BNN - Monday, May 27, 2024 - 01:00 p.m. (ET) - Segment #6

>>> We have greg in toronto. Go ahead, greg, please. >> Caller: hello andré and jason. Good afternoon. Jason, I wanted to ask you about your thoughts about the uranium sector. Denison mines specifically. This renaissance towards uranium that seems to be in the future and how one capitalizes on it including how the [indiscernible] is focusing on it if you are involved in that area. I'll hang up and listen to your call. Thank you very much. >> So resources. Because I mean that's what uranium is is a resource. It's an interesting question and it's an interesting call. This is an area that we are not involved with because quite frankly it requires too much predicting. For example if you held uranium in 2010 you probably started to feel pretty good about things and they have the fukushima crisis in japan knocked it down and here we are, what are we 11 years later, it's sort of taken that it long for uranium to get back. I understand why people get excited about uranium but I have been at this for 20 to 30 years now and there's been periods where people get quite excited about uranium because of course nuclear power is clean, cheap, safe, wonderful energy and that's a whole other conversation that I don't really want to wade in to today. I'll also note that when you are. [ audio interruption ] the support meaning that the earnings aren't there I think that could be quite -- [ audio interruption ] >> Andrew: we are having trouble with our. >> Return on invested capital hasn't been strong. >> Andrew: we were having a bit of trouble there with the connection. Just give us that last remark again if you would, jason, please. >> I was just saying that the returns on invested cancer research in the space have not yet been -- have not yet indicated to us that the current sort of hyperexcitement around uranium warrants necessarily the advance that we have seen in the price of uranium or these uranium participation units or denison mines or what have you. So there is a lot of expectation built into the recent action. >> Andrew: okay. It sounds like not going head over heels into uranium.

>>> Don in edmonton, go ahead, please. >> Caller: hi, andrew. The don here. We talk quite a bit on twitter. Okay. My question is with nvidia. I am playing nvidia using this nvidia bboe canada and it's a fractioned play and I want to know what your guest's thoughts on this and what is the strategy. They are going to split 10 for 1. Will my stock split? >> Andrew: go ahead, jason. Nvidia. >> So I mean the word-play in the guest's question indicates to me that he is probably looking at this as a very short-term decision or move. I have no comments on the short-term nature of this type of company. I will say that the company does meet a number of the criteria we look for. It is founder-run founder-owned. Their returns on invested capital have been quite strong. However, the valuation is 62 times earnings would leave us on the sidelines. We also accept the fact that we may miss these types of massive moves in some of these companies simply because they don't have the history of those strong returns on invested capital and this is a very, very fast-moving space. So yeah, they will split the shares 10 for 1. I think we would probably be a nice time for us to remind everybody that that doesn't do anything for the stock. So the company itself if it's worth what I am seeing here $2.6 trillion when it gets split 10 for 1 they will still be worth $2.6 trillion. He there will be ten more shares outstanding at 1/10 of the price it. Could give some sort of short-term boost. We are with long-term focused at hill s we are looking at the long-term for our shareholders. Or should I say our investors. And nvidia is I guess one that we have missed but we are okay with that because it simply wouldn't have come across our screen with the tragectory that it's had. >> Andrew: thanks for the question.

>>> We have an email from jacob. What metrics do you use to identify growth stocks that will outperform? >> I have been on bnn for five years. This may be the best question I have had during that time frame. It speaks to the type much process we are involved won a day to day basis when we are looking to invest in securities on behalf of our clients here at hillside. The number one metric that we look at to be able to help us understand and find a security that is likely to outperform is the -- I talk about it all the time is the return on invested capital and there is a number of return metrics we can look at. There is return on invested capital or riot. Return on equity, return on assets and we can get into the minutia on the differences between them all. Let's say you look at a spattering of those return met ring. We will just pick return on equity for argument's sake. Average return on equity in the market is around 8%. Standard economic theory will say that if you have a business where the return on equity is 20% or 30% competitors will come in and eat the lunch such that the returns for all of the businesses in that space will go down to the cost of capital which is around 6, 7, 8%. However, in practice when we look at some of these companies it be constellation software, alimentation couch-tard, nike, meta, even nvidia, google, et cetera, et cetera, and we see these businesses that have been able to produce a return on invested capital of 20% for years and nike's case or alimentation couch-tard's case we are talking about decades. What that tells us is that there is a competitor edge or there is a moat around that business that is preventing other businesses from coming in and reducing the return on invested capital. So that would be the number one metric. I don't know if you want me to keep going here, andy, but this is an excellent question and businesses that are set to outperform will have a history of producing strong returns on invested capital. >> Andrew: is there a big difference between invested capital and return on equity? Can you generalize? >> Not really. So return on equity can be [indiscernible] by levering up your balance sheet. Return on assets is the single most return important metric that you can look at because it can't be increased by debt. So return on assets I would say is probably the prime airy one you want to look at. Of course there are others such as the insider ownership. We won't generally touch a business unless the insider or founder so the operators people that are running the business own a sizeable portion of that business or at least have a sizeable portion of their net worth in the business because we want them to be behaving and acting like owners like shareholders like us so that there is a very nice alignment of interest on that front, too. >> Andrew: we will take a quick break and when we come back and we will have a look at jason's past picks when we return. [ ] Gold is soaring and copper demand is at all time highs. American Pacific Mining is seizing the moment by partnering with world class miners to unlock America's next big copper gold strike, fully funded with a $14 million exploration blitz this summer and nominated for multiple industry awards, including six by s&p global. American Pacific Mining fueling America's mission for homegrown metals. In today's environment. Canadians want more from their investments. Invico Diversified Income Fund has provided investors with portfolio diversification and downside protection for over a decade. What could you gain by investing in one of Canada's leading alternative income funds? Invico, reach for the future. Canada has one of the best backyards in the world. Don't let allergies prevent you from breathing it all in. (Sneeze, birds squawking) Get relief fast. Reactine acts fast to relieve allergy symptoms and lasts 24 hours. So, it's a financial approach that just flows together. Kinda like this: Investments in the front... Insurance in the back. We do both. [phone ringing] ( ) To give your teeth a dentist clean feeling... start with a round brush head... add power... and you've got Oral-B. Round cleans better by surrounding each tooth... to remove 100% more plaque... for that just-left-the-dentist clean feeling. Oral-B Harvest Equal Weight Global Utilities Enhanced Income etf. The world's top utility companies in one etf, global Utilities and steady monthly income. Harvest ETFs, income happens here. Tlf is Canada's top performing active etf. With a ten year history of strong returns. Invest in the world's leading tech companies all in one etf.

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