The Canadian Investor - This Boring Retail Stock has Crushed the S&P 500

Episode Date: November 20, 2023

In this episode, Braden starts by talking about his recent visit to New York City as part of a fintech conference. Simon then goes over what a target date fund is and if the new Lifepath ETF offered by BlackRock is a good option for self directed investors. We finish by talking about two stocks that are on our watchlist. Tickers of stocks discussed: TSCO, UBER, iShares Lifepath ETFs Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. Welcome into the show. My name is Brayden Dennis, as always joined by the magnificent Mr. Simon Belanger. Good, sir. How are you? We have an electric episode today. You're going to talk about target date funds and people are thinking,

is this a good option? They've seen this offered through the years and maybe not known what it is. And so that's going to be a good little segment. I'm going to talk about Nick Sleep and his awesome letter to Warren Buffett. And then we're going to go into stocks on our watch list, fan favorite. You have a great name here to talk about. And I have what I'll call a surprising name to be on my watchlist. So make sure you keep listening. We'll each have, it's not meant to be a stock pitch, but it's meant to be a segment where you have our attention company X, Y, or Z. And it's time to do some more digging how we doing man i haven't uh we haven't shot in like a week or week or two weeks or so yeah i'm doing good yeah like i was saying

just did a presentation for my work for pension and then we're recording so i feel like i'll be drained after that because i love presenting and stuff like that but it is very draining like you feel a bit tired afterwards but no aside, aside from that, doing good. Talking a lot in general is like draining. Well, especially if you're using your, you know, there's talking just to talk. But when you're using actual brain power, it does take a lot of energy. That's where you realize that the brain is quite the muscle. I was wiped.

I did 17 meetings in basically mostly one day on Monday. I was in New York. I met our buddy Kevin O'Leary as well, by the way. Fellow Canadian, Kevin O'Leary. Yeah. That was my intro. That was my intro. I met him in the back room of this conference that we were sponsoring. So it's pretty sick. I got like a photo of Kevin O'Leary doing a presentation, then it says sponsored by FinChat. So it was just kind of like, it was cool. Whether you like the Kevin O'Leary TV personality or his FTX issues in the past, which a lot of people were asking about him about that, by the way, on the panel, which is to no one's surprise. But as a Canadian kid growing up watching Dragon's Den, it was a bit

of a full circle moment. I thought it was pretty awesome. No, I think it would have been pretty cool. I mean, I don't think he's going to be answering questions on that for the next several years. Probably it will come back up when there's like a Netflix documentary on it. They're probably going to get someone to play him or maybe he'll agree to actually star in it if it's a documentary well dude he was answering questions he was saying like he was remorseful about it or whatever i yeah i can't really recall exactly but he said it was a mistake and you know you know being in the same room as kevin o'leary and just like off camera or whatever and you're in a group of people in a circle and he just owns the room and the fact that like everyone's in a circle and everyone's just asking

him questions because well he's the the main event there yeah but he is such a compelling and persuasive storyteller it is like it's a clinic to watch. Like I was just kind of blown away by like his, his actual talent of being a phenomenal storyteller. And no matter if you would, you left like whatever he was saying with like, yes, I agree. Like that's how persuasive, even if you were like, you're not on the same page at all. Like he's so persuasive and obviously a very talented guy. All right, let's get into target date funds. This is one of those jargony type offerings that you might have heard at work. Yeah, exactly. So target date fund, people may be familiar, especially if they have defined contribution pension plans, they're pretty common. They tend to be like even a default

option for people because what it does, it's you pick a fund. Typically, you'll pick a date that will be close to your retirement. And then the funnel adjusts automatically the asset allocation to more equity heavy when you're younger and then slowly, you know, increase fixed income until you reach retirement. I think it's a really good option for a lot of people, people that really don't know much about investing. They, you know, might not want to learn about investing. They just kind of want to set it and forget it. I think it's a really good option for that. I think I may have talked about these funds before once on the podcast. The reason why I'm redoing a segment is I know we've had new listeners, but

recently I noticed that BlackRock was actually just started offering an ETF version of it. And to my knowledge, it's the only one I looked. I looked at Fidelity. I looked at all the big asset manager, even Vanguard. And feel free, people, if they know of other options than the one from BlackRock, which is the iShares LifePad, but it just started in October. So it's just a few weeks old. So it's very new. So it's actually a pretty compelling option for ETS for people that want to maybe do self-directed, but really like do the bare minimum and have essentially professional money manager kind of adjust it automatically over time. You've seen this type of product become more and more common for ETFs where it's like you have the end customer very familiar with purchasing that product now

over the last like five, 10 years. But these companies are then rolling out these like set it and forget it type low fee products, but in an ETF distribution. Ultimately, right? Like it's net, net. These are like net, net innovations that are good for investors because the fees are lower and they're getting the same or even better products. So yeah, we've seen more and more of this. And I think that's just kind of the next iteration of like these all in one set it and forget it ETFs. Yeah, exactly. And for so people understand too, it is kind of a, it's a fun of funds, right? So, you know, it is, it adjusts over time, but the equity allocation, I mean, there's several ETFs, index ETF within it that allocates towards equity.

