The Canadian Investor - Revealing our Entire Portfolios - Part 2

Episode Date: November 6, 2023

In this episode, Simon and Braden talk about the rest of their portfolio as they go over what KPI they regularly track for each of their holdings. Ticker of stocks discussed: ISRG, MA, V, WSP.TO, TTD, TFII.TO, SHOP.TO, SPGI, ROP, MSFT, MA, BIL, PSU-U.TO, PSCT, HD, AXON, GRT-UN.TO 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 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  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. 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. We are so happy you are here with us today. My name is Brayden Dennis, as always joined by the magnificent Simon Belanger. Buddy, we got part two of our unveiling of our portfolio. So we did, if you want to hear part

one, that was two episodes ago. These are the Monday releases. Today we are doing part two. So we have another seven or eight, nine-ish companies each to go through again today. We'll go back and forth, kind of same format, talk about what the business is and why we own it and what we track as an investor. Because stock prices can seem highly irrational based on the old analogy of Mr. Market, depending on any given day. Just look at the last two trading days as a perfect example. And this helps us find signal in a world of noise. Before that, is our buddy scumbag public enemy number one scam bankman fraud going to jail or what? Sure looks like it unless something happens at the sentencing in March of next year. But we'll talk about it, Dan and I, on the earnings

and news, but a bit more detailed, but definitely guilty on all seven charges, which was nice to see. And I mean, long story short, as was basically SBF being SBF trying to bullshit his way out of it. And problem is when you're in court and there's a judge can't really tiptoe your way around something. And especially when there's a really good prosecutor asking you questions, it's harder to, you know, try to, you know, give a non-answer or get a reporter that doesn't fully understand the subject to try and just like, you know, throw a ward salad and get them to kind of agree with you. So it was kind of nice to see. I mean, it's too bad that there was no cameras there but been staying on top of it watching some youtube reporters putting content there uh listening to some podcasts with recaps

too did you see the the courtroom sketch of him why does he look like chad with a chiseled jawline like i can tell you for a fact he does not look like that well maybe he's leaned up in uh in jail i don't. Maybe he's been working out. True. Maybe in jail, this guy's on an absolute protein pony of a diet. Good for him. Dude, I'm on, do you know what 75 hard is? Do you know what that is? No. I do not know. It's this challenge, basically. It's like no drinking, healthy eating, and two workouts per day. So, I just finished one. I got number

two later today. I'm doing it for 45 days because I don't want to do this over the Christmas holidays. And like a glass of wine over Christmas dinner is mandatory. I might get exiled from my family if I don't. So I'm doing it for 45, but it, dude, it's in, it's intense, but I feel pretty good. The way I see it, the Christmas season holidays, it's like it's bulking season. Oh yeah. It's bulking up, you know, and then you lean down afterwards. Yeah. Oh yeah. What's wrong with a couple, I ate too much for dinner, seven nights in a row over the holidays. All right, let's get into it. We got part two of unveiling our entire portfolios. Again, a quick plug. If you want to see our portfolios to the percentage,

like to the weightings in screenshots, we just posted one two days ago on the first of the month for join tci.com. That is the Patreon to support the show at jointci.com. As well, next week, I texted you and I was like, we should do an episode. We just did our portfolios. We should do one on how we spend our money and what we really spend money on. Where we're cheap, where we're frugal, where we ball out. And I figured it was good timing because I'm no longer in dirt and ramen. Like today. Just be honest. We recently both made stupid purchases that were expensive. So that's where it's coming from. Hey, this podcast started from very humble beginnings.

You know, when I left my full-time job, it was dirt and ramen for literally two years of this podcast. So a humble beginning. So coming out of that stage, we're going to talk about how we spend our money on the next Monday show. Yeah. And I'll probably be also mentioning, and I think you'll probably do that a bit too, definitely in the last year with high inflation where we've saved on things and just kind of some tips too. I've found things that people have told me that I've kind of applied that. So I think it could be useful, especially since it's financial literacy month on top of that November in Canada. Is that right? November's financial literacy month.

Yeah. Yeah. I'm in charge of organizing a bunch of sessions with my other job. So I'm well aware of what's going on. Yeah. Interesting. Okay. Well, look at us. Look at us go. Financial Literacy Month. All right. I can kick us off here. I will start with Intuitive Surgical, ticker ISRG. I was actually on a live podcast today and they asked me, you guys track these KPIs. Give me an example. And this is the first one that came to mind for me, just funnily enough, ironically here, example, and this is the first one that came to mind for me, just funnily enough, ironically here, which is the DaVinci installed base. What does that mean? Well, DaVinci is the name of their robotic surgery system. And the installed base just means how many are out there at in hospitals currently fixing people's hips and knees. And this is really, really important because once that is in the

hospital, it is generating high margin recurring revenue all day long. It's true razor and blades. 88% of revenue is now recurring. A lot of operating margin kicking in that annual recurring revenue number continues to tick up because that installed base is so high and they can only really install so many per quarter. So the stock price, you know, logarithmically adjusted, follows the DaVinci installed base exactly. And so in my mind, this is the stock that moves the needle both on backwards looking and forwards looking. No, that's a good one. And not to be confounded with Da Vinci bikes, which was found in Quebec, in Saguenay, in Northern Quebec. Is that a high level bike? Yeah, they do kind of wide ranging, but they're a privately held company.

