The Canadian Investor - Top 10 Most Bought Stocks by Canadians

Episode Date: January 12, 2023

In this episode, we discuss the recent acquisition by Nuvei, the roger shaw tribunal approval tech layoffs and troubles at Bed Bath and Beyond. We also look at returns by investment class over the last 37 years and the most traded stocks by Canadians using TD direct investing. Tickers of stocks discussed: NVEI.TO, CRM, AMZN, AQN.TO, TSLA, SHOP.TO, LULU, BNS.TO, SU.TO, TD.TO, ENB.TO, LSPD.TO, AAPL, BBY, NFLX, TSM Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Sign up to Stratosphere for free 🚀 our platform for self-directed stock investing research. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense. Register for ShakepaySee omnystudio.com/listener for privacy information.

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

coming through the pipeline or simply want to lower the risk of your overall investment portfolio, EQ Bank's GICs are a great option. The best thing about EQ Bank is that it is so easy to use. You can open an account and buy a GIC online in minutes. Take advantage of some of the best rates on the market today at eqbank.ca forward slash GIC. Again, eqbank.ca forward slash GIC. This is the Canadian Investor, where you take control of your own portfolio and gain the confidence you need to succeed in the markets. Hosted by Brayden Dennis and Simon Belanger. The Canadian Investor Podcast. How are we doing? Today is January 11th, 2023. My name is Brayden Dennis, as always joined by the majestic Mr. Simon Belanger. Welcome into the show. How are you feeling? I'm recording. This is our first

recording where I am in beautiful Costa Rica. How are you doing? Doing well. Yeah, I wish I was there. The temperature has gotten a bit colder here finally. Normal January weather. So I wish I was down south for sure. Dude, a monkey threw like a piece of wood at me this morning when I was going to get my car. He was up on the tree, and he's legit trying to pelt me with a rock or something. These monkeys are mischievous. No, it's good, man. And it's kind of nice to kind of flesh out this idea that the show goes on. The show goes on no matter what. Let's kick it off here. We got some

good news items. I'm going to go through some return by asset class last year and talk about some stuff happening in big tech. And then we'll finish with Canadian investor sentiment, like what people are holding in their accounts. I think it's a segment that we do quite often. It's always a good one. Let's get into it. What's new here in the Canadian drama, the business news landscape that always has drama? Yeah, yeah, Rogers. I think it's probably Rogers is the equivalent to Tesla in Canada for drama. That would be different, obviously different type of businesses. But last week, Rogers and Shaw won approval from the tribunal. So that's a competition tribunal.

They dismissed efforts from the competition bureau to blog the purchase of Shaw by Rogers Communications. The competition bureau is planning to appeal the decision later this month, but from what I've read, it's unlikely that they will actually win the appeal. As part of the transaction, for those not aware, Shaw would sell its Freedom Mobile assets to Quebecois Inc. Quebecois, I guess I should say it in French because it is a Quebec company. They are based in Quebec and they own the telecom Vidéotron. Vidéotron would then become the operator of Freedom Mobile in Ontario, Alberta, and BC.

And the reasoning behind approving the transaction is that it would create a fourth national player in the wireless space across Canada and will also allow Rodgers to be more competitive against its rivals Bells and Bell and Tellis for the other parts of his business so that's the reasoning behind it I don't really disagree with that because I'm familiar with Videoton but they're predominantly in Quebec so if that would allow them to have exposure to the three other most populous regions of Canada. Is that owned by the province of Quebec or is it a completely private? It's a private business. Yeah. And I think, I think it's anyways, they're, they're well known, pretty, pretty well off family in Quebec that, that owns that. So I think one of them was in politics some years ago, if I'm remembering correctly. I mean, I moved away from Quebec some years ago,

so I don't follow Quebec politics as much. But yeah, they're very present in Quebec, that's for sure. Got it. And one more news item from you here on the docket. Yeah. This is kind of breaking, isn't it? Yeah, so it was announced a couple days ago. We're recording on January 11th. So Nuve will be acquiring Paya Holdings for $1.3 billion USD. All the figures here will be in USD because that's an American company. For those not familiar with Nuve, it's dual listed in Canada and the US. As part of the deal, they'll pay $9.75 per share, which is a 25% premium compared to the price that Paya Holdings

