The Canadian Investor - Our Biggest Opportunity Ever?

Episode Date: July 29, 2024

Braden sits down with Ryan Henderson, growth & content lead @ FinChat to talk about some of our biggest opportunities in the market through the years and some timely news as well. Tickers discussed: Tickers of Stocks & ETF discussed: GOOG, CRWD, CMG, LVMH, AXP, PM, META, AMZN Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Sign up for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast, welcome into the show. I'm joined by a special guest, recurring guest on the podcast here, Ryan Henderson. Welcome to the show, man. For those who do not know Ryan Henderson, he leads all the content and growth at

FinChat. So if you're not following that Twitter account, you're missing out. So you're the man behind all the content we put out. Yeah, a lot of threads. But yes, excited to be on here. I think this is my second time now. So I guess we can call that a recurring guest. Yes, sir. And dude, it's, I mean, you have been doing investment research now, kind of like self-starter. You do post a lot of content online. And so then I was just like, hey, do you want to do this for your job? And you've done such a fantastic job. But dude, can I start with a story for you here do you know bryson dechambeau yeah i'm familiar with like him generally okay so for those who do not he is a professional golfer definitely one of the top best golfers in the world. He just passed. He's the reigning US Open champion,

two-time winner of it now. And he just hits the ball a mile. But for those who are golfers, for those who are not, I'll tell you why this story is relevant and how it relates to business. So he was like Henderson. He was by far the most disliked and villain of professional golf for a long time, for probably ever since he came on the scene. He was like this nerdy physics guy who was like bringing that kind of element to golf, but he just did it in a really unlikable way.

And his interviews were snarky. He wore this silly little hat. And the list goes on and on and on of just why he was kind of the villain. And he started beef with one of the more famous golfers on the tour. Anyways, that's neither here nor there. He starts a YouTube channel, I don't know, let's call it a year ago now. I'm not sure, but he just started posting every single week, like his rounds of golf and like highlights from playing professional golf, but also like doing funny golf challenges and just like trying to show people who he really is. This man's career 180 in terms of like going from the villain to the people's champion in like eight months needs to be studied.

It's like the Mark Zuckerberg rebrand. Yeah, exactly. But like some people who are not like in the know on Zuck will still just think Zuck is Zuck. But like anyone who's into golf has done this complete 180 on Bryson like literally it's it's it's amazing to watch from like getting booed at professional golf tournaments to having the biggest crowds following him around since Tiger Woods and so he just posted a YouTube video playing 18 holes of golf with Donald Trump two days ago. It has 7 million views already. And the point of me bringing this up is Google just released their earnings. YouTube is continuing

to be a strong point of the business. But I did a segment on the podcast maybe like two months ago about LinkedIn, just being like this scarce internet asset that's like impossible to compete with. YouTube is that other big tech scarce asset that's tucked into Google, LinkedIn being tucked into Microsoft that just feels untouchable. And this is where people are going to be telling their story and famous people as well. It's just amazing what this platform has become. Yeah. And it just gets better and better with time. The more people that contribute to it, the better the platform becomes. And it has become, you know, people talk about building a business online youtube really is a platform where it's pretty doable to build an actual business online to build an actual income stream

so yeah it just becomes more and more powerful and that much harder to compete with for like i couldn't imagine trying to compete with youtube trying to start up a competing video service. It would be impossible. Yeah. So I'm just looking here. They just did $8.66 billion in ad revenue. I forget exactly how they break it out, but I see here that they have over 100 million YouTube music and YouTube premium paid subscribers too. It seems like they're always kind of in a forever war with the ad blocker services. I tend to think that they'll win that war over the long run because

they own the browsers and like they own the domain that, you know, they're fighting a war with those, those players like exist on. So I have a feeling they'll, they've just been kind of playing it long game with those services. But man, I am just blown away by this platform. And I see this like Bryson DeChambeau story. And it's just so obvious that this is how people tell their story online now. 7 million views in the past two days. It's going to keep going higher and higher. And it's not like this is a little viral TikTok clip that people watch for 13 seconds. This is like a two-hour video. It is mega long form with probably amazing retention. It's so cool.

Yeah. And the other thing, you think YouTube, you kind of think short form videos, but Amazing retention. It's just whether it's Spotify or Apple, whatever it is, there's not really, I mean, there's some level of a recommendation algorithm, but you're not really going there for new discovery. You're going there for what you already know. Especially for podcasts. I think it's pretty good for discovering new music, but I agree. It's not that great for discovering podcasts. No, exactly. You put up like a short form video on YouTube, there's the chance that something goes viral. You put up a podcast, you have a pretty good idea of how many people are going to listen based on however many people listen last time. Yeah. On that same note, you wanted to talk about Google Cloud spending as that's the hot topic.

