The Canadian Investor - What matters and what doesn’t when buying stocks

Episode Date: December 21, 2020

In our last episode of 2020, we talk about various things you might hear from the financial media and what you should and shouldn’t pay attention to. Want to send us a question? Check out our Anchor.fm link in the description below and leave us a voice message! Anchor voice message: https://anchor.fm/the-canadian-investor/message Twitter: @cdn_investing Getstockmarket.com --- Send in a voice message: https://anchor.fm/the-canadian-investor/messageSee omnystudio.com/listener for privacy information.

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For our final show of the year, we're going to take next week off. You know, it's Christmas break. Happy holidays to everyone. And you'll catch more of Simon and I in the new year. So Simon, let's get right into it. I think this is a very important show that I pitch Simon on something that we need to do. And the reason for that is there is so much information out there on financial markets in general. You know, some good advice, some bad advice, and lots of noise all in between.

So we're going to do a little segment called Things That Matter and Things That Don't because there is so much, you know, whether it's someone trying to advertise their trading, day trading course, which is complete BS. Or, you know, someone looking to tell you what to do with very little experience. There's so much noise out there. And we're here to just demystify, you know, do your own research, one, and focus on things that actually matter. And there are things that actually matter, and there's lots out there that doesn't.

So, Simon, how are we doing? And then feel free to kick in what you think matters in the stock market. Yeah, sounds good. So, yeah, let's get started. As a quick side note, I know we've been getting requests from people for that spreadsheet I was talking about from buying versus renting a home. I will have time to work on that during the holidays I started, but life gets busy, so I know a lot of people have been requesting that, so I will share it on Twitter when it is available, but you can expect that during the holidays.

But having said that, Brayden, why don't you get started with your first one, and then we'll kind of go back and forth. Okay, sounds good. Yeah, that'll be our Christmas present from Simon is the buying versus renting your home spreadsheet of all the things you need to consider in that financial decision, because it's not always, you know, black and white. So, all right, I'm going to start off with something really what seems so fundamental, but is hard.

Not everyone does this. So let's kick it off. Understanding what you own matters. You know, you need to be able to come up with a short pitch deck, or like explain to a five year old of why you entered that position. I'm not saying you know, you go ahead and make a PowerPoint for every stock you own. But theoretically, you should be able to, right? You need to have some sort of conviction of why you own it. And the reason for that is two things are going to happen if you don't know what you own. First thing is going to happen is you're going to all of a sudden start owning a bunch of stocks. Like I'm talking like over 50 stocks. That's way too many for one person to manage, in my personal opinion,

and know well. And you know, there's no there's no right or wrong number of stocks to hold. Some people are much more comfortable owning, you know, five stocks, and some people feel more comfortable owning 25. The number doesn't matter. But what does matter is that you know all of them. Because that number can really start to creep up, which becomes a huge burden on you to understand all those businesses well, understand their fundamentals. And then if the stock drops 20% in a day or in a week, or it has a couple of bad quarters and the stock's going nowhere or losing a lot of your principal, you're going to sell it because you don't really know if the market's reaction to the business and, you know, the business's actual performance are correlating

correctly. Because sometimes the market might be right. Sometimes it might be wrong, but you are not in a position to really make a solid assessment if you don't understand the business. So understanding what you own matters. Yeah. I mean, that's a great point. And it's definitely important to make sure you understand what you own. And also, I've mentioned this before, but be honest with yourself. So if you can only stay on top of a couple of businesses, then that's fine. Why don't you have a strategy that's mostly index funds and a couple of businesses as well that you like, that you want to invest in? So make sure you're honest with yourself. You'll know if you can't keep up with them.

Make sure you're honest with yourself. You'll know if you can't keep up with them. And then that's probably a sign that you should have less stocks and maybe a bit more index funds for your portfolio. That's a great point. Yeah, so I guess I'll go with my first one. So it's more about ratios in general, but one of the ratios that I do like and one that's not talked about, at least not in the headlines that you'll see on financial, different financial sites, but CNN, BC, Yahoo Finance, and all those, is the price to cash flow or price to free cash flow. And obviously, you have to put things in perspective. So obviously, when you compare the price to a metric, it's always relative.

