The Canadian Investor - The Top 10 Bought and Sold Stocks by Canadians in September

Episode Date: October 16, 2023

In this episode, we go over the most bought, sold and held stocks by Canadians according to the TD direct investing index. We talk about a mindset for selling and stocks on our radar. Symbols of stocks & ETF discussed: O, ENB.TO, WEED.TO, TSLA, SHOP, BCE.TO, NVDA, T.TO, AAPL, BNS.TO, TD.TO, SU.TO, ACB.TO, AMZN, CM.TO, NFLX, WISE, ADYEN 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. TD investor IndexSee 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. Welcome in to the show. My name is Brayden Dennis, as always joined by the distinguished Simon Belanger. We have a full slate for you today. Simon's going to go over the TD, Direct Investing Index, seeing what the

sentiment is around certain stocks, what Canadians are buying and selling. I'm going to talk about selling, revisiting selling, and how a framework I personally use in my own strategy to make selling decisions easier. And then we're going to round out with a long overdue stocks on our watch list presented by our friends at EQ Bank. So we're both going to talk, you're going to talk about one stock, and I'm actually going to talk about two European payment stocks that I like. And we'll go from there. So kick us off. What do you got first? Yeah. So the TD Direct Investing investing index for those who don't remember may have missed past episodes so td comes out with this report every month because they have their

td direct investing um and it basically shows whether you know their investors are bearish bullish or kind of neutral goes over the most bought stocks, the most sold stock, and the most widely held stock. And you can even drill down. So I'll add the link into the show notes, but it's kind of nice. You can drill down by age groups, even asset class. So I find it's a pretty useful report. I mean, TD Direct Investing, their fees are not the cheapest, but I think they're relatively, TD Direct Investing, their fees are not the cheapest, but I think they're relatively, they're pretty big in terms of direct investing. So I think the data is still pretty useful to look at as a decent sample. Now, to start off here, so the index here, when they come out with the index, they'll usually, it'll be between a range of minus 100 to

100, where zero is neutral, 100 is the maximum bullishness, and minus 100 is the maximum bearishment on this scale. Obviously, take this with a grain of salt, but the four main components they look at are investors buying more or selling more, are investors buying more on a rising market, are investors buying more at the top of the market or during dips, and our investors retreating to less risky investment. And to get some additional context, let's look back to March, how it's fared. And the reason I took March, you may know why. The main reason is because SVP, so Silicon Valley Bank, we saw the regional banks in distress in the US was all over the news,

a lot of bearishness around that time too. So I just wanted to compare it to what we're seeing right now. So March, the index was minus 20, April minus 11, May minus 18, June plus 19, July plus one, which let's just say it was neutral in July, one which let's just say was neutral in july august minus 23 and september minus 31 so what really we're seeing here is i think investors on the platform definitely influenced by news and events because we can pinpoint you know you know some of the events like i mentioned svb back then in the spring early spring but also now we're seeing some bearishness, especially with higher rates being higher for longer, some economic data not coming as good as people expected.

And then there was a bit more bullishness late spring, early summer, when more and more of the mainstream financial media were saying that we might be heading towards a soft landing. So really, the index, in my view, kind of really follows the narrative in terms of what is in the mainstream media. Before I continue, do you kind of agree with that? It's kind of a reflection of how people are thinking. Or, you know, the vitamin D theory is correct here because we sure are happier during the warmer months there and it wasn't the hottest august so uh you know this is this looks like uh the weather here with uh march

through september of course that's probably not it but uh you gotta you gotta think there's some correlation there between canadians and the warm weather there and feeling good in the summer. Yeah. And typically in the summer, there's less movements mainly because a lot of people in financial markets obviously are on vacation. So you tend to see the market, more movements happening before and after. In September, I think it's notoriously a poor performing month, not to make any sense out of that and draw any conclusion, but I'm pretty sure it's one of the most worst performing months of all time when you look at returns on a monthly basis. I just remember on top of my head. But having said that, it's still just interesting to see that change in sentiment. Now, in terms of the most bought and sold stocks, it's quite, it's a bit of a head

scratcher. So in terms of the bought stocks here, have you had a look at the list, Brayden? Just curious. No, I'm looking right now for the first time. You're getting my live reaction. Yeah. So this is September. So the first one that comes to mind has to be, well, number one on the list, which is at the top spot, which is a bit alarming and shows that a lot of investors are going after the yield. I mean, without rehashing the episode I had with Mikey Rue, feel free to go back to that if you want to learn more about Enbridge and some of the potential warning signs. I mean, it's currently yielding 8.23%, just took on some massive debt. I mean, it's currently yielding 8.23%, just took on some massive debt. Well, we'll be taking on massive debt once the acquisition closes for, I believe it's Dominion Energy that they just offered to buy. So, I don't know.

I feel like people are- Isn't that like $12 billion? Or what was the sticker price? Yeah, it's somewhere around there. $12 or $14 when you include that or something like that in u.s dollars yeah yeah holy smokes yeah a big acquisition and anbridge already has a lot of debt but all that to say clearly shows that people are i think canadians love their dividend payer and are going after yield it's up from the third spot so at number one the second one is eye popping which is canopy growth which is up from number 30 to number two um i i'm not sure there's any explanations outside of them divesting because

that was in september so the wholeSteel bankruptcy, that could be it. Or maybe it's just a low price. You had me at restatement and BioSteel actually losing tons of money and probably going to bankruptcy. You had me at that. Buy. I'll buy it. Yeah. I mean, it could be that.

