BNN - Monday, May 27, 2024 - 01:00 p.m. (ET) - Segment #7

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go ahead, please. >> Caller: hi. I just wanted to know about baytex it. Goes down every day. Thank you very much. >> Andrew: thank you. Open text. >> So I am not that familiar with open text but the caller said something here that I want to highlight which is that it goes down every day. Now if you have a stock that goes down every day and this is a high quality predictable sock you should be getting excited. You should be smiling. You should be rubbing your hands together because the low rate stock price the higher the forward rate of return assuming that this is a high quality predictable business where you think or can predict that the earnings will be higher next year or in five years or in ten years. I think this is something that many investors often don't quite understand. And it's something that for example when I am on bnn a number of the interviewers or guests will say to me oh, wow you are bringing stocks to us that are down. Yes, I am bringing you sale. Who doesn't like a sale. There is a great quote by warren buffett and he talks about how many in his household he will buy hamburgers every single day and when hamburgers are down in the buffett household they rejoice and sing hallelujah. When they are up they are in love. When you have a high quality predictable business producing earnings one that you can actually value when the stock price is down that is always things being equal an opportunity for to you either add to the position or enter the position and the forward rate of return of open text at $40 is higher than it was at 72. So focus on the business. Focus on the fundamentals of the business and the stock price second and if that stock price is down for a business that you like you should be excited. You shouldn't be calling me worried that it's down. You should be calling me excited that it's down or the question should be is this a high quality predictable business. It's down. What do you think I should do? >> Andrew: do you have a broad thought on open text gluers is it a stock on your radar, jay cnn. >> It is a stock that we have looked at in the space in canada we would much prefer enghouse or constellation software. And really constellation software is this clear market leader. You know we have a number of these tech companies in canada that will rely on acquisitions to drive their growth so in our view constellation software is the clear leader, open text has done a fairly good job I would stay they are sort of. [ audio interruption ] -- >> Andrew: okay. I -- I think we lost threw a bit at the end, sorry. Katie in vancouver. Go ahead, please. >> Caller: hi. Thank you for taking my call. I want to find out about constellation -- oh, no, sorry. I want to find out about taiwan semiconductor. It's in -- I want to know what the future prospect of it is. It's been going up quite a bit. And whether it is a good time to enter or maybe I missed the entry point. >> Andrew: thanks. >> So taiwan semiconductor is obviously involved in the semiconductor space and is based in taiwan. So we don't own it. We haven't really looked at it. The semiconductor space is also quite cyclical so the qualer should be aware of that. When we say it's cyclical this is a business where you know their earnings won't necessary will I be going up every single year for a very consistent or similar clip. They are at the mercy of let's say the overall economy or the macro economics but we see here, for example, with taiwan semiconductor that their return on equity has averaged between 22 and 30% over the last 15 years. That is a very strong return profile. The risk here I think would be some geopolitical risk and this is risk that is very difficult to quantify with them being based in taiwan. We all know what's -- the risk going on in that region. I know that for example berkshire hathaway had a position in taiwan semiconductor that they subsequently owned -- sold. Because they found a similarly high quality business that wasn't in an area where there was heightened geopolitical risk. So you know I -- you know. When a stock has gone parabolic. I am just looking at the chart that andy has put up here, that should usually be cause for at least a pause or to have a reassessment. At 26 times earnings they are not incredibly expensive but I would look to add to this position in the low 20s so you know 20 to 30% below where it is right now should gift investor a strong forward rate of return

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