The Canadian Investor - Take-Two Interactive’s big acquisition, Nike vs. Lululemon, Blackberry and more!

Episode Date: January 13, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Take-Two Interactive acquiring Zynga Nike suing Lululemon over patent infringement Constellation Brands earnings Growth stocks go down sharply following the release of the US Fed december meeting minutes Blackberry Earnings We finish the episode with what is on our watchlist presented by EQ Bank! Tickers of stocks discussed: NKE, LULU, TTWO, ZNGA, STZ, BB.TO, ASML, LSPD.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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My name is Brayden Dennis, as always joined by Simon Belanger. So we have earnings roundup to get to. I believe this is our first one of the year in terms of actually recording it. It is not yet earnings season. It's a bit slow in the cycle of news, but we dug deep to get you some good stuff here. Simon, how are you doing? Did you see this big acquisition that happened yesterday with Zynga and Take-Two? Yeah, yeah, I saw that on the news yesterday. I was very surprised. I did not expect that whatsoever.

It's going to be interesting just to keep an eye on that space as a whole, Take-Two just being a large company as it is, and Zynga being more in the mobile space. So very interesting. I'm interested to hear your take as well on it. Yeah, I have a couple of takes, but let's get to the news first, which is that Take-Two Interactive, ticker TTWO, is acquiring all outstanding shares of Zynga, ticker ZNGA,

for a total value of $9.86 per share, which is $3.50 in cash and $6.36 per share, in shares of Take-Two Common Stock, implying an enterprise value of $12.7 billion, which is a fairly large number. Transaction represents a 64% premium to Zynga's closing share price on January 7th, 2022. Here's a quote here from Strauss Zelnick. He was the chairman and CEO of Take-Two. He said, we are thrilled to announce our transformative transaction with Zynga, which significantly diversifies our business and establishes our leadership position in mobile, the fastest growing segment of the interactive entertainment industry. So that's an interesting takeaway right

there because Zynga is one of the leaders in developing mobile games. And this is by far, actually, far and away, the fastest growing video game segment. And I'm interested to see what you think about that. We have talked about it before, but it has to be in my mind. If I'm traveling to, let's say, third world places, less developed nations in my day, world places less developed nations in my day i've seen it firsthand where everyone has smartphones and the kids their adoption to video gaming is through their mobile first that's their first experience on gaming and it must be because the friction and the barriers to get going are so low yeah yeah i think it's i think it makes a whole lot of sense for for those two companies to combine obviously take to making the acquisition for that same reason because it's so accessible for people

to be on mobile um take to interactive a lot of their games if not all i mean they're all console or pc games right um so it does require a decent investment, especially if you're looking at a gaming rig for PC, you're looking like easily over $1,000 if you want to run something on good resolution, good graphics, and the newest consoles are not that cheap either. Whereas most people already have a smartphone, and have these games so it's very accessible to people you really open your potential addressable market so total addressable market we talk about it all the time it makes a whole lot of sense i'm not familiar with like zynga's revenues and all that but just on the surface it does seem like it's a smart acquisition from them at least in

the long run obviously Obviously, the market probably reacted pretty strongly on the day on the news, but looking long term, it makes a lot of sense in my view. It's been a wild ride for Zynga stock. This deal represents a premium to where the stock traded a day before the announcement. However, that price is actually 30% lower than Zynga shares traded for in February of 2021, which is very interesting. Zynga's bread and butter is publishing these kind of more casual mobile games. Some examples are Farmville, Words with Friends, Zynga Poker, Toon Blast, and many, many more. They actually got a lot of their start with publishing Facebook games, especially

everyone knew Farmville from Facebook. And it is basically a collection of mobile games that both eight-year-olds and stay-at-home parents are addicted to on their iPads. That's the type of games that Zynga publishes. Now, on the contrary, Take-Two is a well-known publisher of some of the best IP in video games like Grand Theft Auto, Red Dead Redemption, 2K Basketball, The Borderlands, and more. And when you think of those, those are very kind of contrasting type of player bases. So it does diversify their business, as Strauss said there in his quote, which I tend to agree with. My personal thought is it's a decent price to pay. I think the market doesn't agree with that, but I think it's a decent price because Zynga has been accelerating their growth so much

