The Canadian Investor - Nvidia, Axon, Target, Intuit, Canadian CPI and more!

Episode Date: November 25, 2021

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Rogers naming Tony Staffieri as their new CEO Latest canadian CPI figures Amazon removing visa credit cards as a payment option in the UK Correction in growth stocks Nvidia earnings Axon earnings Target earnings Intuit earnings Home Depot earnings Loblaws earnings Boralex earnings Tickers of stocks discussed: NVDA, AXON, TGT, INTU, HD, L.TO, BLX.TO https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Braden’s Movember link https://ca.movember.com/mospace/14636062 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

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My name is Brayden Dennis, as always joined by the great Simon Belanger. And just like our intro suggested, Simon, I am truly in the great white north today in Northern Ontario recording this show. Before we get into a full slate of earnings episodes, a few coffee shout outs. If you go on our website, thecanadianinvestorpodcast.com or in the show notes there, you'll be able to find the URL. You can go on there and buy Simon and I coffee, support the show. Helena bought a coffee. Thank you so much. Devin, thanks for the show, guys. Great content. Keep it up. We will. Thanks, Devin. Ocean says, keep up the good work. Will do. Marilena says, hope you treat yourselves to some fancy schmancy coffees. Really enjoy the company analysis on the

program. Cheers. I'm going to get some fancy smashy coffees because the Christmas drinks just full of sugar right up my alley. Simone, let's kick into some news here before we do the earnings roundup. Tony Staffieri is replacing Joe Natale as the CEO of Rogers. What a whole mess this thing has become. Staffieri is the interim CEO. He was previously the CFO. Interactions between family members and inside the board. This friction is highly dysfunctional, it feels like. Which is, you know, a weird thing because this culture is now going through the whole company. And it is a $30 billion public company.

So it's an interesting case study for family ties and large corporations. Yeah, exactly. And the governance is a bit out of whack over here. So that's always been a red flag for me for Rogers Communication. And this, obviously, there's a resolution here. What is a bit of a head scratcher for me is that Ed Rogers went back to Tony Staffieri, who was there, as you mentioned, as a CFO previously, because his reasoning is that the company should be doing better and Tony Staffieri would be a good replacement. So, you know, I can get the argument that a new CEO could do things better. But in my opinion, why wouldn't you just get some fresh blood in the company as a CEO if you're going to do that change so that's that's what I find a bit strange here and obviously like you said all the the

family drama going on with uh his sister amongst other thing and I think his mother too on top of this the CRTC hearings started today for the Shaw acquisition by Rogers so this is in the midst of this drama going on. I don't know if it will affect how the CRTC hearings go and whether it'll have an impact on that, but it definitely, you know, outside looking in, it does not look great. Yeah, good point about the CEO. I mean, yeah, wouldn't you want a fresh face? You know, there's obviously a bit of a culture thing that needs to be fixed. So Canada last week did report 4.7% inflation on the Consumer Price Index, CPI, which is the highest since February of 2003. This is following an increase of the week before where the US reported 6% on the official figures. Do you have any main takeaways from that? I mean,

obviously, some things that stood out to me is like home prices, massive, way outpacing that 4.7%, fuel, massively outpacing that. So what's your quick takeaway here? Yeah, I mean, my quick takeaway is we're seeing this increase across the board in terms of Western nations. So it's not specific to Canada or US, you're seeing that in Europe as well. You know, it really sounds like it's not going to be transitory. And the central banks are in a tough position, I would not want to be the head of the central bank in Canada or the Fed in the US. By the way, Powell just got re-nominated for another term today that just came out.

Essentially, they are in a position where their target inflation rate, which is usually around 2%, they're way above that. On the one hand, they could start increasing rates much sooner than anticipated. But a lot of people got much more indebted because of those low interest rates. So you could create some big problems there. Not only to say that some businesses could be impacted for that as well if they're issuing new debt. If you keep the interest rates low, then you have the other situation where inflation will probably just keep on going. So I don't know exactly what they're going to do. I'm sure you don't either. But that's my main takeaway is the central banks are definitely between a rock and a hard place right now. Yeah, I think that's fair. And I think, you know, hikes are coming. But I think even

if those hikes come, they're still going to be small. Interest rates are so low right now. I don't think it's a real concern to owning stocks personally. That is just my opinion. Another quick side note is when you see economic predictions of, oh, I think rates are going to increase this much this year and next year. It's just a prediction. So treat it as such, right? Like a broken clock is right twice a day. So if I just perennially every month said, Simon, stocks are going down this month. One, that would be if I said that every month for the last 10 years i've just been flat out wrong for most months in a bull market but sometimes stocks do go down so broken clock

