Title: Canadian Stocks at Records — Time to Get Selective, says $8 Billion Fund Manager Show: In the Money with Amber Kanwar Guest: Garey Aitken — Chief Investment Officer, ClearBridge Investments (Franklin Templeton), Calgary Date: 2026-07-28 URL: https://youtu.be/mHdNqAKZc7I Length: 53:41 (3221s) Note: YouTube auto-transcript. Fillers (um/uh/"you know" as interjection/tic "like") removed and stutters collapsed; wording otherwise verbatim and every (mm:ss) cue kept in place. Auto-transcript proper-noun garbles corrected to the real entities: "Gary Aken"/"Gary Akin" = Garey Aitken; "Amber Canoire" = Amber Kanwar; "Thompson Reuters" = Thomson Reuters; "Beimo" = BMO; "Senovous"/"Senovas" = Cenovus; "Foris" = Fortis; "Stantech"/"Stan" = Stantec; "a void"/"void" = Boyd; "Gibby" = CGI; "C and Rail"/"CNN Rail" = CN Rail; "Atkins Realis" = AtkinsRéalis; "blah blah" (grocer trimming) = Loblaw; "grosser(s)" = grocer(s); "mode" = moat; "physicians" (utilities) = positions; "EV to EBA" = EV/EBITDA; "accreatively" = accretively; "preandemic" = pre-pandemic; "postco" = post-COVID.
00:03 These are the golden years. We've seen terrific returns out of Canadian equities. >> These stocks are now more expensive. Does it remain excellent? Canadian markets are outperforming and at record highs. We've got Garey Aitken who manages over $8 billion. He'll tell you it's a great market, but he's still looking for bargains everyone else is missing.
00:22 We're not necessarily contrarian by nature, but in an expensive market, worth finding opportunities where people are more fearful. We will make a lot of money from here. >> Are you nervous about your bank exposure? One of your top ideas was the energy sector. Is the reward still there? Thomson Reuters has been in the eye of this storm.
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01:37 Discover how Raymond James can help you live a life well planned. Visit raymondjames.ca. The content provided in this podcast is for informational purposes only and does not constitute financial investment or professional advice. The views expressed by the host and the guest are their own and do not necessarily reflect the opinions of any organization or company.
01:59 The host and guest may maintain positions in any securities discussed on the podcast. Always consult with a qualified financial adviser or professional before making any investment decisions. In this episode, we discuss Intact Financial, Canadian National Railway, and Canadian Natural Resources, which are all stocks that I own.
02:18 Hey everybody, welcome to a brand new episode of In the Money with Amber Kanwar. On this episode, we've got the return of Garey Aitken. He manages Franklin Templeton's ClearBridge Investments. For the last 30 years, he has focused exclusively on Canadian equities, and he says it's never been a better time to be a Canadian equity investor.
02:35 But that comes with a price. Valuations have moved up and so Garey is taking profits in some of the more lofty sectors and using them, I should say, to invest in some real beaten up sectors, like I'm talking Eye of the Storm names. It was a great perspective with somebody who says he's not necessarily contrarian but he is always looking for value.
03:00 Now for some perspective, he joined us April of last year. He was pounding the table on energy which at that point was making a multi-year low — he really did catch the bottom. It was shortly after liberation day and he said I'm all in on these energy stocks and that turned out to be a really beautiful trade.
03:22 So we'll see if his pro picks turn out to be the same but they definitely are not ideas that everyone is bringing us. Let's get into it. Garey Aitken, thank you so much for joining us on the podcast again. >> Thanks for having me. >> We spoke to you in April, April 22nd and that was kind of an anxious time.
03:49 I don't know if we're ever going to get away from anxious times. But here we are more than a year later and we're looking at the TSX hitting record after record. And it's not just a commodity story. You've been covering Canadian equities for 30 plus years. How would you characterize the resiliency that we're seeing right now in the benchmark index? >> Well, it's a remarkable period to your point.
04:15 I call this — these are the golden years. And I think in many respects Canadians probably have underestimated how good this market's been. And not just over a year or so. Really, if you look now at medium-term, certainly post pandemic, but even longer than that, when we capture that brief weakness to 10 years and longer, we've seen terrific returns out of Canadian equities.