recently. Since 2020, they've had that tailwind, but it's been really inconsistent on a 10-year view. I like to see revenues, you know, like consistently compounding over more than just two years. And I really have a tough time seeing staying power with a lot of the games I do. But But again, I don't play Farmville and words with friends. I'm not sure. That being said, it does provide some additional nice, more frequent cash flows because Take-Two's results are very lumpy. They have these big game releases like Grand Theft Auto, which only comes out every few years. And so given that, this merging, it's kind of like a merger of equals. It's going to see how it plays out because the statistically most of the time these deals

actually don't work out that well take two shares are down 14 on the news i think because of that you know there's a bad track record of kind of 10 billion dollar companies merging together and that's what this is so it's going to be interesting to see them play out. I do believe that it's very difficult to really have any sort of sense of idea on how Zynga is going to play out, given their games are so casual. The IP, I don't know how valuable it is. I really don't know how valuable the IP is. But then again, I'm really probably not the best person to ask. Yeah, no, that's a valid point. I think I see it more from the perspective where they could, you know, use the expertise that Zynga has in these mobile games and kind of combine that with Take-Two Interactive, what they already have,

some of the IP that's present and so on so i think there could be some good synergies involved there again i'm not super familiar with these two companies so it's not it's just an overview but i think you know it does make sense at first glance but i agree with you in terms of well i'm with you i haven't really played those games uh those zynga games i'm more familiar with the take two interactive games and i've played those so yeah i mean i think it's it's going to be interesting to see how it evolves but i think it does make sense but i think execution and probably creativity on using both sides of the transaction both ip will be very crucial to making this work in the long term.

You just had the correct take, which I forgot to mention because I think that that's important is this is exactly what Activision Blizzard did when they acquired King because King is like the developer of Candy Crush. And it was an interesting play because like, okay, we need a piece of this mobile gaming, and that's kind of what Take-Two is doing, but it's also a talent grab because like you said, if you have the talent pool to develop mobile games, you can take your super valuable IP, which Take-Two definitely has, franchises with staying power, and start to put them out on other platforms and monetize them in more ways so i think that that's the correct take yeah yeah and last thing i was uh while you were talking i was pulling up their revenue and my god it is uh zynga it is quite it's almost a

u-shape so went way way up in the early 2010s and then went way down around like 2014, 2015, 2016, and then has been picking up slowly and then a bit more rapidly recently. That's the beauty of seeing that graph on Stratosphere, right? Yeah, I was looking on Stratosphere. That's right. That's right, baby. 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

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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. Okay, and then moving on now to fashion. What do we got here for you, Mr. Simon?

News came out last week of Nike suing Lululemon for patent infringement over the Mirror Home Gym Fitness app. So in a complaint filed to the U.S. District Court in Manhattan, Nike accused Lululemon of infringing on six patents. The alleged patent infringement were about technology that enables users to target specific levels of exertions, compete with other users and record their own performance. Nike said that it invented technology that could determine a runner's speeds, distance traveled, the last time calories expanded on a device back in 1983.

Let me just stop there. It's kind of funny. Let's stop there for a second. It's definitely funny that they're using a patent back in 1983 because I was born a bit after that. And I remember growing up the technology in the early 1990s, and it was not great. So I can just imagine the patent that they had back then um just at first glance it's a bit laughable like just from that perspective how can how can they and i'm not a patent lawyer so i mean either this this means nothing but how can you actually flex that you invented the technology to determine like speed you know like that's that's just that's just velocity you're just distance over time like you didn't invent that formula so i i just don't i

don't know how this stands any ground yeah exactly and look in all in full disclosure i started recently a position in lululemon so i just wanted that as well to say full disclosure here. I also think Nike is a great company and obviously has a great track record. But it is a bit kind of funny that they're referring to these old patent for their lawsuit. But what I find really interesting about this news is you have an established player and I think they're both established but Nike who's been a player in the space for decades with a long track record versus the new up-and-coming company that's growing very rapidly in the same or very close space Nike on the one hand has 248 billion in market cap in annual sales of about 45 billion versus Lululemon that has a market cap

of around 45 billion and 4.4 billion in sales. Keep in mind, these are the latest full year figures. So I know their current year run rate is actually higher than that. I don't know. I don't know why, but it kind of feels like it won't be the last legal battle between the two. I don't know why, but it kind of feels like it won't be the last legal battle between the two. It really feels like Nike is starting to really take notice from Lululemon that they're starting to eat their market a little bit. And I think Nike is starting to notice that. I don't know if there is actually grounds to stand for the patent infringement that they're alleging or not. But it seems like, I don't know if they would have done this if it was a very, a much smaller player

that they didn't really see as a serious competitor. Especially in the running market. I mean, if you think about it, Nike has had such a foothold in that, no pun intended. And their shoes still do, whereas like Lululemon doesn't make shoes. But I'm just speaking for myself and yourself.

