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Our team One London Group has been investing for clients who have placed their trust with us for in excess of 35 years. The great part about our business is the relationships you develop with clients. You're working with the clients. Sometimes 10, 20, 30 years, you get to know them well. They get to know us well. They get to know our team members. Some members of our team have been with us over 25 years and that's comforting when clients can call up. There's more than just an answering machine or a voice at the end, there's [00:00:30] a person there, whether it be me or one of our intrusted team members. And if they ask for something, they don't have to wait a day. They're going to get that same service that they can count on that they've had for 30 years.

We're after the long term performance. We're here to emulate what a pension does. And if you think of it, most clients don't call a pension and ask them in a downturn, you know, are you going to sell my investments? We're after companies that will continue to grow their earnings, continue to increase their dividends.

We're constructing [00:01:00] a portfolio that'll weather through good markets and bad markets. So being proactive rather than being reactive. Where as Gretzky always said, you want to go to where the puck's going, not to where the puck's been. Clients feel comfortable in the sense that they've got the backing of a very solid financial institution, but they also have the personalized service and the depth and the relationships of a small team.

It's an in-depth process we go through trying to get a better understanding of what the client's objectives [00:01:30] are. Working with our team, we have a financial planner that constructs a long term plan. We have an estate planner to ensure that there's the inter-generational transfer of wealth. Clients worked hard to build up their wealth. So we want to ensure it moves from one generation to the other as tax efficiently as possible that clients and the next generation are continuing to be able to enjoy the fruits of the parent's long term efforts.

Clients are looking to have a relationship that [00:02:00] they can feel comfortable with. An advisor that they know that they can count on and that's important us.

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Thank you, Peter and the team for having us here today.
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It's a lovely day and thank you for spending your time with us so.
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I'm vim. I'm part of the Canadian equity team.
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at Beutel, and I have three goals today in our.
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conversation. One is to talk to you about the Canadian context.
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And also specific items and case studies in.
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Canada to give you some appreciation for.
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this whole Canadian investment universe. The second is to have.
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a discussion about some of the things that are going on in the world.
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And how you manage through that the 3rd and.
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most important goal is to not put you to sleep so.
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I encourage you to have some coffee and hopefully we'll have.
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a lively dialogue through this whole process.
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This is our journey, hopefully you.
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see the same thing I'm seeing. This is a journey we're gonna take.
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We'll talk to you about Canada because Canada is very unique in.
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the structure of the market and the examples that we have.
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We're going to talk to you about the concept of winning.
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by not losing.
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Because there is an asymmetry to return and capital.
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preservation plays a very key role to compounding.
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returns. Then we're gonna talk to you about how we had Beutel.
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managed through these environments, including a stock.
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example, because it's about the philosophy, but.
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also the people and the process. And finally.
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let's kind of question the nature of the home country.
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bias and if it's actually paid off or not through history.
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So I wanna talk to you first about the Canadian context.
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The Canadian equity market is structurally.
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very attractive.
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It has a stable political structure. The regulators are.
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strong and we actually have some great industry structures think.
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of the grocery stores and the duopoly or the oligopoly.
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you have within groceries. Think of the telecommunications sector. Think of.
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the railroads and even the banking sector that has.
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been very stable and able to deliver great returns compared.
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to even the US market or from time to time.
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you will have issues you will have.
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issues because there have been examples of companies.
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in isolation.
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That really grow in value become very dominant.
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Everyone piles on and it creates a large distortions.
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in the market. And part of this is also because you.
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have sometimes a narrow marketing Canada, if you.
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look to areas like healthcare in Canada, in the Canadian.
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market, your choices are marijuana stocks or seniors housing.
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not the large pharmaceutical companies and the diagnostic.
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companies you'd have globally. If you look to the technology.
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sector, sometimes you riddled with a few issues.
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and one such example that you may know.
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We're going to time travel, go back 20 plus years as Nortel.
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It is probably one of the greatest examples of a stock.
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that got into so much hype.
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That took us all to a very wild ride and we didn't have to go to.
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Canada's Wonderland to get this ride. And you don't want.
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to face these rides in your portfolio. But it was a telecommunications.
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equipment company that became almost 1/3.
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of the TSX. Imagine your portfolios.
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Having 1/3 tied to a stock without.
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positive cash flows without positive earnings and.
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people are just jumping on because they think the ride is gonna continue and.
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it was a great ride for a period in time. You can see from 1999.
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it was one of the best performing stocks added a lot.
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of returns but.
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The unfortunate part is always when the music stops.
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People wake up and realize you do.
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need cash flows.
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All valuations do matter.
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And it's a very uncomfortable ride on the way down.
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Now you think people and investors will learn our lessons.
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but unfortunately we are human and if we Fast forward.
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20 years, you had another recent example a.
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phenomenal company that's an ecommerce platform.
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It was accelerated during the pandemic as well we.
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couldn't go anywhere. We went online, small businesses.
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needed a platform and they grew.
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And what happens with human psychology is sometimes we.
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have a tendency to extrapolate we see such.
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a fast pace of growth and we think it's just gonna go in a line up to.
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the top.
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This was yet another company that became a dominant part.
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of the TSX. Not as much as Nortel.
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But this was larger than Royal Bank. At one point in time and.
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it became such a key contributor to overall returns and.
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the question would always come why don't you own it?
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What are you missing out on?
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Did not generate free cash flows.
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The point in time it was trading at 50 times.
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sales 300 times EBITDA and people had.
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o build stories to justify why you held.
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on to this.
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And of course.
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Last year, the stock was down 73%.
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through a flurry of factors, but that.
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causes a lot of pain when it's the largest name in the TSX index.
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And what if it was the largest name in your portfolio without?
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an underpinning and foundation of cash flows and?
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the key parts of how we look at companies there?
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have been other examples like Valiant.
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BlackBerry. There's a new movie on it now.
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And there will be more.
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It's inevitable. So there is a rhyme to.
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it, and the rhyme has always been lack of cash.
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flows. Forget about revenue or just focus on clicks.
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or some other metric. Don't worry about valuation jump.
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on the train. But that's not how we invest.
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at Beutel.
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And it's gonna be an instance that you're gonna have to face.
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going forward as well. And a key part.
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of why we try to stay away from.
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overhyped companies without cash flows is that we believe.
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that downside protection is key.
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And our focus is on capital preservation and.
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there's this concept of asymmetry at return, which I'm sure you're familiar.
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with, but I'm gonna explain and take a moment here because.
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the path when you lose money.
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Is much steeper to get back to par, so if you.
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look at the middle of this chart, if your portfolio lost.
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50%.
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You don't need 50% to get back, you need 100% return.
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just to get back to par. So you go from $100 to 50.
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you need 100% return. So imagine.
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if your portfolio held Shopify, it's down over 70.
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you need over 250% in return.
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to kind of come back to par.
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But just as important as the math.
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Is the concept of the psychology of having losses.
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And what it means, there's been studies that show the.
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pain of a loss is 2 times greater than.
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the benefit of a game.
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What do you mean what happens when you're in pain? You just do the things.
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that you don't want to do. You sell at the wrong time.
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at the depths of the pandemic, and you have emotional reactions.
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that are not conducive to compounding returns.
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Now app you tell we have a philosophy and.
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a philosophy is around capital preservations because we do.
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believe that defense wins championships.
