The Canadian Investor - Warren Buffett on Bear Markets & Our Watchlist - Earnings Roundup

Episode Date: June 16, 2022

In this release of the Canadian Investor Podcast, we cover the following earnings releases and news: US CPI print Warren Buffet on market Drawdowns Docusign earnings Jennifer Wong becoming the CEO of Aritzia Dollarama Earnings Vail Resorts earnings Rumors that Netflix might buy Roku Stocks on our watchlist Tickers of stocks discussed: SMNNY, GOOG, DOCU, ATZ.TO, DOL.TO, MTN, NFLX, ROKU Our Website Canadian Investor Podcast Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Check out our portfolio by going to Jointci.com 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 MonerisSee 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

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My name is Brayden Dennis, as always, joined by the legend, Simon Belanger. How we doing, buddy? I am, you can see me, I am at the cottage and it is, it's a beautiful day. I'm happy to be here. Yeah, it's a great day. I was actually working outside a little bit earlier today because we have a really sweet backyard. So I was doing a little bit of work there, had some co-workers comment on it.

But yeah, beautiful day here. No rain in sight. Can't complain. The classic, you're like working from home or something. There's always the person on the other end of the Google Meets or the Zoom who's like, oh, working outside. Someone always has to make some sort of comma. Hardly working, working, hardly work. Like, okay. All right. That joke was funny in June of 2020. All right. That joke was funny in like June of 2020. Simone, we have a good show. We got earnings for everyone today. Let's start off with a really nice message that I just read from a join tci.com Patreon supporter named Stavros. He said, great podcast. I respect the effort and

research put into these episodes. There's an amiable dynamic between both of you that renders the whole show easily digestible and relatable. Stavros has a way with words. I like this. This makes your show seamlessly top tier among any Canadian investment podcast available right now, in my opinion. I recommended it to all my peers. Thank you so much for the support, Stavros, for the kind words and subscribing to our monthly portfolio update at the community over at join tci.com that was a nice little message we got there and we get we get so many but we just want to call out some yeah definitely we love hearing that and obviously makes it worthwhile for at least for me I think I'm talking for you as well hearing those messages

that's always the thing that keeps on driving me is just the nice messages and people saying how we've helped them. Last little administrative thing here, stratosphereinvesting.com is officially stratosphere.io. Stratosphere.io is the new domain name. If you go to the old one, it'll redirect you. No worries there. But stratosphere.io is the new name of the company and the domain. This is very exciting for me. It was not cheap to get that domain name, but I think it was the right play overall. So stratosphere.io. Simone, markets have been rough, to say the least. And the leading reason for that is yesterday's CPI print, right?

Yeah, exactly. It was yesterday. I mean, all the days are blurring on together. What year is it? Yeah, exactly. Well, yeah, definitely CPI came out for the US and clearly we do, we know it's a Canadian podcast, but I think the U.S. is important here because usually those are the metrics that will matter when you see big drawdowns on the macro side is what type of inflation print, for example, came in. So another month passed and it's another high CPI increase year over year. U.S. CPI was released and increased 8.6% in May compared to the previous year. Gas prices were up 48.7%, which is not surprising. Food was up more than 10%.

And shelter, on the other hand, ended up 5.5%. Almost all categories were up at least 5%. You can view that on the U.S. government's website. They kind of do the same thing as stats canada they'll outline the categories but actually not as like stats can website i find better to use if you want to drill down to stuff so you know we are critical sometimes of uh how archaic their websites look the u.s government is not much better so i'll just say that no not at all yeah i agree the actual stats can Canada is pretty slick. Each website

is different, managed by different people. Some of them are actually pretty slick. Some of them not so much. Yeah. And what I like personally is it's just easy to get all the categories. You can see by province. They drill it down pretty well. But now to get back to the US print of 8.6%, this was clearly higher than the market expected because once it was out, the markets really went further in the red. Now it'll be interesting what the Fed decides to do this week. They are having meetings. It was yesterday and today. So from what I've been reading, most analysts were predicting 50 basis point hike before the CPI print. And now a lot of the expectations has shifted to a 75 basis point increase. So we

should know, I think on Wednesday of this week. So by the time this comes out, you'll probably know what the Fed will have decided to do following the FOMC meetings. So yeah, that will have a big impact on the markets. We are long-term investors, but let's not hide it. Short and medium term, what the Fed does and the macro does impact where the markets go quite a bit. Oh, for sure. In the short term, without a doubt. If you are new to the show, and we do our best to try to avoid the jargon. And many of you know what CPI is, but if you do not, it is the Consumer Price Index. Canada and the US both measure their Consumer Price Indexes for what they believe is a measure of inflation. It is never the correct

number. There is no correct number. It is an unknowable number, but there are methods of estimation and the consumer price index being one of them. The market has been tough. Let's not kid ourselves. I feel you out there. I get it. This may be one of the first real bear markets that some people have experienced. I get it. I mean, it's been what since 2008, since the real bear market, I'm not even counting 2020. It was like a month and it was over. Yeah, it's been a while. I mean, if we have a younger investor, even you, I would go on a limb and say you weren't investing at that time. I was and it's not easy because what we saw in March of 2020 was almost a flash bear market.

