Using a TFSA as a mere savings account is a terrible idea. Proper use of the account can create a comfortable retirement for Canadians — but you have to invest money in the account to unlock its full potential. (How does $4.7 million sound?)

Here’s how to get started investing in a TFSA for 2026.

Prefer to read? There’s a transcript below.

Nick Sciple: I’m Motley Fool Canada Senior Analyst Nick Sciple, and this is The Five-Minute Major, here to make you a smarter investor in about five minutes. Today, we’re discussing the new 2026 TFSA contribution limits and how to invest that new room. My guest today is Hidden Gems Canada Lead Advisor, Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thank you for the invite, Nick. I love the TFSA, and I’m thrilled to be talking about it today.

Nick: Happy New Year, everybody! It is officially January, which means the CRA has handed Canadian adults the new TFSA contribution room. What do investors need to know about these new numbers, and more importantly, what is the biggest mistake you see people making when they invest in their TFSA?

Jim: Oh, boy, do I have some thoughts, Nick. The TFSA, of course, stands for Tax-Free Savings Account, and there are two important things to take away from the name there. First of all, the tax-free’s the good part.

What is the TFSA contribution limit for 2026?

But we’re gonna talk about the problem in a minute. But, okay, so you’re getting $7,000 of contribution room. You’re not getting free money here, but it’s money that you can contribute and save for the future for your retirement years, or for your future just in general, if you don’t particularly want to retire, or whatever.

This started back in, I think, 2009, 2010, with I think it was $5,000 of contribution room, and it was indexed to inflation, moving in $500 increments.

So if inflation was 2% a year, 3% a year, you know, about after four or five years, it went to $5,500, then it was $6,000, it was briefly $10,000; that’s a whole political thing.

Last year was $7,000, this year’s gonna be $7,000. Probably, if inflation follows its current path, it’s gonna be about $7,500 next year. So you’ve got all of this contribution, and it’s cumulative.

If you’ve not filled your prior contribution room, get on that, okay?

Biggest mistake Canadians make with TFSA accounts

The second thing is a disturbing number of Canadians do not use the TFSA.

And the TFSA is the most powerful wealth-building tool that you have in your Canadian savings arsenal, yes? Above the RRSP, okay?

Especially if you’re a younger Canadian, TFSA should be absolute your top priority. Now, the problem with the name: I hate the name “Tax-Free Savings Account.” This is not a savings account. This is a wealth-building tool, and I hate when I see [that] roughly, just over half of Canadians have TFSAs. And the ones that have it, about half of them use it as a savings account, so they throw it in money, they make it in cash, might earn 2 or 3%, they throw it in GICs. It’s terrible! No! No! This is a wealth creation tool, okay?

How much money can you make in a TFSA over time?

So, steady contributions. And for example, if you were 20 years old today, and you started today, and let’s assume inflation for the next four decades, 40 years, is 2%. And let’s assume you can earn roughly 10%, which is roughly the stock market’s return since the modern-day annualized return. If you start at age 20, go to age 60, maximize your contribution every year. Figure out what you need to do, or figure out what you need to contribute every pay period. Again, the contribution room goes up in $500 increments following CPI. So let’s assume CPI is 2%, you fill out your contribution total, you make 10% returns. Over a 40-year period, you will have contributed about $450,500.

The value of that account in 40 years will be just shy of $4.7 million. Okay? Tax-free. You will owe nothing to the government.

That is why I hate the term “savings account.” This is not a savings account.

Maximize your contribution, invest it, never touch it.

You will have a wonderful retirement.

Where to invest in a TFSA in 2026

Nick: Okay, Jim, so maximize your contribution. This is a wealth-building vehicle. You shouldn’t be holding cash in your TFSA, so that leads us to another question. What should you be holding? What would you be investing this new TFSA room, this new capital, into your TFSA portfolio in 2026? What investments would you be looking at?

Jim: I mean, obviously, it’s personal, everyone’s gonna be different, okay? But I’m gonna say two things. One, first, No. 1, the biggest risk with a TFSA is not contributing, not making use of the incredible tool. The second-biggest risk is not taking enough risk. This is not a savings account, don’t put it in GICs, don’t keep it in cash.

I’m just gonna take this approach for a new investor, or my son. My son is 21 years old, we’ve been contributing since he was 18. Okay, it’s his money, not mine.

If you do nothing else — and I would encourage you to do nothing else before you have $100,000 in this account — but if you do nothing else, contribute to index-hugging ETFs. So, get one that tracks the Canadian market, so that’s the TSX60. (TSX: XIU), I believe, is the one that tracks it. That’s XIU on the Toronto Stock Exchange.

