The Canadian Investor - Twitter gets a new CEO, Market Volatility, Disney and more!

Episode Date: December 2, 2021

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: Jack Dorsey stepping down as Twitter CEO Stock market drops on new of a new COVID-19 variant Canadian banks and insurance providers get the green light to resume dividend increases US doubles import duties on Canadian softwood lumber producers Disney full year earnings results Autodesk earnings Alimentations Couche-Tard earnings Constellation Software will be creating a new venture capital fund called VMS Tickers of stocks discussed: TWTR, DIS, ATD-B.TO, ADSK, CSU.TO, LYV, TDOC, AC.TO, CCL, ZM, PTON https://thecanadianinvestorpodcast.com/ Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Stratosphere 🚀 https://www.stratosphereinvesting.com/See omnystudio.com/listener for privacy information.

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My name is Brayden Dennis, as always joined by Simon Belanger. Let's start with some coffee shout outs. We got Gary Dean. He says the TCI podcast is his favorite financial slash investment podcast. Many thanks. Thanks, Gary. We appreciate it. Arvind V says, excellent ideas. Thank you. Jeff Lutz says, thank you, Braden and Simon. We appreciate you very much. You can go support the show at thecanadianinvestorpodcast.com. We are on Twitter at CDN underscore investing, and then myself at Bredo Capital, and Simon is at Fiat underscore Iceberg on Twitter.

Speaking of Twitter, Simon, Twitter co-founder Jack Dorsey is stepping down from the CEO role of his company. Now, this made a lot of sense to me when I saw the news and you and I were texting back and forth. I have a question for you. What do you think of when you hear the name Jack Dorsey in terms of his involvement? Yeah, I definitely view Jack Dorsey more as the CEO of Square and definitely very involved in the Bitcoin space as well. So it seems like that's been his main focus, at least from an outsider's perspective in the last few years. And I know there's been some activist investors that were of the same opinion. I cannot complain because Square has performed quite well in the

past little bit. I'm a happy shareholder, but definitely I associate him much more with Square than Twitter. Yeah, that's a fair observation. And the market kind of agrees with you from my perspective. He will be replaced by the current CTO, Parag Agrawal, Twitter said. He did co-found the business and he kind of went into the CEO role later in its life, CEO role later in its life, like in 2015. And he wrote here in a statement, it's finally time for me to leave and saying the company was ready to move on. You know, shares started trading up a few percent this morning and now they're actually trading down on the day. So I don't know, don't read into that too much. I don't think there was a email that he tweeted out, a screenshot of it, very fitting, from the email that he sent to his whole company.

And this is what it read. I want you all to know that this was my decision and I own it. It was a tough one for me, of course. I love this service and company and all of you so much. I'm really sad, yet really happy. There aren't many companies that get to this level and there aren't many founders that choose their company over their own ego. I know we'll prove that this was the right move.

Very interesting. And he has a way with words. I like that. I see this as a good thing for Twitter and the stock moving forward, I believe anyways. Twitter is a $39 billion in market cap company. There are 211 million daily active monetizable users, which is a bit of an odd metric, but that's the one that they use. But they have closer to about 400 million active users on the platform. So hundreds of millions of people are using Twitter daily, Simon. But if you look at

Twitter ads, and I know you and I both on Twitter, they're seemingly getting better, but the targeting is pretty terrible. I mean, you've probably seen some ads and gone, how am I in this algorithm? Now, everything on their roadmap for products, it just seems like they kind of dropped the ball. I'm not going to lie. And although they don't disclose it, they have an estimated $9 in ARPUs, which that's the annual revenue per user compared to well over $30 in ARPU, so that's the annual revenue per user, compared to well over $30 in ARPU for Facebook. Now, while investors know that Jack Dorsey is an incredible entrepreneur, and investors, including Simon and I, love to see founder-led public companies, Jack's time being split among Square, Twitter, and now his passion for these Web3 crypto projects as well.

