The Canadian Investor - Tesla and UPS Keep Growing While Others Struggle

Episode Date: October 27, 2022

Earnings season is always a fun time of the year for anyone with an interest in stocks. In this episode we go over earnings from Tesla, American Express, UPS, Moody’s and more! We also discuss the recent inflation news coming out of Canada and why Chinese stocks were getting hammered this week. Tickers of stocks discussed: JD, TCEHY, BABA, MCO, TSLA, AXP, WGO, WHR, UPS Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Today is October 25th, 2022. Welcome into the show. My name is Brayden Dennis, as always joined by the exquisite Simon Belanger. We have a gigantic week of earnings, the most important week of earnings of the earnings season. And we got lots of reporting tonight. We got Microsoft, Google,

Visa, just to name a few reporting tonight. And so what we are going to do, Simon, is also record next Monday's release covering these large caps as well. So today and the next episode, we're giving you special extra coverage of this earnings palooza. Yeah, yeah. I think it'll be fun. I mean, obviously the timing's always, you know, it's never an exact science when they'll report compared to when we record,

but it made sense this time around to do it this Thursday and next Monday. It does. And I'm glad to be on the pod today with your buddy here because, you know, startup, they said, it'll be fun. They said, you've seen me just running around like an absolute psycho. So I'm glad that you and I just get to talk stocks. It's always a good time. So let's get right into it. But before we do that, I thought it was timely. Just a quick note that I get all the time, which is, you know, maybe even five times I think I was told this week. And I'm curious about what your take on this is. out of the market until it recovers, end quote. We'd be recording this in our billion-dollar podcast studio, literally, maybe potentially trillion-dollar podcast studio. But until then, you'll hear the dogs barking, the babies crying, and the Amazon delivery guys. How about this? This quote I get, not investing in this market or, quote,

waiting until the market gets better before I start investing again, end quote. What do you say or what's your first reaction when you hear this type of thing? Because I'm getting so much of it lately. I mean, I've not been getting that much, but maybe I just tune it out. I don't really know, but- That's the correct move. Yeah. I mean, I don't really care if people say that. I mean, it's the wrong way to approach things because, you know, it all comes down when you invest. You want to buy low and sell high, right? So if things are trading much lower and they are trading much lower than they were last year, but then people kind of go into macroeconomic stuff saying that, well, things were way better last year.

Now it's all doom and gloom. But still, you have to keep in mind the market is just, it's a pendulum, right? So it tends to overreact one way or another. So when things are going great, it overreacts on the bull side. And when things are not going well, it kind of overreacts on the bear side. Whether we're done that overreaction right now, I'm not sure. It could go lower, could go higher. But as long as you're consistent and you have some valuations in mind for the businesses that you really like, and I stress good businesses here, in the long run, you shouldn't have anything to worry about. Yeah, the old adage, it's like,

buy low, sell high. And you and I both know it's like kind of a cringy take because for us, it's mostly just keep buying and keep holding for the long term. And the way I think about it and the way I tell people to think about bear markets and investing when things are not as fun, although we've had some green days, everyone's all high now all of a sudden, you talk about that overcorrection both ways. What I usually say is during times like this in your dollar cost averaging when the market continues to suck is buy low and keep buying lower because who's to say things miraculously recover? You're never going to time the market. It is not a game that either of us try to play.

And it is a game that no one us try to play. And it is a game that no one should try to play because you cannot consistently correctly do it. And so just keep buying is the only way to go. And if you get even better prices moving forward, that is an opportunity to be excited and not disappointed in your previous moves. So that's, I just wanted to open with that because it was timely for me. And, you know, at the end of the day, if you're investing for the next decade or two or three, this is just a blip on the radar. Yeah, no, exactly. And I mean, look, I don't get phased by it. I know you don't either, but I know for people, I think that have started investing after the pandemic started. I know for people, I think, that have started investing after the pandemic started,

I know for a lot of people, it's the first time they see this. I can understand people asking the question because it's not an easy feeling if you're not used to it. That's right. And putting my money where my mouth is, I bought Intuitive Surgical today. And so we've said here time and time again to support the show and to see our exact portfolio updates every month. That is at jointtci.com. But we will never gatekeep information behind a paywall. So today,

I did purchase good old intuitive surgical, just a little starter position. I'm feeling pretty good about it. Yeah, congrats. I'm annoyed ASML keeps going up since I bought it. Yeah, you want to buy more yeah exactly it's been crazy up 25 like a week i kid you not i know i but well here's the thing right you're willing to go against the grain when it was at like peak ugliness and peak hatedness of semiconductors and that's not to say it can't get even worse. Like say geopolitical wise in Taiwan. I'm hoping. Yeah, things get really bad. No, I'm not hoping.

You're not hoping that. Yeah. But things get even like really, really bad, right? Like that can happen too. But you know that and you know the outcomes that are possible. But, you know, you're willing to go against the grain in a very unloved yet very good business. Yeah, just hoping the sentiment switches. But now we'll move on to talking about macro. Obviously, Canada released its CPI figures. It's always about

a week after the US ones. Now, the headline number was still pretty high, but I guess people, some people are starting to make a case that it's going down. It's at 6.9% year over year. And I'll kind of switch between sequential here and year over year, depending on what I think applies best, because I'll break it down into different things. Now, CPI rose 0.1% on a sequential basis. So compared to August, it's a slight improvement, but food and shelter remain elevated. Actually, on the food, well, actually, I'll say the numbers first. So food and shelters increased 10.3% and 6.8% respectively year over year, and 0.7% and 0.5% versus August, which is actually quite high for a month to month increase. Now, yeah, it is.

