The Canadian Investor - The Best Performing S&P 500 Stocks

Episode Date: April 25, 2022

In this release of the Canadian Investor Podcast, we cover the following topics: We answer a listener question about selling big tech stocks What to make of Netflix earnings release and recession fears The best performing S&P 500 stocks over 5, 10, 15 and 20 years  How we handle bad news from a company we own Tickers of stocks discussed: NFLX, ENPH, SEDG, TSLA, ETSY, NVDA, DXCM, MPWR, AMZN, AAPL, MNST, TSCO, ODFL Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Check out the Yes We are Open Podcast from sponsor MonerisSee omnystudio.com/listener for privacy information.

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

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. Live from the great white north, 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 April 20th, 2022.

My name is Brayden Dennis, as always joined by Simon Belanger. We got a fun episode for you today. We're going to answer a listener question that I think is particularly fun to look at. We're going to talk about good old Netflix, some of the best performing stocks over the last 20 years. And then Simon, you are going to round out some ideas about how you think about bad news and bad results and how you actually choose to act on it or conversely do nothing. How you doing, buddy? Going well. Yeah, it's doing well. Excited to see the nice weather outside and I think it'll be a fun recording too.

Yes, sir. I am going to Cirque du Soleil tonight. I have absolutely no idea what I'm in for. I didn't even know people went to that anymore. It's awesome. I've been to three or four, I think, in my life. Okay. I just thought it was like a Vegas thing. I'm going to Toronto tonight. Yes, I've been to a couple in Vegas and one in Ottawa when Ottawa turned 150 years old a few years ago. And they had like a makeup tent with some sale and they were all amazing. Okay, interesting. Yeah, to be honest,

I didn't know this was something people still went and did. And here I am going. All right, let's lead it off into this question here. Question from Tina said, I started listening to your podcast recently. I'm learning a lot from both of you. That's great, Tina. We appreciate that. She says, should I sell my big tech stocks like Microsoft, Apple, Google, Nvidia? I know you both mentioned how important it is to focus on

long-term investments, but recently Jim Cramer was saying, sell those tech stocks for now. I'm really concerned. So you want to lead us into this? I know we don't usually do mailbag random questions like this, but this one we figured we just got to answer this. Yeah, yeah. I thought it was a good question. I think it will also help a lot of people that may be feeling the same pressures, whether they're watching the news or something else and essentially not sure what they should do with one of their holding and the first thing to remember here is that Jim Cramer is an entertainer so he does have I think a financial background I don't know him quite well I've seen some of the shows but you know you have to take what he says with a grain of

salt. I'm sure he's made some good calls in the past. I know he's made some terrible ones too. No one is perfect here, including myself and you, obviously. The reason I wanted to mention that is you should always do your own research. So there's no harm in getting ideas from various places, but make sure you do your own due diligence. No one cares more about your own money than you do. And I think that's really important to remember. We've been consistent since the beginning with this podcast that we invest in great businesses for the long term and businesses that we think will be thriving five plus years in the future. The reason we do that is that once we buy into a business,

we rarely sell because we are owners and we're not concerned about short-term fluctuations and not concerned about the ticker itself. Of course, if something major happens to the business, which changes the investment thesis, we will have to re- reevaluate our thesis. It may mean we sell. It may mean we don't sell. It may mean that we kind of just keep a closer eye on it. But for me, I think you need to ask yourself a few things and just be honest with yourself.

So I can't answer that for you. Neither can Braden and neither can Mr. Kramer. The first one, are you trading or are you investing in businesses for the long term? And two, if you're investing for the long term, do you think that your tech stocks will still be thriving years down the line? So I don't know how well you know the tech stocks that you own, but if you do know them well and have a long-term mindset, it will help you zone out the noise that you might see or hear on financial news, websites, YouTube, whatever it is. And that's how I personally approach things. I know what I own. And when I start a position, something, it's usually for the long term.

So when I see negative headlines about a company I own, I don't panic. First of all, I love this question because it touches on a few important topics. The key here is remember what game you are playing, not what I'm playing, not what Simone's playing, not what Jim Cramer's playing, what you are playing. The first most important two words that he said in his statement or how you quoted him was sell them for now. Like, can we just put in bold for now?