As well, you want to track the S&P 500. There’s a host of S&P 500 tracking tools. And then maybe if you even want to add in a little Pan-Asian, Pan-European, index as well, I believe XEF (TSX: XEF) is the one on the TSX that iShares offers. And if you did a 25%, 50%, 25% allocation across those three, and then never touch it, keep on adding every year when a new contribution room comes up, DRIP all your dividends — that means reinvest your dividends automatically, you can get your broker to do that for you — you will have an obscene amount of tax-free money, tax-free capital, by the time you hit 60, [if you’re] using this as a wealth creation, retirement tool, and not a savings account.

Nick: Yeah, it’s great advice. This is a wealth creation tool. Participate, and try to participate in the stock market if you can. That’s all our time for this edition of the Five-Minute Major. If you want more stock and investing ideas from us, click on the info icon in the upper right-hand corner. Until then, thanks for joining us, and Fool on!

The post TFSA 2026: The $109,000 Opportunity and How Canadians Should Invest It appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in iShares Core Msci Eafe Imi Index ETF and iShares S&p/tsx 60 Index ETF. Fool contributor Nicholas Sciple has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Shopify (TSX:SHOP) reported third-quarter 2025 results, which surpassed guidance across the board — yet the stock sold off.

Motley Fool lead advisor Jim Gillies explains what’s going on with Shopify stock and whether it’s a buy now. Prefer to read? There’s a transcript below.

Is Shopify a good stock to buy?

Nick Sciple: I’m Motley Fool Canada Senior Analyst Nick Sciple, and this is The Five-Minute Major, here to make you a smarter investor in about five minutes. Today, we’re discussing Shopify’s third-quarter 2025 earnings and what’s behind the stock’s reaction. My guest today is Hidden Gems Canada lead advisor Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thanks for inviting me, Nick.

Nick: Shopify just reported their third-quarter 2025 earnings results. They surpassed their guidance across the board, yet the stock sold off. Last I checked, it was down about 4% in middle of the day here on Tuesday, November 4. What is going on with Shopify today?

Shopify’s third-quarter 2025 earnings

Jim: This was a great quarter, in my opinion. You had gross merchandise volume, GMV, up 32%. You had revenue also up 32%.

Gratifying to see as a long-term owner of Shopify, that didn’t really make a lot of cash in the early days. I think going back to 2016 when we bought it, early 2016, now is clocking in at free cash flow margin of 18%.

These revenue and GMV growth — if you look over the past couple years, quarter to quarter — performances, frankly, in the last eight quarters. I thought it was an excellent quarter, just in general. As you mentioned, they surpassed guidance on every front.

There’s not much more to say. I mean, their guidance for going forward was also excellent. Originally guidance for this quarter was revenue in the mid-20% range up. Like I said, it came in at 32%. They do tend to be a little sandbaggy, I think, if that’s even a word. But, you know, honestly, it was pretty good.

Why is Shopify stock falling?

The only reason I can see for selling the stock off is just it is a richly valued stock. There’s about 21 times sales, 22 times sales coming in. I generally hate the sales multiple, but it’s what we’re going to use for these high-growth names.

But, my take on it is high revenue growth forgives a lot of sins, okay? And, Stock Advisor Canada and the now-defunct Pro Canada, we both bought this in Q1 of 2016, I believe, and at about $4 or $5 Canadian per share.

And we’ve maintained those positions, or at least Stock Advisor has. And the rationale at the time was high valuation, but revenue growth could go on forever and ever in investing terms.

High revenue growth forgives a lot of sins. So, for example, if they hit their Q4 guidance, which is for low to mid-20% range, so let’s say they do 22%, okay?

If they do 22% revenue growth over Q4 of 2024, the incremental revenue that is produced by that growth rate will be roughly 3 times the trailing 12 months’ revenue at the time we recommended it in Stock Advisor Canada.

And that, to me, is remarkable, and they’re not slowing down. If anything, they’re speeding up.

Nick: Jim, you raise an important point, right? When you see a company come out there, beat expectations really across the board, and the stock trade down, often the answer is the stock market is overvalued, or potentially the valuation of the stock got a little bit ahead of what the company was able to deliver. But if you look over the long pull of the history of Shopify’s presence on the public market, it’s been a highly valued company that’s been able to continue to exceed the market’s expectations year over year, if maybe not every single quarter.

Is Shopify stock overvalued today?

As you think about Shopify today, how are you thinking about the company’s valuation from here and its ability to potentially keep raising the bar?

Jim: I think the valuation remains rich.

We literally said in the original recommendations in Stock Advisor Canada and Pro Canada back in 2016, we said, look, it’s gonna hit an air pocket at some point. And by the way, it has, several times. I think it fell almost 70% from November 2021 through 2022.

These things are richly valued, but as I said, revenue growth forgives a lot of sins. So a company like this, it’s going to perpetually look rich until the growth slows, and if anything, growth has been accelerating in recent quarters.