is right twice a day so just be careful of broad economic general type predictions that either a professional on tv or your friends at a party, say, because they're just a prediction. Okay, this one here, Amazon did say that they are not going to accept visa cards in the UK on the platform. I know you have some notes here. Do you want to just summarize that and then we can talk about it? Yeah, yeah. So news came out last week that Amazon, like you said, will stop accepting Visa credit cards issued in the UK from January 19 of 2022. Amazon did say that the move was because of high credit card transaction fees, but they would keep accepting Visa debit cards. So it's not all Visa cards. Amazon is really playing the excessive fee card here and saying it's an obstacle for low prices for their consumers. It's really interesting as well to think that when you look at what Amazon

offers in terms of rewards card in the UK, they're actually powered by MasterCard. So it might be a little bit of a play on there as well. To me, it feels like it's a bit of a power move by Amazon to try and get Visa to lower their fees, but also promote their own credit card powered by MasterCard, like I just mentioned. I'm sure there's going to be development on this, and I would not be surprised if they backtrack and there's some kind of deal that comes to fruition with Visa, whether they kind of agree to a better rate with Amazon or, you know, I can see there be development on this. I'm not convinced that this will be in effect January 19, 2022. Simon, this is exactly why I equal weight them, because large big box retailers have done this before. They have tried to flex their power over what is happening, you know, and trying to get better margins or lower prices for

their customers because they say, oh, the transaction fees are too hard, too high. I'm going to talk about what those transaction fees in a quick second. But what I mean by this is I think it's important that to mention here, I always get questioned, why do I own both of them? Isn't one better than the other? Well, not really, because I have no ability to predict what's happening in corporate boardrooms on deciding which card they're going to go with. And the payment rails is a large growing market opportunity. And this pie, they're going to duke it out for market share of this pie, the two of them, but it's a delicious pie. I want all that pie. So that's kind of my very non-technical, non-fundamental research on why I own both. And that's exactly how I feel about it. And that's probably a good way to go. I think owning both of them just makes sense, equal weighted, basically the exact same play. Now, let me touch on the fees. The fees on Visa and MasterCard get

ridiculed all the time because you're looking at 2% transaction fees. Visa only takes about, Visa and MasterCard, same thing. They take about 0.12% to 0.14%. The rest is taken from the banks and the merchant acquirer. These are where most of the fees are going. The cards and the banks that are taking on the actual credit risk. And then the merchant acquire who's doing the payment process, or they take a good chunk as well. So I think that there could be pressure on the entire ecosystem of the payments rails moving forward. I'm not going to deny that, but ultimately the ball is in their court. And I think that Amazon is trying to flex their power to try to at least get some negotiations moving forward or try to get better pricing from one of them. They'll say, hey, MasterCard, let's do exclusivity and get better rates. So we'll see how this all shakes out. But I think owning both of them is probably a good way to go. Yeah, and you mentioned it's a large pie. Don't forget to leave some crumbs for Amex though.

Let's be honest. But let's be, Amex is a bit different. Amex is a bit more of a hybrid model. They're also, they're chartered as a bank, but they're also, yeah, they're a bank, but they also have their payment networks as well, but they also issue cards through banks. So you'll see some are issued directly by Amex, but some you can get, for example, just a random bank, but like a Scotiabank Amex as well. So they kind of have that hybrid model, but they have a much smaller part of the market compared to Visa and MasterCard. And we saw the impact that a large retailer had on Amex when Costco switched from Amex to MasterCard years ago. That was a pretty hard move to take by Amex because a lot of people had an Amex specifically because they needed to use it in order to go to Costco. If not, they had to pay with their debit card.

So just some context on that as well. But now we'll move on to unless you did you want to add anything or? No, let's move on. We talk about the payments so much. All right. NVIDIA. Oh God, this is a huge company now. NVIDIA increased revenue by 50% year over year and 9% in sequential quarters. So 50% year over year from this time last year, and then 9% in this quarter compared to last quarter of this year. Some nice 65% gross margins, which has been really steadily increasing over time, watching that gross margin number tick up over and over again. They reported profits up 84% to $2.4 billion in net income for the quarter. Now, their segments from largest to smallest in revenue,

gaming, then data center, professional visualization, automotive, and then their last one, which is OEM and other, they were all up and pretty much all of them at record highs for the quarter across the board. Now, I am very bullish on data centers, as you know. They support the on-growing growth of off-premise cloud computing. Now, this is why I think owning big technology companies with huge cloud computing businesses like the Google, like the Microsoft Azure, like the Amazon Web Services is probably a good idea. But I also like the data centers like real estate investment trusts like Equinix. but I also like the data centers like real estate investment trusts like Equinix. And this is what's got me realizing, why haven't I been looking at the chip designers like NVIDIA?