I will wear Nike on my runs. I'll wear Nike shoes. But apparel-wise, I'm head to toe in Lululemon. So, of course, there are competitors in a lot of these verticals in active wear. in active wear. So this is not the first or last time they will have some battles. I'll put it that way. Yeah, no, exactly.

And the last thing I wanted to add here, there was also other news that came out yesterday about Lululemon. So they actually issued a warning regarding their guidance for full year. Now they're looking at sales that will be at the bottom range of their guidance that they had restated just as recently as a few months ago. The stock went down. I think it was down about 8%. At some point, it finished the day down about 2%. But it just goes to show that the market can often overreact. I would say, especially because we saw that big swing on the same day. I mean, clearly, it's not great when you revise your guidance.

But they kind of still kept in their same bracket that they were previously guiding. And they said that this was caused by the effects of Omicron that it's having on its sales that they could not foresee when they had issued that guidance previously. But that's just a reminder that, yeah, it was down 8% in the morning and then finished almost even on the day when I think investors just kind of grasped a bit more that it was more of a short-term thing than a long-term thing for Lululemon. was more of a short-term thing than a long-term thing for lululemon i think you're fair to say that the market wildly overreacts in the short term and i think that that's kind of a major theme of this show and and it's a definitely something that could happen here especially with how well this company has been executing to not give them full credit and to just have like some little guidance tweak to punish the stock. I think what is like 8% on the news, like Lululemon's enterprise is worth 8% less in a few

hours because of that. Absolutely not. And this is the beauty of the stock market because Mr. Market gives you opportunities left, right, and center. It's a company that's been executing exceptionally well. It's like if you're Usain Bolt and cleaned up at the Summer Olympics year after year, world record after world record, and then on your last Olympics, he wins the gold, but it was a few milliseconds behind his world record track record. And then on your like last Olympics, he wins the gold, but it was like a few milliseconds behind his world record track record. And you're like, oh, he lost it. He's not fast anymore. It's a ridiculous thing to say because it's not true. And it's very recency bias and short-sighted. Let's move on to constellation brands and every time i say the word constellation on this podcast

you're like oh braden's about to talk about constellation software i'm not we're throwing a curveball we're talking about constellation brands ticker stz they reported their q3 fiscal 2022 because it is early january we're into this like talking about weird reporting schedules. And that's very normal. But thank goodness for these companies because it gives us something to talk about. So Constellation Brands, I keep wanting to say Constellation Software, they're reporting Q3. So if you're not familiar with their company, they own a huge portfolio of beer, wine, spirits, including the very iconic Corona. Net sales were down 5%. Now, the results for these types of companies are a bit of a mixed bag.

The wine and spirits segment had net sales down 25%. 25 they said look like there's no way on a comps basis we could keep up with the amount of hard liquor and wine people were drinking in lockdown but on the plus side the beer segment is continuing to crush it uh the beer segment was at four percent led by corona and modelo so overall net system sales were down 5%. I think that's pretty decent given some tough comparables given last year. On a trailing 12-month basis, this stock has done exceptionally well. If you do a 10-year chart, this has been a really good company to own. And like they said, they want to be the brand names. They have very clever marketing. They want to have those brand names.

And Corona is definitely one of the best known beer brands in the world. Now, earnings per share was up 8%, which is pretty good. This thing's not going to make you rich in three days. So let's cool it on that. So 8% is pretty good. And what they do on their statements is they go, these are our numbers, and these are our numbers if you back out our investment stake in Canopy Growth Corp.

