The Canadian Investor - Tier Ranking 25 of the Largest Canadian Stocks

Episode Date: December 11, 2023

In this episode, Simon and Braden rank by tier the 25 of the largest Canadian public companies by market cap. The top tier is Tier S and then goes on a declining scale from A, B, C and D. Tickers of stocks discussed: SHOP.TO, CNR.TO, CP.TO, TRI.TO, BN.TO, ATD.TO, CSU.TO, BCE.TO, WCN.TO, MFC.TO, IFC.TO, NTR.TO, L.TO, T.TO, GIB-A.TO, RCI-B.TO, QSR.TO, FFU.TO, DOL.TO, FTS.TO, POW.TO, WSP.TO, H.TO, MG.TO, TFII.TO 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 for Finchat.io for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Durable is a good term for you because you are an absolute machine with this podcast. As we know, the show goes on. You're doing a bunch of back-to-backs, and it's December, which means that we record a bunch, get them in the bank so that we can actually chill for a week or two during the holidays. But bravo to you, sir. Yeah, it's a bit of a challenge today with uh you know starting a cold but what's new with a young child going to daycare nothing new there just part of the course yeah yeah ground zero breeding of all uh of all viruses dude we have a long overdue episode

it's a format that we have done before. It got tremendous amount of listenership and praise last time we did it. I think people find this to be a fun topic. And what that is, is us going through a bunch of large caps on the Toronto Stock Exchange and ranking them into tiers. exchange and ranking them into tiers. And there is a popular ranking system on the internets these days. I think it came from gaming. It's now a very popular YouTube format where people rank things from highest to lowest in terms of tiers. But there's this S tier at the top. I don't know why, but that's just how it is. It basically just means like A is the best, B is good, C is not great, D is the worst. But then there's this exclusive category of S tier at the top. And I'm going to have to challenge you because I'm looking at the ranking list here.

You're throwing around a little S's a little bit too generously. That's me calling you out here. That's okay. I think you're throwing S around a little too generously here. Well, there is one, two, three, four, four.

That's not that many out of like 26, 27 names. Yeah. That's true. There's just a lot at the start. A lot of these large caps. Yeah. And we won't be doing that. We should not rank them by market caps so that they're all random. And we won't do like a detailed reason why, you know, we're just going to be going through it relatively quickly, but I think it'll be fun. Yeah. Yeah. And so we're

going to go through these names and there's a bit of nuance to this. So I'm going to explain this really quickly and then let's jump right into the list. So we were going to do a top 20 tier list on the TSX by market cap, but you know what that means. Easily more than half of those names are banks, telcos, and energy. And I think there's enough commentary on these mature, slow growth dividend payers in Canadian stock market media coverage. So one, that's boring. The analysis will have far too much overlap. And two, these are not companies you and I are just chomping at the bit to throw capital in. So it doesn't make it as much fun for us. And three, there are so many hidden gems on the TSX in this kind of like blue chip category, but actually have pricing power, actually have international growth opportunities,

and actually pretty good business models with upside beyond just these mature banks paying cash out to the dividend. And so I think generally going through this list, I was generally very kind of positive or optimistic when looking at this group of basket of stocks, much more than we would have if we just did top 20 by market cap. And there are not a lot of companies that get attention on a global scale at all. And many of them just trade exclusively on the TSX, but are very high quality. So I think that that creates a foundation for a good list. Yeah, no, I think so. And if people are interested in hearing about banks specifically, Dan, Kent, and I just

did like an earnings episode. So go back to last Thursday if you haven't listened to it. It's basically almost all on bank earnings with a little couple of news. A big one with Charlie Munger. We did our own little tribute after you talked about him with that special six, seven minutes episode. But if people are interested, we give a lot of perspective on our thoughts on about the banks. We put things in perspective as well,

because there's a lot of numbers being thrown out there right now, especially with provisions for credit losses. But yeah, I'm excited for that one. Apparently, I'm more optimistic than you with my S tier and Dan Foch, the other Dan who recently said, like, I'm becoming a bear will be surprised at my optimism for this episode. Yeah. Well, I think that this list is actually quite a solid list of companies. And so how I made this list was quite simple. I went on finchat.io forward slash screener. I screened for Canadian names, so only listed Canadian companies. I excluded companies that are banks, energy, and materials. So that's how I came up with the screen. I pressed generate, I copied and pasted,

threw it in a doc, and here we are going, Simone. And I've already talked about why that selection bias was made in the screener. And so let's just get right into it. So since this is sorted by market cap, we're going to talk about the largest companies through to the smaller companies out of the gate. Let's do this. You will give your hot take first for the first one. And then the second one, I'll give my hot take first for the first one. And then the second one, I'll give my hot take first and we'll go back and forth from there. Sound good? Sure. Yeah. Yeah. So the first one on the list is none other than Shopify, which has been on quite a tear

in the past six to 12 months. Yeah. So I gave it an S for Shopify. past six to 12 months? Yeah, so I gave it an S for Shopify. S for S tier. I mean, I think Shopify really has shown throughout the years how good of a company it is. Clearly, in the past couple years for me, with the cost reduction they've done, they've kind of sold away the, well, they kept a stake into it, the logistics company or arm that they have bought. And it's hard to argue with all the initiatives and the constant revenue growth. And obviously now for them generating some free cash flow. So that's why I put them S tier. And also just because there's just not a lot of tech on the TSX. So having this company on the TSX available to you makes a whole lot of sense, especially for those who are narrowly focused on Canadian companies. This is one that will benefit globally for businesses around the world.

