FidelityConnects: Dividend investing in the second quarter

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<b>Subtitles are AI Generated</b>

 

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Hello, and welcome to Fidelity Connects.

 

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I'm Pamela Ritchie. Markets are whipsawing almost daily these days between

 

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risk on and risk off.

 

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In an environment like this a balanced income generating portfolio

 

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can help keep the ship steady providing flexibility, resilience

 

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and cash flow while markets swing.

 

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Our guest today says dividend investing hasn't been caught up in the AI

 

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hype as much he's focusing instead on physical assets, infrastructure

 

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and businesses that simply can't be disintermediated.

 

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How do you position for uncertainty, stay invested without chasing

 

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risk, and still get paid along the way?

 

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Where are the most durable opportunities at this point?

 

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I'm happy to say that joining us here today for a look at where he is finding

 

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durable opportunities is portfolio manager, Don Newman.

 

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Don manages several Fidelity funds including Dividend Fund and

 

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Divided Plus Fund.

 

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Warm welcome to you, Don. Nice to see you again.

 

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How are you doing?

 

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Hi Pamela, nice to see you. I'm doing great.

 

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Just to let you know this conversation with you and between the

 

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two of us will feature live French, Mandarin and also Cantonese audio

 

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interpretation so join us in any language you choose there.

 

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Let's begin with, if you don't mind, is it as easy as saying

 

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that old, so-called old economy

 

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companies in fact are kind of the winners at this point and the

 

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newer economy companies are really at a disrupted

 

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risk that's high at this point.

 

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It's not necessarily a blanket statement but certainly there are some.

 

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The dividend space has been a good space this year.

 

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What I try to do is good companies at reasonable prices

 

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that maintain and grow their dividends over time and do it with a little bit

 

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less volatility, has been sort of a good strategy,

 

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at least this year. The idea is the space I

 

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operate in has a lot of companies that have been around a long time, physical

 

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assets, very hard for AI to come in and

 

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sort of disintermediate it. You've seen it this year, technology, software,

 

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has been a really difficult place to be, good

 

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business, repeatable structure, the problem is can AI come

 

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and write all your code and someone can do it themselves?

 

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That's a big question that's going on.

 

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There hasn't been too much of that that sort of impacted the dividend

 

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space.

 

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We're going from decent earnings growth,

 

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good growth in cash flows, good growth in income, and

 

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we haven't had the volatility that maybe some of the rest of the market has

 

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been. It's been a nice place to focus on this year.

 

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We've been talking a lot ...

 

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moments like this remind everyone that diversification is really important, and

 

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if they had forgotten this is a reminder, these types of

 

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moments. Just speak to that a little bit because it's not like this is suddenly

 

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a balanced fund where you get everything, however, the diversification

 

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out of, perhaps, more risky growth is right here.

 

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I think the idea of just focusing on businesses that

 

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have been around for a really long time, that generate really good cash flow,

 

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where AI can't come in. There's physical assets, the

 

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fact that you can write code or target

 

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people in marketing or do things faster than a human, doesn't really matter

 

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when you're dealing with giant physical assets that take a decade to build

 

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and can never be replaced.

 

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Apart from that piece of it, the AI piece of it, we're also watching

 

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some shifts within the world, the geopolitical stage.

 

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We don't need to go into all of them but it seems that there is a really

 

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interesting premium on hard asset companies.

 

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The world needs to have some version of energy security, it appears,

 

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is front burner stuff.

 

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Right now we're seeing consolidation in the energy sector in Canada.

 

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Just speak to that because that's coming and those are typically dividend

 

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producers.

 

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We look at sort of the Canadian energy patch here.

 

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If there was ever a really good example

 

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of the value of secure assets in the ground that are actually accessible

 

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in geopolitically safe areas we're seeing it right now.

 

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You and I were talking about the show, we saw an example yesterday

 

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where Shell came back into Canada. They had been leaving.

 

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I think this is a pretty big statement, wow, the

 

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rest of the world is a little bit maybe shakier, more unpredictable

 

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than we used to have thought.

 

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We've got 20% of the world's oil right now.

 

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There's plenty of oil in the world, we just can't get it out, 20%

 

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of the world's oil is not shipping through the Strait of Hormuz right now.

