The Canadian Investor - Tier Ranking the 41 largest Canadian Stocks

Episode Date: September 27, 2021

In this episode of the Canadian Investor Podcast we rank by tier the 41 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.  We ranked them based on how likely we would own them in our portfolios.  Tickets of stocks discussed: SHOP.TO, RY.TO, TD.TO, BAM-A.TO, ENB.TO, CNR.TO, BNS.TO, BMO.TO, TRI, CM.TO, CP.TO, ATD-B.TO, CNQ.TO, CSU.TO, MFC.TO, NTR.TO, ABX.TO, T.TO, SLF.TO, SU.TO, NA.TO, RCI-B.TO, IFC.TO, L.TO, POW.TO, MG.TO, GIB-A.TO, FTS.TO, QSR.TO, LSPD.TO, WSP.TO, OTEX.TO, GFL.TO, WCN.TO, TFII.TO, FSV.TO, DOO.TO, DSG.TO, X.TO https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital See omnystudio.com/listener for privacy information.

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I am pumped for this show because we have what I believe to be a very fun format for the podcast. Simon, how confused were you when I'm texting you back and forth on the format of this podcast? We are ranking Canadian large caps into different tiers, which I'm going to explain before. But Simon, we're texting back and forth and you're like, what on earth are you talking about? Yeah, I mean, I was pretty confused. Maybe it's because I'm an older millennial. I would say my confusedness level was probably an eight or nine out of 10. But as we were chatting back and forth, and thankfully you gave me a call on FaceTime and showed me your screen just to understand what the actual tiers were. It made a lot more sense and a few YouTube videos on top of that. And

now I know what we're doing, but I think we should explain it so people who are a bit older like me aren't as confused as I was. Fair enough. Okay. So it has become a very popular format for ranking things, whether you're ranking flavors of ice cream or in our case, Canadian large cap stocks, there are A through D tiers, like A, B, C, D, sometimes E, depending on the template you're using. And then at the very top, above A, the most exclusive club is the S tier. So S tier is the best and then A, B, C, D. And you know what? It's become a popular format for ranking things in YouTube videos and whatever, but it's actually a very useful exercise for understanding your conviction in certain stocks. So I am literally going to do this for my own portfolio. And I think it's a useful mechanism

for figuring out how much you should weight a stock in your portfolios. How much conviction do you have in it? So we came up with the criteria of how likely we would own it in our own portfolios. So not like saying, oh, this is the cheapest by valuation or the best growth or whatever the metric may be. It's ranking on our personal likeliness or willingness to own this stock in our own portfolio. So we're going to start at the top with the largest companies by market cap and work through about 35 names. I think it's important to preface, Simon, some of these companies we own, some of them we know extremely well, and then others we just don't cover, have very little interest, doesn't meet our checklist

or screen, so we may not be experts in the business. Let's go through these, and this is obviously subject to change. We might think, you know what, after talking about this, this deserves to be higher and lower in our ranking. Let's kick it off with none other than the largest company on the TSX by market cap by now, like what, over a hundred billion? Shopify. Where does this list start and where does Shopify go into these tier lists, Simon? Yeah, I think we both agree on this one. At the very top of the list, the S category. I mean, I'll personally call this supreme category, but we can use whatever word we

want. I mean, Shopify growing very quickly, good management, huge tailwinds. I think they'll be able to leverage their position and pump a lot of cash flow in the upcoming years as well. So what's not to like about Shopify? Yeah, that's right. I mean, yeah, it trades at expensive prices, but they're going to be able to absolutely throw up some supreme S-tier operating leverage in the future. What's not to like? Moving on, the largest bank by market cap, Royal Bank of Canada. And we could maybe group a bunch of these banks together.

They're very similar businesses. But I think of this as one of the supreme, not S tier, but supreme banks and operators here in Canada. For me, RBC is B category, B tier. They're definitely one of the top Canadian banks, obviously the largest, nice dividend yield of about 3.5%. It is one of two systemically important banks in Canada, which means if it fails, it could trigger a financial crisis. Its revenues and profits are really well diversified overall

between retail, banking, capital markets, wealth management, and custodian services and also a bit of an insurance segment so you're touching a lot of things with them and i think it deserves to be one of the top canadian banks yeah for sure i think so okay so b category at the top of the b category not quite an a so i'm not that pumped to own the banks, but I would be happy to own them at the top of the B tier. Okay. For me, this is like Royal Bank's like 1A, TD Bank is like 1B, third in market cap, ticker TD, big retail bank, huge US exposure, also near the top of the B tier for me. Where does TD sit for you? Yeah, I think I would also put in a B. It's

obviously the other big Canadian bank, mostly retail, pretty big US operation, which they scooped up after the financial crisis. Pays a nice dividend of 4%, so all good with B tier as well. All right, drum roll, please. Brookfield Asset Management, ticker BAM. If you listen to this podcast, you know we love this company. That is S tier on the TSX for me, and I'm sure you're aligned on that. Brookfield has quietly become an absolute monster in market cap, fourth on the TSX now. What's not to like about BAM, the mothership of Brookfield? Yeah. Yeah. And I think that's the only place where we'll defer is not the ranking necessarily, but the one that we own. So I own Brookfield Renewable Partners and Brookfield Infrastructure