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And when you look through the history, there have been 7.
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periods of negative returns for the Canadian market.
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and the TSX.
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Each of those moments have been driven by a different.
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macro factor, call it the tech bubble call.
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it the financial crisis, call it the health pandemic and.
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there will be something else in the coming years and.
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in each of those periods what you'll see as the last line.
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in the management effect is that our funds are protected capital.
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We would love to have been positive in each of those years.
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but you can see the value creation of.
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protecting capital by staying away from overhyped.
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unlearning no cash flow.
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Hop on the bandwagon type stocks that can be very detrimental.
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to your overall portfolio. There will be a different.
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scenario, a different circumstances, but what's key?
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is the capital preservation and focusing on.
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downside protection to compound value.
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Now I want to take a moment just to share a little bit more.
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and to expand on what Peter has shared about Beutel. Goodman.
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So Beutel Goodman is an institutional.
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asset manager with over 70%.
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of our capital in institutions. What does that mean?
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We work with pension funds. We work with some of.
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the consultants like Mercer and Willis Tower Watson's and.
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hey put us through the ringer every single time around what it.
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means. And so we are entrusted by foundations by.
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y pension funds to manage their money on our behalf.
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We are also a long standing firm with over 50 years.
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of history, founded by some great investors like Net Goodman.
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at the late night, Goodman, Seymour Schulich Austin Beutel.
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So we have a long foundational history and another.
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very unique part is and in my past life before I joined Beutel.
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I worked at Scotiabank in 1832, asset manager for a good part of.
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15 years, but a unique part is that we are also.
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owners of this company. We are partners in this company.
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We care as much about your well being because we.
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very much understanding.
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That it's all related. It's not about an.
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individual stock, it's about an ownership culture and.
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the ownership culture also means continuity. You.
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know, we tried to say Beutel is like Hotel California.
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and once you come in, you never leave and everyone has.
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a long history with Beutel to that time.
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Another part is that we manage 45 billion in assets.
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We are a small independent company, but we're very sizable.
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Oftentimes you will see us as top 10 shareholders.
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in many of the names that we invest in and what that.
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means is we have access, we have credibility.
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with management teams and boards on a regular basis and.
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it's all about putting pieces of the puzzle together.
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So we've been long standing, but our focus is on.
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a value investment philosophy. Our focus is grounded.
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on capital preservation.
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This is the team, as Peter shared with you about the.
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what the one London group and the team this.
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is our Canadian equity team and a few things that.
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I'd like to highlight is one is it's.
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a small team focused on Canada.
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We are all analysts first, what that means.
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is that we individually build three statement financial models.
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meet with companies directly. There isn't an A hierarchy.
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in any way or form. We are all endless. That's the heart of.
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what we do. There is no separation of duties we.
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also have kind of a philosophy and a process.
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to get best ideas in this portfolio. We run a very.
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concentrated portfolio. We run about 30.
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035 names in any strategy and.
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all of this is founded on fundamental research.
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And there's low turnover on the team, which means we have a continuity.
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of culture and the heritage that has made us successful.
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over time. And each of these individuals brings something very.
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unique. James Black, for example, worked at TD.
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Securities, Todd Investment Bank. He also worked at Brookfield, Mary.
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Crowell used to work on the fixed income team, Dora who.
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used to work at CI financial buying firms. And so she.
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has a unique corporate development perspective. So we really bring you depth and.
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experience and the history.
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Now that the people, there's another really important layer.
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of consistency, it's your philosophy.
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and your process.
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Our philosophy is a mindset of capital preservation.
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And we believe that is a critical part. So how do we do it?
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There are three key things that ties into our philosophy 1.
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ne is as a value investor, we're not looking to buy junk.
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We really want to buy quality at a discount and a key.
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aspect of how we define quality is free cash flows.
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The actual cache companies earn.
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The second thing that we do is we're very patient investors, you.
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have to be disciplined and when you buy companies there.
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are times we waited 10 years before.
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we actually enacted and executed on a company. So we established.
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parameters and target prices where willing to buy to buy.
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a company, we need to tangibly see a 50%.
00:19:37.245 --> 00:19:40.665
return over three years. Put another way, we're looking to compound.
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about 15% a year on of our ideas because we.
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think that gives us a margin of safety to buy it that.
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if there is any mistakes.
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We have a buffer because we're looking for something that's hated in the market.
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at any point in time.
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But here's the other part that's often not discussed. When do you?
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sell? Is it when you have this gut feeling?
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that might be from bad wine or it's your?
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instincts telling you to sell? Well, we have a very defined.
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and disciplined process on when we take money.
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out, and it's also elaborate on why it's because.
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we go through cycles of fear and greed and you need.
00:20:15.505 --> 00:20:18.565
a system that's consistent to act on rather than just.
00:20:18.565 --> 00:20:21.925
how I'm feeling that day and reflective of Mr Market, which.
00:20:21.925 --> 00:20:23.645
you hear about where.
00:20:24.045 --> 00:20:27.145
Someone can wake up really excited about stock one morning and wake up.
00:20:27.145 --> 00:20:30.925
really upset about it the next day, and things fluctuate and opinions fluctuate.
00:20:30.925 --> 00:20:30.925
00:20:32.065 --> 00:20:35.535
Now let's elaborate a little bit on one concept quality.
00:20:35.535 --> 00:20:37.415
This is free cash flow.
00:20:38.125 --> 00:20:41.395
This is the actual cache a company earns.
00:20:41.395 --> 00:20:44.555
This is not clicks. This is not website visits.
00:20:44.555 --> 00:20:47.695
This is actual cash flows. This is cash flows.
00:20:47.695 --> 00:20:50.875
after a company has invested its capital.
00:20:50.875 --> 00:20:53.035
for investments in needs to survive.
00:20:53.715 --> 00:20:56.825
And this is very different also from earnings. And so a key.
00:20:56.825 --> 00:21:00.085
metric that we look at is free cash flow conversion. How much of your revenues?
00:21:00.085 --> 00:21:03.205
do you convert to cash flow? How much of your earnings do you convert?
00:21:03.205 --> 00:21:07.025
to cash flow? This is the fuel that keeps these businesses going.
00:21:07.025 --> 00:21:07.025
00:21:07.805 --> 00:21:10.835
Because you pay dividends, you pay.
00:21:10.835 --> 00:21:14.255
for buybacks, you pay down your debt with cash.
00:21:14.255 --> 00:21:17.375
Not good, well and not clicks. And so we very.
00:21:17.375 --> 00:21:20.805
much focus on the essence of sustainable.
00:21:20.805 --> 00:21:24.155
normalized free cash flow. And here's why I say sustainable.
00:21:24.155 --> 00:21:27.295
and normalized, we may get the question of look at all the.
00:21:27.295 --> 00:21:30.315
cash flow energy companies are generating right now, isn't it a?
00:21:30.315 --> 00:21:33.355
agreed invest? The question is what does that?
00:21:33.355 --> 00:21:36.405
predicated on and what is normalized look like? Are you telling me?
00:21:36.405 --> 00:21:39.555
what cash flows are at $120.00 oil or negative oil like we've?
00:21:39.555 --> 00:21:40.415
had in the past?
00:21:40.585 --> 00:21:43.895
Is it based on normalized investments that they're making to continue?
00:21:43.895 --> 00:21:47.035
production or some sort of depressed value because they?
