The Canadian Investor - Toast IPO, Carnival, Costco, Nike, Hive Blockchain and more!

Episode Date: September 29, 2021

In this second episode of the week, we’re doing an earnings and news roundup. We’re talking about the recent Toast IPO and earnings from Carnival, Costco, Hive Blockchain, Nike, Adobe, Vail Resorts, Blackberry and Accenture. Tickers of stocks discussed: TOST, CCL, HIVE.V, NKE, ADBE, MTN, BB, COST, ACN 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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How are we doing, Simon? Going well, going well. Just embracing the fall and happy to get started for our earnings episode of the week. Yeah, we got another earnings episode for you guys today for that Thursday morning release. Before we begin today's episode, I want to shout out. I think that we're going to do this weekly segment because on our new website, thecanadianinvestorpodcast.com, you can buy us coffee. And thank you so much for supporting the show. We really appreciate it. Mark Rich bought us coffee.

He says, I await your twice weekly podcast to allow me to further investigate your guidance and comments. I greatly appreciate your willingness to share personal investing stories. Keep up the great work. Thank you, Mark. We appreciate you. Shane Boscoff. He's, I'm a new investor. Loving your advice. Thanks for what you do. Shane, this is not investment advice. Of course, my friend, this is not investment advice, this podcast, but we are very appreciative of you supporting the show and keep listening, man. We really appreciate it. All right, Simon, let's talk about a hot IPO that just IPO'd, I guess, what, on the 23rd Very appreciative of you supporting the show and keep listening, man. We really appreciate it. All right, Simon, let's talk about a hot IPO that just IPO'd, I guess, what, on the 23rd of September.

I was shocked at this valuation, but what happened here? Yeah, yeah. Well, before I get started, just a special thank you as well to Mark and Shane for their nice comments and the coffees they bought us. And just like you said, the Toast IPO was a pretty big big one it's just a continuation of the IPO craziness in 2021 a little bit of context there's been more than 750 IPOs in the US so far this year in Canada the data I was able to find is that there was 88 IPOs in the first half of 2021 I couldn't find some more up-to-date data, but it's still quite a bit. So Toast is a restaurant point-of-sale system.

Seems mainly focused on restaurant from what I could see. So it's definitely a competitor of Lightspeed point-of-sale. Lightspeed, obviously, that we've talked about maybe, what, a couple months ago, I think, that we did Lightspeed? That's right.'ve talked about maybe, what, a couple months ago, I think, that we did Lightspeed? That's right. Yeah, and the big difference with them is their focus on restaurant, where Lightspeed has a more comprehensive suit of point of sales. Toast's market cap is close to $30 billion.

Actually hit that slightly after their IPO. It's a bit down. I think it's probably around $27 billion right now. bit down. I think it's probably around $27 billion right now. The good news is they don't have a lot of debt because I was looking at their prospectus when I was doing the notes over here. Their revenue was up 23% from 2019 to 2020, again according to their prospectus, for a total of $823 million in revenue. For context, Lightspeed had $221 million in revenue for the year ending on march 31st 2021 and trades at a 17 billion valuation but lightspeed's revenues increased more than 80 year to year so lightspeed is definitely growing much faster than toast would be growing so that's

probably that that explains the valuation difference a bit over here. Toast had a net loss of $248 million. They were free cash flow negative $124 million, which was pretty consistent with their year over year. Something to keep an eye on. Like everyone knows, I like to look at free cash flow. Yeah, I mean, it's an interesting business. I still like Lightspeed better because of the growth. But again, the valuation for these type of businesses is just stretched. Let's just put it that way. Yes, it's very sticky. Yes, they're growing very fast. When I look at Toast, I think, okay, they are focused strictly on the restaurant sector, the restaurant vertical and point of sale.

And that is an absolutely enormous market. Don't get me wrong. I think of all the customers they can serve when it comes to restaurants. But when you look at Lightspeed, there's so much more optionality with other sectors that they're going for. Now, they both trade at nosebleed valuation multiples. So if they continue this growth, then the price is right. But they are priced for absolute excellence and they're priced like they don't have competition, which is the furthest thing from the truth. There is so much competition in point of sale. And we've talked about that a lot.

