The Canadian Investor - Private Credit Cracks, Canadian Tire’s Turnaround & GoEasy Delays Earnings

Episode Date: February 26, 2026

Simon and Dan kick off with a quick update on the Canadian Investor Podcast’s first YouTube Live (March 3rd at noon ET). Then it’s straight into the GoEasy saga: Q4 earnings get pushed right up near the regulatory deadline, adding to a growing list of red flags around leadership turnover and loan-book quality. Simon and Dan explain why, like poker, you can’t cherry-pick the information you like. Next, Canadian Tire shows momentum: improving comps, margin expansion, and buybacks doing the heavy lifting—plus a look at rising credit-card write-offs and how the company is using AI to sharpen promos and inventory. They also dig into Blue Owl as private credit stress goes mainstream—redemptions, asset sales, and “par value” optics in a mark-to-model world. Finally, Home Depot remains stuck in a slow renovation cycle, leaning harder into the pro/distribution channel through acquisitions as higher rates weigh on demand. Tickers discussed: GSY, CTC.A, OWL, BAM, BN, HD, BRK.B Watch the full video on Our New Youtube Channel! 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 Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals, don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time.

Welcome to the Canadian Investor Podcast. I'm Simo Berage. I'm back with Dan Kent. We are back for news and earnings. Before we get started, we finally settled the date for our first YouTube live. So make sure you put it on your calendar. Obviously, it's possible that not everyone will be able to join. That's okay.

It will be on March 3rd at noon Eastern time. So if you have time off from your lunch, you'll be able to listen to, Parts of it should be fun. I'm pretty excited for it. Hopefully, we don't fumble it too badly, but I think it'll be fun. And I'm sure people will hear some French pronunciation mistake from me in real time. So it'll be interesting. But I always enjoy watching live from some content creators that I watch, even sometimes if it's after the fact.

So hopefully you enjoy that. Make sure you tune in. If you don't have a chance or you're not planning to go on YouTube, that's fine. our audio release will be using that YouTube live for the Thursday release on March 5th. So both options will be there. And then if we get some good feedback on it, maybe it's something we'll start looking to do one episode per week, live and then two regular. So we'll keep that in mind, but something we're testing out. During earnings season, yeah, you mean like when earnings are up.

Yeah, I mean, there's a lot. When the content warrants it, I would say, don't want to hear us rambling around about. Nothing. But yeah, there's there's a ton to talk about in this episode for sure. We got Canadian banks rolling in right now, I think. So it'll probably be a topic for. Yeah, I think I think it'll be good. It'll be fun to talk about during the live episode, the Canadian banks earnings that are starting to roll in.

I guess to get started here, just a quick mention, people may have heard about the Citrini research report that is, was based in the future in 2028, looking back at essentially the last two years from. 2028. So it's a fictitious fictitious fictitious. Stapien like. Histopian type of research report. But it definitely rattled the markets and it's on AI. Definitely rattled the markets on Monday. And it's something we'll go over next Monday. So make sure you tune in. We'll do a summary because that is a long research record. It took me about an hour to read it. So I did a summary for everyone listening and then we'll give our thoughts on it. It is very interesting, also a little bit scary reading it.

I must be as must admit. So make sure you stay tuned if you haven't read it. We'll go over it. Definitely some good discussion topics there. So now let's get started. Starting off by one of the favorite companies from us to talk about, I guess. So the Go Easy Saga continues. So that's what I put here.

They didn't come out with any earnings release and that's part of the problem. So typically go easy releases their earnings for Q4. Their quarter ends on December 31st. So they have to release it by the end of March. But traditionally they've always released it essentially mid-February. So February 15, give or take a few days depending on the year. But it's within like a week of the middle of the month. That's usually been the case.

And I went back to 2019 and that was always the case. So maybe they had some years where they released it later in March. Prior to that, I just didn't feel like going through all of it. No, not like they have usually been very, like they report. I kind of found it weird and we had a lot of people asking in like our Discord because yeah, the company is usually reporting in February. Late March is odd. Yeah, exactly.