Ticker weed. It's listed in Canada and in the US. This is the marijuana company, which was kind of, I guess the poster boy for a lot of the weed mania back then. Yeah, it was, I think was definitely, I think it still is the biggest in terms of market cap. It was definitely the biggest for most of the weed mania, that's for sure. Yeah. And having the ticker weed definitely helped. When you have a mania that's for sure yeah and having the ticker weed definitely helped when you have a mania having a clever ticker always helps now um canopy growth corp stocks have been getting

crushed like just absolutely crushed so these are unrealized losses so backing that out makes sense now they were buying shares um taking a larger and larger stake of Canopy Growth Corp over time, including buying it at like some of its peaks, which is not a good look, like obviously not ideal. So they have in their statement here on a footnote that I pulled out, which was Constellation Brands has recognized a 424 million unrealized net loss since the initial Canopy Growth Corp investment in November of 2017. So that gives you some context of when they were buying it. And they've continued to actually buy more. I think their stake is about 36. I'm seeing here like 37% of Canopy Growth Corp.

Yeah, they could easily become majority owners if they wanted to. I don't think that would be out of the realm of possibility for them. Canopy is actually their head office in Smiths Falls, Ontario, which is about an hour away from Ottawa. So not very far from Ottawa. For me, Constellation Brands has always been the play I think I would have done if I would have invested in marijuana just because you have that backbone of the liquor and beer business, that business that's doing so well

so you can afford that loss, as we're seeing, from potentially the marijuana market not panning out as they thought they would, and clearly it has not. Yeah, aside from that, I mean, it looks like it's doing very well despite their investment in Canopy. And who knows, they have a strong presence, obviously, internationally, but also in the US. So they could definitely leverage that if and when it does become legalized in the US on a federal level, which is always the biggest, the biggest factor for legalization in the US. Right. And that's an important point, because a company like this, which is about 45 billion in market cap, very strange, because it's like the same market cap as CSU, but one's in Canadian dollars, one's in US dollars, but still.

It's like a call option on the continued adoption and legalization of marijuana because they have that distribution, because they have that network, and because they have that branding and marketing expertise too. Let's not sell them short. I mean, the marketing that is required to run a beer and spirits company like this is immense. You have tons of in-house expertise in that space. So they could be ready to capitalize on it. And I think that that's a correct way of saying it's a pretty interesting way to play marijuana without having to take on extremely unprofitable, unproven, heavily regulated marijuana space. Yeah. And they pay a small dividend, I believe, as well, right? So you also get, And they pay a small dividend, I believe, as well, right?

So you also get, you know, you get paid while you're waiting. It's yielding a bit more than 1.2% right now. So it does, you know, it is a very stable business, at least for their beer, spirits, liquor business. So it does, yeah, it does give you that backbone business if you're interested to get a space in the marijuana or investment in marijuana space. So now we're moving on to our next topic. As everyone has seen, growth stocks have gone down sharply. This is mostly due to the big macro that the US Fed released its minute from their 2021 December meeting. So you might ask, you know, why are the markets down so sharply because of this meeting, because it was held in December and then the Fed had already indicated that they would foresee up to three interest interest hikes in 2022.

Well, that's because the the minutes highlighted something that the markets were not expecting all at once, which is the reduction in the balance sheet and the reduction of its bond buying program, coupled that with interest rate hikes. So for those of you who are thinking right now, what the hell is Simon saying? Well, you may have heard of the term QE or quantitative easing. Well, essentially what QE means is that central banks purchase assets like bonds usually government bonds or treasuries which keeps the value of those bonds high and therefore it does help them to keep interest rates low. The higher the price of the

bonds of course the lower the interest rates will be and vice versa. All this to say that it reinforces the idea that the Fed will be moving more aggressively towards higher interest rates and try to get a grip on inflation. However, the meeting minutes did show that they still have a dual mandate of keeping inflation in check while maintaining full employment in the economy. And that's not that much different from the Bank of Canada. Bank of Canada, their main mandate is still inflation, but now they have to consider, more importantly, the employment in the economy. Now, if we go back to stocks, when interest rates are low and money is easy, markets tend to favor higher growth stocks as investors have to go further out on the risk spectrum of future growth

to try and get returns that will increase their purchasing power over time. It also makes financing for these high growth companies much easier since interest rates are low and it's much easier for them to get capital, especially if you have companies that are growing quickly but also losing a lot of money in that growth phase. So when interest rate rises assets like bonds become more attractive to investor as their yields start going up. Growth stocks on the other hand tend to fall out of favor because of these other alternatives. So as someone who's fully invested in equities I know you are Braden as well these type of shifts don't worry me too much because I