I mean, think about it. There's Clover, there's Squale, there's what's happening with Shopify, there's Toast, there's Lightspeed, there's a million of these point of sales competitors. So it is something to watch. I'm here waiting on the sidelines for this one. It is something to watch. I'm here waiting on the sidelines for this one. Yeah, it seems like Toast really has a pretty big part of the market when it comes to restaurant. And one thing I did notice in their prospectus is that there was a lot of emphasis on omni-channel. So the different ways of doing businesses for restaurant, whether it's pickup, whether it's delivery, whether it's in person. And when we did Lightspeed, that was also a big point of emphasis for them.

So it's definitely interesting to see where that industry is going forward in the next few years, just keeping an eye on how that omni-channel, how important it becomes for businesses. But I'm like you, I'm probably going to wait on the sidelines. And at this rate, I'll probably be punching myself because I didn't invest in Lightspeed when we talked about it, but it's okay. I just can't pull the trigger. Yeah, it's been on a crazy run since we've talked about it. Coincidence? I think not, Simon. I think not. Carnival Cruise Line had an adjusted net loss of $2 billion. They're seeing that people want to get back on ships. Bookings are increasing again and stronger, all things considering for the deposits on 2022 cruises.

They have had to dig deep on the balance sheet, get financing, get refinancing, and try to weather this storm. The business is hardly generating any top line sales compared to usual operations, but it looks like their restart program has 35 ships with a set capacity going. Look, this business has gone from generating $6.5 billion in sales in Q3 of 2019, and now they're running like $50 million a quarter in top line. That lines up with the adjusted net loss because the business is burning $510 million per month, according to the press release. You got to give it to them. They are very transparent and very honest and very forthcoming with their results on the press releases, which I appreciate as an investor. But yikes, I don't really know what more to say. This is a tough spot to be in. In order of the things coming back,

cruises are just like dead last. I can't think of many things that are in a worse shape in terms of the coming back to normal operation situation than a cruise line like Carnival. Yeah. And because most of them are based in the US, one of the other issues they've faced is countries like Canada, where people have been mixing dosage of vaccines, they actually won't allow them on the ship. So you have Canadians actually want to go and take those cruises. And because they've had AstraZeneca and Pfizer or Pfizer and Moderna, whatever it is, it's not recognized in the US. So they actually won't allow them on those ships. So they still have a lot of headwinds to go through. I totally agree with you. And if I

remember correctly, they were able to get financing during the pandemic, like you said, but it was very, very high yield. If I remember correctly, it was like high single digits when they refinanced. That's not really shocking when you consider what the risk profile looks like for lenders who at the time when they were throwing them lifelines, it looked pretty grim for a business like Carnival Cruise Line. Yeah, yeah, exactly. I mean, it'll be interesting to keep an eye on. We can just have a look every time they release their earnings. Them or Norwegian are one of the big ones just to see how they're going. But now on to a business that is actually thriving, Costco. So Costco, we've talked about them here and there before.

I think it's a really great business model with their membership model where they consistently have renewal rates above 90%. So once you're a member, you'll probably stay a member for quite some time. Costco sales were up 17.7% to $192 billion. And that's for their full year. So they came out with their Q4 release. Their financial year is a bit wonky. E-commerce sales were up 44%. I do have a Costco membership.