04:46 And I think sometimes that gets lost a little bit because north of the 49th parallel, we like to compare ourselves to our counterparts in the US and the US market has really been so good and has hogged the limelight globally, but Canada's been excellent. >> And does it remain excellent? And I ask that because a few years ago people lamented, wow, Canadian stocks trade at a huge discount.
05:13 The yield that you can get is much higher. Well, the discount has narrowed. These stocks are now more expensive than they were and the yield is now less than what you can get in the bond market. >> Yeah, boy, you're getting right into the heart of the issue. And there's probably quite a bit to unpack there for us, but I'll start at a high level that I concur with your view there that as good as this has been, ultimately it sets up for probably a little bit less rosy scenario
05:50 going forward just because of where valuations have gone. So there's no question that we're borrowing from the future a little bit, if you will. To the extent we've seen returns 15, 20% for quite lengthy periods of time, think of that as being above trend. And as good as the backdrop has been in terms of fundamentals for these companies, it's not 15 or 20% good.
06:18 So again, we're pulling that forward through valuation expansion, if you will. >> Does that mean you're taking profits in your portfolio? >> Well, no, we try to provide consistent exposure to Canadian equities and fortunately for us as active managers, we are not the market. So we'd like to think that consistently we can find opportunities where there's relatively better value or better growth or some sort of combination thereof.
06:52 But I'd still submit to you that, yeah, it's still more difficult for us to find those same opportunities today than would have been the case two, three or four years ago. I think it's important, and we can unpack this in any way that you want, but to understand the anatomy of this rally over the last couple of years, it hasn't been just one sector dragging us higher.
07:22 It's been surprisingly broad-based. Obviously, gold, but then you've got financials, energy, of course, but then utilities, right? Pretty much everything except maybe the telecoms have really supported the market at these levels. >> Yeah, absolutely. In fact, you've identified at the sector level the big drivers for sure and to some degree there's been the passing of the baton because one of those big sectors will exhibit the leadership and then another will take its turn. So,
08:00 completely, we go back into 2025 and to start that year, there was a lot of concern around tariff implications and what was coming out of the White House, but that quickly turned into a gold-led rally. Then we saw financials really carry the day and of course they're the big weight in the index and led by the banks.
08:24 And then since the events in the Middle East and specifically Iran starting on February 28th, the energy has been really good too. But you will also add in, there's some other smaller themes and sub themes that have benefited some other names. I'm sure we'll get into over the course of the discussion here and some other sectors too.
08:49 So it really has been broad. There's no question about it. >> Yeah, you brought us some nice nuanced stories, especially in pro picks. I want you to weigh in on a debate that's taking place right now on the Canadian banks. We've been talking about this for a couple of episodes. David Rosenberg made a big splash calling the banks our AI bubble.
09:11 >> They're expensive and I'm looking at your portfolio and they're still your top 10 holdings. Are you nervous about your bank exposure? >> Yeah, I guess a little bit we are, Amber, and I did see David Rosenberg's piece and I think there was a lot of validity to his thesis there. At the same time, we're long for banks in particular.
09:41 I would say that we're underweight banks and we've been using it at the margin as a source of cash. So our activity in banks in recent quarters has been to trim, albeit modestly trim the banks, and our view on the fundamentals, Amber, has been really pretty consistent here.
10:05 We've been at this a long time and we try not to get too down when the banks are out of favor and vice versa. So I think effectively these are still very high-quality franchises. Like I think longer term things will be fine, but we've seen such a swing in sentiment in the last couple of years and that's reflected in valuations that if they're not at all-time highs, they're near all-time highs in terms of forward price earnings multiples.
10:39 So that's really a big driver for us. It's not really a concern about what's in front of the banks from a business point of view or fundamentally. It's just what we're paying for it. So with all those returns that we've enjoyed, it's come via multiple expansion. And to my point about the broader market, I think really what that portends is more difficult returns going forward.
11:07 >> And so the four banks you do own, BMO, TD, Royal, Scotia, and it sounds like you're taking profits simply on valuation. I'm wondering if this valuation story, if we can apply it to the energy sector. I don't know if you remember, but in April, we'll get into it when we review your pro picks, but one of your top ideas was the energy sector.