Jim Cramer saying sell them for now. For now is implying that you're going to sell them and then what? Buy them back again later? That's how I interpret it. That implies a trading mentality. It implies that market timing is possible to predict, which it's not. And it implies that you should actively be trading in and out of great businesses. You know, like you mentioned Microsoft, Apple, Google, Nvidia, like these are truly great businesses. And so trading in and out of them, I do not believe is a profitable endeavor. You know, I'm not just saying like, oh, don't trade, trading's bad. Like that's not what I'm here to say. I really don't care, to be honest. I'm just saying that I don't trade because I don't trade. Trading's bad. That's not what I'm here to say. I really don't care, to be honest.

I'm just saying that I don't trade because I don't find it to be a profitable endeavor. What actually is more profitable is in the holding. I want to double click on Simone's two points here. You said, one, are you trading or are you investing for the long term? Or two, if you are investing, do you think these businesses are still going to be great in the future? And I think those are two really good things, right? Just remember, always do your own research and work because when you're investing your own money self-directed, you can't borrow conviction from someone else. You cannot borrow the conviction to buy, hold, sell a stock. It just can't be done. And it's the same for this show. I mean, we provide what I believe is a lot of interesting

ideas, entertainment, and the old rational reminder. These thoughts can help you gain conviction, start your process, figure out new ideas, and see how we're thinking about it. But this falls apart quickly when you don't know the business and some talking head on TV tells you to sell your stocks. If you don't know the business, you're going to be like, I should probably sell my stocks. And that's probably, in most cases, not a good way to go if it's truly a great business. Now, if you're holding some junk company you know nothing about, then maybe when you hear the talking heads, then maybe there is a cause for concern. But I think that's a completely different game. Yeah, completely agree with that.

You really, really can't borrow conviction. Obviously, like Braden has super strong conviction in a lot of these names. He's got extremely strong conviction in Constellation software. I have strong conviction in, you know, the Brookfield family. I know Braden does as well. I have strong conviction in Bitcoin, too. And, you know, when I look at my portfolio, I did some returns recently and two months stood out. December 2021, January 2022, back to back months where I had 14% drawdown in one month and 13% the next month, which is, you know, it's not easy, but I'm really not phased by it because I know my investments. I know the business I own. Obviously, I have some significant holdings in cryptocurrencies as well, but I know the technology, I think, quite well.

So I don't panic. And it's just to show that if you know what you own, you can really stomach a lot of volatility. Clearly, obviously, it's temperament too. I don't panic easily. But I think that's just a good reminder there. Yeah. And, you know, we're doing this whole process of going through our returns. And I can see your returns. You're doing okay, Simon. Holy smokes. You're doing all right.

As do-it-yourself investors, we want to keep our fees low. That's why Simon 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-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right, speaking of volatility, quick comment on Netflix and what I'll call recession fear. So I'm going to get to that after, but let's talk about Netflix for a second. If you are new here to the show, we release episodes twice per week. We release episodes on Mondays for our general thoughts, strategies, mental models, things we find interesting in

financial markets, basically everything you've heard up till this point. And Thursday, we talk about relevant and timely news, including earnings results. Since typically today when we do earnings releases, but you know, I caught that good old COVID-19 virus, so we swapped it around. So I'm going to take time now to talk about Netflix since they just released their first quarter yesterday at market close, and it has got the people talking. One, because it's kind of the kickoff to the earnings loullapalooza of results coming out. This is kind of one of the big hitters first to report. Now, they released revenue of 7.8 billion. That's what they reported, which was up 10% compared to the same quarter of last year. Okay. Paid subscribers were 221.64 million, which was up 7% compared to the same

time last year in Q1 of 2021. Monthly revenue per average subscriber of $11.77, an increase of 5%. That's this pricing power that we've continued to talk about how they keep using. Okay. Seems all right, Simon. Seems okay. The stock is down 37% today. And now in a deep, deep drawdown, well more than 60%. What is it? 67% or something down from the high. Ouch. Woof. Okay. So why? The company actually reported a net loss of 200,000 subscribers. A net loss. All this company knows is net gain in subscribers. A net gain in subscribers just mean that they've had more customers than people cancel. For a company like Netflix, that seems to be expected of them is that they have more new customers coming in, subscribing to the service, then churning off of the platform. This is concerning, right?