was trading before the announcement. It's slightly less than five times trailing 12-month sales. trailing 12-month sales. So, you know, not the cheapest price, but I guess for a company like I'm not super familiar with Paya, but I assume that they're growing relatively quickly here. And Nuive will pay for the deal with a combination of cash reserves, credit lines, and a new $600 million USD credit line. That's a little bit worrying for me, using credit lines to pay for an acquisition right now in a rising rate environment. I mean, they do say it's to provide them with additional flexibility. I guess, you know, I'll just give them the benefit of the doubt that they know what they're doing. And part of the attractiveness here of Paya Holding is that most of their business is done in the U.S. while Nuve is more of a global payments provider

and they also stated that about a third of Paya's business comes from clients in health care, governments, education, utilities and other non-cyclical clients. So it is the reasoning is that it is somewhat recession resistant here. And on a trailing 12-month basis, the combined companies would have $1.1 billion in revenues, $800 million coming from Nuve and the rest from Paya. And Paya is also profitable on a free cash flow basis. And they are essentially breakeven on a net income basis. They lost $800,000 last year and $500,000 the year before. So based on their revenue, I think saying they're breakeven is a good assertion here. Very interesting.

Big deal. $600 million on a credit line. Oh, man. Lever up, Nuve. I like this is a big diversification play for them right yeah like for the most part right so much of their their volumes coming from like sin sin stocks gambling type stuff i believe yeah they have a decent part from there and i think one of the attractiveness of pia holdings is they do a lot of integration in software. So payments integrated. And for example, if your business and you use an accounting software, well, the accounting software as a payment integrated in it, so you can send an

invoice and then your customer can just pay it basically with the invoice directly to your bank account. Very cool. Let's talk about investment returns by asset class from 1985 all the way through to 2022 and double click on 2022 because we're now in January. And this is done by a blog called The Measure of a Plan. I want to shout this man or woman out. I don't know who they are, but I found their blog ages ago, and I'm glad he or she is actively posting again. I do know they're Canadian. That's all I do know. And if you're listening to this, The Measure of a Plan, actually, I'm going to DM you this episode when it comes out. But keep making dope content. You have a beautiful way of displaying the data, complex visuals, and bridging tech and investment concepts. So I appreciate you. They make this periodic table of elements, basically type vibe of returns by asset class by year.

interesting to see and it's all color coded it's interesting to see what kind of works year by year and the randomness of it but then also zooming out on a CAGR basis like on a compound annual growth rate which ones have done like well through the test of time and you'll see here is that there are a lot of asset classes that either do like the best or the worst each year, like gold, for instance, it's always like, great when the market sucks, or like terrible and like doesn't do anything for a long, long time, as like a perfect example. And if you look all the way out from 88, and looking on these past years, you'll have years like gold did exceptionally well in 2020, for instance. But gold has only caggered 1.7% historically, right? So like, that is not beating inflation by any stretch. And so if you look at what did well in 2022, cash basically, despite inflation, was better than bonds or stocks because those were all in double-digit declines. Canadian stocks were down 11.9%, and they were the third best performing asset class in this list.

REITs were down 31%, which is the worst performing by asset class. U.S. large cap stocks down 24%. So that's like full-on correction mode. And then bonds are somewhere in the middle. But look, international bonds, high-yield bonds in the U.S., all down more than 15%, which is pretty insane to think about. T-bills were... Yeah, well, that's what they're including,

cash and treasury bills together. Yeah. Yeah. Together? Okay, okay, true. Cash and treasury bills together. Yeah. Yeah. Together. Okay. Okay. True. Yeah.