I have noticed that our e-commerce experience has really gotten a lot better in the last few years. So I'm not surprised to see those numbers added with obviously the pandemic and people ordering more and more online. Net income was $5 billion, up 25% from last year. They had a total of 817 warehouses, 565 in the US, 105 in Canada, 39 in Mexico, and one in China. Obviously, there are some more in other countries, but I wanted to highlight the top three countries

with their warehouses and wanted to mention China because I think that'll probably be a big source of their expansion going forward because you only have one store in China. And for everything that I've read, the Chinese consumers seem to really embrace Costco for that one warehouse. So it'll be interesting if they continue opening those warehouses in China in the next few years. The amount of new members that hit that first China warehouse, the China store, they call their locations warehouses, is absurd how well it's performing. And this is just, it was a test. And now they're going to be really pulling that lever in China with Costco. The saturation point, so basically, I think it takes about eight years for each

warehouse to hit its peak operating performance because it takes a while to ramp on new members for each location. And China basically hit that eight-year saturation point for their warehouse in three months, which is just a really telling sign that the model should work there. They've shown it work in places you would never expect, like Iceland. Oh, really? Okay. I didn't know that. Yeah. Yeah. They have a warehouse in Iceland. and it's bizarre because the prices in Iceland for everything are so expensive. If you've been there, you know a sandwich is like $45 for a sandwich. A slice of pizza is like $38, right? And they found that, yeah, they're not giving the same cheap prices as they might in the States and Canada or elsewhere. But if they were just able to be the cheapest option, optimized for low gross margins and high membership margins, that they could still win in that market. And they did. So whatever they're doing, man, they got the secret sauce over at Costco.

Yeah, I think we'll probably have to do a deep dive at some point into Costco because it's just a great business, I think. I did a fairly deep one. Oh yeah, that's right. You did. Yeah, that's right. I did a fairly, yeah. Deep dive part two. Yeah, exactly. It's on the Stratosphere model and I went through the report on there. So you can go back and listen to that. As do-it-yourself investors, we want to keep

our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by 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. forward slash host. Hive blockchain, the crypto miner on the TSX venture. And Simon, me and you have actually never talked about this. So I'm interested to see where the conversation goes after this. But Hive has mining operations of cryptocurrencies in Quebec, Iceland, and Sweden. And the cryptocurrencies they mine is Bitcoin and Ethereum. They pick very cold climate locations to reduce cooling costs with reliable, clean baseload power. For example, Northern Quebec is cold and almost all of their power comes from reliable, clean hydro dams. Like 98% of their power comes from hydro, which is incredible.

hydro dams. 98% of their power comes from hydro, which is incredible. Revenue for the quarter was $33 million. And income for their digital mining business, aka the business, was $66.7 million for the year, an increase of 174%. They actually did produce generally accepted accounting principles of $42.5 million of net income. They mined 595 Bitcoin and 96,300 Ethereum during the year with gross margins on the mining operation at 75%. They have a bunch of different gross margins listed, but the mining operation is 75%. different gross margins listed, but the mining operation is 75%. Now, Simon, I honestly, I don't really know what to think here. There's so many of the typical red flags for a TSX venture high-flying stock. It trades for just a few bucks on the TSX venture, yet it has a market cap of $1.3 billion. When I check Stratosphere,

I check on the company search and the management team is selling stock very consistently, like CEO, CFO. There's actually like an interim CEO. It's all very confusing. The investor relations presentations only talk about the stock price. And they even have a slide, Simon, called attracting new investors in the strategy section of the business. These have very little to do with the actual company and the fundamentals. Ding, ding, ding. Can I get a red flag? They hold crypto on their balance sheet, which is fine. You kind of want that if you're holding this. Perhaps there's a place for this in your portfolio if you want to own crypto in an alternative way to owning the actual coins, Bitcoin and Ethereum in this case.

Because they're holding the coins, it makes a lot of sense. Like that actually makes me bullish. This is very similar to a gold miner, except gold miners just hold the gold they mine. Like this would be like if a gold miner held it with no storage costs. It's a cool concept. It's basically huge industrial crypto miners publicly listed and Bitcoin holders. You're getting access to that balance sheet. I'm nowhere near a crypto expert. So I'm curious how much work you've done here, Simon. But I think I'd prefer to own the coins rather than the miners. Expect a ton of volatility.