They did just release earnings. What's the story here? as that's the hot topic, they did just release earnings. What's the story here? Yeah, so pretty good quarter all around Google, just kind of for context to take everything back. A year ago, everyone thought Google was going to be the lagger in AI. They were getting sort of a discount because of that. The stock was kind of selling off because they were behind relative to Microsoft, who had just invested tons of money into OpenAI. And there was even this, I think in February of 2023, Satya Nadella goes on this interview, Satya Nadella, the CEO of Microsoft, and he says, you know, we want to be the ones, we want people to know that Microsoft made Google dance. And you just look at the results and there doesn't seem to be much, quote unquote, dancing going on. Revenues, like I said, were up for-

It's a slow dance. It's a stairway to heaven, seven minutes at the end of the dance here. Yeah. The top line has been really strong for Google. And a lot of it's still driven by search, which is where Microsoft was kind of trying to make some inroads. Operating margin expanded from 29% to 32%. And there was really pretty much growth in all the visions. We talked about YouTube there. The YouTube ad revenue grew 13% year over year. You've got to put some context on that because advertising revenue for YouTube is growing double digits while they are trying to push people to an ad-free solution.

They're trying to convert them to subscribers where they don't need advertisements anymore. And that business is growing. They don't break it out explicitly, but they talk about it on conference calls here and there. And they are growing the subscription business while also growing the advertising. And a lot more of the engagement is coming from shorts where there's a monetization gap. So the shorts don't have quite the same advertising rate as the long form videos. As that monetization gap closes, advertising revenue should continue to grow probably even faster because basically all this is the same. Engagement

has significantly outpaced monetization for YouTube. Anyway, YouTube seems to be very, very solid. Google Cloud was kind of the, I think, story here that most investors were excited about. They crossed $10 billion in quarterly revenue for Google Cloud, which encompasses primarily Google Cloud Platform, but some other services are in there as well. primarily Google Cloud Platform, but some other services are in there as well. And operating income also crossed a billion dollars. So this was, I don't know if I've ever seen a business of this size have such a linear path to profitability. They were just literally improving their operating margins by 2% a quarter for the last 20 quarters. And it's been so gradual. It's like they just

picked the profitability they wanted. And they've done a really, really good job scaling this business. The last thing I'd mention here is the stock, even after beating expectations across the board, this happens every time with Google. They report great numbers, the conference call comes, and then they talk about how much they're going to invest in these new initiatives. And one of those was Waymo. They said they're going to invest another $5 billion in Waymo. They said they're seeing progress there. Curious what your thoughts are here. Thoughts on them spending this much on sort of a, I guess, I don't want to call it a moonshot because it's a little more proved out at this point. It's pretty tangible right now, the Waymo thing.

Yeah. I mean, they have some now experience to go off of in San Francisco, at least that, you know, they're generating real revenue in that business. service. Think of driverless taxi service that is now fully commercially available to the public in San Francisco, in the whole city limits, which is pretty freaking awesome. I mean, I've seen videos of people posting and reviews of people being like, this is so much better than Uber. And you know what? My most recent new position is Uber. I just think that the network effect that they built is spectacular with the drivers. But it's like, what if you don't need those drivers in a Waymo type future? It's not proven out full scale, but they're doing it now fully in San Francisco. It's going to take a long, long time for that to happen in other cities and it's going to be there. But this is a pretty big risk, I think, to the taxi Uber type business. Yeah. I mean, you look at it, just think about Uber,

what would their economics look like if they didn't have to pay out drivers? Well, I mean, you look at it, just think about Uber. What would their economics look like if they didn't have to pay out drivers? Well, I mean, they got to own the cars in this case too, but they'd be more profitable. So you could either have a business that's very large, huge addressable market, very profitable, or Waymo could potentially in the markets where they compete with Uber undercut on cost. Right. Exactly. I think that that's right. It's kind of like when I look at the freight business, it's like, okay, well, electrification and driverless stuff, this could actually be really good for the trucking companies if their largest pain point is kind of eliminated when it comes to costs and drivers and hiring and such a shortage of drivers as well in North America. Like maybe that's removed, but then it's like, but is that a wedge in for new players? That's what I'm wrestling with right now.

It's like, is this Uber gonna be able to flex their ability that they already have the license in all these cities and built out that network effect? And it's a brand that people are now comfortable with and city authority people that are making decisions are comfortable with, or is that a wedge in for a new player? These are the things that I'm trying to balance right now. Yeah. I think I would be surprised if Waymo had any impact on Uber's actual financials for at least 10 years,

just because of the regulatory hurdles. Correct. Yeah. I'm aligned with you. 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 at airbnb.ca forward slash host. That is airbnb.ca forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians. And we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world.

Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. All right, let's talk about CrowdStrike. Simone and I mentioned quickly, like as it was happening in real time last week,

that they basically pushed an update. It had, I forget how many Windows devices were affected, but millions and millions of Windows devices were affected. Do you see those videos of like Delta Airlines flights in Atlanta, just like absolute shit show at the airport? Yeah. So it's caused some real havoc. And if you were following, Henderson, I mean, you probably were, you're following, it's like

the stock rebounded really quick where everyone's like, okay, they pushed a fix, it's fine. And then a couple of days drag on and then investors are like, wait, wait, wait, wait, this is actually really bad for CrowdStrike. And I think it's on like what now, 35% drawdown. I know. It was funny to see the process that probably most of the investment community, anyone that's involved with CrowdStrike went through here because you see the news, your gut reaction is, okay, this is bad. But then your next reaction is, wait a second, look how much, this reveals how critical CrowdStrike is to the internet infrastructure around the world. Maybe people will open their eyes to CrowdStrike from this. And then you realize, okay, wait, no, this is actually bad. Businesses are being impacted.

Customers are probably going to start to have to look for other vendors. You had Elon Musk tweeting, we've gotten rid of CrowdStrike in all our companies. And all of a sudden, it's like, okay, yeah, this is going to be an issue. And I don't know how it's going to impact them financially. But yeah, there are businesses that like Delta, for example, it's been a week since this happened, and they're still struggling to recover. And it certainly impacted their customers financially. Yeah, it's just a reputational risk thing from my perspective, because it was not a failure of their product. There was no hack. This would be way worse if there was a huge hack that affects the integrity of CrowdStrike's cybersecurity product. That was at risk? No, it was just an accident when updating the system that affected a lot of

devices downstream. But this is a B2B SaaS company. And B2B SaaS is built on confidence in the buying process. Sellers are just trying to instill confidence in their prospect that they're selling to that like using us as your mission critical end-to-end security with the Falcon product is going to be a good career decision for you. And now everyone in their pipeline, at least in the short term, is going to have that confidence removed. So I do not think this is a crowd strike killer, but you're probably going to have a year of bookings that they're just not going to have the same growth on the top line for their ARR and bookings. There's just no way.

This is a confidence game. Yeah. You think about maybe there's penalties, fines, whatever that's going to impact them, but exactly what you said, how much does this deter future customers from signing a deal with them? I just, I could not imagine being the product manager or the developer, whoever it was that pushed this waking up Friday morning, seeing endless Slack messages or whatever it was, just, oh boy, you're in for one at work that day. Now, the stock is basically flat year to date now, CrowdStrike. And this has been a stock I've really wanted to own, but it's just been so expensive.

And after this pullback, I'm like, here's my chance. And then I'm like, expensive. And after this pullback, I'm like, here's my chance. And then I'm like, it's still so damn expensive. It's still such an expensive stock. And I think it's worth it. I think that people are going to forget about all of this in a year or two. People in the moment are so reactive. There's been so many IT outages that people just completely forgot about because they're saying that this is the only one that's happened ever. It's like, dude, remember when Facebook was just down for like two days a couple years ago? It was just like fully down for like, I don't know, like 24 hours, 48 hours. You just forget about it. You just forget about it.

You just completely forget about it. And that's exactly what's going to happen here, despite everyone's reactions to this. But this is not consumer. This is not, I can't use Instagram for a day and a half. This is, I'm a buyer of enterprise security software, and you've just made it really hard for me to justify this to my boss. Yeah. That's the problem. This may have had longer term repercussions as well versus like Facebook's outages because of, you know, I think it's mostly the airlines that really struggled with it and weren't able to get

back online as quickly, but some of the customers were probably losing a ton of business. Yeah. But yeah, it's 20 times sales still after 35% drawdown. Still so expensive. Fantastic product, despite what's happened here. Fantastic product. Chipotle, the ticker CMG, right? Chipotle Mexican Girl.

ticker CMG, right? Chipotle Mexican Girl. They, you know, FinChat definitely supports their growth domestically, same-store sales growth when the team's all together in Toronto. That's a big lunch staple for us. You're from Seattle, for the listeners to know. But when we get the whole team in Toronto, that is a fan favorite for lunch selection. Great quarter they just released. And what's happening here? People

mentioned that they're reducing the portion sizes. I don't know anything about this. What's going on? Yeah, it seems we're not the only ones supporting the top line for Chipotle. there's a Wells Fargo analyst who, to conduct research, ordered 75 of the same bowls to, I guess, do this experiment. Basically, over the last quarter, there's been a lot of, I don't want to say outrage, but people thinking that Chipotle, there's some sort of like an internal mandate or some directive to reduce the portion sizes, maybe increase the rice portions, reduce the meat portions, that kind of thing. And it actually became like this trend where people would film the service workers and like order them and just like try to put the pressure on them. And so, it actually became kind of like a concern at the corporate level.

And the CEO came right out this quarter and first of all, 11% comp store sales on a business that's this big already, very impressive. But he says, I want to take a minute to address the portion concerns that have been brought up in social media. First, there was never a directive to provide less to our customers. Generous portions is a core brand equity of Chipotle. It always has been and always will be. It's nice to address that. And this Wells Fargo report, actually, after ordering 75 bowls, he measured the weight, measured the portions, and he said there wasn't any sense that there was shrinkflation going on, but there was huge variability.