11:31 And you said, and I quote, "We're going to make a lot of money buying some of these stocks." You came in right at the bottom. You said that. I don't know if you knew that. You really bottom ticked it. So, congratulations. And since then the TSX energy sector is up 73%. >> But now the question is, is the reward still there for investors or have you done your bit? >> Yeah.
11:58 Well, thanks Amber and sometimes it's better to be lucky than good. I think that our view around energy, if you rewind the clock and I spoke to you as you said April of 2025, that was just a few weeks after what I refer to as liberation day, April the 2nd of 25, when Trump made those proclamations regarding tariffs, and we didn't have a crystal ball in terms of what was going to be a catalyst for higher oil prices at that time, but our view was look, we can identify high-quality businesses at below trend energy prices. The sector wasn't in favor.
12:40 Valuations were attractive and at the risk of sounding glib, often we'll say and there is no catalyst, but if the stocks are cheap and the businesses are good, that's when we want to be active. So we were pretty active in the energy space last year on the buy side and then unfortunately I think for a lot of individuals in society, but higher oil prices here post February 28th have really unlocked a lot of those stories.
13:16 So now, Amber, I guess your question is, is this an analog or something similar to the banks? And yes and no. These energy names have been very good too, particularly those with exposure to or leverage to crude oil. I think that there's some differences though with the banks. Like the energy names are always much more difficult to handicap because myself nor anybody really knows the future path of oil prices.
13:50 We do our best and try to normalize things and think about what's an appropriate price to use for our valuation work. But I think that I'm probably a little bit more excited about energy still from here than banks. It's an uncertain path to be sure, but I think that the risk/reward is still a pretty good setup and I can certainly see scenarios where oil is high for longer, not necessarily higher for longer.
14:26 And in that kind of world, I think that these oil stocks have room to go a fair bit higher even from where we are. >> And we're going to find out what names you like when we revisit your pro picks because it was one of your top ideas, but there's a lot of other stories that I want to get your view on. So let's get into the mailbag.
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16:44 com or visit the link in the show notes. Okay, our first question is from Rashmi and she wants to know about Intact Financial. We've been talking about the financials being so strong. Is Intact Financial a buy? Does it look cheap at these levels? And Intact has been, I own this one, it's been choppy, right? It's not supposed to be this choppy, but the property and casualty insurance company has had a lot thrown at it.
17:17 >> Yeah, it's been choppy more recently. There was, even if we look at just calendar 2026, we had a swoon earlier in the year and then it's recovered quite a bit. But I think we want to step back on this. This is an incredibly well-run, high-quality franchise. I think what they've done is really exceptional and we haven't deviated from our longer term view.
17:53 Now, I do think that insurance markets probably continentally and in Canada, conditions are softening a little bit. I don't know in the next year or two if it's going to be quite as robust in terms of the profitability for these P&C insurance companies as it has been in the last few years. But that really doesn't faze us too much.
18:17 The stock is still off of its highs. I would never profess to be able to counsel people on real short-term movements, but I think at these prices, I think it's still very solid in terms of the return potential. It clearly hasn't kept up with the banks. I think that the banks have really captivated the market within the financial sector, but I think that there's room for non-bank financials for people.
18:48 And I think that if you've got a longer term time horizon, which you should for equities, I think Intact makes a lot of sense. We were fortunate earlier this year on weakness that we did add a little bit to our Intact. In hindsight, probably not enough, but it'll remain a core position within the financial sector for us.
19:12 >> Okay. So you still like it. Here we've got a question on CGI Group. CGI: buy, sell, or hold? This one coming from Vinnie. This is such a fascinating one because it's caught up in the — what's it called? — the SaaS apocalypse, right? Fears on AI disruption. >> And what do they do to get out from under that? >> Well, we own CGI and it's been a tough go definitely in the last four or five quarters.
19:43 It's well off of the highs that we saw earlier in 2025. So, it's been tough. I guess we've been wrong on that for what it's worth in the shorter term. I would still consider it a hold for sure. In fact, we'd probably be buyers — closer to being buyers than sellers. I think that whether you call it a SaaS apocalypse or it's just part of this group where there's the concern that AI and what the future holds for AI will disrupt that business.