I'm sure you've seen the headlines right about I think there's not an investigation, but a commission on food prices and competition in Canada. Have you seen that? Yeah, yeah, yeah, I've seen that. Yeah. So it'll be interesting what comes about that. I mean, I was, you know, grocers have pretty slim margins and there's obviously savings of scales that they achieve some kind of, I don't know, I have mixed feelings about it. I know they want to see if there's some collusion in pricing. Well, there, and obviously, there's been in the past, I think Loblaw has got a big fine, right for bread fixing a couple years ago. Yeah, I think I vaguely remember that. Yeah.

So it'll be interesting. I know a lot of people have been clamoring on this. And the reason why a lot of people have been asking for this is because food increases have increased so much. Now to get back as to CPI figures, gasoline was down 7.4% versus August. I don't think there's much value looking at year over year because we all know it was, you know, much lower last year. I think here it makes a bit more sense to look just at the previous month. Now, one category I've never mentioned when breaking things down are durable goods. So it's there's different kind of categories. If you look at the stats can numbers, sometimes they go into detail, but you can also kind of find buckets. Now that was up 0.4% versus 0.4% in August and 6.7% year over year. And core CPI, which is the preferred measure for the Bank of Canada to measure inflation, remain exactly at the same level

than if we compare it to August. So I think there's ways to spin it that it's not bad. I think there's also ways to spin it that, you it that it's not coming down quickly enough. I think a lot of the debate now going on on Twitter, and I'm sure you've seen this, is if the central banks, including the Bank of Canada, if they're overdoing the interest rate hikes, because it's very possible that we won't know until six to 12 months from here. The reason being is because it typically takes around 12 months for interest rate hikes to really feel their way in the economy. Because higher rates, businesses have less cheap debt, same goes for individuals. So there's a gradual

slowdown over time, and it typically takes that 12 months. So we'll probably have a good idea whether it's working or not, or whether they've overshot or not in early or mid 2023. The reason I say mid 2023 potentially is if people remember, the Bank of Canada actually did not start aggressively hiking rates since it was until last July because they hiked it a little bit before that. But the big rate hikes, last July because they hiked it a little bit before that. But the big rate hikes, the 100 basis points or higher started happening in July. Yep. That's a good point. I was just while you were talking here, I was looking at Loblaws' food retail revenue because I was like, how much has it increased since pre-pandemic and maybe

2020 since inflation really took off? Now, I was very surprised to know because we track food retail revenue, that exact segment in Loblaws, which strips out the drug retail revenue, like from Shoppers Drug Mart and everything. And it is almost exactly flat from fiscal 2020 compared to trailing 12 months in the last four quarters from today, which is very surprising to me. I would have thought that that would have been up like 10% to 15% since then, but it isn't, surprisingly. Yeah, I think what maybe, I don't know what the numbers are, but flat sales, it's something

to keep in mind, but also comparing that to the profit margins, right? So whether if the sales have remained flat, but the profit margins have actually increases means that they have not been passing along the savings to customers. Okay. Yeah. Fair enough. Because I mean, gross margins have continued to tick up for this business since, you know, for over 10 years, over 20 years, basically, margins have gotten better and better for this company. But I mean, it's a public company, right? No, exactly. That's their job to do that, right? Yeah. And look, I mean, they're pumping a lot of free cash flow too, and it's increased a lot in the past three years. But

again, like you said, I don't know what percentage would be associated with a shopper's drug mart versus the actual food business and Loblaws. So I think there's a lot of people taking takes on this. It'll be interesting just to see what comes out of what the government is doing here. And just to circle back to what you were finishing with this in the segment, because I just wanted to point out the Loblaws data, but here is, which is, I think you point out something helpful and useful, which is there is a delay, right? There's a delay between Fed action and CPI prints, of course. And so the problem is, is that there's a delay for the Fed to know and their feedback if it's working or not, or if they're hiking too aggressively as well, right?

And so it's a double-edged sword there. And that's why they have to, you know, you'll see that word, you know, pivot, the Fed pivot. That's a, you know, hot word these days. And because they need to be able to do it quickly because there is that delay that you speak of. Yeah. And probably the last thing I'll mention here, and it's something I just started looking into and listening to. I was listening to another podcast, and this guy is like a macroeconomic expert, but really on leading and lagging indicators. And I mean, maybe the central banks should listen to this guy because there is things in the economy, specific commodities, for example, not all commodities, certain specific ones that traditionally have been

leading indicator as to what is to come. Super fascinating. Obviously, I'm not well-versed enough to go into detail, but that was very interesting. 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. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building

and people share their portfolios, their trades or investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead,

blossom social in the app store and I'll see you there. All right, let's move on here, which is another important headline, which is Chinese stocks opened yesterday. In particular, Chinese technology stocks opened yesterday in the morning down nearly 20%, which is quite staggering. Now, I'm pulling up the Crane shares K-Web ETF because I can measure its performance really easily. And it has those tech names, the largest four holdings, which are all, you know, a good portion. Just make me feel even worse for owning that ETF, right? Oh, yeah. The only reason I know about it is because you own it.

