The Canadian Investor - Netflix, Peloton, Intuitive Surgical, Canadian CPI and More!

Episode Date: January 27, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Canadian CPI reaches 4.8% in December The recent volatility in the markets Intuitive Surgical earnings Netflix earnings ASML earnings Goodfood Earnings Things going from bad to worse for Peloton The impact of the truck drivers shortage on an already strained supply chain   Tickers of stocks discussed: ASML, FOOD.TO, NFLX, ISRG, PTON   https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. Live from the great white north, this is the Canadian investor where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast today is Monday, January 24th, 2022. I'm Brayden Dennis, as always, joined by Simon Belanger.

Simon, are we entertained? Are we having fun yet in this volatility? You and I both have the same stance that this is a beautiful thing. Long-term investors should be thrilled with drawdowns, but it's a bloodbath out there, buddy. Yeah, yeah. It was an interesting day to follow, that's for sure. I think we were just talking about that before the recording. NASDAQ was down about four percent at some point and then finished a day slightly in the green well i mean it's still trading at the time we're recording so there's still time there's there's six minutes seven minutes on my clock yeah so there's still time it's been fun like for some examples here there is a 20 percent change in the price of Shopify equity today.

From dropping 10% to finishing up 5%, the volatility on some single equities today is crazy and the market is crazy. And it makes you remember that this is all a good thing for long-term investors and for self-directed investors who don't have to answer to short-term results. You can do what makes sense because you and I both know that the value of those specific companies, let's use Shopify example, had 20% intraday change in its price in one trading afternoon. You and I both know that the value of that asset and that company did not change 20% in one day. And that is the crazy and the beauty of the stock market if you're long-term oriented. Yeah, yeah, exactly. It's basically the market saying,

if you're long-term oriented. Yeah, yeah, exactly. It's basically the market saying, oh, it's worth, what, 20% less on one moment in time and 20% more in another moment in a very short period of time. It may still be overvalued to some metrics, to some people, that's fine. But just those wild swings within such a small period of time, I think, just reminds people that these growth stocks, there are some great businesses out there. I think Shopify is one of time, I think just reminds people that these growth stocks, there are some great businesses out there. I think Shopify is one of them, but they will be volatile. And today was definitely a reminder of that. So I have an announcement as well for the podcast because I beat you to it. You did. Did I beat you to it?

Yeah, you did. Okay. So we've been like simping over what an awesome business it is. Toby's the man. We love Shopify. The business, the stock we haven't loved because it's traded at prices that just didn't make much sense. It is now taking a 50% haircut and I pulled the trigger. I bought a few shares and I can finally stop sitting on my hands. I'm finally a shareholder in Shopify. So I'm feeling pretty good. Yeah, I mean, I probably would have pulled the trigger as well.

But I'm keeping some money aside for tax time. So I'm trying to be a bit more conservative and just making sure I don't have any bad surprises come the new year. So that's why that I didn't buy too much today i did buy a little bit of bitcoin over the weekend but that's about it for me but speaking of crypto but also growth stock just to continue to what we were saying so the nasdaq is actually down more than 15 since its recent all-time highs in november and down 10 in the last month. So we are in correction territory. I did these stats over the weekend. I was going to redo them just before the recording, but then it picked back up so much since noon that I know those are pretty close to the real numbers. The S&P 500 is not quite

there yet, but it's getting close to the 10% mark as well. Bitcoin on the other end is down more than 25% in the past month and Ethereum is down more than 35%. Bitcoin and Ethereum are both down close to 50% since their all-time highs in November. So if you own growth stocks or crypto I'm sure you're feeling it right now and I know know I am, but I really don't worry because, again, we've talked about it time and time again. I believe in the stocks and Bitcoin and Ethereum in the long run. And these drops are not uncommon, especially for crypto. 50% drops, they do happen. For example, Bitcoin had a 50% decrease in 2021 before it doubled and reached its all-time high of November.

So just look it up when the China mining ban was announced. Shortly thereafter, it dropped into low $30,000 and then went back up within a few months to close to $70,000. I'm talking about USD here. here so make sure it's just a reminder to allocate accordingly if you get into growth stocks or crypto because you have to make sure that you're comfortable with the percentage you own and won't panic when you see big swings like this and that's really important and if you can stomach it then there are stocks that have a lot less volatility that are still very good business. Yes, you might get less growth, but there are options out there for everyone. So keep that in mind. This brings me to what I think is probably the most important thing in any drawdown is you have to know the asset

you're investing in extremely well. Whether it's something more speculative, whether it's a growth stock, whether it's a blue chipper, at the end of the day, if you don't know what the company does well, or if you don't understand the technology you're investing in, and you see massive drawdowns, you're not going to know how to act. And that's a bad thing, right? You want to be able to have some confidence on price sentiment, whether the market is seeing something or it's just a drawdown on the whole market. And that could be opportunity. I pulled up a couple screenshots here from Stratosphere's charting tool, which I thought were interesting polarizing types of investments.

