The Canadian Investor - Rising Rates and the Twitter Saga Continues - Earnings Roundup

Episode Date: April 18, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Bank of Canada raising interest rates to 1% Elon Musk and Twitter Saga BlackRock Q1 earnings Shopify Stock Split Delta Airlines earnings Berkshire reveals its stake in HP Taiwan Semiconductor earnings Peter thiels makes headlines by calling Buffet a Sociopathic Grandpa Stripe update letter Tickers of stocks discussed: BLK, BRK-B, TWTR, DAL, TSM, SHOP.TO Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

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

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My name is Brayden Dennis, as always joined by Simon Belanger. Simon, thanks for stepping in and letting the people know of my missing one episode. Hey, you know what? We get one pass, all right? We get one, all right? Yeah, yeah. I'll probably take you up on that in August at some point because I guess it's fine to announce it now.

So my wife is pregnant, so I'll be a dad. The due date is mid-August. So we may have a WeWind episode at some point in August. Dude, yes. I've known, obviously, for a bit now. And so people know, too, Mr. Bélanger will be a father. So congratulations, dude. Thank you. I know the people listening are very happy for you.

All right, let's get right into it. As you know, we missed an episode. I caught that virus that people have been talking about for a couple of years. It finally got me. Dude, I was starting to really think I was immune or dodging it somehow. But you know what? I got it. It's okay.

I was fine. You know, I'm lucky. I'm lucky. You lucky you know people get a lot worse than i did but for a podcaster my voice was just out of the question and you can still hear it right now but like i'm talking dude what we would we have recorded what was that monday there was no chance there was no chance that was happening. But we're here now on Friday morning. Yeah, exactly. Now, let's start off. So there was a lot of news this week. So it's going to be a little bit of earnings, but definitely a lot of news came out. First one, I'm sure all Canadians are aware that the Bank of Canada raised rates 50 basis points to 1%. Obviously, it's still relatively low compared to historical levels.

But Bank of Canada Governor Tiff McLean said that the reason they were raising rates was because inflation was too high. Surprise, surprise. I mean, I don't think that was a surprise to anyone. The concern is that they don't want inflation to persist for too long. McLean said that the longer inflation persists, then it becomes embedded in the inflation expectation of the general population and businesses. And that's something they want to avoid. They want to avoid that spiral of people having to pay more, expecting to pay more, demanding higher salaries. And then you get a spiral like that that essentially makes prices increase on an ongoing basis he said that the main causes are international so external to canada so you mentioned supply chain issues higher commodity prices obviously

the war in ukraine did not help things but they are also starting to see demand outpace supply in Canada. And another goal with interest rate hikes is to hopefully balance those two out. So making sure that demand and supply are more in line, therefore hopefully reducing inflation. So I don't think it's the last interest rate hike that we'll see. I think most people are predicting that it'll probably get around 2% by the end of the year, which I mean, I think it's inevitable that it's going to that if we're going to continue seeing these inflation figures coming out. What I'm interesting seeing is how it will impact the real estate market. Because I think a lot of people were buying homes because of FOMO,

because they want a home, they want to build a family, it's been a dream of theirs. So really stretching out their budgets to be able to buy a home. And I know it's not a lot, 50 basis points, but it does affect the purchasing power quite a bit. So if you ever use a mortgage calculator, play with the different percentages just to see how much your payments vary, even something as little as 50 basis points. Yeah, it makes a gigantic difference. difference. And so that's, that's the thing that I think a lot of people are looking as, you know, a proxy for how this is going to affect this country in a major way is looking no further than the real estate market. Another thing I noticed here is you mentioned three reasons of why he said the main causes for inflation. I didn't notice, you know,

printing money in any of those three reasons. What's that about? Yeah, I didn't listen to the full press conference. So it's possible he did mention it at some point, but I would- They just dance around it. Yeah, exactly. The Fed is usually the same way in the US. They won't mention that overtly that, you know, just the increase in money supply, the massive increase we've seen over the past couple of years has led to that. You know, maybe in behind closed door, they do admit it, but I don't think they want to. Of course. Yeah. That's hilarious to me. All right. We talked last episode a lot about

the richest man on the planet, Mr. Elon Musk. And this guy just loves this guy loves it lately. He loves the press, I feel like. uh there's more to talk about here what happened yeah the whole elon musk and twitter saga i mean i'll i'll give it to elon i mean he does give us a lot of news to talk about so that's dude a lot of people like i find him hilarious honestly like i'm not one of these like diehard fans because fans because there's a lot of them, especially on Twitter. But he makes me laugh, man. This guy's funny. Yeah, I take it a lot with a grain of salt too.