Now, baked into that is a loss of 700,000 subscribers in Russia, okay? 700,000 subscribers in Russia. Netflix would have actually seen a total net gain of subscribers of about 500,000, which is a deceleration, but still pretty good of subscribers if you back out that Russia thing. And this seems encouraging, right? However, Netflix has stated they expect more destruction in the second quarter, guiding for a loss of 2 million subscribers in the next quarter. That is the concerning part. And that's what's got the market confused. If you look at the numbers and you back out Russia and you see, okay, of course, there's a deceleration in growth.

We've known Netflix has had a deceleration in growth for a while. Of course, they're reaching that maturation in their growth curve. But it's more so that they're saying, hey, look, it's going to get worse. And even worse than that, they're hinting at that they're probably going to start running ads. The story got pretty ugly pretty quickly. And the price of the stock reflects that. There's an old adage in technology, Simon. It goes, if you're around long enough, eventually you sell ads. And that is coming true. Yeah, there's a lot of things that come to mind here. Just I didn't know we would be talking about it during the podcast because obviously I wasn't sure if we would talk about it on this one or that Thursday release but

that's fine and I mostly only saw the headlines because I was working today first thing that comes to mind though is you know is this just due because they had a lot of pull forward growth because of the pandemic and now it's just slowing down so that's the first thing something to keep in mind which you know if that's the case then it's not too alarming but I also know that they mentioned something about people password sharing and looking to potentially crack down on that so people would not be allowed and would force them to get a Netflix subscription I think personally they have to to get a Netflix subscription. I think, personally, they have to be careful with that. I mean, I think it's not a bad idea per se, but

you know, a lot of people may be sharing those accounts and just splitting the costs. So whether all of these actually translate into new subscribers, I don't know. The third part here is, I think it's probably a sign that competition is intensifying in the space because for years when they had amazing growth, Disney Plus was not there we did in our household is we actually set a limit in terms of what we spend on streaming memberships. So we have a $50 cap and then we just rotate. So if a month we're kind of watching more Crave or more Netflix, we'll actually just cancel the ones we're not watching. And as long as we stay under that threshold. And the only reason we haven't canceled Netflix is because we share our account with our parents.

That's the only reason. Because we've had months where we wanted to cancel it and we didn't for that sole reason. So I think it just comes back to this. I think they have to be a little careful. And the last thing is, did they increase prices too quickly? Yeah, I think that's a valid question. So there's a lot of questions if you're a Netflix shareholders.

These are just the ones that came to mind for me just on top of my head. I did not prepare this. I'm sure, like, I don't know which way it's going to go. I have no idea if you have some thoughts on that, Braden, but I think it's definitely one if you own, I would say keep a close eye on it and you want to see where it goes in the next year. Yeah, I think that that's probably a decent idea. And like we talked about in the first segment, there's no point of just knee-jerk reaction buying and selling and trading a stock you own. You got to think about this critically. Now, this is kind of like a make or break year

in this story because you touched on some interesting things, which are, okay, is pricing a problem? I don't think so. I'm going to go with, I don't think so. Although I know people are stretched a little bit with inflation and some of this discretionary spend. I don't see people canceling Netflix. I think it's extremely sticky. I don't even think it's discretionary spend for most households at this point. It's a staple. So I don't think it's that. The competition part is huge though. And unit economics continue to suck miserably for this business. I mean, they have now reached a scale that operating leverage obviously exists. I mean, the business does churn lots of cash. But I mean, you look at the cost of content creation, they just instantly

depreciate it. It's one you have to look at their statements with a close eye when it comes to their financial statements, because it is extremely capital intensive to continue to run this content machine. Now, that content machine has given them competitive advantages over many of their competitors. In fact, like their Netflix studio dominates like almost all of the awards ceremonies they have all around the world for new content. And so they've clearly done that. The Netflix production studio is, you know, the biggest in the world at this point.