There's that Infotech ETF that tracks Canadian tech. Yeah, four companies. Constellation and Shopify, I think, make up roughly 80% of it. And you got open text and I don't know if CGI makes it on the list. Bet you a blackberry's creeping up at the end. Yeah. There's also Descartes. I don't know how to actually properly say that, but that's been kind of a compounder as well. All right. I gave Shopify an A tier, primarily around the unit economics of the business.

It's a name I own. I think that it's probably supremely overvalued here today. Again, if you follow me on Twitter, follow me on Twitter at Brado Capital. I've been doing lots of work on this basket of Shopify and its competitors and trying to really understand the landscape. You'll notice a thing I do is I do a lot of research on names I already own. And so go check it out. But it's no question that it is best in breed among the Squarespace, the Wix, the other e-commerce builders, BigCommerce, Equid, all of them. It's best in breed.

The growth rate is tremendous. The ecosystem is the biggest. But we're still looking at like 20% comps on revenue after flexing mostly a lot of that growth from pricing power in the MRR, like subscription solutions. You have a lot of inflation growth coming into the gross merchandise volume. It's not growing as fast as it should in terms of the valuation on enterprise value to gross profit. Everything else is impossible to really normalize in terms of a multiple because them making actual money is not that certain. And the gross margin profile, it's just really not that good. So I have it as an A tier because you mentioned all those things. I agree with them. I'm just

trying to give the kind of contrary take to the name. It's been a heck of a stock this year. No, definitely. So yeah, we have Braden the Bear here. So we'll go on to the second. Let's go on to CN Rail. Let's bundle the rails here together. And I know you have two different rankings for them. I have them both as A tier, CN and CP Rail. I'd be happy to dual weight them and just go to sleep for 40 years and own them for a really long time. I think in terms of business moat, they're probably S tier. I just look at them as GDP growth type names when it comes to growth with both of them. CP, of course, now has that Kansas City acquisition all tucked away and they should

benefit quite nicely from that. But they definitely hampered the balance sheet quite a bit to do it. And integration of these types of things with these large lethargic companies is not always a piece of cake to get done. So that's my take on them. I think that you could probably dual weight these things, go to sleep forever and sleep great at night owning both of them. Yeah. And I think it's hard to disagree there. I gave S to Canadian National Oil and A to CP. Obviously, I'm probably a bit biased here because I do own Canadian National Oil, not CP. My reasoning for giving slightly higher is because they did not take on a large amount of debt to do that Kansas City acquisition, which could be, you know, the growth. Obviously, there's more growth potential for CP from that perspective.

But I do like that Canadian National Rail doesn't have that, you know, added on tax on debt. It's going to be a slower grower. But these two companies, I actually pulled that off and people can kind of disregard because it's the financial data from Shopify. People can kind of disregard because it's the financial data from Shopify, but the Joint TCI listeners will see that the total returns over the last 10 years for both CNR and CP have actually surpassed the S&P 500. So they've surpassed it by, you know, not a whole lot.

You're looking at 238% for CP, 221% from Canadian National Rail, and the S&P 500, so SPY is the ETF I use here, probably the most well-known one, is 205%. So for those who say, you know, boring companies don't do well, well, these boring companies have done phenomenally well. It won't excite you, but it should, in my view, they should continue at least performing as well as the market for the next five to 10 years, if not more, and potentially exceed them. So that's why I gave them pretty high rankings, both of them. Yeah, I totally agree. I think we have high praise given two A's and you have an S and an A tier there. given two A's and you have an S and an A tier there.

With the ranking, I guess the only knock really is just like, okay, where does the next phase of growth come from? Probably doesn't need it. You know, the bulls will say, if you've held this for the past 20 years and you've held it for another 20 years, your yield on cost is going to be absolutely bonkers. Even though they're not paying out much to you right now. I think, you you know what is it

when you talk when you hear about we've done lots of content on Charlie Munger and Warren Buffett recently when you talk about them and you hear what they have to say a lot of the time it's just around not making mistakes and not not blowing up and not ruining the beauty of compounding and just letting it ride. These are names that are probably going to allow you to compound for a couple decades. 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. Here on the show, we talk about companies

with strong two-sided networks make for the best products. I'm gonna 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 Thompson Reuters, which it always escapes me how large the market cap is. Yeah, it's kind of a business intelligence business i i would say i think that's how they describe themselves i had to look at their business lines because i'm not the most familiar obviously i know they do news but they do other kind of information that's valuable to other

business businesses in general i think they're more like primarily a B2B, so business to business. I don't know it quite well, but it has done very well. I mean, people know I love free cash flow per share, and it's grown at a 11% annual rate over the last five years. So just based on that, I decided to give them an A just because that's quite impressive. Again, this is pretty uninformed. Like I said, I don't know the business quite well. I just took this metric for the fun of it. So you can criticize me all you want for the tier, but I went with an A just based on that.

Yeah, so Thompson Reuters, I mean, it's been one of the, you know, kind of persistent non-bank large caps in the TSX that has really held its own. And the business has been very acquisitive. They've been really good at growing free cash flow share, as you mentioned over time, and just being this kind of what's become a conglomerate from the original Thompson business, which was a news publication. And so they still have that news business and it's actually done really quite well. The problem that I have with the business and why I gave it a C, which is quite a stark

contrast from you and fairly harsh for a company that financially, if you just look at their income statement, it looks pretty great. The problem is if you dig into the segments and look at some of these key KPIs like you can on FinChat, it is a business that is hard to understand and has a mixed bag of results. And these are stocks I really hate to own. And this is just my personal preference. If I look at the line items here, okay? So what they categorize as big three. So the legal professional revenue, the corporate's revenue, whatever the hell that means. Tax, accounting, professionals, revenue. So like a lot of the services, they call that the big three revs. It grows, let's see, percentage basis.