Obviously, I'll give a little bit of my point of view regarding this whole thing as well. People, I'm sure everyone has heard that news came out a couple weeks ago that Elon had a 9.2% stake in Twitter. Then news came out that he would be joining the board of director. Then news came out that he would not be joining the board. takeover bid a hot solid takeover bid of an all cash offer to buy twitter at 5420 a share which would value twitter around 43 billion if approved he would then bring twitter private um a lot of people were speculating that he used 5420 because 420 yeah you know it's exactly what it is. Like, that's just who he is. Probably. Yeah, exactly. I saw it at first. I was like, is it for sure? But yeah, I mean, that would be something that

Elon would do. The main thing we've been hearing from Elon recently about Twitter is that it was the de facto town hall on the Internet and that free speech is one of the pillars of democracy. He's been saying that quite a bit. He's also been messing around with people on Twitter like he usually does. He's been doing polls about like how people would like to see Twitter change, improve. Even, I think he tweeted, what if we change the name of Twitter and remove the W? what if we change the name of Twitter and remove the W? He's such a troll, dude. So Musk released this proposal, and he said, amongst other things,

that it was a generous price for Twitter, but he was using arbitrary price points to support his argument. He said that if his offer was not accepted, he would need to reconsider his position as a shareholder. And the arbitrary price point is that, you know, Twitter is really in the low. It's been trading fairly low in the past couple of months compared to the past year or two. So I think it's a bit, you know, misleading for Elon to say that. But there's a lot of questions here with this move, at least on my end.

Is this the right move for Twitter shareholders? If you're a Twitter shareholder, does this make sense for you? Yes, it's a nice premium, like I said. But if we look at the recent price compared to the price in this last few years, it's not that great. Where will he get the money from what i've read elon has about three billion dollar in cash so most of his wealth is actually paper wealth related to tesla stock and also is equity in space x so will he get a loan will he sell tesla shares or look for a partner and i think a lot of people are speculating here because Tesla has been on a downward trend since the news came out because people are anticipating that if it does go through he's going to have sell to sell shares from Tesla and therefore bringing the price down

and the last question for me for those who like the move on free speech grounds I mean it's all nice and free speech is important but are you really that confident that Musk will deliver on this and if there's one thing that we've seen about must is that he can definitely change his mind very quickly and one question comes up for me even if his intentions are good here will his own self-interest take over free speech at some point in the future? Twitter IPO'd in 2013 and I'd be hard pressed to find a more disgusting looking stock chart performance than Twitter. disgusting looking stock chart performance than Twitter. Shares are up exactly 8% since 2013. It's done nothing. It's bounced around a bit, but it has done nothing. Before this announcement,

if you held shares of Twitter since the IPO, you didn't pay any dividends. So you were down 21% before this news. And now, okay, you've made a dollar since. I get it. In terms of someone coming in as an activist investor, forget all the free speech stuff. Whatever. I don't have any particularly hot take there. What I do have a particularly hot take there. What I do have a particularly hot take there is, I am not surprised that an activist investor, like a Carl Icahn type special situation, doesn't want to come in there and say, what is going on on this clown car of an operation? One of the most important businesses in the world, one of the largest in terms of daily active users, the platform is crazy addictive, and you can't make any damn money. How is that possible? The ad technology, not good. The staff, the engineering staff that they have, that takes them to roll

out some useless feature takes months. They're so lethargic. I'm pretty sure that me and my my CTO can roll out features than a 3500 person engineering team at Twitter to roll out some button on the app. Like it makes no sense. And so for that perspective, I could see someone wanting to come in and right the ship in terms of the business, because it's got to be worth more than what is it 38 billion in market cap before the bid in terms of like optionality and monetize like the average the ARPU is god-awful for a platform so important so addictive has this entrenched user base the de facto platform for information and news and this town hall, it's got to be worth more money. Yeah, I saw a take on Twitter that, you know, I bet you like the person was saying all big