Variability. And he's like, there's definitely some room for consistency here. Like some that were half the size of others, despite the same order. And, you know, you just kind of think if you had some sort of automated system that was giving those portions, it might solve that. But I guess good quarter all around. My guess is that this will kind of fade out and concerns over shrinkflation here might die down a bit since it doesn't seem to be really playing out. You know that spoon scooper thing that it basically looks like a measuring cup on a stick it's a measuring cup on a stick.

And they use that to kind of portion the meat when they, when you go to Chipotle, but you know that you'd think that that would be like, okay, you just fill that up and then this is going to be the same every time. And then you don't have this variability because people especially get sensitive around like how much meat they're getting. If we order a steak or you order a chicken, I want to make sure i have a healthy portion of that stuff now you'd think

that that would solve it but some people don't really fill it up the whole way when you're when you're at chipotle like it's coming out of their paycheck and i always just give them a look like really you couldn't you couldn't have just filled that thing all the way to the top, you know? Yeah, I bet they get a lot of those looks. The other thing is it's really like you could have like an actual measuring spoon where you just fill it to the top. But these are really just large spoons. Like it's stuff's going to fall out. The portions are going to change.

I think there's room for consistency there. But yeah, just- You feel, especially when the person in front of you or behind you got like, I don't know, like 50% more. You're just looking at him like, oh, I don't know if I'm going to be able to afford guac with this fatal financial hit that I just took. walk with this fatal financial hit that i just took yeah it's there's definitely room to you leave room for error and then you leave room for people to get disgruntled with the employees if you don't just automate that system like if there was a way to just make it the same every time it'd be it'd solve a lot of problems yeah it would definitely make the employees lives because obviously i don't say anything like i don't actually care but i definitely in my

mind and probably you can see it on my face like really come on man just uh you know top that top that up a little bit you know give me a little let's move on to luxury payments and luxury have been the things getting smoked luxury has been uh it's been a tough, tough year. LVMH reported earnings, Burberry, which I'll call kind of luxury. What's the story here? I mean, this has been – LVMH has been one of the easiest high-quality names to own. And they're testing shareholders this year. Yeah, there's been – in general, Burberry was one of the first to report this quarter of luxury names. And they reported negative 21% comp store sales. And a lot of

people's knee jerk reaction was, okay, this isn't real luxury. This isn't like a true luxury brand. Let's wait and see. And a lot of the stocks actually sold off. There's a lot of sympathy declines where LVMH sold off, carrying sold off. I call that the Snapchat effect. Yeah, exactly. Being the first to report, you can have a lot of ramifications throughout your industry. And they came out. So, Burberry, bad quarter. LVMH comes out and it wasn't necessarily a bad quarter, but revenue growth, year over year revenue growth has just consistently slowed. It was 20%, 10 teens, and now you're getting 1%

growth, which is still okay. At least it's growing in spite of a difficult market. But during the LVMH conference call, they said the aspirational customers in the US, as we commented in Q1 of this year, are a little bit under pressure due to inflation and higher interest rates that are taking both a toll in terms of purchasing power, particularly in the US and to a lesser extent in Europe. A lot of people just shrugged it off initially and said, a lot of the weakness is coming from China. The consumer environment over there is difficult. So, there's chalking up the decline to that. But in this case, LVMH came out and said, there's some weakness across the board. Caring CEO, they

just reported that he said they're having a challenging market environment, which adds pressure to the top line. It basically seems like maybe tightening of budgets, tightening of wallets across the board. I don't know. Maybe this is temporary. Maybe it's just a tiny little slowdown. But I do think this probably presents some opportunities because you look at LVMH, you look at Hermes, Ferrari, especially. These are businesses that the consumer spending is very resilient, even in tough times, because it is the most affluent customers. It's the most affluent. And for those who are, I'm sure many of you know LVMH's brand, but for those listening who are not familiar with it, it's the French conglomerate Bernard Arnault has put together here. Some of the brands, obviously, Louis Vuitton, Moet Hennessey.

I would say half the portfolio being leather luxury and half the other one being spirits, like alcoholic. Is that a fair assessment? The bulk of the profits really comes from fashion and leather goods. So a lot of the handbags is very profitable for them, the Louis Vuitton type purses and that kind of merchandise. Right. Yeah. So it looks here in order of segments here on FinChat in terms of revenue, fashion and leather is the number one. Then watches.

Oh, no. Then selective retailing. So more clothing. And then watches, or no, then selective retailing, so more clothing, and then watches, and then perfume and cosmetics, which is the Sephora brand, if I recall correctly, and then wine and spirits. So that is not the order I was expecting. Yeah. Wine and spirits, it's also been a difficult business for them. I think a lot of people have kind of thought about maybe LVMH would spin this out eventually, but it just doesn't seem to be the case. Yeah, fair enough. A lot of people will buy fancy alcohol for special events or something, but it just doesn't seem that popular. This is purely anecdotal.