And NVIDIA and AMD are doing extremely well here. NVIDIA stock is up a ridiculous 6,000% since 2015. Now, NVIDIA is building a huge competitive advantage in their main segments Now, NVIDIA is building a huge competitive advantage in their main segments. As AI, connected devices, cloud computing, as these continue to grow, we're going to need even more CPU and GPU power from these businesses. Now, the hardware side here with the chip designers, like with NVIDIA, I don't know them extremely well. And it's probably why I haven't spoken to them much on the podcast. And I had a one-on-one with a listener on the podcast last week. And he's like, I know you're so bullish on cloud computing.

Why don't you talk about NVIDIA? And my answer to it is, I don't know the differences in the hardware tech enough to pick one or to at least know what those competitive advantages are. So that's why I don't speak to them, but I'm doing more work on this. So I promise I'll provide some more insight in the future. But Simon and I try not to talk about things we just don't know about. That would make a pretty bad podcast. So this is a $825 billion in market cap company now. That is absurd. These guys could easily join the trillionaire club soon. You know, it's not a cheap stock. You know, it's trading at multiples well over 100 times free cash flow, close to 50 times sales. But it is a really quality growth name. And I shall, I probably, you know, I'll admit, I probably should have been paying more attention to them. You know,

I missed out on these huge gains. That's okay, though. The good part here, even at $825 billion market cap, the industries they support are very early innings. Computing power, the cloud, autonomous vehicles, virtual environments. These are very nascent stages of adoption when you take the long view. Now, those technologies are not new, but if you were to zoom out, say we look back, it's 2040 and we go, it was so early back then, and that's the kind of view that I'm taking towards these things and doing some more work on them. Yeah, no, a good breakdown. I know a bit about NVIDIA just like you, but I don't know enough to be able to talk too much about them. I know for the most part in terms of their GPU,

it's between them and AMD. I don't think there is much competition outside of that, but obviously clearly it's evolved over the years. 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 now we'll move on onto Axon. Axon? Yeah, I don't know how. He's the owner Yeah, I don't know how to pronounce it. Yeah, Axon. Yes, I do own a small portion of my portfolio into Axon. So for those who are not aware, Axon was formerly known as Taser. We spoke about them. I think I did dive into their business,

I think maybe last year, if I remember correctly, right? Yeah, you did a deep dive. Yeah. Yeah. And so their sales consists of not only hardware sales like tasers and body cams for law enforcement, but they also have software as a service or SaaS through their cloud-based evidence.com platform, which allows law enforcement to review and manage digital evidence captured by Axon's body cameras, for example. So one of the good news and one of the reasons why their stock was up when their earnings release came out is they increased what they viewed as their TAM or their total addressable market from $27 billion to $52 billion. So basically doubling what they view as their TAM. The three main reasons for that are as follows.

So one of the leading factors is expanding the reach of Axon's products in terms of geography. This includes continuing their growth in large international markets such as Brazil and India. They are also going to put more emphasis on private individuals since they have historically focused on professional services. And they are developing a new justice software which will allow prosecutors and defense attorneys to streamline the discovery process and making the justice system more efficient, which obviously is something that is in big need for the justice system, because I'm sure you can see it, Brayden, all the time. We see, you know, crime that will happen, and it doesn't go to court for like two to three years sometimes. So that's definitely something

that could be more efficient. There are some reasons. So now let's look at some of their numbers. Their sales increased 39% to $232 million. Sales from services increased 43% to $66 million. Their annual recurring revenue grew 42% to $288 million. So that's on a yearly basis. This is based really on the monthly recurring licenses and they just annualized it. Their net revenue retention was 119% for the quarter, which is amazing. Anytime you see something more than 100%, it's great because that means that current

users are actually getting more products and services. Gross margins were 62%, which was an increase of 300 basis points compared to last year. They had net income of 48 million versus a small loss last year and they had 74 million of free cash flow for the first nine months compared to negative 62 million for the same period last year. Their guidance looks good as well so on the high end they're looking to about 840 to 840 million range that they had previous provided. So they said they'll be closer to the higher end of that. That would represent 25% growth over 2020. And they actually mentioned that they see 20% compounded annual growth rate in the future.

