The Canadian Investor - Square gets a new name, Canadian Banks, MongoDB and more!

Episode Date: December 9, 2021

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: The markets finish a volatile week Square changing its corporate name to Block Labour shortages in Canada MongoDB earnings results BRP Q3 earnings results Canadian banks earnings Tickers of stocks discussed: MDB, SQ, BRP.TO, RY.TO, TD.TO, BMO.TO, CM.TO, BNS.TO   https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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Welcome to the show. My name is Brayden Dennis, as always joined by Simon Belanger. And we are out here grinding so that you don't miss a single Monday or Thursday release throughout the holidays. We're doubling up on the content, grinding through, doing the research, doing the work for you, the listeners. Simon, how are we doing? It's been a lot of ups and downs in the stock market, but a weird thing is happening. This is a very weird phenomenon. We're seeing lots of volatility and large drawdowns, yet the S&P is only 2% off its high. How can this be? What's going on? simple when you have an index like the S&P 500 that's market cap weighted the importance that's the big companies will have on the index will be much greater than the rest so if you just look at

some of the big names of the S&P 500 like a Microsoft, Apple, Google, Nvidia that will give you a good indicator as to why the indices are doing well versus smaller growth stocks. And I'll say smaller in air quotes because we're still talking about companies that are worth tens of billions of dollars. Yeah, well put. These smaller companies are still worth like $40 billion in market cap, for instance. So you get a good distribution of the index right now in large price drawdowns yet over the last six months these four stocks simon generated close to 70 percent of the s&p

500's return microsoft apple google nvidia which are all having tremendous years. The first three all have market caps of over $1 trillion. And NVIDIA is no small beast either at $750 million in market cap. So you're seeing that due to the distribution, the weight distribution of market cap weighted indices, we're seeing the effect of that. And it's interesting, right? Because if you look at those trillion dollar firms, like Microsoft, Apple, Google, let's throw Amazon and Facebook in there as well, right? These are companies that are growing like startups.

And it makes just literally no sense. If you look at just the top line growth in revenue and in cash flow of those big technology companies, the growth, you wouldn't expect it from a company that size. No, no, that's exactly true. And I pulled out a few figures here just to put things into context in terms of the index. So the S&P 500 and the S&P TSX were both down 2.5% last week, and the NASDAQ was down 4.5%. Clearly, there's been some volatility. I'm sure everyone is feeling it like we just mentioned. But it's important to put things into context so let's not forget that the TSX is up 20% in the past two years the S&P 500 over 40% and the NASDAQ over 75% I know it really hurts sometimes when you own a company there's a sharp drop and it's important

to remind yourself that when you own great companies you have to look at the bigger pictures not just these blips on the radar i mean they may not feel like blips right now in the present but 5 10 15 years ago i bet you won't even remember these like big drawdowns if you still own the company and it's performed quite well so So let's, as we always say, when you have this volatility and a company that you like goes sharply down, it can create some good opportunities to either add to an existing company that you own or start a position at a discount.

Well put, and I totally agree. This is the opportunities that we do wait for. And it seems so silly because the S&P continues to go higher, but that's not really reality when you have a large distribution of the index proponents that are in quite attractive drawdowns for high quality businesses. I stress very high quality businesses. Now, I do just want to have a quick thought on this even more so where you had the 2020 winners just have exceptional returns. I'm thinking of the 2020 winners being like the stay at home stocks, for instance. Now,

they're in huge drawdowns, don't get me wrong. Now, part of that is from they got a little too ahead of themselves last year. The valuation didn't really make a whole lot of sense. That being said, truly exceptional businesses, and there are some of them in that mix. Truly exceptional businesses have carved out a position in this new remote digital economy, and they are going to benefit from that for a long time. And if we think of companies that got to extreme valuations and saw huge drawdowns, like an amazon.com, for instance. I mean, it might be a ridiculous comparison, but if we look at Amazon.com or Microsoft in the early