Yeah. So, I mean, like, if you look at this, you're like, wow, every asset class sucked to own in 2022 for the most part. Like, every asset, it was the worst year for the 60-40 portfolio in like 40 years or something, both down double digits. And so you zoom out and you're like, okay, that sucked. But if you look at US large cap stocks, emerging market stocks, US small caps, Canadian stocks, they've all achieved pretty healthy returns during that time period even if you include the drawdowns and it matches what you'd expect correlated to the risk spectrum and it's just an important reminder that like you know over the long run the weighing machine

matters and and in the short term the the voting machine is in full effect. But on a long view, on a CAGR basis, the weighing machine is in full effect. You can assume that you're going to be in that 8% to 10% for equities. And this is not just my opinion. This is the data. And this is the data on a recent basis as well. And Simo, remember I mentioned last episode, it rarely ever is in 8% to 10%. Look at the returns on equities year by year. It's either up big or down big. This is what you should come to expect. No, no, exactly.

And I mean, I like to use a more conservative approach is because I like to plan more conservatively. But clearly, the data shows that yes, long term, especially US talks will perform around eight to 10%. I personally like to use six to eight just because I like to build kind of that margin of safety and if I'm planning, but that's just a personal thing. I'm just more, you know, typically a bit more conservative in terms of just planning purposes, not necessarily my investments, but just in terms of expectations. No, I think that that's fair. We're doing like a bunch of projections right now in my company. And I'm like, okay, well, let me, let me build some, you know, scenarios, right? Like the scenario modeling is important to do, right? Because like, if stuff goes wrong and you're planning for 10% and you achieve six and a half, and that's like detrimental to your retirement,

like that's going to be problematic, right? So I think what you're saying makes complete sense. Yeah. And I think the best, that's the smart way to look at it. I think the best way to look at it is usually make, you know, kind of, you know, the basis three scenarios, you have a pessimistic, you have a kind of middle ground scenario, and then optimistic. And then you usually want to be able to plan that things will work even if the pessimistic scenario actually happens. And that's how like you can transfer that to, you know, publicly listed businesses, right? Is that, you know, are they able to survive in the worst case of scenarios? If so, then they'll do really

well if it's, you know, average and obviously, the really positive scenario, they'll do extremely well. So I think that's something to keep in mind, even when people are investing in the stock market. 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. for details. That is questtrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades,

their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends. And there's other stuff like learning Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store, and I'll see you there. What is up with tech layoffs? I know I've been seeing you post some

stuff on the good old Twitter internets. Give me the rundown. I mean, this has been all over headlines, I'd say for the better part of eight to ten months in my mind where are we at now here with this yeah so well i mean there were two pretty big announcement last week the first one salesforce uh so i don't think i specified this is tech layoffs i don't i think i was hinting but but I don't think I said it. Yeah. Yeah. They would have guessed it eventually. So, yes, last week, Salesforce announced it was laying off 10% of its workforce. The CEO, Mark Benioff, said that Salesforce just hired too many people because of a boom in revenue during the pandemic. So they hired, I guess the subtext here is they kind of projected that this would continue and clearly

it hasn't. There's also been several executives that have left Salesforce in late 2022, including co-CEO Brett Taylor. And it's not the first co-CEO to leave the organization, which, you know, raises some questions. I don't know about you before I continue, but when you have this kind of turnover in, you know, leadership, it's a bit worrying for me. I don't know about you before I continue, but when you have this kind of turnover in, you know, leadership, it's a bit worrying for me. I don't know about you. Well, I think that it is and it comes down to two kind of root causes. One, the obvious one is that there's maybe the culture's off or whatever. I don't know.

I don't know that. I don't work at Salesforce. But usually for me, it comes down to like compensation and incentives and and not even just so much like total compensation package but like largely around like long-term incentive structures and when there's a lot of turnover usually those long-term incentive structures are just out of keel a little bit. And I think that that's usually where my mind first goes. Yeah. Yeah. So for people like not super familiar with how things oftentimes will go is if you get a new

CEO, for example, that's pretty normal to see some big changes in senior leadership because you get a new CEO they want to bring the people that support their vision you may even see resignations because people just don't think they're a good fit so that's kind of more normal but when you have one that's been in place for a very long time like Mark Benioff it's a bit of a head scratch or maybe you know there's good reasons like you just mentioned and, you know, everything will be all right. But there's also been a leaked two-hour all-hands meeting in which apparently employees were not happy with Mark Benioff who was dodging questions about the layoff. And from what I read, it was kind of a bit of, it was all over the place. And there was a lot of questions that were being raised about Benioff's leadership in the chat with the employees.