He's only one dude and Twitter needs some more focus from the top level. And I think Jack knows that. Yeah, I agree with you on that. I think it's probably a good move for Twitter shareholders. I've never been a shareholder because they've never been able to monetize the platform quite well. There's been up and down. There's been quarters where they've done better. And then it seems like it's always one step forward, one step back. There is not that much progression, but hopefully for those who own the stock, they'll do better going forward. I think it's a really solid platform. When I look at the platform, it's obviously a very important news source for many people. obviously, a very important news source for many people. The influence that Jack Dorsey has is obviously gigantic. He's an incredibly smart guy. But I think Square and Twitter are both

better off with their own sole CEO. As huge public companies, I think that this just makes sense. Yeah. And I remember reading something from Jack Dorsey, and I think ultimately his view is that it almost becomes a decentralized platform for Twitter. I think in his ideal world, he would not, you know, as when he was CEO, he would not have the power to deplatform some people, even though they took that decision. So I think it also kind of the fact that it's so heavily centralizes, I think it goes against a lot of the things he believes in, oddly enough. Yeah, that's a really good point. Now, let's talk about what happened on Friday. A lot of stock dropped on the news of the new COVID

19 variant. There was a sharp drop. I was actually shopping in Syracuse and my phone was just blowing up because I have alerts with Yahoo Finance so I had a look I'm like oh that's interesting what's going on the S&P 500 and the S&P TSX were both down more than two percent on the day there's certain sectors that were down way more than others some were actually up as well so for example Live Nation finished down eight percent canada finished down close to nine percent and they're pretty much flat today my take on air canada since the beginning of the pandemic and we've talked about this is just use a wait and see approach for anyone who's interested in investing in airlines and this really hasn't changed a few invested invested in Air Canada around

March 15 after it crashed in March 15 of 2020, of course, you've done well, but you're still behind the S&P 500 by about 15%. You're less diversified. And in my view, there's more risk involved, especially now with the uncertainty behind a new variant, regardless what happened, regardless if it's a variant that ends up not being too much. It's really the perception of people, right? If people are afraid to fly, afraid to travel, then it could impact that. So for me, it's still a wait and see approach when we're more kind of, we have more clarity on the situation going forward. And then another one that dropped sharply, which probably won't be any surprise to

you, Carnival Cruise Lines was down close to 11%. They're going to be very heavily impacted by these type of news. Stay-at-home stocks were up on the day. So Teladoc helped, for example, finish up the day 3.5%. It was up more than 7% at some time during the day. Zoom finished up close to 6%. Peloton was up 6%. Another one that's a bit of a mix of stay at home and travel and hospitality is Disney. So because Disney has Disney+, they also have a cruise line. They also have their theme parks. So they're kind of in between in my

view. So they're an interesting company to watch when there's these type of news that comes out. I'll actually talk a bit more about a bit later on as I'll be looking at their earnings. They came out with their four-year earnings a couple weeks ago. The last thing I wanted to mention here is really it's important here to realize that markets will react to news. We saw on Monday, so today a lot of these companies that were down on Friday ended up being the opposite reaction today. We've said it before, you shouldn't panic because of news like this. There's still a lot of unknowns when it comes to the new Omicron variant. Psychologically, it's really easy to think that the worst when you see this type of news come out and make a rash decision.

So that's especially true if you owned equities back in early 2020 and had to go through the drawdown of March 2020. It's really easy to try and draw the same conclusions from back then and assume that the markets will react the same way. There's a lot of variables that are not the same. The situation is way different than it was. We have not seen a pandemic since the early 1900s. So trying to predict what the markets will do in the short term, it's a losing proposition. You should really focus on the actual business. So for me, I have a really simple approach to navigate the current climate. One, how will the business perform long term? Two, how has the business fared since 2020? And three, is there an overreaction from short term focus investors that could create a buying opportunity for businesses

that might be impacted in the short term but prevail in the long term? And I'll just give an example on that last point here. So is there a business that might be impacted in the long term and i'll just give an example on that last point here so is there a business that might be impacted in the short term well one that could be impacted in the short term actually a couple there's visa mastercard lightspeed which were all down from 2.76 percent to four percent depending on which one you're you were looking at on friday and they're either flat or slightly down today. These are all businesses that should have some good growth going forward, but the market is seeing them as maybe a bit of a downturn for those businesses. But that should be more in the short term, in my opinion. So it can really create some good opportunity for you guys if you're