00:21:47.035 --> 00:21:50.675
wanna show how much cash flows they're generating so sustainable?
00:21:50.675 --> 00:21:54.155
and normalized cash flows are very important concept.
00:21:54.155 --> 00:21:54.155
00:21:55.015 --> 00:21:56.265
This is my favorite slide.
00:21:57.405 --> 00:22:00.875
Markets are not as technical.
00:22:00.875 --> 00:22:03.915
as fundamental or math driven as we'd all.
00:22:03.915 --> 00:22:07.135
like them to be. It's not a scientific there.
00:22:07.135 --> 00:22:10.175
are two key components of markets that I'd want to share with.
00:22:10.175 --> 00:22:13.255
you. One is what you see on CNBC and BNN, it's.
00:22:13.255 --> 00:22:15.995
a lot of stories and narratives that feed the market.
00:22:16.735 --> 00:22:19.805
As important, it's dripping as a voting machine.
00:22:19.805 --> 00:22:23.075
in the short term, where you and I are buying and selling.
00:22:23.075 --> 00:22:23.075
00:22:23.945 --> 00:22:26.645
And as humans, we are driven by emotions.
00:22:27.535 --> 00:22:30.585
And the market is driven by emotions of fear and greed.
00:22:30.585 --> 00:22:30.585
00:22:31.665 --> 00:22:32.965
So we need a process.
00:22:33.785 --> 00:22:36.925
To capitalize on these cycles of fear and greed.
00:22:36.925 --> 00:22:40.215
that go through macro scenarios or company scenarios. But.
00:22:40.215 --> 00:22:43.235
the first thing I shared with you is that golden line to the right you.
00:22:43.235 --> 00:22:46.355
have to find great companies because there are companies that do not.
00:22:46.355 --> 00:22:49.775
compound value that can destroy capital like 2 examples.
00:22:49.775 --> 00:22:53.155
we shared with you in the past. So you have to identify these companies.
00:22:53.155 --> 00:22:56.655
then we have to wait for a point of fear and.
00:22:56.655 --> 00:22:59.805
it happens in a number of companies where something goes.
00:22:59.805 --> 00:23:02.855
wrong. There's some concern about management.
00:23:02.855 --> 00:23:05.435
and capital allocation, about the industry structure.
00:23:05.695 --> 00:23:08.785
And that's the point when we buy because on every.
00:23:08.785 --> 00:23:11.815
single company that we own, we have a buy price that gives us.
00:23:11.815 --> 00:23:15.035
a 50% return. That means we should act at that point and.
00:23:15.035 --> 00:23:18.535
if we don't act, what are the emotions that are dragging you down we.
00:23:18.535 --> 00:23:21.685
e have a target price. That's how much we think the companies worth.
00:23:21.685 --> 00:23:24.845
on a three to five year basis, not the next quarter and the next day like.
00:23:24.845 --> 00:23:28.225
he market will look tell you on a normalized basis and.
00:23:28.225 --> 00:23:31.345
our process has an automatic trigger where we.
00:23:31.345 --> 00:23:34.465
sell 1/3 of the position when it hits our target price.
00:23:34.465 --> 00:23:35.285
no questions asked.
00:23:35.965 --> 00:23:38.995
This is the systematic nature in which we operate.
00:23:38.995 --> 00:23:42.055
to take emotions out, to take instincts out so to.
00:23:42.055 --> 00:23:45.135
give you an example, if we buy a company that's hated at a.
00:23:45.135 --> 00:23:48.355
00, that means if it hits our target.
00:23:48.355 --> 00:23:49.735
price, it's $150.
00:23:50.405 --> 00:23:53.415
We take 1/3 of that. It takes every our gains. We're back.
00:23:53.415 --> 00:23:56.925
to $100. What we do at that point is assess.
00:23:56.925 --> 00:24:00.215
how things have changed and establish a new target.
00:24:00.215 --> 00:24:03.235
price. Because the world changes companies.
00:24:03.235 --> 00:24:06.715
change, management changes. You can't use old information.
00:24:06.715 --> 00:24:10.115
on your assessment of value. There's something else that happens.
00:24:10.115 --> 00:24:13.935
because oftentimes when a company is loved, there's.
00:24:13.935 --> 00:24:17.415
some other company that's hated. You may look at the overall TSX.
00:24:17.415 --> 00:24:20.755
composite, but underneath it, there are 300 companies.
00:24:20.755 --> 00:24:20.755
00:24:20.875 --> 00:24:23.925
And all of them are different stages. So what it allows?
00:24:23.925 --> 00:24:27.345
us to do is sell into greed for an individual company.
00:24:27.345 --> 00:24:30.465
recycle that capital into companies that.
00:24:30.465 --> 00:24:32.275
are hated, that we've done our work on.
00:24:32.965 --> 00:24:35.665
But we have other layers to help with emotions.
00:24:36.575 --> 00:24:39.665
Another example is when we review companies, we monitor these.
00:24:39.665 --> 00:24:42.715
companies, but I want to give you 2 examples where.
00:24:42.715 --> 00:24:45.785
when a stock hits are downside target so we.
00:24:45.785 --> 00:24:48.905
set it down target which is what's the worst that could happen for.
00:24:48.905 --> 00:24:49.415
stock.
00:24:50.115 --> 00:24:53.325
When a stock hits, it hits the downside target, cause things don't.
00:24:53.325 --> 00:24:56.385
always go as you expect, and as you hope what happens.
00:24:56.385 --> 00:24:59.545
is the file gets moved over to another analyst for a fresh.
00:24:59.545 --> 00:25:02.285
set of eyes. This is very unique and important. Why?
00:25:02.965 --> 00:25:06.135
What happens when someone does when you know you?
00:25:06.135 --> 00:25:09.325
ock that you have fallen in love with in a way? Because you're.
00:25:09.325 --> 00:25:12.575
nchored to it. You've done so much work on it the general.
00:25:12.575 --> 00:25:15.615
answer is everything's OK, don't worry about it. It's fine, but.
00:25:15.615 --> 00:25:18.685
if you remove the emotional anchoring and you put the file.
00:25:18.685 --> 00:25:22.235
to another person, you have an independent set of eyes and.
00:25:22.235 --> 00:25:25.775
This is why not only the process, but the systems we take.
00:25:25.775 --> 00:25:29.115
help to cater and address the issues of emotions that happen.
00:25:29.115 --> 00:25:32.145
in all of our decisions. Like when you love a stock, the.
00:25:32.145 --> 00:25:33.205
last thing you want to do is sell it.
00:25:33.905 --> 00:25:37.035
When a stock is going down, the last thing you want to do is buy it. So we have.
00:25:37.035 --> 00:25:40.895
a system in place to help us address these emotional.
00:25:40.895 --> 00:25:44.255
wonders of being a human, but also shortcomings.
00:25:44.255 --> 00:25:45.175
when you're an investor.
00:25:46.685 --> 00:25:49.205
I want to talk to you a little bit about ESG.
00:25:50.085 --> 00:25:53.235
This is environmental, social and governance.
00:25:53.235 --> 00:25:56.355
factors that is very topical and I wanna.
00:25:56.355 --> 00:25:59.055
share with you how we think about it at Beutel.
00:26:00.075 --> 00:26:03.185
Now the first thing is sometimes you get drowned in.