Moving forward, the question around competition continues to be one that is coming to the forefront. I do think the stock looks pretty cheap here. It doesn't mean I'm going to enter a position, but it does look quite objectively cheap if you're willing to look past a few quarters and hope they turn it around. But again, that's a bet on Reed Hastings and the management team. I think it's a decent bet to make because they're rock stars, but it is a thesis changing and building next few quarters for them. Yeah, I think the only thing for me where they have a bit of a disadvantage is compared to Disney,

because as much as Netflix has produced a lot of great content over the past few years, Disney just has intellectual properties that they know if they produce a Star Wars movie or, you know, whatever other franchise they have, there's a very high probability that it's going to be a hit. I think Netflix also has some of these properties, but definitely not to the extent of Disney. And I think that's where they, you know, I think they tend to throw a lot of stuff at the wall if they want to create a new series. And you know, what happens with those is sometimes, you know, you spend money on something that doesn't really move the needle. And I think that's where Disney has a bit of an advantage. But I'm with you, I wouldn't panic here, it'll just be interesting how it evolves

into the next year or so for Netflix. Now, I am seeing these Netflix results, what people are saying is a sign of weakness in the consumer. Investors looking at some sort of half decent signal going into the first quarter earnings. Doomsday type pessimism sells the paper. It sells the headlines and it sells eyeballs on TV. So when you see recession coming and big red letters type headlines all over the media outlets and the internet, it's just a reminder that a broken clock is right twice every day. So of course a recession is coming. There's always a recession coming. I hate when people say there's a recession coming because of course a recession is coming. There's always a recession coming. I hate when people say there's a recession coming because of course there's a recession coming. What they don't tell you is that they don't know when it's going to happen, how bad it's

going to be, and how long it's going to persist. It's all macro speculation, which is rarely ever correct. So when you do hear that a recession is coming, of course it is. Recessions are normal. They're healthy parts of economic expansion and contraction and part of short-term and long-term credit cycles. That is nothing new. That's basic. That's 101. For investors that are looking out more than a shorter time horizon that a lot of these headlines are looking, you just have a lot less to worry about when your dollar cost averaging continue to invest through all the cycles.

Investors who are looking into right now acquire businesses. They are net buyers of stocks. You should like the word recession, even though it's an ugly one. That's just the reality of it because that's where long-term wealth is actually built. So when you hear a recession's coming, just respond with, of course it is. It's the completely normal parts of economic contraction, expansion, and short-term and long-term credit cycles. It's absolutely nothing new. Yeah. And the funny thing about that is we won't know until after the fact. So that's always how it happens. Yeah. Because the data, you know, after it happens, it's like, oh, we were actually in a recession during these two, three, four quarters, whatever it was. You always know after the fact. Yeah. Because if they tell you a recession's

coming, well, I agree. Of course. You'd say that with 100% accuracy if your time horizon is forever. You just don't know how long it's going to be, how bad it's going to be, and when it's going to happen. All of those three variables are complete guesses, which are rarely ever true. Yeah, exactly. Now, moving on to a tweet for someone that i follow his name is charlie bilello and he had a tweet about the best performing s&p 500 stocks in the past 5 10 15 and 20 years and i thought it would be great to just discuss this on a segment because it's really interesting to see some of the names that are there so i won won't go through all the names. I'll just read the top five names for each of the periods. So for the last five years, the top five names in phase energy, solar edge technologies, Tesla, Etsy, NVIDIA. Those are like all top three were like clean tech companies, which is interesting.

Yeah. Yeah. and we've seen some big gains in that sector and now for the last 10 year tesla is number one nvidia two dexcom three and phase energy monolithic power systems number five two of them i have never heard about before, but I don't know about you. Well, I know the top four. Yeah. Okay. So there you go. And then the 15-year mark, Netflix number one, Amazon, Dexcom, Nvidia, Apple.

And then the last 20 years, this one is interesting. Monster Beverage, Apple, Tractor Supply, Amazon, and then Old Dominion Freightline Incorporated. Wow. Yeah, it's very interesting to look at it. And the really interesting here is that NVIDIA is the only name, unless I missed one, it's the only name that appears during all four intervals in the top 20 lists. There's a few other names that come up three out of four times, including Apple and Amazon. And Domino's. Domino's, yeah. Okay. Domino's is, I guess, only in the fifth. Couple of times.