certain businesses that could do well long term. It's this classic pair trade where it's like, oh, COVID, stay at home stocks up, travel stocks down. And it's so, you know, this is the same old song and dance that we've already seen. And the market is short sighted in the fact that these moves are mostly driven by sentiment and momentum traders. The long-term perspective of these businesses have not changed. And none of this news is really new news. I mean, it's the same old story over and over again. What I tweeted out the other day was every time the market has a broad sell-off because of a novel virus, I put money in the stock market and I keep making money. So, you know, I'm a simple man,

Simon, and I don't see that changing anytime soon. Dollar cost averaging into positions or into the market, whatever your investing strategy is, over a long period of time will yield wonderful results. All this short-termism and what you're seeing in the market, it usually is just driven by traders trying to make a quick buck. If you're a long-term investor, I don't think there's really anything to look at here. Yeah, I totally agree. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense, and with them, you can buy all North American ETFs, not just a few select

ones, all commission-free, so that you can choose the ETFs that you want. And they charge no annual RRSP or TFSA account fees. They have an award winning customer service team with real people that are ready to help if you have questions along the way. As a customer myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks, make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a

great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income. But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. All right. So earlier in November, Canadian banks and insurers were given the go-ahead to resume dividend increases in share buybacks and also raise executive compensation. Now,

we're recording this on Monday, November 29th, but later this week, we're going to have a wave of Canadian big banks reporting earnings. We got RBC Wednesday to TD Thursday, just for examples. So expect us to go over some of those results in next week's show. The reason I'm bringing this up is because I expect some pretty juicy dividend hikes. They've all been sitting on so much excess capital and they haven't been able to return capital back to shareholders for a long time now in the form of dividend hikes or buying back stock. And Simon, they're sitting on a couple of bucks. I don't know if you've seen that, but they have a couple dollars hanging around. Analysts are reporting anywhere from 10 to 35% hikes, depending on the bank.

Here's my bold prediction. That's too conservative. I think, you know, we're a few days away from knowing if I'm correct, but I believe that we will see almost across the board, the high end of that range on dividend increases, like 30 plus percent. Do not be surprised if we see 30 plus percent reports on these dividend hikes. You know, not all of them may be able to do that, but I won't be surprised if I see a bunch of them do it. So Canadian bank investors, rejoice. The time has come. It's here. It's time. They're finally going to be hiking that dividend and buying back some stock. It's a good time to be a Canadian bank investor.

Yeah. I mean, it's not surprising that they'll most likely increase their dividends going forward. A lot of these banks had put reserves for loan loss provisions. They started releasing those earlier this year. We did talk about that in the last bank earnings. So obviously, you start releasing those, you're having excess cash on the balance sheet. Banks are notorious for returning money to shareholders so especially through dividends so not surprising if we see those big increases going forward now we'll go on to some news that came out so the u.s and canada were having a dispute between the duties on canadian softwood lumber producers i wanted to mention a little bit of talk a little bit about that because I know some people like to invest in these type of commodities or businesses that will deal with these commodities.

And I know depending on where you live in Canada, the economy may be a bit more dependent on this than other. The new anti-dumping and duty rate for most Canadian producers will be at 17.9%. And should I say that's the average rate here? 17.9 percent and should I say that's the average rate here it's a bit less than a new preliminary rate that was issued in May but doubled the initial rate of 8.99 percent the rates actually vary based on the producer so for example can4 ticker cfb.to will have a rate of 19.54%, while West Fraser Timber, WFG.TO, will have a 11.12% rate. So I don't know this industry quite well, but my guess is that it really depends on how the U.S. views each producer in terms of dumping prices. I still find it a bit puzzling, though, that the U.S. is imposing these duties since the