So for those familiar with that, I'm sure there's a few people that like bikes. It's actually, I think it's still owned in Quebec. Why do I, when I Google images da vinci bike i get literally a wooden bike what am i missing here oh d e vinci that is a key difference i want you to google images da vinci bikes with oh okay okay and it is a wooden bike no oh these are these are nice these are really nice yeah they're they're gonna be i was anyways i i got sidetracked here. But no, I think in terms of the razor and blade system, I think that's the basis of

their business basically, right? They sell the system and then they get you hooked on the system and then you have this recurring revenue happening afterwards. That's right. Now, for me, I have a couple of funds coming up here. So I bucket them into two categories. I'll start with the first one. And then you can probably talk about another stock for you. And I'll talk about the second ones here. So the first category is index ETFs that have primarily US focus. Now people will say, oh, I mean, it sounds like one of them is global and it is,

but because the US has such a big weighting, I kind of still view those as primarily US index funds. So two of those are actually related to my defined contribution pension at work. Very similar options that you can find as ETF as well for people interested. Now, the first one, it's my biggest holding. It's All World Equity Index Fund. Again, there's no tickers or anything like that because it is an institutional grade fund. This one has equity investments, like it's investing in equities around the world. But again, the typical name, so the big tech in the US, the bigger market caps there at the top of the list. My second one here, again, with the pension, this one is specific to the US, the S&P 500 index.

Again, no ticker, but there's plenty of S&P 500 ETFs if people are interested. I wanted to have a little bit more exposure here specifically to the US because the all world is still all world. specifically to the US because the all world is still all world. So that's how I divided things. I also have in my self-directed investment, the total US stock market. I taught again, kind of the same philosophy. I do want more exposure to the US in general, more so than Canada and even more so than the rest of the world generally, although I do want some exposure outside of the US. And then the last one is VEQT that I'm doing as a kind of experiment that I've shared on the podcast. So I assign $50 a month just to show people

that you can invest even if you have small amounts of money. This one is an all-world equity ETF. There is a decent amount allocated to Canadian stocks and a decent portion to emerging markets as well. But again, there is more exposure to the US and the rest of the world. So that's kind of how I'm seeing it here. It's all funds that have very low management expense ratios. So the highest one is, I believe, VEQT at 0.24%. So it's that or lower.

So very low fees allows me to get a lot of exposure, a lot of diversification. And again, it's all equities here. Do you have a, I love this, by the way, you just have like a nice basket of broad base, low cost index funds, kind of like juggernaut in the portfolio. Do you have like a target? Is it like 30%? I think I was looking at your portfolio of like roughly a third that's indexed. Yeah, that's about it. I mean, I'm definitely open to getting that even higher. Again, my biggest thing is I just don't want too many individual holdings to track up just because of time constraints. And if I'm going to invest in individual companies, I want to be able to stay on top of that. So I don't think I would go lower than that, but definitely am open to going higher, especially if I don't necessarily have any

investments I'm interested in adding to or starting new positions. It's a great call. I mean, many people in this world would do themselves a great service by just owning a low cost, broad based index fund and just letting it ride, adding to it every single month. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning

customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty,

it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, for me up next is MasterCard. I'll couple it with Visa. It's the same exact investment thesis. They are a duopoly of the payment rails for credit cards. And really quickly, just a reminder, folks who have been listening to this show for a really long time, you know this, but

it may be not if you're new to the show, that Visa and MasterCard do not lend any money. If I get, you got a Visa or MasterCard, what's your go-to? You got a couple, you got one of each. What's your like personal spending? Yeah. So I have, sorry, I was about to blow my nose. I asked you at the worst time, literally like. At the worst possible time. You were about to sneeze. Yeah. And I also had muted my mic, so I was kind of scrambling, but I have, well, we have a a master card for the business and then personally yeah i do have a visa and master card so i have like a personal master card for my own expenses and then for our shared expense of my wife and i we have a visa and those are issued by canadian

banks yeah that's correct yeah perfect this is I'm getting. The banks who issue the card, whether it's a visa or MasterCard, they are the ones that are responsible for lending money. They take on the credit risk and they take most of the fee when those transactions happen because they are taking on the risk. If they don't get paid, well, that's just money coming out of their pockets, but they catch the most of the unit economics there for taking on that credit risk. Visa and MasterCard are just agnostic in the back, taking around 12 basis points, 0.12%, just death by a thousand paper cuts for facilitating the network, having the network happen, having merchant banks and

acquirer banks instantly settle. It is wonderful technology. It's very hard to displace because you have this massive network effect. And I track total transaction volume going on the rails. Take rates seem pretty solid. Free cashflow margins are ungodly. There's only really two companies that have ever maintained these kinds of free cashflow margins for long horizons like this. And they are Visa and MasterCard. I basically just benchmark new ideas off of three companies, off of two ideas. Is it better than Constellation Software or is it better than Visa and MasterCard? And I've had that hurdle rate for years and years now, and it has been nothing but money for me. So I have no intention on changing that. I think they're

just two of the greatest businesses ever invented are Visa and MasterCard. And I want to own some of those unit economics. Yeah, exactly. So I'll actually talk to them as well because I do own them as well. So total transaction volume is also something I keep track of. I do keep track of it, but I also like to compare that as well as revenues to the inflation rate. Just because I definitely want both of these to be higher than the inflation rate. And it's not easy because obviously they are a global business, so inflation will vary from country to country. But especially the US and some of the major