And then things were back to normal within a month or two, like you said. But this is it's easy to look at it and think there's just no end in sight. But typically, history shows that it will get better, but it may not be quick. Yeah, that's good context. No, I was not yet an investor. I started investing on my 18th birthday. I am 27. So there you go. However, if you do a brain scan on me, when I see prices depressed, you would like put me in a psychiatric ward. Like this guy has no feeling up there. And I've really done that because I focus on the businesses I own.

And they're not just tickers dancing around a screen. They are real businesses. And in the short term, they are valued on a mark to mark basis daily. And that creates a lot of confusion, noise, and irrelevance for long-term investor. And so I wanted to segue this into a section from an AGM that Buffett did for Berkshire. So 2022, it's continued to get worse for market participants. Let's not kid ourselves. The TSX is down 8% year to date, but unless you own just a basket of energy stocks, chances are you're down a lot more than that, I would assume. S&P down 22% year to date, the NASDAQ more than 30%, which is quite a bit. I mean, that's no joke. If you zoom out, it's done quite well. That group of stocks have done quite well,

but you're on a 30% drawdown. So it is what it is. So Buffett on an AGM here, I pulled this quote. Here it is. You shouldn't buy stocks unless you expect to hold them for a very extended period of time and you are prepared financially and psychologically to hold them the same way you would hold a farm and never look at a quote. And you're not going to pick the bottom and no one else can pick it for you. You've got to be prepared to buy a stock and see it go down 50% or more and be comfortable with it. There have been three times the price of Berkshire went down 50%. If you owned it on borrow money, you probably got cleaned out. There was nothing wrong with Berkshire when those three

times occurred. Now, I sent this video out into the interwebs via Twitter and it went viral. I had never got a tweet go viral like that, but this one went viral. It's just the right piece of content at the right time to go viral on the platform. And there were hundreds of people retweeting it saying, And there were hundreds of people retweeting it saying, stay strong, AMC army, just hold, you know, some ticker, some electric vehicle shit co. And I look at this as a complete misrepresentation to what Warren Buffett is saying. Yes, you have to be prepared to hold great businesses during massive drawdowns like Buffett was talking about. And if anything, businesses during massive drawdowns like Buffett was talking about. And if anything, probably get more aggressive when prices are beat down, but not of bad businesses. Bad businesses get wiped

out in hard times. The key here is that he said, while there was nothing wrong with Berkshire. And so I just wanted to touch on this in two ways. One, drawdowns suck, but you got to be able to hold on to great businesses because these things happen. How many times has some of these great businesses gone down 40, 50% or more? You have to be mentally and financially prepared to endure that. And number two is that this is a great time to buy and continue to collect great businesses. Hard economic times can literally wipe out shit goes. So do not extrapolate this kind of thinking to holding crappy businesses. That's my two parter here on the drawdown.

Yeah, yeah. I mean, I totally agree with that. I would add to that. And I'll probably sound like a broken recording machine at this point. And I'll probably say it every single week or two weeks. But be extremely careful of companies that have a lot of debt on their balance sheet and debt coming due. You have to be careful with those because especially if their revenues are either stagnant or even increasing a little bit, that debt could really, really be hard for them to continue operation if we look a few years

down the line because the interest payments will be just too high. So I would say that's probably in the current environment, the highest at-risk businesses in my opinion. Yeah, totally. As they hike rates and basically tighten quite a bit over the next little bit, that seems to be consensus across the board that that will happen. Of course, that's no guarantee of what consensus and what people think is going to happen, but that's what the word is out there. Look at percentage of net long-term debt that is on fixed rates. Also something important to look at. I was talking about Equinix a couple episodes ago. 94% of their long-term debt is fixed at really low rates, like disgustingly low rates, because those companies can get extremely low rates. I

mean, they're just cashflow machines. They're literally cash cows. So some of these businesses have been able to really shore up their balance sheet with extremely low interest rates if they have that kind of recurring element to their cash flows. Yeah, yeah, exactly. And I'm not saying obviously that it has to be, I would say subpar businesses that would could be in trouble with potentially credit rating, exactly not great credit rating and some debt coming due fairly soon. Whether it fixed or not, you know, if it's fixed, it's fine. But if it's coming due in a year, they may be in trouble when they refinance. So I think those are just something to keep an eye out. Companies you might think are a bargain,

if you're value hunting, just be careful. There might be some bargain plays, I'm not saying, but that can really be difficult for a company to overcome. 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

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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 we'll move on to some earnings because there are still companies coming out with earnings here. I couldn't find many, by the way. I was really searching. Yeah, I know. I found a few. The first one, I think it made headlines quite a bit, DocuSign. They released Q1 2023, so they're on weird financial schedule here. I'm assuming most people are familiar with DocuSign, but if you're not, you probably have worked with their software in the past, especially if you recently purchased a house or did something that required a signature in a legal setting. They aren't the only player in this space with Adobe being another one. And I know there's some smaller players as well.