20:24 We're really not in that camp, but I don't think we've got a crystal ball either in the next five or 10 years what part of their business might evolve as AI plays out. So, we've seen a pretty big derating in this name. So far, the numbers have been fine. I mean, we could quibble a little bit and there might be some cyclical pressures facing CGI and specifically some of their exposures on the US side to the extent they've got some government work there, but really if we look at the numbers, they're still very
21:02 much intact. Of course, equities are discounting the future and that's the $64,000 question is what does the future hold? We're going to be watching it very closely, but we're pretty close to this story. We had a good check-in with management a couple of months ago. >> And what do they say? >> They obviously understand the pressure that they're under.
21:28 I'm sure they're frustrated. As you said, the business is still intact, but I'm curious what they say. Would it just be like bear down and the storm will pass? >> Yeah. And I think that whether we're talking to CGI or pretty much any management team, Amber, let me say that as valuable as that is, we want to put that into a broader context, too.
21:57 So we don't take everything at face value. Management teams can get too close to their own story. And we'll often say that management teams will be the last to know when the bad news finally arrives because they're so close to it and can't see the forest for the trees.
22:20 But I'd say generally these management teams are eyes wide open on this. They understand the bearish narrative or the concerns, but they're just not seeing it. In fact, and we don't really go this far, but a lot of these management teams are saying what they're seeing is AI is benefiting them through opportunities, through their own cost savings, etc.
22:47 Now, I think to construct a really bullish narrative on AI for all these businesses is taking it way too far in the other direction. I think truth will be somewhere in between. And Amber, I think our view is that again, how this plays out longer term remains to be seen. We've got a portfolio of names.
23:11 I would expect that there's going to be some that are surprisingly resilient. Some that might get disrupted pretty significantly. We'll have to see. But I think that so many of these businesses that have been such good business models for years and years that have now seen their stock prices collapse, we weren't in these names a few years ago because of valuation and now we're not getting too caught up in that hysteria on the downside either.
23:47 >> Okay. So that's good perspective and, spoiler, you brought us a name in your pro pick that has been absolutely run over on some of these thoughts. And you have a lot more conviction on that obviously because it's your pro pick. So stay tuned for that. Let's apply this conversation to Shopify which has fallen in this camp of we're not sure what's the future going to look like.
24:13 Even as, I mean, their results are not just better than expected, they're better than they've been. So their growth is better, but the stock is down 25%. And the question from Adam: well, what do you think about valuation? I've never heard Shopify is an attractive value stock, but what do you think of the stock here? >> Until a few years ago, we weren't in Shopify.
24:36 We initiated a position in Shopify. Guess that was in May of 2024 where we thought that there were significant enough changes fundamentally in terms of the free cash flow profile of the business that it warranted inclusion in a portfolio that we run with our investment style. I don't think that we would try to make too strong an argument that Shopify is cheap here.
25:03 If it was cheaper, we would definitely own more. I agree, Amber, that I think it's been caught up in this AI disruption narrative, but there might be a little bit more to it than that. I think that there could, with these super high expectation stocks, it's not enough to just deliver growth and maybe even meet expectations.
25:26 You got to keep upping the ante in terms of what you're delivering. So there's necessarily always a lot of very short-term focus when they put out a quarterly result or provide guidance. So we've seen a lot of volatility in Shopify for sure. I think it's getting caught up in that, but I think that there just might be concern about the growth profile and can it grow enough still for that. >> And competition from Meta.
26:00 That was a downgrade that we got about the fact that Meta, which we think is consumer-facing AI. Well, guess what? They just released an LLM for small and medium-sized businesses directly targeting some of Shopify's lunch. I mean, Shopify has stood its ground against Amazon. So it's fought these big companies before, but I think that's also weighing on the stock.
26:26 >> Absolutely. And I think that that ties into that AI disruption narrative, Amber, and that for sure we think that they've got a formidable moat. Time will tell how long that lasts. That is the big debate of course in the market, but whether it's Meta or somebody else, is there a way to dislodge Shopify and the dominance that they have there? For sure there's going to be debate around that.