Yeah. the coins rather than the miners. Expect a ton of volatility. But I need to do some more management team background checks. They could be totally trustworthy and I could just be like cautious for no reason. But there are some questions I have right now regarding this and the mission that I just need to do a little bit more homework on this one. Yeah, I would. I mean, obviously, I would own the coins over holding a company like I've blockchain or any type of miner and when it comes to cryptocurrency, a couple things to note, I would say for miners, like first of all, yes, they they'll probably hold some crypto, whether in this case, Bitcoin or Ethereum on their balance sheet. But one of the things that miner will do is obviously they have to sell coins to be able to pay for their expenses.

So they'll always be selling some, even though they keep some on the balance sheet. The other thing that will be interesting to look at for mining companies, specifically those who mine Bitcoin, is that the mining difficulties. So the problems that the machines have to solve can evolve over time. So when China pretty much banned crypto mining earlier in the spring, the mining difficulty actually went down to encourage miners to do more and more calculations. So Hive will probably have benefited from that. So their margins will most likely be up in the quarter following this one which was march 31st 2021 so that's something else i would keep an eye on just to look at the kind of margins and profits they made for that quarter and typically it'll adjust every couple

weeks so depending if there's a big drop or increase in mining capacity around the world for bitcoin so that's why like as a side note, why Bitcoin is such an amazing program, if you'd like, because it really adjusts itself based on the capacity to mine. So the difficulty would adjust itself. I'll have to dig more into it. Like I'm not an expert on miners,

but I know there's a few listed in Canada. So maybe in the next few months, we can do an episode on just looking deep dive into like the different mining, blockchain mining companies across Canada and see which one make the most sense in terms of investment. Yeah, well put. And it's an interesting business model, right? It's really quite simple. The top line is basically a calculation based on the price of the coins, hash rates, as you were mentioning, and I guess like the ability to solve it. Or is that the same thing as a hash rate? Like I'm a noob. So, is that the same thing? I believe so. But again, sometimes I even get confused with those terms. So,

don't feel too bad. Yeah. It's completely new technology. So, if you're feeling like us and you're like, we need to use a little homework on this, then that's totally a reasonable thing. It's new. But you know, here on the podcast, we're a curious bunch and we're trying to figure out everything we can. So, we'll tell you when we know more.

Nike. Simon, what happened with Nike? Yeah, so Nike, they had a rough day last Friday because of a tough earnings release. It just was not that great. Let's be honest here. They had supply chain issues, which were the main culprit for that lackluster earnings release. They disclosed that they had lost 10 weeks worth of production since mid-July. It would normally take approximately 40 days to move product from Asia to North America prior to the pandemic. However, as a result of container shortages, port congestion, rail congestion, labor shortages, transit time is now up to 80 days. So double what it used to be.

A big part of that is also because a lot of their factories are located in vietnam and vietnam has had a pretty tough approach with covid lockdowns which has affected their production they revised their guidance lower which is never good when it comes to stock price obviously when companies revise guidance lower it's not as high as the market was expecting usually you'll see a pretty big drop in the stock price. They now expect full year revenue to grow mid single digits year over year versus their previous guidance of low double digit growth because of the supply constraints that I mentioned earlier. So in terms of numbers, first quarter revenues were 12.2 billion, up 16% compared to last year. That's 12% on a currency neutral basis because obviously Nike will be affected a lot by those currency changes.

Nike direct sales were $4.7 billion, up 28%. Nike brand digital sales increased 29% or 25% on a currency neutral basis. Gross margin increased 170 basis point to 46.5%. And their net income was up 23% to 1.87 billion. Personally, I mean, obviously Nike is a well-established brand. I think they'll probably bounce back from that over the long term. I don't think you're going to be looking at very high growth. You'll probably see a steady grower in terms of Nike. If I had to invest in this type of company, I would probably go to Lululemon just because I think their runway is way longer than Nike.