I think them and Adobe are the two biggest in this space, if I'm not mistaken. They have all these random competitors that I end up signing documents, like HelloSign or something. There's all these competitors that popped up, and I guess that's the bare case on DocuSign. Quick thing here, DocuSign, HelloSign, whatever the hell sign, Docu-sign, hello-sign, whatever the hell sign. You could probably send me a docu-sign that says, I owe you my entire net worth. It goes right to the signature line. I just click the button, press done, and never even look. This is worse than the Apple terms and conditions signing off your life away on like these long terms and services, this DocuSign stuff. Like I have no idea what commitments I am signing because

they make it way too easy to be completely negligent. That's my only thought here. I mean, I'm different. I actually was reading them because the last time i used it was for buying a house and i was really careful i wanted to make sure i knew exactly but they're not really big they're like probably less than 10 pages yeah so it's it was doable but going back you know i would have signed i would have clicked that button pressed done and i was done with it now here doc you signed total revenues increased 25% to $588 million and subscription revenue increased 26% to $569 million. Clearly, most of their revenue is subscription. Billings were up 16% to $614 million. Billings actually reflect sales to new customers plus subscription renewals and additional

sales to existing customers. So it's kind of a better indicator of their pipeline. That's important because I'll come back to that in just a bit. Gross margins here were stable at 78%. They had a net loss of 27 million, which was slightly more than three times last year's losses. Total outstanding shares increased 2.7% in the last year, which is actually not bad for a company in the tech space. Free cash flow increased 42% to $174 million. Now, the market did not like the earnings result. And as a result, the stock was down 25% on Friday after the earnings release. The revenue guidance stayed the same.

But what really hampered some of what the market was looking at here was the total billings guidance. So that term I just referenced a bit earlier was reduced by around 8%. They also said that they had trouble retaining talent and that the current environment is challenging. Over the past year, DocuSign is down more than 70%, which is not surprising. It was one of those stocks that really kind of benefited from the pandemic, the lockdown, the stay at home stocks that was definitely part of that. In terms of retaining talent I mean I think that's probably across the board I don't think that's specific to DocuSign there's a lot of

competition for programmers for anything IT related but it'll be interesting just to keep an eye on them how they do for the rest of the year especially like you said it's hard to say whether they can be the leader in the space down the line I think they are probably what like you said, it's hard to say whether they can be the leader in the space down the line. I think they are probably, like I said, the top two along with Adobe here. But maybe there's going to be some smaller players that will eat some market share this year, next year, and the next few years. I am not surprised on the talent front. I am not surprised on the talent front. And if you are a tech stock in this situation, and you have a less than impressive quarter and guidance lowered, you are going to get wrecked. Like, there's just no escaping it. You're going to get absolutely brought to the woodshed. Yeah.

Yeah, there's no – that's the current environment. There's no sugarcoating that one. Yeah, exactly. All right. On to some news, not earnings news, but news. Brian Hill. We've talked about Brian Hill quite a bit, and we've given him lots of respect on this show. He's the founder and now chairman of Aritzia, the women's clothing store.

He has officially handed the keys to the kingdom to Jennifer Wong, the COO, who is now the CEO. Now, this story kind of flew over my head. Maybe you track the name a little bit more than me. I only know it because my girlfriend's obsessed with the CEO. Now, this story kind of flew over my head. Maybe you have been, and you track the name a little bit more than me. I only know it because my girlfriend's obsessed with the store. No, I actually hadn't noticed because, you know, I do keep an eye on it, but we keep an eye on so many things. We keep an eye on freaking a million companies. So, it's easy to miss something like that. But when we had reviewed it,

I remember talking about that and saying like, it'll be interesting because he's not the youngest guy, whether he stays on. What's his exit? Yeah. Yeah. Yeah, I know you're right. You were like a week before the announcement. A wonderful podcast listener, Kennedy, shout out Kennedy.