It grows at around 4% a year. Okay, sure. The news business has been actually really good. That's grown double digits compound annual growth over time. And then you have this global print business, which was one of their largest segments. And this is just a melting ice cube, to no one's surprise, right? It's the print business. to no one's surprise, right? It's the print business. Yeah, maybe that's offset by the news business over time. Do you get what I'm saying here though? It's impossible to really understand unless you really know this business quite well. Do I have a whole huge appetite for digging in and finding out that and tracking which segments working, which ones not? digging in and finding out that and tracking which segment's working, which one's not.

It's like trying to own BlackBerry and be like, ah, but look at these segments. These ones are working, but these ones aren't. I have enough to worry about as an investor. I don't want to be confused about the different business segments over time. No, that's fair. And I mean, again, I gave A, but it could have been a B or C. I think from that perspective, I only looked at it from a free cash flow per share basis, but don't totally understand where you're coming from. Let's move on to the next one here. We got Brookfield. Brookfield I have as my first S tier. And we're going to talk about just Brookfield Corp here. I don't think we have any of the subsidiaries in this list. We can just talk about Brookfield maybe as a whole, particularly here, the mothership, the corp company. So I have it as a nest here for the main reasons as I think it's one of the best companies

on the TSX. It has one of the best track records of any company on the TSX. It's led by one of the best management teams who have huge insider ownership and have done the right things for the last 20 plus years. I think that they are in a unique position to be the operator, raiser of capital, and collect management fees on all that money over time. It's a really unique combo. They just announced that they raised some like 30 plus billion dollar infrastructure fund like yesterday. It's just a casual 30 billion here, casual 30 billion there. This is a lot of management fee net income that they generate off

these things. And look, capital needs to flow somewhere, whether rates are low or high, capital needs to go to a home. And Brookfield has been capturing that for decades now. Yeah. And I think I gave it a nay. The main reason that I did not give it an S is because I think it's a great company. A lot of the things that you said, I echo that, but it also is extremely complex to understand if you start digging into it. And that makes me a little nervous. So I can't give a nest a company that there's still some stuff where I'm like, I scratch my head. I don't fully understand. I've been also recently digging into private equity and I've seen some of the shenanigans sometimes that are used in private

equity and the valuations that are given. I'm not saying that Brookfield does that, but there was a short report, we talked about it, Dan and I on the news and earnings about BIP. And I think that was one of the big criticism for the short report is he was at times questioning the valuation of certain assets and how they devaluated them, which is a criticism that's pretty common to private equity as well. So I think the short report was missing the point on some things too. But for that reason, it's still a big position for me. But one of the things that I've mentioned for my quotes from Charlie Munger is that, you know, I try to be critical even on the things that I've mentioned for my quotes from Charlie Munger is that, you know, I try to be critical even on the things that I'm bullish on, that I own. I want to make sure I'm looking at both sides. And this is just the reality. I think Brookfield is just really complex and

there's still sometimes some, there's still some question marks that I have for them. And that's why I gave them an A. Absolutely. I mean, I just talked about how confusing it is to understand Thompson Brothers. Gave that criticism. Whereas Brookfield's company, I understand much, much better because of the time I've put into it. And of course, today's show is about our convictions and the names and our assessment into the business models and how we think they should be positioned over the next few decades. And so, of course, naturally here on a podcast, our biases are going to kick into that. Let's move into Couchetard. Hey, I can't say the name, actually. You're going to say the name of this one and you're going to take it first. Yeah. So Alimentation Couchetard.

There we go. Yeah. My notes on this, it'sard, which keeps my notes on this. It's just it keeps delivering. I mean, they do. It's not a big grower. It's a very slow, steady grower. They increase the dividend pretty much on a very consistent basis every single year. There's a lot to love about Alimentation Couche-Tard and what they've done over the years. I think the biggest reason for me is still the long-term uncertainty because they have so much exposure to gas stations and how it's going to

look like, or they're going to have a transition plan to have more and more EV charging station. Who knows? That's the main knock on them. Aside from that, I probably would have given an S if it wasn't for that. So that's why I gave it an A. Yeah, the management team deserves an S. The performance deserves an S. I am also giving it an A for the reasons that you mentioned. It's just been one of the best stories on the TSX by far. Like it is on the Mount Rushmore of compounding right now. And I echo the sentiments you had.

I think I 3X'd my money on the stock when it sold off huge. I initiated a position, this was years ago, 3X my money. I'm like, you know, I'm a genius, sold the name. Dude, I think it's like 8X from that sell point. And so, most of the time when you sell great companies, it doesn't work out great for you. However, I share the same sentiment with you long-term, right? We're long-term investors. Everything could be great for Kushtar. It could be a positive, but I don't know that. And I have no real conviction in being able to predict the future for them right now

with any sort of edge or conviction whatsoever. If you do, hold this stock, man. It's been money. Yeah. All right, let's move on to Constellation Software. I wonder what I rank this one. Yeah, I can start and then I'll let you. So I gave it a Ness because if I didn't, you wouldn't shut up about it.

So I gave it a Ness. But in reality, I mean, I know Constellation mostly through you. So I gave it a Ness for that reason. If I were to start a position, which I'm not saying I won't do at some point, I definitely would have to do a position, which I'm not saying I won't do at some point. I definitely would have to do a bit more research just because I want to be somewhat comfortable not relying on your conviction for my investment. So that's the standpoint. But let's just say for I wrote this, but maybe more in reality, it's an A because there is more research required on my end. And that's the

main reason is I don't like I don't fully understand just yet but i can i could be persuaded to give it an s i'm sure if i dug into it a bit more it's certainly become a cult occulty stock both internationally and from canadian investors who have rode the wave of wealth that constellation softwareation Software has created. What's the stock trading? I'm just going to check right now. I think it's over 3,000, right? Yeah, it's over 30. It touched 3,300 already. Today, it's 3,275. It passed 3,300 just earlier this month. Of course, I rated it an S tier. It is by far my largest position.