invest in great companies that produce good cash flows. Yes, some of my high growth stocks have taken quite the haircut since about two, three months and even more so recently. But since I have a long term mindset, I know I'll put a little joke here. It's only a paper cut. So it's not a major cut. Your haircut, it's not a major cut. Your haircut, it's just a trim off the top. You know, you're not getting the razor out or anything like that. Yeah, exactly. And I mean, to me, and I think you probably agree, and I'm interested in your take here

because it's a bit more macro, but it does, you know, it does impact people's portfolio. So that's why I thought it was important to talk about this. But to me, it just creates really good buying opportunities for great businesses that are growing quickly and are seeing a pullback in their valuation. So if you were to take away something from this Fed meeting, in my opinion, I'd say, you know, the last two points that I just talked about are probably the most important is that, yes, you know know you may see a reduction in the value of some of your growth stocks but it can also you know create great buying opportunities

here the market is hilarious because they seem to be reacting to news that is like a month old that's how it feels like to me maybe even a month and a half at this point. Maybe everyone's getting back to the office and they're like, oh, we should probably do something about that news that we got while I was on vacation. Now, all the things that you mentioned, I just want to reiterate that if you're a skilled investor, a new investor, or somewhere in between, volatility and especially short-term market drawdowns on macroeconomic news, like Simon just mentioned, can feel like smart money, professional, institutional money managers, those algorithms that some people estimate make 70% of the actual market moves in the short term, it will feel like they know something that you don't. And this is me reassuring you that it's just really not the case. It really just isn't the

case that they know something you don't. Since many of us use the Standard & Poor's 500 stock index, S&P 500, as a proxy for the market, let's take a look at the period from 1950 to 2012. That's the time period I have this data for. So after a bull long market, you know, this is going to be even more positively skewed to positive performance, which is going to even reiterate that my point even more so, but let's just use 1950 to 2012, because that's what I found. So let's look at some scenarios, how in the short term, you get swayed by performance in arbitrary shortterm time periods into thinking there's some narrative that might not really exist. If you checked your portfolio daily, it would be positive 52.8% of the time. So this is just using the S&P 500. So 47.2% of trading days, you're like, ah, damn, I lost money again today.

Behaviorally, that feels much worse than it really is. Now, if you checked only monthly, it would be positive 63% of the time. If you checked quarterly, it would be positive 68.7% of the time. If you checked annually, it'd be positive 77.8% of the time. If you checked annually, it'd be positive 77.8% of the time. And the stock market has never had a negative return over a rolling 20-year period. It's always been positive if you check over a very long time period. Now, this is not really useful in any operational perspective operational perspective, because no one's going to not look at their brokerage account for the next 20 years. Of course, you're going to look

at it more often than that 20 years is completely ridiculous. However, it is a reminder that when volatility hits, and it always does, it will again, it is now, it will again, it has a million times before, is that you have to remember that psychology treats, your brain is tricking you into thinking that it's worse than it really is. Because when you lose money, it feels worse than gaining money feels good. This has been proven a million times over in behavioral finance. And so it's just a reminder to zoom out. And there always will be these things happening. Now back to the actual case of what you were talking about with the Fed and interest rates. It's like, yeah, okay, they might increase.

Interest rates are still so damn low. And these companies are doing exceptionally well, a lot of these growth stocks are doing exceptionally well financially. They still have super low interest rates. And if this factor rotation continues to happen to more value stocks, air quotes value stocks, then I think that, you know, being long growth is probably a good place to be in the first half of 2022. Yeah, exactly. I think for me, these kind of macro events and market movements, it just basically gives me a hint on what's more attractive to buy, right? So I think it's just that. Like if you see a big pullback in growth stocks, well, to me, it's just a green light

that probably starts in position in some great growth companies that I thought were too expensive. And now they've just become, you know, better, more attractive in terms of price. Their business hasn't changed. They're still growing. Or gotten better. Yeah, or gotten better. Exactly. And to touch on if you check your accounts or monthly, quarterly, annually, and so on,