 

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Oil sitting in Canada, or natural gas sitting in Canada, in

 

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a geopolitically safe place where you've

 

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got security of what you're buying, you can actually get it out of the country,

 

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you're sure about what you own, 10 years

 

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from now you probably still own that asset, and, frankly, there's

 

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not a bomb being dropped on it, is a pretty good place

 

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or pretty interesting place.

 

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There's probably a premium that starts to get put into the market for

 

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those type of assets.

 

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You are seeing that for a lot of different commodities in the

 

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world whether it be copper, oil, just

 

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any kind of secure material that

 

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the world is actually going to need for the longer term, it's not as acceptable

 

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now to be sourcing that from parts of the world that may not be as

 

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stable as what we have here in Canada.

 

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As an example take this to the style of companies that

 

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are steady, that are dividend producers, that have

 

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generally a steady outlook.

 

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I'll ask you this question, are some of the companies that you've mentioned,

 

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that type of involved with materials, energy and so on, do

 

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you kind of have to buckle up because they're going to reprice 'cause they're

 

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going to be worth more.

 

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Yeah. Years ago no one would

 

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touch a pipeline company because everything's going sort of ESG.

 

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We're not going to need the oil, everyone's going to be driving an EV.

 

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Administration changes, the views in the world changes, adoption may not

 

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be as fast, and geez, we need it for transportation.

 

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People are still driving

 

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gas-fired cars.

 

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Then along behold comes the sort of AI phenomenon

 

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where just power is paramount and

 

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you can't do anything. The amount of power that these companies are requiring

 

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is something that no one would have seen 5, 10 years ago.

 

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Suddenly someone that has a natural gas pipeline, this is really, really

 

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valuable stuff and there is massive demand for

 

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that. Frankly, you can't build any of this stuff, and we were talking a little

 

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bit about it, it's all how much do you got and then where can we build?

 

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The economics of building some of this new stuff, people are willing to pay a

 

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lot and the returns are really good.

 

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Suddenly, these went from what people viewed as no-growth businesses to really,

 

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really critical infrastructure businesses that, by the way, generate really

 

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good cash flow and really good dividends.

 

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Good places to be in the world that we operate now and they're also

 

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in geographically safe places.

 

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When you watch this unfolding will your

 

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companies, I mean, do you expect them to all grow their dividends, for

 

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instance? I mean I know there's a lot of calculations within that but is that

 

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a conclusion that makes sense?

 

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What I've always said for years when I talk to companies is,

 

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listen, when we're talking about the way you're growing cash flow, and

 

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dividends are wonderful because it's not like a bond, every year if a company

 

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grows its earnings 8% to 10% or something like that, what I like to see is

 

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you tell me you've got your payout ratio, the amount of your earnings you're

 

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paying out is dividends, in a really good spot that's sustainable, and

 

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if you're growing your earnings 10% let's see a 10% growth

 

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in your dividend.

 

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The percentage of what you're paying out stays the same but you're doing this

 

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wonderful thing. The value of your stock should go up because your earnings are

 

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going up, and if we capitalize it at a reasonable sort of multiple that

 

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stays the the same, we're growing earnings 10%, hopefully, the

 

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value of stock goes up 10%, but we're also paying out a nice dividend

 

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and that earning stream is actually growing at 10% as well.

 

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It's wonderful for someone who's trying to fight inflation,

 

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which we may have a little sort of

 

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perk up in, and getting more cash flow every year

 

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as opposed to a bond from good dividend paying stocks does wonders

 

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for the income coming in to you and your ability to go and fill up that gas

 

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tank which was more expensive, go to the grocery store which was more expense,

 

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pay your rent.

 

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It's this nice sort of hedge against inflation that

 

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sort of helps you maintain your purchasing power over a long period of time.

 

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Potentially, these companies have a lot of growth yet to come because they are

 

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going to expand on some level, or at least be worth more.

 

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It's a lot of sort of old economy companies that,

 

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as I said, people thought maybe didn't grow as much, suddenly,

 

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the demand for a lot of their service is going up and the growth

 

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outlook looks a lot better than it perhaps has in decades.

 

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What about the risk outlook? What are the risks?

 

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It's lower risk, these are traditionally lower risk companies.

 

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There does seem to be, I mean, maybe an argument to be made that AI has a lot

 

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of demands, it appears, on energy, on data, on things that need to be built by

 

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some of these companies, or at least have supply chains feed into them, what

 

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if that collapses a little bit? Do you look at that risk or...?