Alibaba, Tencent, Meituan, and JD.com are the top four holdings. So names that people will be more familiar with, even if they're outside of China. And Simon, you're going to do a segment next Monday on the show here in the news, a deeper dive into the situation and the geopolitics. But the spark notes here for the news today is Xi Jinping won. I'm going to say won in air quotes here, one, his third term. And his stance has been largely anti-big tech, especially over the last five years. And even if it comes at a huge cost to their own domestic large technology companies, largely a good portion of the investing community from the West has completely lost faith in investing in this,

because at the end of the day, they realize that it is what it is. And it is a communist, largely dictatorship. And it has made it completely uninvestable for a lot of people owning funds in the West, especially if they're risk averse. Now, this just solidifies that nothing is changing this news, which is in China, nothing's changing where Xi Jinping will likely be the leader of the CCP for life. And I am no Chinese political expert or what's happening over there. I think you're much more well-versed and your segment's going to be more useful for that next week. But this just solidifies that it's more of the same, and more of the same has been bad for big tech in China. Was that a fair generalization? Yeah, yeah. And I would actually, and I'll elaborate on that. And I would say it's actually

more leaning towards the one end of the spectrum now that we did not want to see. So it's basically, yes, more of the same, but, and I'll go into more detail, but essentially got rid of pretty much anyone that was high up in the CCP that favored a more kind of open market slash, you know, foreign companies investing in China. You know, who knows what really happens? They're saying they're retirements, but he's putting people in place that are really kind of following what he believes in. So it's tilting even more so to the, you know, we'll take care of China. If it means that the economy takes a bit of a hit, it doesn't matter because China is the most important thing just to sum it up, but like I said, Monday, I'll go into more detail.

Okay. Yeah. Well said, because what I was saying is not actually correctly true. What I meant to say is that it's more of the same trend. Yeah. Yeah. Exactly. Yeah. It's more of the same trend, which has existed for large cap Chinese tech stocks over the last two years, which is not good, right? And I'm not talking about their stock price. I'm talking about the way that they have to comply with the gov, more of that poor trend for these businesses. All right. So rounding this out is that investors who were like, yeah, but look, they're so cheap. I think a lot of them are getting washed out and that's why it's so low now. It's become completely uninvestable for some people and I can't blame them. I'm basically now here in the same school of thought.

You and I both own Tencent, which is a great business. It really is. It truly is a great business. And I'm not going to get near rate shifted in my sentiment based on the price. I mean, look at what they own. Look at this giant black box, the investment arm, which is just incredible. I'm not going to make any knee jerk reactions on what I'm going to do because these are some pretty great businesses trading at ridiculously low multiples, the question now is those ridiculously low multiples, are they a trap for people who own it like you and I, or new people who are coming in and drawn to the allure of, look, Charlie Munger bought Alibaba like three X ago, and he thought it was cheap then. How cheap is it now? And so that school of thought, I don't know, three X ago, and he thought it was cheap then. How cheap is it now? Right. And so

that's that school of thought. I don't know. Is it a value trap? I'm not sure. I really don't know. No, I mean, it's a good, you know, something good to think about. Obviously, when we talked about us and Chinese companies, I think it was last year, it was a risk that we were aware of. And, you know, if you're surprised by what's happening in your own Chinese stocks, I think that's a valuable lesson because you should have known these risks. I'll be very blunt, like you should have. These were very clear risks of investing in Chinese company. Yeah. And look, and I think that this has become one of my largest mistakes yet as an investor in my entire career so far, which is I understood those risks and I

thought they were priced in. And clearly that's not true. And how much of this is a poor market and valuation compression in tech and how much is it a China thing? It's really hard to decipher, but I thought it was priced in. And I think that was a mistake because clearly it wasn't. I mean, my cost basis was 2X ago, right? So yeah, we'll leave it at there. We'll talk more about the outfall of all this and the geopolitical situation over there on Monday's release. Yeah. Yeah. That's a good idea. So now moving on to some earnings. So Elon is not just buying Twitter. He's actually running a business called Tesla, for those who were not aware. We haven't touched on their earnings in quite a

while. No, I know. I mean, just with the timing of the earnings this week, you know, that we had to kind of, there's a lot of companies reporting, but it's well-known names, even on the Canadian side. I think it's a little further down like this week or next week or the week after. All the early ones are like the industrials and like, you know, the Dow Jones names are all reporting early, like the 3Ms and stuff like that. Yeah, exactly. Now, Tesla, I think it was a fairly good quarter for them. So they delivered 42% more vehicles than last year. Revenues were up 56%. They increased their operating margin by 262 basis points. Earnings per share almost doubled. Free cash flow increased 148% versus last year. They delivered- What is that number in absolute terms?