So obviously, when you compare the price to a metric, it's always relative. But I do find that there's a lot of emphasis, especially in on earnings. And maybe I'll kind of bundle this with one of my things that don't matter. But there's a lot of focus on the headlines of the actual earnings of the businesses. And not a lot about cash flow and free cash flow. And at the end of the day, I've mentioned it before, that's the actual money that's coming in and out. So there's non-cash charges that are added back in, in the cash flow statement. And that really gives you a good picture of the business, whether it's actually sustainable on a regular basis. Because you can have a business that's showing profit on the income statement but when you look at the cash flow statement they're actually burning money that's because earning

statement the income statement can be a bit misleading when it comes to that you can be profitable on a paper basis but burning money and vice versa so you can have a business and I'm thinking about a lot of SaaS businesses here that will look like they're losing money, but they're actually bringing in quite a bit of money on a cash flow basis. And then in terms of things that don't really matter, or they do, but not as much in my opinion, is the earnings per share specifically, because that can be impacted by a lot of different things, including share buybacks. There impacted by a lot of different things including share buybacks there could be a lot of manipulation by leadership by management in that income statement so that's

something I take a bit more with a grain of salt but all these metrics I think it's also important to keep in mind to put them in perspective So not focus either on one specific metric, compare them to their peers, compare them to themselves historically, and that will start giving you a better picture about the business itself. Yeah, that's a great point. Most financial sites, they'll harp on the price to earnings ratio or price to sales. And there's not many people talking about price-to-cash flow. And if you look into the broader finance community of people who manage money, they use free cash flow more than any other metric in terms of the business's profitability and long-term and their complicated discounted cash flow models. You don't need to do that, but understanding the difference between net income

and the metric free cash flow, that does matter. So I'm glad you brought that point up because you're adding back those non-cash expenses like depreciation, amortization, adjusting for some things in their balance sheet. I don't want to get too into the weeds on this one, but look that up. Stratosphere, by the way, every single company, you can graph their free cash flow and see their price to free cash flow on every single company. So that matters. All right. So I'm going to couple this one as well. And it is something that matters versus doesn't. And this is macroeconomics generally, but what does matter is interest rates right now. This is affecting all businesses' ability to finance growth,

This is affecting all businesses' ability to finance growth, acquisitions. It affects the economy. It affects the stock market. But what doesn't matter is trying to spend a single second on predicting what interest rates will do. And this goes for all macro factors like commodity prices, currencies. These things are straight up impossible to reliably predict. And there have been few people who can, you know, predict these kinds of things, but they can't do it reliably. Like, sure, I can predict, you know, what those commodities next moves might be. I may be right or wrong on this next instinct. But long term, no person can actually predict this. So be very cautious when someone tells you

where they think some price is going, whether it's, you know, a macro factor like interest rates or some commodity. And this goes into also there, it seems to have died out, luckily. But online, there was all these currency Forex trader scams going on. And this seems so obvious as something no one could possibly reliably predict which is you know forex exchanges on currencies but it's complicated enough that it can it tricked a lot of people a lot of people lost money so that's uh it's tough to see but you know things like that matter in the short term in terms of like right now, these, you know, the interest rate matters, it affects a lot of things. But trying to predict it is impossible, and you shouldn't spend any time on it. Yeah, yeah, that's exactly true. And just

so people don't misunderstand, it's really important. What Braden is saying is yes, like low interest rate can affect certain businesses a lot more than others but trying to predict that is what is going to be difficult and obviously if you have a business that's like financial industry banks for example for them typically you don't want to see interest rates too low because their interest margins so the difference between the interest they pay out to someone who gives them a deposit and then the interest that they get when they provide a loan to someone actually shrinks when interest rates go lower so yes it definitely does impact it but at the same time it's really hard to predict and the same thing can happen obviously if the economy goes down it will impact certain businesses more

