The Canadian Investor - Top Performing Canadian Stocks and ESG

Episode Date: June 20, 2022

In this release of the Canadian Investor Podcast, we cover the following topics: We take a look at the best performing TSX listed stocks over the last 5 and 10 year period We discuss ESG investing and how inconsistent the term ESG is when it comes to investing Tickers of stocks discussed: CSU.TO, WCN.TO, DSG.TO, TIH.TO, TVK.TO, CP.TO, BYD.TO, CJT.TO, BIP-UN.TO, WDO.TO, CIGI.TO, IFC.TO, FNV.TO, CNR.TO, GIB-A.TO, CGY.TO, X.TO, BEP-UN.TO, IIP-UN.TO, AIF.TO Check out our portfolio by going to Jointci.com Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital 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. Check out the Yes We are Open Podcast from sponsor Moneris MSCI Canadian ESG IndexSee 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. Live from the great white north, 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. Today is June 15th, 2022.

My name is Brayden Dennis, as always joined by the great Simon Belanger. We got a fun episode for you today. We're going to talk about some really good performing long-term Canadian compounders. And then, Simone, let's talk ESG. I know that this is a topic we've talked about before. And we're going to talk about, you know, what we think. And, dude, we are going off limits. We are going, I'm going to go full rant mode, which is going to be some passion in this conversation.

Yeah, we'll probably hear from a few listeners not too happy with our stance on this. But I think it's, at least mine, I think it's a reasonable stance. It's balanced. I haven't seen yours yet. So you texted me saying it would be, you'd be firing and it'd be pretty, pretty intense. So I'm looking forward to hear it. Well, because the topic is something I actually care about, but it's been an absolute clown show in how it's been conducted. And we'll get into that. You can kind of tell I'm a little,

and we'll get into that. You can kind of tell I'm a little, I'm not sick. It's just allergy season, man. The pollen is absolutely dieseling me. Yeah. I mean, I've been having, I had a day last week where I had allergies. I took two Claritin. Apparently you're not supposed to take two within a 24 hour period or reactive or whatever it was. I didn't know. And I checked the bottles afterwards, obviously. And I was a 12 hour straight sneezing nonstop. I tested three times for COVID negative. And then within an hour, I was perfectly fine at some point, just randomly. The drugs kicked in. Six hours after? Yeah, I guess so. Oh, that's too long. That's too long all right let's get into it a quote i wanted to start today's show with which i liked quite a bit is on the way up

everyone's a genius on the way down everyone's an economist we've seen this a lot totally seen this this a lot. I love this quote. And it describes bear markets really well and bull markets. Yeah. No, I think it's really good. I mean, everyone's into macro right now. It's a bit crazy. Like even people who aren't in the stock market or investing, they're into the macro. So I think it's a great quote. Yeah. And last year, you know, you're a genius if you bought stocks, everything went up. Didn't matter what you bought, it went up. All right. My first topic before we get into the ESG chat is I pulled an interesting list of this guy who does research. I think his Twitter is called Long Equity. I don't know. He posts his blog. And he had this post on Canada.

And so what his posts are about are about long-term, high-quality compounders, like the businesses that have done really, really well. And he looks at return composition in something called linearity. And there's nothing really to this. This doesn't mean that it's a great stock. It doesn't mean that it's a great business. It just means that the stock chart goes up very consistent. They're not big, large drawdowns. The business continues to compound free cash flows time over time. Very lethargic investor base who just kind of buys the stock and holds on. And so I pulled the list for Canada. And so what it is, is it's measuring 10 year linearity and it uses R squared. So if you can picture that metric,

and picture that metric, R squared is how well it matches a certain trend line. And the trend line being up and to the left, like perfect linear trend line. So perfectly straight line on the stock chart would represent an R squared of one. These are all 0.95 and up in terms of 10-year linearity, meaning these stocks just keep going up in a very consistent fashion and don't face huge drawdowns. And so I'm just going to give this list. Apparently, given this metric, some of the best compounders based on performance in Canada. Are you shocked at number one, Simone? No, I mean, you like this one, so I'll let you introduce it. And like is probably an understatement. You're in love with this one. Perhaps that's a fair assessment. I hope your girlfriend's listening. Oh, no, he's in love with something else. I'm in love with, I'll tell you, babe, I'm in love with you, but I'm also in love with a man with a five foot long beard who runs a company called Constellation Software.