U.S. is really trying to control inflation. So if you watch some U.S. news or you just look up some of their news, there is inflation talk pretty much everywhere. CPI figures went up. Housing is going up in prices. So you think that having cheap lumber would be something that they value for consumers and housing affordability specifically. But my guess is that the lumber lobby in the US is quite strong and is putting a lot of pressure on the US government. Still a bit puzzling because, you know, you have your citizen that are suffering and want to get into the housing market and the prices are higher and higher and higher. this would be an easy way

to make that at least a bit more affordable for them. Fed's in an interesting position where they have this inflationary environment. And never before, at least maybe not in my lifetime, we have seen inflation just kind of at the forefront of every discussion. There's the new Fed chair, Powell's back in for more years. And that is at the forefront of all discussions on macro policy. And some of these will just probably fly under the radar because there's so many things for them to look at. And are they looking at lumber products and going, oh, this could be deflationary for housing pricing and that could be good. I just think that there are way too many inputs for them to actually manage the situation correctly. And that's probably what's happening here. No, it's true. But it could also be just perception, right?

The U.S. government could say to his citizen, look, we're lowering these duties from Canada because we know it's important for you. Want people, younger people want to get into housing, even if it doesn't have a big impact on inflation or insignificant, it's still the perception, right? So to me, that's why I find that a bit puzzling that they would kind of side on the way of the producer and not a bit more on the side of the consumer. Yeah, fair enough. Simon, this is why I spend zero minutes a year looking at macro, because it never makes sense. And it will never make sense. All right, let's move on to Disney. I do think that this is an interesting case study into various businesses, new growth levers that they're pulling, but they're so different and all in their new like Disney plus segment, which is this direct to consumer versus their parks, which is this

experience business. And it's this converging of all their IP. And I think that Disney is a very interesting case study right now. Yeah, they definitely are. And like you said, they have this if you're looking at a company that has both stay at home and also some travel experience, this is the perfect company here. So Disney Plus subscribers were up 60% to 118 million. Of course, these are the full year results for Disney. ESPN subscriber were up 66 to 17.1 million hulu subscribers were up 20 to 43.8 million overall revenues from disney was up three percent year over year to 67.4 billion they had two billion in net profits compared to a loss of 2.8 billion last year and let's keep in mind about the base effects over here.

Revenues were up 5% for their media and entertainment distribution as a whole. So revenues for DTs direct-to-consumer, DTC like Brayden mentioned, was up 55%. This includes Disney+, ESPN+, and Hulu. It's part of their media and entertainment distribution. Revenues were down forney parks and experience by three percent which is actually interesting i thought it'd be it'd be higher than last year but then you look at the reporting period and it does make sense because they're fine their fiscal year runs from october to october so last year's year-end result would have included some pre-pandemic time

so it does make sense when you think about that. Free cash flow was down 45% versus last year. For me it's clearly mixed bag for Disney. Yes they're doing well in the subscriber growth but they're still struggling in the Disney parks and experiences. They're also investing a lot in their direct-to-consumer offering, so they are losing money in that segment. It will be interesting to keep an eye on that. We saw Netflix making huge investments in the past in creating content, and Disney is no exception to that. The market definitely did not like the report

since the stock is down about 15% since the results have been out. So it's a stock. It's an interesting case study here. I would definitely keep an eye on them. Personally, I'm not interested in investing in them because there's just too many variables in play here, but definitely a good case study. There's so many moving parts inside of Disney, and there's rumors they're going to, they want to offload the ESPN business. Like, how do you value this thing? I'm not, I'm going to be honest. It's, it is a difficult thing to value and I got to give it to them. I mean, Disney plus, what is that? 118 million subs.

Netflix, as of their latest quarterly report, was 214 million subs. So Disney Plus is relatively new and is making serious ground on the market. Netflix does have an additional 100 million subs. But if you look at the scale as Netflix is the number one in the segment, that 118 million from Disney Plus is very impressive. Can they keep growing it at this clip? That is the question. Now, when I look at their other assets, the pricing power that they have demonstrated on the parks is almost like it's gone to the side of like greed at this point. Like a ticket to get into their park is now like a couple hundred bucks per person when it's all said and done. If you're buying on the additional like fast pass stuff, but there's a lot of controversy around that now too.