Yeah, okay. Never mind. But still, that's been a sneaky, sneaky good stock. Yeah, exactly. You can make a case. Domino's is actually not really a pizza company. It's more of a technology company, the way they've actually developed their app and they were at the forefront. But the one that I'm most interested in is Monster Beverage because it's really impressive. I mean, they had a whopping 116,374% return in the last 20 years can you imagine that holy crap yeah and they're actually they've been publicly listed since 1990 if i remember correctly because i did some research quickly but i didn't put in my notes here and they were founded under another name I think in the 1930s and then it evolved over time

which I did not know either but what's even more fascinating with Monster Beverage is that it does not appear on any other list so really what that tells me is it started that 20-year period from a very low number and grew rapidly during the 15 to 20 year time frame if we look back from today so you can actually see it pretty easily just by looking at the chart and the price is about 20 years ago and i think it was trading for pennies i don't know if they had stock splits in the meantime and whatnot but you can really see that it started a super low base and then over time it just compounded. So if you really held on, you would see that it's done quite well and you'd be experiencing these great returns. It's still done very well over the past five years with the compound annual growth rate over 11%.

The last thing I wanted to mention here is there are two things that come to mind. First of all, compounding can lead to amazing returns if you invest in a good company and you hold it. Because look at the Monster Beverage chart and there were a lot of swings there as well. So you needed to be able to hold it during that period of time to have those great returns. And it's really rare to see companies having some of the best returns over multiple time periods. That reminds me of something that Buffett said a few years ago during one of the Berkshire presentation. I'm not sure if it was the first one when the pandemic started or the second one where he had like his little old school slides and he was showing you know the top market cap for the snp 500 like 20 or 30 years ago whatever it was and then compared to today

and there was like maybe one or two names there i think he was showing the top 20 companies by market cap in the 80s and not one of them existed in the top 20 today right that's it okay yeah something like that. Anyways, I'm memory, you know. That's okay. The Berkshire meeting's next week, by the way, as a side note. Yeah. Oh, yeah, that's right.

Damn, we should go, man. Yeah, next year. We should book a last minute ticket. Next year, Charlie will be 100. We'll go for that one. Yeah, exactly. Celebrate his birthday. And I'm sure he'll say, maybe he'll turn around on Bitcoin by then.

Who knows? Oh, I doubt it. He'll be 100 and more ruthless than ever. his birthday and i'm sure he'll say maybe he'll turn around on bitcoin by then who knows oh i doubt it he'll be a hundred and more ruthless than ever just a quick thought here okay so the top six i'm cherry picking the sixth one because i love intuitive surgical and it's number six on the top 20 monster apple tractor supply co amazon old dominion and intuitive surgical then you get sba Communications, NVIDIA, all of those mega winners, including Monster Beverage Co. They all started as small caps. You need a tiny base of market cap to have these extraordinary returns. Now the unicorns, the greatest businesses ever, reach like 100 billion in market cap

privately before they even freaking IPO, which kind of sucks. But I mean, that's okay too. That is one comment I had here because a lot of those companies have had started off super small bases to have that kind of ridiculous run. This reminds me of reading the book 100 Baggers. And it goes over looking at some of the biggest winners and recognizing trends. The important thing to remember and that what the book touches on a lot is these mega winners have created life-changing wealth. But during that time have seen huge swings, massive volatility, large drawdowns, painful periods, and the market and the public thinking that the stock was left for dead in multiple situations. Look at Netflix. I'm talking about Netflix today. I mean, this was the dominator. It was the best

performing stock of the last 10 years, maybe not anymore. And today the world hates it, right? And so the stock is down 68% from the high, down 37% today. And you had it here, the best performing stock in the 15 year category. So this is a perfect analogy of what I'm talking about, right? Maybe it's not anymore after the drop. Yeah, no, it's probably not. Amazon's probably taken the throne after it's down 37%. But it's a perfect explanation for the volatility you can expect. Let's use another example. I mean, Apple is the second best performing stock over the last 20 years, just behind

good old Monster Beverage. Apple lost half of its value in 2002. It lost half its value again in 2008. And obviously going up a bunch between these periods, of course, or else it would be a zero. It lost 42% in 2012. It had a 20% drawdown in 2015, more than 30% drawdown in 2018. And then it lost the 20% of its value in 2020 when the rest of the market fell. During that time, if you held