I couldn't find their timeline for that, but just goes to show that it's going quite well for Axon. This is a company that is mostly was primarily at hardware play. Now, their body cams and their hardware for police enforcement, then they tag on this software ecosystem to tie in with the hardware products. Now, what that does is it makes it a lot stickier and you add on this new segment of recurring high margin business. It's beautiful, right? It's the Apple playbook is get the phone in their pocket and then get them subscribed to all these services and build a marketplace inside of the, in the hardware. Now, when Axon did that,

that you also saw some real multiple expansion on the business. And that's why the stock's been a good place to be. Now, this is another interesting play where you have this secular underpinning trend of people demanding more accountability from law enforcement. And there's just a need for, like you said, the judicial system to be more efficient via the technology. Now, governments are not good at developing this stuff in-house. And that's why they're incredibly good customers. And they're incredibly sticky customers. So companies that sell software services to government are extremely good businesses. I don't know if you've ever looked at Tyler Technologies. That's basically all that they do. It's like a roll-up of niche vertical market software, like a constellation, but they

just sell to government. And it's really, really good business. So that's another example here. Again, this is something that people want, which is more accountability and more efficiency when it comes to law enforcement and Axon's probably a good stock to benefit from that. Yeah, yeah, exactly. And now we'll move on to Target who released their third quarter sales or third quarter figures. Target released sales up 12.7% for the big box retailer on the back of an already exceptional 20.7% growth this time last year. Now, operating income was up $2 billion. Sorry, it was $2 billion up 4%. So, you know, not as much growth on the operating income. And that was due to mostly margin compression. We're going to talk about that in a second. Now, these big box retailers were dealing with some hard comparables given

that their sales were already so accelerated during the pandemic. Now they're demonstrating double digit growth, pretty impressive given the comparables were quite difficult. Digital sales were up 9.7%. Yeah, sure, this is increasing, but the growth is primarily due to in-person shopping. So that's an interesting thing to point out. The press release did mention that margins were down. And this is the fact that we're seeing higher prices in merchandise, higher freight, higher supply chain costs, and higher wages. Hmm, Simon, sounds like inflation to me. Nothing new to see here, folks. It will be important to watch if they're able to increase prices through this kind of inflationary environment. These expense line items are increasing over time.

These big box retailers are all decent, steady as she goes. But I still think Costco's the best of breed in my opinion. But the market agrees with me. It trades at a category high valuation. Target is guiding for a good holiday season. The stock is down despite some pretty impressive sales growth. So maybe a pretty decent entry point for a blue chip type retailer. I would be watching for sure if they're able to flex some pricing power next quarter. That's definitely something I'd be watching because those expenses are increasing and margins are decreasing. So what does that mean? That means that they're not able to efficiently raise prices. So something definitely to watch. Yeah.

And I saw last week somewhere, and I'm just going on memory here, but Walmart was also seeing these same kind of pressures. And they said that they will be reluctant at increases or increasing their prices too much because the CEO mentioned that essentially that's the reason why people go to Walmart. There's that relationship and the fact that people know that they'll get good prices when they go to Walmart. So it'll be interesting when we get their holiday figures, whether it's Target, Walmart, Costco, all these big retailers, just to see how they did in terms of margins, if they did pass that

on to the customer, or maybe they just passed on partially to the customer and took the hit for the rest. Yeah, maybe I've never worked in big box retail, but maybe part of the strategy here is to differentiate themselves against these other competitors. Because, you know, Walmart, they compete on price, right? Like that's, They're competing on price. So they don't want to necessarily have huge shock to prices to consumers right away during this inflationary environment. Maybe the strategy is hold off, wait a little bit, maybe gain market share from other retailers who are increasing prices, and then kind of slowly ramp up prices while no one's looking. Yeah, exactly. And wage increase is something to look at for any business that you own. Any business will have human capital, right, to have employees. So that's definitely something,

you know, in the quarters to come, years to come, something to keep an eye on. Because if we're seeing inflationary pressures like we talked at the beginning of the episode, that's one of the areas where we'll see it. Yeah, good point. I think that I was reading on the New York Times that low-paying wage jobs are actually increasing the fastest because they can't get employees to come back to work. So what do they have to do? They have to incentivize them correctly. Speaking of payroll and the business of payroll, Intuit is a large player in the space. What happened for their Q1? Yeah, so the market clearly loved the earnings release. They sent the shares up more than 10% last week when the figures came out. Sales grew 53% to 2

billion, which includes the addition of Credit Karma that closed in December of last year. Credit Karma is a service that does product recommendation based on an individual's credit profile. They get paid by the lender when an individual chooses their product as a result of Credit Karma's services. If we strip out the revenues of Credit Karma, which was $418 million, it's an increase of about 21% in revenues. There was also the addition of mail chimp but that was not included in this quarter because it's effective november 1st and their quarter just finished october 31st they grew their online ecosystem sale by 36 percent to