Or it's the fact that it's trading essentially a penny stock now. It's around a dollar a share. So I think there might be just a lot of traders. When I actually, when I did the filter to look at, because they have a trader definition and also long-term holder, and trader is people who trade more than 30 times in three months. And Canopy Growth was actually up there too on that metric. So I'm assuming it's also a lot of people just trading because it is a penny stock.

But I definitely found that interesting. Anything else of note before I go through the list that you see here? My only thought is, look, we do this segment. We're not sponsored by TD Bank. So I could say this. I don't care. Why are you trading on a platform that costs you $10 a trade? Use something else.

That makes no sense to me. Why people are doing active trading for $10 a trade. It makes no sense. Yeah, hopefully they have a lot of money. Some of the usual names here. Tesla, number three down from number one, Shopify on change at number four, BCE up from number 10, Nvidia number six down from number two, Telus number seven down from number five, Apple no change at eight, Bank of Nova Scotia number nine down from number six,

and TD down from number seven. So I mean, some familiar names except for Canopy Growth, I would say, again, Canadians, I think it's pretty constant here. Canadians love their stocks, their dividend paying stocks. And then the most sold, which makes me think why people are actually trading Canopy Growth is because they're number two on that list and up from number 25 for the most sold. So I think that probably says it right there. Any other thoughts on that list? And I'll just rifle through it quickly. I look at a couple of these names and I feel like they fit the definition of a group or a type of stock that I really try to avoid, which I call battleground stocks. Battleground stocks are very popular at the time.

They typically have tons of trading volume. They typically have a lot of conflicting news around them, both on the upside, on the downside. You'll see them as most bought and most sold. So very traded. Tesla has always been kind of one of these battleground stocks. Nvidia is a battleground stock right now. And the reason that I try to avoid them is I feel like it's going to be very difficult to get them right, both for the upside and on the downside. Everyone has an opinion on them. They're typically kind of detached from valuation temporarily, which could be good or bad, depending on what side of the trade you're on.

And they're what I call battleground stocks. I'm making a note here to do a segment about battleground stocks. And it's just a type of name I try to avoid because I can be right or I can be wrong about them, but I prefer to be right or wrong about them from the sideline and not as a shareholder. Yeah. And they're usually quite volatile too. And I would say they're very attractive from an options trading perspective because the more there's volatility, the more you can make big profits or losses, obviously, when trading options. I know Tesla is notoriously popular from, when trading options. I think those are, I know Tesla is notoriously popular from an options trading perspective. Now, just to go down the list

quickly, Tesla, InOrder, Tesla, Canopy, Shopify, Nvidia, TD, Suncor, Enbridge, Apple, Aurora Cannabis, actually up from, in terms of most sold, from number 100, which is quite a jump here. And Amazon rounds out the top 10. And then for the most held, I won't go into much detail here, but just to say, I'll just say the name of the top seven and tell me what comes to mind, Brayden. So in order, TD, Enbridge, Bank of Nova Scotia, BC, Telusus royal bank ag cibc alphanage of next three so apple sun core and tesla what comes to mind for the top seven it's the same as it's the same as every month it's huge yielders tesla and apple every time yeah it's it's huge huge yielders tesla and apple yeah it's crazy because single month the top seven literally i think that the lowest yield i believe is td and potentially

royal bank around four and a half percent i think so that's the lowest yield so it kind of gives you an idea i mean we've said it time and time and time again, Canadians love their home country bias, but also their high dividend paying stocks. And that's definitely a reminder every time we do this here. Be very careful on social media and forums in Canada when it comes to investing. Their Facebook pages, apps, Twitter, social media, 95%, and this is anecdotal, 95% of the discussions are amateur investors only seeking high dividend yields and only talking about high dividend yields like that is the only way to invest. If you listen to this show, you know that this is a trap. It's a trap. Just be very wary about your kind of like information diet with this stuff because it's very clear that it's

pervasive into how people are actually investing their own money from a diy perspective yeah i'll uh i'll disagree i'll say it's 50 percent high yield and 50 penny stocks that's probably which i'm half kidding right because i know you're probably right i know what you're talking about and it seems like it adds the 15 to 20 dividend yield and then the penny stock at like 25 cents a pop um that seemed to be it's like guys you're investing in businesses yeah what are you doing well people just think you know oh if it the stock only remains flat i'm getting 15 i mean that's great returns. I think it's a guaranteed 15% return. Exactly. And then the penny stock, it's the good old, like, you know, if it just doubles to 50 cents, they just look at the actual dollar price. You know, it's all this time, but unfortunately,

hopefully when they do get burned, they will learn the lesson and not do it after. I mean, there's nothing wrong with doing mistakes as long as you don't repeat them over and over. So that's it for the segment. I do like doing that because this segment, because it just gives- It's the blind leading the blind on these forums. Pretty much. Yeah. That's what it is. Yeah. 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. So not so long ago, self-directed investors caught wind of the power

of low-cost index investing. Once just a secret for the personal finance gurus is now common knowledge for Canadians, And we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world. Well, folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global

stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective. Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Anyways, enough on the TD index. Let's talk about the easiest way to know when to sell is to know why you bought. That's the name of your next segment. It is. I need a better, catchier segment for this.