2000s, these are companies that if you were a long-term investor, you temporarily got your face ripped off because they got to extreme valuations. That doesn't mean the business got worse when you saw their stock price fall off a cliff. So just a little another reminder, right, where some of the companies that got to ridiculous prices last year, if you didn't sell them and you're holding on to them, you're like, I'm going to own this for the next 10 years when you bought it. Don't worry so much that you're in like a gigantic drawdown. I know it sucks in the short term. That being said, some of these businesses have actually carved out a really competitive position in the marketplace that they serve. So I just want to kind of reiterate that even the best companies, you got your face ripped off several times throughout owning them. And that's

why you don't hear about that many people you know in your life that have owned Amazon for the last 10, 15, 20 years, or that have owned Google for the last 15 years. The whole time, it seemed like those companies were obvious wins. Maybe Google, for instance. However, people don't hold on to stocks, even when they say they're going to hold it for 10, 15, 20 years. It is easier said than done. And that's why it's really hard to have these multi baggers repeatedly because everyone's got those paper hands, Simon, those paper hands. Yeah, yeah, exactly. And you know, an easy tip if you've been investing for long enough is just zooming out. If you've just started recently, then it'll be obviously impossible to do that. But if you've been investing for several years, if not a decade or more, just zoom out and you'll see that your winners, you know, they've done well over the long run, even though they may have had some drawdowns in short time

periods. 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, 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 gonna 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. Moving on to some other news, Square changing its corporate name to Block. So Jack Dorsey has really been making headlines in the past two weeks. First, we all know he stepped down as Twitter's CEO, and now Square is changing its corporate name to Block. Here's a quote from Jack regarding the name change. We build the square brand for our seller business, which is where it belongs. Block is a new name, but our purpose of economic

empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy. So the name chain is different and similar in some ways to the Facebook name change to Meta that we saw a few weeks ago. First of all, Facebook clearly wants to try and revamp its image after years of bad press and regulatory pressure. But Zuckerberg also clearly wants to focus on the metaverse and have an overarching name, which does make sense since Facebook was their corporate name, but also the name of one of their primary product. I think where it's similar to Facebook is where Square wants to have an overarching name and does not want to have the whole company with the same name as one of its segments or apps. It also clearly shows, in my view, the importance that Square and Dorsey are putting on blockchain technology,

but more specifically with Bitcoin. For those who don't know, Jack Dorsey is a big supporter of Bitcoin, has been now for years. So, Brayden, what do you think of that name change? My first thought is that we have been talking about Jack Dorsey an awful lot lately for some reason. And that's because every week he provides us with a news headline that seems to be worth talking about. Now, as for the name, I like the name. I actually like it. I also think that it's a pretty serious waste of time, energy, and money from my perspective.

It brings me a bigger question around the strategy. And it's not like Facebook or even when Google changed their name where they apps that everyone knows and that the regulators love to tell us we can't do certain things anymore. I understand that and I get that. This one makes me question the strategy. It is another one of these pivotal moments where you have these founder-led businesses going where they want the business to go. Now, who am I to say if it's the right call? These guys have done it all. Whether it's Zuckerberg or Dorsey, they're laser focused on what the next initiatives are. And I'm nowhere near as half as smart as them, so I can't really comment on them.

And I'm nowhere near as half as smart as them, so I can't really comment on them. But as a potential investor, as a public equities investor, I have pause. There's a lot of uncertainty. I want a very clear vision as an investor as to what the strategy is. And right now, I don't know what that strategy looks like. And no one really does. Now, if you look at what Block is, it's Square, it's Cash App, it's Spiral, some new crypto initiative, I guess, Tidal. And then they have this new thing that seems to be really important based on all of their looking through their IR and hearing Jack,

which is, this is not a typo, this is what the name of the company is called tbd 545-66975 and it's some crypto project that you know this is probably just some pseudo name for what they're what they're building i know i know what it stands for i can what does it stand for you can educate me here yeah so tbd is their division to basically build a decent decentralized open source ecosystem for um for cryptocurrency obviously there'd be a big focus on bitcoin they're looking at having like some potential custody products as well actually custody less but products like keys that they would create in terms of cold storage it's still in its infancy so it just started earlier this year but the actual numbers there these are the um so i did some research i was wondering what it was and the best