countries that they have the most cards in, that's something that I want them to be above. And the other thing that I have here for Joint TCI listeners is similar to you. I mean, just free cash flow per share. I mean, it's just almost like a straight line to the right. Not quite, but since 2015, obviously, I could go back further and it would just keep increasing. And it would just keep increasing. But it went from about $2.05 per share to over $9, I believe, in the trailing 12 months. So it just gives you an idea of how much free cash will they actually generate. It took me traveling to pretty remote places in the world to recognize that this is not a growth story that's finished. And you own lots of Bitcoin. I own a sliver of Bitcoin

basically as chump insurance as I think really the only type of technology, like a decentralized technology that will potentially disrupt it. There's this FedNow thing that has tried to come off. Yeah, but that's more like wholesale. So it's more like in between banks and the Fed. So I think a lot of people are calling it a CBDC. It's not really a CBDC. I'm generally bearish on that. So I don't think that they're, you know, my, my de facto is that I don't think they're going to succeed, but I, but I could be wrong. And so of course there's risk with every business, but these are two companies that you and I have pretty much equal weighted for a long time. I guess the question is why not pick one? Why not equal weight? Look, both companies grow almost identical. They have very similar metrics. And if one has some great wind in new jurisdictions or new geographies, I don't have to worry about it. I'm

just going to have them equal weighted and they win some big partnerships and one accelerates. I'm a benefactor of that. But the de facto, I think, is that they will basically achieve identical returns on a long horizon. I could be wrong. And so that's why I equate them. If I didn't think I was going to be wrong, then I would just pick one. Yeah. And they're both like, I mean, they're both very good businesses. And when I mentioned CBDCs, because I didn't explain just central bank digital currencies, you were just kind of so used to acronyms, just making sure if there's some new listeners there and for people are looking to have a hybrid of a bank and a card company then you may want to look into Amex American Express would be kind of a hybrid

obviously it's not used as much as Visa and MasterCard but they kind of have two kind of yeah two systems so they either issue their own card with their own credit, or they go through a bank and then similar to Visa and MasterCard. So that's why sometimes you'll see like, you know, I'm just going to Scotia Amex, but you'll also see an Amex, Amex not tied to any bank. So that's, that's the difference between Amex and Visa and MasterC visa and master right they do issue credit like a bank and it's not that i do think it's a slightly worse business model but amex is a great business and i would be happy to own amex as well i think like from a brand perspective they're just

one of the best businesses around and especially like the pricing power they can demand for some of the cards to just have like oh their fees are like it's like 500 dollars it's a complete luxury flex uh they own that luxury market as well in terms of like you want to have the most elite credit card right like that's a really good business as well and they offer like granted like they do offer good perks if you can afford that fee there's quite interesting perks but anyways we've talked a lot about the the the rails here so i'll just mention quickly so there's another etf i do have this one is actively managed it is canadian equity by ccl with my pension it's actually a very low cost index fund so I was sorry not index fund but a fund even though it's actively managed again

it's into institutional so there's no ticker it's not listed this one as 0.36 percent total fees so quite low for actively managed and it's performed really well and the reason why did get some exposure to that one is that I actually like the allocation better than what the TSX index would have. And Brayden, you'll like this, but one of the top 10, which is not the same for the TSX index is actually consolation software. So that's one of the reasons I actually chose that specific one. It's a pretty small allocation with all things considered, but I did want a little bit of kind of Canadian broader market allocation, even though it's actively managed.

Yeah, that's really interesting because I'm looking at largest Canadian companies by market cap, RBC, TD, Shopify, Canadian Natural Resources, Enbridge, CNCP, Thompson Reuters, Bank of cctd shopify canadian natural resources enbridge cncp thompson routers bank of montreal brookfield okay so like banks energy and shopify essentially kushtard which has been ripping by the way i don't know if you've noticed that scotia bank and then constellation software and just just behind it suncor so you're right it is, it's in that number 13. Yeah, I think it's the sixth largest in that fund. So they've definitely allocated much more than the market cap would dictate if it's market cap weighted. So that's the reason I have it. No, I like that. Because we've been pretty critical of just owning a TSX basket broadly market cap weighted because you're just like 50% banks,

25% energy, like four or 5% tech. Like if it's not for Shopify or constellation, you basically have no exposure. You got like Blackberry and open text. Yeah. Okay. I will move on here to, oh, what do I got here next? Where's my list? Master. No, I just said that. Microsoft. MasterCard, Microsoft. Microsoft is a fairly new position in the grand scheme of things. If you look at the last 10 years, I think I first added to the position, oh, maybe. Oh, is it like this year or late last year yeah beginning of this year yeah okay i'd have to look back maybe yeah i think you were like you trim google a bit i trimmed google hedge it you put microsoft in right if i remember correctly that's correct yes Yes. Yes. You remember my moves better than me. Yeah. That's correct. Yes, that's exactly right. And Microsoft, for me, I'm tracking basically

two things. It's operating cashflow per share, which has compound annual growth rate at 16.5%, and the cloud business. So the cloud business has compounded at almost 30% on a three-year compound annual growth rate. Of course, you see some deceleration, but that's an over $100 billion run rate business in itself. It is utility to businesses. It is become just a gigantic behemoth of a conglomerate. When you look at LinkedIn being one of the premier social networks, that thing is gushing cash. I don't know if you've seen that segment lately, but it is gushing cash. They just bought Activision Blizzard for what? $69 billion. Nice nice and it's just a like you know blip on the radar it's just like like what scale are you operating at that is a 70 billion dollar acquisition it's just like yeah i think they'll do good things with activision blizzard too i think it was in a state where the company was you can make a case that was mismanaged a bit