Same thing for the fixed income portion. There's just not one. There's going to be several. So you are very well diversified with these kind of funds. But again, it's not a great option if you're someone who wants to not set it and forget it and really, you know, be a bit more hands-on you may want to you know be a bit more hands-on but not necessarily be picking individual stocks but you'd like passive i think is the right word yeah exactly have a more passive strategy but still pick the etfs it does require a bit more time because obviously you know i think over time you'll probably want to rebalance it a little bit,

adjust the allocation. Even if you're fully equities, you may be want to minimize or reduce your Canadian exposure, your US exposure, whatever it is, right? Emerging market, however you develop it. So it's not necessarily the best product for that, but it's definitely a great option for fees because I'm looking at I was looking at a bunch of them. So it goes from 2025 to 2065. And the 2025 again, it's just when you're either retiring or you think you'll need the funds, like typically, they'll be used for

retirement. And then during five years increment. So typically, what you'll do is you'll choose the one that's closest to your retirement date. But what you can do if you want increased equities, for example, you can choose one that will be further out than your actual retirement date. So you could choose a 2065 when you really are thinking of retiring in 2055. So what that will do is it will actually keep the fixed income portion lower. So there is some flexibility that you can play a little bit with it. And you can even, you know, maybe you put half of your money in a life pad, a target date fund, and the other half in individual ETF, individual stocks. Like there's still some flexibility that you can do because it's self-directed. This is cool.

So are they changing that asset allocation every year or what's their protocol? Yeah, that I'm not sure. I think it varies from target date funds. I'll show, I'll share here for our joint TCIs listener, just so they have an idea of the differences between. So the one I'm looking at for those listening is the 2025 and 2045. And you can clearly see the 2025, it's someone that would be retiring like pretty much now or in the next couple of years. So you get fixed income 56% and equity at 43%. But then if you look at the 2045, your equity is 89% and the fixed income is actually 10%, a bit more than 10%. So it gives people an idea of how it adjusts. It's probably on a yearly basis, I would think it might be a

bit more frequent, but essentially if we were three years away from, or two years away from 2045, the 2045 allocation would look exactly or very similar to the 2025 right now. Right. So, it looks similar to a kind of like, you know, pick your age. Exactly. That's it. Your age in bonds, right? And then the rest in equity. It looks very similar to that kind of rule of thumb, which, you know, we've been, it's one of those things where, you know, rule of thumbs, like we understand why they exist, but sometimes there's some nuance and like, we've been a little bit critical of just kind of, you know, picking a number in the air and just say, oh, that's a good rule of thumb and sticking

with it. But dude, these products are pretty like awesome for, yeah, the more passive investor where it's like, I want to own this. I want my fees to be lower. I don't want to get screwed. I want to understand this. I want to do some research, but I also don't want to pick stocks all day. Right. And so I think that those are, those are good options. I think that overall the DIY investor has gotten such better options. I just worry that in the past few years, the options have gotten so much better, but there's a little bit decision paralysis when it comes to a passive strategy. It's supposed to be stupid simple when you're just picking to a passive strategy, and now I have to pick through 550 passive ETF products. You know what I mean? The beauty and

the simplicity has gotten difficult when there's decision paralysis. You know, and I think that's exactly, I mean, at the end of the day, even if you don't think about just index ETF, ETF as a whole, there's probably what tens of thousand ETFs to choose from. It can be overwhelming. And I think these target date funds for me, the perfect candidate, you know, I'm sure you know friends or family. I know friends and family that are with mutual funds with banks, and they may realize that they're paying very high fees. This is a fantastic option because oftentimes the option with a bank will have a similar

asset allocation, but they're paying two, two and a half percent in fees where this is 10 basis points for most of them, 10 to 15 basis points. So you're essentially reducing your fees almost to nothing compared to what the bank is. And, you know, for a lot of people thinking of switching, I think a lot of it is, you know, they get scared a little bit, which is fine. I mean, the unknown is, you know, people can think about their whole life, whatever you go, you go on a trip on your own, you know, it's kind of scary at first, but oftentimes, you know, so those are the best experiences and decision, but doing the leap can

be very scary. And a product like that can minimize the amount of work that they have to do and still have a very comprehensive product that, you know, adjusts over time. Obviously, personally, I think the fixed income is pretty high when you get close to retirement. That's just my personal, personal belief. But again, compared to what the mutual funds would put you into, it's very similar in terms of allocation, but at least you're saving on the fees. So typically, your outcome will be much better because you don't have to make up that extra 2%. You know, it's very popular is the Vanguard all-in-one asset allocation ETFs, like VGRO, which is like 80-20 equities and bonds. And then people will just self-directed move it to the more

higher allocation of bonds, less allocation of equities as they go, kind of self-directed, move it to the higher allocation of bonds, less allocation of equities as they go, kind of self-directed. This is basically just kind of doing that for them. Exactly. I prefer the former than the latter because I'm assuming there's an advantage in fees and you're going to know your situation better in terms of risk tolerance. And dude, what if you can retire at 50? What if you can retire at 45? That's why I think it's just better to do the self-directed passive route. Yeah. No, I mean, I definitely agree with you. For me, I think if I have friends and families that come to me, I would probably recommend the target date if I know they're very limited in knowledge.