And that guy's name is Mark Leonard. And so the first company here is Constellation Software, my largest individual equity holding with a five-year linearity of 0.99. What does that mean? It means the stock just goes up and doesn't face huge drawdowns. Even if you look at this big drawdown, it is holding up extremely well. There's like no volume on this thing. Like no one sells the stock. You know what's really ironic, Simon? There's 21 million shares and they don't issue equity and they don't buy back stock. shares and they don't issue equity and they don't buy back stock so since their ipo there's only been 21 million and so people make the joke about bitcoin because there's only 21 million it's like there's a there's a there's a fixed supply of constellation shares you better get

them because there's only going to be 21 million of them and so people like to make that joke. Maybe Satoshi Nakamoto is Mark Leonard. Who knows? Dude. You heard it here first. Dude. Wow. Okay, my mind is blown. That's actually a good theory. Okay, so we got Constellation Software, Waste Connections, the garbage roll-up, the SCARTES systems, the supply chain software,

Toramont, which is the construction equipment rental company. Let's see if I can even list what all these companies do. TerraVest Capital, not sure. Canadian Pacific Railway, the railroad. Boyd Group Services, that's the roll-up of auto parts collision repair companies. A sneaky good Canadian compounder. CargoJet, the commercial cargo jet company. Brookfield Infrastructure Partners needs no introduction. Wesdome Gold Mines, it's a gold miner. Collier is the real estate brokerage company.

Intact Financial, the insurance company, they own Beller Direct as well. Franco Nevada, the Gold Corp. CN Rail, CGI Group, which is the roll-up of IT Consulting, Callion Group? Yeah, it's an Ottawa-based consulting firm. Yeah. Consulting? Okay, got it. TMX Group, the company that owns and operates the Toronto Stock Exchange, Brookfield Renewable Partners, no introduction needed. Interrent Real Estate Investment Trust, a sneaky good REIT actually, if you're looking for residential or apartment REITs. Really good management team over there. And Altus Group. That's the list there. All above 85 points

on five-year linearity. The leading performer being Constellation Software, 10-year return of 2,333%. Yeah. No, I think there's all names. I mean, I'm happy to say that the two major Brookfield that I own are in there. And I'm surprised BAM's not there. But anyways, I'm sure it's probably not that far down from on the list. And then the other one that I'm definitely impressed is franco nevada corp because it is we talked about that i did a segment i think last year about them and the reason why i

really like him is they're a mining so metal streamer so what essentially they do is they finance mining companies and in return they get options to buy gold or other precious metal is also they will have some oil. They'll back some oil companies as well, and they get to purchase it at very attractive pricing while not having the liability and the expenses of operating the mine. So that's why I really like that business model over a traditional miner. Yeah, it's been a really good name and it keeps coming up more and more as one that impresses me that and kirkland lake was always another gold one that always impressed me did they get bought or they're like private now kirkland lake i thought yeah vaguely bought or something yeah i feel like i feel like we may have done them or you did them on this.

We did an episode about it. Yeah, I think it was you that talked about it. I mean, there was an acquisition of some sort. I'm not sure if it was them acquiring someone or the other way around. Yeah, yeah. Oh, yeah, Agnico. Right, remember this. Agnico and Kirkland merged.

Oh, there you go. Remember this? Yeah, we did an episode on this. There you go. Remember this? Yeah, we did an episode on this. 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. 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, Bloss in the app store, and I'll see you there. Okay, Simon, let's peel off the bandaid. It's ESG time. Do you want to give a quick primer on what the term means first? Yeah, so ESG, for those who may not be aware,

I'm sure you've heard the term ESG before, but what it means, it's environmental, social, and governance. So the idea behind ESG probably started around two decades ago approximately, and it was to invest in a way that's responsible on those three metrics. It's not been very popular until recently, up until 2018. For example, fewer than 1% of earning calls mentioned ESG. And then in the span of four years since then, it has increased to 20%. So that kind of gives people a bit of context what's been happening on the ESG front. And between 2019 and today, ESG funds for the asset under management have gone from $1 trillion to $3 trillion.