I think there is a lot more growth possible with Lululemon compared to a more established company like Nike. Yeah, well put. With Nike, I mean, if you're bullish on the brand long-term and it's very hard not to be, I mean, look what they've done. The short-term stuff like what we're seeing here with supply chain disruptions, that's when you're able to buy a stock like Nike that doesn't go on sale very often to buy it at a price that makes more sense. I think it drew down close to 10% with the news of lower guidance.

Buying great stocks on low guidance reports is, in my opinion, one of the best ways to buy stocks and make money. If the long-term story remains, if they're guiding for short-term concerns and the stock sells off, this is what you wait for, right? This is when you buy stocks. This is when you add, if you have it and you add to it. It's like when Autodesk, it's drawn down like 20% on short-term kind of concerns, like not even really, really concerns, but the market, Mr. Market, we know Mr. Market. He's a moody guy, right, Simon? Mr. Market is a short-term moody human, if you will. That's when you take advantage of it. Adobe, ticker A-D-B-E, Adobe achieved record revenue close to $4 billion at 3.94% in the third quarter. This represents 22% year-over-year growth, earnings per share up 28%. Simon,

this company is killing it and reported some really great results, yet the stock is selling off on guidance. Simon, we just talked about this, right? The Creative Cloud keeps on chugging with revenues up 21%. Demand for the Creative Cloud subscription continues to impress. Every time I think, isn't there so much competition? continues to impress. Every time I think, isn't there so much competition? Doesn't every person who needs Photoshop have it already? Doesn't everyone who needs Premiere Pro for editing video have it already? And then boom, another 20% growth on the subscriptions in these creative cloud services. Very impressive. As a side note, the margins on Adobe are insane. Very close to 90% gross margins. And they've had that pretty much ever since they've had this software as a service model.

And we've seen these margins on businesses that are doing this cloud-based software as a service. Have you ever owned Adobe? I don't think we've talked about Adobe that much considering it's almost 300 billion in market cap. I think we did, but like early 2020 or late 2019, like in the first 20 episodes, maybe I would say. It's been a while. I'm sure we've discussed it a couple of times, but like, I don't know. Neither of us have had a really particularly hot take on Adobe yet. They just keep getting it done. And I mean, their financials look incredible. The margins are dumb. They're insane. Yeah. Without having looked, I know that their digital signature offering has really grown the past couple of years. So, that's been a big tailwind for them. And they're one of the biggest competitors to DocuSign. So, that is a part of the business that's really interesting. But yeah,

we probably should do a deep dive on them at some point. Yeah, it's in the Stratosphere model just because from a quant perspective, it ranks so high. The Creative Cloud, they've really pivoted that. It's the subscription for creators and they serve creators who want Photoshop and then Premiere Pro as well. There's a lot of services as well in there. But those are some of the big flagship products. And bundling them into this Creative Cloud subscription has been a huge growth level for them to pull.

So they have lots of other segments as well too. But it's an interesting one to maybe discuss in the future. Yeah. And now we'll move on to another kind of experience play, Vale Resorts. They had their full financial year results ending July 31st, 2021. Net revenue decreased 2.7% to 1.9 billion. Net income was 127 million, million an increase of 30 410 million in free cash flow for 2021 which was higher than 2020 results were impacted by obviously stay-at-home orders earlier this year including in whistler and australia not austria australian ski areas to take a double take here i did not realize I was skiing in

Australia and I did some research and it's I guess southern Australia, the closest to the Antarctic I would say. Yeah. I thought every Australian that skis lived in Whistler. I was convinced of it. Yeah, I had to do some research but they do have – I think their season obviously. They're everywhere in Whistler. They all move there. Yeah. Well, Whistler and Banff, I would say. That's right. But essentially, because of how their financial year is set up, they saw a big COVID impact in their 2020 fiscal year and also their 2021 fiscal year due to COVID enclosures.

