2026 earnings guidance that got investors enthusiastic. The stock jumped a little bit. But the net subscriber ads for Disney Plus in total, which includes Hotstar and Disney Plus Core service, it was okay. and Disney Plus Core service, it was okay.

When you look back over two years, they actually have not grown paid sub. So two years ago, Q3 of 2022, they had 164 million paying subscribers. Today, 159 million paying subscribers. And so it kind of got me thinking to do not too much research, but going on FinChat and looking up every streaming company that reports subscribers. And so, you've got Paramount with Paramount+. You've got Comcast, who has Peacock paid subscribers. You've got Disney has ESPN+, Hulu, Disney+. There's even Warner Brothers does direct-to-consumer subscribers, but it's really HBO, essentially. And then you've got Netflix. And if you look at it, Netflix, over the last two years, has added 60 million paying subscribers. And you might look at that and say, oh, well, they cracked down on password sharing, so it kind of makes sense. Maybe they got some low value subscriber ads. But really, if you look at the average revenue per user for Netflix, it's grown over the last two years in every single market except Asia Pacific. So it's not

just these low paying subs, they're really getting just as many high value subscribers. And if you compare that to the industry overall, everyone that reports they're paying subscribers. So Disney+, HBO, Paramount, Hulu, Peacock, ESPN+, all six of those combined added 63 million over the same period. So Netflix almost added as many subscribers as pretty much the entire industry. And they're the only ones doing it from a profitable standpoint. So in the time, I think over the last two years, they've gone from 10% operating margins to 30% operating margins.

So they're expanding profitability while adding more subscribers than pretty much the entire category. It just kind of feels like these streaming wars that have been going on for 10 plus years now are starting to kind of, we're starting to see spend on new contents kind of coming in. Who's going to be the winners. And it seems like it's primarily Netflix. YouTube as well has been a winner,

but it's kind of a sort of a different model, obviously, because it's not owned content. And then YouTube TV is kind of – it's hard to know the economics there, and they don't actually give out the subscribers. But really, I guess this is all just to say it seems like Netflix is in the driver's seat here. They can spend – I'm looking at the chart that you posted. And so for those listening, it's Netflix's subscriber count, total subscriber count, quarter over quarter,

and has a nice steady slope up. And then you've taken all the other streaming services and stack them together. So it's basically Netflix versus everyone else. And one of these is not like the other. The Netflix red bar is so much materially better. And you just look at these other ones and every subscriber, every subscription business churn is the enemy, especially consumer subscription business. And churn is the enemy for Netflix as well too. No business has perfect zero churn. But you can see how just a few percentage points

in monthly churn that it is better than the other ones and how that compounds over time. Just right here in the data. And one of these things is not like the other. And I did just, I just pulled up as well while you're saying so like revenue per use per membership is up so since december 19 it was it was 13 and 20 cents for u.s canada and now up to over 17 dollars well while subscriber cons gone you know added 100 million roughly. Yeah. That's incredible. Yeah, it really is. The other thing is they aren't dependent on sports rights. A lot of these services, ESPN Plus especially, Peacock even to some degree because they have a big soccer league rights, which probably creates a lot of subscribers for them.

The economics on those aren't great because you usually have a certain contract, certain duration. And at the end of that contract, the league's going to say, well, you either got to – whatever margin you made, you're going to have to add that to our next contract or we're going to go somewhere else with our sports. So, Netflix has done it with primarily on content. They'll do live events to kind of drive excitement like they just did with the... They got to figure it out though. Oh my God. The infrastructure for streaming

that Mike Tyson, Jake Paul fight was awful. I had a bunch of buddies over at, well, you know, Ryan, we're all at his place for, you know, sitting around the couch watching this fight and it was impossible to watch it was it wouldn't it wouldn't buffer it wouldn't stream it was frozen frozen on mike tyson's butt literally and then and then we found an illegal stream that was better and we're like