And that's according to Morningstar. That's not very long. No, in a very short time span. Yeah, exactly. Yeah. And it was in the, you know, if you go one decade ago, I don't have the data in front of me because the notes, I just stayed there. But I would say it was most most likely under 100 billion probably way lower than that wow yep cool so just to continue on that so in the past few months there's been

more and more people speaking out against esg or you know friend of the show elon musk because he long long time listener long time listener friend of the show because he gives us so much content to talk about when there's not too many earnings going on. You know Elon's going to tweet something to give us something juicy to talk about. But he did tweet out, of course, not too long ago that ESG was a scam because Tesla wasn't being included in a top 10 list of ESG companies and ExxonMobil was. in a top 10 list of ESG companies and ExxonMobil was. S&P was the one who actually published the list and they commented that there were reasons for Tesla not being included,

but it does raise some question as to why Exxon, which is obviously in the oil and gas industry, would be on that list. Anything to add before I continue there? I totally agree with friend of the show, longtime listener, Elon Musk. This is horseshit. I mean, how can these guys, we're going to talk about BlackRock and we're talking about S&P Global today, two stocks I own, ironically enough. But these guys should be embarrassed, man. Like, honestly, they should be embarrassed. The fact that they took off Tesla out of their ESG rankings because it didn't meet the social

and governance. Meanwhile, you know, they're doing more probably for the environment on a net net basis than ExxonMobil ever will ever. Yeah, exactly. And look, I don't know what data S&P was actually using for this list on the social and governance side. And that's one of the issues that I'll talk about is it can be highly subjective. It's a black box, really. You can make a case, it's much easier to evaluate, but how they weighed those evaluation will vary extremely widely depending on who does the assessment. So that's one of the big issues. Obviously, SNP, they said that it was more, like you said, related to the SNG here. But on May 31st, not too long ago, a couple of weeks ago, German police raided offices of asset managers DWS and its majority owner Deutsche Bank. The raid was part of a probe into allegation of greenwashing.

This was prompted by a former DWS executive who blew the whistle on the company making misleading statements about ESG investing. misleading statements about ESG investing. And what's making ESG even trickier for investors is the recent change in stance from governments and asset managers because of the Russian invasion of Ukraine. A great example here is governments in Europe, who have traditionally been pushing a lot for ESG and especially the environmental part are adjusting, I'll put that in air quotes, their environmental goals so they can turn to fossil fuels as a way to reduce their dependence on Russian gas. And you can see right here how it starts to conflict, right? So they're clearly putting more emphasis here on the social and the governance at the detriment of the environment. And BlackRock, which has been making a big push towards ESG, Larry Fink has been here on the social and the governance at the detriment of the environment and blackrock which

has been making a big push towards esg larry fink has been pushing for that for at least three four years now i would say announced that it was likely to vote against most shareholder resolutions that would pursue a ban on new oil and gas productions and then Vanguard, the other big asset manager, has just a quick note here, BlackRock, approximately $10 trillion in asset under management and Vanguard around $7 trillion. So Vanguard recently said that it had refused to stop new investment in fossil fuel projects and end its support for coal, oil and gas production. So it will not go against these new type of projects or support for obviously fossil fuel. The discontinue in support for coal makes complete sense. It's terrible, not only environmentally, but also for human health.

And so that makes complete sense to me. I like how you put adjusting in air quotes because, you know, it's so easy to just adjust something based on current events and kind of make something very convenient for you. It's like when a company does adjusted EBITDA and you look underneath, you look underneath the hood of the car and you're like, these are adjustments that you just made to make it look like you make money. Yeah. But they're not real. It's not a real metric. Yeah.

And we've talked about accounting principles before and there are limitations to them. And sometimes adjusted metrics can be very useful. But make sure you understand what the adjusted metric is, because they will tell you it's this minus that works, including this, including that they will tell you what it is. And it will vary oftentimes from one business to another, whichever adjusted metric they're using. But just to go back on Vanguard, they actually said they would not they would not block new investments in fossil fuels, including coal, oil, and gas. Oh, I interpreted that wrong.