When I left my government job and I rolled over my pension fund to self-directed, I threw the entire thing into Constellation Software like a maniac. Yeah, I remember that. Yeah. And it was the best thing I've ever done in terms of investing. And it might sound crazy, it might sound ridiculous to be having it plus its spinoff as more than 50% of one person's portfolio. But Constellation Software is a permanent acquirer of niche vertical market software companies at scale. Their business is acquiring companies. And guess what? They're really good at it. And the management team is best in breed. Mark Leonard

has become the kind of this mythical creature in terms of investing, being put up against the greatest acquirers and private equity guys of all time. They probably have close to a thousand companies now at any point. If we're talking about black box and reporting and all that kind of stuff, that would be as well a knock on the company, just like Brookfield. But here's the thing. Mark Leonard is very hesitant to put anything he does in the public and he doesn't want imitators out there in terms of people trying to do what they've done. And so they've been very kind of keeping cards close to the chest. If you look at the moves they're making right now, it completely justifies that

the market cap, and there's no real reason to believe that they can't keep doing what they're doing. I see on Twitter, people saying, there's no way they're going to be able to replicate the returns they've done in the past, the RICs they've done in the past. Obviously. What do you mean? Of course they can't replicate that. Dude, the stock's compounded like 35% since the IPO in 2006. Of course that can't keep happening. This is a 60 billion in market cap company now. It's not going to become a $100 trillion company by the end of the decade. That math doesn't work, so of course, but that doesn't mean you can't do extremely well

still from here. No, that's definitely fair. 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. So the next one here, the first of the telecos BCE. So I was pretty consistent here, except once I gave it a B just because I'm not like a big teleco person because it requires massive investments. Yes, it's an oligopoly. Let's be honest here. There's just a handful of, it's an oligopoly. Let's be honest here. There's just a handful of companies throughout Canada. I think with Videotron, if we include some of the regional ones, there's probably five or six, maybe a bit more. But there's the big three. You have TELUS, BC and Rogers.

It's just it's going to be relatively steady again, but it probably won't beat the market returns. I'd have to look, but I don't think they've beat the market returns over the last 10 years. So that's why I gave it a B here for BC. I think that these names have been very attractive to income seekers for a very long time for obvious reasons. What? Bells sustained a six plus percent dividend yield for, geez, as long as I can imagine. I don't know what it's stunting today, probably somewhere near there. And I gave it a C and I think I gave most of the telcos a C or lower. Keep listening for one of them that I gave even lower.

And the main reason for that is I am not the biggest bull on Canadian oligopolies. I think that that is probably shocking no one. I just think over a long enough time horizon, capitalism wins. And these companies have been under immense regulatory pressure. The increase in rates hurts them because they take on an immense amount of debt. The CapEx outlay is gigantic. they take on an immense amount of debt. The CapEx outlay is gigantic. There is a lot of reasons that they're not great businesses to own. However, they've been relatively great compounders and they have cash flowing, reliable businesses. They basically run subscription businesses as a service but the you know the subscription businesses i typically like are not as capital intensive and have these kinds of immense regulatory pressure that they have right now and so for that reason i'm not super bullish on many of the canadian oligopolies and that includes the telcos yeah yeah and i'm just pulling up stuff here for the joint DCIs listeners while you were talking just to kind of show your point here. And it's not been a good performer. Obviously,

you're up on your money, but the last 10 years, it's returned 100%, which is pretty good if you just look at it as a standalone. And that's total return, right? You're including the dividends before people slide in our... Oh, yeah. On FinChat, you can do total returns that you can actually look at these things fairly with dividend payers. Yeah. And obviously the SPY, which is the S&P 500, it will have dividends too. So the total returns apply to both.

And the SPY has returned 204%. So double the returns than BC over that time period. And like you were saying, interest expense here, we can see it's definitely increasing because of higher rates. So those are just challenges that will happen with telecos when you're looking at in like a rising rate environment. So that's why, look, I'm not saying it's a bad investment in certain situation. I've said it before, you know, ideally when you accumulate capital, so you're in the capital accumulation phase of your savings, you want the highest total returns. But if you're someone that will panic if there's a big market correction and having a dividend stock that pays

quite a healthy dividend will prevent you from selling and panicking, then I think there is a case to be made that it may be optimal for you to own dividend stocks, high yielders, because it'll prevent you to making an even worse mistake. In pure math, though, it's definitely not optimal. But at the end of the day, a lot of investing is psychology and not just mathematics. And I think there's a case to be made for that. Yeah. I think that that is well put. Let's bundle in here quickly the other telcos because I don't think they need further explanation beyond what we have just said.

I think we've said all of those things broadly apply to the other ones. I have Bell and Telus in C tier. I have Rogers demoted to D tier because I think that the management is by far the worst and set up the worst to succeed moving forward. I look at their balance sheet and I want to cry. And so for those reasons, I've given those ratings. Yeah. Yeah. So same kind of logic for me. So B for Bells, B for Tellus,

and then C for Rogers. Same kind of thing. It just seems like just from a their balance sheets are not great but also from a news perspective like they always get into the news for like the wrong reasons i i know some of the stuff it's not necessarily all their fault but still like at some point it's always them that get into some issues but i will give them an s tier if they sign shohei otani because hey hey now we're talking yeah if because for people don't know so rogers owns the blue jays and shohei otani is like a unicorn like he is something else he's basically two players in one so he's a tremendous hitter but he's also one of the best pitchers in the league. And, you know, people will compare him to Babe Ruth. He's the next coming of Babe Ruth.