So, I mean, I don't know to what extent that's the full truth behind it. But it does create some questions and things that if you're looking to invest in Salesforce or your shareholder, I would definitely recommend listening to the next conference call because he's probably going to be getting questions on that yeah no doubt i mean look it's a hard a hard position for many of these leaders and founder run companies like this one where when things are good things are really good and you keep hiring you keep growing and then as soon as you face a little bit of adversity, which tech, it feels like is facing a lot of these big tech companies are facing adversity for the first time in the better part of over a decade, in my view. You know, some changes have to be made. I think that that's kind of the normal ebbs and flows. I know that, you know, after the Slack acquisition,

the all the execs that came over there, they also have just recently mostly announced their departure too. And that's normal, right? Usually you make your earn out post-acquisition. You collect a bunch of stock of the company that you're being acquired. And then you basically pack up and move on. But usually not all of them go right like yeah you know what i mean so that's the that's the red flag is that like like everyone's going right so something just doesn't seem feel right there but this is just an outside speculators uh view yeah yeah and it could

just be you know benioff making the hard decisions here, too. Right. So people just revolting a bit against that. So something to keep in mind. But I think you should get a good sense if you're listening to that next conference call, because there's going to be questions on it. I mean, if analysts are not asking questions on that, they're not doing their job. So I'll just say that. I wonder, can I come up with a bold prediction that i just slipped my mind go go for it we'll have to write it down because i won't remember to go back to this episode um you know the paypal mafia obviously like all those guys who went on to do incredible

things elon musk peter teal the list goes on and on and on yeah um reed hoffman i think too uh yeah we did an episode yeah we did the slack guys could do something amazing i feel like you know what is it stewart butterfield that started it all all of them have just hit their own outs and they're basically leaving salesforce and they're probably like hungry to do something new after they chill a little bit but like they built one of the most viral products in the history of tech uh which is slack and i don't know i feel like there could be like some slack mafia that forms after this okay so what's your prediction and then give yourself a few years at least yeah i i'd say that within the next five years the the slack mafia creates another big hit okay what's big like a 20 billion come company yeah another yeah another unicorn we'll just say unicorn okay billion private okay maybe ipos that's my prediction. No, that's good. Okay. Yeah. Okay. We'll write that

one down. So the next one here, Amazon. So that one also made headlines. So they announced that they will be laying off 6% of their corporate workforce, which amounts to about 18,000 employees. Although as a whole, I think it's important to keep in perspective that's less than one percent of Amazon's workforce so Amazon is a extremely large employer but clearly they're downsizing some of the staff that helps support the employees that they probably ramped up I'm thinking here's some HR you know when you're doing hires and things like that if you're slowing down hiring you just don't need as many and And the reason here, very similar to what Salesforce said, CEO Andy Jassy, saying they had hired just rapidly in the past two years, and now they're facing economic headwinds and slow growth. So they have to adjust accordingly. And that's the theme that you're seeing a whole

lot with these tech layoffs. Someone asked me on Twitter what I thought, what the reasons were. And, you know, that seems to be the reoccurring type of theme here is just they hired a lot during the pandemic and then things are slowing down. Some of these companies are still growing rapidly, but just not as quick. And I pulled off some data here. It's pretty interesting. The first one, just big tech layoffs. So we talked about Amazon. Meta is also laying off 11,000 employee,

which is 13% of its workforce. Salesforce, a total of 8,000 in all, which is a 10% I just mentioned. Cisco, 4,000, which amounts to 5%. Twitter, they reduced by 50%. That's 3,700 employees. That was in the news when Elon Musk came in. Better.com, 3,000 employees, which was 33%.

And Peloton, 2,800 employees at around 20%. At the end of the day, I don't want to make this too light because it sucks when people are impacted, right? People, it's their livelihood, it's their jobs. But these companies have to do that, right? Because at some point, you have to be able to survive and thrive. And if you don't make these hard decisions, it could really impair you for a long period of time. In the worst cases, it could really could lead to even worse things, right? If you're looking at a company

that's really struggling. And then I pulled some data to really cool site. I don't know if you had heard of this layoffs.fyi. I was just looking at it. By the way, that is the best domain name ever. layoffs.fyi. Holy, that's the best domain name. I didn't even know you could get FYI as your TLD. I think that's what they're referred to. Yeah, I was doing research and then I saw an article and it quoted this. I went to the site and they have like really amazing data. If you look at that, if you're looking to look at table. Yeah, it's all just on an air table.