Partners. But I don't think personally you can go wrong with either owning BAM or some of the subsidiaries are very solid businesses. You just own slightly different parts of the business. That's pretty much it. That's right. For me, BAM, the holding co of the subsidiaries and the fact that it has the asset management business, which I believe to be one of the best parts of the business is S tier for me. The subsidiaries would be A tier. of the business is S tier for me. The subsidiaries would be A tier. Personally, Brookfield's investor day was yesterday. Bruce Flatt, the CEO, is talking about how they're interested in owning software in the future, which I thought was an interesting takeaway. So we'll couple this with a bit of news. Yesterday was their investor's day. Bruce Flatt says a lot

of these sticky software companies that they could buy are very similar to infrastructure in a lot of ways that it's sticky and perform some of that core infrastructure in a lot of businesses in the way that the world interacts now. I thought that was an interesting takeaway. All right, moving on. Fifth in market cap, takeaway. All right, moving on. Fifth in market cap, Enbridge, ticker ENB, paying a juicy dividend yield, close to 7%. And it comes to a lot of these commodity oil and gas companies. Where do they sit on this tier list on your willingness to own? Where does Enbridge on first glance fit for you in this list, Simon? Yeah, for me, it would be a C or D. I think we have it as a C right now. The main reason for me, yes, the dividend is nice, but it's always been

an issue with Enbridge in terms of their coverage ratio for their dividend. They've never really covered it with free cash flow, lots of CapEx expenditure because it is a capital extensive business. I think there's always that risk that the dividend might not grow as quickly or potentially be cut. So that's the biggest reason why it breaks lower on the list. If they could shore up that balance sheet, maybe even cut the dividend for, you know, it would be good long-term. I think it would move up for me, but as we have it currently, it's pretty low. Yeah, fair enough. I honestly have never understood how they don't cover the dividend for years now on free cash. So it doesn't make a lot of sense. I guess it's just a lot of debt. So you can kind of tell in their statements that that makes sense. It's too bad because they

have an absolute monopoly in the jurisdictions they serve with their utility of natural gas. Their distribution of natural gas is beyond impressive. It's an absolute cash monster and those assets are going to be producing cash for a really long time. So if they could just figure that out and be able to answer some of these questions I have when I look at their financial statements, it could potentially be investable and move up this tier list. But for now, I mean, I'm aligned completely. All right, let's look at the rail, CN Rail. For me, I mean, this has got to be A tier, both the rails for me. What are you thinking? I own CN Rail. I would probably put it either A or B tier. Main reason for me is I'm questioning management of Jean-Jacques Rourette because the questionable decision of the offer that he made

for KSU. He got pretty lucky in terms of the breakup fees. Let's be honest here. If it would have been approved in a trust, the breakup fees would have been even higher if it didn't go through. They did announce that they would restart buybacks and there are some activist investors involved as well. So it's kind of an A or B for me at the time being, but the A makes sense. Fair enough. Seventh in market cap, Bank of Nova Scotia or Scotia Bank, ticker BNS. One of the last banks I'd be willing to own here, but it's very similar along with some of the tier below what I believe to be Royal Bank, TD, and perhaps national. I'm thinking C personally.

Yeah, I think C makes sense. It has a nice dividend yield of 4.5%. People may rank it a bit higher depending how much exposure they want to Latin America. It is a Canadian bank that has the most exposure to that part of the world. Yeah, fair enough. I think I mentioned before, I used the bank in Peru and it was clutch. All right, BMO, Bank of Montreal, for me, it is tied with Scotia. Yeah, BMO has actually performed quite well over the years. That's the one that you'd want to probably own if you want a lot of exposure to wealth management and capital markets. 3% or so dividend yield. I'd probably rank it personally in front of Scotiabank, maybe after Royal Bank and TD. That's kind of where I would put it personally. So B or C, kind of in between. Yeah. A lot of these banks are hovering in that range. And again, it is willingness to

own as a scale. So I think that that helps you understand what we're thinking about. as a scale. So I think that that helps you understand what we're thinking about. 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,

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Yeah, me neither. And has a small dividend, 1.4%. It's been on a tier, like you just said, especially since 2018 with the stock price. The revenues had a big drop about five years ago and then have been slowly ticking up. I'm not sure what's up with that, but I don't know it too much. I'm not sure where would you rank it on this list. I'm probably like just see because of the type of perception I have for them. Yeah. When I think of analytics information type companies out there. I want to own like an S&P Global or even Moody's with the Moody's Analytics Service. I want to own one of those. I'm not really interested in Thompson. I'm thinking C tier. Yeah. Yeah. It works with me.