26:59 We're ultimately fundamental investors and we like to see it in the numbers, and we have not really seen any evidence of that in actual results. Again, it's that forward-looking concern that people have, but the stock's off a lot, too. So you're getting compensated to own Shopify now relative to where it was in the past.
27:26 And we think it's a bigger, better company than it's ever been. >> All right, good perspective on Shopify. We can apply this AI disruption theme to kind of the whole mailbag because we got a question on TMX Group. It's so fascinating, all these different industries. Stock exchanges generally have been beautiful businesses.
27:46 TMX was on a tear up until it peaked in 2025 and then a lot of fears started to creep in. Talk to me about why, if you own a stock exchange, investors got nervous about the threat from AI. >> Yeah, Amber. And for sure we're talking a lot about this AI disruption theme and I don't want it to dominate our time but it clearly is one of the big themes.
28:13 So on the positive side as we talked about earlier it could have been financials and banks or utilities, energy, the golds, but this dynamic around AI, there's definitely some winners in the Canadian marketplace but there's been some losers too and I think that TMX is an interesting name. We are owners of TMX. We added to that name in second quarter.
28:44 I think if you really stretch it, yes, whether it's betting markets, whether it's AI, you can construct a story around more difficult times for TMX. But again, I don't want to be glib about all of these things, but we think that that's a pretty entrenched franchise. I think that TMX will continue to flourish.
29:18 Could there be some things that surprise us, that in parts of their market we see some sort of loss or erosion or ceding of dominance? Possibly, but that's really not in our base case numbers. And then what makes us more excited is that to the extent these stocks have checked back, it's the exact opposite.
29:44 When I talked about banks — I think that we're pulling things forward and everybody can't get enough banks — some of the names that I want to talk about today is exactly like energy. The last time we spoke in April of 2025, that's not where people are interested and we can still find really good businesses.
30:02 So we're not necessarily contrarian by nature, but in an expensive market that's at all-time highs day after day after day, worth finding opportunities sometimes where people are more fearful. >> I think that's good perspective. And to quote you, you'll probably make a lot of money if you can do that analysis correctly.
30:27 So it's interesting to see where you're adding. Okay, so you're right, we should take a bit of a reprieve from all this AI dominance. So let's talk about a grocer. >> A nice old-world stock in Metro. Do you like the grocers? I believe it was recently downgraded by one of the analysts.
30:50 This question coming from Minka. We can use Metro as an example which has had some operational issues, some strikes. But generally they all are kind of under pressure even as food inflation is perking up in this country and that used to be good for the grocers. >> Yeah. So I guess to put this in perspective, and I'll speak to Metro specifically, we have owned Metro consistently for many, many years.
31:26 We've also got a position in Loblaw. We were adding and more aggressive and more interested in grocers and we were maybe just a little bit lucky with this as well, but probably pre-pandemic and around the pandemic, and then we saw a big rerate up on the grocers. We've pretty aggressively trimmed our grocer exposure and a lot of that's been Loblaw, to a lesser extent Metro. We still have modest positions in them.
32:00 I think that Metro is perfectly fine. I don't think that the story's broken. They've had some pretty heavy spend years. They built out a distribution center. They've had some labor issues to your point, but we're not getting too caught up in the real short term.
32:19 I still think that they've got a great role to play. They've got great management teams. We like the profitability profiles. It's highly predictable. There's modest growth ahead for them. The stock, in the case of Metro, has been a little bit weaker. I'm not going to say that it's the cheapest stock that we could find or in the portfolio, but those are exactly the kind of high quality compounders that have really built our franchise over the years.
32:51 And I think Metro warrants a role in the portfolio no different than 10 or 20 years ago. >> Okay. And what about that what I mentioned about food inflation, that that used to be such an obvious trade. Food inflation is going up, occupy the grocers, and probably for political reasons they can't grow their sales as much as food inflation is going up.
33:21 I note in all their press releases they are very loud about the fact that our food sales did not grow as much as CPI inflation. >> Well, it's become such a political football to your point. It feels like the heat's off, but it was just a few years ago when there was threat of even more federal government intervention around this.
33:45 It's a high-profile issue. It's something that Canadians see every day. And I think to be fair to these companies, they face a lot of pressures as well and are exposed to cost increases and pressure and I think that they're playing the PR game and doing their best to keep a lid on that.