They don't necessarily want to put a whole lot of time. I think this is the perfect kind of set it and forget it. That's the way I see it. And you can always, if they decide to retire early, you can always sell and switch out to a date that makes more sense. So that's because these are liquid. These are liquid ETFs. Yeah, exactly. That's it. And that's why I think it's ETFs, yeah. Exactly, that's it.

And that's why I think it's for a very specific segment of the population. I think this is a great option. Unfortunately, it's only in USD. So, that's... I think that's a plus, but it could be a downside for people because they still have to... Depending who you ask. Yeah, exactly. So, they have to convert to USD. But still, I really think this is a solid option for a lot of people. But again, with you, I think if you're willing to put a little bit of time, then the passive strategy with, you know, once in a while rebalancing yourself, I think is more optimal, but you have to put in a bit more work. So that's kind of the gist of it. I will put a link in the show note if people are interested. That shows all the different funds that they have. They even have one that essentially you put

when you're into retirement. That's even a bit more conservative. Very cool. 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. All right, let's move on to the Nick Sleep portfolio and his letter to Warren Buffett. So the Nick Sleep is a fairly famous investor at this point. He and a partner ran the Nomad Investment Partnership. And his annual letters have become very famous

because they're extremely well-written and he had pretty amazing returns during that time. They ran the firm for 13 years before winding it down. They made their clients about $2 billion in the process. And over that 13-year period, they returned 921% and the MSCI World Index, because they're out of the UK, 121% and the MSCI world index, because they're out of the UK, returned 116%. So basically, almost 9X the performance of the market. And so that works out to a 20.8% compounded annual growth rate on the fund for those 13 years. So pretty, you know, pretty great performance. Of course, you know, once you're over that 20%, now there are a lot of fund managers, not, not, not, not a lot. There are many fund managers that are able to achieve that kind of timeframe. But once you get over the time, once you get over the 10 year time period, now it's a little bit more impressive.

I'm still more impressed that the people who maintain like 16 over like 30 or 40 years like those are like extremely amazing track records like wealth beating like world changing types of returns i mean even even like 11 plus on a consistent basis i think for me that without is amazing even i'm just talking about like hall of fame you know kareem abdul-jabbar numbers here right like you know like the mount rushmore of uh connor mcdavid in 10 years yeah yeah exactly uh you know m m m m m bedard but the you know what i'm getting at here right like of course those 11 percent or even just market returns over 30, 40 years are world beating. But once you get four or five percentage points over a long time of outperformance,

you're in a kind of an elite category. Today, Nick Sleep has post wind down of the fund. He owns three stocks and he's a 13F filer. So it tells you how rich he is. Well, I guess the fund, he owns three stocks and he's a 13F filer. So it tells you how rich he is. Rich, well, I guess the fund, right? Like the family office that he's managing right now is three stocks. It's one third Amazon, one third Costco, and one third Berkshire. And basically does nothing, like literally nothing. I think it's been that for several years. Amazon's now 38% of the portfolio.

Costco is 34% of the portfolio and Berkshire is 28% of the portfolio. And so I did some rounding up with decimal points there. So hopefully we got to a hundred, but it is just three stocks, super concentrated, does nothing. And it's pretty great. So during that run, Berkshire is a huge, you know, Warren Buffett's company is obviously a huge part of his portfolio now, but it was a huge part of the portfolio and a huge part of the returns during that time stretch as well. And so I'm going to read the letter. It's a little bit long, but it's not too bad. Just like two paragraphs here. And then the response from Buffett as well. Dear Mr. Buffett, after 13 years of running the Nomad Investment Partnership,

Zach and I, who is partner, have decided to close the fund. The process requires us to return the cash. So after many years as shareholders in Berkshire, over 10, we recently sold our shares. It appears to all the world that the performance of Nomad, what has enjoyed over the years was created by Zach and me. This is not the case. As time goes by, the performance that our clients have received is the capitalization of the success of the firms which we have invested in. In other words, the real work is done by you and the good people at Berkshire. One more part here. The purpose of this letter is to say a very big thank you and to let you know that you have made a real difference. Nomad was not a particularly large fund, but over the years, it did make around US $2 billion for its clients, which were

predominantly cherries and educational endowments. Berkshire was a big part of that. That strikes us as capitalism working well. So it's basically saying, Buffett, thanks. Thanks, pal. You've been crushing it. But it's also a reminder that we're investing in companies and the result of our portfolio is not from our magical stock picking ability. It's just about giving capital to great managers and great companies and letting it compound over time because the companies in the portfolio are businesses. And we cannot forget that. Buffett wrote back. This was June 12th, 2014. Dear Nick, thanks for sending along the update. You and Zach have made the right choice. I predict that you will find life is just beginning. Best regards, Warren Buffett. And I just thought it was a really great exchange between operator, investor of two

really well-respected people in the industry. IQ that probably is triple mind and maybe quadruple mind. And so I just wanted to point that out. And you can see how he's investing his money now. It is one-third Amazon, one- one third Costco, one third Berkshire, and just lets it ride. It's been, again, many, many years of outperformance just owning those three names. So I just wanted to highlight Nick's leap and his letter to Buffett. Do you think Buffett wrote that letter on the typewriter or computer? Yeah, it looks... It looks computer, I think. Yeah. Yeah.