 

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Yeah, sure. What you've got to be careful of, and this is what we certainly

 

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have our analysts doing,

 

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to give you an example, everyone wants to build a data centre

 

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so where is the data centre located?

 

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If you're in some incredible hub next to

 

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critical infrastructure that is going to be needed forever, that's

 

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great, that's probably worth a lot.

 

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If you're in the middle of absolutely nowhere and someone's trying to build

 

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something and if the demand falls off

 

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this is the first thing that gets cut and there's no actual need for

 

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it other than some hyperscaler or

 

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some company decided, oh, I need the power and let's put it out in the middle

 

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of nowhere, that is going to be a stranded asset that no one needs.

 

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We want to make sure the quality of the

 

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contracts that people are signing, the counterparties they're signing it with,

 

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are these businesses going to be around in 30 years or is this something that's

 

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sort of a flash in the pan and it's like, oh, we're going to build a

 

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multi-billion dollar facility and the company we're doing it with, by

 

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the, way generates no cash flow and this doesn't really make a lot of sense.

 

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This is where the analysis comes in.

 

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Those are the risks, and that's where you analyze.

 

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We use an example like a utility, what I say is like

 

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I'm not really sure ... and this is the nice thing about ...

 

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sort of the way I think about dividend investing right now, I am not really

 

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sure who's going to win the whole

 

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AI trade. Who's fast, who's going to have the best model, that seems to switch

 

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from sort of week to week or month to month.

 

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You don't need to know.

 

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I'm not really concerned. Someone will win.

 

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The demand is going to improve.

 

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I think we've talked about utilities in the United States will say it's a

 

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factor [indecipherable], this is the best demand they've seen since the advent

 

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of the personal air conditioner.

 

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But it's not all AI.

 

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It's also companies resourcing.

 

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The world has gone from [indecipherable] to use the term collaborative

 

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to a little more insular.

 

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Things are being reshored back into the

 

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US, maybe into Canada as well. You can rely less on your global supply

 

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chains so more stuff comes back into sort of

 

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where it's being sold.

 

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That's good for demand, that's for industrial demand, that's good for

 

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infrastructure, that's good for warehousing.

 

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A lot of different things where play in

 

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is in the dividend space.

 

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And everyone gets paid to wait and grow, ultimately,

 

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their investments, generally speaking, as other things get sorted out,

 

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like who AI winners and losers might be on that side of things.

 

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This is sort of a really interesting place and, arguably, safer.

 

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Yeah, and it's nice when we've got, as you mentioned,

 

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risk-on, risk-off toggling.

 

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Dividends provide this nice baseline of income that stocks go

 

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up, stocks go down on a different basis but you're being paid that

 

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income and you know as long as we're doing our analysis right you know that

 

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income is coming into you quarterly, there's some companies that pay monthly,

 

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but mostly sort of on a quarterly basis you've got that baseline of income,

 

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that stability that is there no

 

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matter what the market's doing and you have the ability to kind of wait things

 

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out. Things get a little bit choppier, fine.

 

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I've got a baseline of income that's coming in and over time, as long as the

 

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companies are doing well, that income will grow and you should get good capital

 

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appreciation as well.

 

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When you look at various inflationary moments, and this might

 

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be a transitory one with the oil price but it certainly affects everyone and

 

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everyone is feeling it, it doesn't mean it's collapsing everyone but its felt,

 

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how do you sort of take this into your stride at this point?

 

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I'm sort of looking a little bit longer term. Certainly anyone, you and I both,

 

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if you fill up your car with gas

 

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it doesn't feel good right now, it's expensive.

 

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Certainly groceries have gone up a lot.

 

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My sort of feel is the

 

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oil price will have a temporary effect on things and it will have an effect on

 

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supply supply chains. Companies are now coming out and saying, okay, the extra

 

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oil price is going to cost us so much more in sort of packaging or whatever the

 

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case may be.

 

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It should be transitory. The oil prices should not over

 

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a long period of time.

 

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Hopefully, cooler heads prevail, but you're not sure, and we

 

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get the Strait of Hormuz open, the oil price will come down a little bit.

 

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That should be transitory. On the flip side of that, sort of looking longer

 

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term, we mentioned sort of AI.

 

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AI is going to be disinflationary.