So I just don't understand how this business can keep growing at the speed it does. And then it does because the IP is so valuable. I don't give Disney enough credit for how much people like Disney. That's I guess that it's just like my own anecdotal evidence that I have zero interest in going to the theme parks. If I'm going to Florida, you know, I'm going to chill on the beach with a beer in my hand. So I guess like anecdotally, I just don't understand how people like Disney Plus so much. But the financials are telling a completely different story yeah i mean i'm sure if we had kids we probably would have a different perspective fair enough with all the movies and you know i'll give

it to disney in terms of the disney plus subscribers i mean they've been lives for about two years now so disney plus was launched Granted, they got huge tailwinds from COVID-19 and people getting subscriptions. But just the fact that they're getting to those numbers, that's impressive. I mean, the ESPN is very located to the States. There's a lot of competition for sports content bidding on these various contracts. So I think that's going to be a bit of a wild card. But Disney Plus is definitely the one to look at. The other two are more US focused. Yeah, fair enough. I guess in my quick analysis after that, it sounded kind of like bearish, but I don't think that's really the reality of what I

think. I think Disney is obviously an incredible business and probably one that is great to own long-term. I guess my perspective and my point being is you got to understand Disney and you got to know Disney. You got to know the IP. You got to see if what's working for them and what's not as a shareholder. I personally don't think I have that edge, but if you listening, you got kids or you like Disney yourself, that's cool. They have so much IP that is incredibly valuable and they're going to continue to be able to grow year over year, I think anyway. So I sounded kind of bearish, but long-term, I think Disney is probably a pretty good bet. Moving on to Autodesk, ticker ADSK. Autodesk shares fell 23%.

Wow. So they fell 16% on the day and then subsequent days, they're now in a 23% drawdown. This is mostly in line with the destruction of expensive software stocks. Expensive on the multiples, you know, they trade at high price to free cashflow, price to sales, you know, price to earnings doesn't even make sense. These are the kinds of stocks I'm talking about. Autodesk was just chilling there in my portfolio while the rest of software stocks got killed. And then I was like, oh, see, you got to own the high quality assets. It's Autodesk. And then they reported a little bit of weak guidance and the stock got punished. Now, before I get to the numbers, I want to preface something. Autodesk is not a cheap stock. And if that was like, you know what, investors are going, ah, you know,

it's not a cheap stock. I'm selling this thing. It's never been a cheap stock. And if that was like, you know what investors are going, ah, you know, it's not a cheap stock. I'm selling this thing. It's never been a cheap stock. And it was certainly not cheap before the sell-off. So if you back out stock-based compensation, it still trades at very high multiples to free cashflow, for instance. I'm here to say, I think it should trade at those premium prices. This is a high quality, very sticky, wide moat software business with over 90% gross margins. Autodesk should trade at a premium. So those who are not familiar with Autodesk, they might be familiar with their products like AutoCAD or Revit, Fusion, Inventor. There's tons of them. I went on their website and counted 74 products. So that gives you an idea of how many they have. Now, many of them are highly entrenched into their core industries of

architecture, engineering, and construction. Again, that's architecture, engineering, and construction. That's that AEC thing that I'll talk about in the future. So when you have some weak guidance, high valuation multiples get compressed. So total revenue for their quarter was up 18%. Seems pretty good. Subscription plan revenue was $1 billion now, which is an increase in 21%, which is awesome. They're doing $1 billion for the quarter in recurring revs. Now, the core AEC segment grew 22% on sales. This supports my

thesis that the core segment around architecture, engineering, and construction still has a long runway for growth while they have additional opportunities in manufacturing, media, and entertainment. Now they are finding some real disruption in global construction projects, and this is affecting their customers. And this is kind of what they pointed out on the call. There's the supply and labor challenges that construction companies are dealing with. instead of saying a lowering guidance and adjusting, they said that it's a risk flag, quote unquote, that they're planting a risk flag. What does that even mean? Like, it's kind of like I saw some people make a bit of a meme about that. They had like the Drake meme where they're like reducing guidance, like no, no, no, no. Planting a risk flag. Yeah. Like that's the kind of like, what does that even mean? We still see the path. This is a quote from, from him. We still see a path to 2.4 billion next year in free cashflow, but we want to flag these risks because we think it's prudent thing to do at this time. Given what we're seeing today, this is not a guide. It's a risk flag. Okay. Whatever

means, whatever that means As a shareholder, this is pretty weird. Not gonna lie. However, this is that however, as a long-term investor in Autodesk myself and someone hoping to hold Autodesk for a long time, I'm thinking in years, not quarters, this does not affect the long thesis. You know, they still grew revs at a good clip. Subscription revenue is up 21%. Computer aided design and Autodesk products have a long runway for growth, especially with global demand for infrastructure. Those having really nice tailwinds. It takes decades to master their flagship products, making it very sticky.