Super anecdotal. Take this for what you will. The millennial and younger generation doesn't really flex like that. Like they'd, you know, like there's some sort of, like maybe if they go to the club, they buy some bottles, like some chump. But like, you know, they're flexing in other ways, not necessarily buying fancy bottles of scotch. Of course, some people are into that. And I think, you know, I like, I like that stuff, but it doesn't seem to be as popular and alcohol consumption is just not in for the Gen Zs. Yeah. Alcohol growth has stagnated and even

started to decline among younger generations. There has been sort of a shift to premiumization. So people that were maybe previously beer drinkers have maybe shifted more to cocktails. But still, even hard alcohol spirits, it's definitely not been a growth business. And the other thing that's become more popular is influencers, celebrities launching their own brands. Their own stuff. Yeah. And it's taking share from some of the leaders that were previously had just significant moats, really hard to disrupt.

Diageo, they've kind of seen the ramifications of that in their top line. So the other thing they've had to do is go out and actually acquire some of these. I can't remember whose it was, but some celebrity they ended up acquiring a couple of years back for a hefty price tag. Was it Ryan Reynolds' gin? I forget. Not aviation gin. It was a tequila from a celebrity that's a little more like, I think, older type celebrity. We wouldn't know him quite as well. Let me look it up. Okay. Yeah.

No worries. But dude, this playbook is so obvious. It's like, hey, I'm The Rock. I'm putting out my tequila. I'm going to sell a zillion bottles of it i'm gonna take a bunch of capital from the churning group who is like extremely well-known private equity type name for working with creators and celebrities to launch their own products and brands and they're experts at it it's just such a good playbook like it's a unbelievably good playbook

yeah i just quickly looked it up it was Casamigos who was founded by I don't know if it was founded by or just like led by George Clooney so it was he's older you won't know him he's George Clooney

I was gonna say Clooney but I didn't know he made Casamigos yeah and I think it was a pretty big buyout. Man Rocket, George Clooney. I like George Clooney. 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 Money

Cents, and with them, you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money.

Visit Questrade.com for details. That is Questrade.com for details. That is 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 forward slash host. That is airbnb.ca forward slash host. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world,

while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information.

All right, let's do some questions. You put together some questions here. We'll go, I can answer them, then you go, we'll do that order and we'll go through. Your question here is, what's the fattest pitch you've seen since you started investing? Good questions you put together here, by the way. What's the fattest pitch I have seen? I like to think that my fattest pitch is still yet to come. I mean, COVID widespread sell-off, market sell-offs is probably pretty easy, but the thing about fat pitches is you already have to have that conviction built up over time. Then the market give you the opportunity at the same time. Widespread market sell-offs,

downturns where everything is down bad, those are always to me the most obvious fat pitches because you don't even have to question to yourself, is it the company or is it the market? In this case, you know it's the market. So I like to think that my best fat pitch is still to come. I will give the example of, of course, they're very big show sponsors here, long-time sponsors, EQ Bank. But I bought the stock, I think it was 2017 or something like that, like years and years ago now, that it was on a 50% week. In one week, there was this huge drawdown because their biggest competitor in Canada in the mortgage space called Home Capital Group was in a massive fraudulent bad loan situation. Buffett threw them a $2 billion lifeline at the time, actually, which is an interesting story.

And their biggest competitor is in absolute turmoil. They're launching this new DIY online banking service called EQ Bank spun out of Equitable Group. This company was crushing it and their biggest competitor is falling. It got thrown out with the bathwater. That was probably one of my best fat pitches and I've made a ton of money on that investment. a ton of money on that investment. Yeah, it sounds like it would have been quite the good setup when a whole area is sell off and they're not really quite as impacted. In fact, benefiting. Yeah. Yeah, exactly. With COVID in general, it was such a unique time because when I think about a fat pitch, I think about companies that are established where it's businesses I know, and for one reason or another, the stock has sold off. It's businesses with a margin of safety, not necessarily the valuation has a margin of safety, but you know the business is all right. With COVID, typically when you see like a 50% drawdown, there's some reason for it. There's

been some – maybe the revenue stopped growing, whatever it is, and there's reason for it. With COVID, everything sold off 50% and you had no numbers to like base that off of. All the trailing numbers still look great. So, a lot of – maybe made for easy buying decisions. But yeah, so COVID, definitely some fat pitches. But yeah, so COVID, definitely some fat pitches. I'd say the other ones where I saw – it felt like there was a lot of opportunities were – there was that little mini banking panic last year when Silicon Valley Bank went under. I think it was First Republic was one of the other ones. Yep. that, and maybe just a flight to safety where people, they don't want to be involved in financials at all. And one of the stocks that sold off hard from that was American Express.