tech CEOs are probably like contacting their lawyers like, OK, if we make an offer on Twitter, like, does it pass any antitrust regulation? Where are we standing? Just making sure that they cannot make a slightly better offer and just take it because there's so much unlockable value that could be taken from Twitter if it's properly managed. And imagine the Facebook ad tech people got their hands on all those users. Think of how much value you would unlock. And so there's clearly a problem there in terms of what's going on. And so I get it from an activist investor perspective, like, how does this thing not make money? Like, I just, I know, if you look at their statements, you know, they are producing, you know, a little bit of cash flow, but like, in terms of what it could be, it seems ridiculous. Yeah, yeah. Because it has those network effects,

right? Dual network effects, users are there, there's been countless other platforms that have been trying to dethrone Twitter. And the reason it doesn't work is because there's a lot of users. And if you go on another platform, at some point, you may like the platform. But if there's no one else there, you're going to go back to Twitter. The entrenched network effects are really, really good there. 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. It's questtrade.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. All right, let's switch gears to BlackRock, the largest money manager on the planet, ticker BLK. They just reported their first quarter revenue was up 7% compared to the same quarter last year. Earnings per share was up a nice 20%. They repurchased about half a billion worth of their stock. They have 3.15 trillion

assets under management for their ETF products. That is astounding, right? Like that has become such a big part of their business, about exactly one third in terms of assets under management. Their total AUM assets under management did dip slightly under 10 trillion. It passed 10 trillion in the fourth quarter of last year, but the market hasn't been great in Q1. in the fourth quarter of last year, but the market hasn't been great in Q1. But if you look at total net flows, things are good for the business in terms of inflows. Now, of course, that AUM number goes down when the market has performed like it did in Q1. But 3.15 trillion assets under management for their ETFs.

And a lot of people just, I feel like people aren't familiar when you, a lot of people are more familiar with iShares, the brand iShares, than even BlackRock. So if you see iShares, you're familiar with it. Some of you may own iShares shares, those ETFs. Those are owned and managed by BlackRock. What an incredible business they have become. And I think it's screaming cheap here. Personally, I do. Yeah, it definitely looks like it's had a decent pullback. So the valuation is definitely pretty reasonable right now. I think it's just, I'm not sure in terms of

how to value it in terms of growth going forward. But I would assume that there's some good prospects, it probably won't be like out of this world growth, but steady growth. Yeah, yeah, you're not going to get like this explosive high tech growth. But one, it's a really, really high quality business. You know, structurally one it's a really really high quality business you know structurally asset management's a nice business and uh the growth of etfs i think is going to continue i don't see that i don't see a world where that thing doesn't hit five trillion in terms of aum on the etf side in the next couple years like to be honest i see that happening with a high degree of confidence. Yeah, probably. And now their dividend is actually approaching 3%. So for a company as good as BlackRock, I mean, you can just collect that 3% dividend and a pretty

reasonable valuation, definitely attractive. Yeah. 3% yield on a company growing of high quality like that. For those income investors out there, that's, dude, that's a good one. That's one I would, you know, like, it's one that I'm like, throw that in my parents' portfolio ASAP. That's the way I look at that one. Yeah, no, that's a good point. Now moving on to some Canadian news. Shopify announced that it was looking to split, well well to do a stock split 10 for 1 they announced earlier this week in addition to the split as CEO Toby Lutke the would get a special

founder share that will preserve his voting power as long as he's at the company it would essentially give him 40% voting power in the company, even if his ownership stake in the company changes. The shares would not be transferable and will expire if Lutke is no longer an executive officer, board member, or consultant whose primary job is with the company. So clearly, they're doing this to entice him in staying at the company and then definitely there's some consequences if he were to leave in terms of the voting right

it would expire if himself his affiliates or immediate family no longer hold at least 30 of the total share count both of these announcement they were made at the same times will require shareholder approval you know for me it's just it's interesting especially the thing about the voting power for loot Kate but he's been a very good CEO and there's no reason to think that he won't do a really good job going forward so I think they're just trying to reward him and making sure that he continues being invested in Shopify. And in terms of the share, the share split, it is what it is. I think we've talked about that in length before. It seems

like every big tech company is doing a share split recently. Normally, these types of corporate structure changes, I'm not a big fan of just in general, like restructuring the class. Most of them are pretty shareholder unfriendly. Now, Toby's been a stud, so I'm willing to give him the benefit of the doubt usually these like I look at these with pretty poor sentiment and I mean I could talk all day about how awesome Toby is as an entrepreneur or founder as a leader but he did have a really bad take in the press the other day that I wanted to quickly discuss. Did you see the one where he wrote this pretty extensively long Twitter thread about how the stock price doesn't matter of his company? No, I didn't see that.