And this is demonstrated with their net retention rates exceeding 100%. They are able to convert non-compliant users to paid users. Now that everything's in the cloud much better than they were before. This little line item was up 50% this year. So that's nice to see. They're growing that core AEC segment, but they also have optionality in other verticals like media, like manufacturing. And then lastly, there is competition coming up in computer-aided design serving that AEC market. But even the competition typically has integrations with Autodesk because they know that their core customer set, their core customers have data and drawings that are already

in Autodesk file formats. It's more of that like can't beat them, join them type deep moat business that you have innovators working on top of what you built rather than being in direct competition. Market participants are so sentiment driven in the short term, like we talked about, sentiment driven in the short term like we talked about but it's like okay zoom out you know Autodesk stock is up almost 300% over the past five years zoom out it's been a great stock to own and one that I will own for a long time to come yeah I just had two things to mention on there the first one is risk flag I mean either he's trying to be transparent or I mean, he needs help from his PR guy because you really want to scare an investor. Try to start using those kind of words. That's right. Like being just saying, hey, we have a guy down from like 2.4 billion in free

cash flow to 2.2. Yeah, the stock's going to sell off, but shareholders are more concerned about this kind of weird wording. Yeah, exactly. But one thing I think is really important for these type of SaaS businesses, which you're transitioning to is that net retention rate. That's always something to focus on. So whenever you're looking at SaaS businesses, you want to see that as close as possible to 100% or higher than 100% because that really shows that their product is sticky. If it's over 100%, it means that consumers that are already with them are actually adding on some more products. That's right. Because SaaS models are, the good ones anyways, are modular in the fact that you can add on more of their services over time.

And if you have that exceeding 100%, the current customer base is spending more money, net of churn, the business is growing, which is very good to see. You're getting that twin engine of growth, and that is a good metric to look at for SaaS businesses. As do-it-yourself investors, we want to keep our fees low. That's why Simone and I have been using Questrade as our online broker for so many years now. Questrade is Canada's number one rated online broker by MoneySense. And with them, you can buy all North American ETFs, not just a few select ones, all commission free so that you can choose the ETFs that you want and they charge no annual RRSP or TFSA account fees. They have an award-winning customer service team with real people that are ready to help if you have questions along the way. As a customer

myself, I've been impressed with Questrade's customer service. Whenever I call or email, every support rep is very knowledgeable and they get exactly what I need done quickly. Switch for free today and keep more of your money. Visit questrade.com for details. That is questrade.com. Here on the show, we talk about companies with strong two-sided networks make for the best products. I'm going to spend this coming February and March in an Airbnb in South Florida for a combination of work and vacation and realized, hey, my place could be a great Airbnb while I'm away. Since it's just going to be sitting empty, it could make some extra income.

But there are still so many people who don't even think about hosting on Airbnb or think it's a lot of work to get started. But now it is easier than ever with Airbnb's new co-host network. You can hire a local quality co-host to take care of your home and guests. It's a win-win since you make some extra money hosting on Airbnb, but can still focus on enjoying your time away. Find a co-host at airbnb.ca forward slash host. That is airbnb.ca forward slash host. Let's move on to Alimentation Cousteau, ticker ATD-B.TO. Total revenues here were up 33% year over year. This was primarily driven by increase in transportation fuel revenues. So it makes sense because if you go back to last year, we're talking about base effects. Again, looking back at what the cost of fuel and gas was.