Oh, I don't know. Yeah, you'll have to look it up. Yeah, I kind of just stuck to the percentages here. I calculated them myself, but I stuck to the percentages. They delivered 42% more vehicles this quarter versus last year. Oh, I actually spoke about that. Sorry, I doubled my line there. But they had some transportation issues for deliveries. And although Elon tweeted that a recession could last until early 2024, he still thinks that Tesla is putting the pedal, well, he still said Tesla is putting the pedal to the metal regardless of what happens. So

regardless of what the economy, whether we are entering in the recession, no matter how long it is, because I guess they're afraid that if they do not do this, when it picks back up, they will suffer from it. Now, Tesla also announced some price cuts in China, roughly 5% saying that the Chinese economy was slowing down. And apparently, Elon said on the call, on the earnings call that Tesla could become more valuable than Apple and Saudi or Ramco combined. This is combined. Yeah. Yeah, I mean, this, I mean, sometimes Elon should just, like when he starts saying stuff like that or even the macro stuff,

that's when I tune out because he's a really smart guy. But I think sometimes he's, I find his ego kind of takes over and he thinks he kind of knows everything and stuff like that is probably not the smartest thing to say. The pump continues. Just in time. Just in time. You know what? I'll shift my sentiment or I'll

shift my tone here, which has been historically bearish when I talk about Tesla. I think that is because of my time in the automotive manufacturing space. I spent five-ish years there between getting and finishing my engineering degree for a large auto manufacturer, Magnet International here in Canada. And I just know how complex that supply chain is and how difficult it is to ramp up manufacturing and how difficult it is going to be to compete with the OEMs, let alone getting your supply chain correct. And so, you know, historically, it's been a bad idea to bet on new car companies. And I will say, you know, which I've given them credit before in the past, many times over is that I've been wrong on this is the execution is just astounding.

It truly is unbelievable. The execution, the fact that they're actually like doubling and doubling and doubling again, their, their deliveries, it's insane. And the demand for their cars is unbelievable, you know, marketing dollars is zero and the demand for their cars is just red hot. So I was just looking in absolute net cash by operating activities. I don't feel like cutting free cashflow right now. You're on the spot here, but it was over a billion and it was 247, nine months ending 2021. So this is nine months ending in operating cash flows. So I mean, hey, from a margin perspective, it's not there yet, but you can start to see what the bulls have been saying. So, all right, fair enough. Let's talk about American Express, good old Amex. They just

reported last week, actually, but Visa reports this evening and MasterCard later in the week. So this is kind of like a preview. I say that because those are the two that I own. American Express is also a great business, but is a much different business. Whereas Visa and MasterCard are much more alike. American Express actually does take on credit liability. So total network volume was up 19% to $394.4 billion for the quarter. So almost 20%, let's call it, on network volumes. And man, the scale of these card networks is just mind-blowing. You know, on stratosphere.io, we track every KPI for these large companies. And we show a trailing 12 months figure, which is helpful to

really understand the scale today and how it's trended, especially mid-year. And I think that it's useful to think about here because the total transaction volume on a trailing 12 months for American Express is now, for the first time, past $1.5 trillion. And that is up 17% from 2021's full year. And we don't even have the fourth quarter for this year. So a TTM is up 17% compared to full year 2021. And so that's interesting, right? You hear tougher macro environment, this and that, You hear tougher macro environment, this and that. And then you realize that there is a secular shift to digital payments, but also that these businesses in terms of transaction volume are some of the greatest inflation resistant businesses ever because they just go with the flow, collecting a sliver, collecting

a take rate on that increased volume. Now, for context of scale, Visa's network has done more than $14 trillion in total transaction volume through the past four quarters. And when they report tonight, it'll be even higher. I have a pretty good feeling. American Express earnings per share was up 9%. They bought back 5% of the share count. So they've been buying back stock pretty aggressively. Now, some points of the earnings call that I want to point out, Simon, which is three quotes from the CEO here, Stephen Squary.

He's the CEO and chairman of the board. I have three quotes here for you. Quote number one. This is from the earnings call. Card member spending remained at record levels this quarter, end quote, new quote. Total travel spending was up 57% from last year. It exceeded pre-pandemic levels for the first time this quarter. So this kind of matches what we had talked about with Delta is that we've now actually seen a surpass of 2019 peak levels in travel expenses. And third quote here from Steven.

Look, I love the quotes from the earnings call because it sounds so much more human than a press release. Look, the spending speaks for itself. I mean, just look at some of these numbers. We're not seeing any changes in consumer spending behavior at all. And look, that's not to say that things may not change, but I can only look at what I'm seeing right now, end quote. So you've now had all three CEOs of the payment networks, Visa, MasterCard, and now American Express come out

on the earnings call and just say, what recession? What slowdown in consumer sentiment? I have yet to see it. They've all come out and say this. That's what makes this whole thing so confusing, is they've all come out and say, we are not seeing any. Alfred Kelly, the CEO of Visa said, and I'm trying to remember what he said, the exact quote, but he said the same thing. We're not seeing any weakness or any slowdown in consumer spending on our network. So what do you make of this? I mean, I kind of come back right to what I was saying earlier for the interest rate hikes and how there's a delay for it.

I think he was very careful with his wording. Yes, obviously, that's what they're seeing right now. But these results are, what, a month or two out at this point. That's typically when companies will report. So things could be changing actually right now. Or, you know, it may actually start changing after the holiday period when people maybe, you know, use the last bullet in their spending gun and then actually rain things down. I'm just trying to obviously have a kind of balanced approach here. You know, I believe them when they say it still looks strong,

but I anticipate seeing Visa and MasterCard having some careful language, probably something similar where they say, you know, that quarter was great. We don't see right now not too much slowing down, but they may have some reservation for, say, like, you know, six months down the line. I have a feeling they won't want to talk about it until they do some forecasts for next year. No, and I think that that's fair, right? They're not going to come out and say things that are like, you know, they're not going to. Why would you?