No, I probably said it wrong. They refused to – no, no, you probably said it right. They refused to stop net new investment. Exactly. Huh. That's why it's very interesting what's going on right now in the esg space especially yeah especially if uh i know a lot of people tend to put more emphasis on the e so people like those who do will probably be a concern here but yeah anyways they just need to

separate them out that's what i think yeah because they it needs to be E and then S and G. E is... I'm telling you, I used to do this for a living. You can come up with a pretty good estimation. Yeah. Well, I've seen... S and G is a black box. Yeah. So I've seen MSCI, who's a bit like SNP, right? For people who are not aware, they'll actually do the indexes that will track certain sectors or similar to what SNP will do in some parts of its business. And I was recently, actually, I'll talk about that a bit later, but I was looking at the composition of their ESG Canadian index. And it's, I'll just say that it's a bit of a head scratcher. I'll say that. I don't don't even want to know well i'll let you talk

a little bit and we'll get back to it you'll laugh i guarantee you okay well we can get into similar topic here so i wanted to discuss blackrock's esg etf and let me let me prep let me preface this with blackrock is not like this evil youtube conspiracy that the youtube bros say they are like if you look up like if you like google like black rock on youtube it's all these youtube bros being like see this guy this is larry fink and he controls the world from the darkness and you're like like it's it's not that. They're asset managers. Of course they own so much of each company because they're managing funds. It's just nonsense, right? Now for their ESG ETF, as you hinted at MSCI, one of the data companies, it's like an S&P company.

They manage this index and BlackRock mimics it. BlackRock's business is to make money. Of course, they're going to pursue this ESG thing. Of course, it's a new opportunity for more products. They create financial products and collect expense ratios. That's their business. It is a phenomenal business, all emotions aside. It's is incredibly good compounder blackrock is so now that's out of the way simon are you ready for my rant of pure passion go for it and i'll bring the balance to the force afterwards okay good good good good all right so this is ticker S-U-S-A, okay? S-U-S-A, SUSA. Their mission of the three, it says on the website, right? I just pulled this today from the website. This is the objectives of the ESG fund, okay? Number one, obtain exposure to a range of large and mid-cap U.S. stocks with leading environmental, social,

and mid-cap US stocks with leading environmental, social, and governance practices. Okay, sure. Number two, avoid exposure to companies with low ESG ratings and severe controversies. Okay, so again, the ratings are dictating it. This is a group of people who are deciding these ratings. Okay, they have some methodology. I think the methodology is a load of crap, but they have some methodology. And number three, they are using it to build a sustainable equity portfolio. Okay. Sure. Whatever that means. I don't really know what that means, but that's okay. Here it says right under that in much smaller text. Okay. But I blew it up for us here. You can see it loud and clear. As part of its investment objective, this fund seeks to track an index that applies the following business involvement screens. So they're trying to screen away these things. Alcohol, civilian firearms, controversial weapons,

conventional weapons, fossil fuel extraction, key extraction, okay, gambling, nuclear power. Nuclear power has made this list. Nuclear weapons, thermal coal power, and tobacco. Okay, sure, a lot of those make sense, okay? You know, you're getting rid of the tobacco, you're getting rid of the sin stocks, right? to me get rid of thermal coal power we don't need thermal coal power anymore in 2022 if we can get off it that's great it's funny how alcohol right is out of there tobacco is out of there but cannabis is fine but cannabis is fine it. It just shows the subjectivity of this. I think that's why I wanted to say that. It made me laugh a little bit, but I think that's a perfect example there.

It's subjective. Now, for the people listening, I put nuclear power in big yellow writing here. in big yellow writing here. Because this tells me, this small little piece tells me that their objective has nothing to do with results. Okay? You and I live in Ontario, Canada. Ontario, Canada has one of the most impressive, most robust, most reliable, and cleanest, cleanest, lowest carbon emissions per megawatt hour generated in the entire world. Now there are cleaner grids, like for example, Quebec's grid is all hydropower. But the population is much bigger. If we took just the running water from Ontario, we could do the same thing. But the population, you need more baseload power. The population of the Great Tron area is like 14, 15 million people.

million people, you need a lot more power. How do you get there? About 55% of the power is via nuclear. This is how we have achieved a clean, reliable base load of power. By having the Peninsula plant run eight reactors, the Darlington plant out in Bowmanville, Ontario, the Pickering plant, which is retiring soon, which was some of the best Canadian engineering in our history, has been running four reactor, used to run eight. They've been going strong since the 60s. I've been in all of them. I've seen all of them work. I've been in the control room of the Pickering nuclear plant. This is how the province has achieved

such clean power. And so I look at something like this and you've completely thrown out, you've looked at this problem, which requires engineering and thrown finance graduates at it. Now, I'm not chirping finance graduates. I make a financial data company of a financial podcast. This is who I am. But do you get what I'm saying, Simon? This has no relation to real results. And this is so annoying to me. lot of people comes back to nuclear power and some of the disasters that happen they're few and far between but everyone knows about chernobyl everyone knows what happened i think it was 2011 in japan with the fuchushima or yeah anyways you know what i'm talking about and there's been a few other exactly a few other ones and i think the fact that they can be, you know, they can have a major impact on the surrounding area.