And if you just looked at American Express's, A, their customer group, but B, their business model is very different. And they ended up being actually in a really good situation. The stock was really cheap. And that was probably, that was one of the biggest fat pitches that I'd say I missed. I think in general there, if you looked in and you looked at what was causing the panic, those banks individually, they had huge customer concentration for the most part. Silicon Valley, a lot of them were venture capital customers that talked to each other. It's really easy to have that widespread concern among their depositors. that kind of widespread concern among their depositors. With American Express, there was just no concerns with that, not to mention it was the most kind of the higher-end consumer, so there wasn't as much concern on the loans as well. So that just ended up being – I can't remember.

It must have been a year ago now where American Express was really cheap, had sort of re-accelerated with younger customers. More and more of their customer base is coming from younger generations and it's very popular there. So they seem to be kind of a secular grower and they got really cheap for a certain time period, but unfortunately missed out on that one. One of my favorite charts that you share is the American Express average fee per card. It's just like the most beautiful graph like pricing power there is just spectacular yeah i think it's grown like 10 annually the average fee per card people are

happy to pay it too now typically those tend to coincide with better benefits as well with the cards so people don't feel like they're just getting chipped. It's usually they can raise the prices because they're raising the value they provide to customers. So that doesn't necessarily mean like profits are expanding because of that, but it is, yeah, people are very willing to pay high prices to have Amex cards. And it's a flex when you pay at dinner. It's one of those legacy brands that's striking a chord with young people too, which is a very important transition. Like when we were just talking about young people maybe not into

buying expensive bottles of spirits and LVMH is seeing that in the financials, that transition for American Express to the next generation might be even stronger than historically. So, you know, like you show up to the concert and you get to go in a separate line and you're like, hey, come with me. Come with me, friends. Don't wait in that peasant line. And you save yourself about two minutes tops, but you know, it feels great at the time. The airport lounges, those two.

Yep, exactly. The lounge feels great. Your next question here, what's your biggest error of omission you've had in your investing career? One, you knew the business was doing well, looked like an attractive price, but you didn't buy it. All right. When I was in university, there was no stock I looked at. And for context, I started engineering school in 2013. There was no stock I looked at. And for context, I started engineering school in 2013.

There was no stock I looked at more than Facebook, aka now Meta. And I feel like such an idiot for this because I would tell everyone I knew to buy the stock. And by the way, it was at like 120 billion in market cap at the time. I just looked on the chart. So there was no stock I looked at more and kind of was a stand for. The numbers were unbelievable. The margins were unbelievable. And I feel like such an idiot for this one because I feel like me, the period I grew up at, the exact time I was born to where I'm at now, there's no kind of position or view to be in the right angle to have an opinion about it and see as you grow up in the internet age. I got my Facebook account in grade six. So I was like 11 years old. I remember very, very distinctly in my buddy's basement, there was like eight of us and we all made Facebook accounts. I remember that summer afternoon distinctly. For context, I'm 28 now, so we're very early. I had Instagram, one of the first, way, way before the Zuck purchase and that wasn't long. I think they only had it for like a year before he bought it.

And so I watched every kid in my high school go from what's that to it being the most popular app on everyone's phone. And so it would have been around 17 times my money. And every few quarters, there was some bad story that had some good entry point. And then in 2022, there was obviously that massive 70% drawdown, huge opportunity. But it was hard, man. I thought Mark was losing his marbles with the metaverse stuff. And I still think that that might be true. It's just that the core business prints so much cash that maybe who cares? Does it matter? I don't know. So that's kind of the story with my miss. Does it matter? I don't know.

So that's kind of the story with my miss. Yeah, it's funny how some of my best investing insights have just been like, oh, I use this all the time. Like, I don't really, you know, the valuation seems reasonable. Sure, like, I'll buy it. And if you just held that over time, it's amazing the returns you would have got. It reminds me of the midwet meme. It's like. returns you would have got. Reminds me of the Midwit meme. Yeah, exactly. It's like, no, but did you look at – did you do all this analysis and listen to 48 conference calls and do all this stuff?

And it's like, no, I use the service and I like it. Yeah, exactly. And it's like you can worry about quarter to quarter, but when it's a business like this, usually those efforts are kind of futile. The 2022, I was in the camp of, okay, Mark Zuckerberg is going to spend just endless money. You know, this is something I can't own. But you look back on it and it took like one comment on a conference call for every investor to be like, okay, this is very ownable. Because all he said was like, oh, no. The year of efficiency thing? Yeah. And he was like, oh, we're going to invest, but okay, this is very ownable. Because all he said was like, oh, no. The year of efficiency thing?

Yeah. And he was like, oh, we're going to invest, but we're still going to grow earnings. And I was like, oh, okay. They're not just going to do it mindlessly. Why didn't you open with that, Mark? Yeah. He had to give us a year of very concerning CapEx guidance before he decided to please all the investors. But yeah, that was definitely a huge opportunity for me.

And I guess you could probably say this with like pretty much any big tech company at the end of 2022. It was like an easy buy because it was such good businesses in general and the stocks had sold off. But late 2022, Amazon had declined 55% from its highs and it traded at a market cap of just over $800 million, which at the time, I probably would have – like if you offered AWS to me, like all of AWS for $800 million, you could justify buying that. Not to mention they have the biggest online retailing business in the world. Probably at what, like almost a $90 billion run rate at that point, right?