I thought they're interesting polarizing types of investments. Berkshire Hathaway and ARK Innovation ETF. ARK Innovation ETF has been getting absolutely smoked. It represents basically expensive, unprofitable, high growth, fairly speculative, air quotes, innovative company. Some of the holdings in there are awesome businesses. Some of them are extremely overvalued junk, in my opinion. I've been pretty critical over what they hold for a long time, maybe because I'm a boring value type investor. Let's not get it twisted here. Some of the stuff in there was trading at prices, nosebleed, face ripping, doesn't make any sense prices. And this happens in the stock market all the time. And we saw a lot of new investors come into the market and buy what was hot, especially when we had record brokerage account openings in 2020. And then again, in 2021, it's a valuable lesson to learn right away is that

even great businesses can be bad investments if they're not trading at good prices. So if we look back three years, ARK Innovation ETF from the COVID crash until the end of 2021 had wildly good performance. It was up over 200% in that timeframe. It has now come down so much that's dipping past the S&P 500 in that trailing time span. And then now if we look at a year basis, a very polarizing security, not polarizing, but a very opposite performing security, Berkshire Hathaway, BRK.B, the B-class shares. On a one-year basis, shares are up like 25% on Buffett's Berkshire. And you are in a more than 50 drawdown on the arc so this is just a really telling graph that i wanted to pull up into the kind of environment that we're dealing with it's a useful reminder and for some people unfortunately a very costly one yeah it's

funny it's almost uh the three-year chart is almost uh you know i then like the end result is the same for all three but the path is widely different that's right yeah i mean i i ran a poll uh between berkshire hathaway and the s&p 500 i said i ran a poll on twitter and it got like a thousand votes and it it was like, do you think over the next 10 years that Buffett's Berkshire, Charlie's Berkshire outperforms the S&P 500 over the next 10 years? And it was a split down the middle, almost exactly cut in thirds for one third. Yes, it's going to outperform. One third, it's going to underperform. And the third result was one third, it's going to match the returns.

So basically, we have from that data, from my thousands of people following on Twitter, they think that Berkshire is going to basically mimic the index for the next 10 years. And I think that that's probably a pretty good take. Yeah, I think it'll vary a little bit just because Berkshire is so heavily weighted in energy, financials, and financials, I include insurance here and Apple. I mean, there's other- And utilities. Yeah, exactly. So that's why I think depending how those perform, it'll have a greater impact, I think, on Berkshire than the S&P 500, which is a bit more tech heavy. More tech.

Exactly. So I think that'll probably, depending how you see those sector evolving in the next 10 years, I think that's the answer that, you know, that's probably how you'll answer that poll, in my opinion. Yeah, just because of such the heavy weighting in Apple, I think that there's enough exposure there to some of the big tech names in the S&P to get somewhat similar tracking on the index. But I mean, yeah, with how much is tied up into FANG or Magma, whatever you want to call it, there's definitely going to be a wide spread over 10 years. Probably. I mean, who knows? This is just speculation. Yeah, exactly. Now, moving on to a different topic,

because Canada released its CPI increase for December 2021. It was lower than the US, but it still increased 4.8% in December, which is the fastest rate since 1991. The overall figure is what gets the headline, but I always find it interesting to dig into the numbers and see exactly how each category items have fared. So the one that stood out for me, well, the one that stood out was energy, which was up 33%. And the aggregate of electricity, natural gas, gasoline, and a few other items in that same category were up 21%. So we're really seeing energy as a whole, not just gasoline.