wow this netflix has got to figure this out yeah yeah that that was certainly red flag and you weren't the only one that had difficulties there. Apparently 60 million people streamed it. So I guess I don't know if it broke their servers or whatever. But yeah, I guess the point being is that they just have such a revenue advantage now that they're able to be – they can still spend more on content while increasing profit margins. They can spend more than their competitors on content while increasing profit margins. And they can be more flexible. They can try stuff like they're going to have with the NFL games on Christmas. There's just a lot they can do. It feels like they're in the driver's seat here and it's hard to see them not expanding their leadership position from here. I remember the stock was on just such a pessimistic drawdown in the summer of 2022. Yeah. Subscribers dropped for like one quarter.

One quarter. Stock dropped 70%. And the reality was that subscriber drop was actually them just cord cutting all their Russian subscribers, right? That was the reality of the drop in subscribers. Yeah. The stock since then, let me see, percent change since then. The stock since that point is up over 5X.

And this is actually a really good point of what I'll get into later today. But when a story is so different, when the consensus around a story is so different from reality, that's when stocks go nuts. Same with like the meta is a good example. This is a good example where it's like, ah, there's so much competition and they can't raise prices. Okay. They smoke their competition and they raised prices both. So the two big narratives around the stock were both just incorrect. And that's why you see the story.

Everyone go, oh, wait, nevermind. We're all wrong. Let's re-rate this thing. Yeah. This is also another example of letting your winners ride. Yeah, this is also another example of letting your winners ride. And it's maybe like one of the biggest examples because for a long time, Netflix has constantly traded at a valuation that you'd probably say it's a fulfilled the expectations or surpassed the expectations and constantly warranted the premium valuation. So when you've got something like this where it's a category that's ripe for a big winner, which is streaming TV, that's certainly been the case. And it can grow at above market rates for a long period of time. I think those are the ones where you kind of – when you own it,

and it gets a little extreme on the valuation side, maybe close your eyes a little bit and pretend it. Just don't even look at the valuation for a little bit. I'm actually reading right now, Reed Hastings' book called No Rules Rules. So, I'm about halfway through it. I'll be done it pretty soon here yeah he's fascinating company he is exceptional for sure talent density i believe is their kind of approach to everything like less employees pay pay a few really really good employees really really well and they he seems to work for him one of the first chapter is the whole the book's called no rules rules so it's basically kind of like unlearn everything you know about like bureaucratic large corporate companies because they're not

going to work at your startup and um the first thing he writes is like, just rip up the employee vacation policy and don't track it. And like, we've never tracked it because I'm too lazy to track it. I'm like, oh, perfect. Reed Hastings told me I don't need to track it. So I don't need to go build that spreadsheet that's been on my to-do list for two years now. Thanks, Reed. It's a good book. for two years now.

Thanks, Reed. It's a good book. If you look at big tech revenue per employee, Netflix is like way above everyone else. Now, some of the big tech companies like Amazon, they have lower margin revenues. It might not make sense, but you can actually track that KPI on FinChat.

If you chart it, NVIDIA's has exploded recently, but other than NVIDIA, it has surpassed all other big tech companies, the MAG7. 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, 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. 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, 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. That is airbnb.ca forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of

ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was

that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Well, kind of similar on that same vein, brands resonating with the TikTok gen is what I want to call it and the dichotomy of the performance of them. So, you're a little – I'm turning 30 this summer. You're a little bit younger. What do you consider yourself? You're like right in the middle of a millennial Gen Z, right? I think I'm technically Gen Z, but I don't want to be. It doesn't feel like it. You don't strike me as the TikTok generation. So, we'll let you- I'm not on TikTok now.