answer i found was essentially it's the number of seconds from the time that the US went off the gold standard in 1971 with Nixon in September of 1971 versus the start of the Unix time or epox time. That's January 1st, 1970. So it's essentially the number of seconds that elapsed between that time. So it's a very crypto-y kind of thing. And first spiral, that's essentially just the crypto division of the cash app that they're trying to separate. So they're trying to, yeah, separate everything where, you know, I think time will tell whether it's a good strategy or not. That's where I kind of stand for. But I like that Dorsey is definitely focusing on Square now and not having part of his time on Twitter. Yeah, that makes complete sense. So there are these separate entities and they're saying,

okay, we're going to change the name from Square because Cash App is such a big part of the business. For example, Tidal is a bit of a joke of an asset in my opinion. It is the one that I, yeah, i find a head scratcher but nonetheless yeah for those who are not familiar with title it's basically a spotify competitor but it's not really even a competitor like i again another one of those things where it's like jack you love to incinerate money i know you're a genius but like prove to me that i can sleep at night owning this stock and i just don't know that i'm there ah no that's fair enough i own it i can sleep pretty well but my cause base is pretty low so i'd have to be uh how old have you been square uh right now i think it's been close to four years just on top of my head yeah four or five years i think yeah you had a couple

monster years there wow nice yeah yeah it's been one of my best performers so that's why i'm gonna give him the benefit of the doubt and you and i probably should too right but these are the these are the questions that i'm asking right is investors want investors want to know what the future looks like i know that it's very impossible for people to predict right? Investors want to know what the future looks like. I know that it's very impossible for people to predict the future, but they want to at least have some grasp on, if I am putting my capital down, what are you doing? Because TBD 545 bunch of numbers like, shut up, you nerd. Like what's going on? You know, like that's my opinion. No, that's a fair point. I mean, but on the other hand, though, if you look at Facebook,

even with the meta, there's a lot of questions there. And even if you go back at when Facebook was first created, if you could have foreseen where social media would have ended up to where it is today, I think it would have been very hard to just wrap our heads around that, right? So I think, you know, when there's new initiatives, new technology, I think it's just human nature to have a lot of difficulty understanding where it would go, because it could go a lot of different ways. I mean, I think there's a lot of potential for Square, but it could also go into a direction that no one has foreseen, Jack and Mark Zuckerberg included. Zuckerberg. Yeah. And that's a fair thing, right? You want these companies to have optionality and say it's a massive thing here and you can timestamp that

I just have a freezing cold take here in 2021. But time will tell. And that's the best part about being an investor is you don't have to know right out of the gate. There is still companies that have long, long run runways that you can see a story unfold. You don't have to be super early in it. Like in 2010, you could have known Google was a monopoly on search and done unbelievably well on that stock over the last 10, 11 years. And it was something that was intertwined already then in our daily lives. And so the point I'm going with is if there is truly a massive market opportunity, you don't have to have like some sort of early entrance in it. You can continue to watch the story unfold. Yeah, exactly. Now moving on, we'll talk a little bit about employment shortages in Canada because it continues to happen. I came

across on this interesting article. So there's leaked emails from owner operators of Tim Hortons that surfaced and they were saying there's a hiring crisis. But it really varies depending on the location since Tim Hortons operates a franchise model in Canada. But there seems to be one common theme is that they're finding it increasingly hard to find new employees and retain them. I pulled some data after that from Stats Canada and they estimated in Q2 of 2021 that there was 731,000 job vacancies in Canada, which is pretty crazy. And what I've been reading so far recently is that it could be as much as a million vacant jobs because obviously this data is a bit old, but that's the latest official data from the Canadian government.

I know it is macro stuff, but I think it's really important to understand what's at play here and how it could impact the profitability of the companies you own, because let's face it, every company has employees and labor costs. And I think it's important to keep an eye on for the companies you own because you want to also get a sense of the company's pricing power. If wages increase but the company has tons of pricing power, then obviously the impact will be less significant than one that has little pricing power.