So even at 21 times sales, which, again, I hate the sales multiple, for valuation purposes, but I think it’s very, illustrative here.

This will continue to be richly valued, but as long as they’re posting that growth, I think it’s warranted. There was a little throwaway comment in the press release about global iconic brands taking on more and more space in the Shopify universe. And they specifically called out Estee Lauder. But even in my own day-to-day life, we’ve seen it move away from these small and medium-sized businesses that we originally were attracted to for the story nine years ago. Like, my local junior hockey team, their merch sales are all through Shopify. Netflix Canada, last I checked, was using Shopify, to do their order-taking and what have you. The Globe and Mail, Canada’s national newsletter, guess who they use? Again, Shopify.

And this is just, you know, intrinsic to Canadians in Ontario. The Ontario online cannabis sales, so it’s all regulated by the government. If you don’t want to go to one of the 35 pot stores in your local neighbourhood, you can order online. Guess who powers that? Of course, it’s Shopify, and you can go on and on and on.

That is something that I think is really, really valuable, and kind of not really appreciated in the Shopify story, even today. It’s kind of become the choice of who you’re going to go to to provide your online sales.

It’s starting to look to me like Shopify’s kind of the first choice, and maybe the last choice for a lot of people, so I think that’s excellent.

Nick: Shopify looks like the type of company that can continue to become the default when it comes to online commerce. It’s important to remember this is a stock that was up more than 60% coming into this earnings report. So while the stock may be taking a little bit of a tumble post-earnings over the long pull, it’s been a great performer, and the longer your time horizon is, the less important these quarter-to-quarter fluctuations become. It’s not the two-day, two-week, two-month moves that matter, it’s the two-year, two-decade moves that really make the big money for you as an investor.

That’s all the time we have for this edition of the Five-Minute Major. If you want some more stock ideas from us, maybe the next Shopify, you can click the icon in the upper right corner of your screen. Thank you for joining us for this edition of the Five-Minute Major, and we’ll see you next time.

The post Is Shopify Stock a Buy After Crushing Its Q3 Guidance? appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

By investing in Rogers Communications (TSX:RCI.B), you can become a (very small) part owner of the Toronto Blue Jays. But should you? Motley Fool advisor Jim Gillies walks you through it. Prefer to read? There’s a transcript below.

Nick Sciple: I’m Motley Fool Canada Senior Analyst Nick Sciple, and this is “The Five-Minute Major,” here to make you a smarter investor in about five minutes. Today, we’re discussing the Blue Jays’ return to the World Series for the first time since 1993 and how investors can actually own a piece of Canada’s baseball team.

My guest today is Hidden Gems Canada Lead Advisor, Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thank you, Nick. As a lifetime Blue Jays fan, very pumped about this.

Nick: I’m pretty sure all of Canada knows the Blue Jays are back in the World Series for the first time since Joe Carter’s historic walk-off World Series-winning home run, but fewer folks probably know that the Blue Jays are owned by Canadian telecom giant Rogers. What’s Rogers’s relationship to the Blue Jays and to Canada’s pro sports ecosystem as a whole?

Jim: Rogers IS Canada’s pro sports ecosystem, or at least a good chunk of it. Certainly in Toronto, they pretty much own everything. They own the assets, the teams. Rogers, of course, owns the Blue Jays, who play in the Rogers center, formerly known as the Sky Dome.

All 162 games a year are broadcast on SportsNet, sort of Canada’s version of ESPN, which is owned by Rogers. Rogers, of course, sells the advertising for the game in stadium, or in stadiums, as well as over the air. So they own the team, they own the stadiums, they own the media, distribution, advertising.

And if you’re watching this over your high-speed Internet connection, either on your mobile devices or in your home, that’s probably also provided by Rogers, the telecommunications guys. They’re the largest player in Ontario, one of the largest players in Canada.

The thing is, Nick, it’s not just the Blue Jays.

Rodgers now also owns a controlling stake, 75%, in Maple Leaf Sports and Entertainment, MLSE, which owns the Toronto Maple Leafs (the most valuable team in the NHL), the 2019 champion Toronto Raptors, the Toronto FC soccer team, the Toronto Argonauts of the Canadian Football League, as well as the Leafs’ AHL (the minor league affiliate) the Toronto Marlies. It also owns the Scotiabank Arena, which is the home of the Leafs and the Raptors; and BMO Field, home of TFC and the Argos, and the Coca-Cola Coliseum, home of the Marlies. Most of these are all available, at least in part, via SportsNet, and those that aren’t on SportsNet are sold off to other carriers, so, for example, the Leafs will sell off some of the rights to competing network TSN.

Because Rodgers has the media rights for the NHL through 2037, 2038. And I could keep going, but basically the gist is, they kind of own Toronto sports, and they own most of Canadian sports as well.