And the reason is odd is obviously we talked about it a lot, but there's been a lot of issues plaguing the companies for lack of a better, better words this. CFO left late in the summer, almost in the fall. So it was a surprise departure, went left for another opportunity. But the timing was a bit. I was very sure they brought it an interim CFO, sorry, to be able to oversee the release of the financial statements for the new year and so on. There was that, there was a short report that highlighted some concerning issues about

the company, especially when it came to the interest receivable. and if you're not sure what interest receivable is for a subprime lender or a lender, but a subprime lender like GoEasy is essentially they are booking the interest income under income statement. So as revenue, but they haven't received the money yet. So that has ballooned from I think the mid-teens to around 40% just going on memory here. And that's pretty concerning because it could be a leading indicator that there's more

of their loans that under that are not performing, then they're actually reporting in terms of delinquency rates. They came out. They had a close call with analysts, sell side analysts that are notoriously biased towards the company because they want to keep access. They want to keep good relationships. And then they were using them to say, oh, this short report is not good and blah, blah, blah.

A few weeks later, they had a statement that was kind of a head scratcher, didn't really explain anything. And on the conference call, on the earnings call, they just didn't really provide any satisfactory answers. We went through that at the end of last year. But their argument was essentially, well, we changed the way we report the liquequencies on the first end. And on the other hand, we have a lot more loans that are secured. So they're backed by hard asset like mortgages for homes and also car loans. But the problem is they make that look like it's a really, they You recoup like 80, 90, 100%, but the reality is a lot of these mortgages are second mortgages. So they come after, say, the big banks.

And the car loans oftentimes are underwater as soon as they're taken because of the fees and all of that. And then when you know that someone is coming after you to repossess your home or repossess your car, oftentimes you don't take the best care of it. So all of that, the costs associated with recovering, those recoveries, you can, if you, if you, you start doing some research, oftentimes it's closer to 40 to 60 percent depending on, you know, it's a car or home or even less. The second mortgages can be really dangerous because you're coming after the bank. So sometimes there's nothing left after all the fees you're incurred to try to recoup that money.

So I just wanted to give the background because on top of that in December, the CEO left for health reason. The CEO that just started a few months prior. I think it started in the summer, right? If I remember correctly. Yeah. So E left for health reason, which of course, you know, I'm hoping it's legitimate, but the timing, it's just a timing of everything. And then on top of this, you get them pushing back the release of their earnings for Q4 to almost the regulatory deadline. The regulatory deadline is March 31st.

To report it for them, it's going to be March 25th. So all these things together, if it was just one thing, just pushing back. and everything else going fine, then I think most people will just say, you know what? There is an interim CFO. They're just trying to take their time to do things, right? But because there's all of these things,

to me, there's just a whole lot of smoke going around this company. Yeah, and I think, like, there's been a few counter arguments that, you know, they have a new CEO,

so maybe they're kind of giving them time to kind of figure out, you know, the loan book and all that type of stuff. But like they've gone through, I think this is their fourth CEO and seven, years and they never delayed any like they always reported you know typically when they reported when they have the other CEOs so well and even the CEO right now has actually been on the company for close to two years and he was president of go easy so go easy financial the financial

arm yeah exactly so he should know the business pretty well that's why it's just really really strange like i was saying like if you don't this could be absolutely nothing but if you don't think this is weird, then you're delusional, I would say. Like, they've reported in February every year for the last, you know, seven plus years. And now all of a sudden, you know, after reporting a not so good quarter, last quarter, now the results are pushed out like nearly a month. Like, as I said, it could be absolutely nothing, but it's like it should be, you know, you should be looking at this as something that could potentially.

be an issue. I mean, I've never been called, well, I've never been, I guess I've never been called an idiot more than kind of saying that this one was overvalued at 200 and now it's 109 and people are still somehow saying I'm, I'm the, the dumb one. But yeah, it's, I mean, a lot of people, I think, you know, they've held this one for a long time. It's been a very good company to own. And I actually, like I said, I covered this company from 2018 up until, the summer of 2025. But these companies run in cycles. So yes,

you know, if you bought it post-financial crisis, you've got a 10, 15, 20x. But if you bought it in 07, it took you seven, eight years to get a break even. So it's,

yeah, like these companies are very volatile. Yeah. And you add the fact that right now, sure, companies like this will make projections. They will put provisions for credit losses. So they'll set aside money for bad loans.

that's all fine and dandy. They should do that. I mean, they all do that. Even the large banks do. And they'll make projections on different economic scenarios. But the issue right now is the economic scenarios are so difficult to predict. Like, who knows with Trump and how the world is changing, how the Canadian economy will look this year or even two, three years from now. It may be materially different.