She hit us up and said, I haven't heard a comment on you guys from Brian Hill stepping down as Aritzia's CEO. And Kennedy, you are right. You are correct. Thank you very much. This flew over our heads. But the timing is good now to talk about it because I'll get to that in a second. Brian Hill, the founder of Aritzia, the Vancouver-based women's clothing store, we've talked about it extensively. Simon, you were just hinting at that. It was announced about a month ago that it'd be transitioning to the chairman role about a month ago from now. And so I just looked to see if that was in effect. And Jennifer Wong becoming the CEO just became in effect. So here's our chance to

report it as news. Jennifer Wong is the CEO of Aritzia. Long story short, I look at the management team and those changes are now official. From her current role, this is from their website. Prior to her current role, Ms. Wong served as president and chief operating officer or COO for seven years as part of her overall 35-year tenure at Aritzia. Holy smokes. Ms. Wong embodies Aritzia's culture, championing our business and our leadership philosophies. Okay. I'm like, okay, cool. That's the 10-year cool. Here's the key piece, all right, Simone? It also says at the bottom, just in a little line at the bottom, she led the launch of their e-commerce business in 2012. There's the kicker, right?

That's been such a good story for them is that e-commerce business. And so I'm speculating here for sure, but that certainly launched her career into the C-suite as the COO, and then now takes the CEO title. Launching that e-commerce business was obviously a big role. Yeah, and when you have someone in the COO role, typically they'll be almost running the business on a day-to-day basis and And then the CEO will be more kind of the strategic direction of the company. So the fact that she's becoming CEO and being as a CEO for a while, I think it'll only be good. I mean, if I were a Aritzia shareholder, just based on this without, just based on what you said, because clearly we missed that one, I wouldn't be too nervous. I

think it sounds like a good person to take over the CEO title. Yeah. And Brian's sticking around. He just doesn't want to be the CEO anymore. And I can't blame him. I mean, sheesh, that's a long time to be the founder and run the company for a long time. Yeah. It's great to see more women CEOs, man. She's clearly been instrumental in their growth over their career. I don't own shares, but I'm definitely cheering on this company. And I think that their penetration into the US is going to make a splash. And the stock's been getting crushed like everything else. So maybe the fundamentals keep improving over there. So maybe it's time to keep visiting it.

Yeah. Yeah, definitely. Now, the next name on the list here is Dollarama. So, one of the companies, again, that's reporting on a bit of a weird schedule, either Q1 2023 earnings. And it was a pretty good quarter. Why does it feel like Dollarama reports earnings 48 times a year? I think last time... Or maybe we just never miss it. No, I think last time... Well, we never miss them on the one hand. And I think last time is because I was never miss it. No, I think last time... Well, we never miss them on the one hand. And I think last time is because I was looking at retail as a whole. So we talked about Dollarama. And I think I had referenced that they would be reporting soon.

So here it is. Okay. Sales increased 12.4%. They have a lot of quarters somehow. I'm not really sure how that's working. So sales increased 12.4% to 1.07 billion. Comparable stores sales grew 7.3%. Gross margins went down 15 basis point to 42.12%. I mean, for me, let's just say they remain stable because it's impressive considering how a lot of retailers, and we touched on that a couple weeks

ago, have seen a lot of margin pressure in their most recent quarters. That gross margin line staying stable, that's solid because we talked about that before. But just again, just to remove some of the jargon, when we say 15 basis points, that means 0.15. There are 100 basis points in 1%. So 15 basis points, it means 0.15%. Many of you will know that many of you will not. And then now everyone knows it. Yeah, exactly. And when you're used to that basis points, I find it a bit cleaner to talk about differences like that, then, you know, when you get that, you know, 0.70, or it's, you know, it's just easier to say 70 basis points at that point. So that's for our newer listeners, especially if you're watching or reading on financial websites or in news.

You'll see that BPS term quite a bit. Or if you hear someone saying BIPs, that's usually what they'll mean as well. So there's different ways they'll use it. That's right. bips, that's usually what they'll mean as well. So there's different ways they'll use it. That's right. Now, earnings per share increased 32.4% to 49 cents. They repurchased 107 million worth of stock during the quarter. Free cash flow increased 7.5% to 116 million. In their earnings release, they mentioned that they benefited from the lifting of COVID-19 restriction, which resulted in double digit increase in customer traffic.

They said that there are ongoing supply chain challenges and cost pressures, but they remain one of the best options for consumers in terms of value. And I have to agree with that, right? If everything's rising, everything's relative so yes costs may be rising as a whole but if they're still the cheapest option even though they've risen they'll still be the cheapest option and this quarter covered February March and April so to me this is really impressive because inflation picked up during that time frame and they still managed to put out those results February it was starting to pick up March and April it really picked up so it'll be interesting if they're managed to put out those results. February, it was starting to pick up. March and April, it really picked up. So it'll be interesting if they're able to continue this year, so Q2 and beyond.