so i think microsoft i think they have a history to have listening to their customers much better the company was, you can make a case that was mismanaged a bit. So I think Microsoft, I think they have a history to have listening to their customers much better than I think Activision Blizzard has. Yeah. Well, the bar is set pretty low there, wouldn't it be? Yeah, exactly. So I mean, what's not to like, I mean, I track probably three or four things there, but mostly looking at the cloud business. And then since it is a conglomerate, just kind of like an operating cashflow per share over time, you know, they're going to dish out lots of cash to shareholders over the next 10 years. That dividend is probably going to grow pretty nicely. You know, it's an easy stock to own. I would say, I mean, what's not to love about a utility for the business world? I would say it is as blue chip or more as like an electric utility

because i think that i look at them as a utility in terms of the cash flows with businesses yeah no i think i was talking to to dan on the latest release and we were talking about them and i said basically microsoft and I think I would put almost Apple there. Google, there's, I think you can make a case for Alphabet as well, but it's definitely Microsoft and Apple. I think for most people, whether they, you know, know a lot about investing or not, I think it's very much perceived as those like blue chip stocks, even for fund manager. I mean, it's almost like IBM back in the day. They're much better businesses. Can't get fired buying IBM. Exactly. So I think those two are definitely

in that category. But for me, I mean, obviously I sold those just because I allocated more to the index funds I talked about because they're so heavily weighted in those funds. Microsoft's like a 6% weighting on the S&P. Something like that. It's kind of crazy. So people were asking me and they're like, oh, well, you're missing out on the s&p something like that yeah it's kind of crazy so people were asking me and they're like oh well you're missing out on the upside i'm like yeah maybe a little bit but at the same time i still a lot of my returns will still be dictated by that magnificent seven or whatever it's called right so um that's the way i see it plus it's less work on me to keep stay on top of it. I still have interest in checking the business out, but I'm not going to be digging as thoroughly, I would say.

We are hitting historical spreads between returns on large cap, like mega caps compared to the rest of the index and the largest spread between the Russell 1000 and 2000 in terms of weighting. Like, dude, there's really like the market. If you look outside of the largest 300 ish names, maybe even the last 150 ish names globally is actually not expensive. But you miss out on what we classify as probably the greatest business on the planet. So it's easier. It's not just so easy to say, okay, well, I won't buy Microsoft then. Well, it's like, okay, well, for all those reasons that we just mentioned, then go for it, right? You might find

some better deals elsewhere, but you're going to miss out on owning the utility of businesses. No, exactly. owning the utility of businesses. No, exactly. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with

Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away.

Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. That is Airbnb.ca forward slash host. So now I'll go on to my next one here.

So I have my category of cash and cash equivalents. I'm going through all the most boring stuff and then I'll talk about the actual businesses afterwards. But I think I've been pretty consistent on that. With my defined contribution pension, I have a, you know, I have not a big, but a little allocation to just a money market fund that's in Canadian dollars because there's no U.S. options. I also have in my own portfolio allocation to Bill, ETF BIL. This one is in USD. And as well for the Purpose U.S. Cash Fund ETF, which is psu-u.to, also in USD. So I'll be honest, I'm very happy to park some of my cash into these cash and cash equivalents, especially in US dollars, because I try to hedge as much as I can away from the Canadian dollar, because people will ask me sometimes, like, oh, you're really bearish on Canadaish on Canada and I said oh it's not necessarily that I'm extremely bearish on

Canada it's more that you know my regular income comes from is in Canadian dollar I'm relying on the Canadian economy for a lot of stuff so for my investments I do try to hedge in US dollars which is the world's reserve currency. US treasury bonds are the base of our financial system. So the fiat system that we live in, it's US treasury bonds. It's not a gold-backed system like it was prior to 1971. And you can make a case that was actually before that because the 1971 change by the Nixon administration was basically a formality because the peg to the US dollar to gold was essentially broken. So the reason I just want to hedge against the Canadian dollar whenever I can, because I want to diversify. And that's typically my philosophy is I don't want

to be too concentrated in anything. And the difference between PSU and Bill, Bill is one to three months treasury bills bagged directly by the US government, whereas PSU are deposits in US dollars at large Canadian banks. I would argue that that one's slightly riskier because at the end of the day, if the banks are insolvent, which I think it's a low risk, but if it ever happens, the Bank of Canada can't really bail them out if it's in US dollars because they cannot print that. They can only bail out Canadian dollars. But at the same time, it is more tax efficient for the TFSA.