Like someone built this with no code because it's all just air table. Yeah, I mean, mean dude there's so many awesome websites people can make without having to know any code with all these no code tools like air table and stuff uh this is brilliant this is good yeah and basically the chart i pulled off is just the uh layout laid off since q1 of 2020 uh up now. So essentially, it's very easy to look at the graph. So essentially, you had increased layoffs in Q1 and Q2 of 2020 when the pandemic hit, then almost no layoffs until Q1 of 2022 when companies actually switched to hiring because of the increased demand. And then since Q q1 of 2022 you see a very sharp

noticeable upward trend i mean it looks slow for q1 2023 because we're just a week into 2023 but the fact that we're just a week in and they're already counting around uh 20 000 layoffs it tells me that the trend will probably be continuing at least for this first quarter uh but just an interesting thing to to look at here yeah q1 looks high for where we are today oh yeah i know yeah it's the 11th of january um that's it yeah yeah okay this is and and well yeah you're pulling this data from Jan 8th. Yeah. Jeez. This is to no surprise, right? You and I have talked about this extensively,

that tech had gotten super bloated. Like, you know, people were saying, oh, shoot, there's a recession, and then Google hires 13,000 employees in one quarter. It's like something has to give, right? Like something has to give. I think that this is very normal ebbs and flows. And the Fed ain't going to stop until that employment rate takes a budge, right?

Well, I mean, Powell, speaking of the Fed, just a quick mention here. He came out, I think, a day or two ago and said that they're looking to get the rate to 5% and leave it there for a bit. So there's a little bit of hiking left to go. Let's just say that. Jeez. Well, there you go. 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 Money Cents. 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. That is questrade.com. Calling all DIY do-it-yourself investors. Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends, and there's other stuff like learning

Duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. Some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. All right, let's move on to our next segment of something we frequently touch on every once in a while, which is called the Canadian The Canadian Investor Sentiment and TD Bank publishes their most active moved securities and stocks on the TD brokerage platform. So thank you all for posting that because it makes for interesting content. The number one, and this is since November, the number one most purchased stock on their brokerage is Algonquin Power.

You're shaking your head. That's people chasing yield right there. That's like 100% people chasing double-digit yield. They're seeing it 10%. They're going after it. That's why I'm shaking my head. I'm like, yeah, they're like people. They just look at dividend yield, and they're like, they get excited and they buy it.

It's either a yield trap, a value trap or an amazing trade right now. And I can't make sense of it. I can't make sense of their capital allocation. I can't make sense of their balance sheet. I can't make sense of the management team. I've been sniffing this out for a long time now. team. I've been sniffing this out for a long time now. I'm patting myself on the back. I've been sniffing out Algonquin's questionable capital allocation and balance sheet management for two years now. And you've seen the drop. Now the yield's at like 10%. But they've already, they made a press release that was like, we're cutting the dividend yield without saying we're cutting the dividend yield. Like they did every single, the dividend yield doesn't make sense, cutting the payout. They did every single thing, Simone, to say we're cutting the div payout without saying we're cutting the div payout. It was incredible.

Number two, down from the first slot is Tesla. There we go. Yeah. Get out of the way, Tesla. Algonquin's here. Amazon, which was up quite a bit. I do think Amazon's got too cheap. Shopify in there as well.