I think totally the perception of people is that it's bad. It's not clean. Totally. I get that. The risks from a disaster perspective exist. They do exist. Now, Canadian reactors should be used around the world because we use something called Canadian deteriorating uranium, which runs H3O hard water through the plant for cooling. It is some of the best engineering on the planet. It's a true Canadian gem of engineering, okay? That prevents

every disaster that's happened currently couldn't happen with that given all the redundancies and backup power as well it's not to say that a disaster can't happen it's that the disasters that have happened couldn't happen in our case i hope that clears it up a little yeah no i think that's good okay so let's get through now i'm off my rant on nuclear power let's get through the top 20 names held in ticker SUSA BlackRock's ETF. And this is, I'm assuming the largest ETF with assets under management. Like I'm going to go on a whim and say that it's the one that they tout and it's BlackRock. So they're the leader. Here's the list, right? Are you ready, Simone? Okay. Apple, and this is in order, okay? Apple, Microsoft, Google, top three holdings, okay?

So what, like just the global market cap, okay? Apple, Microsoft, Google, Home Depot, Tesla, okay? I agree with that nvidia kellogg interesting pepsi co texas instruments adobe 3m blackrock ironically adp johnson controls international i also agree with that one that's a good one expedititors, WW Granger, Coca-Cola, Alphabet, Class C. Okay, so Google again. Martian McLennan and Waters Corp. I just listed 20 companies that make up one third of the fund cumulatively because it's market cap weighted, I'm assuming, just looking at this list. Only two of them, I would say, actually, their mission is to create a net ESG positive

impact. I believe that's Tesla and JCI, Johnson Controls. They do building automation, energy efficiency type stuff. And so, yeah, this is a complete clown show. The rankings don't make sense. The methodologies don't make sense. And so I think maybe there's some problems here. Maybe my rant is the real problem is that you can measure E, S and G are a complete black box, right? And that may be where I'm getting really hung up. You'll see where I think it just, the E also has issues. And I'll tell you a bit more with some of my examples.

But my first reaction from this is, you know, Google, for example, I think it's a great business, but it does not have the greatest governance. I mean, they have like dual share classes where some have, I can't remember the amount of votes. So you can just look at some of these companies and the governance is not necessarily the best. So clearly they did not put a lot of emphasis on that, which kind of goes to your problem of saying earlier, why are these being put all together, the ESG as a whole?

But that's kind of also the lens I'm looking at this from. Right. Okay, fair enough. Can i tell you a story about black rock my personal story with black rock okay i was working in real power for five years about not quite just a little less before working on stratosphere.io full-time and they really wanted data from and since i was the data guy on measuring carbon emissions and some of this stuff they really wanted data on on how some financing was being used and you know how low interest rate green type financing was being used to generate positive reduction in carbon emissions, which I am so on board with measuring. Now, BlackRock really wanted to know this data from me. I'm talking like senior VPs on these calls. And I'm just going to them. I'm like, okay, this is a massive undertaking

for me to find this data. I have to do quite a lot. It is attainable in terms of me coming up with an estimate. I can get you that data. You just need to convince me that you will do anything with it. Just blank, Simone. Just blank.

And they're like, oh, well, we just need the data. I'm like, well, what are you going to do with it? They have no idea at that level. Nothing, nothing. And so, well, these are executives of BlackRock. And I'm like, if you can convince me that it will make a single difference in the way you model out ESG,