34:11 It quickly becomes really difficult and messy to get a real good apples to apples comparison in terms of prices, but that's really not driving our view here. I would suspect that no time soon will we see a repeat of that big inflationary spike that we saw a year or two post-COVID.
34:35 So at least we're hopeful that we don't see that again because I don't think that they really want to go through that from a PR point of view again and certainly in terms of potential government interference that would be really disruptive to those businesses. >> All right, let's find out your new high conviction ideas because your past ideas did really well.
34:59 We'll get into your pro picks. Pro Picks is brought to you by ATB Financial. With over $100 billion in assets, ATB Financial is powering possibilities for more than 843,000 financial services clients. ATB Capital Markets is a leading North American investment firm providing holistic corporate and capital markets advice and full-service financial solutions. Visit atb.
35:29 com/inthemoney for more information. Okay. So, before we get into your new ideas, let's review the ones that you brought to us April 22nd, 2025. You liked Canadian Natural Resources, Canadian National Railway. You were very patriotic in April. And Fortis. So, CNQ home run, up 72% since you chose it.
35:53 You said we're going to make a lot of money. The question is, I mean, you also liked I think Cenovus and MEG, now it's just Cenovus. >> Yeah. >> So, you like energy. You see there's more upside. You said that at the top of the show. Is CNQ still your favorite way to play it? Do you have others? >> Yeah, it'd be one of the best ways to play it for us and it commands the biggest weight for us in that sector.
36:21 So it's a go-to name for us. It's also an index heavyweight. I mean, we're not going off off the board there picking that name, but I think that it's perfectly fine and I'd have no problem at the margin adding to a Canadian Natural Resources for sure. >> Your second idea, CN Rail, and I own that one too, I think, up 40%.
36:44 I mean, that really took a while to work. >> Yeah, it finally — >> Yeah, it was backend loaded. >> It was backend loaded and they faced continued challenges in 2025 after we spoke and it's definitely really frustrating I think for everybody involved. It's been an incredibly challenging environment for North American rail until the last couple of quarters. And I think it's a classic example, Amber, and just as we get into this I think it really reflects the way we try to look at the world
37:21 is that there were people that were incredibly negative on rails and CN a couple of years ago and our thought was that there's nothing structurally broken. They're facing headwinds. There's some cyclical pressures and that's the time to be more interested in the stock and we'll wait for better days.
37:43 And we're going to see, I believe CN Rail report numbers tomorrow. They just had a very constructive announcement last night with Union Pacific. The stock has been hitting 52-week highs now day after day and we've enjoyed that. We're holders of it. We have not started trimming yet. I think that there's more here on CN Rail.
38:08 I would expect that we'll go through all-time highs here. And I think that there's still some multiple expansion, but we're kind of getting into the later innings of that relative trade. >> Interesting. You did mention the Union Pacific / Norfolk Southern merger which CN Rail was opposed to, except now they were playing chess with that and now, in exchange for not being opposed to it anymore, they now get market access to some of UNP's rail network, right? >> So exactly, so that
38:44 turned out to be a big win for them. >> The third was Fortis. It has benefited as a utility from I think the data center trade. >> Yeah. >> It was recently downgraded at CIBC just on that, just it's played out. Valuation is where it is and we're going to move on. What are you doing with Fortis? >> Yeah.
39:07 So the CIBC analyst that we know well downgraded Fortis within the last couple of days and I understand the rationale there and I wouldn't argue that it's cheap anymore. When we were building the positions in utilities two or three years ago and there were interest rate concerns and people just were questioning the growth. I do agree that maybe the data center buildout, just the electrification dynamic in North America, just has solidified people's views on longer-term rate-based growth with Fortis and others and they're just
39:46 really shining, those long-term dividend growth stories. We've been trimming utilities in the last year or so, in hindsight maybe a little bit too early, Amber, because in many cases they've even moved up after we've sold them. But Fortis is still the anchor utility name for us on the strategy and yeah, we just can't say enough about the execution there.