I think a good tip I heard on another podcast, I can't remember which one, but I think it was with Andrew and Dave, the Investing for for beginners. I was listening during the holidays and someone was saying, you know, if you have the tendency of checking your stock portfolio too often because it's on your phone and you think you'll panic sell, for example, just because you're constantly watching and you panic. constantly watching and you panic well something easy you could do is just delete all those apps from your phone and make it so you actually have to log on to your computer which requires more time and oftentimes you know if you're out and about walking in the park or whatever you don't have your computer with you so you have to wait until you get back home and just that time frame can oftentimes just calm you down and not make you make a rash decision. That's right, because there always will be some headline that is bound to worry you. the front cover of all major business investing news sites in March of 2020, they were basically telling you, these headlines were legitimately telling you

to sell your entire investment portfolio. You had Bill Ackman go, quote unquote, hell is coming. That's what the headline was. The whole page is red. It shows how much stocks are going down. It has these like kind of like spooky virus spikes on the top all over the page, right? And that was the most freezing cold take ever to sell your stocks because we hit all time highs in the summer. Like, you know what I mean? It's just, there's always going to be something like that. So I, I can appreciate that little tidbit and that little hack, which is if you can reduce, if you can increase the friction for you to be able to make bad decisions, I think that's probably a good way to go. Yeah, exactly. Now, moving on to some earning Canadian earnings, a company that have four more Canadian darling

BlackBerry released their Q3 earnings in 20 in December, it was their Q3 2022. Again, they have a bit of a weird reporting schedule here. And it was another quarter that was just not great for BlackBerry. I read their press release and I'll be honest it was a bit of an eye roller. It really looks like they're trying to pull any type of positive out and point it out. It's full of non-gap measures and they kind of it seems like it feels like they're cherry picking measures that are good for the press release. The overall picture if you look at the financial is just not great. are good for the press release. The overall picture, if you look at the financial, is just not great. Total sales for the quarter were down 18% to 184 year over

year. If we look at their first three quarters, it's even worse. Revenues for that period were down 28% to $533 million compared to the same period last year on their press release they highlighted that their gross margins were 64 percent and i just double check it is true yet it was down from 68 percent during the same period last year so yeah 64 is good but when it's trending down it's not great they were free cash flow negative to the tune at $42 million for the first nine months. That's compared to free cash flow positive of $25 million during the same period last year. They had net income of $64 million for the quarter, which was one of the few positives for them compared to a loss last year. But when you dig into it just a little bit, it was because

of a fair value adjustment for their debentures, which is convertible debt. Even if you're generous and you give them, say, another $200 million in sales in Q4, which is higher than they had in this past Q3, they're still trading at seven times sales for essentially no growth or even like negative growth. We reviewed BlackBerry, I think. no growth or even like like negative growth um we reviewed blackberry i think uh was it last this summer or you know 2021 did it this summer yeah i remember because i was i was recording at my at my cottage i remember that episode yeah you were sweating i remember yeah but things no ac baby it's a it's uh it's polar opposite compared to minus 20 here right now. Yeah, same for Ottawa. I think it's minus 25. But all that to say that things aren't really improving for them.

John Chan has now been CEO for more than eight years. And yes, BlackBerry has pivoted from a smartphone maker or hardware maker to a software company. So I will give him that. But, you know, it's still not great. It could be worse, yes, for them. I mean, they could be bankrupt and they're not. That's true. But if you bought this stock five years ago, you would have a bit more than 20% in return.

But if you would have invested in just the S&P 500 instead, you would have had more than doubled your money during that same time frame. So unfortunately, still not turning around in my view with BlackBerry is just a bit more of the same, just kind of steady declining a bit. And it's just not a company I'm interested in for those reasons. If you listen to our review of BlackBerry, because it was requested so many times, it was basically never ending me saying, yeah, they have all these cool little things. They've transitioned the business. They have all these interesting security plays. It's cool what they're doing in the car, in the auto. They're doing some cool stuff there.

But why am I paying double-digit sales for no growth? I kept saying that over and over. And you just mentioned, it's not like- Now it's single digits. Single digits. The multiple has compressed a little bit as it should. But again, it's like, if I'm hoping for a turnaround play financially, I want to pay a turnaround multiple. I don't want to pay something that's not even that cheap for something that requires a lot of turnaround. And it's John Chen, right? John Chen. John Chen.

I think of John Chen and his time at BlackBerry as a very specific type of sports analogy. And I'll tell you what that is, which is you've had a company fall or a team. In my analogy, you've had a team fall from grace. They used to be great. They're not anymore. They need to do a rebuild. So what do they do? they're not anymore. They need to do a rebuild. So what do they do? They bring in a new GM,

a new head coach, and they're like, okay, we're going to rebuild the team. We have these new strategies. We're starting basically from scratch. And so we're going to do all these things. And then for the next 10 years, they go under 500 for 10 years straight. And they're like, this rebuild just never worked out. It's just this never ending, less than 500 not winning team. And they keep the GM, they don't fire the head coach. And it's just this never ending subpar performance that you're like, there was a couple, there was a couple things from our season that we can draw on and say that was pretty good. But for the most part, it's like we're still never making the playoffs. We weren't even close to making the playoffs.