No surprise. We see some Canadian names. Bank of Nova Scotia. Suncor there as well. No surprise. We see some Canadian names. Bank of Nova Scotia, Suncor, TD Bank, Enbridge. So, you know, those Canadian names that frequent this list all day long. And then Lightspeed is still there. Still getting bought quite up in droves by Canadian discount, sorry, yeah, discount broker buyers. And Apple, which seems to be always in the top 10 as well, being a couple trillion in market cap, that is no surprise. And then I also pulled here, I think we can safely extrapolate this to just Canadian asset class holdings, which is Canadian equities 52.6%,

US equities 27%, other 10.5%, international equities 4%, cash 3.8%, fixed income 1.37%, and global fixed income. So that was Canadian fixed income and then global fixed income at 0.3 percent so too long didn't read is held in here is basically no bonds and a ton of canadian home bias on the stock side yeah yeah i'm assuming others it's probably like options like uh bitcoin etf stuff like that right they probably put that all in kind of one big pool yeah because it's pretty it's yeah anything they can't safely put into one of those buckets let's throw it in other I mean it clearly shows that there's still a strong Canadian bias the one thing I do wonder is the cash and cash equivalents I wonder if they include money market funds in here or if that would be in the other I'm not sure yeah i'm not sure i probably

included because it's cash equivalent it does say cash equivalent so i feel like if it didn't they would just say cash yeah anyways no it's always interesting to see where where people and you can see some themes right people kind of the light speed I'm assuming it's probably people thinking it's dropped a whole lot and they see value in there and same kind of thing with Algonquin but I don't know I feel like Algonquin's a pretty risky play I mean if you've done your homework and you think it's gonna bounce back I mean definitely make sure you do your homework there because i would not be banking like you just mentioned on that juicy dividend i think it's pretty inevitable that they'll be cutting it yeah and and look their assets are utilities so like their business is not risky it's the fact

that they have somehow got themselves in such a precarious situation and so much debt with like not even good rates like i don't what are they doing issue green bonds you idiots um yeah i it makes it's made no sense to me that like i i should never feel that I can run someone's business better and I have no idea how to run their business. That feeling should never come across my mind and it does with Algonquin. And for those reasons, I'm out. Now moving on here to another business that's in trouble. Obviously way more trouble than Algonquin. I'll make that clear.

BetBad and Beyond came out and warned of potential bankruptcy. I know they came out with their Q1, I think, earlier this week. But that's beside the point because, I mean, they basically came out to, I guess, give people a heads up that it was not going to be good. So it's one of the pandemic meme stocks. It really went up. I think it was not going to be good. So it's one of the pandemic meme stocks. It really, it went up, I think it was last year. I think it really went up on the Wall Street bets type of deal. And I think what's interesting here

is the last paragraph of the statement that was issued by the company, and I'll quote it. The company continues to consider all strategic alternatives, including restructuring or refinancing its debt, seeking additional debt or equity capital, reducing or delaying the company's business activities and strategic initiatives, or selling assets and other strategic transactions and or other measures, including obtaining relief under the U.S. Bankruptcy Code. These measures may not be successful.

So essentially, they're saying that there is a going concern here. They're facing some liquidity issues. I'm not sure who would be actually willing to offer them some debt. I posted something on Twitter about their profits and free cash flow, which has been on a downward trend for years. So it's not like they have a great business model here. They all have a unique kind of product. You can go to pretty much any major,

you can go to Walmart and pretty much find everything that you'd find at Bed Bath & Beyond, right? So I think it's pretty dire here. Bed Bath & Beyond, right? So I think it's pretty dire here. Bed Bath & Beyond also stated that their reduced credit limits resulted in lower levels of stock in their presentation. As a retailer, that means that they are having issues buying inventory since they are running out of cash

or credit options. Retailers have to first buy that inventory and then sell it. So if you have no cash to do so in the form of cash or credit options. Retailers have to first buy that inventory and then sell it. So if you have no cash to do so in the form of cash or credit and have no one willing to provide you cash or credit, then you are essentially entering a debt spiral. So I think that's what's going to happen here with Bed Bath & Beyond because if you can't buy inventory you need, that means that you have lower sales.

If you have lower sales, it means that you'll lose more money since your costs are probably not going down as quickly and this is just another case that if you look at their financial reports you could have easily spotted this their q2 reports show they had 135 million in cash as of august 2022 compared to 439 million in February of 2022. So it's gone down dramatically. And then in their first two quarters of last year, they had a net loss of $724 million, and they had lost over $800 million in free cash flow.