No. So I don't even know if it's still up because he was getting roasted like he seems like the guy to just keep it up but he wrote this exhaustive twitter thread about how the share price of his company or the share price of a stock is completely irrelevant. And he was relating it to sports and like coming up with these analogies of why the stock price doesn't matter. First, I thought this is only coming up because your stock price is getting mashed.

So it's clearly top of mind for you. And two, not true. Your stock price definitely matters when you are a tech company that relies on attracting and retaining talent through share-based, stock-based compensation. And if your share price gets mashed, it matters to your employees a lot. It matters a lot to your employees. And I thought that this was a pretty out of touch take for someone like him to make, given how much SBC, stock-based compensation, is important in total comps for their employees for a company like this.

So sure, if there was no SBCc sure whatever it might not matter that much in the short term but like i don't know this just felt like i don't know this gave me the the weird a weird vibe yeah and i'll just add to that so it does definitely you know helps for stock based compensation. It also allows a company like Shopify to not dilute as much as if they do a secondary offering. Obviously, stock based compensation will also dilute a little bit. But if they do decide... It affects their cost of capital is what you're saying, right? Exactly. So if they do want to do a big initiative, and they don't want to tap into the debt market, it gives them an extra option. Obviously, they can always do a secondary offering.

But the higher your share price is, the least amount of shares you'll have to issue to reach that target funding. So share price does matter whether they would actually issue shares, do a secondary offering, who knows? But it is a good lever to have at your disposal if you do require it, especially if you're trying to invest in the business. Yeah. And like I said, I could do a whole episode about all the great things that I think that this podcast does do a decent job of pumping his tires. But this was not a good take by toby i'll have a look at it yeah have a look how you uh you summed it up but uh he does this analogy of sports and i'm like toby you're a nerd dude you're a nerd you don't know sports all right delta airlines Delta Airlines reported an operating loss of $783 million.

Total operating loss of, is this right? $10.1 billion. I just copied this from my analyst's notes sometimes. I'm like, can you give me some notes on Delta? I saw the airport earnings. Operating expense of $10.1 billion. Increased $679 million compared to the March quarter of 2019. Operating revenue of $8.2 billion for the March quarter of this year, which was 79% restored from the 2019 level. So again, this is one of those businesses that are still like kind

of leaning on those 2019 comps, which is fair. I mean, that's fair. It's an airline. Traffic was down 20-25% year over year, which I found weird. And capacity slipped 17% of the quarter. So not great. Corporate flyers in March did improve 70% versus 2019. So, okay, so it's 70% of what the 2019 level is. So that's kind of what we're seeing across the board between 70 and 80% of 2019. So that, like a formidable recovery, right? But there was a lot to unpack in these results. And I'm no airline analyst, but I was doing my best here. And one thing that I thought was interesting is they kept commenting how basically January and February were like, blah, like kind of like soft. But oh, baby March, like, you know, like this month they're like, they're highlighting like, so the quarter. Yeah. But let me tell you about the month of March

and even right now, cause we're releasing those results in April. And they're like, even April, let me tell you about April. Uh, we're seeing the best demand in our company history. demand in our company history. So Delta forecasts that revenue is going to climb back to between 93 and 97% of 2019 levels. So like, we'll call it a full recovery back to 2019 for this second quarter, which is pretty, that's pretty good. They returned to profitability in the month of March, again, like they keep cherry picking the month of March with an operating margin of almost 10%. I have one last quick quote here from the CEO, but any thoughts here on kind of like the demand and this return to travel?

Well, first of all, I was checking. So yes, they had total operating expenses of 10.1 billion. So that was correct. It just seems so high. Yeah, I mean, for an airline as big as delta uh not overly surprised i hear canada has a lot of pretty high operating expenses going back just on memory i don't think it's that high but it's still very high yeah um no i think it's uh i mean it's they probably are looking at march because i know there's a lot of travel that's done with March break and so on.