fiscal year due to COVID enclosures. Toll skier visitations at the U.S. destination was only down 6% compared to 2019, going back a few years, of course, pre-pandemic, which is good. And it indicates that things are turning around for them. They issued guidance, but they did caution that they could negatively be impacted by COVID-19. So, I thought it was interesting that they would actually go ahead and issue guidance. Personally, I probably would have played the COVID card if I was them a little longer just because there's still a lot of uncertainty, right, when it comes to that. I don't think we'll see widespread lockdowns for those type of activities again but i wouldn't you never know they closed they closed the resorts and like whistler closed its doors like with a month and a half left in the season this year yeah yeah exactly so while we were in what the third wave or whatever you

want to call it at that point so nothing's out of the realm of possibility so i just thought it was interesting that they still gave guidance but obviously, they put a lot of caution around it. This is an interesting business because they're quietly really trying to pivot the company in a way that in 2008, here's some stats for you. In 2008, 26% of revenues were from seasons pass, meaning 74% was from lift tickets. Today, it's almost 50-50 passes and lift tickets. It's 47-53. And they have been very clear that they want over 75% in the future of their revenue mix to be from seasons passes. So they want that locked in subscribers. It's like they want to move to that skiing as a service business model.

So what have they done? They massively slashed the price of the season passes at the Vail Resorts. If you're in Canyon or BC, that includes Whistler, Blackcomb. So when they did that, investors were like... Investors love pricing power, right? So they're like, what the hell is this? And then they just basically closed out their sales just very recently in the last few days for pre-sale for the season pass for the winter coming up. It's going to be snowing there soon. And they had record bookings in season

passes. And so they want to move to this, get the pass subscribers volume way up, get the people on the resorts. We've seen this before and people want to have that recurring revenue model mix well yeah and you minimize the impacts of mother nature right so if the weather is not nice during the winter or it's unseasonably hot and people can't use it as much while they're locked in with that revenue and they don't depend as much so yeah i remember like we have some local ski resorts here and that was the same thing they would always try to push the season passes they'd have like discounts if you bought it before like end of september and stuff like that and then they

would have discounts if you bought it between september and end of october and like different discounts so i'm not surprised to see that it'll be interesting if they achieve that and to see how they continue operating with COVID-19 in the background. Yeah, their revenue mix and the traffic through the resorts right now has become hyper local because they've been forced to, right? The international travel to the resorts and this affects the economy and the village and stuff too of where these places operate, but they've had to become hyper local and they've gotten it done. I mean, the stock trades at all time highs, I'm pretty sure. So very cool. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense,

and with them you can buy all North American ETFs, not just a few select ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and

keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of

your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's move on. BlackBerry. BlackBerry, Simon. When a company releases their press releases for the quarter and says, we meet expectations on revenue. The business is performing excellent, blah, blah, blah, blah. And then they say, revenues were 175 million. Internet of things segment was 40 million. And those are real numbers from the press release. And then they list these segments, but they don't say if it was up or down from the previous year on a

percentage basis, like a normal press release would. Normally, you would say that our revenues were $175 million, up or down X percent from the quarter last year, and during the same time period last year. Well, this revenue number is down 15% from the previous year. How did I find that out? Well, I had to look at old statements. I had to actually look on their financials from 2020, this time last year, because they didn't make it obvious. BlackBerry's income statement looks like a nice smooth trend of a growth stock or a high quality compounder in reverse. It looks great if you're looking at this stock upside down. I expect BlackBerry to carve out their niche. I think that it can do a few things great. I do. I really do. And I really hope they can. It's a Waterloo, Ontario, Canada story.

But I do not expect this company to be bigger in the future unless something major changes. This is the ongoing fall from grace. The stock is down 95% from its peak. When BlackBerry was cool, man, remember that? Too bad from a Canadian story perspective. But if I owned this business, if I owned this stock right now, I'd be looking to move on. It trades at 10 times sales for mediocre software margins and negative sales growth. It's really hard to say you'll make any money. I don't see any IRR moving forward on this stock right now based on my quick analysis of the business. Yeah. And we did a bit of a dive on it, right? We won one of our polls and we didn't love what we were seeing. I think it's also,

you can make a case if it was priced attractively at a good valuation, which is not the case currently trading, you said, what, 10 times sales roughly. I mean, if you were getting like a really good discount and there might be some prospect of some slow, steady growth going forward, I think you could probably make a case for it. But for me, it's still wait on the sidelines, see if they can turn this around, which at this point, I think they've been trying to turn this around for what, like five, six years, if not more now. It feels like a decade to me. Yeah. So, I think it's in, what's the CEO, Miss Chen, right?