Nick: That’s right, if you think about the crown gems, the Infinity Stones of Canadian sports, Rogers has completed the gauntlet. Investors, rightfully though, have historically focused on the telecom side of the business, which is much bigger than the sports and media side of the company. However, the sports side of the business is growing. All signs point to the company buying an additional 10% or 20% stake in MLSE in 2026, next year, when they have the option to do so. Why might now be an interesting time to consider looking at the sports side of the Rodgers portfolio?

Jim: So, investing in Rogers, which is a publicly traded company on the TSX, it’s RCI.B is the ticker, investing in Rogers for the sports portfolio is kind of problematic, because even everything I’ve just described to you, and the breadth of all of it is all in what they call the media division.

The media division accounts for between 12 and 14% of total revenue for Rodgers. Meaning, even if the Jays have an amazing year — and they did — and even if they win the World Series — they might — (murderer’s row for starting pitching for the Dodgers and some guy named Otani, notwithstanding) and they managed to boost revenues substantially, it’s still likely the media division only caps out at about one-sixth of total revenue.

And that’s in an aberration year where the Jays finished first and are going to the World Series. A year ago, they finished last, and revenues, we’ll say, were lower.

You didn’t have a difficult time picking up a ticket, I’ll put it that way.

But you also live in a world where the value of sports franchises is only going up. Live sports are valuable, right? It’s one of the few things we can watch in real time, rather than just having to Netflix it in three to six months, or whatever.

And so, hidden asset values aren’t always reflected. You can own these things. And Rogers has been a terrible investment for a decade. It’s gone nowhere for a decade; the market’s more than doubled. So, bluntly, I have no interest in Rogers, the company, even with all their riches of the sports and the communication.

But that said, there are rumblings that Rogers is contemplating spinning out the media division on its own as a publicly traded entity, similar to MSG, which is the holding company that owns the New York Rangers and Knicks.

Those rumblings are openly speculating on a spin-out or an IPO of a minority stake of the media division that, if fully valued, would raise substantial capital for Rogers. I would be REALLY interested in owning that

if they do complete that, and there’s probably no better time. You want to strike where the iron is hot? No better time than after maybe a World Series victory, and before the Leafs do their latest, whatever choke job they’re going to do. So, I’d be looking for this in the next few months, to be honest with you, and I’d be very interested in it.

Nick: As sports fans, it’s time to keep our eyes on the Jays in the World Series, and as business and investors, maybe time to keep an eye on what Rodgers is looking to do with its sports portfolio looking into the future. Jim, thanks for joining us for this edition of “The Five-Minute Major.” For our viewers, want more stock ideas from us? Click on the icon in the upper right of our corner. Thanks for joining us, and we’ll see you next time.

Jim: Thank you.

The post Blue Jays World Series: I’m Not Buying This Go-Nowhere Stock (but I Would LOVE to Buy This Instead) appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has no position in any of the stocks mentioned. The Motley Fool recommends Rogers Communications. The Motley Fool has a disclosure policy.

The market has been bonkers these past few weeks. Learn how to approach the tariff-driven volatility with Hidden Gems Canada lead advisor Jim Gillies. He also shares a few stocks to consider for a TFSA right now.

Prefer to read? There’s a transcript below.

Transcript

Nick Sciple: I’m Motley Fool Canada senior analyst Nick Sciple, and this is “The Five-Minute Major,” here to make you a smarter investor in about five minutes.

Today we’ll share how we’re approaching all this tariff volatility and share a couple stocks to consider for your TFSA right now. My guest today is Hidden Gems Canada lead advisor Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thanks for the invite, Nick.

Tariff news and market reaction

Nick: Volatility has been the buzzword in markets over the last week. Donald Trump’s reciprocal tariff announcement on April 2 sent the U.S. S&P 500 index down nearly 5% on Thursday and nearly 6% on Friday. Then, a week later, his announcement of a 90-day reduction in reciprocal tariffs down to 10% — although excluding Canada and Mexico and actually increasing tariffs on China — that announcement sent the index back up 9.5%. As we’re sitting here today on Thursday [April 10], the S&P 500 index is down another 3%. Global indexes also volatile all over the board. Jim, how are you responding to this volatility as an investor?

How investors can respond to volatility

Jim: Well, Nick, you know I’ve tried curling up in a fetal ball under my desk, and that doesn’t seem to have worked very well, so we’re going to skip that one way I’m responding to this.

But you know, thinking long term, saying to myself, “this too shall pass.” I’ve been fortunate enough or unfortunate, depending upon your point of view, to have been investing publicly for the Motley Fool since 2005 and privately for myself for almost a decade before that. So I’ve lived through the tech bubble and the subsequent tech wreck. I’ve lived through the global financial crisis, recommended stocks publicly during the global financial crisis, lived through Covid, lived through all the other little minor market events that always seemed problematic. The Asian currency crisis in ’98, the fall of Long-Term Capital Management in ’98, the Canadian marijuana stocks massacre that followed 2018.