This is what BlackBerry feels like year after year after year. Yeah, it's like the Buffalo Sabres, but they have switched GMs a few times. At least they're trying to switch something up. No, that's true. Yeah, no, that's the first thing that came to mind. But now we'll move on to our next segment. 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. Our last segment of the day, which we will be doing on

a regular basis because of our wonderful sponsor. So this is what is on your watch list presented by EQ Bank. So we're going to be doing this on a regular basis. I think that you guys like this segment anyways. And it's just something that we're thinking about on a regular basis in terms of what's on our watch list. What are we thinking about pulling on the trigger? What have we been pulling the trigger on in our own investment portfolios? So you can get a look at what we're looking at. So I'll kick it off here first, Simone, which is ASML, ticker ASML. It is a 290 billion in market cap company. It is a Dutch company and the leading manufacturer of photolithography systems, which are required for manufacturing semiconductors.

Now, I've been going a bit down the rabbit hole into ASML into figuring out why is this such a good company? Because I know a lot of really smart people that are like, you got to look at ASML. It is a absolutely critical business in the world. And the reason for that is they are the provider and they're critical in the world supply chain because they can only make a certain amount of these lithography machines, which are required to have manufacturing capacity of semiconductors. This is a big reason you're hearing about semiconductor shortages. Oh, there's not enough chips. We can't make this because there's not enough chips. There's not enough semiconductors. This is why you're hearing it. This is a big part of it is because,

well, hold on. I'm skipping a part. I'll show you why it's really hard to make these things and why ASML is great. So they make EUV machines, which are extreme ultraviolet machines that cost $150 million each. That's not a typo. This is not a quick mass production machine. You can't just go TSMC, Taiwan Semiconductor, TSMC, Taiwan Semiconductor just go, Simon or ASML, we need 20 of these things. It's like, hold on. That's like ordering 20 jumbo jets for a fleet of an airline. It's not like, hey, yeah, we'll get some samples over to you tomorrow and we can have that fulfilled by next week. Sample's over to you tomorrow, and we can have that fulfilled by next week. That's just not the case. It requires time, endless tiers of suppliers, just to make one machine.

There are over 100,000 parts required to make each of these machines, which cost $150 million. So you can see how this is a bit of a bottleneck into getting more manufacturing capacity online for semis. So you can see how this is a bit of a bottleneck into getting more manufacturing capacity online for semis. Now, what EUV machines do is over time, they've been getting better. And ASML is a big innovator in this, which is they can increase the amount of transistors that are in the silicon. Now, you're hearing this and you're like, okay, this might be above my head. Maybe you're a semi-expert and it's not. But I'm legit like at a 2 out of 10 in understanding this business. I have a lot more research to do.

And that's why it's a good one for this what's on your watch list segment. My preliminary thesis and work leans me to believe that I want to personally own the extremely high moat manufacturing side of the industry like asml tsmc ticker tsm now tsm does introduce some geopolitical risk let's not kid ourselves but they're extremely high moat companies very important to the world now the stock like asml it is expensive but its position and durability could make that very warranted. Myself and my analyst at Stratosphere are doing some more work on it over the next few weeks, and we're going to have coverage on the site. So perhaps I can do a full breakdown of the business on this show in the future. But really, really fascinating company and extremely complicated business as well.

No, that's a great one. I mean, I was not aware of them specifically, but I was aware of the machinery that was involved in these large like Taiwan semiconductor. Like there's a reason why they weren't building. It takes a while to build them. And I knew it was a machinery involved. And this makes a whole lot of sense for mine. I mean, we kind of thought about this a bit more last minute so um i'll the one i'm thinking there's actually the first one is lululemon

that i've been buying i've mentioned that quite a few times i started a position since the valuation started going down we talked about them earlier so i won't go into more detail the second one is actually light speed so. So Lightspeed with the pullback. I like that you brought this up. Yeah. So with the pullback it had, I mean, one of our biggest pet peeve with Lightspeed, and we were very upfront when we first talked about them in the spring, was evaluation. So that was one of the clear drawbacks for me that was preventing me from investing with them was evaluation. I'm still not ready to pull the trigger on Lightspeed. I want to see their full

year results, see how they're doing. I also want to see how the lockdowns that we've seen in the past couple months and we're currently in, how that will impact our business because they do still have a very, they're very tied to the retail right so there's still a very big part of the business that's tied to retail operations so that's something else I want to see but at the current valuation it does make them a bit more attractive they're still not cheap but it's definitely more palatable in terms of valuation and I still think there's growth ahead for Lightspeed. And I'm happy.