than others so i would say be aware of what impacts it can have on the business that you own but like braden said don't try to actually predict what's going to happen because you might get lucky once in a while but it's very hard to to know on a consistent basis. Yeah, well put. So I guess I will go with my second thing that matters. So I've talked about this before. Specifically, I know a lot of people that listen to our podcast love dividend stocks. Dividend stocks are really popular with Canadians, which is not a surprise because, you know, not only Canadians, but you Americans, Australians, whatever country you are, people tend to have a home country bias. So invest a lot more in businesses that are within their country or do their main business in their country

or are listed on their stock exchange. But when it comes to dividend, a lot of people tend to go specifically to the dividend yield. And obviously, if you're a retiree, you'll want to have a decent dividend yield, ideally growing as well. But for most people, I mean, as long as the dividend is growing, you don't want to see too high of a dividend because that's usually a sign of something not going well in the market. Basically pricing that there might be a dividend cut or trouble in the future. But the payout ratio is really important. And I'll go back to my first point in terms of free cash flow, but specifically the payout ratio versus free cash flow.

That will give you a good indication if the company can actually continue paying that dividend on a, you know, continuously year after year, even increase it. So the lower the payout ratio, the better. For certain type of businesses, it's fine to see a payout ratio in the 70s or 80s, where they have really stable cash flows. I'm thinking here, utilities, for example, some others, it might be a bit more of a sign that there could be some trouble. Like tech businesses, usually you'll want to see something more around the 30, 40, 50% range at the highest end. But make sure, again, you compare it with their peers. You compare it with themselves historically, but that payout ratio is really important. And if you see the company having a payout ratio above 100% on a consistent basis, year after year, that's a really big red flag because that means they're basically funding

their dividend with debt. 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. 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. Yeah, good point. If you see pay ratios over 100 year after year and this happens i've seen many uh yeah red flag ding ding ding something is wrong yeah i think uh an example of that just a quick note i think exxon mobile has been like that for quite a while so if people want to look at that yeah a lot of oil and gases were

fueling the dividend from other financing so uh obviously not ideal long term um i'm gonna switch gears to something that doesn't matter and you see this more than anything. And it's this whole problem that people who do not invest their own money, they're potentially looking to invest, or they're just kind of confused by the whole process, which I understand. The financial industry has done a great job of making it seem more confusing than it is. They've done an exceptional job at that because, you know, they keep their jobs if it looks awfully confusing.

So when you see, I'm doing air quotes right now, even though you can't see me, professionals on CNBC, Bloomberg, BNN, Bloomberg, whatever, or you watch a YouTube video and you get some ad of some trading bro that's trying to sell you his signals group for some ludicrous price. First of all, those are the worst people on the planet. Let me just get that out of the way. But what they'll talk about is some things you might hear. Here are some very classic technical analysis terms, which, by the way, is not technical at all, and it's horrible. Here we go.

A double top, a trigger line, head and shoulders, a rising wedge, double bottom. Oh, here's the best one. Inverted head and shoulders these are all these chart pattern recognitions that people think they can reliably predict stock movements uh long-term effectively by day trading with these very strange pattern recognitions. And they talk about support lines, and they talk about resistance lines. And some of it may have merit on a very, very short-term basis. But if you could predictably, reliably determine what's going to happen with stock prices on every single equity,

well, you'd make a boatload of money. And you'd make so much money that you'd be the richest person, you know, in a few days of multiplying your money. So be wary of the promises that these people are trying to give you some common sense. But these technical analysis terms for long term investors, just don't matter. They're completely irrelevant. So when you hear support resistance lines from people you'd think would be quite reputable, just understand that they're executing short-term trading strategies that may or may not work. I'm not here to tell you that they do or do not. But for long term investors, which I think everyone should be if you're listening to this podcast, they just don't

matter. And you can completely ignore them. That's my hot take on technical analysis. Yeah. And I mean, that's completely true. I mean, you see those as soon as you start like YouTubing a few videos about investing, you'll see those ads all the time. And just like Braden said, if they were so good at it, why are they like trying to make money off of you trying to sell their products? So just keep that in mind. But yeah, they're definitely short term, really short term focus. And look, I'm sure there's traders out there that do very well but one of the other things that they have running against them is that every time they profit they actually get

taxed on that profit so it's really it's a lot harder than it seems uh you cannot also you can't be trading in your tfsa or rsp um the the cra will after you. And they're vague in terms of like trading as well. So vague. Yeah. They're so vague on this. They are very vague. So they can apply that as basically as they wish. So you really want to be on the safe side.