00:26:03.185 --> 00:26:06.225
so much alphabet soup and so much noise you don't even know.
00:26:06.225 --> 00:26:09.305
what you're looking at, and so the question becomes what?
00:26:09.305 --> 00:26:12.465
are the most material factors? So when we look?
00:26:12.465 --> 00:26:15.865
at all these factors, we focus on financial materiality.
00:26:15.865 --> 00:26:18.965
What does that mean? Tell me about how this issue.
00:26:18.965 --> 00:26:22.345
impacts my assessment of value of revenue.
00:26:22.345 --> 00:26:25.425
of cost of capital, of terminal value.
00:26:25.425 --> 00:26:28.465
The second thing we do is we don't only.
00:26:28.465 --> 00:26:30.325
look at the risks of a factor.
00:26:30.885 --> 00:26:34.075
We also look at the opportunities we own a company called BRP.
00:26:34.075 --> 00:26:37.175
for anyone who owns a skiddo, a CDU, this is the company.
00:26:37.175 --> 00:26:37.805
that makes it.
00:26:38.545 --> 00:26:41.635
And there's a great opportunity from the environmental front because they're.
00:26:41.635 --> 00:26:44.765
investing in electrification of their motors and.
00:26:44.765 --> 00:26:48.095
they're expanding into new markets, including electric motorcycles.
00:26:48.095 --> 00:26:51.225
This is an incremental opportunity where they have a cost.
00:26:51.225 --> 00:26:54.635
in no revenues. So we also consider the implications.
00:26:54.635 --> 00:26:57.735
Another example is TC Energy. We own, these are natural.
00:26:57.735 --> 00:26:58.435
gas pipelines.
00:26:59.315 --> 00:27:02.425
You've learned is that you can pass hydrogen through these.
00:27:02.425 --> 00:27:05.665
natural gas pipelines that you carbonize there's a great opportunity.
00:27:05.665 --> 00:27:08.885
because you cannot build anymore pipe in the ground anywhere, so.
00:27:08.885 --> 00:27:12.265
there's an incremental value that you have to consider now.
00:27:12.265 --> 00:27:15.345
the last thing is as investors, we don't look.
00:27:15.345 --> 00:27:18.365
at what's happening today. We have to look at where things.
00:27:18.365 --> 00:27:21.555
are going, where the puck is going, how are things going to evolve. So we're.
00:27:21.555 --> 00:27:24.755
not buying renewable companies or technology companies.
00:27:24.755 --> 00:27:27.845
because they have a low emissions profile. We're looking at which companies can actually.
00:27:27.845 --> 00:27:29.145
improve going forward.
00:27:29.495 --> 00:27:32.895
About three to five years, and our independence of research.
00:27:32.895 --> 00:27:36.105
means we're doing the digging by ourselves. We have our shovels.
00:27:36.105 --> 00:27:39.395
in our hand. We're trying to understand these companies. We're having real dialogue.
00:27:39.395 --> 00:27:42.465
with companies, not a checkbox exercise and our.
00:27:42.465 --> 00:27:45.985
key pillars on how we approach it is one, we engage with companies as.
00:27:45.985 --> 00:27:49.005
you may recall, 45 billion in assets, a top 10.
00:27:49.005 --> 00:27:52.045
shareholders management and teams and boards want to talk.
00:27:52.045 --> 00:27:55.095
to us, to give you one example, we are a large.
00:27:55.095 --> 00:27:58.225
investor in a company called Restaurant Brands. Anyone drink Tim?
00:27:58.225 --> 00:27:59.125
horton's in the crowd.
00:27:59.745 --> 00:28:02.865
So Tim Horton's Burger King Popeyes Firehouse.
00:28:02.865 --> 00:28:06.105
sub this is a company that owns those we bought it in.
00:28:06.105 --> 00:28:09.165
the point of fear when everyone thought Tim Hortons was not gonna make any.
00:28:09.165 --> 00:28:12.425
money. No ones going back to work and that it is a destroyed.
00:28:12.425 --> 00:28:15.465
franchise in various forms. We bought this at a point.
00:28:15.465 --> 00:28:18.845
of fear where actually have done extremely well on it, but.
00:28:18.845 --> 00:28:20.625
this was a company that had a few issues.
00:28:21.255 --> 00:28:24.845
There's a few issues on governance that we weren't quite happy with this.
00:28:24.845 --> 00:28:28.185
related to the skill sets of the board, where there were more financial.
00:28:28.185 --> 00:28:31.205
ngineers than industry experts. This had to do with board.
00:28:31.205 --> 00:28:34.225
diversity where we didn't think they had a diversity of thought in.
00:28:34.225 --> 00:28:38.005
their leadership and it also had to do with leverage. They have a fantastic.
00:28:38.005 --> 00:28:41.145
business model that generates a lot of cash flow essentially other.
00:28:41.145 --> 00:28:44.215
eople pay them money to build restaurants and then they get.
00:28:44.215 --> 00:28:47.445
the cash flows from it. They clip a coupon on it. Phenomenal business.
00:28:47.445 --> 00:28:50.585
But we pressed them and we said. We'd like to see a lower leverage.
00:28:50.585 --> 00:28:53.225
We'd like to see you mindful of different payout ratio.
00:28:53.385 --> 00:28:56.755
We hammer them every single time we caught, talked to them. We talked to them every quarter.
00:28:56.755 --> 00:28:59.815
and what we saw is a change in the board and a.
00:28:59.815 --> 00:29:02.995
change in the capital allocation and leverage target.
00:29:02.995 --> 00:29:06.065
and this is being through numerous ingredients on the phone.
00:29:06.065 --> 00:29:09.255
We've met with the different heads of Burger King of you.
00:29:09.255 --> 00:29:12.275
Horton's of Restaurant Brands. We've had dinner.
00:29:12.275 --> 00:29:15.485
with the chair of the board around these. And so when you're.
00:29:15.485 --> 00:29:18.735
engaging the question to ask is how meaningful is that?
00:29:18.735 --> 00:29:22.115
when you have a top ten shareholder engaging who's a fundamental?
00:29:22.115 --> 00:29:23.975
investor, who cares about business value?
00:29:24.255 --> 00:29:27.405
They listen. They also engage us on it. We also.
00:29:27.405 --> 00:29:30.505
go through proxy voting. We are independent. We just don't follow.
00:29:30.505 --> 00:29:33.705
a rating that's put forward and we collaborate with different.
00:29:33.705 --> 00:29:36.945
organizations. So that's some context around risk management, but also.
00:29:36.945 --> 00:29:40.185
integration. I want to give you an example to tie this together.
00:29:40.185 --> 00:29:40.185
00:29:41.015 --> 00:29:44.065
The process on a company that we bought.
00:29:44.065 --> 00:29:47.105
in Q1 of 2021.
00:29:47.105 --> 00:29:50.205
custard is a leading convenience store operator.
00:29:50.205 --> 00:29:53.305
You will know it as Circle K when you go to a.
00:29:53.305 --> 00:29:55.625
convenience store, you go and fill up gas.
00:29:56.425 --> 00:29:59.595
This was a market darling for a period of time we had done.
00:29:59.595 --> 00:30:02.815
work on it. We never thought it hit the value to give us that 50.
00:30:02.815 --> 00:30:04.435
return over three years.