CIBC, for me, 10th in market cap on the TSX. For me, it is Scotia, BMO, CIBC, all kind of sitting there at the top of the C tier for me. What are you thinking here? Yeah, I would probably put BMO in front of them. But again, I think it's in that same range for me. CIBC, I think it has a dividend yield of about a bit more than 4% just going on memory here. And it's very diversified, but a lot of exposure specifically to Canada here. I mean, they all do, but CIBC is the last diversified outside of Canada.

Yeah, lots in retail and exposure to the housing market. TC Energy, ticker TRP, high quality name. I think they've had some real difficulties in operating their business from a regulatory perspective. This is C tier for me. What are you thinking? Yeah. I mean, I kind of just know the name mostly. It has a good dividend yield. I haven't really checked how much it's covered. Dividend yield over 5%. That's not really unusual for this type of business though. So probably just C because of the type of business it is and also more research would be required on my end too. Yeah, which is totally fair.

I mean, we can't be experts in 35 of these Canadian large caps when we might only cover like 10 of them. All right, largest telco by market cap, BCE, has that fat old dividend yield. What are you thinking? Yeah, BCE, I think think for me it's either a C or D like I mean it's a telco you know what you're getting you're getting a big yield it's a very capital intensive business we're seeing it with 5G they have to invest a lot of money in there the reason why I don't love BC is they still have like a big legacy business and that's where I'm like, I don't, not sure how well it'll do going forward and it has a lot of debt on the balance sheet as well. So, that's why I rank it a bit lower. Yeah, fair enough. I'm not particularly interested in owning it myself, but not really interested in owning any of the telcos, so maybe that speaks to our list here.

CP Rail. For me, both rail, CN and CP, very investable long-term ideas. This is A-tier category. I might actually prefer CP Rail over Canadian CNR because of the potential that they'll be able to add KSU to their operations. Just the network that it will create for them is pretty exciting. All depends, obviously, it's the transactions not done by any stretch of the imagination. So they may have to divest some of their operations

if it goes through. So something to keep an eye on. But yeah, I don't think you can go wrong. Let's be honest, CP or CNR, they're both really solid businesses. Pays a tiny dividend, but does grow over time. All right, Kouchetard, ATD.B. Can you please say the full name, Alimentation Kouchetard?

I need the French one. Alimentation Kouchetard. Oh, see, that was beautiful. There's no D. That's what I'm messing up. Yeah, silent D. there you go i love this business great capital allocators great management team they're obsessed with the store model they get it done they make global acquisitions the biggest question mark and the reason that i have not added to it even though it's so cheap and they keep growing that top line and gross profits, is what is going to happen with electric vehicles? This is an obvious issue

and they're doing lots to get around that and they're doing testing in Norway with the electric vehicle program. It could pan out, but I need to see more to have high conviction. Regardless, this is like low A tier, fringe B tier for me. Yeah, I think I would probably put it in B tier for that same reason. And also, I just don't, I'm not sure I see like the growth going forward. That's probably the biggest thing with them. I mean, they have been an acquisition player, right? That's all. That's what I've been doing since I think for 20 years or so. So I think that's probably the biggest question mark

for me. So that's why I rank it a little lower. Okay. So I got it at the bottom of the A tier. Simon's got it in the B tier. Fair enough. There's lots of questions around Couch Tower, but that's why you can buy it at a fairly cheap price these days. All right. Another cheap stock, Canadian Natural Resources, CNQ. I think this company has some of the best assets in the oil and gas game, in the energy game, pays a fat dividend. I'm thinking like bottom of B tier for CNQ personally. Yeah, it's probably for me either that B or C, but in terms of oil and gas plays, it's probably at the top of the list for me. The other one we'll talk a bit later, but I agree with that. Yeah.

Okay. Well, let's talk about that one. It's a little bit further down in market cap, but you and I were saying before, and it's very similar in that Suncor conversation. Yeah. The reason why I do like Suncor and I would probably put it pretty close to CNQ is just because they have a really, they're an integrated oil company. Right. So if you're looking to invest in oil, Suncor has a bit of everything they have production, refineries and distribution. of oil better than pure plays in either production, refineries, and so on. Because what happens for them is price of the barrel goes up and makes it cheaper for them to buy for the refineries and so on. And then there's always the distribution. They got hit last year because obviously no one was driving oil demand cratered, but I think it's a pretty solid play if you want to invest in oil. Yeah, fair enough. Well put. I'll let you introduce the next one and ask me what I think.