Yeah, yeah, yeah. They're not going to be saying things unnecessarily for, for predicting the future, but it is kind of interesting. Now we're into, you know, September ending quarter and hearing these kinds of quotes come out still now. And so it's just, it's just interesting to think about. And then you, you wonder, okay, how much of this is demand for digital payments? So it's just interesting to think about. And then you wonder, okay, how much of this is demand for digital payments? So that's skewing their results in a nice way. And how much inflation is actually driving this top line? Like those are two things you have to factor in as well.

But overall, I mean, these three businesses are just incredible. Like they're so good. From a margin perspective, it's almost unbelievable when you look at the profitability of a Visa and MasterCard. You could make the case, and I often do, that they're the best businesses ever made when you look at the profitability metrics. Yeah. No, they are great businesses. That's for sure. metrics. Yeah. No, they are great businesses. That's for sure. 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. Calling all DIY, do-it-yourself investors. Blossom is an essential app for you. It has been blowing

up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building and people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free.

You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me. Search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools.

So go ahead, Blossom Social in app store, and I'll see you there. Now we'll move on to a completely different company. One we haven't talked at all here, I guess, maybe a little bit similar to BRP, but I guess it would qualify in the same kind of category, I would think, right? Winnebago? Totally. Yeah. So they released Q4 in full year, and I'll kind of look at both because I think it tells a bit of a different picture, whether you're looking at it on the full year or on the quarterly basis. Now, for the full year, really good result. Revenues increased 37% to $5 billion. Part of this was driven by acquisition.

A main and one of the, well, the big acquisition was Barletta, which does pontoon boats. The operating income was at 43% with price, actually operating income was up 43% with price increases partially offsetting higher production costs. Net income up 38%, 38.6. Free cash flow was up 62% for the year. Now, something interesting about Winnebago is that their revenues actually doubled since 2020. And keep in mind that this is a company that had a stronger 2020 than 2019. So their revenues have actually been steadily increasing. So you can say that the pandemic has definitely helped them out. I think a lot of people wanted to travel, you know, that was a good option to just get an RV to travel, especially when a lot of stuff was logged down. If you don't want to risk

going to a hotel, you know, a lot of people were paranoid with that, you know, you have your home on wheels. So why not? Right. Yeah. Especially if you look at the U S right. Like, okay. Can't fly. So in, in Canada, you're pretty like, okay, well, I am definitely bunking down for winter. I have no option. There's nowhere I can go domestically inside the border of Canada and be somewhere warm. Like that place doesn't exist. But for the States, I mean, all four seasons all the time, right? So there's a big demand for this kind of thing. If you're told you can't leave the country, people are like, all right, let's get a Winnebago, let's get an RV and hit the road because there's lots to see. Yeah. And wasn't the border kind of open

to some extent, pretty much the whole pandemic? I think there was more restrictions to flights, right? More restrictions to flights. That's right. Yeah. So I think it probably offered even Canadians the options to go into the US. Now Q4 tells a little bit of a different story. So definitely seeing a bit of a slowdown there. So revenue still increased 13.8%. However, if you exclude that Barletta acquisition, they only increased organically 4.3%. Revenue were primarily increased by higher prices. So not because of volume and operating income was three percent higher which is something to take note because it is lower than their organic growth and net income was 1.8 percent lower so I don't know if this is kind of the start of a trend here

at a potential kind of deceleration for Winnebago. But I was just kind of interested to see how they're doing. It's not a company I know very well, but just the trends here. Again, kind of going on the fact that there's a lot of predictions that we're going into recessions. I just wanted to see, you know, these type of vehicles. Maybe they don't get too badly affected because maybe a lot of people just start targeting RVs as a way of having home ownership, right? Maybe that offsets it a little bit. I have gone down extensive YouTube rabbit holes about converting your like sprinter

van or like, you know, like some sort of bus or like shuttle bus and converting them to a home and then like living out of it and just the idea of like this digital nomad experience that you can do from anywhere outside of your rv i think it appeals to a large number of people and for me it's like a mix of that sounds kind of appealing also kind of terrible but i like watching those like home renovation shows so it's like you know all the all the niches in one and so i can see why people want to do this especially the more like i'll say millennial type generation who would like have a lot of reason to do this and no reason to stay in one place is what I'll say. So I don't know. I think the future is brighter for these companies over the

next 10 years than they were over the past 10 years. Not to say that it wasn't great, but I do think that there's a secular demand for these types of equipment and types of lifestyles, I'll say. Yeah. For me, it's just maybe a good alternative to kind of homeownership for some, right? Yeah. Yeah. For some at a certain part of their life. Yeah. Exactly. Well, I mean, if you really can't afford a home, maybe you start looking at something you can afford. I don't know what the prices are. I'm assuming it's probably, you know, 150, 200 grand around there, but it's still cheaper than buying a house i mean even sometimes probably cheaper than some down payments required and some people just want to live in their van go rock climbing every day work from their laptop and with very minimalist lifestyle

and i think that appeals to a lot of people including me i think that it's i think that it's cool and so i think we'll see more that it's, I think that it's cool. And so I think we'll see more of it, but who knows? All right, let's move on to Moody's Corporation. This and S&P Global are global, are the best boarding businesses in the world. All right, Moody's Corporation reported their third quarter and on the surface, it's like, oh no, revenue is down 16% year over year and year to date through nine months down 11%. And the reason for that is there are two main segments for Moody's. There's the Moody's Investors Service, MIS, and Moody's Analytics, MA, which is like a SaaS subscription. It's a software business. Now, today I posted on Twitter at Brito Capital, go follow me, of course. I posted a graph of