I haven't seen, maybe he has, but I'm happy to see that DAX has not commented on the stock price. I don't like when CEOs do that. And I'm very happy to see that he has not done that. He's obviously got a great vision for the future. He's very ambitious sometimes. I find him a little too ambitious.

He should be a bit more focused on the medium term and not thinking about 20 years down the line. Because there are some challenges that are coming up. But I do like that he's long-term focused as well. So it is one that I have on my watch list. It's also a Canadian company. So gets bonus points for that it does and it's certainly come back down to life and this is why it's okay and in our case this is definitely what happened it's okay to look at a stock that has done nothing but go up

which was when we talked about it, that's what was happening, and just go, if this doubles from here, and I don't own it, and I'm staying on the sidelines, that's okay, because I'm not comfortable paying the price that it was worth.

It was like 15 billion in market cap, maybe more. Oh, I think in Canadian, I think it hit close to 20 billion yeah yeah yeah and so it was it didn't make a whole lot of sense from a value perspective there now which rates for seven seven canadian seven billion canadian on market cap It's down 69% nice from the highs of when it traded in September of just 2021. So absolutely serious drawdown. One that I could definitely get interested in. It's been a double whammy, right? It's been growth has been getting crushed. And then there was that spruce point

thing. And so like, it was this like double, double momentum. And I have been very clear about this. Momentum is a hell of a drug in the both upward and downward direction in the short term for stocks, especially high growth stocks. And so maybe it's maybe it's an interesting one here. Yeah, exactly. I'm not like I said, I'm not ready to pull the trigger just now. There's a few things I still want to see happening. I want to see the full year numbers. I want to see how they're faring against competition because, you know, there's still a lot of growth baked in even at their current valuation. So you want to make sure that they can sustain that. But it's definitely, it's caught my eye a bit more definitely. And, you know, I feel for people that

do own it and paid over a hundred dollars a share, for example, and they're probably down 50%. But just remind yourself of why you own this company and why you started that position. And if you still love the company, it may represent a good buying opportunity for you. Who knows? Yeah, well put. Thanks so much for listening, guys. We really appreciate you. Who knows? Yeah, well put. Thanks so much for listening, guys. We really appreciate you. We are on a mission in 2022 to provide the best podcast in the space. And I think that we are doing so. I think that we can continue to grow it. We are number one in the business category

and investing categories, both in this wonderful country. But there is still a lot of growth. Edison Research came out and said that 21% of people listened to podcasts in the last month. Only 21%. Now, I think that that could go to like 50, 60 percent in the next few years and so what do you think what do you think that's possible i think that's that's ambitious but i definitely yeah i definitely can see it growing the next few years i think people especially with video on demand with all the different services out there people are getting more used to and enjoying the fact that they can listen to audio on their own schedule so not having and the type of content they want to listen to exactly and I think it's still you know progressing people are still getting used

to that we saw the shift with television as well it took years until you know the shift really started happening. It's still happening right now. So I think there's a lot of potential in this space, but I think I'm probably more conservative. I think it's going to take a longer period of time. And that's fair. I mean, that's a severe adoption curve that I just laid out in terms of growth. But who knows? Maybe it will. You can check out our podcast website at thecanadianinvestorpodcast.com. I know it's a mouthful, but it's just thecanadianinvestorpodcast.com. Really, really not that difficult. Our episodes are about page. You can contact us, leave a voice

message. There's a link there to support the show and a link to try Stratosphere, or you can contact us leave a voice message there's a link there to support to support the show and a link to try stratosphere or you can type in getstockmarket.com and head to stratosphere it is the absolute best platform for self-directed investors all right so um let's do this let's do this let's get this this year and uh i'm pumped, man. Thanks so much for listening, everyone. We'll 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.