Yeah. And I think the forward was, you were basically paying forward sales. I'm pretty sure you mean $800 billion in marketing. Sorry, $800 billion. Yeah, not $800 billion. Of course you would buy it at that price. But it just like, you look at what was the narrative around it at the time. And for anyone who doesn't remember or didn't follow Amazon at the period, there was during COVID, they had so much growth pulled forward. For context, in 2020, their retail sales grew 39%. And that was off of

a $245 billion base. So I don't know if you've ever seen that level of growth at that size. So in 18 months, Andy Jassy kind of went on this conference call and he said, we had to make some decisions and we decided we're going to essentially double the size of a fulfillment network in 18 months. And he said it would have taken six to 10 years, but they had to basically supercharge it. And then following that, there was this huge pullback. So I actually, I went back into kind of my notes around the time and it says, around the end of 2021 to the start of 2022, shopping trends started to revert. People were spending less and shopping more in person because you're kind of coming out of COVID. So there was that big online supercharge in sales. I said, this led to

excess capacity across their fulfillment network. And at the same time, nearly all their major variable costs were skyrocketing. So ocean freight, air freight, trucking, fuel costs, they all were contributing to this huge increase in cost of revenue. Not to mention, they had to double hire. There was a bunch of duplicate roles across their fulfillment centers because people would say like, oh, I've got Omicron because there was that second variation. And they couldn't necessarily fire them because they had it, but they had these duplicate roles. So, they had to double hire. And so, it just led to this – actually, they went to unprofitable on their retail business. And then cloud revenue was like slowing down at the same

time. So everyone kind of thought this is structurally unprofitable. But if you just like Amazon had proven that they can be profitable, they'd done it for five years prior to that. And so when you actually go back and you look at the operating income, it's went from $30 billion to $13 billion across the whole business at its lowest. And then it's since shot back up to around 50 billion. So if you had a sense that, okay, this will actually, a lot of these cost increases are temporary and they'll slowly start to fill out that extra capacity. It was, it was certainly an easy investment. I think it's doubled in the last two years since that point in time. Yeah. And another one exactly like the

meta example where it's like outrageous capex spend, but in hindsight, it's always 2020. But it's like Amazon was always going to be the company that does this so that their fulfillment network and that magic of Amazon, when you press buy and it magically appears at your house at like a creepy time speed and efficiency and reliability, that's in their blood. Relent relentless.com go to relentless.com it redirects you to amazon.com like this is this is truly the jeff bezos way and so like i look back i'm like why was anyone surprised that they did this yeah and you know some sometimes companies pour money into capex and you don't really know what the return is going to be. You kind of think like maybe some of the company's AI initiatives, it's maybe expensive on the CapEx line and you don't know what it's going to be. But Amazon, every time they add a new logistics center, new trucks or new planes, you know it's helping the delivery speeds, the efficiency, whether it's the other half of CapEx is AWS servers.

Anytime they're buying more AWS servers, it's because they are telegraphing more demand. So higher CapEx for Amazon is typically a good sign. Yeah, I'd say so. But the investing community is very short-sighted. Definitely, yeah. So, but you know, the investing community is very short-sighted. Definitely. Yeah. And I think that, you know, they've been burned too on a lot of stuff, right? It's like the other bets from Google. I think, you know, maybe Waymo is the most exciting things to come out of there in a

long, long time, right? It's like. Yeah. I mean, if all the CapEx were coming from like Alexa or ring cameras, then maybe there'd be cause for concern. But Amazon- Core biz. Yeah. The core business, higher CapEx tends to mean more demand is incoming.

Last question. How has your investing strategy evolved over time? Do you want to go first on this one? I think I have an answer, but I want to think for a second here. three years that I was investing, I was very valuation focused. And I think that led me to a lot of opportunities where even if it worked out, I was going to have to sell and redistribute those earnings somewhere else. I was going to have to find a second idea if I had to sell. The more and more that I study the best investors, the great fund managers of all time, all their biggest winners came from things that they just held for a long,

long time. You can find the cigar butts and stuff like that. And if you're a fund manager, it kind of pushes you towards that because you want to manage some of the short-term numbers to keep investors happy. But if you're an individual investor, I find myself trying to find really high-quality businesses. I still am somewhat stringent on valuation, trying to find a reasonable price, but I'm happier to- You're trying to not do silly things. happier to you're trying to not do silly things yeah the i'm like i'm moving away from the trying to find the hidden gem where i'm somehow the only person in the entire investment universe that's discovered this thing to okay that's a valuable business it provides a valuable service and i think its moat is going to widen in the future. I think it's worth owning.