Moody's Analytics revenue over the past 10 years. And it's one of those beautiful, consistent, up into the right graphs that you love to see from a software company. And it's because it is. Moody's Analytics is a software as a service business. And the reality now today on this third quarter is that over half of their sales in the quarter was actually through Moody's Analytics, which is a growing, sticky, recurring high margin software business. So that sales was up 14% and through nine months, 18% up on the top line. For Moody's Investor Services, you're seeing revenues down 36% year over year. And so is this surprising? No, it's a capital markets business. It's not

surprising to me at all. And if you look at what makes up Moody's Investor Services, it's corporate finance, structured finance, financial institutions, and those are the three big ones. Look at the drop in corporate finance. Where is the bond issuances, right, Simone? Where is the bond ratings business? And that's the nature of this. It's very cyclical with credit, right? Like short-term and long-term credit cycles. And so you have this like kind of cyclical with rates business, but they've created this wonderful software business now that is now over half of the top line on their latest quarter. So it's kind of given me resemblance to one of those businesses that out of nowhere over the past 10 years, they've created this segment that is more valuable than the rest of the business. You know what I mean? Like AWS is a perfect example of that. I'm trying to think of other ones that, you know, turn, spin up a line

item out of nowhere and it becomes such an important part of the market cap moody's comes to mind what else comes to mind i don't know money any yeah no i don't know but i think aws is like a clear a clear one right yeah i mean i think maybe i guess google and youtube kind of but YouTube's been there for so long. That was an acquisition. I don't, yeah. I'm talking about like spinning up something. Anyways, I will all keep thinking of some, but here we go.

So here's a quote. Moody's Analytics again delivered impressive growth this quarter as our suite of data, digital insights, and digital solutions helped customers identify and manage their risks. and digital solutions helped customers identify and manage their risks. However, Moody's investor service revenue was meaningfully impacted as global debt issuance has declined sharply and ongoing market volatility persistent in inflation and geopolitical tensions. That's going to be the buzzwords of the day. The reality is that this business is obviously very tied to capital markets with the

bond issuances, the credit rating agency, but they have one of the best business models in the space, not only which is highly defensible and how a bulk of the revs are coming on this recurring subscription with Moody's Analytics. So you know what? Overall, the long-term thesis for this business remains, which is there's two players in town to rate bonds for the most part in this duopoly. And I'm happy that I own both of them. Yeah, it reminds me, I think it was last week, right? We talked about BlackRock and their earnings. So kind of the same kind of thing, right?

Obviously, there are different businesses, but just impacted by markets in general. Yeah, exactly. You know, we're talking about public companies here on the show, and you know, how their prices are impacted from their results. And then you get a business like Moody's or BlackRock, where their results are actually tied to the financial markets. Chicken or the egg situation. But yeah, I mean, there's nothing really more to add here. I think, you know, you're seeing some weakness. You're seeing some softness for all those reasons that I've mentioned. But there's also some really nice bright spots to highlight as well. No, that's a good overview.

Now we'll move on to another company. I don't think we've talked on the podcast about. Again, one, I was just interested in seeing what was happening. The name is Whirlpool. Obvious, I think everyone has probably heard of them. They do household appliances, essentially. Now, the reason I wanted to talk about them is because there is a correlation between their results and the housing market. It's pretty simple when you kind of just think about it for a minute. If there's a lot of new constructions or major renovations which require appliances, then Whirlpool should see a tailwind from that. And on the other hand, when we're seeing slowdowns from new constructions or even

investment in the housing market, you have the opposite end of the scale. And I would say it's starting to show pretty it's definitely starting to show with Whirlpool so that's a premise here that's showing and I'll go over the number so people can't get a better idea now sales were down 13% for the quarter or 9% if you exclude foreign exchange sales were down 7.7% for North America and 28% for EMEA which is is Europe, Middle East and Africa. Earnings per share down 33%. Free cash flow negative for 24 million so far this year. By the way, this is the third quarter. And last year at this same point in time, they had a billion in free

cash flow. So we're already seeing some dramatic changes. And the guidance, wow, I've rarely seen a company change its guidance so much. So they've changed it multiple times this year. So I'll just compare it to what they were guiding when essentially this financial or fiscal year started. At the end of last year, so at the end of Q4 last year, when they gave their guidance for 2022, they were expecting net sales growth of 5% to 6%. Now they are forecasting for 2022 as a whole, as of Q3, revenues to drop 9% for the full year. That's a dramatic change. And earnings per share, they were forecasting $27 to $29, now around $19. And they were forecasting at the beginning of the year $1.5 billion in free cash flow, now $940 million.