And then you have all the disruption with AI on top of that. It just, there is just so much. risk and so many issues also like red flags popping up with the company itself that it's a bit and this is just one additional thing. And that's the issue is I saw on Twitter like we, we and I both like we're going back and forth with a few people. But I think it just came down that the bulls are just looking at this as a singular event. They're just looking at the postponement like, oh, it's just postponing. There's a new management team. They need more time. But it's like they're not looking at any of the other stuff. And to me, when you invest, you have to, oftentimes you have

incomplete information. Very similar to how like people know I play poker, but poker is a game of incomplete information and you have to make the best decision you have with that incomplete information. And you should try to use as much of it as you can. So when you start not using some information but using other, that's where you can get into trouble and make some some mistakes. So I just wanted to go over that. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations.

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I'm on there. I encourage you go on. there and follow me, search me up, some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. Now let's go to actual earnings with Canadian Tire. Good on you for picking up that one. I forgot they reported. Yeah, they're on, uh, they're on a very good run over the last while they're up over 40% like over the last year.

If you include the dividends and it kind of seems like, you know, the results are starting to turn around for the company. I mean, up until 2025, I think it was, yeah, five quarters ago. They were just constant declining year-over-year comparable sales. It's pretty much flipped five-street quarters now of positive comparable sales. And this quarter came in at 4.2%. So, yeah, it's, I mean, you got to give props to Canadian entire earnings on the year increased 19% while revenue only increased 5%. So margin expansion was big here, like a big part in

this. Even a margins increase from 11.9% to 14.2. But the other one was buybacks. So the company bought back and eliminated around 5% of its total share count in 2025. And I'm pretty sure they were going pretty aggressive on the on the buybacks to in 2020, in 2023 and 2024. sport check had 9.5 comparable sales growth 9.5% comparable sales growth. Marks was 7.2 and Canadian tire 2.7. I mean, I'm a bit surprised in regard to sport check. Like, I know this is anecdotal, but I don't think I've stepped in one of those stores and like five years. I mean, we used to shop at them all the time, but not really anymore.

But that's unless the comps were pretty ugly like pre-2020, and maybe that's why we're seeing almost double-digit growth there. but pretty much every segment of the business is kind of humming along nicely. Members are growing nicely, like their loyalty program, like Canadian tire, whatever, the money, all that type of stuff, up 6% year over year. And the company has developed an AI system that is going to help it kind of capture consumer trends better. So they mention, like by the sound of it,

they'll be able to kind of detect particular events and auto-manage inventory, apply discounts and promotions online, etc. I mean, you know, again, it's not really good for marketing teams from a, from a human capital standpoint, you know, because by the looks of it, they're looking to replace all of that and kind of automate it, but like, it's hard to deny the benefits to Canadian tire. I mean, you have a back-to-school promotion. You want to run and it just auto-applies all the discounts, kind of creates your campaigns,

runs them like that. You don't really need a lot of the, you know, the humans to do the work. Yeah, one thing I'm going to add for a sport check. So just looking at the results here for the screen I'm sharing for joint TCI. And you can see that, yeah, it's actually the best quarter for sport. Not only sport check, but I think Marks since December of 2022. So they've actually, yeah, they went back to the pretty much same level of revenue for sport check. So since then, every December quarter, they were around 550 and now they jumped to 638, which was,

the December 2020 high. So I think it was just really bad and big of the thing. It felt really ugly. And then I was kind of thinking like maybe the Olympics to the degree, but this quarter ended like at the start of January. Yeah. Because they sold like apparel like sport kind of team apparel was one of the main

reasons. So I kind of thought Olympics, but this would have been a bit early for the Olympics. But yeah. It's had pretty good year. But yeah, I mean on the on the AI side, it's still pretty early, but clearly, I mean, there's very few companies who are not building something out in this regard.