So it's a little bit of a trade-off, but that's the reasoning behind those. It's not a huge allocation, but i'm more than happy to have a smallish allocation to these cash and cash equivalents when they're yielding more than five percent in interest just like me i think i talked about on the last episode i i'm more conscious conscious conscious conscious yeah i think so yeah there's a conscious and then there's conscience not to be confused the good old english language maybe no yeah let's keep it simple welcome to the podcast folks i am more aware of and more deliberate about i think that's the right word about making sure that that cash and my brokerage is just kind

of like sitting there as being like, you know, I got four or five grand just sitting there, like put it to work, you know, like no, no ETF fee by just put it on, on the cash TO or whatever the, it's like 10 competing for a few basis points, basically get them to work. Basically it's like a little bit more deliberate about that. All right. This was a weird one because I own it today and I wrote on Join TCI two days ago about Roper Technologies. I even put it as my desert island stock. Hold this for 10 years and I think you'll do good. I still strongly believe that. It is a 45, roughly $50 billion conglomerate of industrial and software companies. They are a buyer of these companies. And the acquisitions are typically in the multi-billion dollar

range. So much bigger than like a Constellation, for instance. And these carve-outs, they do carve-outs, they do full-out buys, like basically like a giant private equity company. And Roper has been a fantastic performer across the board. Just unbelievable. And they've done a wonderful kind of transition to buying large vertical market software companies as well. And so I track how much of the software business is

now part of it. The software revenue has compounded annual growth rate of over 20%, double digit organic growth as well. So just really, really nice metrics. They'll pay up a lot more than a Constellation will than buying VMS. However, when I compare it to a Constellation, because 10 years ago, they were very different businesses. Roper was buying a lot of like pumps, industrial stuff, like a lot of electronics that might go in like a manufacturing plant and the recurring rev stream off those, like really good businesses, but different, more industrial, I'd say. And they've pivoted more to buying this kind of like VMS, like VertiFour was a big one they did in 2021 for 5.4 billion, which is insurance software. And almost every metric from valuation to growth, historically growth forward to the management team to capital

allocation. I thought Constellation is superior in almost every facet. However, it's been nice to own the exposure of those larger carve-outs in the multi-billions. But if we observe the last 12 months of Constellation, they have been killing it with these larger deals. Going up to the regulators and stealing Empower and Optimal Blue from the ICE and Black Knight acquisition, they bought those for pennies on the dollar in the $900 million range for an acquisition. So the fact that they're flexing that muscle so effectively at egregiously high returns on investment capital, like 40 plus percent, Simone, I don't feel like there's as much of a need for me to diversify what I think is not as good of a business and not as good of a

management team. Now I wrote also in my joint TCI ramp, I haven't done anything yet, but I'm thinking about moving it all over to Constellation, which seems ridiculous given that it's already such a large position, but Roper's not a giant position. And I still think you do fantastic with Roper from here. It's not a knock on Roper. It's more of a wide diversify. It's kind of like a Moody's versus S&P type situation. I think S&P is a better business. And so i'm thinking about that that's what's going on all that i'll leave it at that for roper yeah no i think that's a good point and i mean just the fact that they're they're almost like a holding co right so it's uh same thing for consolation so i don't think i think it's a bit overblown for people that may kind of

question the concentration when you kind of get to know the business. And, you know, clearly you're not just owning one thing you're owning. 900. I don't know. Yeah. I was going to say thousands, but pretty close to it. I think the tracker's at like 912 at this point or something like that. Yeah. Maybe I'll buy one share of the 1,000 mark. Maybe I'll buy one share of the 1,000 mark. Yeah? Yeah, on the 1,000 mark. So the last one here of my ETFs, believe it or not.

So I have one last. I've had this one for quite a bit. Yeah. So it's the Invesco Small Cap ETF, PSCT, management expense ratio. So total fee of 0.29 percent this one is pretty simple i something i i've actually i think i started that i got that position at the onsets of the pandemic so it's been quite the it's performed pretty well for me and it just tracks a bunch like it's an index of small cap companies i believe it's the subset of the snpP 600, if I remember correctly, in the US.

It's like the small cap. Is that correct? Yeah, I think so. Something like that. Is it 600? That sounds right, actually. Yeah. I'm just going on memory here.

But yeah, the logic behind it is I want some exposure. Yeah, that's the S&P small cap 600 index. Yeah. Exactly. So it's a subset of that index. So it's just essentially the technology of that index. Yeah, exactly. So it's a subset of that index. It's just essentially the technology of that index. That's why the fees are still quite good for a more niche ETF. And it's exposure to those smaller cap technology companies. And it's performed quite well. Obviously, you know, you

don't have the upside of holding these companies for very long periods of time if they perform well, because they eventually just get out of the index because they're too large. But again, when that happens, the fund managers rebalance, they can use these proceeds to rebalance the ETF with smaller, smaller companies. So perform well, and I don't intend to sell it anytime, you know, I keep track of it every now and then, but that's the beauty of having, you know, an ETF is you, it's more of a hands-off approach. Yeah, I like it. Is that any more individual fund allocation or is that it?

Yeah, that's it for the funds. So now I'll switch over the actual companies. Obviously, I talked about Visa MasterCard because you were talking about it, but I've got about four to go. Okay. All right. Perfect. Me too. All right. So, we'll get through these. For me, I just hinted at it. S&P Global, ticker SPGI, and we just talked about the S&P 600. These are things that they maintain. The very infamous S&P 500, these are indices they maintain. It's actually a really nice business line item for them. For me, I look at free cash flow per share on a three-year CAGR and looking forward as well,

because this is a business that buys back lots of stock. It's a collection of dominant market positions in the financial world when it comes to indices, when it comes to rating bonds, when it comes to market intelligence, which is the other segment that I track, that has caggered at almost 40% over the past three years. They bought IHS market. They have the capital IQ product, the chart IQ product. They just have all of these gigantic dominant 1A, 1B type players in the financial world. And so S&P X credit rating agency, I think is amazing business. S&P credit rating agency is the best business. And so I'm really happy about owning this company.

the best business. And so I'm really happy about owning this company. I think, you know, it's not going to blow, you know, it's not going to be a, you know, 50 bagger in your portfolio, but if you're talking about high quality, wide moat comp, like companies that can compound double digits for the next 10, 15 years, this is a really good name to think about. It's not cheap. It never really is. And that's because it speaks to the quality of the moat. Of all of their subsidiaries that they have. No. Yeah.