00:30:05.165 --> 00:30:08.535
Then we had a great moment because where patient investors.
00:30:08.535 --> 00:30:11.615
what happened? Well, one climate.
00:30:11.615 --> 00:30:15.135
change and the concern of climate change in the pandemic caused.
00:30:15.135 --> 00:30:18.395
everyone to think gas stations are going to be worthless and.
00:30:18.395 --> 00:30:21.555
they have a terminal value of zero. We have done work.
00:30:21.555 --> 00:30:24.795
on it. They have an experiment in Norway which.
00:30:24.795 --> 00:30:28.045
is the furthest ahead. And we had confidence, comfort.
00:30:28.045 --> 00:30:31.355
that they were going to be able to generate returns. In fact, the gross margin dollars.
00:30:31.355 --> 00:30:35.035
were higher in Norway through this transition, the.
00:30:35.035 --> 00:30:36.055
second thing was.
00:30:36.485 --> 00:30:39.735
Because of the pandemic, there was an assumption that no one was going to drive.
00:30:39.735 --> 00:30:42.845
They make money in two ways. They sell gas and they sell.
00:30:42.845 --> 00:30:45.925
all the chips and the Gatorade and everything else you want.
00:30:45.925 --> 00:30:49.055
If no one's gonna fill gas because the assumption was no one's gonna drive.
00:30:49.055 --> 00:30:52.305
again. The fuel volume assumption changes. Well, we had a different view.
00:30:52.305 --> 00:30:55.415
That wasn't this extreme of extrapolating what happens when you.
00:30:55.415 --> 00:30:58.445
get locked down that the world changes and you're never leaving your house again.
00:30:58.445 --> 00:31:01.665
We get an assumption of some sort of normalization that.
00:31:01.665 --> 00:31:04.765
the real estate of this also had tremendous value.
00:31:04.765 --> 00:31:08.085
And the final thing is you would have read this in the newspaper.
00:31:08.085 --> 00:31:08.085
00:31:08.305 --> 00:31:11.555
There was a rumor and somewhat confirmation.
00:31:11.555 --> 00:31:14.655
that they were gonna buy a European grocery store or store called.
00:31:14.655 --> 00:31:15.095
care for.
00:31:16.135 --> 00:31:19.345
The market got freaked out like you're going to Europe, you're going to grocery stores.
00:31:19.345 --> 00:31:22.355
What's going on? And we as a large investor.
00:31:22.355 --> 00:31:23.965
got a call directly to the CFO.
00:31:24.755 --> 00:31:27.995
We spoke to the CFO about their thinking behind this.
00:31:27.995 --> 00:31:31.025
acquisition. If it moved forward, we understood the.
00:31:31.025 --> 00:31:34.305
history of acquisitions. So we haven't done our work.
00:31:34.305 --> 00:31:37.665
got a great chance to buy this company at the point of fear.
00:31:37.665 --> 00:31:40.815
for all those factors of a quality franchise that.
00:31:40.815 --> 00:31:41.845
generates free cash flow.
00:31:42.535 --> 00:31:46.365
Now let's Fast forward to Q 42022 last.
00:31:46.365 --> 00:31:48.435
year, the stock hit our target price.
00:31:49.105 --> 00:31:52.695
It had done extremely well and what we did we.
00:31:52.695 --> 00:31:56.535
did on 1/3 sale, we took the capital of.
00:31:56.535 --> 00:31:59.675
1/3 of the proceeds. Now we're reassessing because the.
00:31:59.675 --> 00:32:02.715
circumstances are different than when we bought it, so we,
00:32:02.715 --> 00:32:05.775
cannot rationally say that this is the same value.
00:32:05.775 --> 00:32:08.985
of the company, but we're taking that capital and then we recycle that.
00:32:08.985 --> 00:32:12.755
capital into other companies that we found value coincidentally.
00:32:12.755 --> 00:32:15.855
around that same time is also when we found a great opportunity.
00:32:15.855 --> 00:32:18.915
in a company called CGI, it's an IT consulting.
00:32:18.915 --> 00:32:20.015
and outsourcing firm.
00:32:20.475 --> 00:32:23.485
It got sold off with the tech wreck when all the technology.
00:32:23.485 --> 00:32:26.585
gets stocks got hurt. We didn't go and try to buy a Shopify.
00:32:26.585 --> 00:32:29.635
which is not generating cash flows. We found a real free.
00:32:29.635 --> 00:32:33.045
cash flow generating company that was hated at that time.
00:32:33.045 --> 00:32:36.605
and that's the recycling of capital that comes along.
00:32:36.605 --> 00:32:39.675
this very much this process that's ingrained at Beutel.
00:32:39.675 --> 00:32:39.675
00:32:40.445 --> 00:32:43.455
This is the CIBC ICS managed portfolio.
00:32:43.455 --> 00:32:46.995
These are the parameters of the portfolio.
00:32:46.995 --> 00:32:46.995
00:32:48.355 --> 00:32:51.415
The market cap is about 3 billion or so, and to give you.
00:32:51.415 --> 00:32:53.395
some context, when you're a value investor.
00:32:54.015 --> 00:32:57.545
You're naturally not in early stage companies because.
00:32:57.545 --> 00:33:00.845
you're looking for cash flows. So the very nature of the maturity.
00:33:00.845 --> 00:33:04.045
of some of these companies gives you an element of stability.
00:33:04.045 --> 00:33:07.105
and security from the size and liquidity and.
00:33:07.105 --> 00:33:10.205
maturity of some of these companies we have.
00:33:10.205 --> 00:33:13.325
generally low 30s in portfolio, so it's run.
00:33:13.325 --> 00:33:16.825
as a concentrated portfolio and then we put some guardrails around the portfolio.
00:33:16.825 --> 00:33:19.845
1 component is picking Gray companies, the.
00:33:19.845 --> 00:33:22.925
second is building a diversified portfolio that.
00:33:22.925 --> 00:33:25.445
we're not over our skis at any point in time.
00:33:25.605 --> 00:33:28.725
That gives you risk exposures that you don't want and these.
00:33:28.725 --> 00:33:31.955
are some of the parameters that you'll see that we've put in place.
00:33:31.955 --> 00:33:35.035
from the number of positions or the position size.
00:33:35.035 --> 00:33:38.395
not getting too large and the maximum turnover we.
00:33:38.395 --> 00:33:41.575
generally have about say, 20% turnover. What?
00:33:41.575 --> 00:33:44.955
at means is we hold companies for five years on average sometimes.
00:33:44.955 --> 00:33:48.085
es it's being low as 10 and sometimes it's been a little bit higher.
00:33:48.085 --> 00:33:51.235
about 25%. It's not because we feel like we want.
00:33:51.235 --> 00:33:54.855
to trade. We don't think there's a direct correlation between.
00:33:54.855 --> 00:33:56.695
he amount of activity and you returns.
00:33:56.985 --> 00:34:00.175
It's what the market does and what we do.
00:34:00.175 --> 00:34:03.415
because of what the market does. If the market loves custard, what we're.
00:34:03.415 --> 00:34:06.685
selling it and we're taking proceeds. If the market hates CGI.
00:34:06.685 --> 00:34:07.335
we're buying it.
00:34:09.345 --> 00:34:12.515
Let's talk about what's going on in the market and Peter or Paul.