Like, it's undeniable now. And then when we look to the credit department, because we always kind of look that over, credit card sales increased 3.9%. Accounts receivable grew 2.5. However, the allowance for credit losses is now 12%. And the write-off rate was 7.2. Like, I think that's pretty, the right-off rate has always been around this range. I feel like it was in the 6% I'd have to look by it feels like it's gone up. Yeah.

Ticking up a bit more. Yeah. And I think this is like double the big banks. That's right off the top of my head. But I don't think the big banks are even over 4% on their on their credit card right off. So we've spoke about why that is before. But yeah, it's a bit, you know, higher right off than most of the big banks. However, the customer quality, I guess, would be lower in general.

And they've been going through a bit of a restructuring phase. They say it'll finally start to see the benefits in 2027, sorry, 2026. They're going to see around 100 million plus in cost savings. And I mean, these are pretty notable because they effectively fall straight to the bottom line. I mean, they announce them, you know, in 2024, obviously nobody really thinks about it. But then when they start to kind of work out later on, it's definitely a net benefit. Not really a company that moves a needle for me. I mean, if you managed to time the cycles on it, you did quite well.

But I think if you just bought and held this one over the last decade, I mean, you haven't really earned all that much. But yeah, they're doing quite well now. I feel like, you know, we talk about this one almost all the time. And it's been pretty ugly for like a better part of 18 months. And now it's kind of started to turn things around over the last year. Yeah. Yeah, no, exactly. And I was, as you were talking, I was trying to get the credit card.

ride off rates here. For the banks? Yeah. Well, no, just for a Canadian tire for last year. I know when we first started talking about it.

It was like high 3% range. So it's gone up quite a bit. Yeah. So net credit card ride off rate. Yeah. So it was last year at that same quarter, it was 7%.

So it's gone up a bit. Yeah. It's gone up a bit. Yeah, exactly. Like they also show 6.1 for Q3. 2023, but that 2.4, 2023. Oh, actually, yeah, 6.1. So actually it's gone out.

Yeah, I thought they were showing Q3. So yeah, it's gone from 6.1 to 7 to what did you say, 7.2? 7.2, yeah. Yeah. So it's definitely trending up. And like we've said before, it's not the same credit quality. And they are aggressive. And when you go to Canadian ties,

holy crap, you can't, you can't have eye contact with them because they're coming. Yeah, usually I go. with my daughter so it's an easy and I'm like I'm borderline rude when they come to me like I do not want to waste any time like it's just I'm not rude but I'll be like very direct I'm like not interested yeah like and then I walk away I don't even yeah how about you same thing or yes yeah yeah sometimes yeah I mean I will admit I don't go into Canadian tar very often the one

where I'm at is not a very nice Canadian tar so I try to avoid it at all cost the one we have For those living in Ottawa, I think it's the biggest in Canada. It's like two floors. It's super nice. My daughter loves going there and trying the bikes out. So oftentimes we just end up there and not buying anything just like trying the kids bike out. So I probably go there more often than I'd like to admit. But let's move on here.

Speaking of credit, Blue Owl is still making headlines here. And obviously it's starting to boil over another private credit companies. You texted me when you'd first seen that, I think. right? Yeah, they wouldn't do any, they like halted redemptions. Yeah, exactly. So investor in Blue Owl continue to want their exit, to exit their investment in the funds that the company manages. They have high exposure to software companies and fears are high about potential disruption by AI. And this is why I think Blue Owl is kind of the poster child for this right now. Really, they're the ones that are kind of, yeah, the poster child, lack. of better words. And they tried to do a merger between one of their private and public fund that

would have hit private investor with a 20% haircut. And obviously investors, they got, I think there's lawsuits going on because of that too. And investors are worried about the overall quality and value of their loan portfolio. Just a quick reminder here for those not familiar, I know it can get a bit confusing. So Owl, ticker OWL, is the management company. So they get fees from managing Blue Owl funds. So essentially it's like Brookfield asset management would be like similar, right?