You're not on TikTok. Yeah, you're an old soul. So, please jump in. Let's be as anecdotal as we feel during this, because I think that that's kind of the point of this. Last week, I showed how few of the biggest companies in the world have remained dominant for multiple decades on the pod. Sorry, that only a few of them in the top 20 by market cap, or the top 100 by market cap exist in that list today, basically. It's one of the beautiful things about capitalism, forces, innovation, new ideas, opportunities, et cetera. But it's also brutal, right? Competition is brutal, things change, consumer preferences change, and brand stickiness changes as well.

So I want to bring up a couple company examples and trends where there are clear headwinds examples and trends where there are clear headwinds and bring up the reality that the things that you may like as your generation, and this is going to happen again and over, and it's happened with every generation since the dawn of civilization, they're going to like different things and they're going to buy different things. They're going to interact as a consumer differently. And the new generation that is about to become soon, the largest population and the bulk of consumer spending is going to resonate with different things than previously. You're from Seattle. So, you know, Starbucks being an iconic brand. from seattle so you know starbucks being an iconic brand have you noticed young people don't like starbucks like they're dude there's hundreds of if you go on tiktok or search just google i

don't have tiktok either if you google boycott starbucks there's like 2,000 TikToks of young people saying why you should cancel Starbucks. They're the worst corporate company ever. Cancel them. It's absurd. I don't know why, but this is happening. So Nike stock is another example. Nike's down 13% over the last five years. Starbucks was on that similar trend.

It got the Brian Nickel jump here recently, but they've both heavily underperformed the SPY. Both companies have had declining revenues since 2023, a quarter over quarter sequential negative revenue growth. And so that's fascinating to see. You're seeing lots of new competition pop out in footwear and a long list of things. This is not really a comment on Nike or Starbucks, but the fact that the brands that I love and my siblings love are just different than the people who are 19, 20 love today. They're just not the same brands. Yeah. Yeah, it's interesting with Nike, it's kind of hard to see what specifically went wrong.

Like you've seen sort of an onslaught of competition from, I think the company is called On Holdings. Yeah, On Running is the shoe. Yeah, on running is the shoe, Hoka. Maybe there's some other ones as well that have just kind of gradually taken share and really, no pun intended here, burst onto the years from now and we're like, oh, yeah, no, we expected Nike to grow or kind of move past that. Whereas Starbucks, they are facing a bigger headwind, which is people are moving more towards energy drink consumption. That has been a massive growing category. consumption. That has been a massive growing category, whereas coffee consumption, I believe it's either stagnated or declined over the last 10 years. So, they kind of face a bigger headwind, not to mention they are a premium price point as well, which might deter certain younger generations also. So, yeah, it's been interesting. Starbucks has declined traffic specifically. So transactions was down 10% year over year this quarter.

And it's been negative. That's in North America, which is- That's a number of transactions. You can strip away price and stuff there, yeah. Yeah, and if you look at the pricing growth and the traffic growth, it's just going two separate directions. Traffic has continuously declined over the last six or seven quarters. And then they continue to somehow raise prices. We'll see if Brian Nichols steps in and changes that a little bit. I suspect that he probably will. But yeah, they have some maybe larger overarching industry-wide headwinds that they'll have to face relative to Nike.

It just seems like people are opting for different shoes at the moment. Yeah, they have different problems, but they have brand loyalty issues, I think, largely. They have brand loyalty issues, I think, largely. I mean, if you look at Starbucksotal but i i so many good coffee shops here in the city that it is like a premium price for a very mediocre cup of coffee so they have a bit of an issue there too yeah you know starbucks probably benefits from the fact that they offer an addiction to some degree. If we're thinking about brand durability over the long run, apparel is fickle. Trends change really quick. If you're selling something that's addictive like caffeine, you tend to be a little more durable. You look at some of the best

performing stocks over the last 150 years, 100, 150 years, they're tobacco brands like Philip Morris and stuff like that that have been around for so long, it kind of allows the brand to last for longer. But yeah, I'll be curious if Starbucks can really recover from this. You're right. I didn't really think about it, but I have not seen someone post – maybe I'm just getting old, but I have not seen someone post a picture of a Starbucks cup in quite a long time. I used to see that all the time. Alcohol, another big one. In Canada, according to the data from September year over year, Ontario, the province of Ontario sales fell by 2% year over year, Quebec by two and a half Alberta saw a steep double-digit decline. Provinces like Nova Scotia down 4.2%.