This is 16th in market cap on the list on the TSX. Let's just guess which one it'll be not. So number 16 on the list, CSU.TO Consolation Software. So where would you rank that one, Brayden? I won't spoil it, so I'll let you have the fun for it. That's S tier, baby. S tier all day. Mark Leonard is a wizard. This used to be a small cap on the TSX. It's 100 bagged and then some incredible capital allocator. He owns over 600 companies underneath the CSU umbrella. It is a beautiful decentralized acquisition machine buying niche, sticky software companies. Constellation Software is the best stock on the TSX. Don't at me. Yeah, I probably would put it just in A because I don't

know it as well as you do so i kind of rely on you for for that one quite a bit but obviously the the return speaks from themselves so i think we'll just leave it at that yeah we're talking large caps it is funny because you know a large cap now topicus you know how we talked about topicus did you know it's now one third of constellation and market cap now i didn't, but I know it's been on a roll, so I'm not surprised. Because if you convert all the fully diluted shares and you look at all the prefs and you look at the structure and they released this document yesterday to clear up some confusion, the actual market cap is like 20 billion, close to 20 billion in market cap.

So technically it is a large cap. And are we surprised that Brandon put the consolation in the S tier, the guy who put his whole lump sum in that one company? Yeah, yeah. Hey, we're talking about conviction, baby. That's S tier conviction. Don't try that at home, kids. Yeah, dude, that's an extreme sport.

Man U Life, ticker MFC, highest insurance company by market cap on the TSX, number 17th on the list. I don't want anything to do with these insurance companies. Maybe Intacct's interesting, but I'm not interested. This is a D tier for me. I'm not a big fan of insurance companies either. And let's be honest, they have not performed well. They're almost like breakeven over the past five years without the dividend. They do pay a good dividends. Obviously, they've had positive return about close to 5%. Just fun fact, their all time high is still from 2008. So they still have not gotten back. Oh, really? Yeah, it's pre financial markets crash. Yeah. So I mean, insurance can gotten back to that. Oh, really? Yeah, it's pre-financial markets crash. Yeah, so I mean, insurance can be really tricky business. I think it's even harder for them now that yields are so low.

A big part of it is insurance. They collect a premium, they reinvest them, but they have to invest them for the most part in safer assets. So I'm with you on that. Nutrien, this is one of the better producers. It is a commodity space. It's that Agrium Potash merger that happened a few years ago. They're a great operator.

You know, like in terms of company and execution and their market share for the commodities they serve, I'm all in on nutrient, but I'm not all in on commodity businesses. This is like a high C tier, maybe mid C tier for me. Sounds about right. I mean, if someone's bullish on obviously the growth of human population and people needing to eat and potentially droughts going back up, it should increase demand for their products and commodities as well for fertilizers. So, I think for me, C probably makes sense. Is that what you said, C? Yeah, I said C, maybe even upper C because you bring up a good point. I mean, they do have that tailwind behind them from a macro perspective, which you need as a commodity business.

This is why steel producers have done so well too, right? There's so much demand for infrastructure in steel. Even though it's a commodity business, it still can be a great stock. Yeah. And it has 3% yield. So that's always something you have to fall back on. And that's going to be a common theme. A lot of these businesses pay a dividend. How juicy are the dividends on the large caps, the TSX? And this has to be why Canadians are so obsessed with dividend yields. I mean, look at these things, 4% plus and most of them 4% plus and safe. You don't find that very much on US markets. So that's got to be a thing. Barrick Gold, ticker gold, which is an awesome ticker. I don't want anything to do with gold producers. This is D tier for me. This is with the insurance

companies. Yeah, yeah, probably a D tier. Obviously pays a little dividend close to 2%, clearly tied to the price of gold. And also it's very capital extensive in terms of when you get into mining operations. If people are interested in miners or get into that field, look up streamers that have a slightly different business model and I find a bit more attractive. You can debate us all day long. We get it. Barrett Gold is a cheap stock. It's certainly undervalued. Willingness to own scale for the long term in our style is very low. It's our opinion too, right? So someone could have them as S just because they love gold producers, but that's just our own opinion. So I'm sure we'll get tons of tweets on this list.

Oh, yeah. And by the way, we're going to post the photo of the tier list with all the logos of the company on Twitter. So look out for that. That is at CDN underscore investing. That's the right one. You got it. CDN underscore investing. I don't even know our own Twitter handle.

Tell us. Number 20 in market cap, ticker T. This is my favorite telco. And I'm looking at your notes here. You're saying the same thing. This is probably both of our favorite telcos to own, which is already in a not very exciting to own category. But this is a good company and they've pushed the pace and they've innovated a little bit. You touched on TELUS Health before. They just spun off this very interesting tech consulting business under TELUS and it has its own TSX listing.