I think so might have got yeah i got someone to type that up and then it is his actual yeah the signature yeah signature there i just i just joke because when they use like powerpoint or something just like the basic basic stuff you know the white slide with like nothing else at all so but i mean obviously how old is buffett like 88 89 90 no no he's in his 90s is he okay yep let me see charlie turns 100 on new year's day so we're coming up to that buffett's 93 he is august 30th it's crazy how sharp they still are yeah we almost have the same birthday me and mr. Warren Buffett. He's two days after me.

A few decades apart. A few decades older. Yeah, Charlie turns 100. Yeah, literally. Almost, yeah. Charlie becomes a centenarian. That's the word, right? Centenarian.

I don't know. Yeah. On January 1st. What a remarkable track record. No, that's pretty cool. And obviously just, you know, investing in great companies and letting it compound. But it doesn't mean also to not, you know, not follow the companies. I think that's important to remember.

And, you know, being critical of your own investments as well. Because sometimes you can be blinded by something just because you believe in the company, but there's some clear warning signs. So I think it's just a reminder to, you know, I think it's important to think long term, but sometimes the company, the trajectory it's taking, it's not exactly what you had factored in when you started your investment and you may have to make some changes based on that. Let's move on to stocks on our watch list. Let's get you to go first here. This has been a low pro compounding machine and maybe one that not many of the folks have at least looked up before. So I'll let you take it away.

Yeah. So the one I'm looking at is Tractor Supply. The ticker is T-S-C-O. It is listed in the U.S. It's a company I've heard quite a few times before. And definitely this will be maybe a shallow dive. Obviously, I'm just giving an overview. But definitely one that's piqued my interest. Just looking at the metrics, it's quite impressive. And I'll go over some of the reasons that I think it is.

But just to give people an idea of what they are, if they've never heard of it. So what they kind of state themselves, the business of being on their website is for 85 years, Tractor Supply Company has been passionate about serving the needs of recreational farmers, ranchers, homeowners, gardener, pet enthusiasts, and all of who enjoy living life out here. It's a pretty big company too. I think I was looking at the market cap. It's a market cap of $22.4 billion and an enterprise value of $27 billion. So definitely not a small company. I would say probably a medium cap by today's standards. Kind of always forget now the things that have changed so much in the past few years. But in terms of exposure, so or I mean, store count here is what it looks like. So as of the end of 2022, they had a total of 2333 stores, which is broken down by 2066 tractor supply store 186 pence pet sense stores 81

horse shoulder farm and home stores i probably butchered the name and they also had nine distribution centers i love when there's these weird names i'm just like okay give it a shot yeah give it a crack see how it turns out sometimes you just know it's wrong but you're like yeah i'm just gonna run exactly it's probably wrong and i was looking at stratosphere or finchat sorry that and the store count looks like it's now at 2393 i just went to their latest annual statement which was 2022 so that's why I wasn't the most up to date, which would bring it to a 2.5% increase in store count for this year so far. Now in the past five years, store count has increased at a compound annual growth rate of 4.5%. I haven't listened to any of the calls or

did a deep dive into all of the statements, but that's definitely something I want to understand from management. What's the outlook for the next five years for the store count? Because clearly there is a decent amount of growth that's actually coming from that. And from what I can see, they seem to be pretty much located all over the US. I don't know if they have a store in every single state, but it does look like they do just based on the map, unless like I don't see Hawaii and all of that. So continental US, it definitely looks like they do just based on the map unless like i don't see hawaii and all of that so continental u.s it definitely looks like they have a store count in every single state and clearly texas here is the biggest kind of area in terms of store count it has more than 10 percent of their store count for tractor supply but also about 10% for pet sense, but definitely located across the US. Not surprising,

Texas, it's a pretty big state population as well and never been myself, but from what I've heard and seen, there's definitely, it looks like a lot of farmers and ranchers in Texas. You've been to Texas, right? Just to Austin. Austin's a great city but hey we're not talking farmland here i'm just looking at the store count here yeah december 2019 there was 1844 stores as of their latest q3 september ending of this year basically 2200 stores so they've been they've been adding like do some quick math here like like 20 a quarter, roughly, sometimes more like in Q4 of 2020, maybe they did some acquisitions because in 2022 and Q3 and Q4, so the end of last year, they basically built 150 stores. So I don't know if they bought

something there and rebranded them, but they have been like aggressively improving this footprint over time. Yeah, exactly. And I like I'm showing on for Joint TCI here. So you have back in 2018, so the last five years,

