OM DENNE EPISODE
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What do you do when a stock you own drops 26% in a single day? For long-term investors, moments like these can be the ultimate test of conviction.
In this episode of the Long Term Investing Podcast, Barry Schwartz, President and Chief Investment Officer at Baskin Wealth Management, and Ernest Wong, Head of Research and Portfolio Manager, break down the sudden plunge in Fair Isaac (FICO), what changed for the business, and why they’re resisting the urge to make a knee-jerk decision. They discuss how to determine whether a falling stock represents a broken investment thesis—or simply a new challenge for a strong business. They also look back at lessons from Netflix (NFLX), TFI International (TFII.TO) and Moody’s (MCO), where sharp selloffs didn’t necessarily tell investors what would happen to the businesses over the long term.
Barry and Ernest also tackle rising interest rates in Canada and the U.S., why chasing higher yields in U.S. fixed income can introduce unexpected currency risk for Canadian investors, and why they prefer keeping bond maturities relatively short.
Finally, they make the case for Costco (COST). From cheaper gas and growing membership benefits to e-commerce, delivery and new stores, Barry and Ernest explain why they believe Costco’s flywheel continues to strengthen—and why they think the company deserves its premium valuation.
Plus, why sometimes the hardest—and smartest—thing a long-term investor can do is nothing.
Timestamps
00:00 Intro
00:54 The three topics: FICO, interest rates, and Costco
02:48 FICO’s 26% drop: what happened?
03:41 Why investors shouldn’t react too quickly
04:34 Netflix and TFI: lessons from sharp selloffs
06:33 How US agency mortgages work
07:33 Credit scores and mortgage pricing
08:27 FICO vs. VantageScore: what’s changing?
11:10 Why mortgage lenders may favor VantageScore
11:56 The risk of weaker underwriting
13:22 How much FICO market share is priced in?
14:22 FICO’s other revenue streams and FICO 10T
15:28 FICO’s profitability and cash flow
16:25 Moody’s: a regulatory-fear comparison
17:54 Diversification and managing stock risk
18:34 FICO’s growth outlook over the next 3–5 years
20:25 Interest rates, inflation, and fixed income
22:29 The currency risk of chasing US bond yields
24:30 Why short-duration bonds can help in rising-rate markets
25:57 Costco’s earnings and business strength
27:07 Costco gas and membership value
28:42 Costco’s membership flywheel
29:02 Store growth and expansion potential
30:06 Why Costco can gain share in volatile times
31:05 Costco same-day delivery
32:31 Is delivery incremental or cannibalistic?
33:44 Why Costco commands a premium valuation
35:53 Closing thoughts
Links
DISCLAIMERS
This podcast is for informational purposes only and any forecast on the economy, markets or individual securities should not be viewed as investment advice, a recommendation or an offer or solicitation to buy or sell any securities. Clients of Baskin Wealth Management and the speakers on this podcast may own shares of the companies discussed. Information on this podcast is current as of the time of production and is subject to change. If you have any questions or would like to subscribe to these podcasts, visit our website at baskinwealth.com.