So they're probably looking at that as a good month. And, you know, hopefully for them it will increase. But I think it's pretty encouraging overall in terms of results compared to the 2019 levels. Still not quite there yet. Still not quite there yet. And I know I've seen anecdotally that airlines are also raising prices and demand seems to be still pretty strong. They're raising prices to counteract those higher fuel prices. And I don't have the stat here.

I wish they had it in their release. But as far as I know, US domestic travel is like killing it. So in terms of returning back to 2019 levels, they really need that push from international, which is still, you know, part of this recovery. But as far as I know, and based on like some quick math here, But as far as I know, and based on like some quick math here, you know, accounting for international, U.S. domestic travel is on fire, like crushing it. And so, yeah, good for them. CEO Ed Bastian said, the demand, quote, the demand is phenomenal. We've never seen in our company's history demand for our product and services at this level.

In March, here had the highest sales in terms of bookings in any month in our history. And it's continuing into April. That's pretty interesting. So it's good to see a rebound, and I'm not surprised demand for air travel is red hot right now. I'm just not surprised. In terms of capacity capacity the airline should have a much better time this year and uh you know i could see the next three quarters of this year being absolute madness for demand it's interesting to see and look at air travel and looking at these

these companies like delta like a public company, as like a proxy for the recovery. But as many of you know, it is nearly impossible, never say never, but nearly impossible to convince me to own any airline stock. This is just a historically pretty crummy business. Yeah, it's very lumpy. I mean, it's going to be up and down depending on economic cycles or obviously that would have been my argument prior to the pandemic. Now with the pandemic, I guess for unforeseen black swan events, I would add to that. But I'm like you.

It's just a lot of uncertainty there, costs. The unit economics are just brutal. I want to own companies with good unit economics. I think that that's just a blanket statement. Yeah, exactly. And I mentioned fuel costs rising, and it's all nice and dandy if they can pass that on to the consumer. But at some point, if demand kind of slows down from the consumer side, you can't really hike prices all that much if demand is not there to counteract your higher fuel costs. So I think it's very tricky. 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.

Trade.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 is airbnb.ca forward slash host we'll move on to our next piece of news that one came out what about 10 days ago approximately uh so berkshire revealed

that it had a stake in hp ticker hpq um last well so news came out i did these uh these notes uh last week so you're expecting to record out. I did these notes last week. So you're expecting to record it sooner until I was like, yeah, exactly. The news. That's it. So Berkshire news came out that they had purchased 4.2 billion worth of HP stock. This is a bit of a head scratcher for me. I'll be honest. HP's business has been pretty flat since 2014.

After years of decline, revenues have grown 11% since 2014 clearly not great their revenue is still very predominantly for hardware the majority 48% is notebooks after that you're looking at printing supplies and then desktops. So there are 40%, 20% and 15% respectively and then some smaller segments. It just does not seem like a great business for me. One of the bright spots here is that they do generate a lot of free cash flow. So I'm assuming Warren Buffett and Berkshire, that was something that they really zoned in on. They also have a pretty good balance sheet and they pay 2.5% dividend and are trading

at very cheap multiples. They had a P of around seven when I did the notes. It's possible it changed a little bit. And they've also been buying back shares at a pretty rapid rate. They bought back $7.2 billion worth of shares in 2021 and $4.1 billion in 2020. So it's clearly, I think, a value play here by Berkshire. But again, with Berkshire investing in Apple, Apple being such a great business, and then you're investing in HP. I just, I mean, I don't know. It's a value play. I don't think this is a wonderful business at a decent price. I think this is a okay business at a pretty good price.

That's how I kind of see that. And let's remember about HP, right? It had one of the worst acquisitions in history with the Compaq acquisition when we did that episode on the history of some of the largest tech acquisitions. Yeah, I think a lot of the same sentiment here. I mean, they do like buying unsexy businesses, right? And HP, I mean, try to think of a less sexy technology company than HP. Like, what says cubicle in the 90s more than this stock, right? Like, I don't know.

than this stock, right? Like, I don't know. But then I look at it, all time high in April of 2022, all time high for this thing. You know what it is? It's that share buybacks. I had no idea they were deleting the share count like that. This is a 39 and a half, call it 40 billion in market cap business. You just said they bought back 7.2 billion worth of shares in 2021, another 4 billion in 2020. I mean, they've retired most of the shares. So that seems core to Warren's thinking here or Warren and team. Yeah, exactly. I mean, you know, it's been one of the big reasons why he's bought Apple, right? They love that they were deleting the share account. But again, we're looking at completely different businesses.