they had what like 1765 stores and then you're close to 2200 trailing 12 months. So definitely really impressive what they they've done in terms of store count they seem to have a good strategy because like i'll talk later their profitability metrics are quite good whereas sometimes when there's too many too much expansion i can really hit the margins if it's not done properly but for them it looks like they've again without doing a deep dive here it does look like they've found the right kind of mix in terms of metrics i talked

about the market cap before but the trailing 12 month p is 20 over the last five years that's actually a pretty good p for this company if you look at the historical five years, it ranged from 14.5 in March of 2020, which we all know why that probably was the case, to 29 as it peaks. So I would say it's almost always in the 20s in terms of range. Of course, this is trailing, so you have to use that with a grain of salt. It's not forward looking. EV to free cash flow of 52. Now, it's hard to say for this part because it but it does seem somewhat reasonable for the past five years for this company so it's hard for me to say whether I

think it's cheaper or not from that perspective. Over the last five years sales have grown at a compound annual growth rate so a KGAR of 14 percent. Diluted EPS has increased at a KGAR of 20%. Free cash flow per share has increased at a KGAR of 18%. So I don't know about you, but they're doing something right. Yeah, those are some really solid growth metrics for a company that is fairly mature. I mean, it's not at clearly reach maturation growing those numbers, but it's also not a retail concept that they invented last week. So this is really impressive. Yeah, that's it. And they pay a nice little dividend, to be honest.

So they pay a quarterly dividend, $1.03, which yields around 2% right now. And the dividend has increased at a whopping kigger of 28% over the last five years. It's massive. You check the dividend increase and it's been something else. And they've also been buying shares pretty regularly. And their free cash flow per share, as everyone knows if you've been listening to the podcast, has been increasing very nicely over time as well. So if we're looking in the past

10 years you were looking at 80 cents a share and now trailing 12 months at 740 a share it kind of peaked in the in 2020 which i'm not surprised right a lot of their items were probably in hot demand because of the covid19 pandemic so there was like a big boom there and kind of went back down. But if you remove 2020, it's actually pretty much steady way up. So pretty impressive from that standpoint. And the first thing I look at here for these retail concepts, right? Because you grow the business by new store accounts. You're looking for some organic growth as well. I don't know if they break that out. I'll have to look at the KPIs, but you're looking at the return on invested capital for this business because you're looking at the success of like a Dollarama or other retail

concepts where it's like they're in rapid expansion mode, opening 20 a quarter, like 150 22, maintaining a 21% five-year average return on invested capital means that the unit economics of store openings are really good. It's 19% for Dollarama. And we're talking about some of the kind of best, best-in-class metrics in terms of store openings and the unit economics around that. So it creates value by adding more stores, like clearly. Yeah, exactly. And one other thing that I think is really impressive is their gross margins and operating margins. So if you look at the last 10 years, gross margins have steadily increased from 34% to 35.6%. So just very slowly, but you can definitely see the increase.

And then operating margins have held pretty steady at right around 10%, dipped a little bit around 9% in 2017 to 2019. But aside from that last 10 years, right around 10%. So it's telling me that they're able to, like you said, open these new stores, but also keep their margin, especially with inflation that we've seen the last couple of years. That's even more impressive. And in terms of share count, they've decreased their share count at a compound annual growth rate of 2.4% over the last five years. Again, that's very impressive. And they're clearly giving back to shareholders in the form of buybacks and dividends,

returning a lot of capital. And their total returns are just like, they're very impressive. Over the last five years, it almost pretty much doubled the returns of the S&P 500, not quite. double the returns of the S&P 500. Not quite. So 141% total returns versus 79% for the S&P 500. So this, I mean, it ended up being a bit more of a shallow drive here. And I know like I put in, or I think you added in the comparable sales growth. So definitely that has dipped a little bit in recent quarters. But again, given the economic environment, I was looking at their earnings release, the latest one, I think it was flat comparable sales growth. But looking at other retailers recently, that's actually pretty good. In this current environment to have flat comparable sales growth,

that's much better. I mean, it's way better than a canadian tire i know it's not the same but it's also better than a home depot so i think it's something to keep in mind that yes it may be not growing as as robustly as it did from a comparable sales but the fact that they're holding up pretty nicely i think that's worth something what is happening in 2020 there with the same store sales growth it goes absolutely bonkers nearly 40 percent that has to be right yeah i guess just like home improvement and yeah landscaping you know everyone and their brother and sister was getting a pet like all these things right that were that were big tailwinds for them so that that would be my assumption i mean i would have to go back but i think that's a pretty safe assumption to

make but that's it that's my the stock on uh you know on our radar on my radar at least i know it was a bit of a shallow dive but the more i kept reading the more i kept researching but i wanted to keep it not too long at least yeah no very No, very cool. I mean, for me, you're looking at this thing. They have an interesting... For those who are unfamiliar with the store, I've been to one before. And are you familiar with Home Hardware in Canada? Oh, yeah. Home Hardware Building Center.