The 33% was gasoline alone, just going up quite significantly. And I just always get annoyed when they talk about core CPI because they zero out the price of gasoline. And to me, it makes no sense because yes, I get it that it's volatile, but it's still part of inflation for a lot of people, right? A lot of people still depend on that. Now, transportation was also up quite a bit at 8.9%. Food was up 5.2% overall. And Stats Canada also published their annual review for 2021. So the overall CPI increase for 2021 was 3.4%, which is quite high when you think that the Bank of Canada target is to keep inflation between 1% and 3%. That's why we always hear of that 2% target because that's the midpoint. And gas prices were up 31% in 2021 year over year. Overall groceries were up 2.4%,

but some items were way up while others were relatively stable. For example, eggs were up 6.3%, bacon 12.5%, while fresh fruit was up 2.6%. Almost makes me think I should become a vegan because it seems like those were lesser increases. It's time to become a vegan for your wallet, Simon. So here's, I found an interesting extract from the Stats Canada website. Essentially, what they were saying is they were saying that prices went up so quickly last year that the base effect from last year should have a downward effect on cpi for 2022 so that's what they posted on their website

and i was wondering brayden like what what are your thoughts on that do you think that they're right do you think it's a bit kind of risky trying to use the base effects? Will inflation continue on the same pace as it is right now? What are your thoughts on that? It's really hard to say because it's like they're saying like, okay, we saw a really high CPI and then moving forward to 2022, how does that base effect affect what we're going to CPI print this year? And I just don't know if I buy into that concept because if you see what we're seeing right now, what's got to give for that to change? I mean, we're seeing tightening on the macro side. Like, I'm not an economist.

I really can't speak much to that. And I don't put more than a second per year into economic predictions. So, I don't know if I'm going to put too much weight into an economic prediction, even from stats can at this point. No, I just thought it was interesting for them to try and make that forecast when most people have been trying to forecast inflation and CPI for the past couple of years. I've been way, way off. A lot of people thought it would pick up faster. Yeah. A lot of people thought it would be transitory. You know, depending on who you're reading, who you're listening to, you'll have all these different kind of predictions that probably did not fully come true in the past couple of years.

I just thought it was interesting for them to try and use the base effect. I don't know where it's going either. I'm not smart enough to know what will happen next year in terms of CPI and inflation. You're smart enough to know that predicting it is a waste of time. Yeah, and there's some way smarter people than me that have been wrong. So, I'm just not going to try and predict. But I just found it interesting that they're trying to say that base year effects will have an impact in 2022 on the downward effect, which is, I think, a bit ambitious. I was watching some football this weekend. Oh, what a good weekend of NFL football.

Oh, unbelievable. So, I was watching with some buddies and one of my buddies goes, Braden, like every time I'm on a news site, I'm always seeing, you know, this economist thinks this and it'll be on the front page of the business or financial newspaper or website. This economist thinks that housing's heading this direction, or there's going to be this many rate hikes in 2022, and the market's going to do this, and the market's going to do that. And he goes, why are they all wrong? I said, that's because as Peter Lynch said, 15 minutes per year on economic forecasts and predictions is a waste of 15 minutes per year. And so it's one, it's impossible to predict. Two, good investors, in my opinion, are focusing on the companies they own. And the best businesses in the world can kind of survive and thrive in almost any type of environment. And a lot of that has to do with pricing power and durability, recession-proof, non-cyclical, these types of things. These are the things in our control, Simon. Owning great businesses, holding them for the really long term. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees.

They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because

brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Bloss in the app store, and I'll see you there. We're getting into earning season, Simal.

Slowly. We're getting into earning season. We got Intuitive Surgical here. You're going to talk about Netflix here. We've got a couple more on the slate. Intuitive Surgical released their fourth quarter and procedures were up 19%. When I say procedures, Intuitive Surgical manufactures the DaVinci Surgical System, which is a robotic-assisted surgery business, what they call RAS, R-A-S, robotic-assisted surgery. The company shipped 385 surgical systems, which was an increase in 18% year over year compared to 326 that they shipped before. The company grew its DaVinci Surgical System to 6,730 systems installed base for the

end of the year, 2021. This increased 12%. Fourth quarter revs was 1.55 billion in top line sales, an increase of 17%. I took an excerpt here. We cover this business on stratosphere investing. And we have a thing at the top that says, where are we at with this business now? What's happening with competition? And so I took this excerpt that we wrote. Robotic assisted surgery systems are gaining ground as hospitals seek better outcomes for patients. The DaVinci system is the best in class and once planted in a hospital, Intuitive makes tons of money from instruments and accessory sales. This is the truest razor and blades out there, right? It's like you get that installed base and then you have this high margin recurring revenue base

because all of the instruments and accessories are one-time use for these surgeries. That's really solid. Moving on on the excerpt here, competition is here, but we're not quite concerned yet. Johnson & Johnson delayed the release of its system until 2024, and Medtronic must overcome the 21-year head start Intuitive has benefited from. I have a category of companies where it's like, it looks really expensive on the growth rate. Well, and it is an expensive stock. It's getting more attractive as many of these are right now. But it's not like a stock that's going to grow 50% on the top line year over year like a lot of these really high price to sales companies are. However, the runway for growth is in the decades.