Apple is thriving. They have services segments wearable that are growing very rapidly. They have such a strong brand where people are willing to pay very high prices for their products, really high margins. HP is just another PC maker, in my opinion. That's a bulk of their business still. Yeah, I just think of printers. They you know like it's they could be you know evolved and i just wouldn't know but that's that's all right uh let's talk about a company that smashed results tsmc i gotta check here has the stock reacted on this because um as you know

this is just kind of like an unloved geography. Wow. Not even popping on these results. Still 30% off the high in January. Wow. Okay. This is just from my own knowledge here, but they reported $17.5 billion for the quarter, an increase of 36%. Diluted EPS increased 45%. Wow. And free cash flow of $3.8 billion. You know, this is one of the most important companies on the planet, being the foundry for basically all semiconductors. Like it's kind of crazy. This like monopolistic way that they work. Now, they reported their segments, but I thought were interesting to highlight here. High-performing computing and automotive segments both grew at 26% year over year.

Every single division on terms of growth by platform on a quarter over quarter basis grew some high single digits, but then HPC, high performing computing and automotive were big standouts. Now automotive, I mean, it seems like a cycle thing and like supply chain thing. But wow, like, the top line at 36% feels really good. And so this company continues to get it done. Seems pretty unloved given its geography and stuff like that. So, yeah. Yeah, no, exactly.

It looks like a very good quarter for them. It's kind of crazy the amount of cash flow that they're generating just in a couple of quarters, though. Just in one quarter. Close to $4 billion. I did not know they generated that much. And possibly, I'm just going to limb here in the share price. I wouldn't be surprised if it's mostly people trying to price in the fact that the U.S had made has made it a point to invest in some

foundry capacity exactly some foundry capacity within the u.s and maybe they're kind of looking outwards in the future and thinking this will impact adversely taiwan semiconductors yeah i i get that sentiment i don't i don't maybe i'm not this is for people way smarter than me yeah no the the u.s is obviously very keen on making intel great again like in terms of investing in local capacity and i think that that's a really good idea for that country in general that's my only thought there yeah no that's a really good idea for that country in general that's my only thought there yeah no that's a good point no i was just kind of speculating on what maybe has caused it uh because they they're definitely seeing some pretty strong tailwinds right now now moving on to

some more news uh for those of you who are into bitcoin you uh i'm sure you're aware that there was recently the 2022 Bitcoin conference and Peter Thiel made some pretty bold comments about Buffett calling him a sociopathic grandpa. Simone, should we back up for a second? Most people here will know who Peter Thiel is, but if you don't know who Peter Thiel is, should we give a little primer? Yeah, sure. I mean, the first thing that comes to mind for know who Peter Thiel is, should we give a little primer? Yeah, sure. I mean, one, the first thing that comes to mind for me for Peter Thiel, so he's a tech investor, but he co-founded PayPal with Elon Musk. So that is the first thing.

And Palantir. And Palantir. But for me, it's always like the PayPal thing that comes to mind. He's like the king of the PayPal mafia of just like that band of billionaires. Exactly. But he's done like he's a the king of the paypal mafia of just like that band of billionaires exactly but he's done like he's a tech investor so he's invested in tons of other tech companies first investor in facebook yeah there you go you know more about him than i do right he turned a roth ira into like five billion dollars so roth ira for those listening is like very similar to a TFSA. Yeah, with more restrictions, but very similar.

Yeah. But like has contribution limits and stuff like that. So like the fact that he's able to turn it into $5 billion, it's just like ridiculous, basically. Yeah, exactly. And I think I remember reading that they like were looking at changing the rules of it to avoid this kind of Peter Thiel rule. Yeah, Peter Thiel rule. Anyways, so to go back. So Peter Thiel is obviously very bullish on Bitcoin and he had a keynote speech during the 2022 Bitcoin conference. And he went on a bit of a rant about Warren Buffett and a few other well-known figures in the investing world that have been very critical about bitcoin he called warren buffett like i mentioned a

sociopathic grandpa with a slide of buffett when he said that it was like rat poison and you would you would never own any um sorry it scrolled that my notes kind of went... I'm messing with the document here, my bad. It's all good. And Thiel also called out Jamie Dimon from JP Morgan and Larry Fink from BlackRock. He then called out ESG, said that the difference between ESG and the CPP, the Chinese Communist Party,