They manage private investment and they get fees. So just wanted to, because there's a few different publicly traded Blue Owl and this is the management company. And as long as the funds have assets in them, Blue Owl gets a percentage of those as

revenue. And that's really key to understand what they're doing. So sure, right now they are losing AUM as they return money to investors. So what they're doing essentially, they're selling off assets now to not just provide money to investors who want to redeem funds. They're basically saying like anyone that's in this Blue Owl Capital 2,

which is the fund, so it's a retail focus fund. What we're doing is we're selling parts of the assets and we're giving you back the return of capital. Typically how these funds will work is they're going to allow a percentage of redemption every quarter. For example, you can redeem up to 5% of the shares that you have in the fund every single quarter. But the request for redemptions have been so high that they decided to do this instead after trying to merge the fund, which would have screwed some investor like with 20% discount. And this is a bit worrying because the drawdown.

essentially allows them to do a slow bleed versus a kind of quick bleed where they have to panic sell a lot of the asset. You look like you want to say something. So go ahead before I continue. No, no. Go ahead. I was just reading that. I do have the one thing I will say is this is like it's getting big now.

But this was kind of like not talked about a lot for what, like months and months. but now it's like it's hitting mainstream because even I think it was yesterday we had Jim Kramer come out like Jim Craver Joe Jim. He's telling a man. Yeah. Maybe that's a sign of the bottom. I don't know, but he came out and he called these these funds out like straight up. He said, I mean, quote, these PE firms and these taken private enterprise software firms are not worth what these funds paid for them.

It happens. They made mistakes, but own it. it, take the hit, don't hide it. So. Oh, and they are trying to hide it. That is for sure. Yeah. They are trying to hide it. So just to continue on that.

And yeah, even though there's a lot of memes of Jim Kramer basically saying something in the opposite happens. Yeah. I mean, he has a point here. It's hard to not like agree with him. So what they did, Blue Owl, is they did a massive 1.4 billion asset sales. So to kickstart this liquidity, they sold that 1.4 billion slice of price. private credit loans to institutional investors, pension, and an insurance firm that they own themselves.

Oh, that's very convenient. So essentially Blue Owl framed this as like, oh, you know, this is a win. We were actually able to get essentially par value for these loan, 99.7%. So they're basically saying, look, our loan portfolio is great because like institutions actually want to buy it at like almost par value. you. And okay, maybe that's true, but to me, this is more optics than anything. Because the problem is that of the four buyers, there was Kovari. I'm not sure if I'm pronouncing that correctly. I would imagine so. It seems like. Kovari asset management and insurance firm majority owned by Blue Owl. We also don't know what percentage of that $1.4 billion was sold to each

of those buyers. So if you followed the money, it looks pretty messy. They sell loans to their own insurer and of course the pension funds that provides cash to the fund. The management company, which gets fees from those funds, so Owl that I said earlier, Blue Owl, that ticker owl, use it. Basically, they said they would start using it to buy back stock because obviously they get fees from that fund. So essentially what they're doing is they're trying to keep as much money as long as they can in the fund so they can capture fees from that fund to try and buy back stocks and they announced that they would authorize $300 billion in share repurchases for the program in 2026. Now, to me, that's a PR move because why the hell would you be buying back share

when clearly there's some issues going on with your fund? So they're trying to show confidence, but I think for investors, it's looking more and more like they're prioritizing the management company over the investors that invested in their actual funds. Pretty concerning, I think especially the figures of 99.7 par value when it's being purchased by your insurance, the company that you own. And to be fair, they are not the only one that have that business model. This kind of business model is great when things are going great. because essentially what happens is you get money that's put into the insurance companies.

So people pay premiums, whatever the insurance business model is. The insurer, I think it's called the float, right? You know insurance companies better than I do. So they take part of that float. They will invest it into investment to generate a return. So what these companies do is they will do that, take that float, invested in their asset management company. So Apollo does this. Brookfield does this.

I believe KKR also does this. So they generate a profit on the fees. And if the investments, the private investments that they have do well, then they also have a nice profit. And then the insurance company can pay its obligation. So they essentially pocket the fees plus the profit because they own both the insurance company and the asset management business. But the issue is when it starts going the other way. And Blue Owl is a exhibit A on this. potentially happening for them.