Jeff Chen? No. John Chen? Oh my God. John Chen. That sounds familiar. Let me look it up. Blackberries. I had it. I was looking at the releases today. John Chen. John Chen. Okay, perfect. He's been the CEO since 2013. He came in and everyone's like, he's going to turn this around into a software security business.

They have this segment in the auto industry. And I think they saved the company. Yeah. But it's been melting since. They also got a pretty big backer in Fairfax Financial. So Prem Watson. So I guess that's worth something. Again, I think for me is just a wait and see. I hope they do turn it around and they carve a niche, like you said, and maybe even develop something and increase those margins. But I think they have something

to prove. And I think the valuation that they're trading at, I'm pretty sure I can find something that trades at 10 times sales that's growing a lot faster than BlackBerry. Or at least growing. Like it has a revenue growth rate greater sign than 0%. You could find a lot of them at similar margins. I think the gross margins are like 60%. For software as a service, that's not even great, which seems ridiculous, but it's really not good. Accenture, the consulting firm had revenues increased 24%. This is an Irish company, had revenues increased 24%. This is an Irish company, ticker ACN. Free cash flow was $2.2 billion for the fourth quarter and $8.4 billion of free cash flow for the year. Whoa. Earnings per share was up 29%. They increased the dividend 10% as they usually do. This is one of those

dividend aristocrats in the making from my perspective. Everything is up double digits across the board. What's not to like? Now, if you're an investor that likes high quality roll-up strategies like grow by acquisition firms, Accenture has got to be on your watch list. They are prolific acquirers. I get notifications for model portfolio companies with Stratosphere, of course. So since I have Accenture in the dividend growth model portfolio, they buy a new consulting firm. Simon, I swear it feels like every day of the week. It is an acquirer of professional services that generate tons of cash. It helps that they specialize in this digital transformation type

of consulting services, which is in very high demand. Simon, did you realize that this company now has a whopping market cap of $215 billion? No, I did not. I would have guessed probably around $75-$80 billion, but I'm not the most... You're quietly just compounding, man. Yeah, I'm not the most familiar with it, but especially with the current valuations that we're seeing. But it trades at a fair price. It trades at six times sales, like 22 times free cash. Yeah, that's not too bad. Yeah, that's actually...

I mean, it's consulting, so it's not like sexy high margin. It's consulting. Yeah, it's actually pretty cheap compared to some of the valuations we're seeing. But... Well, we just talked about BlackBerry that trades at 10 times sales for declining business, right? So these deals exist out there. I mean, Accenture is a high quality compounder, high quality roll-up company, and one of those truly great European firms. I mean, you can probably make a case that it's not cheap just for a consulting firm.

But again, I mean, we probably could have a full episode on how the market is not cheap as a whole right now. So yeah, I mean, it definitely sounds better than BlackBerry like we talked before. But again, different type of businesses. Before we wrap up this episode, and this is not even on our notes here. So Simon, I just wanted to bring it up. Twitter's going nuts. Everyone's making fun of Robert Kiyosaki, the rich dad, poor dad guy.