But so far, I mean, I have to hand it to you, Brayden. You kind of were making the case for this. I think it was earlier at the very beginning of the year, last year. And they seem to be- Around their pricing power? Yeah, exactly. About the pricing power. So they seem to be managing that well. And the lifting of the COVID-19 restriction, I think it's really important for them because

I haven't dug into the results, but I can just imagine that they don't get much in terms of online sales because a lot of people would just not think to order online for Dollarama. There's one at every corner anyways so why would you even choose that so um just wanted to mention that as well yeah and uh it should perform pretty well in a tougher environment on the macro scale so i refuse to doubt their ability to raise prices given their track record at this point and i'm slowly being converted you know if i keep saying it enough it becomes true yeah if i say i'll say because they have 48 quarters so we have a lot of time to talk about them two more quarters like this and i'll be converted i'll say okay all

right all right let's talk about veil resorts this is skiing as a service baby this is sass skiing as a service for those who are not familiar with veil resorts they own veil obviously veil breckenridge keystone whistler black home oh god they have a bunch they have the five most visited ski resorts in North America. They own the best. Park City, another one. I don't have the list in front of me, so I'm just going off memory. Now, Simone, before I get into the results, I was messing around on their website. I was going through some presentations that they put out. And you can see this little graph. Now, I haven't seen this graph. I've seen the one below it that

shows their shift from past sales, sorry, other way around, their business converting from lift tickets, mostly revenue, to season pass revenue. That one I've seen around a bunch, but this one I haven't seen. Now, if I can paint a visual picture for you, there is a graph here. The Y axis, the vertical axis is price and the X axis is time commitment. Okay. So price, vertical, time commitment, horizontal on the X axis. You have low time commitment, high price of buying lift tickets at the window, like showing up to Whistler Black Home and buying a $200 lift ticket. It's a little bit the cost. Low time commitment because you're just going one day, high price. Okay, next you have online advanced lift tickets. So basically like you're

going to secure a lift ticket before you go online. The time commitment is a little bit higher and you get a little bit of a discount. Okay. Where they are trying to live is in the mid to lower price category of higher time commitment of season passes, regional passes, and their epic day passes. And so this is buying more tickets at once using the epic pass or actual full-on season passes. This does a couple things. It advances their cash flows earlier up in the year, and it provides that recurring revenue, gets people on the property more often, and overall, more people skiing, more revenue being brought in, and better recurring cash flows. Now, this is the most important part of the results. Past products, so season past products,

through the May 21st, 2022, for the upcoming ski season increased 9% or 11% in sales dollars compared to the previous year. They talk about this term advanced commitment products. That's on the far right side of this price and time commitment scale. The epic pass, the regional passes, and season passes. So you want anything here before I get into the rest of the results?

I mean, obviously, I think it's probably, to me, the biggest advantage here is they're not as weather dependent. dependent because if you rely more on day passes, if you have a year that's unseasonably warm and season is delayed, then you can definitely take a big hit in terms of revenue by doing- More variability there. Exactly. By doing those advanced sales through season passes, you kind of reduce that variability. So I think that's probably how they benefit the most, I would say. Yep. Nope. Another one of the benefits for sure. There's a long list of them. There's a list of pros and cons. And so they've weighed them out and they said, higher skew towards advanced commitment products, which is a jargon for more season passes,

is better for the business. Okay. So if we look here in fiscal 08, 74% of their revenue came from lift tickets and 26 from season passes. Currently it's 62% passes and 38% lift tickets. So that's kind of flipped on its head and they expect 75% to be passes and 25% to be lift tickets. That's their goal. Total revenue for that quarter was up 32.3% to $1.1 billion for the quarter. And this quarter represents February, March, and April. So these are important months for ski season, no doubt.

And they did produce $372.6 million of net profit, which was up significantly. I mean, a lot of that's pulled forward from a lot of shutdowns previously from COVID. I know Whistler-Blackcomb closed down early last year. Like right after I left, it closed down the whole place. So like, okay, everyone has COVID, bye-bye. Everyone go home right after I left. And so that affected like a month of their season. And so that doesn't help as an example. That's the results in a nutshell, but more about this continued shift for their business, I think is really important to keep highlighting. Yeah. The only thing I wonder is how much of a tailwind they did get from the pandemic where people it was people skiing exactly it's one of the activities where people knew they could do in a in a safe manner so they

would go out I'm sure a lot of people took up skiing or hadn't ski in a while just deciding to do it obviously how many people keep doing it yeah exactly so just weighing that with the lockdowns obviously lockdowns affected revenue, but I'm sure there was a higher demand for their passes because of that. So that's something I would keep an eye on now that hopefully that's all behind us. It really looks like it is. So something to keep an eye on for those interests in this name. Yeah, things look good.