Someone sent me the other day. So they're doing stuff and they're not just putting their money back into hockey arenas like Rogers and Bell. Yeah, and I mean, they, again, all the telecos have a nice yield, 4.4% here. You mentioned the healthcare exposure. I do like that they don't have as much as a legacy business than Bell and Rogers, and I think that gives them a pretty good advantage. people looking for income. So I think that's the one I would own if I'd be close to retirement looking for income. So for me, probably a C tier, maybe even in the B tier, definitely in front of its competitors. Yeah, I'm thinking B tier for Telus. If you want to own this and you're a

dividend investor, there's only a few of here that I'm excited about from a high yield dividend income investing perspective. There's not many of them. It's with the banks type category. But tell us, I like it a fair bit. Number 21, Sun Life. It's with Manulife. Not interested. D. Yeah. Yeah. I think I would put it right around there. High yield again. But if you look at, just have a quick look at the chart, the returns have not been great. You're basically looking at almost flat returns with a nice yield. So again, insurance business, it's not something I love, but some people like Buffett love it. So we'll see. It depends what you like. Yeah, exactly. You bring up a good point. Depends what your goals are, right? And it's not to mention that any of these

companies are not good businesses. They're like tens of billions of dollars in market cap on the TSX. They must be doing something right, something good to get to that scale. But if we have to rank them, this is what we come up with. We talked about Suncor. We had it in that C tier, maybe B tier with CNQ. National Bank, I think this is an interesting one and turning some heads lately. What do you think? Yeah, I know it's performed pretty well. I remember your first interview with Barry Schwartz. I think he was pretty bullish on National Bank. Has a smaller yield this one. Definitely one of the smaller of the Canadian big banks. I don't know it well

enough, I'll be honest. So I would probably put it in the B slash C tier personally. Yeah. They have some exciting international growth and some exciting things coming out. We saw the brokerage service going zero, zero fee commissions. Pushing the pace a little bit. They're the smallest, they have the smallest yield. That's probably why I'm the most interested in it. And from their international growth exposure, they're really honing in on some of these unbanked markets like Cambodia. Man, when I was in Cambodia, I saw national banks everywhere, like the branches. So very interesting that unbanked segment that they're really focusing on, even from Canada,

makes a lot of sense to get after so and i like the vision for national bank rogers ticker rci the other large telco this is my least favorite to own so i'm thinking like bottom of c tier personally what you don't like the shaw communications acquisition i don't like when i used to be a rogers customer and i couldn't get on the phone with anyone that's what i didn't like about rogers yeah i mean hey if you want to own a portion of the blue jays you gotta own rogers stock but it's true yeah i would probably put them again big legacy business has a decent yield but but probably towards the C, CD, I would say as well. Kind of same categories as Bell at BCE for me. Maybe if I buy a few shares, this playoff

push from the Js will be secure. Inter-intact Financial, IFC, this is a good business and they have really done well. The Bel Air Direct business underneath them, obviously the Intact insurance business. And we're talking about how we don't like Manulife and Sunlife. I don't Intact all day long. I'm thinking high B tier personally. Yeah. I mean, I don't know the insurance businesses well enough, but they must be doing something well. They've clearly outperformed their counterparts in terms of the insurance business. Smaller yield here, less than 2%, but that's probably because they reinvest more in the business. That's just an educated guess. I don't know for sure. So yeah, I would probably put them higher than the other two. So C or B

probably makes sense. Intact has adapted tech the best of those three names. And I think they've benefited from that greatly. All right. Loblaws, ticker L. Loblaws is a great company here in Canada. Am I excited to own some of these Canadian grocery stores? No. Is it a good business and as stable as they come? Yeah. What are you thinking? I'm thinking low C tier personally. Yeah, B or C is probably what I'm thinking. It's not nothing that would be exciting, but it's something you can probably just buy in your portfolio and forget. I mean, it's obviously the biggest grocer in Canada. You will be looking at low margins, but really economies of scale here and, you know, eat so what else can you say about them and they've performed decently over the past

five years and decade and uh you know a small a small yield but we saw even berkshire buying some kroger in the states so i mean that's right yeah if that's worth anything so b or c for me blue chip as they come power corp this. This is an interesting one, Power Corp. You got to really look under the hood for Power Corp. I'm leaning low B tier. I think we have it at C. I think it might be deserving of going up. They do own a controlling stake in Wealthsimple, which is interesting. That deal happened, I think, last year, maybe the year before. What do you think for PowerCorp? I would actually put PowerCorp just on the same level as Manulife and Sunlife. I know we've talked about Intact Financial. I do

like that one slightly better without knowing too much about insurance companies in general. However, knowing too much about insurance companies in general however power corp its main businesses are still insurance companies so they own controlling stakes in that and for me i mean i can't really make sense of why i would want to own more uh power corp over canada life or manual life so to me i think i would just put them all in the Group D, but I can understand why you would put them a bit higher. But I would have them right alongside Manulife and Sunlife. Okay, yeah, so PowerCorp, ticker POW. That's what we were thinking. Magna, ticker MG.