Just rolls off the tongue. It's a bit of a word salad, isn't it? The easiest note, especially when you're coming off a cold like I am, it's really like, oh man, it's hard. By the end of the segment, we'll have a catchy catchphrase and turn it into a blog post or also we'll just have this word salad here. The easiest way to know when to sell is to know why you bought. So selling is a much more difficult operation in portfolio management than buying. Buying is easy, selling is hard. And it's talked about very little. And even in the context of this podcast, because we're learning how to invest, we're talking about competitive advantages, which businesses we think are great. And we really don't sell very often, if ever,

and we really don't sell very often if ever. So it doesn't come up that often. And so I've written and discussed this on the podcast before on when I sell the decisions I go through and I'm going to revisit it. So tune in next Monday episode, which is going to be recorded next week and released on October 23rd. And I'm going to go through a several point checklist of things to consider on the next Monday release after this is released. But before that, I wanted to talk about flipping that on its head and share my framework for something I do when I buy a stock. And that helps me sell. And when I started doing this, it was one of those things where I thought, why wasn't I doing this before? This is kind of like an investment for a long time. There's things that I've picked up along the way and gone,

10 years in, and I'm like, what was I doing for the last 10 years by not doing this? It feels like I just made this very difficult decision-making process a lot easier for me. And so my view and confidence selling positions increased greatly when I started doing this. In fact, I have positions where I own now where I didn't do this when I bought them and I'm going back through them. And I noticeably feel different about my confidence level, but I'm doing it retroactively. So it's all good. And before I get to what it is, the reason it's so helpful for investors is because the market's keeping score every day of every price, every security. It's making you think that you have to react or feel a certain

way, behavioral biases, and investor psychology kicks in. This, what I do now, helps me keep grounded and track the actual business performance and not just the stock price. Because prices act very irrationally. And it's your job to remain rational. So you have to think, there's this mechanism that's telling me I have to act irrational. The whole industry around news and finance is made to make me act very irrationally. The trading platforms send me alerts to make me think more irrationally because they make money on trades. Follow the incentives. Follow the incentives. Your job is to remain rational here. So here's what I do. Two things. One is qualitative and one is quantitative. Quantitative-wise,

quantitative quantitative wise a case of some numbers wise i write down and track just one to three numbers or kpis for the business beside each name in my spreadsheet and monitor just those numbers i mean i can i can monitor more but i'm making sure that every quarter every every every you know business result that comes out, I'm monitoring these names. It is the original inception around why we started doing it at Stratosphere because we noticed there was no platform doing it for us. So it was like, if I'm tracking Spotify and I only care about Spotify subscribers, I want to track that easily, so let's aggregate them at scale. And so just one to three business KPIs, that's not earnings per share. It might not even be revenue. Those are the numbers that are going to come out in the press release. It's going to be in the headlines.

They're going to be buried in their reports. And guess what? They are derived from the business KPIs that actually matter. And I'm going to go into example here in a second. I'll make it a little bit easier to understand. Qualitative wise, I write down just one, two, three. So it could just be one for the numbers. It could just be one for the quality wise. And I'm going to write down one to three of their competitive advantages that I think that are most important to monitor. Okay.

I'm going to use Netflix here as an example, because it's easy to follow. It's not one I own, but it's simple for the podcast because most people listening are familiar with the business, if not actually customers as well. So KPIs, simple as can be. I would pick just two. Total net paid subscribers, or members as they call it, people with memberships, the number of memberships to Netflix, and the average revenue per membership. So here on Stratosphere, I click both of those metrics, and I see average revenue per membership go up. So since December of 19, here in the United States and Canada region,

it's gone from $13.20 to $16. So that's me verifying that they are flexing pricing power. One of the biggest concerns in the investment thesis for Netflix is can they continue to flex pricing power? If this number keeps going up, that matches my thesis. And then two, nothing else matters about Netflix other than subscriber ads. Nothing else matters. Like, nothing else matters. Everything else that they do is to increase that KPI. You know, they can invest in content, they can improve their marketing,

they can do this and they can do that. That's all for the mission of increasing total net subscribers. Quality wise, I think I picked a poor example because I'm not sure about their competitive advantages and it's why I don't own the stock. But perhaps content scale is certainly one. IP that they're building, the integrations with the hardware being the defracto streaming service, their data advantage that they have on all the members, but what people like in all the regions being global and having this huge pipeline for the ability to create hits, to keep people glued to it. These are certainly things that increases Netflix's power and competitive advantages. These are just off the top of my head. I'm not a shareholder for the reasons that I can't answer

this well. So I would think to myself, how can I monitor that? Well, I'd monitor content spend. I'd monitor catalog releases. I'd monitor anecdotally original content. I might think about doing that quantitatively by monitoring how the content is performing at award shows. Is that getting better or worse? And so there are so many things in financial statements, so many things on these news press releases, and I've got it down to really three things that I'm going to follow for this business. And the more you know about the business, the easier it is to actually simplify it. It's like, you know, if you want to learn something really well, learn how to teach it because then you have to know how to simplify concepts. And's like, you know, if you want to learn something really well, learn how to teach