Manitoba down 6.7%. And British Columbia down almost 5%. So across the board at the province level, of course, on the national level down, these are significant year overyear declines in alcohol volumes, in my mind, like in a single year. You see these trends happen year-over-year of like, okay, people stop smoking as much, people stop drinking as much. It's happening fast. It's happening fairly fast. 62% of it, this is US data, 62% of adults under age 35 say they drink. 20 years ago, that was 72%. So down 10%. 10% of young people age 35 and younger say, I guess from age 18 to 34, say that they drink. 10% less people. And among the adults that do, this is a study done by Gallup, young US adults have cut back from an average of 5.2 drinks per week among drinkers down to 3.6.

So that's down an average of 1.6 drinks per week among the cohort that do drink. Every alcohol stock that I can think of, I threw into a FinChat performance chart, and they're all basically down, even total return, even their paying, distributing a lot of cash and buying back a lot of stock, have underperformed the S&P. Every generation has their judgments against the new generation. It's a tale as old as time. You know, saying they don't, you know, they don't work hard, blah, blah, blah. You know, they don't, you know, they can't relax and kick back and have a beer. You know, this happens every single generation. You know, we have people, young people work at our company i've had

the honor of working with some really smart young people they're tech savvy and they work damn hard in my experience you like you work hard like think of damien like these guys your kids are fantastic and they just have different brands they resonate with, different career aspirations, and different consumer preferences. The takeaway here is not any of these brands that we've discussed or alcohol consumption or Nike or Starbucks. The heart of the issue I'm trying to get at is, as an investor, it's our job to not fight secular trends. It's a, okay, I don't understand their preferences or I don't agree with what they're saying or I don't agree with their career aspirations. But you know what doesn't matter? The market doesn't care what you think or what you care about. It cares about the

underlying fundamentals and the story being told about these companies. And that's the story around these alcohol stocks is the data is saying people under 35, 10% of them less are drinking on average. So money is lost when a story changes for the worse. If the fundamentals also change for the worse with real data, you get smoked in the stock market. So don't fight the data. Don't fight the trends. I think it's a really bad way to invest. I think value investors and recovering value investors have had to learn this really the hard way. Yes, the stock can look extremely cheap on trailing multiples or trailing stories, but that's not how these businesses are going to be valued in the future.

Yeah, I agree. And I want to like some of these companies because there's some real advantages, like with Diageo, for example, or certain premium spirits, it's hard to grow. You either have to have a certain tequila farm in Mexico, or cognac can only be grown, the grapes can only be grown in a certain area of France. And if you have a regional advantage, it's great. But at the end of the day, if less people are drinking your alcohol, you're constantly facing a new headwind. A little bit of growth solves a lot of problems.

And a lot of the companies, even the most advantaged here are going to be facing that. Side note too, because I saw your notes on tail as old as time, older generations complain about the younger generations. I looked this up just to confirm. generations, complaining about the younger generations. I looked this up just to confirm. Socrates used to write a lot about how the kids just weren't working

as hard. And they just, you know, this younger generation, they got it too good, they got it too easy. And I like to think we've come a long way since then. So, it is really this is something that just constantly happens. You get old, the younger kids just don't have it

the way we had it and yeah it's it is really a tale as old as time a philosopher from the the 300s bc is saying the similar story right like this happens over and over and over again. And the takeaway here is the market doesn't care about your opinion. It's like a really hard reality, I think, sometimes for investors who want to just think objectively, not get emotional, treat this seriously, and not fight the secular trends. I mean, this is not to say that there isn't an opportunity when you think or know that there's something seriously wrong about the consensus story in the market. Like that Netflix example we just used, that meta example in 2022. This happens as well. But I have 20 years of data of people drinking less, right? That's not a quick quarter of missing subscriber base in the market overreacting. This is a real fundamental secular trend that is really hard to fight and make money. It's really difficult.