Yes. On another level. Like, it's not even comparable, like what he's doing right now compared to back then and how good the players are in general. And I don't know. I've been following that. I don't want to get too disappointed if it doesn't happen. But apparently the Blue Jays are in the running.

They're in the running. I think that they're in the top three based on the podcast I was listening to this morning. And for people saying that Rodgers is cheap, if they do sign him, it's probably going to be around $50 million to $60 million a year for 10 years. So it's a lot of money. It's a lot of money. And he is worth it. And then some. Oh, man, I'd love it if Shohei came to Toronto.

Hey, Rogers, you want that S tier rating, baby? Come on, bring Shohei home. All right. Okay. Let's also bundle a few other names so we can talk about them quickly. All of the insurance names, Manulife, Great West, Sun Life, and then maybe even throw in Intact in there. I have Manulife, Great West, Sun Life. I think that they're all C tier, B tier type income seeker names. Not really for me. I don't know where any growth comes from.

I don't understand the businesses particularly well. I think if you wanted to own insurance and own more upside, just own some Berkshire stock and go to sleep. In terms of Intact Financial, I think Intact is the best and best run insurer company. And for that reason, I have them up in B tier. Yeah, same kind of thing for me. I don't know insurers all that well, but I do know, you know, with, you know, the climate change kind of happening and we see more and more natural disasters happening year over year, that increases the risk for these companies. So that's something I think to take into account. However, there are reinsurance businesses, which is one part of the Brookfield. Brookfield, yeah.

Yeah, exactly, where they essentially, insurance companies go to them to get insurance on their claims. On their insurance. On their insurance. So, yeah, it's definitely something to take into account, I think, going forward. But again, Intac has performed by far the best of these companies. We could probably even lump in Power Corp because Power Corp, yeah, it owns what, 60 something percent of Great West Life. So I think, and a lot of very much related to the insurance business. So I think for me would be also, yeah, same thing,

kind of Power Corp, maybe a little lower than Intact. But the one thing with PowerCorp is they do own Wealthsimple, which I think is pretty interesting. Yeah. All these names, including PowerCorp, not as much Intact, but the traditional, more mature insurtech companies, insurance companies, PowerCorp, a lot of them have a large wealth management business as well in the business of slinging mutual funds. I think McKenzie is owned by Power Corp, if I recall correctly. I think you might be right. Yeah. These are not growth businesses right now with big structural challenges in terms of the marketplace

and what consumers are looking for. And that's probably why PowerCorp's like, hey, Wealthsimple, you'd look good. And so I think that there's some kind of... Again, when it comes to these companies that have some melting ice cube line items in them, my preference is to stay away because it's rare. In my experience, it's rare to get them right. If you do, it works out. I don't think I can get them right. And I think that they're very challenging to own, personally, for my preference.

And that's why I have them in the C tier, mostly. That's fair. So moving on to the next one, we have Nutrien. So this is a commodity play. I gave it a name mainly because in terms of commodities that you know will be required from the world going forward potash is definitely one of them and they're one of the largest producers in the world of fertilizer in general but especially potash used to be formerly a merger of two companies but it was

Agrium and the potash company of saskatchewan that merged together because obviously there's cyclicality to it i couldn't give it a nest here but just the fact that the world is so dependent on it and there's not that many producers in the world i had to give it an a because of that that's my reasoning behind it. I share all of your same things. I have it as the front of B tier, one of the best Bs in this ranking. And that is because I think it's an extremely well-run company. They're in a must-needed type industry. However, I am hesitant to give any company that is a commodity business A based on the business model. We're assessing mostly business model here. And so for that reason, I think you have

to have a great amount of pricing power to meet that A or S tier. That's just my opinion. We did skip Waste Connections in the list here. So let's circle back to Waste Connections, a name that you and I both have listed here as A-tier, solid company. Waste is still so fragmented. I look at the two businesses that are real assets in terms of real assets on their balance sheet, in terms of trucks and landfills. I look at trucking and waste collection as the two best roll-ups in North America. And so I look at the garbage business like Waste Connections or the trucking business like TFI International or a US-listed XPO Logistics. These are such fragmented businesses that actually have real benefit to integration and tacking on kind of buying these distressed assets

from mom and pop owners a lot of the time too with these types of businesses. And so Waste Connections has done amazing of growing in the US. And I think this is kind of one you can own and sleep well at night, especially because they're in the business of collecting garbage, which isn't going anywhere anytime soon. The stock trades at a premium multiple and always has, and I think it deserves to. So that's the one cautionary tale. Yeah, no, I think it's a great business. What I'm showing here is the growth rate of free cash flow per share. So in the last 10 years, it's grown annually at 12%, actually more than 12%. And the total returns in the last 10 years, it's returned 230%. So definitely more than the S&P

500. So it's a boring business, but that free cash flow just keeps going up to the right slowly, but surely and rarely ever dips except for 2020, but I think they can get a pass on that. Dude, your Joint TCI listeners are seeing Simone absolutely put on a clinic right now, sharing a screen of FinChat. Dude, you're a real power user now, watching you pull up these charts quickly and everything. I am impressed. Those people on jointTCI.com, you get our monthly portfolio updates that we just posted very recently. And as well, all the graphs that we talk about, usually, nine times out of 10, we share them on the screen here. All right, let's move on to Loblaws. Dude, I really wanted to have this as my third S tier. I only have two. I really did because I think it's the best run company,

best grocer, maybe the best, maybe this and Dollarama is like the best, very limited growth outside of Canada, but still amazing stocks. And so I really wanted to get there, but I thought to myself, no idea can be S tier without a lot of international growth opportunity in my mind. And so for that reason, I have it as an A tier. I don't have much to explain more. I think most people are familiar with Loblaws and the grocery store and the pharmacy businesses that they've brought in together, like Shoppers Drug Mart as well. This is, in my mind, the best grocery store to own. Yeah, I agree. I mean, the reason why I would not give it an S is just because of the politics surrounding it.