it because then you have to know how to simplify concepts. And this teaches you to how to simplify, how to think about owning this business. And that's how I'd approach this for Netflix. Simple, easy. I'd track subscribers. I'd track ARPU, average per user. If those fade, you know, that means the customers don't like the content, the competition is difficult, and they have no pricing power if those two KPIs fade. And if they execute well, the business and the share price will be rewarded. Along the way, it's going to be volatile on the stock price. And that's why I have something to ground me and refer back to in my original buy thesis. to in my original buy thesis. And if that is compromised, my sell decisions become a lot easier. And that's why selling becomes a lot easier. If you think about this from day one

as a shareholder, as when you buy the stock, because Netflix, remember in 2022, when the stock fell 36% on their Q2 results last year, in one day, you know, it's a 250 billion market cap company at the time. That's not normal. And so everyone ran for the exit because Netflix is doomed. Netflix is dead. You know, everyone will say that when a stock is down 36% in one day, you look at the results and you go, did ARPU increase and did subscribers increase? In that case, subscribers were flat, but that's because they had backed out the entire Russia business. Ex-Russia subscribers increased. Okay. So I go, yes, check. Yes, check. Move on with my day. And if you moved on with your day, I'm pretty sure it's been good since.

No, I think that's definitely a good way, not too complicated, I think, to decide, or at least warrant a deeper dive into the business you own. Maybe you do track a few KPIs regularly, and then you're starting to see a trend you don't like, then maybe you start listening to earnings calls more closely every quarter. And just listen to what management has to say the causes what plan they have. And then if it's not to your satisfaction, then you go ahead and sell it that might be like, to me, I would see it as like, kind of a bit of an alarm. And you have to dig a bit more and then if things actually you know reflect that alarm what you're seeing in the kpis then yes i would

go ahead and sell the business yeah yeah it's got a couple quarters on the leash and you're like okay this is you know what you don't want to overreact to one quarter or even one year. But if things are not going the way that you set out in your investment thesis, then admitting you're wrong and moving on is fine. It happens all the time to even the best investors in the world. Yep, well put. 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. So not so long ago, self-directed investors caught wind of the power of low-cost index investing. Once just a secret for the

personal finance gurus is now common knowledge for Canadians, and we are better for it. When BMO ETFs reached out to work with the podcast, I honestly was not prepared for what I was about to see because the lineup of ETFs has everything I was looking for. Low fees, an incredibly robust suite, and truly something for every investor. And here we are with this iconic Canadian brand in the asset management world, while folks online are regularly discussing and buying ETF tickers from asset managers in the US. Let's just look at ZEQT, for example, the BMO All Equity ETF. One single ETF, you get globally diversified equities. So easy way for Canadians to get global stock exposure with one ticker. Keeps it simple yet incredibly low cost and effective.

Very impressed with what BMO has built in their ETF business. And if you are an index investor and haven't checked out their listings, I highly recommend it. I bet you'll be as pleasantly surprised as I was that BMO, the Canadian bank is delivering these amazing ETF products. Please check out the link in the description of today's episode for full disclaimers and more information. Are we going to stockss on our Watchlist? Yeah, let's do it. Kick us off here. You got a name here.

Yeah. So Stocks on our Watchlist presented by our great sponsor, EQ Bank. So the one I did, I ended up doing a mini deep dive on it, but it won't be too long. I'll keep it under 10 minutes for sure. Now, the company I took, I think I've mentioned it before, I believe so. It's Realty Income, ticker O. It's listed in the US. It is a REIT. They focus on freestanding single unit commercial properties leased to high quality clients, really in the retail space. That's what they focus on. Is this a Berkshire business? Is this a Buffett stock, isn't it? Or am I off?

I think he had Store Capital Group, which is similar. I'm not sure if he had realty income. I mean, I wouldn't be surprised. It's definitely, it's been forever. I mean, it's been around since 1994 on the public markets. So they typically have long-term triple net lease agreements in excess of 10 years. So for those not familiar with REITs, triple net leases is where the tenant is responsible for the base rent, property taxes, building insurance, utilities, as well as other operating and maintenance costs. The landlord, in this case, Realty Income, is really only responsible for structural repairs of the building. So it's definitely a nice way. It has its pros and cons, but definitely a nice way to have some cost certainty and expense from the Realty Income

perspective. They have over 13,000 properties in the US, Puerto Rico, UK, Italy, and Ireland. And they are quite well diversified across industries and customer base. I mean, I say retail, but it's different kind of retails as people will see. In terms of top 10 industries, the lowest one is 3.7%. The highest one is 11.1% and anywhere in between. So they have convenience store, grocery stores, dollar stores, home improvement, drug stores, restaurants, health and fitness, automotive services, and general merchandise. So definitely kind of stores that are, I think will still thrive in most environments. So you have these things like I don't think they,

you know, even if there's a recession, I don't think they would be too impacted. Obviously, you know, maybe sales would go down for some of these industries. But for the most part, I think they should be pretty resilient and should have much impact on the tenant base for realty income. And their top 20 clients are actually really well diversified. I won't go over all of them because there is a lot of them, obviously 20, but the biggest one is Dollar General at 3.8% and the smallest one is Lowe's at 1.1%. You also have something like Walmart in there, Sam's Club, BJ Wholesales, 7-Elevens, LA Fitness. Walgreens.