There’s always something large or small, and we prefer small. But there’s always something going on in the market that looks like it’s getting wrecked out. And this is a pretty big one. It seems that the administration in the U.S. seems to favor chaos a little bit, at least for the time being. When it comes to trade and tariff negotiation that they sent, they seem to view it as a feature, not a bug.

Whether we agree with it or not is kind of irrelevant. It is the cards that we have currently dealt to us, so I am taking it slow. I am reminding myself of the long term. I’m fortunate enough that I have been steadily building cash every paycheck as well as I took a few things off in late 2024, and earlier in 2025, where I have a reasonably large cash balance.

I’m slowly deploying that. Almost glacially, if you prefer. And I’m sitting here going “I am assuming I am not investing a dollar today that I am not perfectly happy seeing where I’m investing them, seeing that it’s staying there for a minimum of five years. And beyond that I’m trying to get outside and stay physically active. Walk the dog, go for a bike ride. That’s about it.

3 stocks Canadian investors can confidently buy in a TFSA right now

Nick: Yeah, Jim, you mentioned those past economic panics. And for just about all of those, if you bought shares during that market environment, you’re sitting here today pretty happy with those purchases. You mentioned building up cash in your portfolio. For investors who do have cash to deploy today, what are some stocks that look attractive to you as long-term adds? If you’re looking to add to your TFSA account here in this market volatility.

Jim: Not a problem. I’m going to be exclusively Canadian here. First I’m going to advocate for a couple of REITs. One is SmartCentres REIT (TSX: SRU.UN). They are Walmart’s landlord in Canada.

I think people will still be shopping at SmartCentres, regardless of what’s going on with tariff mania, and whatever’s going on at Walmart, which we probably can expect the prices at Walmart to rise a little bit. But that would be SmartCentres, run by the guy who helped bring the entry of Walmart into Canada. Back in the early ’90s. Guy named Mitch Goldhar. He’s a founder, owns a lot of shares. It pays a very nice dividend, I think, north of 7% at this point.

And alongside that I’m gonna give you Slate Grocery REIT (TSX: SGR.UN), which is — it’s in the name. They are a REIT that owns grocery stores. They exclusively own grocery stores in the U.S, however. That also pays a very nice distribution, is run by good management, and should largely be at least tariff-muted. It trades in Canada, but all of their properties and their financials are in the U.S.

And I’ll give you MTY Food Group (TSX: MTY), which is the parent franchisor of about 90 different banners on both sides of the U.S. border. Very highly franchised. Lots of good cash flows, and the market hasn’t cared for about three years about this one, and, you know, I still think it reflects very good value. So there you go.

Nick: Yeah, for investors looking for companies that are going to be reliable dividend-payers, are still going to be around here in five years. Some great companies to add to your TFSA today. Jim, thanks so much for joining us for this edition of the “Five-Minute Major.” Hope to see you again soon.

Jim: Thank you.

The post 3 TFSA Stocks to Buy Now During All the Tariff Volatility appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in MTY Food Group, Slate Grocery REIT, and SmartCentres Real Estate Investment Trust. The Motley Fool has positions in and recommends MTY Food Group. The Motley Fool recommends Slate Grocery REIT and SmartCentres Real Estate Investment Trust. The Motley Fool has a disclosure policy.

Justin Trudeau has resigned as Canada’s prime minister. How will the political shakeup affect the investing landscape in the country?

In this five-minute video, Motley Fool Canada advisor Jim Gillies imagines how things could change for business and investing in the years ahead.

Prefer to read? There’s a transcript below.

Transcript

Nick Sciple: I’m Motley Fool Canada senior analyst Nick Sciple, and this is “The Five-Minute Major,” here to make you a smarter investor in about five minutes.

Today, we’re discussing Justin Trudeau’s resignation as head of the Liberal Party and its implications for Canadian investors.

My guest today is Hidden Gems Canada lead advisor Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thanks for the invite, Nick.

Nick: Without further ado, on January 6, Justin Trudeau announced his resignation as Liberal Party leader after over a decade as the leader of the party and nearly as long as prime minister. Parliament will be suspended until March 24 while the party works to select its new leader. Jim, this shakeup comes amid a shaky Canadian economy and some economic threats from U.S. President-elect Donald Trump. What does this change in leadership in Canada mean for investors?

What Trudeau’s resignation as prime minister means for investors

Jim: I’m going to try to stay as non-political as possible and probably fail anyway. And I’m also going to have the conceit that I’m going to presume I know the outcome. And so just remember that reality — while it might be similar to what I suggest — is absolutely going to unfold differently.