 

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Productivity is going to go up.

 

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That means people can do more with less and that's generally sort of

 

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disinflationary. My view is

 

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you probably have inflation temporary picks up a little

 

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bit but over the long term there's sort of a balancing of

 

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forces that probably keep inflation at more reasonable levels.

 

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You have access via the amazing connections

 

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that Fidelity provides to sit with management, obviously, and to make decisions

 

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along with knowing what their teams are up to.

 

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Just curious how ... we talk a lot about innovators and hyperscalers

 

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and some household names in terms of the CEOs and that kind

 

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of thing, how is management, generally speaking, at the companies that you

 

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invest in, just different?

 

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They have a different mindset because they have to.

 

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It is a little bit of a different meeting when we have hundreds

 

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of companies, if not thousands of meetings a year we do with

 

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our management teams across the world.

 

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What you'd see probably in a meeting for a

 

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Nasdaq company or someone that's

 

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focused more on just growing the business, their meetings would all be around

 

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what's your market, what's the addressable market, how fast can you

 

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grow, how fast we grow earnings, but

 

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there is no dividend kind of thing because you're using

 

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all of your capital to reinvest in a fast growing company.

 

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For meetings that I would generally sit in there's a little more of a

 

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talk about capital allocation.

 

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The company's already been around for a long time, they generate a lot of cash

 

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flow, we want to know how are you using the cash

 

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flow? How much do you need for operations, how much do you need for sort

 

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of capital improvements, CapEx, to grow the

 

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business, it's not going to be as fast as

 

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a business that started two years ago, and then what are you doing on

 

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... how are going to use the excess cash flow that you generate because you

 

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generate a lot of excess cashflow.

 

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Is it on acquisitions, what companies are available, how do you fill in the

 

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holes that you may have in your business, is it on share buybacks?

 

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Then let's talk about the dividend policy.

 

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How do we get more .... while growing your business I don't want all the money

 

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back if you can't grow.

 

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I want a growing business that can also grow its dividend.

 

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Let's talk about your dividend policy, your payout ratio.

 

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Let's talk about how your debt structure, whether that's appropriate

 

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or not, do you need to use some of the money to reduce debt or are you in great

 

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shape and you can lever up a little bit, and how

 

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you grow that dividend coming coming back to the shareholders

 

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So on that how do you view a moment ...

 

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and I'll ask you one question on interest rates, it is kind of an

 

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interest rate week so we have to ...

 

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the idea that they're low in Canada now, they've come down, the cutting has

 

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happened, we think maybe the cycle is finished, they'll probably sit at

 

[00:17:57.376]

neutral, we don't know, what does that release for company

 

[00:18:01.346]

management to do or not to do?

 

[00:18:03.048]

What is this moment? There does seem to be inflation kind of flying around in

 

[00:18:06.652]

the wind, some people think it's back, who knows?

 

[00:18:10.355]

My personal guess is that probably the central banks

 

[00:18:14.293]

are on hold for the foreseeable future.

 

[00:18:17.496]

There's enough uncertainty right now where I don't think they want to be taking

 

[00:18:20.732]

a shot one way or another that

 

[00:18:24.736]

may come back to haunt them. I think the safest thing for them, and the

 

[00:18:27.840]

smartest thing for both the Bank of Canada and the Fed, is to just say

 

[00:18:32.211]

we're on hold right now.

 

[00:18:35.180]

What's nice about that for companies is it becomes sort of

 

[00:18:39.351]

instead of having to guess, oh, geez, we're

 

[00:18:43.355]

2021, '22 and rates are in the midst of starting to go up from

 

[00:18:47.459]

below 1 to 5% or something.

 

[00:18:49.862]

You've got stability, which is really good.

 

[00:18:53.699]

You can actually make some decisions now and say, okay, well, we can pencil

 

[00:18:57.536]

this interest rate into the cost of debt or whatever we're thinking of

 

[00:19:01.640]

and go out and make decisions.

 

[00:19:05.043]

We're going to invest in this, we are going to add this much CapEx, we can

 

[00:19:08.847]

borrow this amount of money at a reasonable rate and it's not going to come

 

[00:19:12.251]

back to haunt us in 5 years when that loan rolls over or

 

[00:19:16.555]

the 5- or 10-year bond comes due.