They've been definitely Loblaws, but also Metro and Empire. They've all been the whipping, I'll say like whipping people or whipping companies from the federal government. They're trying to blame the higher food costs solely on them. Scapegoat. Exactly. Scapegoat a little bit. So I think that's going to be a headwind for these companies going forward, at least in the short to medium term. So that's why I would have a hard time, yeah, giving them a nest, but it definitely crossed my mind. That's for sure. Moving on to CGI.

For those who are not familiar with CGI, it is a tech consulting firm that has grown to become a massive global company. I believe they're based out of Quebec. I'm like 99% sure. CGI is, you have in your notes here, it's like Canadian Accenture. And that's totally true. I didn't know it really well. And I started looking, I'm like, oh, it sounds like a Canadian Accenture. That's exactly what they are. And so that is technology

consulting. They are acquisitive. They're good at cutting costs. They're good at rising, growing, compounding earnings per share and free cash flow per share over time. This is just a real stalwart of a name. I just look at it and I give it a B tier because why wouldn't I own Accenture? Accenture basically beats it on every metric I can imagine and I think is better at tucking in and doing more acquisitions. metric I can imagine and I think is better at tucking in and doing more acquisitions.

So for that reason, it's a B or T year because I would just, there's such an obvious move for me to own its competitor and I think I'll do better. So for that reason, I have it as a B. Yeah, I don't know the company much clearly and I gave it an A just because I have a hard time not giving an A to a company that's grown free cash flow per share at more than 10, well, double digit over the last five years. And they've grown it at 12% per year. So just based on that, I'm like, I will give him that. I will give him an A. Let's move on to the next one if you want to call this one. Yeah, Restaurant Brand International.

So they own some very familiar brands to Canadians. So they own Tim Hortons, Popeye's Chicken, Burger King, Firehouse Subs. Am I missing any? No, those are the big four. Those are big four, right? So the reason, I mean, I think it's a fine company for people looking to get exposure to the kind of fast food industry. I think that's the best way to put it. I believe too, and correct me if I'm wrong, they run mostly on a franchise model, right? Yep. Yeah, that's right.

So I don't think there's anything wrong with it, but my perception of Restaurant Brands International is that there tends to be one of their kind of brands that is doing well, and then the other three will be one of their kind of brands that is doing well. And then the other three will be kind of flat. That's always, and it kind of switches back and forth for a while. It was Popeye's Chicken that were really, you know, ramping up the results. Then I think Tim Horton's been doing a little bit better recently.

So I can't recall them doing really well for all three of their major brands. And then you have Firehouse Subs that's a bit smaller than the other three. So that's why I gave it a B in terms of ranking just because I think they're, aside from I would say Tim Hortons, I think they're all like good brands,

but I think nothing really outstanding. Dude, I think I was just smiling ear to ear when you're saying that because every earnings report, there's always one bright spot of the brand portfolio. And it's never the one that was the bright spot the previous year or the previous quarter. That does seem to be very true. And so for that reason, you're right. They never seem to all be firing at the same time. The thing that is confusing from my perspective that I've never been comfortable with the name is I'm happy to own a lot of these quick service restaurant concepts. I think a lot of them are quite good businesses. A lot of them are franchises, are owned by franchisees. They're

very similar businesses to hotels. And Bill Ackman loves these businesses. I don't know if you've ever looked at his portfolio. It's like quick service concepts and hotels because they're very similar businesses in terms of they use franchise models. And they're very kind of dependable and easy to understand. But the capital allocation for restaurant brands, I don't get it. They've been so disciplined. So I want to give them a praise for that. But it's almost like, have they been too disciplined? All the money seems to go to the dividend. They have tons of debt and they don't seem to really tack on any brands when I think that they could have been a little bit strategic in 2020 with some really struggling brands that they could have been out there getting.

So are they too aggressive, not aggressive enough? Like their balance sheet tells two different stories when it comes to the debt and the moves they make. And for that reason, I've never been really too keen to own the name. No, I think that's good. You want to go with the next one? Yeah been really too keen to own the name. No, I think that's good. You want to go with the next one? Yeah, let's go to Fairfax. Let's do this really quick because I don't understand one piece of Fairfax and probably we'll have to take a long time to understand it.

It's been a heck of a stock and it was so, so cheap. Every value investor part of my brain wanted to buy the stock two years ago, and I should have because it's done tremendously since I was thinking about owning it more deeply. And the reason I didn't is because I don't understand it, and I don't understand it now. So I'm not going to say another word. Yeah. I mean, they really crushed it i'm looking at their returns over the last 10 years and 263 so they've done well i know it's an insurance company but they also do investments so they'll kind of place bets on various companies one that comes to mind is toys r us in canada i believe they bought the stake along with one of the subsidiaries of PowerCorp, if I remember correctly.

So there's Toys R Us Canada. Like a lifeline type of credit facility? Yeah. Well, no, I think they bought it out of bankruptcy. Oh, they did. Okay, they bought it. Got it. Yeah.

So they have that. I know they have like BlackBerry, which that one is a bit more of a headscratcher. But they come up with these like very creative kind of deals, right? So I'm pretty sure it's like convertible debt into shares for BlackBerry. But I have to admit that they were probably the ones backing John Chen for the longest time, because they're one of the largest investors in BlackBerry. And just based on that, you know, you're not going to make all the right decisions and that's completely fine. But just that, I do question

sometimes some of the bets that they'll make and the insurance industry is not something I know very well either. So I gave it a B just based on that. Yeah. Yeah. Like a distressed buyer, right? Like private equity run by Prem Watsa, who's known as being one of the most prolific capital allocators in Canadian history. And so for those people who have followed the name and thought it's been so cheap and still think it's cheap, congrats as of late, because you've been right.