And all the signs are there that they may be entering into that. They're no longer in that flywheel, but essentially spiral downwards where now they're forced to sell assets, potentially at a discount. So they're taking losses. And at some point, it's going to ripple into the insurance business, especially if they start buying those bad loans with the insurance company. Yeah. And I mean, like if they didn't disclose how much was bought by each of the four.

buyers. How do you know that their own insurance company didn't just buy most of it. Yeah. Most of it. Yeah. So it's yeah, I don't know. We did. I can't remember when we did that private credit episode where I know over the payment and kind and all that type of stuff. And like the like how bad of shape like a lot of their, especially the software companies were inside of the portfolio. But yeah, I mean like a lot of companies, a lot of insurance companies do this type of stuff. Like if you think of a company like Berkshire, they'll use the float to buy publicly traded equity. He's a lot of private companies as well. They're not getting into this type of stuff. No, no. Private companies would be like they own like dairy queen and fruit

of the loom, not like they're not issuing, you know, credit to some. Well, and that's a difference, right? A Berkshire will own a company. They'll use that. They'll buy typically publicly traded company and those are marked to market. The problem with private assets is they're marked to model. So you don't know what the true value is. They use a model to do it. But if these assets were on the public market, what would be the actual value? And there's really no way of knowing. And that's been one of the biggest criticism for these private investments is they tend to say that they're worth more than they actually are.

You know, during big crashes, they say, well, look at our value, our investments actually, you know, the market tank 30%. but ours remarkably was up 5% because their mark to model was different than what the market was doing. So just something to remember, I want to also give us a little bit of credit. We don't really take Victory Labs, but remember when we talked,

maybe a year or two ago, about private credit being offered by Weld Simple. And I'm not, it's not to pick on Weld Simple here. Obviously, QuestRates a sponsor of this show, but, and I don't blame Quest's WalthSimple for doing so. Just because they, you know,

there's demand for it. So if there's demand for it, they'll do it. Like, I totally understand that. But my biggest thing that of caution for private equity and private credit is it was getting so late almost in the cycle, right? It had grown in popularity after like decades. And then you have that being offered to retail investor. And it was very opaque. You don't really know what you own. Your capital is locked up for several years. So there's liquidity issues. And And now we're starting to see some of the cracks happening. So hopefully there's not too many people listening to this podcast that own this. And I'm not saying with Wild Simple, maybe it's like it's doing quite well and there's no issues there.

But the problem is when there is issues, it's very hard to know until oftentimes it's too late. And there's not much you can do because then the funds can just do like Blue Owl did and they just freeze redemptions. And then your capital is locked up into that and you really have no way out. Yeah, and I bet we have, I had a lot of questions about this again on our disfor. And I said, well, simple and get details on the fun. Exactly. Because, like, just ask it. You should be asking for sure.

You should be asking because, yeah, this is, there's an element of like, when a company like Berkshire is doing this, like they own a ton of private companies. There's an element of, I guess you could say trust there. Yeah. Like Berkshire, their private companies, if, you look at their, you know, you can, you can see their portfolio of private companies. They're not, you know, they're not investing in a bunch of, you know, they're not paying like 30, 40x sales multiple for a bunch of. And levering them up.

That would be on the private equity side, but the private credit side, things like that. But yeah, there's a big element of trust here. And I mean, on this stuff, like you said, there's, there's no transparency with a company like Berkshire or even a company like Fairfax. Like they do the whole thing to float with, you know, buy public equities, private companies. There's a bit more transparent either, whereas here there's none. Yeah, and also oftentimes with just to finish on public, sorry, on private equity is what they'll usually do is they'll buy and then they'll saddle the company with debt and then they'll turn around and then they'll try to exit the investment within five, six, seven years, whatever their

goal is. So that's not something that I believe a Berkshire would do, for example. So just to keep that in mind. So there's different ways of doing this. but I think it's important to talk about because you saw, for those owning Brookfield, BN, the drawdown on Monday was in big part because of Blue Owl. I think it was also in part by that Citrin research report because it also had some implication for private credit in that 2028 scenario. But yeah, Brookfield was hit.