And frankly, as an individual investor, you can be a little more lenient on valuation because your time horizon is longer, assuming you're on the younger side of things. It's longer than most of the funds that own it. Yeah. And if some disaster or some bad news, crowd strike story does happen, you don't have to go back to your client with your tail between your legs and tell them some story. Yeah, you're not getting redemptions. You're getting consistent income, hopefully. If you're making money on a regular basis,

you can consistently add more when those opportunities arise and not have to explain your previous mistakes. Yeah. Well put. Dude, ditto. Especially around just wanting to own things that I look at. I look at my portfolio and I'm just like, I feel real good about this over the next 10 years. Numbers aside, I really like, I posted on Twitter how you can kind of take all your portfolio weightings now on the dashboard and just see like the portfolio statistics of everything and i just look at that i'm like this looks like a really good stock like if it were a company yeah in aggregate this looks like a fantastic stock like the portfolio weighted

metrics whether it's like revenue and ebitDA growth and valuation and all that kind of stuff. It's like, this looks like something you'd probably want to own. I'd say my investing strategy over the last five-ish years has trended towards more concentration, more and more appetite for owning fewer ideas at size. How do you feel about starter positions? Oh, we've talked a lot about it. I actually have a very hot take on this. I think that they're complacent. I think starter positions are the definition of complacency and laziness. And that doesn't mean adding to a position in a small way and then continuing to add to it over time is a bad thing. I think that's a really good thing.

And I like the framework that Chuck Ackrey has on workbench positions and core positions. The example I use is I added ASML and it's continued to remain a workbench position because over the next 12 months, I didn't think that it was at a good valuation anymore, but I don't sell. So it's remained at a workbench position instead of just like I can continue to accumulate it and it become a core position. So he has two definitions of this. So he has two definitions of this. I think mentally that's a huge difference compared to, hey, I am going to do this starter position and learn more later. Like I'm going to borrow my conviction now and build it myself over the next whatever time frame. That's how I view starter positions. And I guess it's just definitions at this point.

So that's how I view starter positions. And I guess it's just definitions at this point. But to me, that's a completely different mind framework compared to, I have 100% conviction now. I'm do a starter position, it's usually high quality. If that becomes sort of a fallen angel where there's one day or two days where there's big drawdowns, sometimes I'll be like, oh, you know what? I'll buy a couple of shares. I think I read this, there's this investment blog that I read and the guy was, he bought it and he couldn't really justify it. And he just said, you know what? I'm a sucker for a fallen angel. I think I'll do that occasionally with, with the starter positions and then start to read up if I need to get rid of it. And I feel like the drawdowns were justified. I can always do that. coincides with my strategy around your question of like like a fat pitch because that could be a fat pitch situation but because i don't like doing starter positions without 100 conviction then you end up with a like i'm i end up with my anti-goal of owning a lot of positions yeah because i'm trying to go into extreme concentration so if i've built out that

immense concentration it's probably going've built out that immense concentration, it's probably going to come out, a fat pitch is going to come out as a full core position on day one. Yeah, I think some of the fattest pitches that I have seen over my time investing have come from within my portfolio. Because you don't have to do the research. You already know the business. You already have the conviction.

Yeah, you've been along for the ride, so you know what the business is like. You've kind of gotten a sense of who management is and whether you trust them or not. So yeah, you've got that conviction to begin with. I'll leave you with the analogy from the venture world. So just to simplify people for people here. So Henderson, say you have a company and I invest a million dollars into your first round of venture capital. It's like you sell me 10% of the business for a million dollars. It's valued at 10 million or something. If I'm a sophisticated investor and I have the correct documentation, I will also have pro rata on your next investment to maybe in some case, increase my position, but also at least at the minimum top up so that I

can keep my 10%. So I'm basically, I'm giving myself the option that next time you go raise more capital for your business, I have the ability to invest more. Because it's privately traded, right? It's privately held, so I can't just go buy shares on the open market of your startup. But this gives me the ability to buy more by having this pro rata rights. A lot of big VCs, the most money they make is on those pro rata little investments to top up. On a risk-adjusted return, those are usually the best money they make on a risk-adjusted return because they've gotten to know the business and the founders and the team over the last however long. That's the same thing with you already being an owner.

Yeah, it's way less speculative. You become very acquainted with it and it's something you just know intimately well. All right, that wraps it up. Dude, thanks for coming on the pod today. And we'll, the pod goes on here Mondays and Thursdays. Simone and I tried to record an episode on our usual Tuesday and

my neighbor is doing I live in an apartment in Midtown Toronto and my neighbor is doing Renos. Quiet all week. We're just about to start recording and you start like hardcore drilling and hammering like two minutes before

we pressed record it's like all right this is this is gonna work i'll call henderson yeah i'm happy to come on it's always fun to always fun to join and uh second time was fun we'll have a third time here at some point as well we sure will thanks for listening if you have not checked out fin chat uh you got the guy doing all the content right here on the line, Ryan, and you can get 15% off by using code TCI, 15% off a plus or pro plan. But if you just want to use it for free as well, you get lots of data. So more than welcome to go use it for free at FinChat.io. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guests featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with

a financial professional before making any financial or investment decisions.