And that's why it's so attractive for me is that they could do double digit rev growth for a long, long time in my opinion. Like the growth runway is extremely long for robotic surgery. Yeah. And I'm wondering if they'll see an uptick in surgeries as hopefully COVID-19 normalizes and we probably enter an endemic I think is the term. Yeah. Yeah. Yeah. So I wonder if they'll see an increase in elective surgery because a lot of them I know have been pushed back.

I don't know if that's affected them a lot, but maybe there is some potential more growth coming from those that were pushed back because of COVID-19. Yeah. So in 2020, they actually did have less top line sales than the year previous. But now in 2021, it's exceeded both of those years. So 2019 and 2020. So we've seen it come back in a major way and increased adoption. It's really sticky too. And the surgeons love it. Coming right from the mouth of the people who use it, the customers, they love it. They don't

want to go back. It's safer. It's more efficient. It's better for everyone involved when it comes to outcome, safety, and the surgeons. And so, they can kind of continue to tack on the capabilities of each procedure, right? Because they have to design and build specific processes and instruments and robots for each specific surgery, right? So as they continue to build out that fleet, this is what I mean by they have a wide horizontal room for growth as well. Not only do they have a lot of upside in the procedures that they already do, but the fact that they have so much optionality in the procedures that they can do in the future. year results. Netflix shares actually failed 21% on Friday because mostly of slowing subscriber growth. They added 8.28 million new subscribers for Q4 of 2021. But where the market seemed to have been disappointed was that they expect to add 2.5 million subscriber in Q1 of 2022.

And for comparison, that's compared to last year. Last year was 4 million for the same quarter. So quite a bit less. Netflix also mentioned that competition is starting to be more intense from more entertainment companies because a lot of them are starting to launch their own streaming offerings. Especially this has been happening in the past 24 months and that's a shift from the past as Netflix had said that other streaming products wouldn't materially affect its growth so it's they're starting to mention that yeah it might affect a little bit more than they had said in the past and before we get to their, Netflix announced that they would also increase its membership costs in Canada and the U.S. So, Brayden, we talk a lot about the pricing power.

And I think they do have some pricing power. The plans that they're starting to increase is basically in Canada. The increase will be $1.50 to $16.49 for the standard plan. And for the premium plan, it's going to rise by $2 to $20.99. And they are putting in place some similar increases in the US. I know we've talked about them quite a bit. I think they do have some pricing power, but I think there's some limit to that pricing power. That's always been kind of my stance on it. I refuse to be bearish on their pricing power anymore. Because I was like you, I was like, okay, a couple hikes for sure. They can do a couple hikes. Dude, no, they're doing lots of

hikes. And I don't see how that has slowed down subscription growth. Now, I do want to say in their latest quarter, their latest print, the one you're talking about right now, it was the lowest trailing 24-month of net subscriber ads since 2018. And that's been a downward trend. It kind of peaked in the first quarter of 2020, quarter of 2020, obviously. I mean, we can see that. That being said, it is a fully cash-producing, self-sustaining, operating leverage, cracked out operating leverage this business is going to generate. I think that this is a good time to own Netflix with this drawdown. But to answer your question, I'm going on a tangent here. To answer your question, I am not going to be bearish on their pricing power ever again because I continue to be wrong

on that. Yeah. I mean, I think I would personally, I think I disagree with that just mainly because I'm thinking about myself and it's starting to get to the price too that people start noticing on their credit card statement when you hit that $20 threshold especially for the premium I know the standard plan is not there quite yet you're starting to notice a bit more it's not that $10 that you know Disney Plus is charging or whatever other streaming service, you really have to, I think, start providing some good value when you're starting to increase the prices and reaching that threshold. So that's why I'm a bit more reluctant because I'm thinking about myself. If we didn't have, you know, a few members of our family using our premium plan,