So keep that in mind. So it would have to be in a taxable account. And whenever you make a profit, you'll have to pay taxes on that. So that's why it's really difficult to be in a taxable account and whenever you make a profit you'll have to pay taxes on that so that's why it's really difficult to be a good trader and that's why we have a long-term view we're investors uh in my mind if you're buying a company for less than a year you're a trader that's just the way i believe any you really when you invest you're in there for the long term so just keep that in mind and you know you if you pick a good company if you pick a good stock you don't have to worry you just buy it you know you add more over time your dollar cost average and 5 10 15 20 years

when you look back you'll say wow good thing I didn't didn't try to time when I was buying. I just bought at specific intervals because it really won't matter if you picked a good business really far out in the future. Yeah, so true. in general with my blog is the number one metric I should have for, for people who are new to investing is people who realize that trading and investing are not the same thing. I know it sounds so elementary to long-term investors, but the, if I could convince the masses that those two things are not equal, we've seriously done our job. Honestly, with so much crap out there on day trading, especially with folks unfortunately losing their full-time jobs and, potentially looking to be a trader, even an investor, and you get sucked into this crap, man. So just be careful out there. That's all. Yeah, exactly. So I'm going to give kind of combine two together, just because we're already 20 minutes in, I guess we could probably go for an hour just talking about these.

Yeah, for sure. So I'm going to go with things that matter. So you want to see as much as possible a moat. So what's a moat for those of you who are not sure? So a moat is really something that makes the business almost like a monopoly, a legal monopoly if you'd like. almost like a monopoly, a legal monopoly, if you'd like. So something that makes the business very hard to compete against and which makes its product or services very sticky for the long term. So there's different types of moats you can identify. Just a couple of examples. So we've talked about this before. Network effects. So those are really when a specially software,

when we're thinking about that, or even like I'll take a Facebook for an example that's an easy one to wrap our heads around it well the reason why Facebook is so successful is because even if you know Joe started a social network on his own well he'd have however good it might be it actually would have to convince enough people to make it worthwhile to go on that new network it would be really difficult because a lot of people you know even if he convinces a couple million people well they'll be like well most of my friends are still on facebook so why the hell am i on this site so that's a really good example of a network effect it can be in a bunch of other types of businesses but that's a really good example of a network effect it can be in a bunch of other types of

businesses but that's a really easy example legal monopolies is another example so i'm thinking here utilities are legal monopolies for the most part where they have they distribute power for example and they have specific price increases a guaranteed purchase agreement and those are usually set by the governments in place or another type of moat would be one that would have a big barrier to entry so we've talked about railways before well railways were are really difficult because they're borderline like legal monopolies as well but it would be difficult for someone to start another railway because they have all those regulatory approval they would need to get just to install

those rails just a monetary investment that it would take as well billions and billions of dollars so it would be very difficult for other businesses or other entrepreneurs to come and compete. So that's really something that I try to find when I invest in a business. On the other side, if you're starting to research businesses, especially newer businesses or businesses that have new products or new services, you'll notice that management tends to talk about total addressable markets. And that's good, that's fine, but always take it with a grain of salt when management talks about that. Because according to management, I'm sure if we looked at the management total addressable market before marijuana became legal in Canada, I'm sure we would have seen some pretty eye-popping figures

from the different management groups and cannabis companies. So you have to be careful about that because for the most part, they're trying to pump their tires. And that's fine, but I would always be careful with that. It's probably a fraction of what they're saying. So you want to err on the conservative side when you see those TAM or total addressable market numbers stated by management. Those total addressable market numbers in pitch decks for investments seem to get more and more ludicrous the more hot that market is uh you're seeing this