through all of it, Simone, you made 395 times your money in that period. In those just 20 years, if you've held this since IPO, I mean, God, if you've held this since IPO, you're a trillionaire. But this is not an exception. This is what I'm trying to say. This me handpicking Apple is not an exception to the rule. This is the story we see time and time again for all of these mega winners. Volatility is part of the story. It's not a bug. In software, we'll say, volatility is not a bug. It's an actual feature. It's by design, and you should come to expect it. Yeah, yeah, exactly. That's really well put. And it's easy to look back at these companies and say, oh, wow, like what's the next Amazon? What's the next Apple or whatnot? But keep in mind, you also have to have the temperament to

hold them when you're experiencing these drawdowns like Brayden just mentioned. I mean, it's much easier to look at 2020 hindsight and just figure, oh, that, you know, I should have done that. It's easy. I think not a lot of people are sitting on those gains because it's much easier said than done. Oh, it's a lot easier said than done, especially when you're, you know, you lose half the value of the stock and everyone tells you it's left for dead, right? Yeah, exactly. And I mentioned it earlier doing my portfolio returns.

I mean, I experienced, you know, back to back months of about like 14% drawdown. So if you had like 100k in your portfolio, you just saw probably around like $25,000 just, you know, wipe out in those two months. So it's not easy, but I think it helps reminding yourself, at least for me, that I'm a long term investor. So these months don't matter. It's helpful for us to go through these scenarios too, right? Because if you're new to the game and you've seen nothing but gains, some bad few quarters in the stock market will punch you in the face and you'll feel stupid. But the reality is you shouldn't. You know, happens all the time. The number does not always go up, unfortunately.

you know, happens all the time. The number does not always go up, unfortunately. 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. Now moving on for how to approach bad news for a

company that you own. So this relates a little bit from the question we started the episode with that we got from Tina. The first thing I'll do is I don't panic. The worst thing you can do is just panic sell. Bad news can come in many, many forms. It could be losing subscribers like we just mentioned about Netflix. It could be a wider than expected loss. It could be missed earnings. It could be a short report. It could be guidance that's a little not as rosy as the market expected.

It could be a well-respected CEO or someone from the c-suite suddenly leaving it could be losing a major client I mean there's tons of different bad news that can come out for business that you own the next thing I want to do is I want to understand what the bad news means for the business and notice how I use business here, not stock. The reality is just bad news headlines will happen all the time to all businesses, even the very best ones. Apple and Google have had antitrust issues

in the past years. Microsoft had to write off major acquisitions in the past decade that we touched on during our biggest tech acquisitions. And it could also be a growth stocks with slowing growth, but still growing very quickly. There's a few things I'll look and try to understand. First, is the bad news important or just a headline grabber? For example, Miss Analyst Estimate is a great example of just a headline grabber in my opinion. If the bad news

is important, does it impact a major part of the business or only a small not important part of the business? And I think a really good example here is Lululemon and their mirror acquisition. You can definitely make a case that was not the best acquisition at this point. Maybe it'll turn around, but it's also a super tiny part of their business. And honestly, as a shareholder, if they were to write it off, it's not great. You don't want to be wasting money like that, but it's also not the end of the world. If the news is important and has a material impact on the business, is this more of a short-term impact or long-term impact? If's short-term it could present a

buying opportunity since i have a long-term mindset think of a business for example and i know brayden you'll relate to that that goes from a one-time purchase of their software to a sas model you could see multiple years of slow revenue growth or even decline in sales during that transition period to then see sales rapidly pick up down the line and having that reoccurring revenue. So it's always important to keep that in mind and looking at the bigger picture. And if I determine that the news is important and it could impact their business negatively long term then this is when I'll generally decide to sell. I may have had the right idea when I bought the stock or when I bought the company but things have materially changed and the future long-term prospects are no longer the same. I mean Blockbuster would have been a good example here. Once streaming and illegal downloads started becoming more and more prevalent,

it was probably a good sign for investors if they were aware of this, that it might be a good time to sell Blockbuster because obviously they were still operating. They didn't file for bankruptcy down the line, but I think it was a sign that things were changing. So these are just things that I'll ask myself. And I think the most important here is I do not make a knee jerk reaction. Even if I decide to sell a business, I'll usually wait at least a couple quarters, even after the bad news to make that decision. I want to make sure, you know, it actually is trending in the wrong way before I decide to sell.