Nothing to add to that one. So I'll go to my first company. I guess aside from Visa MasterCard. Home Depot. So this one. I have a few metrics. I'll explain why. So average ticket size. which gives you an idea of like every time someone goes, like what's the size of the transaction, the amount of a number

of customer transaction. I think that's important. The operating margins, that's something I keep track of. And of course, free cash per share, which will be a recurring theme here for me. Typically, that's something I take a look at very closely for most of the businesses I own. And the reason why I looked at these metrics, especially average ticket and customer transaction, is that Home Depot is very commodity dependent. So if you think about, you know, people might remember if you built anything that required wood during the pandemic, it costs you an arm and a leg. But again, that was because the price of that commodity went at a big run up. So clearly that boosted sales for a company like Home Depot, but not necessarily margins because they also had to pay more to buy that lumber.

And then they resell it of course at a higher price i think sales can definitely be a bit misleading for a company like home depot so that's why i'm looking at these other metrics but you know i encourage anyone to have a look at their free cash flow per share and it trends in the right direction obviously it's not going to be a company that's going to be growing at a crazy pace or anything like that that's why i wasn't adding store accounts or anything like that very mature business but as we see people especially in the u.s people not wanting to move because they have these super low 30-year mortgages and they're not portable meaning that you can't you know port your mortgage to a

new home that you would buy well what do you do You renovate the home if you need more space or you want to update it. And there's probably going to be two companies that will benefit the most from that in the US. There's Lowe's and Home Depot. So that's kind of the premise behind it. There are, in my mind, really only a few retailers that I look at and go, this is an amazing company. Just the way it's run operationally, the brand, the management team, the capital allocation, there's just really a few names. Home Depot and Costco for sure come to mind as just like the two kind of leaders when it comes to retail. And it's nice because you can own both and they don't compete with each other. Yeah. And they're kind of Amazon proof too, to some extent, because, you know, it's not easy.

Like obviously there's items that overlap that are sold at Amazon and Walmart or whatever. But when you're looking for larger items i think amazon has probably come to the realization that it would just be too complicated and you know it probably would be very difficult for them to compete with uh home depot and aloes and they've it would require customers to be able to go in the warehouses and then that would be exactly that would actually be some wild optionality for for amazon if they kind of had like costco warehouse model we could go in there and buy larger items and bulk and yeah i imagine that the the investment required for that that would be like in the hundreds of billions of dollars oh brother they've already spent all that

and then some yeah exactly what's a no What's a couple hundred billion between friends? Yeah. Bezos will have to sell his yacht that's stuck in the Mediterranean. That would be tragic for him. But it's okay. He'll be able to keep his blue origin and thank the Amazon workers for it. Yeah. I forgot about that.

That's a good memory. That was a blunder, wasn't it? that's a good that's a good memory that was a blunder wasn't it i'm gonna go over to shopify which has been just like an unbelievably weird stock to own lately in terms of price action a little bit too much volatility for my for my blood okay the stock is up uh what is it i was up like 20 20 yesterday 32. 20% yesterday, 32% since three days ago. Like, what is going on? And so, yes, they reported some really nice results and nice earnings. And it's nice to step back and just look at Shopify from the perspective of really maintaining their mission of getting more merchants on the platform,

of really maintaining their mission of getting more merchants on the platform, selling things, and kind of unlocking the internet in terms of GDP and entrepreneurs kind of working together to build online businesses. And Shopify has done an exceptional job. It was so expensive. Looking back, the stock in 2021 was in full meme mode at $150 billion in market cap, $160. What did it even hit? It was like $180, was it? For market cap, yeah. It was pretty crazy. $180 billion at one point?

Yeah. I'd have to look on Stratosphere. Here, I can actually pull this up right here. You can look up the chart. Yeah, right now it's at $109, but that's Canadian dollars. And yeah, I got like crazy run up at some point. Okay, so the New York Stock Exchange listing on November of 2021 peaked at $212 billion, which was $268 billion Canadian on the TSX.

Sounds a bit high though. It sounds high, right? Are you sure they're not kind of converting already? I have to look up that number. 200 billion in market cap. I mean, I bought it after it sold off like 50%, which is about what it's trading at now. And then a little bit more basically at the lows of 2022.

And that's more than doubled since then. It's starting to feel like rich again, which sounds ridiculous when I bought shares basically at this price like a year ago. Rates were materially different. Growth stocks were materially different. And so I do think the stock's looking a little pricey here again. What is it forward? Forward 68 times forward next year's free cashflow. So not a cheap company, but growth is re-accelerating. This is what the market is harraying about. If you look at monthly recurring revenue, MRR, that has seen a nice acceleration last quarter

and the quarter before, because they raised prices. So they you're seeing some of their flexing of the pricing power on the subscription solutions revenue. So, you know, it's a good store to own. I don't know if it's a forever business for me to own. Like, I don't really know. I think that there's kind of a lot of competition here for them to fight against when it comes to helping people sell online. And the fact that they offloaded the logistics business, I think it was a great move in the short term. I just don't know. I was kind of betting on the logistics solutions really widening their moat. And for me at this point, I think MercadoLibre has a much wider moat because for me at this point i think like a mercato libre has a

much wider moat because they own a lot of that infrastructure in terms of uh delivery so tbd some some some decisions to be made about this stock right now but gross merchandise value is volume is still exploding at you know 25 percent compound annual growth rate for a sustained period of time here. So the business is doing well. It's starting to look at gushing some cash soon and seeing that operating leverage getting a little pricey.