I will get the data for you. Nothing, nothing. And so they just wanted the data so it could sit in an Excel spreadsheet for no reason, like just a complete waste of time. And so I just said, no, I ain't getting it for you guys. Unless you can come up with a good case for me to get this data for you, I ain't getting this data for you. And they could not come up with a good case for me to get this data for you i ain't getting this data for you and they could not come up with one half decent reason for that and so that was so the real story of why brayden quit his job and went to stratosphere.io yeah they're like oh well blackrock told me you're not cooperating bye-bye no it was just so irrelevant and thisbye. No, it was just so irrelevant. And this is the

problem, right? It's just so irrelevant in terms of the real work being done to reduce carbon emissions, which I believe is an important thing for the world to be working on. It's just not being treated properly. And this really grinds my gears. And so I am like super pro real action and super anti ESG. And that is a hilarious two things to put together. 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. 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. Now, I'll kind of elaborate on a few things I referenced here. So one of the biggest issues like we referenced with ESG is

that there's no consistency in how they evaluate companies. If you don't believe me, look up the MSCI ESG indices that you actually reference. And there's a lot of funds that you'll see, and you'll see names that will literally raise your eyebrows as to why they would be included in an ESG index. And although you can argue like you did that the E should be much easier to measure, the application that they put on the funds can vary very widely. So if you look and you pull it up, I have the link here for you, Braden, and I'll add it to the show notes. pull it up. I have the link here for you, Brayden, and I'll add it to the show notes. So if you look up at the MSCI Canada ESG Focus Index, 15%, one five of the indexes in energy with TC Energy and Enbridge being the top 10 holdings. So, you know, it's like some real conspiracy shit, isn't it? Yeah, I think the reasoning, the reason the way they, I believe,

shit isn't it yeah i think the reasoning the reason the way they i believe justify that is that if they the energy sector is so big in canada that it would be overly concentrated into just a small number of companies but again why do you want to read these top 10 constituents because it just looks like the the tsX 60 top 10 to me. Yeah, with some small differences. So yeah, the top 10, well, basically it's Royal Bank, Toronto Dominion, and I'll just say Royal Bank and TD have about 7.5% each and Bridge at 6.2. That's over 20 right there. Yeah, that's over 20 right there. Yeah, that's over 20 right there.

Bank of Nova Scotia, 5.4. Bank of Montreal, 4.2. Nutrien, 4.1. Canadian National Rail, 4.1. Brookfield Asset Management, 4. TC Energy, 3.5. And CP, Canadian Pacific, 3.29. So it is very similar to the index itself.

And that raises some questions there, just to why would you even brand it as an ESG? So it doesn't really make much sense because someone may see an ESG fund that doesn't have a lot of knowledge or experience in investing. They might see an ETF. They see this ESG ETF based on the MSCI Canada ESG Focus Index.

They don't really do their due diligence, which we always tell people to do their due diligence. Even with ETFs, it won't take you as long. It'll probably, within 15 minutes, you can have a good idea of what the ETF is by looking at the the fun like the two pager that's on there you're going to get everything you need to know at the very least but a lot of people actually don't do that and just having esg in the title may mislead them in thinking oh well there's no way there's oil companies in here it's esg right and that completely offline. And then you get in obviously the S and the G where

things can get extremely subjective. The E as well. I mean, why the hell is it included in an ESG fund, these names? That's a discussion for another day. But I'll list off a list of sectors that you did reference a bit earlier where some people may think they're fine investments and other would not touch them with a 10-foot pole. And it will vary, again, from different funds. So tobacco, cannabis, alcohol. You mentioned the one that, you know, tobacco and alcohol were not good, but cannabis was fine, apparently, according to them.

Yeah, just whoever you talk to, right? And then gambling, then obviously weapon manufacturers, controversial weapons, defense, whether, you know, a lot of people don't want to invest in defense stocks. I don't believe that was excluded from the one from BlackRock. I didn't see that excluded, like Lockheed Martin type company. I don't think that would be excluded. Yeah, and for a lot of people, it's not right to invest in those companies depending on what your values are and some people think it's it's actually a great thing exactly

yeah because they think that it's important to protect the country or whatever right like there's different views the world is not black and white yeah and the last one here adult entertainment companies so that would be another one where some people would probably say you know it's better to invest in these kind of companies than being it on the black market where people can be exploited. So you can make a case, you know, and some other people would never touch that with a 10 foot pole. My point is just being like you said, a lot of the social and governance can easily conflict with the environmental aspect. And if we go back to the fossil fuel from Europe's going to to not be over reliant on Russia, that's a perfect example there. And clearly they are putting more emphasis on the social and governance. And, you know, it comes to mind if the social and

governance is so important for Europe and Western nation. Why not have similar approaches with China, Saudi Arabia, who both have very poor human rights track records. But many countries will overlook that because they need oil from Saudi Arabia and they need cheap goods or chips coming from China or Taiwan. Obviously, that's closely tied to... What do you think Apple does all their business? The number one weighted holding in BlackRock's ESG ETF. Apple Incorporated. Exactly. And yeah, it's just...