But again, I think even when a company has pricing power, it's always tricky to increase the prices. Yes, they're able to increase them if they do have that pricing power, but there's always a breaking point for consumers. So it doesn't necessarily mean that they can increase their prices with the same amount that's being reflected in their wages, for example. Yeah, it's a fair point. With some very few exceptions, for the most part, consumers are price sensitive. And there is a very specific willingness to pay scale for every single business. And most businesses, most smart ones understand their willingness to

pay scale. And it's something that they think about every time they increase prices. Ideally, they pass on a lot of these costs to consumers if they're able to. But what Simon is pointing out here is that that's easier said than done. And a lot of times, brands don't want to just increase prices when when consumers just aren't ready for it. And that's a good point. Mongo DB. Let's talk about Mongo DB. For those who are not familiar with Mongo DB, It is a database as a service. Now, MongoDB, their database technology is built on the document model, which is a non-relational database. So if you are in the tech community, or even maybe not, you might have heard of NoSQL. This just means that it's a non-relational database. If that means nothing to you, just know

that compared to traditional databases like Oracle, for instance, this provides developers with a lot more flexibility and some performance improvements. MongoDB Atlas, their product, is database as a service, which can work with your public cloud platform, like Amazon Web Services from Amazon, Azure from Microsoft, and GCP from Google. Now, they did report their third quarter of fiscal 22. I know, a bit of an odd schedule. Revenues were up 50%. The stock popped 16% today as of recording.

And MongoDB Atlas, that database as a service segment, revenue is up 84%. That is unbelievable. They now have over 31,000 paying customers, now including myself shortly. Stratosphere is building portfolio personalization tools for our users and the and the podcast listeners here as well and so this will give our users the ability to have their own watch list portfolio performance tracking which is going to be absolutely fantastic i can't wait to launch that with all of you some and i think you're really going to like the performance tracking. We're going with MongoDB. It's the one that I've used personally as a web developer,

and they are gaining tons of market share. You can hear it from me first if you've seen MongoDB and how good of a performer this stock is. They are for real, and they have a lot of market share in the developer community. Now, I had a good old shower thought today you know when you just sit in the shower that's when the best ideas do you do you experience that by the way i mean i don't i don't i do but i don't sit in the shower you think i sit down in the shower hell no but you know what like i see people even have like whiteboards where they have um a whiteboard that's waterproof in the in the shower so that if they have a good idea they can write it down i know it seems strange but this is something that i would actually buy now i had a shower thought today not sitting down simon that's. If you owned a basket of companies that their core customer is to speak to software developers of both startups and large enterprises,

this basket would be set up to win over the next few decades. And MongoDB absolutely needs to be in that basket. Because yes, there's going to be some wild volatility in this basket. They're super high-priced stocks. They trade at face-ripping, nose-bleed valuation multiples, but still, I do think the market is right to price them so highly because the growth is explosive, the switching costs are immense, the margins are attractive, and they're taking market share from the incumbents while the total addressable market continues to grow year over year. They had gross margins in the quarter of 70%.

They did have negative free cash flow of $9 million, but like $9 million is peanuts. They have $1.8 billion in cash at the end of the quarter. At the end of the quarter, there is something I just wanted to highlight here from the press release that said MongoDB Atlas, which is their database as a service platform, achieved FedRAMP designation with the Department of Health and Human Services, HHS. This is an American agency, I assume. American agency, I assume. And yeah, so once they get FedRAMP authorized, they'll be positioned to better capitalize on the significant popularity of MongoDB across a number of US federal government agencies. I thought that was an interesting thing to pull out. This is obviously huge. I've talked about this before, but I really like software companies that sell to government agencies for obvious reasons. Government is a very good customer. Hence why I like Constellation Software so much or Tyler Technologies. They sell a lot of recurring software subscriptions to governments around the world. Now the stock is up a lot today, but it's in a small drawdown

like the rest of fast growth tech. It's very expensive. But finance people here, don't get a look at building technology companies like I do on a day-in, day-out basis. I'm here to tell you they are heavily under-earning right now and grabbing market share, which is very smart, to gain the respect and know-how from the software engineering crowd. to gain the respect and know-how from the software engineering crowd. The only database technology I have actually used, and when I did my web development boot camps and self-taught myself over the last two years, they teach you MongoDB.