And I think that goes back to the zombie company segment, right, that we had done last year, late last year. So I encourage people to go back and listen to that if they're kind of wanting to learn a bit more on what zombie companies are. And I, you know, it's not awesome news, granted talking about this, but I think it just reinforces that in the current macro environment that we're in, there should be increased focus on quality, you want to make sure you're betting on good or great businesses, not businesses that are in a downward trend just in the hopes that you might be able to catch a value play. what purpose does it serve like its customers right now? I don't know. It's like lost in between its value proposition. And you're right.

Nothing, nothing you can't get at Walmart. And this is kind of like, you know, in tough economic times when, when companies like this that are on the verge or there's zombie companies when they're on the verge of bankruptcy pretty much all the time. And then, you know, the consumer sentiment goes the other way.

And the strong gets stronger, basically, because competition just keeps getting wiped out. And I think this is a perfect example. Yeah, exactly. And you'll see some bad companies this year. Like this is not going to be the last one, especially when the debt comes due and they have to roll it over because they can't pay it so when you're rolling over is basically your debt comes due you've been paying interest but now you have to refinance and if you're not in a good and strong position there's higher rates there's a chance either the rates will make you go out of business if you get financing or no one will want to provide you

financing so then the other option is to issue new shares but again if you have a stock like bed bath and beyond that's down the gutter um issuing new shares is you know would not do much because they would have to issue so much and dilute so much and who would buy them anyways so you're kind of in the in the death spiral it's snowballs out of control basically that's it let's look at an earnings preview we are about to be in thick of it my brother uh u.s banks are reporting at the end of this week tsm actually reports today when this pod comes out, which is tomorrow. Week of the 16th picks up really nicely.

We got Netflix on January 19th. That's one I'm really interested in. We're definitely going to cover on the pod. I want to see where subscriber counts go on that earnings release. I'm actually very intrigued how Netflix is doing, and they've rolled out the new pricing, the ad-supported model. And for the first time, you know, facing some pretty serious adversity.

It's not like the business is in, like, dire trouble or anything, but definitely facing some adversity for the first time in the last couple quarters. And, you know, it's the laws of capitalism, right? It can't be good times forever. Yeah, I was going to say, yeah, I was just going to add Netflix. I'm going to be intrigued to see how the kind of the economics behind that ad supported model. That's the one thing.

I don't really care about the subscriber count personally. I just want to see the economics behind it. Yeah, fair enough. Then the following week, January 23, we got the big dog of earnings week that week uh big tech visa asml rope or just some of the ones that we're gonna for sure cover it's gonna be jam-packed so make sure you tune into the show um every mondays and thursdays but thursdays we do the earnings report updates over the next couple weeks they're gonna be uh gonna be really

important to kind of and and interesting, right? Like Netflix is a perfect example too, where it's a business facing some adversity, switching up, like pivoting to try to accommodate the lower end of the market as well. They lost a bunch of subscribers net-net when you factor in Russia, like in Q2 of last year, and a changing landscape with competition. But then lastly, also a changing consumer. And this is a business to

consumer business. So it kind of it kind of checks a lot of boxes for me in terms of looking at how people are feeling. Yeah, I do wonder if they may end up cannibalizing themselves a little bit with the ad-supported model, especially if people are trying to cut costs, right? People are feeling the pinch with inflation and potentially people losing their jobs, but they still want to keep it. So I'm very intrigued at what this year will look like for Netflix. I think there's a lot of moving parts like you just mentioned. Totally agree. Now I guess the last thing on the slate here.

So Lululemon adjusted its Q4 guidance and the stock took a big hit. It was down by close to I think 12% on Monday when they came out with this. So they first increased their sales guidance by 1.9% compared to what was previously stated. Their previous range was between 2.66 and 2.7 billion. Obviously, when I use a percentage, when there's a range, I just use the mid-range here. The earnings per share range got narrowed as well. So it is now slightly higher on the lower end and slightly lower on the high end which is fine I mean they're just they have more visibility into

the quarter so they can make it a little narrower here it's now between 4.22 and 4.27 compared to 4.2 to 4.3 now they lowered their gross margin outlooks by 115 basis points, which is, again, the mid-range. And I think that's what the markets really didn't like because they were originally expecting an increase of 10 to 20 basis points in that gross margin and now a pretty significant decrease. And for the new listeners, basis points are basically one basis point is 0.01%. So 115 basis point would be 1.15%. So I think all in all here, I mean, I think it's kind of a lukewarm. It's not all bad. Lululemon had really increased its gross margins over the last couple of years.