40:17 I think that the future's probably as good as it's ever been for these names, but yeah, I come back and hate to always be throwing cold water on things, but when stocks move this much, it probably means weaker returns at some point in the future. >> Okay. Well, let's stoke the flames of some stocks that have been definitely left out in the cold because the whole theme of this episode has been things have been great, but they're getting pricey and you've got to really sharpen your pencil and look for cheap ideas
40:48 that aren't value traps. So, you've brought three to us that are all down and dirty. They're under pressure. They trade generally at a cheaper multiple than the market. And they have nuanced stories. So the first is Boyd Group which is collision repair centers. It's been under massive pressure, down 35% this year.
41:11 What's caused this pressure and why do you like it here? >> Yeah, so we really like this story and we've owned it for quite some time in both our small cap fund and our flagship larger cap Canadian equity fund. It's been punishing for us in the last year or two and we've bought it and it's gone down and we've bought it again and we continue that process.
41:37 So in full disclosure, these things don't always work in the short term the way you'd like. But we've got a lot of conviction around Boyd. There's been weakness and it's not really because of AI. I think you'd be stretching it to get to that. I think that there's just been challenges for that whole North American collision repair industry in terms of same store sales.
42:05 So, people want to see Boyd get back to its historical more robust organic growth. >> And is that like a consumer story? Like, you really got to bang up my car before I'm willing to go and spend money on this? >> There's a lot of dynamics. There can be miles driven. There can be the value of used cars that can impact things. There can be the price of insurance and deductibles.
42:40 There can be lots of little drivers in terms of how their business looks in the short term. But again, I don't want to get too down in the weeds for people with this. This stock has seen a massive correction in terms of its multiple. We still think that there's lots of great years ahead of this business.
43:01 I think that there's still acquisition opportunities. Probably more difficult to do those as accretively as they were able to do 5, 10 or 15 years ago. But there will be growth through acquisition. I think that they're well positioned. I think that we're going to see a more consistent profile of organic growth or same store sales growth.
43:25 I think that the margin — we've seen margins expand a little bit. I'm not too concerned about margins, but it's been a real disappointment for people that have wanted consistent growth. We've probably seen a big rotation in the nature of the shareholder base of what was a real go-go story at one point, but we're going to stick with it.
43:45 And we've really bought quite a bit of stock in recent quarters. >> Is there some low-hanging fruit? Like is there something they could do? When you say rotation in the shareholder base, I hear maybe a little activist interest, some sort of agitation to get things going, control what they can control.
44:05 >> Yeah, definitely a possibility. I think that they're putting a different emphasis on investor relations here than they were doing previously. That might help. I usually don't like to talk about that too much, but I think that in this case, management communication and just the way that this story has been messaged and perceived has really played into stock price weakness,
44:39 i.e. that this stock has been punished far more than we think was warranted. So, now time will tell. We've got to see some consistent numbers and guidance that when articulated is generally met and I think that that will take time to renew confidence. But that can come as quickly as that can erode and it certainly has for Boyd.
45:08 I think that they can rebuild that. It won't happen overnight. It won't happen in a quarter. >> That's good perspective though for patient investors. Stantec, another broken story, a compounder until it wasn't. It's now trading at the lowest level since 2023. Engineering and construction.
45:32 This one has been a bit of execution, a bit of AI fears, and now they've got a new CEO, so maybe some transition. Although it was an orderly transition, it wasn't like, oh, all of a sudden there's a new CEO. But talk to us about the fear versus reality on Stantec. >> Yeah, Amber, and I think that you stated it so well in terms of where Stantec was and some of the near-term pressure points in terms of the stock.
46:01 So kind of some similarities with Boyd, that Stantec really for 20 plus years has been one of those terrific growth stories, growth by acquisition. It's had a big fall from grace in the market in the last year or so. But again, we're pretty close to these management teams. We're not seeing it in the results and the numbers.
46:26 I think things still look really good. It wasn't a cheap stock at its peak and with that — and that was my point earlier with some of these other names — comes lofty expectations, and organic growth is off a little bit from where it was and maybe where some investors wanted to see it. I think that some of that would be due to the US business.
46:53 It's still solid organic growth, but a few percentage points less than I think where it'll shake out or where people wanted to see it. That's pressured it. And the AI — and this is not unique to Stantec. Like even in Canada, in the Canadian marketplace where we've got AtkinsRéalis or WSP, I think that they're kind of in the same boat.