If you do one of these boot camps, very often you're learning MongoDB because you can start using it completely for free. It's a freemium model, so you can get deeply entrenched into how to use it as your backend database, which is very incredibly sticky and has immense switching costs. And you can get familiar with it before paying for anything. This is an incredible business and one that I would definitely be looking out for over the next few years, Simon. I knew of the name, but I haven't used it myself. Definitely one to keep an eye on. Sounds like they have a good product, although I guess valuation is always the tricky thing here.

It's always the tricky thing. And it's why I don't own the stock. I mean, I'm not comfortable owning things that trade for a bajillion times sales. And that's okay to have some, you know, just lines that you don't cross as an investor. I'm trying to own the best businesses in the world, but I'm also trying to own them at a decent price. And so it might never trade. It could be like a Shopify scenario where it just, you're waiting for multiple compression and it never happens. Is Shopify just completely immune to multiple compression? I guess time will tell. They're just completely immune from multiple compression over time, it seems like. Yeah.

Now we'll move on to BRP earnings results. So they released their Q3 2022, another one that has a bit of a weird reporting schedule. The overall demand continued to be strong for BRP products, but they were affected again by supply constraints. It seems like constraints. It seems like it's a common theme here whenever you listen to earnings calls for a company that produces goods. They have a high level of missing components. They did mention, however, during the conference call that it was improving in recent weeks. They also launched the SEDU switch, which was well-received. I had to look on their website,

and it looks like a souped-up ponton that has the ability to- Pontoon. Did you just say ponton? Ponton, I did. So a pontoon that has the ability to did you just say ponton ponton i did so a ponton that has the it has the ability to go fast so i think you can switch between like almost a speed boat and you know just chilling on the lake i saw them i'm i'm all in tune on their products as a as a cottager and and just absolutely loving cds they're so much fun but yeah their new pontoon boat looks pretty fun i don't know how well it's gonna do and then i looked at it and it's like oh yeah the back orders are insane so i guess people want it yeah exactly and i mean if i had a cottage and would

only have one boat uh from what i've seen that probably would be it it seems like it does i have a pontoon i have a pontoon it's great you can entertain a million people you can stuff on way too many people on the boat and have a good time so i get that for sure and uh they're also expanding one of their facilities to keep up with strong demand so that's good they also mentioned that they are on track to achieve their previously stated guidance for the year. Revenues, however, were down 5.2% to $1.58 billion year over year. That was due to an anticipated decrease of products delivery, mainly caused by supply chain constraint, but they did mention that their back orders are very high. Revenues were $5.3 billion for the nine-month and being october 31st 2021 that's up 28

compared to the same period last year so that's that's really impressive net income for the quarter was down 35 to 127 million their free cash flow increased 70 to 734 million for the first nine months versus the same period last year, which is very impressive. Everyone knows how much I like free cash flow. They renewed a share repurchase program to repurchase up to 3.8 million shares over the next 12 months. On that note, their outstanding number of shares has actually decreased almost 7% since last year. So you can clearly see they're executing on that buyback. They also declared a $0.13 per share dividend.

Both of these moves are showing me that management is definitely looking to return capital to shareholders. And I mean, that stock has performed quite well in the past couple of years. So anyone who's owning the business should be pretty happy shareholder with them. This is a sneaky compounder, Simon. BRP is a sneaky compounder. If you look how they're growing free cash flow per share, earnings per share over time, it is consistent. And you know how they're doing it? Well, they're increasing the top line and the bottom line as well, but they have been deleting the share count. They have been consistently buying back stock because their share price have just always traded at a discount because it's known as a cycl know, it's one of those businesses you'd think that in an economic recession, it'd be the first thing to cut spending.