You know, if you look at it like tobacco in the 90s or something like that, like if you compare it to that era where it was clear tobacco consumption or cigarette consumption specifically was going to come down, like they were going to be facing that headwind. Less and less people were consuming cigarettes each year, and it was very clear in the data. But it wasn't as competitive. You can't advertise, at least in the United States. I think it's similar in Canada.

You're not allowed to advertise new cigarettes. So it's not like there's these startups. We've seen a ton of startups in the alcohol category. Tons. Like the entire seltzer category, basically. Yep. So, I don't think- Yeah, all the beer brands were sprinting to own the tobacco brands from 30 years ago, even though the secular decline might look the same and the tobacco brands were able to still grow earnings in the process

because there's very little competition and they can increase prices. I think alcohol is going to look very different. Not to mention, there's been a lot of – you can have a differentiated opinion on some of these extremely attractively priced tobacco companies where you go look volumes are actually increasing and they're selling zins left right and center or the zin competition of like these pouches that every every hockey bro wants to throw in before a game like that that is actually a real thing right so that's a good example of where money can be made where the story is wrong so it's all about like understanding is the story that's being told is there real fundamentals to back that up And if there is one way or another, it's like pay attention

because you can make a lot of money when a story goes from really bad to okay and okay to good and good to really good. But you can lose a lot of money when it goes the reverse, right? Like it's, you gotta be careful. Yeah, yeah, yeah, exactly. And there's a lot of alcohol brands that are not trading at the same discount that you get with other sin stocks. And they've got inventory issues and

declining consumption and yeah, a lot of the issues that they highlighted here. 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 not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has

everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it.

I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank, is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Let's have something more from you here about restaurants. This might be a good segue. Yeah. For FinChat, I looked through basically all the earnings throughout earnings season, especially all the big ones. And I noticed a theme with especially the restaurant brands. It started with Chipotle.

And then I saw McDonald's. And then I started to see, I think, Restaurant Brands International, tickers QSR, who owns Tim Hortons. And I believe they own Burger King, BK, and KFC. There's another conglomerate too that owns like three, but- QSR is Tim Hortons, Popeyes, Burger King, and Firehouse Subs. That's right. Okay. The-

Basically, every single one was reporting sequential declines in comp store sales. And keep in mind, that's sequential. So, they might've still had positive comp store sales. And keep in mind that's sequential. So, they might've still had positive comp store sales. Like for example, we're going to talk about Tim Hortons here in a second. They had, I think, 2% comp store sales growth across their stores. But it was 3%, I think, last quarter. I could pull it up on FinChat really quick. So, we're seeing sequential declines. And here to name the list of the ones I So, we're seeing sequential declines. And here to name the list of the ones I found so far that had sequential declines, it's pretty much every single quick

service restaurant. McDonald's, Burger King, KFC, Taco Bell, Pizza Hut, Tim Hortons, Popeyes, Starbucks, Chipotle, Wendy's, Domino's. Every single one saw sequential declines in their comp sales growth. Is that seasonality though, a sequential quarter? No, because it's going to be year over year figures. Oh yeah, it would be year over year. Right. So that summer versus the summer. Okay. Okay. Got it. Yeah. And when you go through some of the conference calls, you start to see it's really consumers trading down. Consumers are spending less. Average ticket is really being pressured. They're voting with their wallets in most cases. And so, specifically at brands

where they weren't the value brand, like Starbucks, that's not someone that I scream value or scream low prices. You saw really big drops in traffic, minus 10% in North America. Popeyes, same thing. Their traffic fell off a cliff and the management team came out and said, we were not positioned well for the value conscious consumer at Popeyes. Tim Hortons, on the other hand, 2% comp sales. And they actually, I think I've got a quote here. It says, yeah, this is from the Restaurant Brands International Conference Call. It says, Tim's in Canada delivered a 2.7% increase in comp sales,