It was way lower. Overall, I mean, the results were okay, I would say. Their net earnings decreased 8.2% to $694 million. They are increasing their quarterly dividend by more than 25% to $0.11 per share. They saw their operating and SG&E expenses increased by 12.8%. Management said that they are seeing increased costs for employees and employee retention. Just a fun anecdote on that. While I was driving back from Syracuse, I mean, it's just fun to think.

And I ended up stopping at a McDonald's to buy a coffee. And they had a sign that said hiring at $15 an hour with interviews on the spot. I've seen fast food restaurants have were hiring signs before the pandemic but that's nothing new but the interview on the spot in my mind really shows how the labor market has shifted from employers having the upper end to the labor force having the upper end and I thought it was an interesting anecdote just to go on with the fact that they are seeing with alimentation, an increased cost in employee retention, and especially retention bonuses, they were saying,

I would keep an eye on that because I would predict like personally, I would not be surprised to see if that keeps going on for at least a little while. What's your view on that one, Brayden? Yeah, I don't see that slowing down. I listened to a podcast that kind of pointed out something similar, which is these lower wage hourly worker jobs are actually the highest increase in actual rate per hour. Like they're these jobs, their salaries on an annualized basis are increasing faster than every other segment of the labor market because they can't find anyone, right? You have to incentivize people. So yeah, interviews on the spot, we will pay you and hire you right now to come flip some burgers at McDonald's. Yeah. But

we're seeing that across the board. Yeah's crazy because especially at mcdonald that mcdonald was 24 7 so i guess like whoever is the manager there during that shift they're just going to uh yeah do an interview on the spot regardless of the time of the day which i just thought it was fascinating and just a good anecdote to to kind of show what's going on. But overall, they said they weren't affected too badly by supply chain issues since most of their products actually come from North America, so they rely a lot less on overseas shipment. Nonetheless, they say that they have seen a decrease in overall selection in their stores because of it. They will also be delisting their Class B shares as of December 20th. If you own these Class

B shares, nothing to worry about. The shares will automatically be converted on a one-on-one basis, and they will only have one share listed from that point on. So that's it for Arimata, Saint-Croix, not too much. They added a few stores, but closed a few. It was almost neutral. When you looked at their earnings report i think you'll probably see them return more and more money to shareholders until they come up with maybe a new acquisition i'm not sure but uh i know you probably remember this i'm putting you on the spot but what was the acquisition they were trying to do and they it fell through care for in france the large grocer.

Yeah, that's right. So it'll be interesting if they're kind of eyeing something else, but I think for the time being, it's kind of steady as she goes for them. It's a bit of a lull in their capital allocation strategy and you're seeing them hike that dividend up 25%. By the way, this has been a very consistent 15 plus percent type dividend growth stock on a long view. So if you are a dividend growth investor, CouchTard is an interesting one. It trades at very fair multiples and it's only listed on the TSX. I don't believe they have any other listings. So maybe you're getting some discount to peers there from that perspective as well. Now with CouchTard, I do see this kind of lull in the business, like I was mentioning before, because that care for acquisition didn't go

through. Investors were kind of like, what's going on? And then they've just been kind of quiet since then. So I am interested as someone who follows the company fairly well, is to what is that next move? Is it grocery stores? The market didn't really like that. Can they do more roll ups and quick convenience and fuel? And what is the future of this business in a electric vehicle first world? These are the questions that investors should be thinking about with CouchTard. And we just hope that they have a good answer for it. Yeah, that's a good point. And now we'll move on to our last name, one that I didn't know existed, but I'm sure you were aware of. You're talking about Constellation? Yeah. Yeah. Well, the CSU Venture Fund, I didn't know they had an actual venture fund. Oh, no. It's because it's brand new. This is new, Simon.

Oh, I did not know. Yeah. Oh, you love to see it, don't you? Yeah. Well, there you go. You just gave it away. The news is Constellation Software, ticker CSU on the TSX, they announced late last week, Simon, way to look into the news notes here. They will be creating a 200 million venture cap fund called VMS Ventures. VMS stands for Vertical Market Software. For those who are not familiar with the space, they are looking to deploy $200 million over a three to five year period. The fund will be run by Dan and he will continue to be the CEO of Topicus Operating Group, but he will resign of his role from Topicus.com as CEO. So Topicus.com, the stock, he will no longer be the CEO of that company and he's going to run this venture firm and the Topicus operating group.