outrageous tam and uh comp table that you'll see in like typical investor decks and the comp table and the tams for some of these ev stocks just don't even make sense. So yeah, I mean, take it with a grain of salt. Sometimes it has pretty good merits and sometimes it doesn't. So, you know, just use a little bit of common sense on a lot of these things we're talking about will actually bring you a long way. All right. So this is something that's really important uh what does matter is that you are in a financial position to never sell stocks unnecessarily so if you have some emerge if you don't have an emergency fund go ahead and do that that matters and then if you're in a, you want to, you know, a little bit of cash for your life planning wise, because if you don't, you have to sell stocks unnecessarily. And when you do that,

there is a chance that you sell stocks unnecessarily at a bad time. You know, if I needed a bunch of cash in March that of this year, that would have sucked. So I need to do everything I can in my in my will to not be in a position that I have to unnecessarily stop compounding. Now, there's obviously going to be extreme conditions, and just conditions in your life where you want to sell stocks, there's nothing wrong with that. If you're in you want to sell stocks. There's nothing wrong with that. If you're in a position to do that, that's fine.

But don't break the most important like Charlie Munger rule, which he says is never interrupt compounding unnecessarily is like the most important rule. So if you do not need to interrupt the compounding process, don't. And if you can put yourself in a financial position in terms of your personal finances, in a position where you never have to unnecessarily sell stocks, that will massively help your investment portfolio over the long term. Yeah, yeah, exactly. And keep in mind too, we've talked about this before if you know you'll need a certain amount of money within the next couple years don't invest it don't invest it in

the stock market putting in something that is safe a good example is if you're looking to buy a house and you have the money for a down payment but it it's tied into stocks, you'll probably want to be selling a big part of that, at least to cover your down payment. Because what if you find the house and then the market just suddenly crashes and you get really screwed in terms of your down payment. So that's a good rule as well. If you think you'll need the money within the next couple of years, you don't want to be invested into stock. I know someone that was closing on their house in March and was waiting, waiting to like pull out of stocks to finance the house, which is, you know, fine in most cases. Well, not in March. So that's, that's why, you know, three years is a typical,

So that's why three years is a typical rule of thumb. If you need it within three years, stocks is probably not the best store of capital. So three years is a pretty good rule of thumb. Exactly. I've seen five. I've seen more conservative numbers as well. Yeah, yeah, exactly. I think five years is a good rule as well, especially if you're retired and you're kind kind of counting on that money as you're living expensive then you want to give yourself a buffer but yeah the the down payment's a great example you don't want to be stuck in a situation where

you find your dream home for example but then the stock market at the same time is going down so now one thing that doesn't matter and I don't think we actually talked about that before on the podcast. So, um, special dividends, uh, so special dividends are different from the regular dividends that a company will pay. So it is a special, like it says in the name, it is a special dividend. Um, so companies, um, I know Costco tends to do this every couple of years. They'll do like a special dividend is when they basically have too much cash on the balance sheet is probably the easiest way to say it. And they want to reward their shareholder with a one time, oftentimes large dividend payment. And I mean, it's great if you're a shareholder, but make sure that you do not factor that in into their regular dividend payment. Because some sites, they'll pull the data and they'll actually factor that in.

So you might actually think that if you don't... The yield will look massive. Exactly. If you don't do your research and you just look at the yield, it'll be very misleading because they had a special dividend. And for the most part, it's very unregular. It could be once the business did it, that's all in their history. They might do it every three, four, five, six years, but not on a regular interval. So I mean, I've had it before with some of my stocks. It's always really nice. I'm not going to complain. But just don't factor that in as something that's guaranteed.