The very large manufacturer, auto parts manufacturer, a business I know extremely well. This is a mid B tier category. I mean, from the perspective of their business being somewhat commoditized, you could definitely make that argument. They rely on the total growth of light vehicle production, aka cars. That being said, they are a beast. They're so good at what they do and they have the engineering facilities. They have the most engineering and R&D out of any of the auto parts makers. So their ability to capture some of the growth in EV and what the car has become, which is a computer, a giant computer on wheels. Magna has really steered the business in the correct direction to win more business as that moves on. And now, you know, the CEO stepped down

and the new CEO is the old chief technology, Swami. I think they're set up for success. Personally, I'm thinking mid B tier. I'd probably put them C personally, just because it's not a business that really excites me all that much. So that's just the premise. And I don't know the business as well as you do. So that's why I have it a bit lower. I don't think I would be that excited to own it. Fair enough. All right. Ticker CGI. No, actually the company is CGI. The ticker is GIB, which I never quite understood. The Canadian consulting firm, they do tech consulting. This is a name we cover on Stratosphere. It is exceptional in what they do. They buy back lots of stock, they grow the dividend, and they just continue to grow over time via acquisitions of

service-based tech consulting companies. The reason why I have it in the B tier is I just don't know why you'd own it over an Accenture, for instance, which is probably a bigger and better version of tech consulting. But from when it comes to Canadian large caps, this is a name I would be happy to own. And I think the price is right here. I'm thinking high B tier above the banks, high B tier for me. I'm going to default to you on this one. I really don't know it well, so I'm just going to go with you for the B tier. Fair enough. Fortis, the utility company, ticker FTS. This has been a good performer over time. They grow the dividend. They pay a nice

yield. It is a utility company. What are you thinking? I'm looking at our rankings. I think we might have it a little too low. I'd own it over the telcos personally. What are you thinking? I mean, I know a little bit Fortis. I would probably put it, I'm with you, maybe a B just because I think it's a pretty solid dividend play, especially if you're looking for income. It's a utility. Yeah. Yeah. It's boring. Boring. It gets the job done. Boring. If I'm retiring and I want that income, I'd be more than happy to own it. So maybe it'd be based on that. I am getting hungry, Simon. Restaurant Brands International, 31st in market cap.

You know what? I'm realizing that we skipped a few on purpose. So we'll call it around 31st in market cap, but it's in that range. It is in the TSX-60. Ticker RBI. What are you thinking? You know, they manage Popeyes, Tim Hortons, and Burger King. Where does this sit for you?

Yeah, I'm noticing you're using the US listed ticker. So the Toronto one is actually QSR.TO for people that... This is true. It's okay. I always put the Toronto listed one in the notes. So just look at the notes. It'll be fine. That's true. It's QSR for quick serve restaurant. Exactly. I mean, I would probably put it in C tier, I think is where I would go. What do you think about that one? The balance sheet makes no sense to me. It never has.

about that one. The balance sheet makes no sense to me. It never has. But I mean, at the same time, those companies aren't going anywhere. Popeyes has basically driven all the growth for restaurant brands lately. Yeah. And I mean, it pays a nice little yield of 3.3%. So that's really nice. I think for me, it's just the growth that I know they've tried expanding the Tim Hortons brand in the US, for example, that didn't really pan out. Now they're trying in China, we'll see if that pans out. They've had a lot of issues domestically with some of the restaurants, especially in urban centers, a lot of them are really struggling. So I think I don't know, I'm the growth, I'm not sure exactly where it's going. So I think that's why I would put it in C tier. Yeah, I'm with you. I'm thinking high-end C tier, but you're getting paid to wait with that div. I mean, it's higher than I was expecting from a yield perspective. It's such a mixed bag, right?

Because you look at their statements and you're seeing all the growth come from like Popeyes and then the other ones just kind of decline at like single-digit percentages. The odd-time Burger King sees some growth in Europe, but it's really hard to be excited about this one. So I guess from a conviction perspective, we're thinking C tier. 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

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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. Lightspeed. Simon, what do you think of Lightspeed? I think I would probably put it in after we reviewed it on popular demand. I would

say probably A or B. I think I really like what they're doing, really growing really fast. Again, I'll say it again. I think for me, the only thing that worries me with them is competition. Obviously, we're not talking about valuation, which is a discussion for another day. So I probably would put it A or B just because of the other players in that field. Yeah, I'm thinking A, but in terms of willingness to own right now, it's expensive, man. You know, we had this conversation a couple months ago. I'm thinking A tier without any hesitation.

But yeah, willingness to own right here, right now. I have some concerns about the price, but we'll see. Yeah, I mean, if we put Shopify in the S tiers, obviously I have concerns about the price there too. So that's why I was like trying to forget about the valuation a little bit. Fair enough. All right. Now we have a bunch of high quality names coming up. I'm just looking at the rest of the list. I like all of them. I think that on the TSX personally, from my perspective, is the companies in the 5 to 40 billion in market cap are where the really interesting ones are and ones I'm really willing to own. So after a string of C and not so exciting B and potentially D tiers, I like the rest of this list for the most part. WSP Global, ticker WSP, the engineering firm. This is A-tier