I would probably, you know, kind of stop for a few months, restarted it for a few months, I kind of start and stop as we watch content, depending on other platforms and whatnot. So that's kind of where I'm looking at just because of just a psychological aspect of reaching that $20 threshold. Yeah, and I get that. And that's what they're mentioning, which is if you have a bunch of streaming services, it's going to add up. If all of us are continually increasing the price, now we're... Our customers cut the cord, which is the term used for canceling their cable plan that they had with their big telco and are just doing streaming instead. And so they cut the cord because they weren't using their cable and the cable cost

a hundred bucks a month. And they, there was terrible value. You can subscribe to Netflix for 10 bucks a month. Now it's like, okay, you can scribe for 20 bucks, but Oh, are you going to also subscribe to prime? Are you going to also subscribe to Disney Plus? Are you going to get the long, long list of them? I guess from that perspective, I see where you're coming from. I still think the value proposition is so good, even in future price hikes. That's my opinion at this point. Yeah, fair enough. My last concern about them before we we kind of continue the earnings here uh from our little tangent is um i i also think you know content creation is not cheap and that's always going to put a lot of pressure on margins for nesflix so i think that's uh that's the other area of concern that i have because if you want

to keep those subscribers you have to invest in content. And if you don't, obviously, I think it would have an impact on that. But I digress. Now, they had a very good quarter, I think, in terms of revenues. So their revenues in terms of they were up 18.8% for the year to $ nine point seven billion net income increase eighty five percent to five point one billion eps increase eighty four point eight percent to eleven twenty four a share they were free cash flow negative this year compared to last year with the addition to their content asset always being the largest line item in their cash flow statement it was significantly higher at 17.7 billion compared to 11.8 billion last year but essentially you know it seems like it

is paying off in terms of content for next netflix because um like you know they seem to be at least for now keeping those users they're able to do those price increases. We'll see if it affects their user base. And for that content creation that I just mentioned, if you wanted to understand how it ends up on their balance sheet, well, that's why it comes out of the free cash flow statement because it does go on the balance sheet as an asset. And I said free cash flow, but the cash flow statement. For the results, there are lots of questions that investors have. How sticky is this growth? The net ads are lower. Growth is slowing. Content's expensive. Why buy this instead of buying Amazon? That's one of the questions that I know I have. I can't speak

for the market, but I asked myself this too. I started your segment with, I think that Netflix is very interesting here. The valuation has come down quite a bit. They're definitely a very good business. The unit economics aren't great, but they reach this level of operating leverage that it's okay because they're so big. For me, it's like, why buy it over Amazon? Straight up, if I'm looking at a comp, why would I buy it over Amazon? I can't answer that question. If you do a sum of parts, why would I buy it over Amazon? For instance, here's to give you some little context. Netflix revealed that it's going to spend over $1 billion on cloud computing costs through 2023. Who takes that cloud computing costs? Oh, yeah. Netflix is Amazon's web services,

one of their largest customers. And so I guess from a comps perspective, you look at how much Amazon's gone down and they compete on Prime. Yeah, there's all these other businesses. It's like, why would I buy just Netflix when I can buy Amazon? That's what I think anyways. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission-free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real

people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000

Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know,

I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right. ASML. I recently spoke about this on our stocks on our watch list segment that we do biweekly now. So we'll do that again soon here. ASML is the glue of the semiconductor industry. They're a Dutch company that manufactures lithography machines, which are required to make semiconductors. When I say semiconductors and you hear chips, it's the same thing. So don't sweat the small stuff. Each machine has more than 100,000 components and costs hundreds of millions of dollars each to make one machine. They are these marvels. These lithography machines are

marvels of engineering, and they're a bit of a bottleneck for bringing on more capacity for semiconductors. This is why you hear any casual conversations like supply chain, inflation, and chip shortages. ASML has this super fat wide moat in this business, and so here are their Q4 2021 results. Revenues were up a nice 33% to 18.6 billion euros. These new lithography systems for full year was 286. So they shipped 286 of these things. And they also sold 23 used systems here in their press release. So that's a small, very small segment in comparison to the 286 that they shipped of new machines. This is crazy impressive. Because remember, the same scale in terms of cost to make one of these lithography machines as commercial airplanes. I'm talking about hundreds of millions of dollars. Net bookings more than doubled and gross margins were a solid 52.7%.

Ownings per share year over year, full year was up 69%. Nice. And with the theme of this podcast today, shares are a little trading down on a nice little drawdown right now, even though this company is so great. Let's not kid ourselves. The stock is still up 450% over the past five years. It's on my personal watch list with some free cash if I decide to buy some shares. I'm very interested in buying shares. This is a Dutch company, but shares do trade on the NASDAQ for ticker ASML for $660 per share. Yeah. I mean, it sounds like very good results. And do they have any competitors or they're pretty much the only one in the space? It's quite monopolistic from that perspective in the lithography business.