Walgreens. CVS. Yeah, so there's- Pharmacy and dollar store is very resilient. Exactly. So that's the kind of read I actually really like, especially in this environment. And I'll talk a bit more about that in a bit. Now, what's really impressive is they have 99% occupancy and they've always been above

95% since their IPO in 1994. So if you want to talk about a really resilient business, I mean, and a business that, you know, there's been recessions since then, there's been the great financial crisis. I mean, they perform really well regardless of the environment. And 85% of their leases have rent escalation tied to them. So that means that the rent increases every year at a certain percentage. There's kind of typically three that they'll have. So some are fixed increase, some are tied to inflation, subject to certain caps, and some are calculated as a percentage of the client's gross sales. So 85% of their leases actually have built-in increases to them, varying based on what kind of lease it is here.

So it should be pretty resilient, even in an inflationary period like we're experiencing right now. even in an inflationary period like we're experiencing right now. Now, the debt, and I think that's really important. Anyone looking at a debt-intensive or capital-intensive industry, especially REITs, you want to look at how the debt is structured. There has been a lot of press about commercial real estate and how it could be in a lot of trouble in the U.S., and obviously this is commercial real estate. But if you look at the debt, it looks pretty good in the US. And obviously, this is commercial real estate. But if you look at the

debt, it's actually, it looks pretty good in my view. So first, the vast majority of their debt is due in years down the line. So none of their debt is due in 2023. And only 11% of their debt is due in 2024 and 2025 combined. I believe it's 5 percent 2024 and 6 percent 2025 and less than 36 percent of their debt is due before 2028 and the rest, so about two thirds is due 2028 or later. So the reason why that's really important is because rates are high. They'll most likely be staying high, at least in the short to medium term, if we listen to what Powell and the other central banks are saying. So you want to make sure they don't have too much debt to refinance, at least in the next couple of years. And that's definitely the case here. They also issued $2.1 billion worth of debt this year at 5% or slightly over.

It's right around 5% mark. It was earlier in 2023. So that also tells me that they can get some pretty good rates and they have an investment grade rating by the big three credit agencies. You know, whatever you think about the credit agencies and how they rate debt, the reality is it does matter in terms of what kind of interest you can get. And in terms of what kind of interest you can get. And in terms of investment grade, they're kind of around middle of the pack for investment grade. So six out of 10 possible echelons for the investment grade for the big three here. And interest expense has increased in the last four years, but it's definitely more a result of them adding more debt and getting additional assets than just the debt they have paying more interest on it.

So, yes, there is a little bit of that. But if you look at the amount of assets, how they've grown, and the total debt, clearly the assets have grown much quicker than the total debt and the interest on that debt. So it's nothing, I I think to be concerned about. And the last thing I'll say here is obviously you talk about REITs, a lot of your returns will be coming in the form of dividend, currently yielding 6%, which is quite rare for this name. Dividend has grown at around 3% to 4%, depending on what timeframe you're looking at. In the past, you know, 3, 5, 10 years, it's always around that ratio. Their AFFO, which is adjusted fund from operation payout ratio, which is always the one I look at

for REITs, is around 76%, which is actually on the lower end of their historical range. It was not unusual to see it more around the 80, 81% mark. And for those not familiar, I know we've talked about affo before but essentially to break it down quickly you get to affo by adding depreciation and amortization back to your net income and then you remove the impact of things like proceeds from sales and remove some expenses tied to the normal operations of the business. So that's kind of what you get to AFFO. It's very useful for REITs specifically.

And in my opinion, the best metric to look at when you look at payout ratios for real estate investment trusts. So I definitely have this one on my radar more on my RSP because it is a U.S. dividend payer. And I do have some cash available there. And I mean, there's a good chance for our joint TCI listeners that I'll be adding or starting a position to realty income when they look next month. Yeah, good breakdown. I think that it's important that you talked about the actual debt structure, because if you look at what is the asset class of... Excuse me, how about this? What has gotten

crushed in 2022? But what type of asset class? Yeah. So anything that's capital intensive. So anything that has a lot of debt because interest rates are getting higher. Yeah. That's right. Stuff with a lot of debt and a lot of leverage has been getting crushed with the move on rates. That's been what's not working. As a general, like if we're going to look back on the year and see, you know, worst performing types of industries, we will see these high rate, higher level businesses

most on the downside. And that's what we've seen so far on the year. And then when you look at those types of, you know, heat maps, those ones at the bottom tend to do really well over the next few years. And that presents opportunity in the names that are actually not in structural decline or have actual issues. So, when you look at the whole industry, you know, what realty income is on a what, like 35% drawdown at least? Oh, yeah. Well, I think, yeah, 25%, 30%. I mean, it's basically the marking throwing out the baby with the bath water that's what it is exactly exactly yeah you know there's a leak in the bat you know unplug the bathtub drain

and all the rubber duckies sink even if there's some really you know some of the rubber duckies are really struggling but not all of them and um that's exactly how i think about some of these names and it's important you touched on the actual debt structure. There's a big difference between having a lot of debt and having a lot of ugly debt that's coming due soon. And that they're going to have to take on more debt at higher rates. There's a big, huge difference in that. Like Roper Technologies has like 30-year credit facilities at like ridiculously low rates. And so some businesses can get away with that. So I think this is a good breakdown.