Let's move on to, what do we got? Dollarama. Do you want to take this one because you have you have a high ranking here yeah so i gave it a nest here i mean they clearly know what they're doing they have a set amount of goods that they have on the shelves i think usually they'll just have like one item per like you know one type of peanut for example, one type like they don't. They keep things pretty simple. They seem to have a good knack of opening stores and where to open them. They have some exposure to Latin America through Dollar City that I think it's really interesting.

They have, if I remember correctly, around like 500 stores in Latin America, with Colombia being the largest, largest one. They don't own 100 percent of Dollar City, but they own a controlling state. And they look like Dollaramas, right? Yeah, yeah, yeah. We had someone on Twitter tweet Ben viral. I saw that. Some dude opened these stores to make them look like Dollarama. And then I kind of quote him like, well, that dude is actually Dollarama.

Like, here's an answer. But the guy was like, yeah, the guy was like yeah i the guy was like oh thanks for letting me know so i like i was like oh no worries like you know mistakes happen i wouldn't uh you know expect everyone to know that and the last reason why i gave it a nest here is somehow in that whole like federal government blaming the grocers debate, Dollarama is never mentioned. And Dollarama does sell a good amount of food. And it's especially attractive for people that maybe have lower income and don't have the means to buy larger quantities that end up being cheaper on a unit basis. And to go to like a Costco or Loblaws or, you know, Superstore or whatever the kind of low-cost option is.

And I don't know. You never hear the name of Dollarama when the federal government is convening this grocer code of conduct. Yet, I know they don't sell all the grocery goods, but a lot of people will buy a decent amount of food there. So I gave them an S for all those reasons. No, I'm with you. And I've been persistent. I'll pat myself on the back. I've been persistently right about their pricing power with these dollar store concepts and how they just kind of own Canada in this space. I want to give them S tier, but as I said before, I'm not giving any company that I don't think has obvious international growth opportunity an S tier. And you mentioned the dollar city category.

You could say the same thing about a lot of these Canadian companies, especially if they're retail concepts like Tim Hortons. It's not that easy. It's not just let's plop this in and it's not that easy it's not just let's plop this in and it's gonna work the same we've seen time and time again that that doesn't work the same way u.s retailers come to canada and they don't work like they they do down south like look no further than tarjay good old target didn't last very long yeah apparently though the the guy who that, what I mentioned is he lives in Colombia and he was saying that the locals, like, it's always packed. Oh, interesting. So, yeah, I mean, that's obviously anecdotal.

So, I'm sure he hasn't visited all the couple hundred stores in all of Colombia. But look at this. Like, this is crazy. So, people will see the last 10 years, Dollarama has returned 615%. We're not investing in the right thing, right? I think we need to invest in dollar store. That's crazy. And the free cash flow per share, which obviously by now people know I love dysmetric, has just been going up to the right right and the reason why i look at free cash flow per share because it accounts for share dilution and it's usually a pretty good indicator of whether like the returns of a company if they're growing free cash flow per share i mean

pull up gross margins over time if you can yeah okay so just let me yeah just search in gross margin there gross profit no no no gross profit margin. Yeah, there you go. Okay. Nope. And then I'll just... You did gross profit. Oh, whoops. Okay. Just bear with me, people.

Oh, you'll love it. You'll love the live demo here. Look, gross profit margin. There you go. There you go. Okay, so we've seen it. Yeah, so it's basically been 40. It's come off a little bit from the highs of high 50% or high 40%, sorry. But it's still

being maintained at 47% for this retailer of low cost goods. They're moving lots of volume. This is so impressive. This gross margin item, line item, I think is the real bull. Well, look at the operating margin. I mean, talk about gross margins, but operating margins have actually been going up for the longest time. Wow. Yeah. So these are really impressive. And I mean, with fixed costs being increasing in recent years, I think that's doubly impressive that they've been able to.

I think that's doubly impressive that they've been able to dip a tiny bit, but thing that I find hard to justify with Costco, is you have basically the same amount of store openings every quarter and every year for both these retail concepts. You have amazing ROICs on them, but you have to justify the growing market cap by scaling the increase in growth. market cap by scaling the increase in growth for me to for me to want to pay what is it 42 times earnings for costco right like that's the one thing to think well well maybe they'll uh you know we'll start colonizing mars and open some dollar stores there we don't know let's just do a few more names here let's pick a a couple. Let's bundle these two utilities, Fortis and Hydro One. Now we have different ratings for them. You and I were texting back and forth going, look at the Hydro One stock. Dude, the stock chart over the last five years looks like a Ponzi

scheme. It's just so linear up and to the right. It's been incredible. You have your cause for concern with the name, so do I. And that's why I've given the B. What is that concern? We're talking about Hydro One here. Yeah, I mean, it's essentially a public-private partnership at this point. So 47% stake. 47% is owned by the Ontario provincial government, which obviously they don't have controlling stake,

but I would assume that they're the largest shareholder overall. So whatever they want will clearly have a big impact on the company. Despite that, it's returned over 100% over the last five years. So I gave it a B just based on that, because I don't know, you know, governments, they're not usually the most efficient. And sometimes they will push for decisions that may not be in the best interest of the company. At the end of the day, you're the shareholder. So that's the opposite of what you want. Yeah. Who doesn't love a good old monopoly, especially when it comes to these utilities? A lot of them are that by definition, but I share that same. I have a rule. I don't invest in public private partnerships for the reasons that you mentioned. However, Fortis, we both have as A tiers. Fortis has been that blue chip that everyone has always looked for in terms of a blue chip utility that just