It's like that where it's not in very... It's not typically in big urban centers. It's like that where it's not in very, it's not typically in big urban centers. They, they will go into the rural areas where they don't have to compete with Home Depot. And so where there's not enough population for Home Depot and Lowe's to, to, to set up shop. So they, they really thrive in kind of like more rural areas, the same way that home hardware is playbook here is in canada with more rural areas and of course they they'll have some urban locations as well but that's the bread and butter where they're you know competing with home depot is hard yeah a lot of the items would

overlap but they have some differentiators right like they offer like you know livestock food i think like i heard someone saying a while back, like you can even buy like chicken and stuff, I think in some of the locations, right? When it comes to farming, yeah, you're right. That is a differentiator because that's their roots, but they've really, they've grown well past that into, you know, you can go buy a barbecue,

you know, you can buy, you can buy hardware, you can buy lumber, I'm pretty sure. So yeah. But no, it was kind of fun. I'll definitely try to dig more into that. 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

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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 forward slash host. That is airbnb.ca forward slash host.

I like the name you've picked. Yeah, an interesting name. How things have changed, huh? Yeah, how things have changed. Well, I think that that's a great place to start. So I got off the plane back to the Torontoonto city island airport you take an underground tunnel under lake ontario to get back to the mainland if people aren't familiar with billy bishop airport and you take an elevator up back once you've made it onto mainland you take a bunch of escalators and it's a very small airport right like there's only there's not multiple planes taking off or

anything is it still just Porter there? Porter and Air Canada. Okay. Okay. Yeah. Cause it used to be just Porter, I think, right? I think so. I've taken both Porter and Air Canada from there, but mostly Porter Airlines from there. I don't know if there's anything else, but anyways, it's, it's just the point I'm trying

to get across is a small elevator. They move everyone through an elevator when you get off the plane, right? Like it can't be, it can't, they can't do that at Pearson international. So I kid you not every single person, I'm talking 10 Pete plus people. It's a big elevator went on their phones. And at the same time, everyone like all at once, like some dystopian black mirror shit, simultaneously, everyone pulled up the Uber app to get their car. You're going to get picked up from the airport. And it was one of those anecdotal moments where you, as an investor, go, I got to take a look under the hood.

I got to just hop on Stratosphere and start looking just one more time. A name that I've just not, I've passed as an investor so many times so of course we're talking about uber you know the brand that everyone knows and the app you probably have on your phone or or uber as the french would say is that right i don't know i assume because especially in france they love like saying english words but with a french like very clearly like they'll say instead of saying just to let you know yeah they'll say you'll be talking French and then they'll say packing these like oh yeah yeah that's I love French Canadian accents I want more friends French from France if you go in Canada and you get

francophone they'll usually like use an English word but they'll say it the like English way but then the rest is all in french yeah right so i'll set the stage with i never thought uber was going to be a good business i i you know i looked at the statements when they went public i looked at their s1 i i reviewed it for four or five quarters after being public in 2019 and then into 2020. And I never thought it was going to be a good business. I've been very critical of the cash burn. You know, they're burning what, like four or five billion in cash a quarter?

It was out of control. And I was very critical of the unit economics overall, very critical of the moat. I thought, you know, this is just such a zero interest rate phenomenon. The fact that this thing has been funded to finally reach scale at this point, like investors have piled in billions and billions of dollars to this thing that can't make money? Well, an investor's superpower is being able to change your mind when the facts change and recognizing the facts have changed for sure. And I was wrong on a few things. I was right on a bunch of things, but I was wrong on a few things and the facts have actually changed. So the stock IPO at just under $70 billion in 2019, May of 2019, I believe the IPO was.

Today, it's $110 billion in market cap company. So it's gone from $70 to $110 billion since 2019. So it's not like I've missed the boat or anything here. The stock's up since IPO, but it's not tripled. And I think it is a significantly, significantly better business than when it was in 2019. If you look at the revenue growth rate since then, the business grew revenues by 56% in 2021, 86% in 2022, and now 23% trailing 12 months. So it's, it's, it's really, it's really died down a little bit, but in 2021 and 2022, they did, they, they did exactly what Airbnb is in these new sharing economy companies and said, what happens if we we double prices? What happens? And ridership has only gone up. So EBITDA, earnings before interest taxes, depreciation, amortization,

has been negative, negative, negative, negative every quarter, basically, until Q4 of last year, and then now more consistently into June 23 ending quarter. So Q2 of this year, they generated 530 million in EBITDA, 600 million in the latest quarter ending. And so the business is actually generating real free cashflow, generating actual operating margin and some scale there. The mobility business has been tremendous. That's like when you call an Uber car, that's grown by 50% CAGR over the last three years. The delivery business has grown by a 50% CAGR and the freight revenue, which is a segment that I don't fully understand yet and have to do more digging on, has been explosive, but off a much, much smaller base. The total Uber trips on the platform dipped as low as 737 million