845 million they were free cash flow positive for $100 million for the quarter, which was a 20x increase from last year. However, free cash flow can be a bit lumpy on a quarterly basis. That's not unusual. You'll see that for a lot of different type of companies. So you definitely want to look at the free cash flow figures on a yearly basis. To put that into perspective, their free cash flow increased 35 to 3 billion for their full 2021 fiscal year which ended on july 31st 2021 for this one for me it's really keeping an eye on the mailchimp acquisition i know brayden you weren't a big fan of it or i don't know if you weren't a big fan i think you were just a little more confused as to how they would integrate that within their business. For me, obviously, it's a wait and see. I don't own into it. But you know,

there's a lot to like about their business, but it's still not cheap. It's trading at about 20 times sale based on their 2021 fiscal year. There's a few. The businesses of this quality and this growth and this stability and maturity, you know, pays a dividend, pays a growing dividend, rock solid balance sheet, super profitable. There's not many in the technology space, but Intuit is that business. Now, you did mention the questionable MailChimp acquisition. It's not that I think MailChimp's a bad business. acquisition. It's not that I think MailChimp's a bad business. It's that all of their businesses so far connect really well into small business and maybe medium-sized business operations,

managing payroll, managing employees, managing tax, stuff like that, right? That's what their bread and butter is with QuickBooks Online and stuff like that. These SaaS businesses, which they've done a wonderful job transitioning to it as software as a service. Now, if they're doing all these like kind of acquisitions that don't fit in there, you know, what is their identity? Are they just acquirers of software companies or are they acquirers integrators of software companies? Cause those are not the same thing. Acquirators of software companies, because those are not the same thing. Acquirers of software companies, standalone and acquirers of software companies and integrate them are very different in terms of how you treat acquisitions. So it'll be interesting to see what they do because they've always been on the, you know, they all kind of work together.

And it's a, you know, one-stop shop business suite for managing your small business. I'm a of it myself. So I am going to be watching over the next year. I don managing your small business. I'm a customer of it myself. So I am going to be watching over the next year. I don't know what position I've wanted to. That's been incredible stock, but I am definitely now watching the strategy around acquisitions. Yeah. No, well put. And now we'll move on to another big box retailer. Lots of big box retail. Yeah. Lots of big box retail today. And it's weird because I'm talking about the music. I'm talking about tech sales were up 9.8% compared to the third quarter of last year. So we'll call it a nice 10% growth on the top line, 36.8 billion in sales for the quarter. Pardon me, 36.8 billion in sales is a ridiculous number. They grew revenue year over year by $3.3

billion. Now, when we talk about growth numbers, you say, oh, they grew revenue 10%. It's important to talk about scale. The scale of Home Depot is on another level. Home Depot has 2,317 retail stores and 500,000 employees or associates. Now I pulled their numbers from those two figures from their classic legal jargon at the bottom of the press release. But you know what I found weird, Simon? They didn't mention at the bottom of their press release in the legal jargon that, oh, by the way, our stores smell fantastic. We have the best smelling retail stores in the world. I'm surprised they didn't include that because that's just a fact. Here's a little snippet from the CEO.

As evidenced by our strong performance in the quarter, our team continues to do an outstanding job of operating with flexibility and agility. Ultimately, this is what allowed us to respond to the elevated home improvement demand, which has persisted. I'd like to bold that for a second. This home improvement demand that has persisted, that was the big question. Is this just a COVID project thing or is this for real? I would like to extend my sincere appreciation to our team, as well as our suppliers, supply chain, and transportation partners. We continue to navigate this dynamic environment together. I just said, you know, maybe Costco is probably the best retailer in the business.