I mean, it's not like some explosive growth, but we're seeing 11% in sales dollars compared to last year for those advanced commitment season passes for next season already compared to this time last year. And so more renewal on that, more new net sales of that, obviously important for their business. And so we'll keep track in that. I do think like, you know, as a skier, snowboarder, I mean, once you do it, once you get it, once you, and these are not some little hole in the wall ski resorts, you know, you spend some time at one of these Vail resorts or you got to pass there. Like you live in the mountains you are converted man like one of the most addictive outdoor activities is being out there in the mountains by far from my opinion anyways yeah i mean i used to ski when i was younger now my body i think uh would not necessarily let me do it but i mean i've talked about mountain biking before and it's that same kind of feeling. Which is also a big business for them in the summer. Big business for them. A lot of ski resorts do that in the summer, definitely. It actually allows them to get

some revenue in their down season. There's other ways as well, but that's a big one. 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 or 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. Some big news or some rumors coming out last week about Netflix potentially wanting to buy Roku. So that started coming out when the rumors came out, the stock popped, but it was pretty short lived. I wanted to give a little bit of context here for those who are not aware. Roku is a smart TV software platform. They generate sales through hardware sales, licensing of its

software, but most of it is through advertising and subscriptions. Roku currently has a market cap of $11.2 billion and they are free cash flow positive. They generated $188 million in free cash flow last year and $85 million in Q1 of 2022. Netflix on the other hand has a decent amount of debt on its balance sheet their cash position is okay but it's definitely not a net cash position they essentially have twice the amount of debt than they do of cash it's pretty obvious here why Netflix would want to buy Roku we We've talked about it a few months ago when they came out with their earnings. They're seeing a subscription slowdown and are looking at the potential of cheaper ad supporting model. Of course, Roku is in the ad business, which would

make sense from that perspective. So there's a few things I wanted to go over here. Did you want to mention anything before that? No, I'm all ears right now because you mentioned this to me, but I don't know the details. So I'm getting educated at the moment. Yeah. So Roku, the first thing about Roku is that it's platform agnostic, which is something that is probably very attractive to its advertisers and customers. I've used Roku in the past, and that was actually the reason why we bought it we bought the actual hardware or the roku stick because the other option had limited access to other streaming services i'm thinking here fire tv from amazon you couldn't get i can't remember

which one but i think we couldn't get like apple tv on it if you only get like the prime video. Prime video, Netflix, but they're definitely, they're cagey on who they allow. Apple against the world, buddy. What's that? It's Apple against the world, brother. Yeah, exactly. But that's something I think

that is very attractive to Roku right now, just the fact that they're not associated with any major of the streaming platforms. The second thing here, and I'll be honest, I am kind of questioning Netflix leadership here if they go ahead and try to make this acquisition because everyone knows that Netflix has been struggling

from a growth perspective recently. And there's no doubt in my mind that that would be used against them. They could be seen as desperate. They're not in a position of strength here. And the real question is why hasn't netflix leadership or obviously reed hasting is right at the top there been able to be proactive here and anticipate the slowdown in subscription growth that was going to happen sooner and late than later especially with the big pull forward that they saw during the pandemic.

So it just feels like a bit of a knee-jerk reaction. Did you want to comment on that part? Perhaps, yes. I mean, the net ads was nowhere near where it has been. Net subscribers was actually down quarter of a quarter. I get all that. net subscribers was actually down quarter over quarter. I get all that. But if you look at the compression that's happened in Roku, buying them looks a lot more attractive today than when Netflix was in a position of strength. So I think that net nets out in a positive way for Netflix,

just to play devil's advocate. Yeah, yeah. But then I would counter with the fact that Netflix stock is way down as well. Yeah, like it's not been great. Yeah, exactly. And that's those are kind of my two points, right? So, you know, obviously, if they buy Roku, there's two main options. It's either, you know, you make a stock based offer, because clearly, they don't have that much cash, or you get debt. And the issue with debt is Netflix is barely investment grade. So they're not getting a good rate. That's what it means. When you're barely investment grade, you're probably going to be able to get more debt.

Is their credit rating that bad? Oh, yeah. They recently, they got, when I was researching that, I think it was October 2021. It was late 2021 where they got upgraded by senders and pours to investment grade. It was actually junk bond before that. Weird. Yeah. Well, I think it's just because they, again, they have a decent amount of debt on the balance sheet on the one hand.