 

[00:19:21.426]

Stability is good and if you've got stability you can make decisions, and

 

[00:19:25.631]

making decisions is generally good for business going forward.

 

[00:19:29.535]

The ability to just have sort of an amount of certainty,

 

[00:19:33.505]

ultimately. Canadians love dividends, they've always loved dividends.

 

[00:19:36.608]

I was going to ask you how much is that still

 

[00:19:40.646]

true? I mean, there are new generations of investors coming through with

 

[00:19:43.882]

different styles that have been really interesting.

 

[00:19:46.318]

Are you reintroducing dividends a lot right now because people have been

 

[00:19:50.255]

in zero interest rate situations for, you know, not

 

[00:19:54.226]

now but over the course of the last 15 years, is there a moment to reintroduce

 

[00:19:58.830]

what you do, do you find?

 

[00:20:02.868]

I find people start sort of maybe listening a little bit more when

 

[00:20:07.339]

the market sort of fluctuates a fair bit, we have a period

 

[00:20:11.510]

where maybe things haven't gone up as much, when

 

[00:20:16.848]

some new startups that are suddenly

 

[00:20:21.420]

worth $10 billion aren't worth very much anymore, valuations

 

[00:20:25.357]

come down because there's a little more uncertainty.

 

[00:20:29.795]

Going back to just basics, companies,

 

[00:20:33.999]

I've got a good dividend, I've good earnings growth,

 

[00:20:39.605]

I'm buying companies at a reasonable multiple where I'm pretty sure

 

[00:20:43.642]

I'm not going to lose a lot of money over time.

 

[00:20:46.912]

What I say is I try to buy good companies at reasonable prices that

 

[00:20:50.983]

maintain and grow dividends over time and try to do it with a

 

[00:20:54.953]

little less volatility in the overall market.

 

[00:20:57.789]

Kind of the idea is to keep people invested, keep financial advisors

 

[00:21:02.227]

from taking too many calls from their clients over a period.

 

[00:21:06.131]

Over 5, 10 years you go back and you look

 

[00:21:10.068]

and you've made a lot of money and you have done it while actually

 

[00:21:14.406]

being able to sleep at night.

 

[00:21:16.074]

For a lot of people that really, really sort of resonates, and there's

 

[00:21:20.178]

the people who like to just take shots at things and see if they can get

 

[00:21:24.283]

the multi-baggers and like the excitement.

 

[00:21:27.552]

For a good portion of the population, they

 

[00:21:31.690]

don't need the excitement. They just want to be able to sort of say I'm putting

 

[00:21:35.193]

my money in something, I think it's managed responsibly and I'm

 

[00:21:39.131]

going to look back at it in 5 or 10 years and I've done really

 

[00:21:43.335]

well and I've been able to sleep at night.

 

[00:21:46.872]

Fascinating. I really think that's fascinating.

 

[00:21:50.709]

Let's go through the sectors a little bit.

 

[00:21:53.912]

Banks are not hard assets but they are dividend pairs.

 

[00:21:57.082]

I mean, almost bond-like they used to be described as.

 

[00:22:01.453]

There's some discussion about where disruption belongs in that story.

 

[00:22:04.890]

Are they of interest to you?

 

[00:22:06.792]

Do you stay away from that sector? What do you think?

 

[00:22:08.060]

No, banks have been really good for the last number of years.

 

[00:22:11.596]

The companies took a lot of provisions very early.

 

[00:22:14.499]

We ended up where the housing has cooled off a lot but

 

[00:22:18.737]

we haven't had the...

 

[00:22:22.240]

There's no cliff, there hasn't been that cliff that they...

 

[00:22:22.874]

There was never the '24, '25, '26 idea was there's so

 

[00:22:27.012]

much rolling over, geez, there's going to be provisions everywhere, or actual

 

[00:22:31.083]

losses everywhere, and the losses have never really come in.

 

[00:22:34.486]

The companies have generally been doing a pretty good job growing

 

[00:22:38.490]

businesses. Capital markets have been good, wealth management's been good.

 

[00:22:42.394]

The company's been growing really nicely.

 

[00:22:45.297]

Now it's a case the multiples are a little higher, dividends are a little bit

 

[00:22:48.600]

lower but there's still ...

 

[00:22:50.502]

you go and listen to it, it still sounds pretty good.