he said that there is no really difference between the two in his view so bit bold here clearly everyone knows that i have pretty strong conviction in bitcoin but honestly when i hear speeches like this um like the speech from peter i'm not a big fan i think it's the type of behavior to me that's my own opinion that does not sit well with a lot of people who are bitcoin curious um you know people have not invested but they're thinking of maybe putting one percent of their assets in it they're still doing the research or still learning about it those type of speeches give an impression that if you're not in favor of bitcoin that you're

against it right there's no other way around right and it's very adversarial and i get there's a still a lot of you know fear uncertainty and doubt being thrown out there that oftentimes doesn't really for the most part there's a lot of counter arguments that you know point those out as not being very valid and you know i get it that they want to address those and peter wants to address those but i think you want to make bitcoin you know more inclusive and have a less more of a inclusive tone than some than something like that just being adversarial and just thinking that a lot of people look up to warren buffett right and having that tone i think will just make a lot of people reluctant of investing in bitcoin that's just me

my view i i don't know it i do have a hard time with that that type of discourse from peter dude this did not sit well with me like at all i mean what's the point of talking trash about buffett like that was like this guy didn't just like slip up and just like call him a sociopathic grandpa he had slides and slides against. Like this was premeditated. And it's just like, why? You know, like why are you talking, why are you getting up there and talking trash about one of the most successful and philanthropic, is that the right word?

Philanthropic people in the world, right? Like Buffett would have over $200 billion if he didn't give so much wealth away. Like, no one talks about how even just last year, the year before, like $15 billion, basically a year of being charitable with his money. And that doesn't come out in the press. That doesn't come out in the headlines, right? Like, and, I don't know. This just seems so silly. Don't get me wrong. I like Peter Thiel. I like his book. Zero to One is a great book. I like his lectures that he does with Y Combinator if you're in the startup world. You've probably seen a lot of them. He's obviously smart,

knows what he's doing. But it's just like, I like what you said, right? It's like, he's kind of saying, you know, it's us versus them. And it's like, what is going on, man? Yeah. And, you know, Bitcoin, you know, I'm a big Bitcoin bull. Everyone knows that. But there's a lot of great things about the technology. So why not, you know, focus on the positive and debunk those, you know, that FUD that currently is being used? For example, a lot of people are talking about money laundering or, you know, not, you know, Russia evading sanctions with cryptocurrency. Well, I mean, the U.S. actually looked at that and they said that there's no evidence that Russia is actually using cryptocurrencies or Bitcoin to evade sanctions. They're actually, you know, just stashing money with, you know, close relatives or business associates and actually evading sanctions that way. And it's just, I don't know, it doesn't sit too well. I actually like during the Bitcoin conference,

John Vallis, that we had on the podcast in one of our early episodes, who actually, you know, he explained to us a bit more how Bitcoin worked. That was like two years, two years and a half ago. And he was one of the the person presenting Kathy Wood and Michael Saylor. They had a discussion. So he's the one who introduced them. And I thought his approach was way better where he just encouraged people to discuss Bitcoin with people in their life and trying to encourage them to learn more about it and answer their questions with an open mind. And I thought that was way more appropriate than what the approach that Peter took, because like you said, it was planned.

He had a slide with Warren Buffett's face. And I think the words, if I remember correctly, like the rat poison reference that Buffett did. I thought the rat poison thing was a monger. Monger has been very famously quoted calling it rat poison squared. Yeah, they may have both used it yeah maybe they guys 99 years old buffett's 91 calling him a sociopathic grandpa is just like dude that's just like kind of disrespectful man like i don't i don't see exactly and like who knows maybe i don't know why warren buffett doesn't want to learn more about it, but he's traditionally

not wanted to learn that much about technology in general. So it could just be that. It's still done just all right. Yeah, exactly. He could have other motives that he doesn't want the status quo to change. Who knows? We're not in his mind. We don't know. But I think you have to just be careful a little bit and trying to interpret why people are doing something all right last thing on the slate here and then let's wrap this up uh stripe stripe oh boy stripe go public please collectively uh the business so okay let me rewind stripe processed a letter they published published this letter from the two brothers who founded the business.