But interestingly enough, it was only Bam and Brookfield because obviously BN, Brookfield Corporation owns a big, big chunks. of BAMs. They just bought the rest of oak tree. Like what was that six months ago probably? Yeah, a few months ago. So it's, they have you, they have a lot of like, I know it's seen as a very good company and it is,

but at the end of the day, they're not immune and it's a very complex business model. And I think over time to me, that's why I've stuck a bit more with just Brookfield infrastructure partner and Brookfield Energy partner just because it's the hard assets. It hasn't performed as, well as Brookfield Corporation, but when I hear this kind of stuff, I feel much safer owning

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Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account,

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podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, Blossom Social in the App Store, and I'll see you there. So enough of that, let's move on here to Home Depot. I know it's a company that you still own, right? Yes. Patiently. Patiently owning this one.

I mean, I guess it's kind of like the, you know, Canadian tire I'd say is like the barometer of the Canadian consumer. I guess Home Depot is kind of the U.S., especially when we're looking at renovations and stuff like that. But it was another soft quarter, I guess you could say, but one that was like well ahead of expectations. I think they beat earnings expectations by 10 or 15%. Total revenue was down 3.8%.

That would be kind of the headline number, but they had an extra week last year, so the results are not really comparable. When you kind of level that out, it's pretty much flat, slightly down. Comparable sales came in at 0.4% on the quarter and 0.3% on the year. It's pretty clear here that, you know, the organic growth engine, at least for Home Depot is like, it's complete standstill. There's not, it's just kind of trying to keep its head above water at this point. It is a very well-operated company who is doing fairly good considering the circumstances, but the bulk of the growth right now is coming from acquisitions, which I'll get to in a bit because that's pretty notable for Home Depot over the last while.

The decline in customer transactions is continuing to accelerate. They're down around 8.5% year over year and on a full-year basis, they decline 2.2%. To give you an idea, the company, in 2020, reported a 5.3% decline in overall time of actions. And I would say 2023 was the ugliest year

we've seen for all that. Like, that was when we had, you know, we were coming off that 9% inflation rates were going through the roof. So we're still,

you know, it's getting better, 5.3% to 2.2, but they still need some sort of catalyst. I would imagine that's declining rates in the U.S.

And I think the company now is kind of realizing it needs less exposure to the retail and kind of DIY side of the economy and more to kind of distribution and the commercial end. And it is spending a ton of money on acquisitions. I think we're talking like 20 plus billion in this space to kind of improve its, what do they call it's pro department, which would be like its contractors.

So they're buying drywall companies, roofing companies like distribution. They're delivering it to the contractors, all that type of stuff. SRS would be the roofing company a bot and then it acquired GMS, which would be the drywall. And I think their strategy here, like as I said, is kind of turn it into a industrial distributor. Like, it'll still have a ton of retail exposure, but there's more money on that side than the retail market and it's less cyclical. Like, it's, it's still going to fluctuate, but it's not going to fluctuate as much. And they do mention there is still, like this would be on the, on the DIY side of things. They say there's around $22 billion in pent-up renovation demand.

I think Home Depot controls like, it's like 25% of the market. They sound like a Canadian realtor a year or two ago, pent-up demand. Pempt up to, yeah. But they need, obviously, you know, the dam needs to break out, I guess you could say. They mentioned that Q1 earnings, they'll be down year-over-year mid-single digits, but they said it won't really do anything operationally. They're just acquisition integrations. I mean, you roll out $22, like billions and billions of dollars on acquisitions.

It's going to cost you some money to integrate them. And you can kind of tell they're uncertain about the future. So they raise the dividend, but then they mentioned they're just going to stop share buybacks. And I mean, this could mean a wide variety of things. They could feel that, you know, the acquisitions are more beneficial than buying their own stock. Or they just could have truly no idea where the economy is going to go over the ex bid here. and I kind of want to save up the cash for more opportunistic buys. But I think like the number one thing now, higher mortgage rates in the states plus higher

key lock rates are no doubt just putting a stall on renovations. You can see it in the transaction activity, variable sales, the average ticket. People are just doing what they have to. And that's pretty much it. Because like, yeah, well, just like I'm showing here for a joint TCI. So you can, yeah, like you're saying, essentially since it peaked in 2022 and then you have the customer transaction, those have been down. So the like the amount of transaction, but then that's not too bad if the average ticket would be going up. But the average ticket has been essentially flat during that period of time too.