There's a lot of ugly stuff in commercial real estate. I would say be very careful. And I think you really have to do your due diligence. And I still need to do a bit more research on realty income. This is just kind of the starting point for me. So I still need to listen to a couple of earnings calls. I'm pretty familiar already with the name, granted, but, you know, the debt was one of the first things I looked at. And for those of you not familiar, just starting, when you look at the financial statements, you can just go down to that section

and then pass. Usually the cash flow statement will be the last one. And then you go past the cash flow statements and you'll either have the notes, but sometimes they don't bring them down in notes, just in sections. And you'll usually, if they have debt, you'll have a section where they'll lay out how the debt is structured. So you really want to avoid two things. You touch on it. Any large amount of debt coming due in the next couple years, that would be really low rate at much higher rates. So if the company has a lot of debt coming due in the next few years, that would be a warning flag, a warning sign for me.

The other one is too much revolving debt, which revolving debt is just uh another word to say like variable debt which that would be a pretty bad thing if they have a lot of that right now too so those are kind of the two warning signs i would say when people look at it but any capital intensive industry you have to look at the debt i mean you should always but especially right now especially right now yes yeah good point like there's a lot of kind of opportunity in the ugly the ugly areas right now like commercial it doesn't get much uglier than commercial real estate right now like what's uglier i can't like as an asset class it's

gotta be the worst performance yeah i think it think it's, and just the bad press, right? There's constantly like, you know, bad press about commercial real estate. And I think, you know, Dan and I talked about that. It's a big space. There is definitely, yeah, it encompasses a lot of things. I mean, if you look at apartment buildings, so REITs, residential REITs,

it's technically commercial real estate, but I have a feeling that most of them will do okay because there's so much demand for apartments and for, you know, rent and people finding a home to live in and can't afford to buy a house. So I think it's important for people to understand that. But I couldn't help myself. I'm, you know, my value investor kind of at heart. But again, I think this is a very good business. I'm not saying all of them are. This is, I think, a more isolated case. That's exactly what this is. It reminds me of... I don't know the exact quote, so I'm not even going to try.

But Paul Graham, who started Y Combinator, he's definitely known as one of the most influential people in startup world in Silicon Valley and in the US. And he touches a lot on how some of the best businesses are made in hard times. A lot of the best startups have come out of recessions. You get like all these entrepreneurs who are like out of a job who, you know, put their head together to make something great instead of, you know,

working their golden handcuffs cushy job in San Francisco. And the reality that he says is along the lines of, it actually doesn't matter how the economy is for a startup. Like when just a few customer wins can move the needle so much for a startup, it really doesn't matter how the economy is doing. It's not going to sway a business from failing or succeeding. And so using like the broader economy and as running a startup as being soft is basically an excuse. And so I think of that as like, there are isolated cases of wild success in what can be painted as like a struggling sector or, you know, a tough economy. And so I,

you know, you try to always just like in the last episode we're talking about statistics look under the hood you know we make money looking under the hood yeah right like that's that's how that's how you make money and you can make a case right if a business or a startup does well when capital is tight and not flowing, well, you can probably assume like not all, but most of them should do quite well once it's much easier to get cheap financing and a lot of capital. So I think it's a great point. Yeah. All right.

For me, I have actually two companies here and I don't have, I'm not going to go deep like that into either of them, but I'll give you a quick hot take on why I think that they're at least worth a look here. Those two companies are Adyen and Wise. So Wise is a UK listed fintech company. They have grown tremendously both for business and for personal. And so you can think of their personal, you can think of their business a lot like PayPal. A lot like PayPal and the fact that you got a wise account, I got a wise account, I'm going to send you money. And for my business, it's very useful in terms of moving currency and having multi-currency credit cards

and spending. So for instance, if I'm in the US and I use my card, it'll come out of my US dollars. If I'm in Canada, it'll come out of my Canadian dollars. I can pay my employees all over the world. I have people that work in Europe for me. I have people that work in the Philippines for me and I pay almost no fees for moving money around. And when I have huge payments come in a US dollars and I got to move it to Canadian dollars to pay my Canadian employees, I am saving tens of thousands of dollars a month. I kid not i'm gonna probably save like two hundred thousand dollars this year uh by using this platform for what on conversion fees conversion fees paying people uh transaction fees the the whole dude it adds up so are you implying that the big Canadian banks charge a lot of fees? Is that what you're saying? Yes, exactly. Exactly. And their mission really is to make a borderless payment. Like it's basically like the mission of Bitcoin using fiat. Like that's what Wise's mission is. It's like borderless payments, no fees, instant settlements, and they've built

really fascinating infrastructure to make this happen. Now, the explosion of business accounts is very promising. The explosion of personal accounts is very promising. And it's just a good product. It really is. And I think it's going to, it thrives in the creator economy as well and the global economy. And I think that it's a very, very high likelihood that this business crushes it over the next five years. My concern comes in where their mission statement being basically the Bitcoin of fiat currency is they are basically driving cost to zero, including for their business. They have been mercilessly improving the customer experience and sometimes at the risk of their own take rates and how they can actually make money.