primarily driven by traffic growth. While we continue to see a softer consumer environment impact the broader QSR industry in Canada, Tim's number one restaurant brand love and number one value positioning allow us to maintain our leading market share. Domino's said something similar, which is like, we had a feeling consumers were going to trade down. We positioned ourselves well. I think Domino's had 5% comp store sales growth. And so we're just seeing this total shift from post COVID, companies were, McDonald's was supporting, I think, double digit comp sales growth. And I think a lot of it was from average ticket, like inflation. People supporting, I think, double digit comp sales growth. And I think a lot of it was from average ticket, like inflation. I think consumers were willing to pay up a little bit and brands would say, oh, it's inflation, but they were really driving average ticket higher and higher. Now you're seeing it be a little more discerning. You're

seeing the same thing in a lot of the grocery stores. Walmart is reporting really strong numbers because they're where consumers trade down. When they don't want to spend premium prices on groceries, you end up at a value place like a Walmart. Or if you don't want to go to a Starbucks or you're pinching your budget and you're thinking Starbucks versus Tim Hortons, you're probably going to go Tim Hortons. So yeah, curious to see if this trend continues, but it actually kind of makes me feel if you're a Starbucks shareholder, maybe you feel a little more comfortable knowing that every other quick service brand struggled a little bit as well, but you kind of got to meet the consumer where

they are, which means a little more discounting most likely. Yeah. It'll be interesting to see what Nickel does. I think that's a really interesting point about these brands because I look at them all as low cost. But you're right. I mean, for someone who's a little more cost conscious, you're going to get better bang for your buck between these. between these like you can i remember going to domino's pizza and like using the when i was in university using the coupons and getting a medium like walk-in eat eat lunch and dinner for like six dollars yeah like it is way cheaper than groceries like way you can't you can't eat at the grocery store for two meals for six dollars no i think it's like they finally had to get rid of their discount that was like the promo was two two pizzas seven dollars each and it was like iconic like totally drove volume for them there's

two medium-sized pizzas they finally had to push it up a little bit i believe i can't remember what what the price is now, but yeah, I mean, it's hard to beat that value. And you're not going to get that at other pizza restaurants either. You go to any other pizza joint, you're probably paying more than 10 bucks for a pizza. Didn't Buffett just buy a bunch of Domino's? Yeah. He owns 3% of the company now, I think. Oh, wow. We talked about this last week. I think it was Simone and I talking about this, about Buffett's huge cast position and the Buffett indicator.

What's your quick read on this? Is this a huge offload of Apple, or is he really not finding value or can't deploy? What's your quick take? Everyone has a take on this. I want to know yours. I have a theory that he's trying to give, Buffett's obviously getting up there in years, and he's trying to give his lieutenants a clean slate.

He's a young lad. Yeah. I mean, people said this 10 years ago that he's getting up there in age, but I think he's probably trying to give his lieutenants a bit of a clean slate. I might be reading into it too much. Whereas if you're his lieutenant, Todd Combs or Ted Weschler, and you inherit a portfolio that is 40% Apple trading at 40 times earnings with very little growth, your scorecard is probably not going to look that good. And I mean, 10 years out, it might be tough to really –

one, it's hard to find positions that can be large enough to impact it when 40% of your portfolio is Apple and you have that much in cash. So I think if you have a whole bunch of cash and you kind of sell off some of the more expensive assets, maybe he's waiting for the right pitch, but I think it makes it a little easier on his lieutenants from here. Some people are speculating there's a dividend coming, but he's never done it yet. I'd be surprised if it happened now. So I don't know, that's kind of my take is maybe making other than the operating businesses starting to