Any dividend is not guaranteed, obviously. But some, like I've said before, if you look at the free cash flow payout ratio, some are definitely safer than others. But special dividend, take it as what it is. It's a one-time thing. Don't factor it really into your investment thesis for the company. 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 questtrade.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, 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. Yeah, very, very good point. That was just, that was well said. I'm going to go very quickly and then I'll get into another one that doesn't matter. But here's one that definitely, in my mind, doesn't matter, and is for the short-term trading community, but unfortunately is at the top of every

Google Finance search that you type in a stock ticker, and that is 52-week highs and lows. If you look at any stock ticker and Google it, you know, see how the price performance has performed and, you know, whatever time interval you're looking for, you are going to see lots of metrics and almost none of them are useful for anyone who's a long-term investor. And 52 weeks highs and lows are, you know, not useful, not, they don't matter. They're not important. Uh, so if you think they matter, well, they probably don't. Uh, so another thing that I think is important, uh, important to know, sorry, important to note that it's not important. Uh, very confusing. So this is something that doesn't matter. And this is whisper stocks. Okay. Whisper stocks is everyone has had a relative over Thanksgiving. You know, the holidays are coming up. You're going to get some stock pitch

from a relative. Some penny stock is going to the moon on some whisper news like, oh, so exciting. Listen here, though. Let me tell you about this one. You see this all the time in mining stocks. Do some due diligence. Don't jump the gun on this whisper stock without having any insight into the company. This goes back to point number one, which is what does matter is you know the business.

You know the business fundamentals. And whisper stocks are not only an easy way to lose tons of money. It comes down to all the other things that we've talked about, you know, you're going to own it for probably a very short time period, or you've just accrued this position in your portfolio that you have no idea what it is. And this goes back to a very famous, you know, Peter Lynch in his books when he talks about folks are so good in their research, if they're buying a new dishwasher, you know, they do their research, they find out what the competitors are. Oh, Samsung has this, you know, Bosch has this, this is this price. It operates at this temperature. You know, you become an expert in kitchen appliances by the time you purchase something,

but you jump off a cliff to buy some whisper stock and who knows what's going to happen. So don't do more research on your kitchen appliances than your stocks. That's going to go down as my potentially most famous quote. Yeah, I guess it's just maybe a bit the gambling instinct in some people that do that. And trust me, I've done that mistake before you just go back in our mailbag episode and you'll see that uh what brayden just said i did that mistake so i know the feeling um so that that's great advice though um so things another thing that doesn't matter and that'll probably be my last one and i Brayden, you might have one or two left after that. So things that don't matter.

And I've said this before. So earnings for a real estate investment trust is useless. If you see an article, you read an article of, and I've seen that on various websites. They'll talk about a REIT and they talk about its earnings. As soon as you see that, that article is complete crap. They have no idea what they're talking about. Earnings are completely useless because they factor in, like we've said before, depreciation and amortization. Those are non-cash items and can be pretty massive when it comes to real estate investment trust. So you really want to look at funds from operation or adjusted funds from

operation. If you're not sure where to find that data, the supplemental financial data usually for REITs will have all that information in there for you so it won't be in the regular earnings report it will be in the supplemental data and they'll have it break it down broken down for you so yes you'll have to do a bit more research and it's not as easily like easy to find it in the different Yahoo Finance and things like that but just make sure keep that in mind because that can be really misleading for REITs. Yeah, good point. Like the P-E ratio on a REIT is something, again, that when you look it up is going to be right at the front of your eyes and is completely useless because it has no consideration to what are real cash expenses. And for real estate, you need to use FFO or AFFO.

So thanks for pointing that out, Simon. Okay, I got one last one that I think I'm going to couple in as well, which is valuation matters. Okay? I think everyone knows that. Maybe not recently, but valuation matters. But where I'm going with this is, now it's not any groundbreaking information,

but where I'm going with this is that any specific valuation metric alone in a vacuum may not be useful and may not matter. But the perfect example of what Simon just said, you know, price to earnings or earnings growth, you know, things to do with net income on the income statement, with a real estate investment trust, not useful. So if you look at PE on real on real estate

investment trust, they're gonna be super, super low. So that may be useful for some businesses and completely useless for another business. So what is important is that you use valuation metrics to tell a bigger story. Like you use multiple of them. You check the market cap because that definitely matters. multiple of them, you check the market cap, because that definitely matters. You know, if the market cap is $200 billion, and you ask yourself, is that business actually worth this, potentially is this may come with experience, but yes or no should ring a bell pretty quick. So what matters is valuation. What doesn't matter is using one valuation metric in a vacuum and trying to tell the whole story from that business.