That's my concern is like their mission statement sounds not like a for-profit company and the way they talk about their business and the way that they have their product roadmap laid out. It sounds like a public service and a not-for-profit. I'm an investor. I'm trying to make money here. And so that is concerning. Do they outline like other plans of monetizing the user base or? Yeah, this is what I have to really, really have to look into. To upgrade your account to a business was $29 one time fee. Oh, oh, wow. Okay.

Yeah. They should make that like a subscription. Yeah. Yeah. So it's a one-time fee again this goes back to if i was really trying to make money it'd be a pretty easy decision to just say it's gonna be 29 a month or 29 a year you know based on the volume you're moving like they could have like value-based pricing you know if you're moving like over 100k a month like it's it's 29 per month not

per year you know like or or even more because i would pay it yeah i would one million percent yeah or you you have a base fee that's small and you're allowed up to this volume and then if you go above then you fall into a second like there's different ways to yeah as a business but i'm sure as a customer you're pretty happy so yeah exactly as a customer i'm happy so i think it's more of a land grab type move like they they still have this huge huge total global addressable market they're they're growing customer accounts hand left you know hand over fist when it comes to both business and personal and so they're getting this really great reputation, business is growing really well, it's profitable, all this stuff.

And so maybe they start the monetization really plugged in later. The problem is, I don't know. And until I have an answer for that, it's a watch list name, but it deserves a second look here, trading at 17 times next year's EBITDA. It's come down a lot on the valuation, and not because the stock price hasn't performed, but because the business has grown so, so much. And second is Adyen, which is in a completely different situation. The valuation has plummeted. It used to trade at like 150 times enterprise value to EBITDA just in 2021 alone. Now it trades at 18 times next year's enterprise value to EBITDA. Adyen is a large payments provider business out of the Netherlands. This is a Dutch company that is basically a Stripe competitor. If you're

familiar with Stripe, for the listeners at home, this is payments infrastructure. If I want to start my own business and I have some software company, I want to accept payments. I want people to be able to pay me via multiple ways, whether it's facilitating ACH or pay by credit card, which is very common for lower priced tickets, ticket items. It's done on Adyen. Customer pays, the merchant pays 2.9% typically for Stripe or Adyen. And this is a business that is a competitor to Stripe. But the way they run their business is entirely different. They do, it's like the US versus Europe and how you build businesses. You know, the US is spend,

spend, spend, hire, hire, hire, you know, do acquisitions, grow, grow, grow, raise tons of money. You know, they had a hundred billion valuation at one point and Adyen's always been higher slow, higher right. Don't raise outside money. I think they did a direct listing. Be profitable from day one. And so they are all of those things. They grow fairly consistently. The reason the stock has dropped so much is this has turned into a very, very fast, very, very fast growing business into a more moderate growth business. And the management team has hinted at that. So the valuation has gone from nosebleed to arguably cheap.

So I think it has gone into complete overreaction territory into what is a founder-led, profitable, nice growth payments business that I think has a really nice few years to come still. And you can't look at the drop in the multiple and not at least have a second look at it and how much the multiple has gone down. So why is an ad in two interesting payment businesses for two different reasons? Yeah. And I just wanted to add something just in case. I know we talked about that term a lot, but enterprise value, you just take the market cap and then you add in the debt and

you subtract the cash. And that's what ends up being your enterprise value. So it's just another way of valuing it. Typically, you'll get price to earnings. It's just the market cap when you look at that. Or you can do it in a few different ways, but usually you can calculate it with the market cap. And price to free cash flow would be the same thing, for example. So just so people are aware that might be newer and not really familiar with that term. That's right. It's just factoring in the debt as well there with enterprise value.

I think it's a little bit more of a complete picture. Now, for a lot of these software companies that are tech companies that don't have a lot of debt, enterprise value and market cap will be very, very similar. So don't feel like you're missing out on something huge here. I just like enterprise value to EBITDA when comparing businesses because it's a little bit more normalized than free cash flow. And it's a bit more of a complete picture than just price to earnings in my view. So it doesn't always work, but I use it as a screening metric very often.

And when comparing two businesses, especially if they're not in similar industries, it's really helpful. So that's it for me. No, it was great. I mean, obviously i was familiar with aiden uh i wise i was listening yeah sorry uh wise i i was i heard the name before but um you know i was listening carefully because uh i

wasn't fully sure what they did so uh glad you have that on their watch list and i guess we'll be uh checking if you you take the dive or uh once you understand Wise or I guess Adyen, like what would make you purchase it? Yeah, it's a good question. Well, what would make me purchase it is more research. I know you like you're familiar with probably a bit more with Adyen than Wise, right? On the product side, probably not. I'm probably more intimately familiar with wise. I'd say I know wise better at this point, just because it's been top of mind for me recently and

doing a little bit more research. I just need to be able to answer some questions that all investors are struggling with right now that I laid out. It's like, is this a not for profit? Yeah. now that I laid out. It's like, is this a not for profit? What's the catch here? And a lot of customers, I'm using it. I'm also wondering, what's the catch here? I think we've been so used to being screwed by Canadian institutions when it comes to fees that it's almost unbelievable seeing this product. No. I mean, look, I changed. I think I left the big Canadian bank for my personal account. It's about like, must have been like close to 10 years ago