00:34:12.515 --> 00:34:16.535
please throw bread at me if I'm running overtime so.
00:34:16.535 --> 00:34:18.455
don't mind that. Let's talk about the market.
00:34:22.055 --> 00:34:24.325
Yeah, not all at once.
00:34:25.425 --> 00:34:26.435
One at a time, please.
00:34:26.855 --> 00:34:28.935
UM, 2023.
00:34:29.615 --> 00:34:32.385
Has already started as a fascinating year.
00:34:33.885 --> 00:34:37.475
And 2023 started with concerns of a recession.
00:34:37.475 --> 00:34:37.475
00:34:38.435 --> 00:34:41.465
And I'm sure you heard market pundits say it's gonna be.
00:34:41.465 --> 00:34:44.845
a hard landing. It's gonna be a face plant. It's.
00:34:44.845 --> 00:34:47.905
gonna be a soft landing. Now. It might not be.
00:34:47.905 --> 00:34:50.985
a landing at all. We're just gonna stay flying and.
00:34:50.985 --> 00:34:54.005
they're going to be predictions in the economy and just look.
00:34:54.005 --> 00:34:57.205
at track records and figure out, well, how often are they? Right. They'll.
00:34:57.205 --> 00:35:00.635
e right. It's just they may be wrong for 10 years in a row before they're right.
00:35:00.635 --> 00:35:00.635
00:35:01.725 --> 00:35:05.015
And macro predictions for us have not been.
00:35:05.015 --> 00:35:08.315
where we found value in high probabilities and.
00:35:08.315 --> 00:35:11.515
what happened in January is the market was up 7%. Why?
00:35:11.515 --> 00:35:14.635
jobs were stronger, inflation was coming.
00:35:14.635 --> 00:35:17.875
down, the view was inflation's coming down everything.
00:35:17.875 --> 00:35:20.995
s more stable. The central banks may not hike as much and.
00:35:20.995 --> 00:35:24.455
we may continue on. And there's no problem and then bam.
00:35:24.455 --> 00:35:26.485
markets, Silicon Valley bank.
00:35:27.595 --> 00:35:31.155
Big issue focused on the venture capital space.
00:35:31.155 --> 00:35:31.155
00:35:31.835 --> 00:35:34.885
Some mismanagement and then Signature Bank focused.
00:35:34.885 --> 00:35:35.725
on crypto.
00:35:36.495 --> 00:35:39.855
And then you have Credit Suisse and all of a sudden the market Spanish again.
00:35:39.855 --> 00:35:39.855
00:35:40.705 --> 00:35:42.865
The markets panic, there's going to be a banking crisis.
00:35:43.935 --> 00:35:46.965
And the banking crisis means, hey, all that loan.
00:35:46.965 --> 00:35:49.415
that you had to spend, it's gonna get paired back.
00:35:50.175 --> 00:35:53.195
And that extended to Canadian banks, even though large banks.
00:35:53.195 --> 00:35:56.225
were the winners in this, when deposits were flowing.
00:35:56.225 --> 00:35:59.345
out of these small regional banks, large banks were actually earning.
00:35:59.345 --> 00:36:02.555
nks are able to buy at more attractive.
00:36:02.555 --> 00:36:04.365
but this is the most recent thing.
00:36:05.435 --> 00:36:08.935
And we've shared with you different stories and going forward there.
00:36:08.935 --> 00:36:12.025
may be other aspects. The questions are gonna be around.
00:36:12.025 --> 00:36:15.695
well, China and will invade Taiwan. No idea will.
00:36:15.695 --> 00:36:19.025
Donald Trump evade jail and become?
00:36:19.025 --> 00:36:20.345
the next president again?
00:36:21.625 --> 00:36:24.685
Will AI change the face of Google search or?
00:36:24.685 --> 00:36:28.035
your lives in our lives, there are going to be a number of factors.
00:36:28.035 --> 00:36:28.625
hat come out.
00:36:29.465 --> 00:36:32.635
No one predicted the health pandemic and the impact it would have.
00:36:32.635 --> 00:36:35.775
or when it was gonna end, no one predicted.
00:36:35.775 --> 00:36:37.695
Putin invading Ukraine.
00:36:38.505 --> 00:36:41.535
No one predicted bank. The reality is we are gonna live in.
00:36:41.535 --> 00:36:44.575
circumstances. They're gonna be uncertainty. We just have to.
00:36:44.575 --> 00:36:47.735
learn how to live with it, how to manage capital, how to protect your.
00:36:47.735 --> 00:36:50.875
capital and move forward. And if you look at the bottom of this.
00:36:50.875 --> 00:36:53.975
slide, what we focus on is our actions.
00:36:53.975 --> 00:36:57.155
the things we can't control. We can't control the world around us.
00:36:57.155 --> 00:37:00.395
We simply have to take queues and do what's in the best interest.
00:37:00.395 --> 00:37:03.775
of our unit holders. As I shared with you, we bought CGI.
00:37:03.775 --> 00:37:07.015
in the tech rec last year when everyone hated stock the.
00:37:07.015 --> 00:37:08.875
stock is up about 30 to 40%.
00:37:09.285 --> 00:37:12.705
Over that course, when we bought it because it was bought during hate as.
00:37:12.705 --> 00:37:14.265
a cash flow generating company.
00:37:15.025 --> 00:37:18.045
We on the other side have made some sales because we're.
00:37:18.045 --> 00:37:21.175
cognizant that a company has chapters.
00:37:21.175 --> 00:37:23.475
in its life like we all have chapters in our lives.
00:37:24.095 --> 00:37:27.245
We don't stay the same, they evolve and we have to update our views.
00:37:27.245 --> 00:37:29.905
of these companies. A company that we sold was Onyx.
00:37:30.645 --> 00:37:33.795
It's a private equity manager, but they've made a few mistakes.
00:37:33.795 --> 00:37:37.035
They bought a company called Gluskin Sheff that there essentially writing.
00:37:37.035 --> 00:37:40.175
down. They bought a company called WestJet before.
00:37:40.175 --> 00:37:40.895
the pandemic.
00:37:41.985 --> 00:37:43.875
Their returns were becoming poor.
00:37:44.685 --> 00:37:47.805
And in an asset manager like we are well if.
00:37:47.805 --> 00:37:50.835
f you're returns are poorer, no ones gonna trust you with your capital.
00:37:50.835 --> 00:37:53.875
and you're flywheel starts to come undone and so.
00:37:53.875 --> 00:37:56.965
we chose to take capital away from Onyx with our updated view on.
00:37:56.965 --> 00:38:00.195
the company and move it forward. And in the fat middle all those process.
00:38:00.195 --> 00:38:02.115
sales, we had a lot of winners.
00:38:02.785 --> 00:38:06.255
We had boring companies like Hydro One which delivers.
00:38:06.255 --> 00:38:09.275
electricity throughout Ontario in transmission and.
00:38:09.275 --> 00:38:12.315
distribution. We bought that company at the point of hate Q1.
00:38:12.315 --> 00:38:15.895
2020 in the pandemic. When people thought electricity.
00:38:15.895 --> 00:38:18.945
demand was gonna go down when people were worried about them.
00:38:18.945 --> 00:38:22.155
doing an acquisition. But we saw the path forward that was actually.
00:38:22.155 --> 00:38:25.295
a boring utility versus Shopify I want.