I don't know. Maybe Home Depot is the best retailer in the business. These are exceptional companies. And I really do believe that they need to change their press release around how good it smells in Home Depot. Yeah. Yeah. I mean, that's I never thought about that. But it does have an interesting smell. I'll say that in Home Depot, when I think about it a little bit, I think the hot housing market probably is a big tailwind for them. Because on the one hand, people that may want to move out of their home, but then are looking at the prices, maybe think, you know what, I'll just renovate my home. It's more cost efficient. I'll do it that way. Or you have people that are looking to buy fixer uppers, flip them

and clearly move on from the home. So these are two things that would happen quite a bit when you have a hot housing market. So I'm not surprised from that perspective to see Home Depot doing well. Yeah, because the hot housing market has certainly persisted. We've seen that with the most sales of detached homes of all time. That's at record highs. And people want to make their space better. So that permanent work from home shift, we're seeing that not just to be, you know, oh, here's a couple months at home. It's, yeah, maybe you're always at home or maybe you're, you know, at home half the time, you know, stuff like that. So people want their space to be nice and Home Depot will continue to benefit from that. I do think that it's important that they

pointed out that this is persisting and this maybe isn't just a quick, a quick trend. Yeah. I think the only question for me is if there is a housing downturn, how Home Depot do during that. I think that's just the biggest question mark if, for when it happens, but now we'll move on to the thrilling space of groceries with Loblaws.

Oh, this is, this is exciting stuff. Get your popcorn. Exactly. But before I get to the actual earnings, there was an interesting mention in their news release. They mentioned that their President's Choice brand,

which, by the way, I really like. I think they make a lot of good products as a side. But they have the most extensive line of non-meat based, plant based. There you go. Plant based products in Canada and are launching 10 new products offerings as alternatives to meat and dairy. I wanted to highlight that because when we talked about Beyond Meat last week, I did mention that an issue here is they don't really have a mode. And one of the things I did mention was that nothing's stopping grocers who have brands, just like President Choice and Loblaws, to leverage their own footprint and roll out

more plant-based alternatives. And clearly, if they want to highlight in their own stores their products a bit more than potential competitors like Beyond Meat, they have the ability to do so. So that's something I found interesting when I was looking at their earning release. Having said that, revenue for the quarter was $16.05 billion, which is an increase of 2.4% compared to last year. Drug retail, which is Shoppers Drug Mart or Pharmaprix in Quebec, increased 4.4%. Did you like that little Quebec, the French one? That was a nice jingle, yeah. Yeah. The e-commerce sales were flat year over year, but that followed a 175% increase in 2020,

which is totally understandable when you think where the pandemic was at. A lot of people were doing click and collect. But it's interesting that it was flat. So they actually kept that online engagement from last year. But it does highlight some of the base effects that we've been talking for about a year now. Their net earnings increased 26% to $431 million. They repurchased $300 million worth of shares during the quarter and even more so for the whole year to date. To me, Loblaws, Metro and other grocers like Kroger, for example, in the States, it will be really interesting to watch in the next year or two to see how inflation impacts the result. in the next year or two to see how inflation impacts your result. Are they going to pass on the price increases directly to consumers or are they going to take a bit of a hit on the margins to not increase the prices too much? But those very interesting because this affects everyone. Everyone's eating. So everyone's going to see that price increase if they do pass it on to consumers.

Yeah, I think that that's a recurring theme with all the retail talk today is can they do that effectively? Can we just double click on that for a second? President's Choice is the best in-house brand, maybe other than Kirkland because Kirkland dominates, but President's Choice is just good. Everything they make is good. Yeah, and Kirkland is a wider range of stuff too, right? They'll have like their Kirkland brand. I think they do like golf balls. I think in Alberta, when I went there a few years ago, they had like alcohol from Kirkland too.

They had like Kirkland vodka and stuff like that. But yeah, for me, I mean, I'm thinking I have a Metro right next door, not far from my place. And I'm not a fan of their home brand. I think it's compliments or whatever it is, but I do love President Choice. So, yeah, I mean, I love their products. I mean, there's always something, an option for whatever type of food you're looking at. All right. 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. This next segment is not so much, well, I guess it's kind of news. It's very relevant to today, but I wanted to talk about some real drawdowns. You know, when I look at the market today, it's November 22nd, I have a lot of stocks trading down today. Like they're down four or 5%. Some of them, you know, just a few of them are up. And then I look at the market and the market's up like, you know, 20 basis points, like 0.2%. I'm like, what is up right now? Like, I don't see anything. Now there have been some real drawdowns in high flying, I don't know, COVID stocks. Is that a correct characterization? Some of them are, some of them