And they have not typically been very free cash flow positive. They have a bit more recently, but it's been very lumpy. So I think it's that and the large commitments that they have to make for production, I think it probably what scares a lot of the rating agencies. So that's why I think it would be very tricky, in my opinion, for Netflix to make that kind of acquisition. Because again, I get that Roku is down quite a bit, but

how do they finance it? And right now, I'm not sure it would be very easy for them. A lot of people are risk averse. We've seen it with how the markets are down. So it's not like they would be able to get some cheap financing. Yeah, no, probably not. And I look at this and I think, okay, maybe a good idea. idea roku is a pretty good business kind of underrated business i mean they have their tentacles as the operating system on so many of these tvs i know mine is yours is via the stick mine's the actual os yeah that's the actual operating system of the tv i like it it works. It has this like kind of ecosystem of apps as well. So there's a little bit of a, maybe a network effect there, some switching costs

introduced. I think it's actually a pretty good business, at least, at least better than what meets the eye. Because at first when you're like, what's 20 billion for a Google Chrome stick? What are those things called? Oh, the Chromecast. Yeah. Chromecast. Chromecast. I'm like, what? 20 billion market cap for a Chromecast? Like, what is this? But there's more to what meets the eye there in terms of the business. Yeah, no, definitely. I mean, I think there's definitely pros and cons. The biggest pro here is that it would be free cash flow positive. So it would bring in some free cash in it. That's true.

That's probably the biggest advantage of them doing that. But again, how they would go about it, I think, is the biggest question mark. Let's move on to stocks on our watch list presented by the best branchless bank in Canada, EQ Bank. Go to eqbank.ca forward slash TCI to open an account. I was shocked at how easy it is to just get going on EQ Bank. I put away all my for tax time, high interest savings account, moved all the cash over there. That's what I did. That's how I'm using it. Go to eqbank.ca forward slash TCI. And that helps us as well. So appreciate if you use that link.

Okay, Simone, you have one off the board here. Off the board. Yeah. So for those of you follow me at Fiat underscore Iceberg, you probably know where I'm going with this. Usually I'll tweet because I'm doing research for the podcast. How can I repurpose this? Yeah, you get a little preview about it. So the name is Shimano. Ticker over the counter here. So S-M-N-N-Y.

So Simon, mother, Norman, Norman, Y. And I will put it in the show notes. It is an ADR, so an american deposit receipt it's also listed on the tokyo stock exchange because it is a japanese company so if you're not into cycling even if you are not into cycling actually you probably heard of shimano shimano is also present in the fishing industry and produces rowing equipment i haven't dug into them to know enough on where the revenues mostly come from but at the quick glance i will go on a limb and say that it's mostly cycling and i thought a japanese manufacturer thing that they have really good

equipment like top tier equipment in completely unrelated categories yeah is that it you know what i mean yeah i mean i guess like mitsubishi and stuff like that i guess it's leisure i guess you could you know kind of put it there the rowing equipment is pretty interesting they have like clips for roars i was looking at their website i'm like oh wow i never thought about that but i mean it makes sense. The Japanese are some of the best manufacturers in the world. So maybe I guess that just makes sense. That was just a random observation of mine.

Yeah. And I thought about this last week when I was actually checking reviews for a bike part that I'll need to replace on my bike. And I knew they were publicly listed, but never thought about looking at how they've been doing. And I'm going obviously to do more research like I mentioned on them and I'm looking to do a deep dive on on them this summer and I think I have an advantage here because I know their bike business pretty well because of

my passion for cycling mountain bike and I do have a road bike as well there are for a little bit of context for those of you who still don't, not too familiar with them, there are two main bi-component manufacturers and a bunch of smaller ones. So I would go as far to say that it's a duopoly here. The other company that's very prominent is SRAM, which is a US privately owned company. I had to convert most of these numbers that I'm going to talk about to USD since they report in Japanese yen. They have a market cap of 14 billion. They had 4.1 billion in revenues last year. Revenues have more than doubled in the past decade and I have grown every single year. They had 687 million in free cash flow last year and they pay a dividend of 1.25 percent clearly here

things will fluctuate because you're converting from you know Japanese yen to US dollars or Canadian dollars so currency fluctuations will be a big thing for this business the stock hasn't done well in the past 10 years not well at all but I think that's a bit of a symptom of the japanese market as a whole so i'm not sure it's specifically to them because you know at first glance without doing a deep dive a lot of stuff looks good here and the stock is down 15 50 50 percent in the last six months and they clearly had a boost from the pandemic but i can also tell you firsthand that they've had issue related what's the ticker i'm typing it into stratosphere right now what's it yeah it's sm and ny and ny yeah oh yeah yeah the adr okay yeah the adr and

i mean like i said i still need to do a lot of work, but they have been in the cycling industry for decades and decades. They have been there for a very long time. Typically, they won't necessarily be the ones innovating. They do take their time to put out new items instead of rushing something that doesn't work. But when they do come out with it, it works very well. My current mountain bike has SR sram and it's just because there wasn't much available for shimano and if i had to go and choose i would definitely take the shimano equivalent it's a very good brand they had a hell of a 2021 whoa yeah yeah

they had a big boost because of the pandemic. But I mean, they build a lot of quality, just, you know, like I said, based on experience. And I can only imagine some of those components have extremely high margins, especially the kind of higher end stuff. I don't think people realize how expensive, if you're not into cycling, how expensive those can be. I can imagine. And my brother's into downhill mountain biking and he spends money. I'm like, whoa, that's like a car.