00:38:25.295 --> 00:38:28.635
to say hydro ones delivered 60 to 70% return over.
00:38:28.635 --> 00:38:32.195
that time period because we bought a cash flowing stable.
00:38:32.195 --> 00:38:35.355
great business model at a point of heat and you'll see the other names.
00:38:35.355 --> 00:38:35.355
00:38:35.755 --> 00:38:38.865
That we've done well on and these are process different sales. We don't fall in love.
00:38:38.865 --> 00:38:42.665
with companies, we recycle that capital because we think cash flow generation.
00:38:42.665 --> 00:38:46.025
we think sentiment and valuation plays a function and risk.
00:38:46.025 --> 00:38:49.815
and we are your risk managers as a number one goal this.
00:38:49.815 --> 00:38:51.385
is our portfolio as it stands today.
00:38:52.875 --> 00:38:55.905
This portfolio is an active portfolio and it will change.
00:38:55.905 --> 00:38:58.935
from time to time. You would not have seen Custard.
00:38:58.935 --> 00:39:02.325
before the Circle K stores, you would not have seen restaurant before.
00:39:02.325 --> 00:39:05.395
and you may see new names we probably have.
00:39:05.395 --> 00:39:08.725
three to four active files that we fully modeled out and we're waiting.
00:39:08.725 --> 00:39:10.135
for the point of pain.
00:39:10.975 --> 00:39:14.425
To buy these and when we buy it this portfolio.
00:39:14.425 --> 00:39:17.715
will change accordingly in any names that you below 2%.
00:39:17.715 --> 00:39:20.845
that's a function of names that are either on their way out because.
00:39:20.845 --> 00:39:23.865
we've done process sales or we're building up when we get that.
00:39:23.865 --> 00:39:27.165
opportunity. But we run a concentrated portfolio almost.
00:39:27.165 --> 00:39:31.565
50% all in our highest conviction names this.
00:39:31.565 --> 00:39:34.585
fund has done extremely well during periods.
00:39:34.585 --> 00:39:37.765
of pain like last year when the market was down 6.
00:39:37.765 --> 00:39:40.805
this fund was down one we would have loved to be positive, but we also.
00:39:40.805 --> 00:39:41.765
have to be realistic.
00:39:41.865 --> 00:39:45.195
Of how we manage it, that's 500 basis points of capital protection.
00:39:45.195 --> 00:39:48.285
over that period in this portfolio. And as I said, it's.
00:39:48.285 --> 00:39:51.295
not a static portfolio. It moves because of the process.
00:39:51.295 --> 00:39:54.555
It doesn't move because of my stomach and my gut feel it's a process.
00:39:54.555 --> 00:39:57.855
that's instilled that Beutel in 2021.
00:39:57.855 --> 00:40:00.965
Energy was the best performing sector, we're not.
00:40:00.965 --> 00:40:04.095
that big on energy because we are concerned about.
00:40:04.095 --> 00:40:07.375
what normalized free cash flow looks like. You can have periods.
00:40:07.375 --> 00:40:10.475
of time when the estimate is a 10 billion in free cash flow.
00:40:10.475 --> 00:40:12.315
six months later that estimates.
00:40:12.365 --> 00:40:13.295
Minus 5 billion.
00:40:13.955 --> 00:40:17.185
The Stability and stability does not lend itself.
00:40:17.185 --> 00:40:20.305
as well. We will buy it when it's heated we have owned.
00:40:20.305 --> 00:40:23.325
C and Cuba, for we have owned tech resources. There are no.
00:40:23.325 --> 00:40:26.645
sacred cows and as things change it will change. But.
00:40:26.645 --> 00:40:29.825
if you look at the top ten holdings, even Q.
00:40:29.825 --> 00:40:33.215
to this date, we've held up with the market as it's rallied even.
00:40:33.215 --> 00:40:36.465
though Royal Bank, TD Bank, BMO.
00:40:36.465 --> 00:40:40.045
TC Energy have not worked well. So we have a lot of latent potential.
00:40:40.045 --> 00:40:40.045
00:40:40.735 --> 00:40:41.805
Where we do our work.
00:40:42.925 --> 00:40:46.115
We assess it. We recently met with the CEO of.
00:40:46.115 --> 00:40:49.435
BMO. We recently messed with the CEO of TC Energy. Why?
00:40:49.435 --> 00:40:52.535
we wanna stay on top of our names and CEOs, wanna.
00:40:52.535 --> 00:40:56.055
talk to us as a top large shareholder in their portfolio.
00:40:56.055 --> 00:40:56.055
00:40:56.755 --> 00:40:59.765
This is our sector weight. Our portfolio does not look like the.
00:40:59.765 --> 00:41:02.815
index. It's not because we purposely wanna make it not.
00:41:02.815 --> 00:41:05.955
look like our index is because we do it at the bottom up level.
00:41:05.955 --> 00:41:09.425
It's because the names Nortel and Shopify can completely.
00:41:09.425 --> 00:41:12.615
skew your index. It's because we don't believe there's.
00:41:12.615 --> 00:41:16.005
value right now in names like healthcare. I have looked at a healthcare company.
00:41:16.005 --> 00:41:19.445
we disqualify companies when the quality is not there.
00:41:19.445 --> 00:41:22.625
So it's not like we're not looking. We've looked at real estate companies we.
00:41:22.625 --> 00:41:25.925
have not gotten to the point of finding equality company with free cash flow.
00:41:25.925 --> 00:41:29.005
You have seven investment professionals with a lot of experience who are.
00:41:29.005 --> 00:41:30.265
cycling through all these names.
00:41:30.365 --> 00:41:33.495
And sometimes more than once. I may take a file and look at it and.
00:41:33.495 --> 00:41:36.915
say I'm not sure if I'm comfortable with the parameters.
00:41:36.915 --> 00:41:40.135
or the outlook. Someone else may cycle through sometimes.
00:41:40.135 --> 00:41:43.315
will come with a different conclusion, but it has to be validated and it has.
00:41:43.315 --> 00:41:45.585
to be vetted in a very thoughtful manner.
00:41:46.485 --> 00:41:49.755
What you'll observe is 2 things. We are underweight energy.
00:41:49.755 --> 00:41:50.415
and materials.
00:41:51.035 --> 00:41:54.385
The portfolio outperformed in 2021 and 2022.
00:41:54.385 --> 00:41:57.545
when energy was the best performing sector, so that.
00:41:57.545 --> 00:42:00.725
tells you that we're focused on capital preservation and free cash.
00:42:00.725 --> 00:42:04.025
low, but it does not compromise your returns it.
00:42:04.025 --> 00:42:07.205
adds capital protection and we have been able to find.
00:42:07.205 --> 00:42:10.485
phenomenal companies like custard like Hydro.
00:42:10.485 --> 00:42:13.645
One like CGI that's giving you attractive return.
00:42:13.645 --> 00:42:17.185
So you do not have to take that risk. You just need a system and process.
00:42:17.185 --> 00:42:20.325
at will deliver that return. Right now our overweights aren't.
00:42:20.325 --> 00:42:22.605
staples companies and consumer discretionary.
00:42:23.175 --> 00:42:26.265
The reason is we found great opportunities to give you an example.
00:42:26.265 --> 00:42:29.585
We bought George Weston in 2020. George Weston.
00:42:29.585 --> 00:42:33.205
is a boring holding company by the Western family. It owns Loblaws.