are not. Now there have been some real drawdowns on some of these companies. PayPal down 37%, Twitter down 38%, Snapchat 38%, Twilio down 41%, Coupang 44%, Fetch 48%, Moderna 48%, DraftKings 50%, Pinterest 50%, Roku, Zoom, Alibaba all down like 50, 60%, Teladoc, Zoom, Alibaba, all down like 50, 60%. Teladoc, Fastly, Peloton, Beyond Meat. These things are down. Peloton has a 70% drawdown right now on its stock price. Now, what is happening here? Some of them are reporting slower growth and saying, okay, yeah, we had some pulled forward growth. Of course, there was pulled forward growth in some of these companies. You own Teladoc. It got to valuations that probably you can agree on didn't make sense. But that is a good example of if you believe in some of this disruptive

technology and you believe in it, you are going to see massive drawdowns at some point. This is not normal. Look at all the most successful stocks in history. They've all seen drawdowns of sometimes they lose half their value in one month. And then you look 10 years ago and you go, oh my God, that was such a good buying opportunity. Now I'm not saying all of these are fantastic buying opportunities. Some of them very may well be. And what's light speed down like 65% since it's high, maybe not that much, maybe 50% from its high. Some of these companies are reporting exceptional growth. Some of them are reporting slower growth. The point I want to make out here is that if you own disruptive growth stocks, you have to be able to understand there will be massive drawdowns at some point. Focus on the business fundamentals. When you read the press release, is it meeting the expectations that the management put out? that guidance that the management put out. Don't worry about the stock price. It's completely irrelevant for long term investors. And if you own this stuff, you got to be holding it for the

long term or else what's the point of investing in disruptive growth? Yeah, I mean, for the names you mentioned, it's definitely you know, there's a wide range of names. There's a few Chinese names in there. We know what's been causing them to lag a bit behind with the Chinese Communist Party and basically their unilateral intervention in certain companies. But you mentioned a Teladoc. I think for me, a Teladoc is no big issue. They had their investor day last week, and it's basically in line with what they were saying. But again, I think it's just a market at unrealistic short-term expectation. And the key word here is short-term. If you're looking at Teladoc on a long-term basis, I don't think the premise has changed.

Everything that they mentioned during the investor relation, the investor day call, was in line with what they mentioned. But you're totally right. You'll see some ups and downs. I mean, growth names, that's what you're totally right. You'll see some ups and down. I mean, growth names, you know, that's what you're in for. You know, these 50% drawdown, 60%. If you have a good business and it's trading at really high multiples, if there's anything that's short-term that the market doesn't agree in, you'll see some big swings and it can go either way, right? If there's

a nice surprise on the upside, you may see an increase in 10, 15% sometimes in a single day. So you have to take it with a grain of salt. If you still like the business and you're comfortable with adding more, then it can be an opportunity to add more. Let's use Zoom Video as an example. Zoom Video stock is down 56% from its all-time high. Now, what happened is when it hit its all-time high, short-term momentum in the stock price, momentum is a hell of a drug, Simon. It can bid the price up to places that doesn't make sense. Short-term traders are trying to get in there to make money. The retail folks hear about it and they go, oh, I'm making 300% in a row on Zoom in one week,

like time to get in. So momentum in the short-term is a hell of a drug. Now, if you look at the business fundamentals, Zoom has built a very long-term, wonderful business with staying power, supreme integrations, maybe perhaps the best-in-class product out there. There's competitors. There's Google. There's Microsoft with their enterprise solutions for video. But here's a really sticky long-term company that could be 56% ago on the stock price. Maybe it didn't make sense. But now, maybe it does. And so I'm just trying to point out the fact that don't buy into short-term momentum in stocks. Focus on the business fundamentals. Yeah. And make sure you do research here, because I'm looking at Peloton, which is down 70% from its highs. And I would venture to say

there's a good reason, right? We went over that and Peloton had to change its guidance really quickly. Their margins are going down. They're not seeing the same traction as before. So some of these names may be great opportunities, but some you may want to double check. You might still think it's a great opportunity to invest in Peloton, for example, but in my view, there's a bit more of a reason than some of the other names. Fair enough. All right. Last one on the slate here, Simon. Yeah. So the last one, so last earnings call or earnings overview that we're doing is Boralex. So we had one of our listeners request that we talk about them in our earnings release episode.