quality for me. I like roll-up strategies and roll-up strategies in engineering provide a lot of cross-selling. This has been a phenomenal stock. It's like quadrupled for me. I own it, so that maybe implies an A-tier for me. Yeah, I think probably just put personally B because I don't know it well enough. But again, just based on what you said, I know you know it really well and how excited you are. I'm willing to move it up to an A. Thank you, Simon. Appreciate that. All right. OpenTex Corporation, ticker O-Tex, the Waterloo-based tech firm. They grow by acquisition. They have a lot of legacy businesses. Lucky for them, those legacy businesses are really sticky and people are still on that recurring revenue basis. Now they are doing the new OpenText Ultimate Cloud, which is growing at over 20% a

year. Over 90% of revenues are recurring. Is it exciting? No, but it's like a 5% free cash flow yield. OpenText for me is top of B tier from evaluation and their play in the cloud moving forward. Yeah, I think I'm on board with that. I mean, as long as they continue to execute on the cloud, I think that's a solid B, maybe an A eventually. Yeah, perhaps. I mean, they have this, their statements are funny. Half of the segments are growing at double digits and half of them are declining at double digits. So it's this really mixed bag of results. So something to watch for if you're looking at the company. GFL, ticker GFL, the waste garbage company and now infrastructure and soil that they're doing. This is A tier stuff for me. I own GFL. I like it. A tier all day, baby. What are you thinking?

Yeah, I mean, probably A or B tier for me. It doesn't excite me all that much because of the type of business. So that's probably why I would put it B, but they seem to be executing. And it's one of those waste collection type of companies. I know they're a bit more diversified than that, but yeah, I think it's one you can just set and forget. I just realized we didn't have waste connections on this list. Oh, there you go. Waste connections for me is, you know, it's the same as GFL. I mean, I like them. They're roll-up companies and garbage, which is really fragmented. Good capital allocators.

WECN just below GFL in an A tier, but they're very similar companies. Yeah. Yeah. I mean, to me, I think I would probably rank them pretty much equally. WECN probably has more of a track record for a publicly listed company, obviously. So, maybe that's worth something. That's fair. And less levered, which is also interesting. TFI International, ticker TFII. This is like top of A tier for me personally. Yeah, I think I would agree with you. I mean, that's the one that I probably wish I would have

bought when you kept talking about it or started talking about it. It's performed really well. And I guess it's the other alternative to railway, right? In some respect, it's kind of a mix, I guess, almost a logistics, but also last mile delivery. So it's kind of an alternative to railway, but also a FedEx and UPS. So it's an interesting place. I would be fine with that. Yeah. TFI has been a phenomenal performer. I mean, come on, look at that chart. CN and CP, I mean, they can't really build more rails, right? It's hard to build more rails. Who's going to supply all that extra stuff that humans are just obsessed with making?

It's TFI. And who's going to get it right to your house with the last mile delivery? It's TFI. All right. First service, the roll-up company in services for residential primarily, and they have other commercial businesses as well, but it is a roll-up in the service business for real estate. It's one I'm digging into a lot lately. It's bottom of A tier for me. It's been a phenomenal performer. Just definition of compounder on the TSX. I'm thinking low end A tier, but I don't know if you know this one that well. I don't know this one that well, so I'm going to default to you

on this one too. There's just a couple of names that i didn't know as well um that's one of them bombardier rec products ticker do brp this is a tier stuff man yeah it's a good part of the business that that bouncey sold off so we talked about them what uh maybe a couple months ago how it sounded like they were just selling off all the good parts of the business and the recreational products was one of them. I mean, people like their recreational products. And I mean, I'm not sure if it's necessarily something I'd own, but I can see people wanting to own it. I don't know. For me, it'd be like a A or B type of deal. I mean, they've performed well, so it's not anything on the business, just personally how excited I am about the business.

Right. I had it as the pick in the Canadian equity portfolio at Stratosphere. If you're looking for Canadian model portfolio and the companies I would invest in and do invest in with my own money, that is at stratosphereinvesting.com. If you can't spell that, that is getstockmarket.com. BRP was the latest pick in that portfolio. I think it's too cheap. I think it is an underrated compounder from here and the brand power of Seadoo, Can-Am, and Skidoo is very strong for the future. So I'm all in on BRP. Ticker, do. I guess the only thing for them is how much did the pandemic really act as a tailwind?

And will that continue going forward? I think that's probably the biggest question mark about them. Well, financially, not a lot because they couldn't make them fast enough to supply the demand. So I mean, I think in the future, what you're going to see that they're going to really benefit from this in the end is that they're going to start charging a lot more for the products. They're going to be flexing some serious pricing power. They must have a big order backlog. Huge. You can put in deposits for next year's stuff,

but you can't buy it yet. Descartes Systems, ticker DSG. It is a software play acquisition, organic growth as well in logistics. So their customers are like trucking companies. This is a really good company. Growth's been explosive. Chuck Akers owned it for a long time, which is actually really surprising. I'm thinking B tier from a growth perspective. It's as good as it comes. It's just a little expensive. I'm thinking high B tier, maybe at the very top of B tier for me. Yeah, I mean, I'd be good with that.