This was the first look at what the business is doing in terms of total transaction volume to get a real scale of what they've done. real scale of what they've done. So in their letter here, they said, collectively, businesses on Stripe processed more than $640 billion in payments in 2021, up 60% year over year. So $640 billion transaction volume, up 60% year over year last year. Pretty significant. up 60% year over year last year. Pretty significant. Now for those who do not know Stripe, it is not a public company. It is a private company, so you cannot buy shares. But it is widely considered the most valuable private technology company in the world. At about $100 billion on their last raise, I think it was like $99 billion in valuation on their last private venture capital raise.

The letter written by John and Patrick Collison, who, by the way, these guys are the best. Like, they've gone on podcasts and stuff too. And so you can search that up. These dudes are great. Obviously incredible entrepreneurs, pretty cool story. Two brothers, you know, hacking their way through multiple entrepreneurial stints in their teens and then, you know, stumbling on Stripe, building, you know, one of the most important companies,400 new businesses starting using Stripe per day last year. More than 100 businesses every single day

passed the milestone of 1 million in sales. Pretty cool. 60% of tech companies that IPO'd in 2021 use Stripe as their payment processor. Fun fact, Shopify still uses them. Startups are their core customer base, and many of them have become gigantic tech unicorns in terms of their customer success. This is why I find the company so interesting.

The growth of their customers is directly related to Stripe success. I like these types of businesses where their customers and your success are aligned. This type of incentive alignment creates a really good feedback model. By comparison of the two huge internet payments infrastructure, not including PayPal, the most direct comp to Stripe is Adyen. And Adyen, I've seen them get their name more out there. They're a gigantic company in Europe especially,

but I've seen them get their name more and advertise here in Canada more recently, anecdotally, but I've noticed it. They're an Amsterdam-based company. So these are both gigantic European success stories. Adyen's 2021 GPV, so total volume, was 561 billion, up 70% year over year. Stripes, again, 640 billion, up 60% year over year. So actually reasonable comps, like they're pretty similar. And it makes me think with Adyen on the public markets at 57 billion in market cap,

down 25% year over year, seems relatively cheap. I didn't know Adyen was doing that much volume. And so yeah, just final quote here from the Collison brothers. Online spending was only 12% of total. And so there's still a long way yet to go end quote. So pretty interesting. First time getting a look at this business. It's one I've been following. It's one I'm a customer of with my startup. Really clean product and payments is such a good business. So I think they'll go public one day. Yeah, I was going to say, have they mentioned anything about actually going public or it's still kind of up in the air? actually going public or it's still kind of up in the air? I thought it was going to happen last year. Yeah, there has been whispers. And maybe this first public look into the business is kind of gearing up for that. Maybe. I don't know. I wouldn't be surprised. I think that the problem is, is that with these numbers coming out and Adyen being their most similar comp,

it seems like their valuation would actually decrease on a public market. So that's probably not what you want to do. That's fair. That's fair. All right, folks. Thanks so much for listening. We appreciate you guys very much. So, Simon, I like theseay or monday i like these morning recordings yeah we can we can probably do that uh on monday for next uh thursday's

recording because i'm off it's uh easter monday oh yeah and you get the monday too right yeah yeah well i don't i took it as a vacation but oh okay i'm off regardless yeah i know some people get the monday and the friday where it's like yeah okay but you took it off because the friday is the today's the real holiday right yeah today uh so ontario is the friday and then quebec has the monday off oh i didn't know it. Yeah, it is. So it's funny because everything's closed on the Ontario side today in Ottawa. And then if you want to shop, you can just go on the Quebec side

and then vice versa Monday. Interesting. Okay. Well, there you go. You learn something every day. Thanks so much for listening. Check out the website, thecanadianinvestorpodcast.com.

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Shouldn't have picked such a hard company to spell. Go to getstockmarket.com. That is getstockmarket.com. It'll redirect you there. Thanks very much. And if you haven't given us a rating, we haven't asked in a while, give us a rating on your podcast player.

If you're on Spotify, you can throw in five stars. If you're on Apple Podcasts, you can also leave a little review there. I have yet to be convinced there's another better method of growing a show organically than getting reviews. So it helps get the show out there, especially on Apple Podcasts. Leave a review. Give us five stars. Really appreciate it. Take care. We'll see you in a few days. Peace. 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.