gets it done. It's very well run. It's very diversified, both in the generating assets that it owns, but also in the geographic locations that it operates. And so no real concerns for me here. I'd be happy to own Fortis. It's not really kind of my style of an investment, but it's been hard to go wrong with the name as of late. Yeah. No, that's it. Sorry. You just said Quintus. Oh, the cold is coming in. The meds are kind of wearing off a little bit right now. But yeah, not much more to say. You know, utilities better than I do. The one thing I was going to say is that it's actually outperform XLU, which is an ETF over the last five years,

a utilities ETF in the US. So that's why I gave it an A as well. I guess correction. I thought the stock had done better as of late. I think it's being bundled into these types of names, dividend payers, lots of debt, haven't done well this year. year. But investors have been just fine to collect that dividend and avoid a lot of the ups and downs that you get if you own a lot of other names. All right, let's round us out here. I got two names here and then we'll be done. They're both acquirers. Start with WSP Global, a stock I've owned for a long, long time. WSP is a acquirer of mostly civil engineering firms. Think of like the built environment is the types of engineering firms that they buy, whether that's environmental engineering, buildings, infrastructure, and they've been really good at

it. They grow organically, typically high single digits, and they've compounded at close to 20% on the stock for a long time because they tuck in these acquisitions and they print a lot of money. There's still reasons to be quite bullish on global infrastructure, and there's got to be a services company that does a lot of that work in the background. I still think that the price is fairly reasonable for the name. It only trades on the TSX. You're getting that nice TSX discount, which I like to see. And yeah, not much more to add here. I've owned it for a long time and I'll own it for probably a lot longer. Yeah, I put it as a name mostly based on what, you know, I've learned from you from this business. So maybe I should put it more B and dependent on me learning more about it.

So I'll leave it at that. Yeah. I said we're going to do an acquired. What do you want to do? Magna or TFI? We can do TFI. Yeah. No, better than Magna.

Well, a little better than Magna. Okay. Magna, of course a little better than Magna. Okay. Magna, of course, is the auto parts maker. You and I both have it as a B. TFI International, I have it as an A. I mentioned before the Waste Connections, TFI. These are, I think, some of the best roll-up opportunities of physical businesses. I say physical businesses. I just mean like not

software, not tech. And they've done exceptionally well. It's run by a phenomenal management team with a lot of skin in the game. They've made really smart acquisitions. They've grown free cashflow and operating cashflow per share at an immense amount over the past 10 plus years. Happy to own it here. It's grown into a massive position for me without adding a single share. I think it's a 10 bagger for me now. I'd have to check. It's been a good investment. Yeah. Yeah. I like TFI just because the logistic industry is still quite fragmented and obviously I should have invested in it before the pandemic. I think when you started investing in it around that time

right before. So it's been definitely a good return in terms of yeah, since then, it's probably going to be facing some headwinds in the short term, I would say, because they're going to be dependent on the economy like any other logistic company. So I would give it I would say probably like B or A, I think probably, I'm not quite sure. Let's say a B plus, B plus tier. Because yeah, there's still quite a bit of competition with large businesses in the space. So I think that's probably why.

But they've proven that they can definitely deliver there. Yeah, it's so fragmented, right? Like there's still a lot of opportunity for them to grow. And that carve out they did of UPS for the UPS freight business. Oh man. Some acquisitions, I look at them and I go, how did they let that go? How did these companies let that asset go for that price? And UPS freight seems like one of them the two the two latest from constellation there in the black knight ice merger that's another one where it's just like motivated sellers yeah oh

yeah never under never underestimate motivated sellers and if you are an acquirer that is uh your bread and butter dude a lot of this list of the high quality TSX companies here, a lot of them are acquisitive. Many of them. If we look at them, okay? Thomson Reuters, Brookfield, Kushtar, Constellation, Waste Connections, kind of, blah, blah, it's not really. CGI, fairfax

fortis a little bit wsp tfi gfl open text ccl first service the scar tests those are all their business is acquisitions for the most part. Like that's how they grow. And I just listed a good amount of them. Well, it's not like, oh, they also do acquisitions. Like, no, that's core to what they do. A lot of them are roll-ups. So very interesting. There's tons of them on the TSX.

Now I have one stock on my mind right now, and it's not a Canadian stock. It's because I'm going to go and have to get some Tylenol cold inside us, and that's owned by Johnson & Johnson. So maybe I should buy a few shares while I'm going to go and have to get some Tylenol cold in sinus, and that's owned by Johnson & Johnson. So maybe I should buy a few shares while I'm at it. Yeah, get a couple while you're at it. Offset your costs. Exactly. Thanks for listening, folks.

We really appreciate you tuning in. We're going to try to do this kind of, I think we did it like two years ago. We try to do it maybe every year. It's a fun format, right? Like we cover a lot of names. We give our hot takes. We give a ranking. Human brains love rankings, including mine.

And so we'll keep doing it. Should do it for the venture and say eventually the like top 25 biggest stock of the venture. Oh, this one looks like a fraud. I'll give it a D or E. This one looks the least like a fraud. S tier. S tier. S tier, exactly.

Oh, God. We'd get in trouble. We'd get in trouble with that one. Let's do it. Thanks for listening. We appreciate you. Again, join TCI.com and FinChat.io. Simone's showing lots of...

He's a power user. Simone using FinChat on the screen here for the Joint TCI subscribers. We'll see you in a few days. We got lots of content coming out through the holidays. The show goes on. See you in a few days. The Canadian Investor Podcast should not be taken

as investment or financial advice. Brayden and Simon 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.