So that's, I think those two things show pretty well, right? What's going on with the business. Yeah. And I mean, you can see from 2013 until 2020. It's just like a steady increase. And then you hit obviously 2021.2 where probably, I don't know, five years worth of growth was pulled into like two because you could, you could finance a kitchen renovation for pretty much.

I can't even remember what heat lock rates were in Canada when it was that low. I think you could borrow probably like two and a half, three percent, probably something like that. Yeah. Yeah. But now, I mean, here I'm getting one right now and I think it's around five. So in the states, they're probably, because even mortgage rates in the states are still 6%.

So you're probably paying like 7, 8% for HECLock. I'm just purely guessing. Nobody's renovating their kitchen. And this assumes that you have enough equity in your home. So that's one of the issues is there are several markets in the U.S. Where they've seen massive declines, like all those hot markets during the pandemic, think Austin, Florida, because they had looser restrictions or not at all. these markets really saw big booms and the U.S. is notorious for that, especially not everywhere, but in those sunbelt areas where they really let the free market go, which I think is great for

home buyers is when there's a lot of demand, I mean, there's not much blue red tape in terms of building new homes. So builders really start ramping up, but then that's a pendulum, right? When there starts being too much or in oversupply, then it swings the other way and then you start seeing a decline. So I think that's probably one of the issues is there's people that probably bought in 21, 22, 23, higher elevated prices. And now they have little to no equity. So even if they wanted to do some renovation, they can't even tap a home equity line of credit. I don't know how it works in the U.S., but I assume you need to have equity in the, your home price. Yeah, they will blah. Yeah. Just making a pretty good assumption here that you, yeah, I think,

Like in Canada, I think they'll only give you access to like 70. I think, yeah. 80% of your record. So yeah, it's. I mean, for me, I bought this one kind of based on on a turnaround in that regard. Like, I think it'll happen, but it just depends when. I expected US rates would be a lot lower right now than what they are. So that's kind of why this hasn't paid off, but I'm still, I'm still holding.

Let's hope that Citrini's research report doesn't come true because it would not. Spoiler alert. It will not. There's a section on mortgages and home builders and all that and home prices. And it's not good. It's not good. There's not, there's nothing really good about that. No, but it should be a pretty good episode. Yeah. Yeah. So stay tuned on Monday. So we'll be, we'll be doing, I think, a good discussion. I mean, just it's, it's definitely scary a little bit. And I think this is a good point to end the podcast, but just a preview for Monday.

It's definitely a bit scary. But I think we'll go over some. summarize it like we said, and then just have a discussion because I think it is a good report to just raise some question and discussions about where AI is going. I think the last few months, I think a lot of people are realizing that AI is progressing way faster than we had originally thought. And I mean, I think there's some scary scenarios out there. Again, I think there are. I think People who just say it's being overblown. I think for me, is it? Maybe.

You know what? I probably would have said that until I like went down the ravenpool. And yeah, I like could it still be overblown? Like I guess you'll have to tune it Monday as to whether or not we think it's overblown. But I've changed my views substantially over the last four or five months or so. Yeah. So tune in to know Dan's views and how they change on Monday. So we'll leave it at that.

I think it'll be a fun discussion just to still have. We'll also on Monday. We'll also put the link in the show notes. If you want to read the report yourself, by all means, go at it. And again, we really appreciate the support. Thank you, everyone for listening to the podcast. If you'd like to see us on video, go to join TCI. And yes, we will be doing some YouTube lives,

but the regular episodes that are not on YouTube, the video will be available on Join TCI, of course. And we are going to be posting our portfolio. updates in a few days, so probably Monday the 2nd or March versus depending on how my schedule and our schedules go when it lands on the weekend. So if you want to see that, make sure you tune in. I've done a few moves, not too much, but I did a few moves last month. One notable. So make sure that you subscribe if you want to see that. If not, we really appreciate it. You can also get the podcast ad free on if you subscribe to joint DCI. So thanks again for listening and all the support. We will be

back on Monday. If you want to see us on YouTube Live, last reminder, it's going to be on Tuesday, March 3rd at noon Eastern time. We'll be scheduling that probably in the next day or two. So you can set it as to be notified when it does pop up and we start the YouTube Live. The Canadian Investor Podcast should not be construed as investment or financial advice. The host and guest 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.