So they did have some room here. The one thing I mentioned the last quarter years. So they did have some room here. The one thing I mentioned the last quarter when they reported earnings, and I am a shareholder here, is that, you know, they did have a lot of inventory on the balance sheet. So they did that purposely because they thought that a year earlier, they didn't have enough. So it'll be interesting to see how those inventory levels are at right now and something to keep an eye on because the more it stays elevated, if the sales don't keep up, they'll have to start discounting a bit more. And I've seen I had a Lululemon gift card for Christmas. So I have noticed that there is a bit more things that are on sale than normally. And the sales tend to be a bit better from a consumer perspective.

So I don't know if it's just anecdotal or they had it around Boxing Day, so maybe they were having a bit better deals there. But typically, Lululemon doesn't do all that many discounts. So something to keep an eye on if you're a shareholder like me or you're interested in the business. If we're talking

anecdotal when i was there a couple days after boxing day things looked good things looked great for lou yeah things look to be shaping up just fine um and i sure did my fair share um of of helping their fourth quarter out so um you know know, you can thank me at some point. No, I mean, look, this totally felt like a gigantic overreaction. It's short term. It's short term traders move in the markets and look, their margins dropping by that much. Is it great? No, of course not. this is a business that is touted by their gross margins being so high because they have that elite pricing power and maybe if they are moving a little bit more off inventory with sales we're still talking about best in class

margin profiles that are like just largely unbeatable in the apparel segment. So if we're knocking them for being elite and still being elite, but it's a little off, like it's just not thesis breaking at all. And so it just felt like a gigantic overreaction to me. Yeah, because let's, you know, like you just mentioned, I mean, most clothing retailers like a Lululemon would kill to have a gross margin that's probably like 500 basis points lower than what Lululemon has, right? So exactly.

That's how high their margin is. I don't have it just on hand. I know it's we've talked about it before. So it's very high and they do have that pricing power so i think it's probably an overreaction i think for me um really the inventory is something that is worth keeping an eye on that's the one thing you want to make sure they it's not too bloated because then that could really uh impact that gross margin going forward gross margins are uh quite healthy here on lulu we where it's high 50s usually yeah um i could chart it out here on uh on stratosphere but oh here it is i got uh i'm working on some you know costa rican wi-fi here in the jungle so uh it doesn't load quite as fast as usual. Yeah, it's usually high 50s. It's been ticking up kind of gradually over time from, you know, low 50s, high 40s over the past 10 years. So they, you

know, the margin came down on a TTM compared to the previous TTM. But we're talking about significant improvement over time, It continues to edge up. It's the definition of pricing power. The visual that I'm looking at right now is the definition of pricing power. Yeah, no, exactly. That's why I own it, and that's why Lululemon tends to trade at a premium. So I guess if the market, as long as it kind of stays, it stabilizes, doesn't go down too much,

I think they'll be in a good position. But again, with the caveat of that inventory. That does it for today's show. First one here at Coach Rico. Hopefully, you know, I can literally hear nature in my mic right now. So I don't know if the listeners are hearing the crickets and stuff like that. I don't know if the listeners are hearing the crickets and stuff like that. But Producer Mel has her work cut out on the episodes while I'm traveling. Thank you so much for listening to the pod, folks.

We really appreciate you hitting 2023 right with continuing to dollar cost average no matter what shout out to all y'all doing that we appreciate uh we appreciate that and we appreciate the listenership go to stratosphere.io um we just opened up some contact us pricing for the kpis and uh we're going to be talking quite a bit about that with Adrian. We're recording an episode with Adrian from Stratosphere tomorrow, and we're going to go over Aritzia and some of the KPIs. And we've opened up that KPI plan for individual investors if you contact us on the form there. So if you go to stratosphere.io forward slash pricing,

you will see it there and we can hook you up. Have a wonderful rest of your day. We'll see you in a few days. 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.