They're going to have to have a really good fourth quarter. I'll say that if they want to achieve that $900 million. But, I mean, this stock has just been smashed. It's down 45%. It's now yielding 5.33%. So, high yield, but I don't know whether it's worthwhile or not. I don't know this business enough. I don't know what the payout ratio will be once we, if we look at either the trailing 12 months or even, you know, this year as a whole, or we try to project in the future. So definitely do your due diligence here. This is a company that will go with interest rates and housing starts and major renovations. So as interest rates go up, it's going to affect them quite a bit and vice versa. If we see rates starting to go down in a year or two and housing starts just kicking up and just starting again and accelerating, then Whirlpool should be a business that benefits

on that. Yeah, I think that it's an interesting one to call out because it's not one that, you know, you think of right away with the housing or renovations slowing down, right? Like, you know, you think of Home Depot or like Home Builders, those types of names, but, you know, what's being sold in those Home Depots is stuff like this. And I have no real comment here other than the fact that we bought a Whirlpool dishwasher when I was, I want to say in like the ninth grade and it broke before like the end of the month. And so I am out, I'm out on Whirlpool stock and the appliances. I'm so, so out. For those reasons, I am out. No, I mean, yeah. And you have to keep in mind too,

I'd be careful with people projecting this with Home Depot because Home Depot, yes, they sell appliances, but they are also the place you'll go even if the economy is not doing well, you're not buying a home. Let's say you own your own home still, or maybe even if you rent, you need a new light bulb, you need to do some small repairs, not necessarily major, you're going to have to go to Home Depot to get that material. You're going to push off- Versus like a major new build or major reno probably swapping out appliances. Exactly. So they really need, you know, let's be honest, it's either, you know, appliance break or you are purchasing a home or doing a major reno. I mean, I think those are the main reasons that where you would need to buy appliances and they do license. I think some of their appliances, I'm just going on memory here. I think Ikea appliances are

actually produced by them. I could be wrong, but I know they're produced by one of the major manufacturers. I think they do, right? Yeah. Whirlpool makes Ikea. Let me look that up. Ikea's kitchen appliances are actually Whirlpool. So it is that.

But you are unlikely to find this information without some serious research. Okay. Okay. Thanks, Google. Whatever that means. But you know what? I think that they do white label it for Ikea. Now, those appliances are obviously the quality that you could expect.

So... Yeah. I mean, it depends. They have some expensive stuff now at Ikea for appliances too. So I don't know, depending if it varies, but if people were wondering how the housing market is or how it's going to be, you know, I think Whirlpool is a pretty good gauge here. I've heard a lot of economists and kind of macro experts refer to appliances as a good indicator for housing starts specifically. Interesting. I think that that's probably really smart, but it's also going to be something that gets fulfilled late stage in the project, right? Yeah. Yeah. I mean, they could, I don't know how it works, whether they buy them early on or they, I really don't know, but-

When in this cycle is that procured? I'm not sure, but I would think later. Yeah. But I figure it was fun to talk about this one we haven't talked about. It's a fairly small business too. I think it's around 5 billion in market cap for those wondering. Is there anything more annoying than when an appliance breaks? Oh, I know. I actually can't think of a more frustrating thing to deal with because, you know, now they're like just one big computer, right? So it's like you can't just swap, like, you know, it's like you have to get the exact person who works from the exact appliance manufacturer to do stuff with the computer board on all these appliances or else you can't do anything. Like there's no chance I'm swapping

that out. Like there's just no way. We had a few break a couple of years ago. One of them was our washing machine and, you know, called the company, came in. The guy was very nice, very honest. He's like, you know what? Like, it's going to take us four to five months to get the board that you're talking about. And it's going to be like $100 cheaper than you buying something brand new. And obviously, you know, if you get something brand new, you have to. That's the scam right there. Yeah, you have to warranty and everything. So he's like, it's up to you.

I can do it. I can order it come back but he's like if i were you i would just you know just buy something new so i'm like okay so i paid him i think he it was like 75 bucks just for him for half an hour to have a look but you know that's for him to come tell you buy a new one yeah yeah pretty much there you go 75 bucks later all right let's round up today's show with ups's third quarter dude yesterday i was i was leaving my house i don't know if you have this in audible but i'm noticing them so much in toronto is that the fedex guys have a bike where there's like a big basket or like big container that sits in the front of their bike it's like no no it looks amazing you know like the uber eats guys they're all they have the

big backpack behind them the fedex guys their actual bikes are modified to have this huge thing on the front it looks hilarious but you live downtown right so maybe if i lived i mean i'm not far from downtown but i think it wouldn't be as efficient although i've noticed that fedex i not as much anymore but this year a few times i've noticed them with like budget vans because they just yeah they didn't have enough i guess vehicles they didn't have enough so they just grabbed like a u-haul look at the photo i just dropped in the dock okay no i've never seen that before you haven't seen okay there i'm noticing them more and more in toronto now but yeah it's maybe in downtown ottawa yeah if you can explain it for people on the pod so

they have a bike and then there's this big i would say the easiest way to explain it is you know people selling popsicles and ice cream on a bike it looks like that it looks exactly like that or the guy wheeling the thing down the beach with the big like fridge yeah with the bike that's what it looks like anyways they're all over the place now and i didn't notice them up until recently so i don't know if it's a new thing or like it just came to toronto hey and it's good for the environment you know Keep those emissions down. So for UPS, they had revenues of $24.2 billion, which was up 4.2% from last year for the quarter. Earnings per share was up 10.3%. So nice double digit year over year on the earnings per share.

Now, one thing that I wanted to note here, and I don't care that much about UPS's results. It's not a stock that we care so much about. I mean, everyone knows what it is, but it is a good barometer. It is a good bellwether. And that's why we talk about these ones. But one thing that I wanted to highlight is their pricing power. So let's look at the US segment in particular. They had like the volumes were not there, but the 9.8% increase on the top line was driven almost entirely by hiking the price on piece per delivery. And so you're really seeing them kind of flex that pricing power. I mean, costs across the logistics base have been up across the board, but you can see here, even UPS and, you know, them being a part of that industry is really flexing their ability to raise prices on a per delivery basis. And so, I mean, the good ones are able to hike it. And the poor ones in each space are the ones that are just price takers.