You can see how they're really picking and choosing. Clearly, it's not great what russia did by invading ukraine and obviously we condemn that but you know a saudi like i said saudi arabia is does not have a great track record obviously they haven't invaded you know someone recently but you know you can make a case that they're not there are some some valid questions to be asked there from an esg lens it's the same questions why the people, I'm going way off track here, I'll make this quick, but why people are upset about this new golf league. Oh, yeah.

The live golf league, trying to snipe all the players using the Saudi oil capital fund or whatever it's called to pay for all these players to come over. It's like, oh, really? Come on, man. Sellout. There's been researchers at MIT and the University of Zurich who found that ESG rating agencies, so an MSCI or SNP, other agencies like that, have a very weak correlation between that when they do ESG ratings. So that

means that one agency's rating will differ greatly from another because if they were actually aligned, their correlation would be much closer. And depending on what criteria the fund uses to establish ESG rating, you'll most likely have a concentration in certain sectors. And that's one of the big risks of ESG. If they're actually, you know, that MSCI Canada index that we were talking about, if they were truly on the environmental aspect, you would definitely see some sectors being extremely overweight. And they are already very overweight on financials when you're looking at the index. And to me, look, there's nothing wrong trying to invest in companies with an ESG lens.

But I think the best way to do it is actually trying to do the work yourself and applying your own values to it and find companies that actually suit your vision or your values. Obviously, it will be hard sometimes to find some of the data. It won't necessarily be easy, but I think that's the simplest way to do while

simplest that's the cleanest way to do you with no pun intended here because you'll actually be checking out the businesses yourself checking their track record on the environmental side the social side the governance sides and making sure that aligns with your views because we just showed it if you pick an ESG fund chances are that it won't meet your definition of what ESG should be. Right. It's actually a lot easier to do that with picking individual equities in a portfolio. It's actually so much easier to do that yourself than buying one of these funds because the basket of stocks in there,

you're going to find something you don't like. Yeah. Well, I mean, it'll probably be more work for you, but you'll know. Oh, totally more work. But you'll know that there's a much greater chance that the companies are actually, you know, have share your vision of the world because at the end of the day, it's your vision of the world, right? If you're investing based on those values. Right. And maybe I need to think about this because I own S&P Global. I think it's probably one of the highest quality compounders in the

world. I just roasted BlackRock here. They're just literally their business is asset management. And if they see an opportunity for investors to come in, they're like, hey, we're just tracking MSCI and S&P's ratings. Those are the companies that I think have a large responsibility here. Like, BlackRock's just going to make money. They're like, okay, I'm going to follow MSCI's rating guides, raise these funds and make money. Sure, I would do the exact same thing. But these ratings companies like MSCI and S&P Global have a real part here and I own one of them. And so I'm like, what the hell?

These guys need to do better. Yeah, I think there's blame to share here because I think BlackRock definitely has some blame because if they wanted to really push for something and say, you're going to have to be more thorough on your your ratings and change the way you rate them with that many asset under management they have some pull i'm pretty sure snp listens when blackrock says something i'll just say that and same thing for msci and same thing for uh moody's right so like blackrock has a lot of

weight with them so that's why i think they all have a role to play. So I won't be as hard as you. I'll be a bit harder on BlackRock. Fair enough. You know what? I think it's true. I own Moody's and S&P Global. And this ESG business, it's a big growth lever for them to go into foray into a new market of data

and analytics and ratings this is their business it's ratings their business is ratings yeah and you know what this kind of reminds me a little bit is you know with the nicola and like all this you know as soon as it was ev like the stock would be way up. So you'd have these companies with no business model that would just say, oh, we're an EV company. And then their stock would be way up. And I think this is happening a little bit in the space where you have these funds that are, you know, branding themselves as ESG because they're like, yeah, that's what the retail investors or the institutional investors want. So we're giving to them what they want, even though it's not really what they want. Right.