bad guy. About every single month, this guy writes some dreaded tweet. Robert Kiyosaki, the author, he writes this elaborate tweet about how the economy is going to implode. And I kid you not, he writes this saying, sell all your stocks. The market's going to implode literally every single month for the last 10 years and the stock market's gone up and up. I'm bringing this up because it doesn't matter who you are. You could have all the clout in the world for writing a very popular finance book like Rich Dad, Poor Dad, which is really basic and elementary. I don't even think deserves a lot of credit to begin with, but that's another discussion. Even if someone has a lot of credit, if they are making general broad market predictions, like, Simon, the stock market's going to crash, sell all your stocks. Whether this is a friend of yours,

whether this is an expert, whether this is some clickbait ad that you see online, take all broad market predictions in terms of upcoming crashes or upcoming bull or bear markets with an absolute grain of salt. No one has ever predicted and timed the stock market ever in the history of the world correctly and with a repeatable nature. So I just wanted to bring that up, Simon, because market predictions are a complete waste of time. So is he saying to sell all the stocks and what, keep it in cash or? He's saying even Bitcoin is going to crash. Like, dude, it sounds like an absolute psychopath on this tweet, but someone made a graph that shows all of his like bearish market sentiment tweets over the last 10 years graphed along the S&P 500. And you know what the

S&P 500 over the last 10 years looks like it's a you know straight line up I find it hilarious man yeah I mean you have to also put things in context and I'm like whenever I see an all or nothing type of prediction or tweet that's when I I kind of I mean I question it so that's that's obviously exactly what you seem to be saying it's basically you know that doom is coming and just sell everything and everything will go to zero so yeah I'm like that too you have to make sure you know what you own we've told you like we've been saying this a lot of times before make sure you know the businesses you own and make sure you diversify because if you're well diversified in stocks but potentially other assets as well you'll be able to sustain those type of corrections

or bear markets much better than someone who does not know what they own and then there's a big market correction and they just panic yeah well put some we've done 103 or 104 recordings of this podcast, talking about hours on hours of content. And we have never once ever made a broad market prediction. Once. Ever. Didn't we have our predictions? We had our hot takes, but they were more micro they were more like

i think that the valuation on tesla is absurd and that it's probably you know but they were never like i think that impending doom and crashing of you know the fed is incoming right i think i had said there would be like a 20 market correction or something like that or more and then march of 2020 happened. I think that's the only thing I did, but it was never doom. Oh, shit. Yeah, you did say that. But again, I wasn't saying sell stocks. So, Simon's one for one. Or anything like that. Yeah. Simon's one for one. That's actually really funny. I forgot about that, but you are one for one. So, basically, don't listen to people who make market corrections except for Simon because he's

literally has a crystal ball on some of this stuff. For each time I'm right, I'm probably wrong about four times when it comes to that stuff. So, I'll just say that as an asterisk. And last thing I wanted to add while you were talking, I googled. So, ASHRAE for Bitcoin. So, it's basically the solving skills of the computer to do the mathematical problems. So, when the hash rate goes down too much for a prolonged period of time, then the code basically automatically adjusts to make it easier to do those problems. And then when the hash rate increases, the opposite happens. It makes it harder. So, it basically levels out.

It's an interesting business, right? It's a very strategic operation of trying to find margin between electricity costs and computing power. Yeah. Yeah, exactly. Simply put, right? It's a margin between computing power in these massive server rooms of these computers solving problems to mine Bitcoin and keeping your electricity costs below the net income you can generate from mining Bitcoin. Yeah, that's it. It's as simple as that in terms of equation. But the problem is you can't really predict what your revenues will be. That's the biggest issue, right?

Very unpredictable. Very unpredictable. So yeah, I think, I don't know. I think we've talked enough about it. You have anything else to add before we wrap up here? If you have not been to stratosphereinvesting.com, go ahead and do so. You can go to stratosphereinvesting.com. If that's do so. You can go to stratosphereinvesting.com. If that's too hard to spell, try to understand. Go to getstockmarket.com. That is where you can find analytics and research by yours truly.

My work on there. This is completely my life's work at this point now. So go check it out. That is stratosphereinvesting.com. If you have not reviewed the show or followed it, subscribed on your podcast player, go ahead and do so. We really appreciate it. We really appreciate all the feedback we've been getting and the donations. And the donations that we didn't recognize today, we also appreciate you. There's been a few other ones. We'll work through the list on that and

give out the shoutouts where credit is due. Thank you so much. Take care. See you in a few days. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.