That's literally a car, this mountain bike. I get it. Okay, let's round out today's show with my company you guys may have never heard of. It's a company you guys may have never heard of. Simon did one way off the board and I was like, okay, how can I go really off the board here? So the company you may have heard of is called Google. Now, the core search business of Google is the best business on planet Earth. Actually, I haven't heard of Google.

I've heard of Alphabet though. Oh, you've heard of alphabet okay good good okay good yeah parent company you've heard of okay good when you look at the sum of parts google is starting to look extremely cheap extremely cheap given the quality of the business the the growth, the opportunities ahead. If you look at the opportunities in the core search business continuing to grow at unbelievable rates, YouTube is on steroids. GCP is growing. It's no Amazon Web Service or Azure, but it's still player number three in the hyperscalers market in terms of cloud. The advancements they're making in Google Workspace and really being part of that core

enterprise solution for teams working, the other bets just incinerates money and no one gives a shit. It's just incredible. They have compounded revenue by over 20% on compound annual growth rate, free cash flow over 20%. The margins are impeccable. The talent retention is incredible. Their opportunities moving forward in artificial intelligence is unmatched. Their talent pool, I think I just said that, is just so, so key. And it trades at 13 times EV to EBITDA today. Let me see how far it is off the peaks.

I was buying shares a little bit more expensive ago to say the least yeah and i think it trades at less than 20 times p too less than 20 times free cash flow bro yeah well at this point like earnings and free cash flow are the same number because that's just the kind of business it is but less than sub 20 times free cashflow. The stock is down nearly 30% off the high, almost exactly 30% off the high. And hey, look, sometimes the best opportunities I already own, in my opinion, sometimes the best opportunities are hiding in plain sight. Sometimes the best opportunity is something that you engage with on a daily basis. And I do that very much so with Google products. This is a slam dunk for one of the best businesses in the world here. And of course, the market can get worse. Google can keep going lower and that's totally fine.

Yeah. And for those interested in buying that, that may not have $2,000 US to fork out to buy one share. The split is coming up in July. There's always the Canadian depository receipt from the O-Exchange. That's always an option. But if you want to actually own the shares, you'll have to wait about a month or so. I know it's July 2022. I couldn't find the exact date, but it's coming. So they're doing a 20 to 1, so it'll be much more affordable per share. Obviously, we've talked about stock split before.

You don't you know you don't july 15th they're doing a 20 for one yeah 20 okay there you go 20 for one so shares will go to like 200 bucks no no no no no that would be a 10 you saw my face i was like you're like that is the worst math ever no because shares are two grand. That would be a 10 for one. Yeah. And so you'll be able to get a much more, you're not going to be spending two grand US per share. You have this 20 for one stock split. And that's exactly a month from today, plus a day. And I would say that's probably the biggest benefits

for retail investors for stock splits like that, especially when you don't have the option of buying fractional shares, is it just gives you the opportunity to buy a business if you have smaller amounts of money to invest. That's right. So shares will be a hundred. I did 10 for one. It'll be about a hundred bucks change in USD. Of course, that doesn't change the value of the business, but it makes it more accessible for you guys as Canadian investors. more accessible for you guys as Canadian investors. All right. Thanks so much for listening. Two things, stratosphere.io. Simone, we are days away from you searching a company and having all of

the S&P 500 and the TSX 60 for the key point indicators and segment revenues. key point indicators, and segment revenues. Like how many iPhones did Apple sell? How many Netflix subscribers? How many Equinix interconnections? How many, oh my God, how many Spotify subscribers? What is Amazon Web Services top line revenue just for that segment? The list goes on. Costco members, Costco warehouses. You're going to have all of them on stratosphere.io. You can get a free trial there. Of course, if you do want those premium metrics, you can get 15% off by using code TCI at the checkout on the strike page. Save yourself some control effing in the documents. When you get that data right away, you don't have to scan the whole when you get that data right away.

You don't have to scan the whole document. 10 quarters, 10 years. Yeah. 10 quarters and 10 years we will have for you if it's literally available. Thanks so much for listening. If you have not gone to joinTCI.com too, we're getting lots of good feedback on joinTCI.com. It's simple and concise and it shows our portfolio updates.

And then as well, you get some recognition for joining the community. So that is join TCI.com. There's only $9 Canadian. So it's quite attainable. Thanks so much for listening. We'll see you in a few days. If you're new here, episodes are on Mondays and Thursdays. Take care.

Bye-bye. The Canadian Investor Podcast should not be taken as investment or financial advice. Brayden and Simone may own securities or assets mentioned on this podcast. Always make sure to do your own research and due diligence before making investment or financial decisions.