because I did not want to keep, I think it was like 4,000 or 5,000 in cash in my checking account. So I would get the- That earns nothing. That earns nothing, but they waive your 15 fee or 20 fee if you keep that and i basically called them i'm like easiest scam that people have already got like they've gotten away with forever and i i basically call i said look um i'll stay with you if you remove the fee but have no minimum they said no i'm like okay i'll change bank thank

you bye-bye and sorry bye-bye it was a little bit of a pain, but honestly, very happy I did it. Since then, I probably saved thousands of dollars, to be honest, if you factor in the fees and the interest I'm getting elsewhere. So, yeah. The thing that is interesting about Adyen here as well is adyen has a lot of negative sentiment because well the stock price is dude it's on a 50 drawdown right now while stripe had a didn't they have a round a down around too yeah yeah stripe had a down round and adyen hinted at slower growth or guided for lower growth moving forward um basically in the same week, it sent the stock mid-August.

Yeah, I was going to say that was a couple months ago. 50% in one, in like two trading days. Oof, yeah. Yeah, like two, three trading days in mid-August. So the stock today is trading at 732 euros. Stock today is trading at 732 euros. It was trading for 1,700 euros on August 1st. So a very significant drawdown.

You know what I also like finding, Simone? Stocks that screen really bad, okay? A lot of fund flows and idea generation comes from screening. This stock started screening terrible just in their last first half 23, because it's a European company. They don't have quarterly results. They have first half, second half. So they just report twice a year. And if you look at gross revenues on every platform, including Stratosphere, because we use S&P for it, we use Capital IQ data for it, the revenues have dropped off a cliff. The settlement fees, aka revenue, went from 3.6 million, or no, that would be 3.6 billion to 485 million, the settlement fees. Now, if you look at net revenue during that same timeframe, net revenue went from 600 million to 740 million. So nice growth year over year on the

first half 23 versus first half 22. But if you look at gross, it went from 4 billion to 850 million because they changed how settlement fees are reported on their financial statements. So there's actually really great numbers in the net revenue for the business. That hasn't changed. It's improved greatly. But the gross revenue- Would this explain it right here? Yes.

Yes. Now, I'm going to copy another image for you to share on the doc here. Yeah. So for those, obviously, on Join TCI, you'll see it. But you essentially, it the on the doc here yeah so for those um obviously i'm joined to ci you'll see it but you essentially it's on the quarterly basis you just see revenues growing growing growing and then they fall off a cliff essentially uh q q1 of this year yeah yeah and those are the quarterly revenues because we just take the half revenues and split them into two um for approximations

because they don't give us quarterly numbers. Now go to back to the doc. This is from the investor relations from Adyen. Look at the settlement fees, the process and fees, sale of goods and other services that make up total revenue from contract with customers. Look at the settlement fees. It goes 3.6 billion to 485 million in fees. Of course, they don't collect take rate on that, like all of it. They don't take 100% take rate on that. So net revenue

is the number that actually matters. so net revenue is the number that actually matters yeah so net revenue is the number that should be reported uh on all these platforms including including ours yeah exactly it's when you have like a lot of the times too with payment processor i know like paypal has that too like gross transaction volume but you know it's an interesting number but really it you know they only take a small percentage so their net revenue is actually it's not the actual revenue of the business it's just a transaction volume i know it's a bit different here but it's the same kind of logic yeah because this isn't transaction volume it's fees and so again the way that they've changed

how they report this number it's probably like, we should be reporting it like this because then that actually adds up to net. Yeah, exactly. You know, because it's also not volume. So, it's a bit of a confusing number. And so, they probably addressed that and changed it. But now it screens horribly. You know, it looks like they've lost 75% of their revenue, which is not true.

No, it's not true. I mean, it's definitely a competitive space, and I think that probably is dragging down the stock a little bit too, and maybe I think a good topic for a future episode because we're running long here, but just at the, you know, we've talked about a lot of interest rates, but what that means for also higher growth businesses, because a lot of investors don't want to invest in these higher growth names now because they can get,

you know, five, five and a half percent on U.S. treasuries. And I think, you know, that would be a great topic to have. We've talked about the dividend aspect, but also for riskier assets, which, I mean, it's technically more of a riskier stock, at least compared to some blue chips. It's definitely an established company, but it still falls into that, I would say, kind of growth. Growthy. Yeah, growthy, exactly. Yeah, that's right. There's risk off. That's it, yeah. We were that's right. There's risk off. That's it, yeah.

We were risk on and now we're risk off. I love a good buzzword here to end today's episode. Appreciate you listening. We are here Mondays and Thursdays like clockwork. I will be here every Monday, but soon probably not many Thursdays in the future, but I'm not going anywhere just yet. Appreciate you joining in. If you wanted to see these beautiful graphics that we're sharing on join TCI.com, go to join TCI.com. That is join TCI.com. You know, we picked a great domain because you don't have to like spell it out. It's like, I think we just did spell it out.

Join dci.com. It's $9 Canadian. You get our monthly portfolio updates, Simone and I's actual real money portfolios to the exact name and percentage, as well as you get our faces for radio, our faces for podcasting on the feed there as well. Take care. 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