47:17 I just decided to single out Stantec here as another one of these great businesses that we think will be just fine. And again, time will tell, but I think that it's another story where we will make a lot of money from here. >> The flywheel, as you mentioned, putting aside even the AI disruption threat because it's hard to like claw it up a building or you know what I mean? Like these are very involved projects.
47:46 But aside from that, you mentioned they were an M&A driven model, >> and then if organic growth is not where you want it to be, that's an ugly combination. So, what do you think the fix is? It sounds like organic growth you're more confident on and they don't have to get back to M&A as aggressively as they were for the story to work.
48:09 >> Yeah. And I think that it's easy for us on the outside — and we're just investors — and you expect all of these stories to just neatly and predictably do acquisitions at the pace you would like and the size and the metrics and that. And the reality is the world's much more difficult than that.
48:31 I think that historically Stantec, sometimes that'll come in fits and starts and they can be lumpy and they've got to be sharp on price and looking at opportunities. As Stantec gets bigger and bigger, the profile of the acquisitions and the opportunity set evolves as well.
48:53 So, I think that that's still going to be a big part of their future, but with these stories, some people might get a little bit disappointed if they're not seeing acquisitions exactly at their pace. And I think that the real thing though with these stories, and it's similar with Boyd, is that it's price paid and there's as much competition as ever.
49:17 There's still lots of private equity and other competitive players that I'd say in general have bid up acquisition multiples in a lot of these areas. So, we don't want to see Stantec or anybody just do acquisitions for the sake of acquisitions. They've got to make the numbers work. >> All right.
49:39 >> Well, I was going to say I want to make sure we squeeze in your third idea, which is just as spicy as the others. Thomson Reuters has been in the eye of this storm. And you could say maybe tangentially it could affect a Stantec, AI could affect a Stantec or TMX Group, but Claude in particular has come out with specific offerings that seem like they rival a Thomson Reuters, their legal software, their tax software, and it's down bad.
50:11 It's down 60%. It's been a huge drop. And you're coming in here. Tell me why, Garey. >> Well, it's — >> Glutton for punishment. >> You get a sense for kind of the thesis that I like to work off of here. So, for many years, we weren't in Thomson Reuters. I think it probably peaked at 30 times EV/EBITDA.
50:36 It wasn't until these fears surfaced and the stock started to break down that it started to make sense for us. Now, again, we started at a higher price than where it is today. So, we would have been better served to hold off a little bit, but we'll never get that timing perfect.
51:00 Roughabouts the EV/EBITDA multiple gone from 30 times to 12 or 13 times. Yeah, there could be some pressure. We know what's going on in the legal space in terms of the competitors, but again when we look across their big segments we don't think that the end is near. Now people are talking about all this terminal risk and the same people that loved it at 30 times EV/EBITDA now are calling for the end of a lot of these businesses and >> we're just on the other side of
51:38 that trade. We think it'll be just fine. And if it's not and if it grows slower or there's some threats, well, we're buying it at more than a 50% discount. So that gives us that margin of safety when we do our work. We think that we're buying Thomson at close to 50 cents on the dollar.
52:00 So if we're right, we're going to make outsized returns probably for the next decade here. And if we're wrong, we've got a big margin of safety there where we could have a slightly lesser return, but probably still a good return off of a less rosy future than someone that bought it at 30 times and had to have the world come in perfectly and still probably make barely an acceptable long-term return on equity.
52:36 >> I can't wait to talk to you in a year to see how these picks do. Maybe we'll need two years for some of these stories, but really great picks and great insight and analysis. And we'll see how it shapes up. Certainly your last round did very well. Garey, thanks so much for joining us. >> Yeah, thanks. Looking forward to it.
52:57 >> That's Garey Aitken joining us from Franklin Templeton. Don't miss our next episode. It's me and Jillian. We are doing our midyear review. How did portfolio managers do over the course of the last year? We rank them. We talk about the stocks, the best performing fund managers, the worst performing ones, the worst picks.
53:17 We do it all in our next episode before we launch into our summer series in August. We'll catch you on the next episode.