Bluntly, the Liberal Party of Canada, it doesn’t matter who they pick as the next leader, they’re cooked. They are going to lose the next election.

Probably badly. In Canada, while we have more than two main parties, there’s really only one alternative.

Canada tends to flip about every decade between the Liberal Party of Canada or the Conservative Party.

There’s going to be, in my opinion, an incoming Conservative government headed by Prime Minister Pierre Poilievre.

Now, that next government is going to do a number of things that I think actually, in spite of the, shall we say, slightly negative setup you gave me,

I think is actually going to be beneficial. I’m choosing to be optimistic here.

So I think they are going to be cutting taxes, specifically the carbon tax. Mr. Poilievre — sorry, I can never pronounce his name.

He likes to have a catchphrase and a branding. He’s calling it a “carbon tax election.”

Don’t know that that rolls off the tongue, but whatever. I think there’s going to be some addressing of recent hikes in capital gains, which have not actually gone through Parliament, which is now closed, as you say. I think those will quietly go away. And I think there’s probably going to be a lot of other taxes being lowered as well as parts of the civil service are going to be culled.

Future of Canada’s economy

I think an incoming election is going to be focused heavily on productivity. So the GDP per capita in Canada has badly lagged that of the U.S. over the past decade.

Poilievre has signaled that they are going to be looking to increase exports of resources. We have what the world wants: oil and gas, uranium, potash.

And he’s actually responded to the assertions that we are ripping off your fine nation with a trade deficit.

He’s saying, yeah, we are being ripped off. We’re selling to you at below market rates.

He’s actually kind of signaled that if you want to throw tariffs and you don’t want our stuff, that’s fine.

We’re going to be doubling down on infrastructure and extra capital spending. And I think that’s a good thing.

I think overall, Poilievre is going to make an environment, or seek to make an environment at least, where capital has a friendlier destination in Canada than it’s had over the past decade.

Stocks that could benefit

Nick: So you think about a change in administration, a natural question is who benefits? You talked about maybe some potential policy changes. As an investor looking for a destination for their capital, do you see any potential winners and losers from Canada’s change in political leadership among investable businesses?

Jim: I think it’s going to be resource companies for the win. Oil and gas I think will do well. So pick your favorite. Canadian Natural Resources (TSX:CNQ). I know you like. Tourmaline (TSX:TOU).

Topaz (TSX:TPZ), International Petroleum (TSX:IPCO). I think uranium is going to do very well. So Cameco (TSX:CCO). I think potash again, as I mentioned, so there’s your Nutrien (TSX:NTR).

I think as well, the banks will probably, in a more capitalistic friendly nation, the Canadian banks will probably benefit. And I think Canada is going to be more open for business, more pro-business than the current government has been. And again, I’m trying to stay fairly apolitical here.

As some people will, of course. Like or dislike that, that’s fine. I’m just trying to swim in the waters that I understand.

How politics and policies affect investment process

Nick: Jim, maybe one last question for you. More broadly, obviously eyes train towards the political environment when you have a changeover in administration. When you think long term, though, how important is policy analysis, the political environment to your investment process?

Jim: In truth, it’s not really. We get the governments we get. You know, I am but one vote in the broad democratic system.

And I am largely powerless to influence the outcome. So I just essentially, as I said, I have to swim in the water I’m given and I have to deal with the environment that exists when I make my recommendations.

Nick: Well, Jim, it’s time to go swimming. We’re out of time for this edition of “The Five-Minute Major.” Thanks so much for joining us and we’ll see you next time.

The post Trudeau Is Out as PM: What It All Means for Investing in Canada appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in International Petroleum and Topaz Energy. The Motley Fool recommends Cameco, Canadian Natural Resources, International Petroleum, Nutrien, Topaz Energy, and Tourmaline Oil. The Motley Fool has a disclosure policy.

CI Financial (TSX:CIX) stock zoomed on the news that the company will be taken private by Mubadala Capital, an asset manager based in Abu Dhabi.

Will the deal actually go through, or might it face government scrutiny? Motley Fool Hidden Gems Canada advisor Jim Gillies shares his take.

Prefer to read? There’s a transcript below.

Transcript

Nicholas Sciple: I’m Motley Fool Canada senior analyst Nick Sciple, and this is the “Five-Minute Major,” here to make you a smarter investor in about five minutes.

Today we’re discussing CI Financial’s CAD$12.1 billion enterprise value deal to go private. My guest today is Hidden Gems Canada lead advisor, Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thanks for the invite and the discussion, Nick.

Nick: Jim, we’ve got a big deal to discuss today. On Monday, November 25, Canadian wealth management giant CI Financial announced it had agreed to go private at $32 per share in an all-cash deal to be acquired by Abu Dhabi-based Mubadala Capital. Jim, you’ve been following CI Financial for some time. What did you make of the deal?