Okay. There are other players, don't get me wrong. But most of the other players are... ASML is their customer. Like to supply the finished lithography machine to then ship it to TSMC. That's basically how the industry works. Okay. Okay. No, interesting.

No, I think you've talked about them before and definitely an interesting company. So, I'll probably add it to my watch list as well. Fat moat, very fat moat. Now, moving on to a company that's not doing as well, actually a company that's doing very, very poorly right now. And that's nice. That's nicely put, Simon. Yeah. So Peloton, I'm sure people have seen the news. This is another one I had to add a little bit more to my notes today because I typically do my notes on the weekend when we record on Monday. And I did my notes over the weekend. But then today, Blackwell Capital LLC, which has a stake of less than 5% in Peloton, has been calling for the departure of the CEO and co-founder, John Foley. They're also calling on Peloton to explore the

sale of its business to either other type of fitness businesses, or I've even seen some mention of companies like Apple that would be more in the tech space. I mean, that's interesting to say the least, but to give a bit more context, this is another growth stock that has seen a big fall. And that's really an understatement. Peloton is down more than 80% over the past year and more than 20% last week on the news that an internal document was showing that they were halting production due to weaker than anticipated demand for its bikes and treadmill. For context Peloton now sits below its pre-pandemic IPO and it's actually about at the pre-pandemic IPO price now of $29 per share but it's still not great considering that it was worth quite more than that.

I think it was in the hundreds of dollars during the peak of the pandemic. I don't have it right in front of me, but if I do the reverse math, that would make sense. And Peloton said that those reports were incomplete and out of context. However, their investor relations side did mention the following as we discussed last quarter we are taking significant corrective actions to improve our profitability outlook and optimize our costs across the company this includes gross margin improvements moving to a more variable cost structure and identifying reductions in our operating expenses as we build a more focused Peloton moving forward. So that means like that's corporate talk in saying that there's definitely

some big changes coming and it's not going well at all. And to go on top of that, they actually provided a preliminary update last week on their Q2 earnings report that will be out on February 8, 2022. The update was not great either. So they're forecasting now revenues of approximately $1.14 billion versus their previous guidance of $1.1 to $1.22 billion so definitely on the low end there and they're ending their connected fitness subscription of approximately 2.77 million users versus previous guidance of 2.8 to 2.85 million so it's not it's really not great um i think if you're a Peloton shareholder, I definitely feel for you right now. But it's definitely a stay-at-home stock that has not performed well in recent months. And it really sounds like management, they revised their guidance a few times now. They really made some

bets that, yeah, they just didn't foresee the market going where it was going. I think it's as simple as that. As soon as the news came, I never owned shares of it. I thought it was an interesting business. I talked about it a few times on this podcast. As soon as I hear a company, the management come out and say, we're hiring McKinsey to do some restructuring. to do some restructuring. You bet your ass I'm selling shares. I'm going immediately to my brokerage account and getting out of there. This is just a bit of a... The wheels have come off on this stationary bike, Simon. Yeah, yeah. And I was looking, I just was browsing on their website just for fun, just to see how the cost of bikes and subscription and their subscription is $50 Canadian a month, which is not crazy in terms of price.

But again, you know, unless you use it a lot, I'll go back to what we were saying about Netflix. I think it's a high enough amount that if you're really not using all that much, at some point, you'll just say, okay, I'm just cutting that out because it's still 50 bucks I could use on something else. And with things reopening more and more, I think that will probably be the reasoning of some of their users. I know some of them are very loyal and that's great. But I think just something to keep in mind too. Yeah. I mean, for many people, we've seen at home exercise equipment become

a drying rack for laundry. It's become cliche to say, but it's true. And if that happens, you bet that people are going to unsubscribe. And that's just the nature of fitness and to stay at home fitness is it's a tough business sometimes. All right, let's move on to a tweet here that I just wanted to pull from Barry Schwartz. Barry's been on the podcast here before. He tweeted something that I think is very useful and can resonate with a lot of you. He tweeted four things I will not do during a drawdown. Keep in mind, he manages money professionally. And so he has to be understanding of client needs as well.