in the quarter ending June 20, 2020. The latest quarter, they did 2.4 billion trips on the platform. So ridership has gone out through the roof. Wow, here's the kicker. During that same timeframe, their take rate, so the money that they take of money spent on the platform has gone from 15% to 27%. So the take rate has expanded dramatically while trips have gone up. That is a recipe for actual operating leverage in the business. Now, how have they been able to pull this off? What are the actual facts that have changed? Competition has been crushed. Lyft is like what? How many quarters away from being bankrupt? Take rates have been flexed from the low to mid teens to the high 20%. It hit as much as 29% in 2022 while gaining actual market share, making real cash

flow now. And they can potentially now, first quarter over quarter, where they stopped diluting shareholders and the share count actually went down. So that share count has been dripping up and up and up and up and up over time since IPO. Do you have to, when you don't make money, how are you going to fund the business? So they can finally stop diluting shareholders. They can finally start making money and they can keep growing. And I think this network effect has reached too big to compete. I think the moat has got really good out of, not out of nowhere. That's not true. The moat's been good. I think I'm just finally understanding it. So that's my pick for stocks on the watch list today. Uber, a company I never thought would potentially be in the

portfolio, but you never say never with investing. You never put your head in the sand and say, you know, never going to take a look at this name ever again. When the facts change, which I think they have been both qualitatively and quantitatively, I think Uber is set up to do extremely well over the next 10 years. No, I mean, it's hard to disagree with you. They definitely change things around. And I know the joint TCI was listening. I was trying to get the charts on. Yeah, you're doing a good job there. Yeah. I'm trying to get all this stuff at least so people could get a visual at the same time.

And I looked at Lyft and they're still not free cash flow positive. So I hadn't looked at them in a very long time, but their revenues are increasing a little bit. But at some point, I mean, especially in the current environment, investors are demanding profitability. That's what it is. Lyft stock is down 87% since IPO. Yeah. Yeah. I mean, and they've done a tremendous job.

I don't know. Do you know when Uber One came out for Uber? The subscription business? Yeah. The subscription business. Must have been a couple of years ago, right? Yeah. Because that was a pretty smart move.

If you use like uber pretty often it's definitely worthwhile i've i've used it a little bit mostly because they had promotions and then i just cancel it in advance i cancel it like you know a month from now and it's no longer i mean i think it's a good idea too right like if if you're a city slicker and you don't own a car or, you know, you're like me and my car basically just sits underground 10 months a year, take a lot of Ubers because it's a little bit more convenient. It's easy and it just works. And it's so much better than cabs at this point.

Oh, yeah. Even in New York, a place that's just been dominated by the cab business, like, dude, it's Uber now. Yeah, exactly. a place that's just been dominated by the cab business like dude it's it's uber now yeah exactly and i think people people kind of easily forget that but especially if you're living in this city you walk a lot or you could be taking the subway or you know the light rail in in ottawa maybe you have a car but you barely use it crunching numbers oftentimes even if your car is paid off you know the insurance and the gas and the repairs that you don't have to do if you get rid of that car and take public transit once in a while you take an uber you'll probably end up saving money not

to mention you might might sell your car and it's probably worth 30 40 000 depending on your car you are yeah i mean depends depends the car but dude used cars are like they've gone down in price a little bit yeah they definitely gone down but they're still fair enough they're still pretty expensive but that's something for people to consider as well but for me i mean i i've only used that never used lyft and it does feel like the network effects are just just too powerful especially with the fact that they have the food delivery and you know Uber traditionally no I think it's it's looking good and obviously if we get like self-driving cars I eventually that could even improve their

margins even more so it's something to to keep an eye on and I don't know if you knew that. So I used to about 10 years ago, I used to work at the city of Ottawa and I worked with bylaw services, but it was into licensing. And one of the things they licensed was taxis and these plates. So in Ottawa and it's similar in New York City, and I'm assuming it's probably similar to all the cities. So back then, I mean, Uber was kind of starting, but it was still very niche, not a lot of drivers, not a lot of people using it. And these there was a limited amount of taxi licenses. So oftentimes, there was actually a black market for them, because they were so valuable, because you could be essentially licensed. And I remember in Ottawa, I don't know what the exact

price was, but it was tens of thousands of dollars. When if you bought it from the city, if you were lucky enough, I mean, it would probably cost you a couple hundred dollars. That's it, right? And I think New York City was the same where it was probably over $100,000 for the license. I'm just kind of throwing numbers there. My my memory like it's been 10 years ago but it was staggering numbers and remember that's money 10 years ago so it's just it just kind of shows i don't think these licenses are worth that much anymore i don't think they're probably only worth face value because you can become an uber driver yeah that's right that's right and you look at the story in terms of like the company and like the

founders who, I think his name is Travis, I forget what his last name is, the founders who had to push through just immense regulatory hurdle. They basically had to be gangsters, like operate this thing illegally for a long, long time. And I just think long-term you have questions about how the business operates in a driverless world. So maybe they can be the leader in that technology. I think Tesla wants to be a leader in that technology. So that brings some uncertainty into the fold.