 

[00:22:53.271]

Then there's the idea of, well, maybe there's an opportunity that they could

 

[00:22:56.908]

actually do some really good cost-cutting now.

 

[00:22:59.344]

It's not just by releasing heads. There's so much of

 

[00:23:03.348]

these banks that are legacy systems that have never been integrated,

 

[00:23:07.352]

you've done acquisitions over time, it's possible that they spend billions

 

[00:23:11.356]

and billions of dollars on, guess what, software every year, maybe

 

[00:23:17.329]

you never had sort of the human capital to go and replace

 

[00:23:21.466]

because it just takes too much time, too much effort, too much money.

 

[00:23:26.104]

Maybe you can come and use some AI now and rewrite some code and

 

[00:23:30.175]

take hundreds of systems that have all been patched together and make things

 

[00:23:34.146]

more efficient. People I know that work at banks are always just like,

 

[00:23:38.216]

we've got a whole bunch of systems that maybe don't

 

[00:23:42.287]

talk to each other that well or have been used over time, a bit antiquated,

 

[00:23:46.758]

maybe now is the ability to actually take that and take a whole bunch of costs

 

[00:23:50.429]

out by using some new technology and make

 

[00:23:54.366]

things more efficient and, with that more profitable.

 

[00:23:57.736]

That's good for stocks.

 

[00:23:59.438]

That's good for stocks, absolutely.

 

[00:24:01.106]

A couple of different questions here.

 

[00:24:04.209]

This is quite specific to how it fits within accounts, I might leave that

 

[00:24:08.380]

one, but could you share your thoughts on the variable

 

[00:24:12.384]

versus fixed dividend payouts in a period of fluctuating

 

[00:24:16.421]

earnings, taking a look, particularly, at commodities companies.

 

[00:24:19.591]

That's sort of one of the questions.

 

[00:24:21.560]

In general, what I'd say for most companies

 

[00:24:26.164]

I prefer the idea you have a fixed dividend that grows.

 

[00:24:30.202]

It grows with earnings.

 

[00:24:32.804]

I actually have no problem with the variable dividend

 

[00:24:37.375]

things for commodity companies.

 

[00:24:39.277]

What I like to see there is you've got basically a

 

[00:24:43.315]

base and what they will do is say, here's a base dividend and this is

 

[00:24:47.419]

what we can cover all the time.

 

[00:24:50.689]

We are generally pretty sure, unless Armageddon happens,

 

[00:24:55.093]

that at pretty much trough pricing in the commodity we can still

 

[00:24:59.030]

pay this dividend. That way they never have to cut the dividend.

 

[00:25:02.234]

Then anything over that we will pay out a

 

[00:25:06.471]

proportion of our earnings in a variable dividend.

 

[00:25:09.774]

I think it's actually a really good strategy for companies where the companies

 

[00:25:13.945]

over time will grow production, will grow earnings, but the earnings kind of

 

[00:25:17.983]

look like this because they're cyclical companies.

 

[00:25:21.820]

Cyclical companies probably shouldn't

 

[00:25:25.790]

have

 

[00:25:30.762]

... a long term steady dividend is not always the the best thing for especially

 

[00:25:34.966]

really cyclical companies.

 

[00:25:35.901]

Now, what you may be able to do if the company's improving is take

 

[00:25:40.005]

that base dividend and say, okay, well a couple years ago

 

[00:25:43.975]

we could pay $1 a share in

 

[00:25:48.146]

dividends, you know, our company has gotten bigger, our company's gotten

 

[00:25:51.049]

stronger and at that same low commodity price we can now pay $1.50

 

[00:25:55.120]

a share, and that's great, you can raise it that way.

 

[00:25:56.888]

The idea of having a fixed plus some variable that

 

[00:26:03.695]

is subject to higher commodity prices is great and hopefully, the company's

 

[00:26:06.865]

improving itself, improving its cost structure where that base dividend can

 

[00:26:10.335]

grow as well.

 

[00:26:11.136]

Okay, love that. That's fantastic.

 

[00:26:13.572]

Okay, here's another one. Traditional Canadian dividend payers are currently

 

[00:26:17.309]

looking expensive, so get your comments on that, for some of the reasons you

 

[00:26:20.912]

spoke about, where are you finding value currently?

 

[00:26:25.116]

This is the portion where

 

[00:26:29.754]

I like to sort of toggle the fund a little bit.