Jim Gillies: Yeah, I’ve been following for a while. I’ve owned it for two decades on and off myself and recommended in a couple of Foolish newsletters.

I was unsurprised that something happened, and yet surprised that it was this definitive. What I’d actually been expecting is, over the past few years, CI has been really diligently and somewhat aggressively, frankly, building up a U.S. wealth management arm that they call Corient.

In fact, about a year and a half ago — a year and four months ago — the same Abu Dhabi-based investors were at least partially involved with CI taking on an investment in the U.S. wealth management business called Corient. They took in a billion dollar U.S. stake, in part funded by the Abu Dhabi investment authority, as well as Bain Capital, the state of Wisconsin (for some reason, anyway, that was a little odd). But Abu Dhabi was invested. It was involved there. At the time, you’d take a billion-dollar investment for a 20% stake in a sub area of the business.

It was a little weird because the entire market cap of CI at the time was about CAD$2.6 billion. The enterprise value — so cash or the market cap plus net debt — was CAD$5.7 billion. And here was an investment in Corien that valued just Corian at US$ 5 billion. So this was one reason why we had it in a couple services.

What I was expecting to come down the pipe in the next couple of years was the the U.S. IPO of Corien.

That may, in fact, happen in the next couple years.

But I was not expecting that the Abu Dhabi investors, Mubadala Capital, would move to buy the whole thing. That did genuinely surprise me.

Nick: Yeah, Jim, this is the biggest investment I can remember of a Middle East investor in Canada. Any chance that impacts closing the deal? Given that this entire Canadian business is being taken private, or, on the other hand, do you think we could see more of these deals of large Middle East investment companies becoming involved in the Canadian market?

Jim: Well, I’m not sure of Middle Eastern, but I’m going to go just general foreign takeovers, or maybe foreign takeovers that aren’t U.S. companies.

But you know, I look back to 2010; Australian giant BHP Billiton was trying to take over Potash Corp. of Canada, which had previously been the largest company in Canada.

The government of the day blocked it. Said it wouldn’t be a net benefit to the country. And why, that’s interesting to me today is:

Yes, I think this deal could fall through, but it won’t be because the people involved somehow don’t want it to be. I mean, the insiders are rolling some equity. The chairman, Bill Holland, is rolling some equity. Everybody’s praising the detail of the deal in the press release today.

One of the subheadings in the deal press release made me pause, and this comes ahead of any of the transaction details or the board recommendation. There is a section about a third or even a quarter of the way through the press release. The title is “Benefits to Canada.”

This, to me, sounds like the people involved here are expecting the Canadian government to take a look at this as a potential foreign takeover similar to BHP proposing to take over Potash and going, “No.” I think they are worried that the Canadian government might prevent this. And so they’re trying to get out ahead and not detail the potential benefits to shareholders, but benefits to the country. And they talk about maintaining leadership, maintaining jobs, maintaining headquarters, and most importantly maintaining CI’s philanthropic support of charitable organizations across Canada. I thought that was interesting, and yes, I think it could signal that they are at least worried the deal will fall through.

Nick: And we’ll see where things go from here. This may not be the last episode in this transaction, but in the near term, shares of CI Financial are up significantly today. So it’s certainly a happy day for shareholders. Jim, thanks for joining us for this edition of the “Five-Minute Major.” Hope folks will join us again next time.

Jim: Thank you.

The post CI Financial Wants to Go Private: What Investors Need to Know appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in CI Financial. The Motley Fool recommends CI Financial. The Motley Fool has a disclosure policy.

Brookfield Asset Management (TSX:BAM) subsidiary Oaktree Capital is now involved in Italian soccer. How did this happen, and what does it mean for Brookfield?

In this five-minute video, Motley Fool Canada analysts break it all down. (Prefer to read? There’s a transcript below.)

Transcript

I’m Motley Fool Canada senior analyst Nick Sciple, and this is the “Five-Minute Major,” here to make you a smarter investor in about five minutes. Today we’re discussing Brookfield subsidiary Oaktree Capital getting involved in Italian soccer. My guest today is Hidden Gems Canada lead advisor, Jim Gillies. Jim, thanks for joining me.

Jim Gillies: Thanks for the invite, Nick.

Nick Sciple: Excited to to be here with you. We’ve got a fun story today. As I mentioned off the top, Brookfield subsidiary Oaktree Capital. Brookfield owns just under two-thirds of Oaktree Capital stock. It took control of renowned Italian soccer club Inter Milan. Jim, how does this company find itself tangled up with soccer? We’ve got hydro dams in South America; now we’ve got soccer clubs in Italy.