And I just, I don't, I'm not fully convinced on the moat right now. So TBD. Yeah. I mean, I think I share most of your thoughts here. I do own Shopify as well well and to touch on the

mercato libre obviously i think shopify is in an interesting position because they have clients globally right but mercato libre is very focused in latin america and exactly and shopify especially if they want to do the logistics let's say north America, there's a lot of competition in that space. So I think, and it's not an easy business either. So, I mean, I can see why they would kind of get rid of that, but they kept a stake, right? When they sold it off, I think they kept a stake in the other company, a small stake, if I remember correctly. I'd have to look back at that trend. That was earlier this year, if I recall correctly. Yeah. I think they kept, I mean, I could be wrong, but I think they kept like a minority stake in it. Yeah. But TBD let us know on Twitter. Yeah. You just look at the

CapEx spend from Amazon and you think like, that's a business really thinking long-term about winning this market. Yeah. I don't have really refined thoughts right now so i'll just i'll leave it at that that's all good so now my next one here is axon so those not familiar with axon and it's a name it's not a big position so sometimes i even forget i own it but it performs really well dude it's been crushing yeah i know it's uh i've had it for like several years now and maybe i should have just made a larger position i would be more on top of it but the axon for those not familiar they used to be named taser so the good old taser that people are all familiar with but they have these body cams as well so they have like the hardware business but really what their mode is is their cloud storage platform so all the various webcams that you know various police corps have and also

the military while the footage actually goes into the clouds to secure cloud and the various police forces have a subscription with axon enterprises so it's a company that's actually very sticky. There's like some competitors, but every time I try to find competitors, it's not like they're few and far between and they don't seem to be making a whole lot of headway. So for me, it's a SaaS revenue. So software as a service revenue, how that's increasing. increasing and again free cash flow per share because one of the biggest issues with axon is share count has grown at a decent clip so since 2014 it's actually grown at a four percent annual pace so it's not great you definitely would want to that to be a bit lower but at the very least if i keep track of free cash flow per share it does take to into account the share count so if that keeps increasing at least i know is that okay shares may be increasing but

at the very least they're generating more cash flow than the increase in shares and that i can live with it's kind of insane how i'm just looking i'm just looking at on stratosphere on the kpi so the the service services gross profit, so the services business, that's not selling up the hardware, that's the software, has caggered a compounded growth rate of 43% since September of 2019 quarter through here to the latest quarter. Annual recurring revenue has exploded from $142 million to almost $570 million a quarter. So like over $2 billion run rate now on revenue, on recurring revenue. And dude, it's really sticky because it's government and it's attached to hardware.

There's no stickier software than software that's attached to sticky hardware like like look at apple for example yeah exactly and it's actually like it's interesting looking at them because i mean they basically went from nothing for that recurring revenue so that services revenue i mean it was it didn't really start like being a significant part of the business until I'd argue until like 2018 is pretty much when it's really started picking up. So for those who are watching right now, they'd be able to see it like it was negligible before that. And now it's I would say I think it's a majority or close to at least 50-50 right now of their whole revenues that are coming from these services. So it's been a big shift. And I think it's been a great move by management to actually make that shift.

But it hasn't been easy because it took some time for it to actually, you know, really be good for the business and show some results. The first time the software and sensors revenue passed the hardware revenue was December of 2021. So Q4 of 2021. So I look at this company, by the way, one of your best stock picks. I look at this company and I think, look at that optionality that was kind of unlocked in the business late in its life, because it's been around for a long time, kind of unlocked in like 2017. That's what happens when you have a founder who runs your public company.

When you have a founder-led public company, the amount of like businesses inside of business that has like kind of entrepreneurial spirit, like look at AWS. If you were to buy the stock in 2005, you would have had no idea that you'd have a hundred billion dollar run rate company invented inside of the business. Right.

So incredible. All right. Moving on to, I got two more. I've got one more. One more. Okay. Yeah.

Okay. Well, I got three more. So I'm going to actually, I lied. So I got, I'm going to do two really quick here here tfi international is the trucking company it's been rough for trucking companies i like the price of tfi international right now operating cash well not just trucking

logistics logistics yes it's been rough for these names not for the business and they're actually saying that next year they're loading up for another big acquisition. The business has been executing well. Of course, there's some headwinds, but they have grown operating cashflow per share at over 16% compound annual growth rate over the last three years. If you look at the last five years, they have been extremely acquisitive and buying stuff on the cheap. The Trade Desk, which I'll rapid fire here. The Trade Desk, which I'll rapid fire here, the Trade Desk is a software as a service company that helps advertisers buy media on the internet on a real-time auction. It is awesome technology, really, really cool. And it helps, it's on that,

riding that wave of digital ad spend for these companies. So if you want one platform to manage all your ad spend across all the social channels and on like a over the top TV. So say you like watch Roku or you have like Hulu with ads to get ads in there. That's all done on real time auctioning of, for buyers with the trade desk, really cool company and gross billing. So, you know, with the Trade Desk, really cool company. And gross billing, so revenue that they're booking is grown 35% compound annual growth rate and customers in double digits as well. So sticky software for the advertising business

and really cool tech that's hard to compete with. Like there are some other players that are doing this kind of real-time digital media buying, but none that have the scale and network like the Trade Desk. Yeah, exactly. And the Trade Desk is basically like people may not be familiar with that. Like they do programmatic ads.