And so this is why you and I talk so much about price makers versus price takers. So total operating profit was up over 10%, kind of in line with that earnings per share number. I think for the most part, these results are stronger than FedEx's back in September. I think that that's pretty easy to say. And the question has been around, is there a big slowdown in logistics or is FedEx just soft compared to UPS? And so that's been kind of the discussion I've seen online for people who track the

logistics businesses is like, is it a FedEx thing or is there a real people who track the logistics businesses is like, is it a FedEx thing or is there a real slowdown in the logistics space? And so the answer for me is a bit of both. The short answer is that we're going to see normalization in normal e-commerce last mile delivery volumes. I think that that's going to go down to a more reasonable place. volumes. I think that that's going to go down to a more reasonable place. But for the most part, UPS does seem to be executing quite a little bit better than FedEx. And the stock price as of late certainly reflects that sentiment by quite a wide margin. So I think this result was kind of like, yeah, there's some softness in logistics. But overall, these haven't been UPS problems.

They've been FedEx problems. And so let's stop moving both these names on the same results. It's like when Snapchat comes out with their terrible earnings, and then all the digital ad plays go down. It's only a few more quarters before that stops happening entirely because they are not related. And so I don't think you can stretch that out to FedEx and UPS, but at some point maybe you can because the execution has not been same, same. No, I mean, it's kind of funny looking at the chart. They were tracking each other until like September when FedEx released its results and then FedEx is year-to-date FedEx is down like close to 40% and UPS 21% or 22% around there so

definitely the market which is just the market yeah like in line yeah matching market performance versus like severe under performance yeah and I mean is it at the same time too is it a mix, I don't know the business as well enough. It sounds like UPS is better run, but is it maybe FedEx trying to just be in the, you know, get it at the front end and, you know, taking a hit right now and then being okay later on, maybe UPS is kind of waiting to see how it goes. I don't know, right? There could be a bit of that where FedEx just decided to take the hit right now and to be better positioned down the line. And maybe UPS is kind of waiting and seeing. Maybe there's a bit of that too. Yep, agreed. But if you give

me one of these bikes, I'm just looking at the photo again. You give me one of these bikes, strap that FedEx logo on there. Let me just buzz around Toronto, but you'll see the photo again. Give me one of these bikes, strap that FedEx logo on there. Let me just buzz around Toronto, but you'll see the earnings print. The stock will be up 10%. I mean, I can say one thing, like those bikes are probably extremely useful in a city like New York City. Oh, for sure. With all the traffic there, like, I mean, I'm sure they get around way faster than any kind of vehicle, so.

Totally. That's why you've seen so much traction with the bike delivery for Uber Eats and stuff. Because downtown, it's the same reason that I don't live in the core anymore. I'm way on the outskirts. But when I was in the core of the city, like post-graduation, working my corporate job, I biked everywhere. Because there's no way I was driving my car around downtown. It's just like that's misery. Like it's straight up misery. And so, I think that these will do well in the city. I wonder if UPS is going to do something similar. These look pretty sleek though. We'll see. We'll see. Maybe that's why, you know, maybe they're costing too much to FedEx. I don't know. Yeah.

Yeah, we will see. Thanks for listening to the pod, everyone. This is the Canadian Investor Podcast. We're here with you Mondays and Thursdays. Me and Simone, the odd time we bring in a guest, but for the most part, it's banter between the lads here talking about companies. And then on Monday, we talk about our general thoughts on the market. Tune in this Monday. We're going to do more earnings because it's earnings season. Here it is now. We talk so much about long-term investing and how the stock price doesn't let us

sway the narrative in our mind on the business if it's executing or not. We wait to earnings to look at the real numbers and then make our decision from then. And here they are. These are the real numbers. This is, you know, if you tune in four times a year, this is the time to tune in. And for the most part, I haven't really made any hot takes on what I've thought so far with companies' reports. But I think by the end of Thursday, I'll have some real good hot takes on it. Yeah, I think for me, it's just I'm still digesting overall.

I think it's been pretty good, but it's still been a bit of a mixed bag depending on the companies. But yeah, I think I would give it two weeks. Just yeah, big tech is reporting. But I think not sure when Canadian banks are reporting, but I'll be interested in seeing that and then kind of make an opinion of, you know, where it's going a bit more. Yeah. And what I fear is that, you know, none of it will matter because everyone's just watching what the Fed does. Yeah. Oh, everyone is. Yeah. Let's not kid ourselves.

Yeah. Let's not kid ourselves. But you know what, if you're watching what's actually happening with business fundamentals and results, and you know, you get some more opportunities for cheaper prices, then there you go. There you go. Thanks for listening so much. We appreciate you go to stratosphere.io to check out the best free investment research terminal. And there's lots of stuff coming over out over the next month that I think you're going to love. I have some gigantic news that I want to share with you guys on the podcast. I probably, hopefully fingers crossed, we'll be able to tell you guys that news on tomorrow's recording, but I, which is released on Monday,

but yeah. Yeah. So Monday, I hope I can, I hope I can give you guys that news. I'm very hopeful. I'll put it that way so that I can stop spending time on it and let you guys know what's happening. We'll see you in a few days. Take care. Bye-bye. The Canadian investor podcast should not be taken as investment or financial advice. Braden 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.