Like, oh, there's a recession. There's no way I'm buying that new toy, that new Sea-Doo, that new snowmobile. That's their bread and butter, right? So you'd think that that would be the scenario. It turns out when there's a pandemic and everyone has to be, you can't, you know, get together. These are the things that people actually want. And I believe that the demand for their products, yes, it's crazy hot right now. No, they can't even fulfill the demand because of the supply chain constraints, I think it's here to stay. If you get on a Sea-Doo, you get on a snowmobile, Simon, you're converted. It is a blast. It is so fun.

Daniel Tosh has a joke that he says, you've never seen anyone not smiling on a jet ski. And that is so true. If you ever see someone not smiling on a jet ski, I don't even know what to say to them. So I believe that this is a sneaky compounder. It is the golden asset of the Bombardier family. 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 gonna 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, let's talk about the banks. Drum roll, please. The banks, you know,

the banks. Drum roll, please. The banks, you know, earnings season for the banks, it comes after the big onslaught of other companies, and then the banks just consistently keep getting it done. They're like, you know, the bank index, I think, is that Canadian banks are at 52-week highs and maybe even all-time highs. They keep getting it done, Simon, and I was wrong. I said that they were going to have monster dividend increases. They were at the low end of my estimations,

and that's because they returned money to shareholders via aggressive stock buybacks. So I thought it was going to be higher and lower on the stock buyback. I was wrong this is this is a prime example of Simon if someone has short-term estimations just throw it out the window I've been saying that myself I threw out a hot take saying it's fun for the show but it really comes down to they had they they did exceptionally well but they bought back a lot of stock and so so the dividend hikes

you're seeing at around 10%, 20% typically. Do you want to kick it off with RBC, the biggest of the bunch? Sure. Yeah. So the biggest, Royal Bank. So fiscal year 2021, revenue increased by 5.3% to $49.7 billion. Net income increased 40% to $16.1 billion. Diluted earnings per share increased by 41% to $11.06. The return on equity increased to 18.6%, which is always a very important metric when it comes to bank. The quarterly dividend per share increased by 11% to $1.20. They also announced their intention to repurchase up to 45 million common shares. When a company announced their intent to do so, it's always up to a certain amount. So they give themselves some flexibility.

And that's why I mentioned it the way I did as well for BRP. But Royal Bank did well, and I think it's going to be a consistent team for the rest of the Canadian banks. It is. Let's rifle through these. Bank of Montreal reported an increase in revenue in the top line by 7.9%. Net income increased 52%. Diluted earnings per share was up 53%. Return on equity, that's the golden number for banks. It increased to close to 15%. Is this the biggest of the bunch in terms of dividend hikes?

I believe so. They hiked their dividend 25%, and they announced $22.5 million in share buybacks. This is a very common theme that we're going to be repeating here. Yeah, exactly. Now on to CIBC, Canadian Imperial Bank of Commerce. Revenue increased by 3.8% to $11.4 billion. Net income increased 68.4% to $6.4 billion. Diluted earnings per share increased 69% to $13.93. Return on equity increased to 16.1%. The quarterly dividend per share increased 10.3%. And then they unveiled again, same thing, plans to buy back up to 10 million shares. Next up, we have Bank of Nova Scotia. BNS reported revenue flat, but net income is up 45%. Return on equity to 14.7%. Their quarterly dividend per share increased 11% to $1, Bob.

They are launching, again, the allowance to buy 24 million of their own shares. I'm looking at charts here of the banks, and it looks a lot different than the market. The banks look a lot different than the index in terms of they keep chugging higher and they seem to be, they have very little correlation with the market. It feels right now because they're reporting some good results. Could be that off cycle with their results. But look at the profitability from these things. It's just mind blowing. but look at the profitability from these things it's just mind-blowing yeah yeah exactly and i guess uh i guess we're not benefiting that much from it since i don't i do you own any banks still or you own eq right i own eq bank um and i own td bank now i think royal Royal and TD are the best of the bunch from my perspective. They all have

their own thing and we've talked extensively about them. We don't need to talk about them now, but I believe that the biggest two are the best two. And then the fastest growing and probably best suited for the future is National and EQ. That's my opinion. National and EQ Bank, I like what they're doing. Yeah, I mean, I'm not in tune with banks all that much, and I don't own any. Obviously, I have some exposure to the financial markets or financial institution in different ways. But yeah, I mean, I guess everyone who's been owning banks can probably tell me I told you so. So they've had some pretty good returns.