00:42:33.205 --> 00:42:36.645
Choice Properties, which is the real estate for Loblaws.
00:42:36.645 --> 00:42:39.865
and it owned a bakery, and it was headed for a period.
00:42:39.865 --> 00:42:43.245
of time because blah blah was not performing because Galen Weston.
00:42:43.245 --> 00:42:46.725
wanted to turn it into an investment bank and buy more assets. We.
00:42:46.725 --> 00:42:49.745
met with Galen. We met with Richard, and we saw a.
00:42:49.745 --> 00:42:52.785
change in tone. We saw that they were less interested in.
00:42:52.785 --> 00:42:53.805
buying more assets.
00:42:54.025 --> 00:42:57.355
No one knew what was gonna be. Was it a Shopify, a technology?
00:42:57.355 --> 00:43:00.535
company was gonna be something tied to the grocery store. They changed it.
00:43:00.535 --> 00:43:03.585
and they narrowed. They sold the bakery business, blah, blah.
00:43:03.585 --> 00:43:06.775
Turned around. This has been also up 80%. Like hydro.
00:43:06.775 --> 00:43:08.195
One. Boring is beautiful.
00:43:09.045 --> 00:43:12.055
We like boring businesses that generate cash flows and.
00:43:12.055 --> 00:43:15.195
we're happy to buy these all day and that is what?
00:43:15.195 --> 00:43:18.835
drove up our exposure to consumer staples, not.
00:43:18.835 --> 00:43:22.095
because we had a view on the economy. These are not macro calls.
00:43:22.095 --> 00:43:25.115
We try to be fully invested as much as we can. There's.
00:43:25.115 --> 00:43:28.175
only one point in time where cash went up to about 10% and that was.
00:43:28.175 --> 00:43:31.275
in 2007. We just didn't find opportunities. We didn't.
00:43:31.275 --> 00:43:35.055
want to force capital when there were the opportunities and.
00:43:35.055 --> 00:43:38.255
it's not because we had a call on the macro either, but when we.
00:43:38.255 --> 00:43:40.035
don't find opportunities, cache will build.
00:43:40.235 --> 00:43:42.145
If not, it'll be bottom up ideas.
00:43:43.335 --> 00:43:46.365
Now let's close, because I'm sure you're bored at me, but thank.
00:43:46.365 --> 00:43:49.765
you for not throwing bread on this whole question.
00:43:49.765 --> 00:43:53.065
of that you've heard taking money out of Canada.
00:43:53.065 --> 00:43:56.205
put into international, putting into emerging markets, putting into.
00:43:56.205 --> 00:43:56.785
the US.
00:43:57.905 --> 00:44:01.155
But when you look back over a long period like the 20 years.
00:44:01.155 --> 00:44:04.185
where oil is done, what it's done, US tech has done.
00:44:04.185 --> 00:44:04.925
what it's done.
00:44:05.775 --> 00:44:08.905
The TSX is added and created a lot of value for you.
00:44:08.905 --> 00:44:08.905
00:44:09.675 --> 00:44:12.945
And we at Beutel Goodman, as one of the largest Canadian.
00:44:12.945 --> 00:44:16.425
quity managers with a disciplined process, have done extremely.
00:44:16.425 --> 00:44:19.565
well for you over a long period of time. What's?
00:44:19.565 --> 00:44:22.695
also really important to understand is that Canadian equities.
00:44:22.695 --> 00:44:25.705
does not just mean Canadian companies exposed.
00:44:25.705 --> 00:44:29.025
to Canada. That might be true for Loblaws that.
00:44:29.025 --> 00:44:32.405
might be true for Rogers and your cell phone bills, but it owns.
00:44:32.405 --> 00:44:35.665
magnet, which is the 4th largest auto supplier in the world.
00:44:35.665 --> 00:44:38.965
It owns restaurant brands that has restaurants in the US.
00:44:38.965 --> 00:44:40.785
internationally abroad.
00:44:40.905 --> 00:44:44.175
These are actually global franchises that are getting built in Canada.
00:44:44.175 --> 00:44:47.375
Even when you look at Canadian banks the some.
00:44:47.375 --> 00:44:50.455
of you may not know, TD has 40% of his exposure in.
00:44:50.455 --> 00:44:50.995
the US.
00:44:52.515 --> 00:44:56.145
That's he hurting the stock right now, but it's a North American franchise.
00:44:56.145 --> 00:44:59.465
that's growing and evolving. So even when you're buying Canada.
00:44:59.465 --> 00:45:02.685
you are buying global franchises that are dominant.
00:45:02.685 --> 00:45:05.865
that are structured in a very attractive manner, so.
00:45:05.865 --> 00:45:08.965
I would say, oh, Canada, don't steer clear of it because it.
00:45:08.965 --> 00:45:10.695
has added value over time.
00:45:11.665 --> 00:45:12.935
So I've shared a lot with you.
00:45:14.035 --> 00:45:15.265
But I hope it was.
00:45:15.995 --> 00:45:19.965
At least an interesting discussion with one or two key takeaways.
00:45:19.965 --> 00:45:23.055
But our philosophies core on.
00:45:23.055 --> 00:45:26.325
being a value investor are focus is on capital.
00:45:26.325 --> 00:45:29.525
preservation. It's built on a system, it's.
00:45:29.525 --> 00:45:32.665
not built on a person's, it's not built on a whim.
00:45:32.665 --> 00:45:35.755
It's a very structured process of how we look at companies and we do.
00:45:35.755 --> 00:45:37.495
the homework and we don't rush it.
00:45:37.775 --> 00:45:41.095
We are independent and I think.
00:45:41.095 --> 00:45:41.095
00:45:41.965 --> 00:45:44.975
When we meet with management teams and we meet with a lot of management teams.
00:45:44.975 --> 00:45:48.495
it's really for important for us to meet the people, understand the culture.
00:45:48.495 --> 00:45:51.615
because that is how decisions are made and.
00:45:51.615 --> 00:45:54.685
I think as an independent franchise, that's not pressured.
00:45:54.685 --> 00:45:57.755
bout short term performance, that's not driven by other.
00:45:57.755 --> 00:46:00.965
factors. All we do is equity management.
00:46:00.965 --> 00:46:04.025
by owners who are focused over in the next three to five years we're going.
00:46:04.025 --> 00:46:07.115
to make those decisions that are in the best interest of.
00:46:07.115 --> 00:46:10.465
our unit holders, not by the prerogative of a bigger holding.
00:46:10.465 --> 00:46:12.475
company. And that is actually true.
00:46:12.575 --> 00:46:15.975
And very meaningful and a key part of the reason I also joined Beutel overtime.
00:46:15.975 --> 00:46:15.975
00:46:17.105 --> 00:46:18.255
We've had a long history.
00:46:19.055 --> 00:46:22.075
And we've been here for over 5 decades. We'll be here for another.
00:46:22.075 --> 00:46:25.185
5 decades. You have consistency expert in.
00:46:25.185 --> 00:46:28.225
depth, and there are some slides just to show you some of the long term.
00:46:28.225 --> 00:46:31.655
performance of how we've compounded value while protecting.
00:46:31.655 --> 00:46:34.695
your capital. So let me end there and please.
00:46:34.695 --> 00:46:36.325
hand it back to the wonderful team.