But he has to be that voice of optimism and reason. And hopefully, Barry, you're okay with me sharing this. I thought this was awesome. He goes, four things I will not do during a drawdown, a.k.a. when stocks are falling like they are. One, sell because I'm worried things will get worse. Two, sell what has gone down a lot to buy what has not. Three, be concerned that my portfolio is doing worse than index A, B, or C.

And four, wait until the market bottom to put funds to work. Number four is probably the most important one of them all. Timing the bottom is impossible. Every correction, I think, is probably a good time to buy stocks. Historically, every correction has been a good time to buy stocks without a single exception. Every single correction over a long enough time horizon has been a good time to buy stocks. Yeah. You need to buy while on the way down to the bottom. You do. You do. No, you totally do. And that's why you dollar cost average. And you have to recognize that things can still get a lot worse. Like we kept saying in March of 2020, look, I'm buying stocks hand over fist right now.

This is the buying opportunity that you wait for. This is that Shopify 50% drawdown that I've been waiting for. And so it can get a lot worse. That security can fall another 25%, 30% easily. that security can fall another 25%, 30% easily. And I need to be aware of that and okay with that because I'm going to focus on the business and not the stock. Yeah, no, well put. And now we'll move on to some more earnings. This one's a small Canadian company. I think most people will actually be familiar with it.

Good Food, they reported their Q1 2022 earnings so good food for those who are not aware of them they do milk kit delivery for a bit of context here it's a pretty small business they have a 245 million approximately market cap might be a bit lower because of today good food is down about 75 percent in the past year. And looking back just at their chart, a high look, you can easily see that this was a stay at home stock because it got a huge run up before the pandemic. And then during the pandemic, obviously, and then has been on a steep decline ever since. Their net sales decreased 15% year over year to 77 million. Their gross margins went from 32% last year to 22% in this quarter. They were free cash flow negative for the quarter for just shy of $33 million versus being almost

break-even on a free cash flow basis last year. The meal kit delivery is something that I personally would not invest in. It just seems like it's not a great business. There's a lot of variable costs as well involved in here. And I don't think consumers are that loyal either. And so they don't really have a moat. To me, the big risk here for them, I think, the elephant in the room is grocers, right? So if grocers start taking on this business and taking advantage of their distribution um i think it could be really scary for a smaller company like that i know metro already has a subsidiary i was reading on this miss fresh i believe i haven't tried them but and i wouldn't be surprised if loblaws eventually got in that business. Maybe once the pandemic kind of levels out a little bit because I think they're probably – they have their handfuls with making sure their

stores are running well and so on. But yeah, it's just – it's a company I would have trouble investing in. I don't know about you, Brayden. All of the large grocers at this point are at least experimenting with it at a bare minimum. And I agree with you, the economics of these companies is tough. And it relies a lot on, I'll put it this way. There is this like path to profitability, old adage in Silicon Valley. And many of these types of businesses, there's just not that much operating leverage to actually move the needle. And so growth just gets more and more and more expensive. And from a risk adjusted perspective, I think that many of these companies, including Goodfood, are really difficult to invest in.

Now, that's not to say it's not a great company. I've tried the service. I think that a lot of these meal kit delivery companies are really good. We've had HelloFresh and Chef's Plate sponsor this podcast. We've used the services. And so thanks for sponsoring the podcast. We've used the services. And so thanks for sponsoring the podcast. We've used them. And it's really good.

Like this is not an ad, by the way. It's really good. Like the services are really good. But the competition is wild. Like the competition for these as an investable idea are very, very difficult. So I agree with many of the things you're saying. Yeah. I wonder if some of them will start doing like some customer loyalty plans or systems because to me, that seems like a bit of a no-brainer because I've tried a lot of different

ones and I liked them all pretty much. I don't like... Yeah, they're all good. They're all good. I'm just going to be straightforward here. But again, it's easy to cancel. That's a thing. And it's easy to kind of switch from one to the other depending on what you're looking for or depending on the deals that they're offering. So yeah, that's kind of where I see it. But I wanted to add that because it's a Canadian company.