It's just a company I don't know as well, but I know it's performed pretty well over time. So B sounds about right. The last one, Simon, we've gone through 40 companies. This is the 41st company. And I think it's fitting, actually, because we're talking about companies on the TSX. Who operates the TSX? Well, it is TMX, ticker X on the TSX. I like TMX. What do you think about TMX? Yeah, I mean, it's an exchange. It came from the merger of the Montreal exchange and the Toronto exchange. I think that must have happened like 15 years ago, if I remember correctly. It's been a while back, but it's not going to blow you out of the water, but it's been steady,

has a nice little dividend yield. I don't have it right now in front of me, but I think it's- It's a small little one, but it grows. Yeah, 2.2%. So nothing to sneeze at more than your interest account. me, but I think it's a small little one, but it grows. Yeah. 2.2%. So nothing to sneeze at more than your interest accounts. So yeah, I think for someone who's looking for obviously some steady growth, it's proven track record. I don't think they're going anywhere anytime soon. Yeah. So for me, probably B tier, I think would be a kind of a solid company. Yeah. I think B tier is good here. I mean, it is solid as they come.

You're not going to see explosive growth, but companies need to list if they want to tap public markets, which they're doing more and more of. And TMX benefits from that. They have to have these ongoing fees. Their revenue base is so solid. I like TMX. Their revenue base is so solid. I like TMX.

I would not buy it over the NASDAQ or the New York Stock Exchange, which is owned by ICE. So NASDAQ or ICE, I'd be willing to own before TMX. But if you're trying to buy an exchange in Canadian dollars, you got to buy the Canadian exchange. So that's ticker X. Yeah, the biggest knock is probably it may have trouble expanding, right? If they ever want to expand, that's the biggest issue. I mean, I'm not saying that they won't be able to. I'm sure there's probably a way for them to buy smaller exchange outside of Canada. Maybe there isn't, but I'm sure there would be a way if they wanted to. That's probably the

biggest knock. I think it's just going to be more of like organic growth in air quotes, I would say. Yeah. Fair enough. So Simon, looking at this list, and if you want to see the visual of the list, go on Twitter. Even if you don't have Twitter, you'll be able to look it up at CDN underscore investing. And if you have Twitter, follow us, of course. I'm just thinking of this right now, is that when I look at this list, there is a direct correlation between the top companies in the S tier and the lowest quality in the D and C tier. There is a direct correlation between ability to scale and companies that are kind of landlocked in Canada. Do you see that?

Yeah. Yeah, no, there's definitely that. And I mean, the other thing I would add is dividend. It's like top tends to not have either a big dividend or no dividend. And then as we go towards the bottom, the dividend yield increase. Yeah, you're getting more mature companies that have little growth and probably very little prospects to continue to scale. Yeah, all the biggest dividend payers are all in B, C, and D. True. Yeah, that's actually true. There's not really a big yielder in the A tier or the S tier at all. No, some of them do pay a dividend, but I think it just goes to show that dividend is not everything.

Everyone loves getting income, but I think just having a good business definitely is more important than having a huge dividend yield. Say it for the people in the back, Simon. Canadian retail investors need to hear that. And the quicker they come to that realization, the better their investment performance will be for the long term.

And it just comes back down to companies we want to own in Canada. There's a few that I want to own. I don't want to own the index, but they need to be able to demonstrate scale. And the companies that are at the top of this list can demonstrate scale beyond the borders of Canada and tap into global markets like Constellation Software, Brookfield Asset Management, and Shopify in that S tier. Those are the three companies that made it to our S tier. And they can scale. They can deploy capital across the entire planet. And that is a huge advantage. special for the most part versus another bank, right? Like we're looking at the top businesses, they tend to have something that they're doing right compared to some of their competitors. I mean, banks, yes, they'll be diversifying different things and different world exposure,

but a bank's a bank. That's at the end of the day, that's what it is. They're not doing anything really special. I think that's a very fair take. There's nothing wrong with owning the banks. I mean, like I've said, they're incredible profit centers. They pay dividends. Dividends are safe. They're so backed by the Canadian government. They're not going anywhere. They are diversified. They have all these things going for them. But in our willingness to own them for the long term, just not that exciting. I think that does it for this episode, guys. That is our tier list. Again, if you want to see the photo, go check it out on Twitter. That elusive S, Club, Constellation Software, Brookfield Asset Management, and Shopify. That A tier is CN Rail, CP Rail, WSP Global, GFL Environmental, TFI International, First Service Corp, BRP

Bombardier Rec Products, Descartes, and Couchetard. The rest you can see. I'm not going to go through the rest of the tiers. Thank you so much for listening. If you're new to the podcast, we have podcast episodes that come out on Monday mornings and Thursday mornings. Like clockwork, we haven't missed an episode since we promised we would provide you two per week. We'll see you in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment

or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.