reduce some of the equities and give a cash portfolio more to his lieutenants. Yeah, it makes sense. I mean, especially around the Apple position, because it just had become such a giant piece of the equity pie i think it was what oh was it over half or 40 i'd have to look i don't think it ever got over half but it was it was a huge piece in in that ballpark and um yeah so the clean slate thing happens it's just it's funny i mean yes I think the market is frothy, but people are saying, oh my God, this Buffett indicator is when he's holding this much cash. Have you looked at the cash and cash equivalents on a chart? It's been going up. This is not new. It's in the hundreds of billions now. And I remember being on this podcast years ago and

going, oh my God, he's got 160 billion in cash now. What does this mean? Looking into the tea leaves and now it's double that. The market's ripping. It's crazy to put that as some sort of indicator in my mind because there's just so many external factors that you and I won't not know the answer and no one will. And so that's why I think people are just speculating. Yeah. And you don't know what percentage of that they're mostly allocating to insurance reserves, as opposed to them saying, I want to store up cash and buy treasury so that we can get some mammoth deal when things turn sour. I mean, a lot of it

could be that they want more for insurance reserves or maybe they find treasury is attractive, but keep in mind, they're fishing in a different pond. They bought 3% of Domino's, one of the biggest pizza chains in the world, and it's 0.2% of their equity holdings. There's less opportunities for them. Oh, yeah. Yeah, yeah. And he's talked about that so much, right? The returns he was getting on a small pile of money and the way that they were investing was so materially different. He says that in the shareholder meeting every year. He's like, guys, what you're able to do sitting on the floor is just such a better position to be in than what I can do. That's how I read it every single time.

Yeah. I mean, think like the number of companies that can actually make a difference to his equity portfolio, probably really low. You can go down the market cap list and once you're probably a hundred to 200 companies in, that's it. Like if you haven't found a company in that pile, it's probably not going to impact your overall portfolio. Yeah. Makes sense. I mean, it's just such a different constraint to deal with, but- A good one. I think I said to Simone, the actual Buffett indicator should be people on Twitter saying that they're

smarter than him. It's like a real time to get defensive in the stock market. Yeah. Yeah. My returns are beating him for this week, for this week, this hour, this minute.

Well, that does it folks. Thanks for, for tuning in Anderson, that does it, folks. Thanks for tuning in. Anderson, thanks for joining the pod. Where can folks find you? I will say I'll do a plug for the account you manage, which is the FinChat Twitter account,

at FinChat underscore IO. You've brought that account to zero to, what, like 35,000 followers in the last year or so. Somewhere in in that ballpark i don't think it's at 35 yet but hopefully hopefully soon yeah 30 something round up yeah there's endless content to post from fin chat honestly like yeah so many different valuable data points and comparing companies to one another with the KPIs. And it seems to have resonated a lot on the Twitter sphere with our followers. So yeah, there'll be plenty of more content to come. And where can the gang find you? I think you'll be frequented on the pod more and more these days. So people probably want to be able to see where they can follow your stuff.

Yeah. If you enjoyed this and you want to hear more, I co-host a podcast of my own called Chit Chat Stocks. I'm also on Twitter on my actual page, which I don't use as much anymore because I'm mostly on FinChat, but I think it's CCM underscore Ryan. But yeah, really, if you want to hear my thoughts, it's going to be all on the podcast, Chit Chat Stocks. Beautiful. Thank you, man. And for the listeners, you can support the show on the Patreon at joinTCI.com. That's our $9 a month portfolio update Patreon. And if you haven't given the show a rating on Apple Podcasts or Spotify, that is much appreciated. You can throw in there, give a little rating on Apple Podcasts. If you're on Spotify, you can throw a certain number of stars and then press follow and then

the pod will automatically come into your feed. Helps us a lot, costs nothing, and we appreciate it very much. We'll see you in a few days. Bye-bye. lot, costs nothing, and we appreciate it very much. We'll see you in a few days. Bye-bye.