You just laid out four really good points. And my mind is spinning the whole time you were saying them. So I'm going to try to comment on each one of them here. First, you said news headlining like analyst misses or like they missed on earnings. It's like, okay, what does that even mean? One, you're comparing some analyst's estimate to what they think the business can do for a quarter. May or may not be relevant. You got to figure that out, but chances are it's really not that important in the grand scheme of things. You mentioned the Lululemon thing and the acquisition of Mirror. And if it's

a fail, you're investing in such a good business that they can afford to make a mistake, which is an interesting thing, right? It's like the Google incinerating money in other bets and no one gives a crap. I love it. And then I was thinking of the Autodesk example there with the SaaS model, like, dude, the financials looked really ugly from 2016 to 2018, maybe even 2015 or like earlier. It didn't look good, but they were part of doing a transition and you had to understand what was going on. And then the thesis change, right? The actual thesis change. This is important because you said, okay, I'm noticing that there's a thesis change but i'm also not making any knee-jerk reactions in my portfolio dude i just realized this episode is

flowing really well in terms of like the topics we're talking about they all kind of work together this is really key and i want to touch on this and use even just a personal example. Do you remember last year when Visa and MasterCard were said left for dead because of buy now, pay later? They're like, oh, all of these firms are doing buy now, pay later. And Visa and MasterCard are dead. The rails are dead. No one's going to use them anymore. Blah, blah, blah, blah, blah. I saw the stock. Oh my God, panic. Square's buying a firm. You're all screwed type of thing. That was the sentiment. The reality was, okay, a lot of that transaction volume is going through the rails. So one, this is me knowing the business and two, not making any reactions because the quarter comes out and it turns out transaction volume is at all-time highs. Now, if something significantly changes, if we move to a different currency that is not revolving around the rails, I reserve the right to change my mind or understand new

facts presented, right? Like that's the important part. If there is a decentralized currency that takes over, goes around the rails and leaves the payment rails as the blockbusters of the 2020s, I have to pay attention to that and notice that there could be an actual thesis change. But until I see that, until I'm proven wrong, I don't have to make any decisions. I'm just going to buy and hold great businesses and monitor them, right? It's not buy, hold, and do nothing. Although I like saying that and it's a little sexier. It's buy, hold, don't physically do anything, don't trade,

but monitor, right? That's the difference. Yeah, exactly. And typically, I mean, you'll have time, right? It's not like you have to sell within a day. If not, your whole investment is gone. Maybe you should have sold a little earlier when you've really have come to that conclusion. But for the most part, I mean, you'll have some time. And I think as a general rule, at least for me, it's better to take your time than making a knee jerk reaction. Almost every successful and experienced investor I have talked to that manages money professionally or has been done exceptionally well, they all say the more costly mistakes in their career have been selling too early because those are the ones that they

actually had like they missed out on opportunities to kind of correct all their wrongs in terms of their career is actually selling too early. And that's important, right? Like, I mean, selling too early sucks. And it's like what Munger says, just don't sell, don't interrupt compounding unnecessarily. That's the key, right? You're not like unnecessarily making trades. And it goes back to this first question about Tina asking about the big tech stocks. Sounds to me like selling Microsoft and Google is unnecessarily interrupting compounding. That's what I think personally. Yeah.

Yeah, I know. That's a good point. All right. Thanks so much for listening, folks. We really appreciate you. Again, that's two episodes a week. If you're new here, if you're not new here, share it with a friend so that we can get more people

that are new here. We love the new folks. And thanks so much for listening. If you have not checked out Stratosphere, that is getstockmarket.com, G-E-T, stockmarket.com. You go there, you will get 10 years of analytics, 10 years of financial statements on the companies you want to search up. You type in any ticker, the data just shows up. I really appreciate you check it out so I can stop eating dirt and ramen, as Simon knows.

Really appreciate that and check it out. I spend all my time building it so that'd be great nice get stock market.com anything else simone you excited for earnings season it's coming up yeah yeah excited for earnings season always some good content when we do our earnings roundups so it's much easier to find some businesses obviously we don't have to scrape the barrel for ideas but there's been a lot of news lately. So I think, you know, good old Elon has picked us up when there's no earnings to be released. Yeah. Thank God for Elon over the last two weeks. There's nothing else to talk about. Speaking of Elon, Tesla just reported their earnings in the last like 20 minutes. So we'll

catch up on that on the earnings release in a week's time. So stay tuned and that'll be part of next week's discussion. Thanks so much for listening. 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. 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.