Now we'll move on to the one that you just mentioned, the second largest bank. Last but not least, Toronto Dominion Bank, TD Bank. Revenue decreased by 2.2% to $42.7 billion. Net income increased by 20.2% to $14.29 billion. Diluted earnings per share increased 20% to $7.72 per share. Return on equity increased to 15.5%. They also announced that they would be increasing their quarterly dividend by 13% to 0.89 per share. And they are looking to repurchase up to 50 million of its shares. So pretty consistent theme here, dividend increase and share buybacks.

Yeah, it's very consistent across the board. It's explosive net income growth. That's just what happens when they release all of that. And then buying back lots of stock, increasing their dividend like they always do. Absolutely ginormous profit centers, the Canadian banks are. I can't really say anything more than that. Yeah, they're not sexy. Yeah, they're boring.

But that's exactly what you want if you own the Canadian banks. That is exactly what you want. I always say the only person who's beaten Warren Buffett over the last 50 years is a guy who's just held Royal Bank and just let it ride. Because what on earth would your yield on cost be? Like, what would you be getting in income? I know Barry Schwartz has been on the pod before. He said that he met a client that brought his book to their firm and collects $800,000 per year in Royal Bank dividends per year.

And wasn't an employee. He just dollar cost averaged royal bank for like 40 years yeah i mean yeah it's definitely good for him i would say uh it's very concentrated i have a feeling where it was probably you know he didn't probably have that many holdings but who knows i that's probably the one thing i would caution uh since canadians you know we we've seen it people tweet at us you know there's there's a pretty strong canadian bias when it comes to canadian investors and you know banks are fine but just keep in mind like especially if you invest a lot in canada it's very easy to get your portfolio too heavily weighted in these banks. So just keep an eye on the weighting.

That's probably the one thing I would say is as safe as they may appear. You also don't want like, you know, 50 plus percent of your portfolio in that one sector. Yeah, it's a fair point. And if you look at what makes up the TSX Composite Index, if you own that index, you are overweight banking, materials, and energy. And why is that? It's because look at the index constituents. We just listed off all these banks that are worth tens of billions of dollars, sometimes $100 billion. If you look at TD and Royal and Royal Bank, there are they all exceed that in market cap. That's what you're buying. With the with the exception that Shopify

is an absolute behemoth now and makes up a huge portion of the index, but that is what you're buying. Now, has that been a good thing for the index? Absolutely. I mean, they've kind of carried the index on their back. All right, guys, that does it for this week. If you're new to the show, we do Mondays and Thursdays for episodes. Monday, we talk about earnings like this, news that we find interesting. And then other way around, Simon, I'm messing up our own show. Thursday is when we release earnings. And Monday is when we talk about investing concepts and things that are useful to think about all the time as an investor. Thanks so much for listening. If you haven't checked out stratosphere, go to stratosphereinvesting.com. If you wanted to get a

quick snapshot of all these earnings releases, I'm talking about, like how much did TD Bank's earnings per share increase? You go on stratosphereinvesting.com, you use the company search, you type in TD. On the news portion, you can get their press release right inside the app. Yeah, that stuff's available on their investor relations. But then what if you want to look at CIBCs and compare it to CIBCs? Oh, you just put in the CIBC ticker. What is it? CM. And then boom, you have a frame of reference to make some comparisons that again, that is stratosphereinvesting.com. If you have not given the show five stars, go ahead and do that. We appreciate you so much coming up. We have our hot takes for 2022 and

looking back year in review coming up shortly. So I'm now here with grinding so you don't miss any content. Talk soon. Bye bye. 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.