Now, Robin will become the CEO as well. He already has the role as chairman, and he's going to become the CEO. That's Robin van Polje. I don't know if that's how we say it, but that is the most Dutch name I've ever seen. Mark Leonard, the GOAT, the president of Constellation, he said, organic growth will be very important part of CSI's enduring success. Fun fact, CSU is the ticker, but they actually call themselves CSI. So if you hear CSI when I'm talking about Constellation, it's not a typo. It is quite confusing though. Topicus has one of the best track records of sustainable organic growth at scale that I have seen in the vertical market software industry. I will personally support the fund and Dan as he focuses on

leading Constellation's larger organic growth efforts. So this is exciting as they look to invest in some high growth, larger software deals. And when I say high growth, I mean internal organic growth at these software companies. They're hoping to use this as how they can learn how to acquire fast organic growth companies, but then also look to roll out a lot of the strategy that these companies are using to generate organic growth inside of their portfolio of hundreds of companies as well. So that's always been the knock on CSU is, yeah, sure, they're able to acquire all of these software companies, but none of them are actually growing. Now, Mark has been very clear in the past that he can generate really good IRRs and buy software companies at relatively good

EBITDA multiples that don't have organic growth and still deliver exceptional returns for shareholders. I mean, look at the CSU chart. It's bonkers over the last since IPO. It's insane. But he's recognizing that organic growth will be important in the future. And so they're seeing lots of pressure probably on the ability to buy VMS software for really low EBITDA multiples. There is more competition in the aggregators or large serial acquirers of software companies. So he's probably seeing more and more competition in these deals. And he's recognizing, hey, I mean, long term, if we can also generate reasonably good IRRs while acquiring software companies, and they have this internal organic growth strategy, then we can probably generate even better returns for shareholders. So he is that lifelong learner

type of CEO that you want in the driver's seat. Yeah. I mean, thank you for the breakdown. And to my defense, people probably don't know this. I do my notes on the weekends for the Monday recording episode, and I didn't have a chance to view all of it. So yeah, I do them last minute. So that's, that's, uh, it's not your fault. I'm just giving you a hard time. I wanted to make sure people were aware, but definitely, you know, I rely on you mostly for CSU.

You know that one way, way better than I do. So, well, it makes sense that I had never heard of it. So that's what I wanted to. Yeah, and I hadn't heard of it until a few days ago as well. And so I'm someone that follows the company probably closer than is healthy for a normal human being to do so. But that's kind of the cult of Constellation Software. Thank you guys so much for listening. Today is November 29th.

We got big banks earnings coming out this week, Canadian banks. So we'll see that. Again, you heard it here first, Simon. I'm calling it bold predictions. You got to do bold predictions on the podcast. I think that these dividend hikes are going to blow the socks off of the market. 10%, 20%. No, I'm talking 35%. That is my prediction. I could be dead wrong, but that's what I, based on some quick calculations of how much excess capital they would be able to actually reasonably do that and maintain good payouts. That's what I think. I don't know if you have any sort of hot take on that. No, I mean, I'll keep my hot takes for the year end when we do our 2022 hot takes or bold predictions. And we'll probably have to revisit the ones we did last year to make sure we met

them or just completely missed the boat. So I'll let you be completely wrong or way right on this one. Yeah, I guess we'll find out very soon in a couple of days. If you're not following us on Twitter, go ahead and do that. That is at CDN underscore investing. Our website is the Canadian investor podcast dot com. For those who want to check out Stratosphere, it is my software company where you can find 10-year financial statements, analytics, and write-ups on a lot of these companies we talk about, both Canadian and US listings. Because there's lots of sites out there that have research on US listings, but very little

on the underserved Canadian stock investing market. So go ahead and check that out. That is stratosphereinvesting.com. Gave us a review, five stars on the podcast. We really appreciate you do that. It helps us grow. It helps other people find the show. We'll see you guys in a few days. Take care. Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Br Braden 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.