Yeah, exactly. Like, it's true. I mean, the market's going to go the way that the customers are signaling that they want it to. And right now, it's, I guess, has just gone to give me a basket so i can feel good about it give me a basket of what you say meets your requirements so i can buy it and feel good about it and so that these like robo advisors also can say you want to invest in this clean green and we're awesome just like wearing a t-shirt that says i'm nice on it you know like those kinds of investments and it's all broken man it's all broken yeah i think our rant for people to you know don't take

what we're not saying here i think it's great that there's people want to invest in environmentally responsible companies that have a good social impact on the community on the world and good governance in place but what seemed what's pretty much happening is that they're lying to you that's what what it is. Yes, exactly. Yeah. And that's the biggest issue. That's our problem is that they're not being truthful with the companies that they own. They're branding them at something that they're not. That's exactly it. Yeah.

You just put how I'm feeling in a very elegant way. And I appreciate that because you're right. Don't hear what we're not saying. We're huge proponents of this. If we weren't, we wouldn't care yeah you know what i mean like i would just say oh look at this black arc's making their money good for them you know like i wouldn't even trigger me but we we actually care thank you so much like honestly dude the show well a couple things in the in the works i guess on the show we have some plans to make some new shows and you're going

to hear some more content about that. So if you're a big listener of the show, we are going to have more shows, not more episodes of this show yet, or maybe- Not hosted by us, so don't worry. You won't have to bear with us. Yeah, that's right. Yeah. We'll put you out of it there's going to be more canadian focused investing content coming from us as a company is that fair to say without giving too much away yeah yeah exactly yeah i think that's good it's going to be canadian focus it's going to be on other types of investing there i think that's some things that we don't touch on as often and we probably don't know as well as other people in that space.

Right. Yes. Yeah. And hint, Canadians love this just in general. So I think that more details to come very soon. We're just a few weeks away from being able to tell you what's going on. And I think you guys are going to love it. And it'll give you more content specifically for Canadians. It's going to be right up your alley. If you like this show, if you're a longtime listener of the show, which I know many of you guys are, this is going to be right up your alley. JoinTCI.com is our Patreon to support the show.

A lot of work goes into these shows, and we really appreciate that you go over there. And you get two things. You get a shout-out from us at the beginning of the episodes, which we do every two or three episodes or so. And you get to see me and Simone's stock portfolio updates. I guess just whole portfolio updates, actually. Yeah, just the whole portfolio updates actually yeah just uh the

whole portfolio and then what moves we've done for the month yeah so i think it's good and especially right now i think a lot of people are feeling the the bear market that we're in whether it's stocks in general crypto obviously has been uh has some pretty massive pullbacks especially if you're has some pretty massive pullbacks especially if you're dabbling in cryptocurrencies that are not bitcoin and ethereum so a lot of a lot of movement there but i think just to see that we're feeling the that too like we're not immune to that but just look at it literally google the company stock chart and uh extrapolate that as my whole portfolio it pretty much looks like that yeah oh not sorry that never turns on a recent recent times if i if it was if it was zoom out the full way i would be on a beach somewhere kicking it back yeah and you can see what we're not doing we're not panic

selling too right so even though we're experiencing these drawdowns like pretty much everyone else is unless they're all invested in uh in energy at this point you can see that's what we're doing how we're reacting or not reacting i think not reacting may be the best term there thanks so much for listening stratosphere.io is my company. Simone is a very key partner and investor in the company as well. Stratosphere.io. We have 10 years of financial statements for you, industry comparison. Think of like a Bloomberg in the web app or like Yahoo Finance on absolute steroids for the price of Netflix. Well, it's free, but you get steroids for the price of netflix what's free but you get everything for the price of netflix so it's like a freemium type thing that is stratosphere.io

the spelling is like the layer of the atmosphere dude did i tell you about the reddit thing when i searched up like uh reddit reviews for stratosphere no and the one guy's like hey i was just wondering what you guys think of i love the podcast and there's like a bunch of comments being like what do you mean what do i think about the atmosphere like like because the stratosphere is the second layer of the atmosphere and they're like you're gonna need to be a little bit more specific. I have no idea what you're talking about. I have no opinions on the second layer of the atmosphere. I knew it was a part of the atmosphere. But aside from that, I'm not, you know, I like universe and solar system shows as much

as the next person. But that's the end of it. I'll leave that to the, what, astronomers? Yeah. That's the end of it. I'll leave that to the, what, astronomers? Yeah. Astrologers, like the people who tell you what month you're born in.

Is that astrology? Astrology, yeah. That's why I hesitated. I always mix up the two. Astronomy and astrology. That is hilarious. Okay. 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.