So they matter. And use many of them to help tell a better story, to verify your thesis, make sure you're not making any mistakes. So I think that wraps it up, guys. I think this is important in terms of there's so much information out there. And if you are new to this or not, you know, I get confused all the time. Simon and I, you can get confused by all kinds of things out there because there's so much information, so much information overload, but a lot of it doesn't matter.

And you just got to pay attention to the stuff that does. And if you can filter out things that matter for long term investors, which ultimately comes down to real business performance, you know, not what's in the media, but real business performance, you'll do very well long term, if you focus on that simple thing, because that matters. And knowing the business, the real fundamentals, that matters. So when you go down, you know, you're downtown Toronto, you're on Bay Street, and you see hundreds of tickers flying by on some LED screens, some are up, some are down, you know, oh, this stock's up this day, this one's down a lot this day. These things are all an illusion to make it seem more complicated than

it actually is. Because you have a market where people are keeping score every day and that really is the problem right we're keeping score of this stuff every single day and it introduces all these short-term uh complexities that just really are not important yeah and that does it for this week guys yeah go ahead uh yeah i was just wondering quick question for you just uh on the same theme do you think it's worse now with uh smartphones and everything being available so rapidly yeah of course of course i wonder how it's way worse now imagine like 1990s i was too young to invest back then but uh just wondering how people were reacting when it wasn't you know the information wasn't all available um it's just interesting to think about it, how it was probably 25, 30 years ago and where people probably just didn't have that additional stimulation. So I imagine it was much easier to just be a buy and hold investor at that point if you were interested in that.

in that it's a good point right because it's two-sided where it's it's never been a better time to be an investor like if if you you know if you look at it it's truly never been a better time to be an investor data is so readily available it's accurate in terms of things that do matter like real business fundamentals super easy to find this stuff out on the internet uh stratosphere has all of, so there's no other place to go. But the problem with this is if I'm new to investing and I YouTube how to start, how to just begin investing, you know what I'm going to get hit with? I'm going to get hit with an ad from a trader guy who tells you I can get rich in a few weeks if I join this course and sign up for his trading signals thing. And this happens. It's crazy right now. There's so many of these. And now,

unfortunately, someone believes that that is investing and it's not their fault, right? They went into this funnel. So it's this two-sided problem with, it's never been a better time to be a long-term investor. Fees are so cheap. Data is so readily available, but there's a lot of noise. And that conf that that confuses people. Yeah. It's like it's weird. It's like it's never been easier, but it's never been harder at the same time. It's you can buy a company with a click of the button. But at the same time, there's so much information that that makes it harder on one aspect. But no, I just wanted to get your thought on that. I was thinking about that recently, just how it would have been like even before the age of the Internet probably wouldn't have been so much easier just to buy and hold if you were willing to put the work in in a different kind of way.

One quick story before we wrap this up is when I first started my blog many, many years ago, I made a video course that is still there on how Canadians can get started with index investing. to if they were to take it to actually do it instead of it just being a link they click and never touch again. So I wanted them to complete it because I thought it was important that people get started with basic index investing and start thinking about this stuff long term. I then realized that I hated people trying to get money for these online courses, which seems so schemey, because all of them were, whereas mine is like, you know, I'm just like, Hey, yeah, guys, try out index investing. It's great. There's so much other crap out there that people are starting to now, you know, get their guard up when in, you know, when this information is being presented to them, rightly so like, I want people to be skeptical, um, when they see this kind of stuff now. So it, it is, it is an interesting problem, Simon, because it's never been a better time.

Once you can break through kind of the noise of stuff that does not matter. That does it for this week, guys. Getstockmarket.com brings you to Stratosphere. And we'll see you guys in the new year. I was going to say we'll see you next week, but unfortunately, we'll have to wait a couple more weeks. Happy holidays, everyone. Seriously, Merry Christmas.

Happy holidays. We wish you guys the best. Take care. Bye-bye. The Canadian investor is not to be taken as investment advice. We wish you guys the best. Take care. Bye-bye.