 

[00:26:35.527]

If defence, if banks have run a little bit, you've got some pipelines

 

[00:26:39.497]

that may have run a little bit, let's go and find things that maybe have

 

[00:26:43.602]

gone a little bit risk-off, people don't like things.

 

[00:26:47.205]

I can give an example, rails haven't worked in five years.

 

[00:26:50.542]

We've essentially been in a transport recession

 

[00:26:54.746]

for the last five years.

 

[00:26:58.116]

If you look at the stock prices, stock prices

 

[00:27:02.287]

haven't done a lot.

 

[00:27:04.122]

Start looking at companies where not a lot has happened, the

 

[00:27:08.627]

stocks haven't gone that far but they're really good businesses and a lot of

 

[00:27:12.097]

other things have gone up.

 

[00:27:14.566]

Transports has been one where the cycle's starting to improve a little bit.

 

[00:27:18.236]

We've had a couple truckers reporting. Down in the US they basically

 

[00:27:22.374]

put in a lot of regulations about you have to be English speaking, you have to

 

[00:27:25.644]

be American, a lot of the workforce has been pushed down.

 

[00:27:29.614]

Trucking rates are starting to go up.

 

[00:27:33.852]

Rails are sort of a more efficient version of trucking so some of the stuff

 

[00:27:36.755]

that comes off trucks will go on to rails.

 

[00:27:38.890]

You also have some reshoring and things like that.

 

[00:27:42.327]

There are some good things that are actually starting to happen there.

 

[00:27:45.964]

Let me ask you, we don't have a ton of time to talk about this but as a theme

 

[00:27:50.135]

you've found it really interesting to take a look at an ageing population

 

[00:27:54.105]

and their needs, ultimately.

 

[00:27:56.441]

Sorry we only have two minutes on this. Tell us about it.

 

[00:27:57.976]

I will go real quick on this. You are finally getting to a point where the

 

[00:28:01.913]

baby boomer generation is sort of hitting its late 70s and 80s.

 

[00:28:05.784]

I love sort of infrastructure type things for old people.

 

[00:28:09.688]

If you look at stocks, especially down in the US, anything related to, and I

 

[00:28:13.758]

own a bunch of them, real estate companies that have to do

 

[00:28:17.696]

with seniors housing,

 

[00:28:22.133]

with skilled nursing, with at-home care, anything

 

[00:28:26.971]

where people are hitting 80.

 

[00:28:29.274]

We had COVID so no one wanted to put their parents in any of these things

 

[00:28:33.244]

so no supply got built.

 

[00:28:34.946]

It takes a while to build supply.

 

[00:28:37.015]

Now there's this just massive demand for all these facilities because

 

[00:28:41.052]

everyone's hitting the age where they actually need the seniors' care.

 

[00:28:45.090]

We've got lack of supply and a huge amount of demand and the pricing

 

[00:28:49.194]

power is great.

 

[00:28:52.697]

It's just a secular trend that will last for the next decade,

 

[00:28:56.968]

it's just kind of starting. We've got some of those companies in Canada as

 

[00:29:00.572]

well. It's infrastructure.

 

[00:29:02.874]

AI can do nothing, you need actually people and physical assets

 

[00:29:07.145]

to take care of people and it fits really well into the

 

[00:29:11.149]

world we have right now.

 

[00:29:12.383]

It sounds like you have so many opportunities right now along

 

[00:29:16.488]

with the steady ship that you've always been at the helm of.

 

[00:29:19.791]

Steady plus toggling into companies that come on sale that are really good

 

[00:29:23.561]

businesses, and there have been a bunch of those over the last month or two, to

 

[00:29:27.766]

have a balanced portfolio where you're not all defence, you're not all offence,

 

[00:29:31.069]

you just own a bunch really great companies that we like that over time

 

[00:29:35.273]

should appreciate and pay good dividends.

 

[00:29:37.275]

Don Newman, fantastic to speak with you.

 

[00:29:39.344]

Thank you for catching us all up to what you are doing every day.

 

[00:29:42.013]

All the best.

 

[00:29:42.313]

Thanks, Pamela.

 

[00:29:43.014]

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[00:29:45.650]

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The views and opinions expressed on this podcast are those of the participants,

 

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and do not necessarily reflect those of Fidelity Investments Canada ULC or

 

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