I think it's all programmatic, right? Programmatic. That's right. Yeah. And it's all demand side. So demand side is company actually looking to buy up some ads or ad space because they have ads they want to do. And then you have the opposite, which is the supply side of the platform. And there are companies that kind of specialize.

So it's kind of the opposite, if you'd like, of the trade desk. So there's two sides of how programmatic ads. I've gotten to know that a bit better because we're looking into it for the podcast as well so it's the same kind of thing it's available for podcasts and i believe the trade desk also i'm pretty sure i saw their name for the demand side platform as well too for there yeah they're basically in all types of digital ad buying. So podcasts, over the top TV, social channels, display ads on the internet, like they're plugged in. And since it's real time, like, and the data points are just like constantly being bidded, like millions of data points are being looked at a second.

You know, you're as a customer, you know, you're getting kind of the best deal, which is also like a lot of value add for their customers. Yeah, no, exactly. Now I'll finish with my last name here, a name that I might actually be looking to add because it's been crushed recently. So that's Granite REIT. So this is a industrial REIT. So industrial REITs, typically, I mean, they can be used for large scale kind of business operations. So for example, like those Amazon warehouses, if they're renting space, I would be rented from industrial REIT. And the bullish case for industrial REITs in general is that, you know, especially right now, the economy is not going well. So that's maybe a bit more bearish. But the fact that we're more and more looking at kind of no longer unipolar world, less globalization, a lot

more reshoring or friendshoring. So that means a lot of production is coming back home or in country that are neighboring us. And I think this could be bullish for companies like that. So industrial REITs. So that's why it's actually quite interesting. So in terms of the KPIs that I look at, one of the big ones and the biggest risk with Granite is the Magna exposure. So the car part manufacturer, I think that's the best way to put it for Magna. So, you know, they still have a lot of exposure to Magna. So the two things I look at is Magna as a percentage of annualized revenue and Magna

as a percentage of gross leaseable area. I believe they're in the 20-25% range for them right now. It's been going down over the years and definitely something I would like to see going down probably in the kind of 10% or less at some point, just because you don't want to be overly reliant to one tenant. That's just a risk to have like one tenant just being so large. The other things, as with all REITs, I keep a close eye on funds from operation, adjusted funds from operation, and then the payout ratio relating to FFO and AFFO. I am very impressed they have diversified even that far away from Magna because this was a

spinoff of Magna. Frank Steronic, the original founder and original founding CEO, when he built, founding CEO, when he built, by the way, exceptional story, you know, fled Nazi Poland, came here from his garage, did deliveries to GM for the, you know, the sun visors you flip down on your car. Oh, yeah. That was his first product. And he would make them sleep on the floor of his shop and then drive them to Detroit. So he was the manufacturer and the logistics and the CEO and he was just doing all of himself, amazing rags to riches story. And so they took all the real estate and made it a REIT underneath all of the manufacturing plants and started Granite. So at one point it was technically 100% of the portfolio. So interesting company there. I will finish this off here with WSP Global, the Canadian

engineering giant that no one except for this podcast ever talks about. And Simo, let me just pull this up here. WSP, let me just pull it up here. They are now a $23 billion CAD stock. How long have we been doing this podcast for? It was a mid-cap name when we first started it and I first bought it. So it's been a great business to own. they are buying global civil engineering firms. So think of the built environment. So they are a service businesses for, you know, think of think of the Brookfield infrastructure business. You know, there has to be consultants and engineering firms that are signing off on everything doing all the surveys from the environmental assessments to the actual civil construction. It all has to be done by a firm like WSP. And they are now the leaders in that. And they keep

buying this very fragmented world of engineering firms. I have many friends that work there since I went to school for this stuff. I'm just trying to pull up my notes here. I'm all over with my tabs here. The backlog has grown 21 percent compounded and they have 4x the number of acquisitions they did in the last three years than the previous three years so dude it's super profitable service business it's like a censure right like it's it's just it's a censure but for civil engineering yeah. I mean, I've kind of grown to know the name just through you, but I definitely want to keep an eye on. But yeah, that was a fun two-parter episode.

They always end up running much longer than we think. Exhale. Exhale, brother. Yeah, exactly. We wanted originally to make one episode, and then we ended up with probably could have made three, but... Could have made three. Thanks for listening, folks.

We appreciate you. We are here Mondays and Thursdays. As you might notice, you got Dan Kent from stocktrades.ca. Hey, go check out stocktrades.ca if you've been listening to the podcast with Dan there. It's the service he runs for Canadian do-it-yourself investors. We got to get a little discount code for him to promo here on the show as well. So thanks for listening. We are here Mondays and Thursday him to promo here on the show as well. So thanks for listening. We are here Mondays and Thursdays as per usual. The show goes on. Hope you like this two-parter series. Make sure you turn in next Monday. I'll be here with Simone, and we're going to talk about what we actually spend our money on. Because yeah, I mean, we talk about individual equities and how we invest our money, but that's not always the whole picture. So we'll go deep and dive into our...

It's a taboo thing to talk about money, but we're here to break down barriers, baby. So come check that out. That is next Monday. See you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.