So here it is. Boralex is a renewable energy provider, which has operations in Canada, France, the US and the UK. In order of importance, they have wind, hydroelectric, solar and thermal assets. They're a fairly small company with a market cap of $4 billion. Brayden, you know this space fairly well. Were you aware of them? Yeah, yeah, you know this space fairly well. Were you aware of them? Yeah, I know this one. Okay. So they had revenues $126 million, which was an increase of 20% compared to last year. They had a net loss of $22 million compared to a net loss of $8 million last year. However, their free cash flow was $63 million for the quarter, which is not surprising given that it's

a renewable energy provider. Earnings for these companies, we've talked about it before, just like a Brookfield Renewable, or even for most REITs, is not a very telling sign of the health of the business. You really want to be looking here at free cash flow or funds from operation, which is a slightly different metric. They're much better measures because they give you a better overview of the cash actually coming in because it strips out the depreciation and amortization in their earnings.

Their total power production for the first nine months of the year was 4,061. Gigawatt hours. Gigawatt hour. I lost the acronym for a bit, which was an increase of 24% compared to last year. It's okay. I knew you would have my back there. I did a stint as an engineer in power production.

So if I don't know gigawatt hours, then I should have never had that job. I should have been fired on the spot. And you know what? I had it. It just kind of escaped my mind for a second. They currently pay a quarterly dividend of $0.60.5 per share, which has been the same since 2018. So they haven't really grown the dividend, although they did grow it prior to 2018. But I know some of our listener and clearly the one who requested it was intrigued by this company. So we can always, you know, look at it a bit of a deeper dive in a future episode.

I had heard from them, but I'd never really taken the time to do a deep dive into them. My recommendation for anyone looking into some of these pure play renewable energy companies is there is actually surprisingly, I know this is a very strange concept for a utility, but cyclicality built into it. And that is because wind, hydro and solar are cyclical based on the season, especially hydroelectric. You know, like there is the freshette season at the end of the winter, where flows to the river systems are really strong, and that's going to be some of their best money-making months of the year. So just make sure you're comparing it on comp quarters, like how we do on their growth, because there is some built-in seasonality. Now, with most of these utility companies, it's important to actually look at the assets that

they own in their generation profile. Some of them are criminally overestimating how green their power production is. So focus on the pure play renewables if you want to actually own the renewables companies. By doing that, you have to look at their assets and you'll be able to find that pretty easily. That is my recommendation. All right, Simon, before we give it up for the show today, I have a quick little story for you guys on the podcast. I'm going to tell you guys how I drive cars completely for free. Simon, I don't even know if you know I do this. I drive cars completely for free. Okay, so this is how I do it. I take over people's leases during a certain time. And you can find people who are in a pinch, you know, maybe they're moving to

the UK and they got to get rid of their car and they're on a lease. Now, sometimes they'll give you money to take their lease. I drive a beautiful, oh, it's gorgeous, Simon. When you see it, drive a beautiful, oh, it's gorgeous, Simon. When you see it, all the heads turn. Nissan Rogue. It's bright red and my buddies call it girl's night out. I think it's a little cooler than that. I call it the Baton Rouge, but who's counting? Now, this car, I was given $3,000 to take the lease off their hands and it had 18 months left on the lease paid the lease transfer fee and that was probably the best deal on the site at the time for this lease takeover site now this is the part where it's very lucky so i drive you know i got three thousand dollars got all this cash in my pocket the buyoutout fee on December 20th is $16,800 for my 2018 Nissan Rogue. I can sell it

for 25 and a half on auto trader right now. Now this is due to the fact that used car market is highly inflated because there's no inventory of new, new cars. But I believe that you, you know, even if I wasn't making $7,000 on the sale of this car, you could, or more actually, more than that, you could actually drive cars completely for free with this methodology. Now, you're obviously going to have to pay gas, you're going to have to pay insurance, but your payments on the lease can be completely covered if you do this strategy. So I call it car hacking. I don't know. I haven't seen any of the YouTube personal finance bros catch on to this one yet,

but I'm telling you guys here first, you can drive cars completely for free with my little cheat code. All right, guys. Thanks so much for listening. We appreciate you very much. If you have not reviewed the show, if you're on Apple Podcasts

and you give us a little five stars and give us a little review, we appreciate that so much. It helps the show. I can't even describe. And then if you're on Spotify, hit that following button at the top of the show. It really helps other people find the show. It boosts us up in the algorithm. Very much appreciated. If you have not checked out Stratosphere, stratosphereinvesting.com or getstockmarket.com will We'll bring you there. The feedback on the new site has been awesome. If you want to find very reliable financial statements, press releases like we're talking

about here in the news category, a stock screener. Who doesn't love a stock screener? It's completely free to use and you can check it out there. We'll see you in a few days, guys. Take care. Bye. to use and you can check it out there. We'll see you in a few days, guys. Take care. Bye.