Of course, that's still a long way out before that's widespread adoption. And not to mention that has to go through all of the OEMs and car manufacturers. So, you know, being not long kushtard because of electric vehicles has not been a good trade. It's not been a good trade. And I don't want to make that mistake here as well with Uber saying, you know, that's, that's coming, that's coming, that's coming. And it very may well be, but maybe it's an opportunity for them, if anything, for margins to go up and run that technology and own that business. So maybe that's an even better opportunity. But of course, the market hates uncertainty. They hate the long-term disruption threat. So the thing that I need to kind of just to wrap this all up, next steps for

me would be to understand the other two segments. What are the unit economics specifically of the delivery business and this freight business that I didn't really even know they had, if I'm being completely frank. Because I understand the mobility business, I understand the margin profile, I understand the moat there, but the competition and delivery is very tough. The marketing spend is absurd, like absurd. Doorordash is the biggest player in the u.s they have most the most market share for that business ahead of uber which i was surprised to hear but in the u.s it's a bigger brand probably i guess it would be skip the dishes in canada right the second one because i assume uber is the biggest right uh yeah uber is definitely the biggest in canada that's my best guess doordash is the biggest in the u.s uber's number two player so i need to

figure out those two business segments a little bit better but dude i i think that it's in back where i was going about the travis story like they're they're operating this thing illegally you basically need zero interest rate venture capital phenomenon to fund a business for this long, to lose this much money for so long. No one's funding anything like this right now. No one in VC world is funding anything like Uber right now because you have to burn cash for way too long. And that works when there's zero rate and interest environment. So where I'm going with this is this is impossible to replicate right now. This moat is incredible.

And so I got to just do a little bit more work. But it's a fascinating company right now. I mean, it's amazing because you have to... People probably don't realize, but there were taxi unions. The amount of pressure that governments got local governments for banning ubers early on there was a lot of stuff that they had to kind of push through you know i don't know maybe sometimes they were kind of tiptoeing the line of what you should and should not do but again right now it's looking pretty tremendous i thought actually we're gonna say you're gonna

try to be an uber driver for a little bit just to see. Yeah, do some boots on the grill and research. Yeah, as long as, you know, some listeners order an Uber in Toronto, Braden shows up. Every year I have this thing where I'm like, for my cardio, I'm going to get one. I'm going to strap on one of those backpacks. I'm going to bike around the city and deliver people's pad ties uh I never end up doing it though but one of these days man I do have a question for you so when you get into an uber do you want the driver to be chatty or not chatty or it depends on your mood you know what I put it this way i usually will have my headphones in i'll be

like listening to some a podcast or something so that kind of signals like no i don't yeah that's fair but coming home from the bar i've had a couple drinks in me i i i started asking them way too many questions i've done that i started asking them next thing you know i know everything about like this guy's like family he has three kids all of them go to university x y and z like i know everything about this dude by the end of my trip if i've had a couple of pops on my way home but but that's pretty much the only time i don't it's the same thing right and i probably you know i think we're done on the investment talk but the last thing i'll say is it's like getting a massage right it's always like i don't know if i should be talking you're just not saying anything

like well i feel like we're doing this we're doing a seinfeld episode so true the the massage yeah yeah if we have some massage therapists tell us what the etiquette is should we be talking or like you know it's fine not to be honest i'd rather talk in an uber than to my massage therapist other than like what's the spot yeah that's the spot you know like yep that's the sore spot i want to just zen out dude i guess for me doesn't matter because i i get deep tissue massage all the time so i'm like almost in pain while i'm getting massage yeah yeah hurts so good i think that that's one of those just like human intuition like vibe check on you know if you want to want people to chat or not when you get an uber i don't do this as much anymore i don't know why i did this so much

but i used to always get in the front seat. And the guy would always look at me funny. I was like, always get in the front seat? Well, I used to get, I don't get it anymore, but I used to get really sick sitting in the back of cars. Oh, okay, okay. That's fair then. I'm sure if you explain that, they'll be like, okay, yeah.

If I look at my phone in the back seat of a car, I want, I like, i have to puke my butt like a fever yeah but if i do that in the front seat i'm okay especially if i look at a phone or something like yeah i can do whatever in a car i'm fine but my wife's like that she if she can't like look at her phone for too long in the back seat if not she'll get busy yeah yeah phone for too long in the back seat if not she'll get busy yeah yeah so yeah uber drivers would always look at me funny i'm like sorry man i just gotta sit in the front like you want to keep your car clean yeah exactly some people are cool with it but some not always thanks for listening to the pod we appreciate you we are here mondays and thursdays I'm here Mondays, Dan. By the way, we need a new,

we need Dan, we need specifications for the two Dans. Because we have Dan Foch that runs the Canadian Real Estate Investor Podcast. We have Dan Kent who runs the Thursday episode of this podcast. We'll have to talk in our internal Slack and get like nicknames for them because we can't just keep doing Dan. I don't know what you're talking about half the time. When you're like, oh, I was talking to Dan about this. I'm like, I just have to figure out if it's bearish, I know which Dan you're talking to. That's pretty easy.

So we'll have to figure that out. But thanks for listening, folks. We appreciate you. We'll see you in a few days. 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.