It's a smaller one. And I'm sure some people may have an interest in them or maybe even own it so i thought it was a good idea to add it yeah fair enough last segment on the slate for you guys today which is called truck yeah that's what i put and that's what it's called uh so this is an interesting development happening right now here in Canada, which is that hundreds, I've took some excerpts here from one of the big media agencies, not agencies, one of the big media companies here in Canada, which is covering the Freedom Rally. Hundreds of truckers set off from BC to Ottawa on Sunday to protest a federal vaccine mandate, despite urging the country's largest trucking federation to comply. The protest has been dubbed the Freedom Rally against the federal mandate for cross-border truckers, which went into effect on January 15th.

for cross-border truckers, which went into effect on January 15th. So very recently, Canadian truck drivers now need to be fully vaccinated if they want to avoid a two-week quarantine and pre-arrival molecular test for COVID. The Trucking Alliance and the American Trucking Association say up to 26,000 of 160,000 drivers who make regular trips across the Canada-US border are likely to be sidelined as a result of this mandate. This is the number that I just said that is useful for context. 26,000 of 160,000 drivers estimated to be sidelined as a result of this mandate. We're not here to comment on the mandate at all. You guys can make your own decisions. Everyone can make their own decisions on what they think. This is a significant amount of drivers in trucking that affects logistics. It affects our economy. It affects our supply chains. This is worth the discussion.

And it ultimately hurts Canadians right now with 26,000 of 160,000 drivers who make this Canada-US border regularly to do their job are not going to be working. That's concerning, man. Yeah. And, you know, whichever part of the debate you stand on, whether, you know, you support it or you're against it um you know we won't get into that um everyone like braden said has their views but i think the one thing you cannot debate is when you have 16.25 percent of your workforce that could potentially not work um i don't care what kind of business that you have this This is going to be disruptive. And definitely some businesses that rely heavily on those goods and services. And obviously, like you said, you know supply chains very well.

You know, I don't think it'll be a surprise to me and probably not to anyone if we see some kind of some items on our shelves that are just not as available in the upcoming probably weeks months i would say i think there's probably always a bit of a delay right before that happens so yeah maybe even quarters yeah so it'll be the development will be interesting just to keep an eye on but um yeah i think i think it's inevitable 16 is not is not nothing. So, there's going... For an industry that's already been so constrained, right? Like, there's already been so many headwinds. And then this, it's... I think my generation, maybe yours a little less, but, you know, we're 10 years different, but my generation are a lot of the parents, it was basically you go to university or college, like that's what you do. There was not a lot of value put on, you know, these types of blue collar jobs.

And I think now we're seeing the effects where there's a lot of people that are in my age group in their 30s and their mid-30s that may have been a perfect fit for that, but they were encouraged to go in other trajectory that may not have been the being enforced is just compounding the issue because the truck driver problem is nothing new. But that's 16 percent. In terms of like supply of human resources. Yeah. Yeah. Yeah, exactly. So, just to keep that in mind. But we're just talking about the business aspect here.

And it'll be interesting to keep an eye on. And obviously, we've we've you know we do our segment like today that's more on news and uh we'll see we'll see what uh in the upcoming weeks and months and like you said maybe quarters what effects we have i'm sure we'll have some data coming out trickling out and uh maybe it'll take maybe a month there's always a bit of a delay with the data but i'm sure we'll see some data regarding that yeah it does it does slightly bother me a little bit that jobs like this don't get enough respect like these are some of the most dedicated people in this country doing an incredibly important job to get to like this this place doesn't work without the trucking industry and the logistics industry

like nothing nothing works i'm not using this computer doing this podcast without without them so uh just a shout out to to everyone who does very important jobs that don't necessarily get a lot of credit all right that does it for this episode, guys. Stay optimistic out in that volatility. Listen to the podcast. We'll keep you level-headed. The most important part of volatility is it's going to test your conviction, Simon. It's going to test your conviction. It's going to make you question how much you really want to own the company when you see it go down and down and down. And we're Canadians. We're used to volatility and weather. So, what's the difference? Weather,

stocks, we're used to it. Yeah. We got volatility and weather four times a year. No, but seriously, you got to know the company and you got to focus on the business. Some of these companies didn't get 25% worse in four days. That's just the reality. So focus on what the reality is and you'll make more. We're not just saying this because make you sleep better at night. If you actually go against the grain, historically, you make money. We're trying to make money here, Simon. We're trying to make some money.

That's why we invest. Thank you so much for listening to the podcast, guys. We really, really do appreciate you. If you have not checked out our website, thecanadianinvestorpodcast.com. Thecanadianinvestorpodcast.com. It's got everything about the show, how to contact us, how to hit us up for the mailbag questions, how to follow us on Twitter, how to subscribe to the podcast, everything you need, how to check out Stratosphere at stratosphereinvesting.com. Thank you guys so much. We appreciate you. See you in a few days.

The Canadian Investor Podcast should not be taken as investment or financial advice. so much. We appreciate you. See you in a few days. Bye-bye.