Brookfield’s acquisition of Oaktree Capital

Jim Gillies: Well, Brookfield acquired a majority stake, 62% of Howard Marks’s Oaktree in, I believe, May of 2019. So right there — 62% — they do have majority stake, but they’ve largely allowed Oaktree to kind of run as it was being run. So it’s more of an exit strategy for the folks at Oaktree. Starting in 2022, Brookfield was allowed to buy shares of departing or retiring members of Oaktree, so it’s likely that they own more than 62%. Now, we have no idea what the number is. Sure, it’s buried in some of some of Brookfield’s filings, but I’m not gonna go looking for it there. But there is a plan as they retire, as they liquidate their stakes, Brookfield is the buyer. The earliest that Brookfield could own 100% of Oaktree is 2029. We’re about halfway there from the original deal. So you know, it’s somewhere between 62% and 100% is what they own. That’s how Brookfield got involved in owning an Italian
premier soccer club. It’s kind of fun, actually.

What the asset means for the futures of Oaktree and Brookfield

Nick Sciple: Oaktree specializes in distressed debt. The Chinese owners of the company found themselves in hot water, and the distressed debt-holders ended up owning the club. Now, today, Jim, what do you make of the long-term prospects for this investment that Oaktree now has in a controlling stake of Inter Milan?

Jim Gillies: This is like the famous saying, “Too much leverage in too short a time horizon is a fuse.” I believe it’s Tom Gaynor from Markel who said that. That’s basically what happened here. They took on a 275 million Euro loan from Oaktree in 2021 to fund payroll and operations, and they did it where the interest essentially accrued. So they weren’t even paying interest. They couldn’t bend the cash flow for that. So the natural thing happened when you take on distressed financing. They couldn’t finance, they couldn’t refinance, they couldn’t do anything with it. So Oaktree wins, and some people call this a “loan-to-own” strategy. I think it’s pretty great, and we know that across all kinds of sports, whether the NFL, Major League Baseball, the NHL, premier soccer, European soccer, these are incredibly valuable assets. People are paying record prices for them pretty much across the sporting spectrum.

So frankly, I think that’s pretty good deal for Oaktree, and they got it by being basically a lender of last resort. I think it’s pretty good in the context of Brookfield overall and Oaktree overall. It’s actually pretty small potatoes, which sounds kinda weird. But given the billions of dollars of assets you’ve already alluded to that Brookfield owns a wide spectrum of, you know real assets and hard assets, this is relatively small. But it’s still a very distinctive asset. It’s an asset that you really can’t replicate. I can’t go start a rival club in Milan. There’s already one there, AC Milan, I suppose. But there won’t be a third team coming in here, just like there won’t be a fourth team in the New York area for the NHL. There won’t be a new Major League Baseball franchise popping up in Columbus, Ohio, anytime soon. These are very distinct, unique, largely protected assets. And now Brookfield/Oaktree owns pretty a good one.

How long will this last?

Nick Sciple: Yeah, they own them for now. We’ll see how long that remains on their books! I don’t think Brookfield or Oaktree, for that matter, want to get involved in the pro sports ownership business for the long term. Leave that to John Malone and Liberty Media. But it’s certainly an interesting story and one we will continue to follow. That’s all the time we have for this edition of the “Five-Minute Major.” Thank you, everyone, for joining us, and we’ll see you next time.

The post GOOAAL! How Brookfield Scored Soccer Club Inter Milan appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in Brookfield Asset Management. The Motley Fool recommends Brookfield Asset Management and Markel Group. The Motley Fool has a disclosure policy.

Premium content from Motley Fool Stock Advisor Canada

The Single Best Way to Invest in Bank Stocks

The implosion of Silicon Valley Bank (SVB), and others, sent shockwaves through the banking industry, and the “Big Six” Canadian banks were not spared. SVB went down a third of the way through March. The average performance for the Big Six was a 10.6% drop from the start of March to their respective bottoms (between March 13 and March 24). All have since recovered somewhat, but stock prices across the group remain depressed.

Step back and understand, Fools: We’ve seen such fear before. During the 2008 Global Financial Crisis, with world banks failing right and left, the Big Six were pummeled alongside everyone else. For example, at its nadir, Bank of Montreal (TSX:BMO) had fallen so far that its dividend yield exceeded 11%! If you’d bought on that day, you’d have made a 17% annual return (assuming reinvestment of dividends) — a number that has simply smashed the annualized market return of 10.5% (as measured by the TSX Total Return Index). The others have also all outpaced the broader market by between two and 6.4 percentage points annually.

Bold statement: we’re of the mind that this isn’t the Global Financial Crisis Part II.

For starters, during 2008/2009, when the financial system was at risk of collapse, that was a crisis brought on by credit-quality concerns. The industry concerns today simply aren’t the same.  Rather, today, it’s fear that certain banks, SVB among them, locked in excellent-quality, long-term assets, paying them far too little attention at a time when cost of liabilities is soaring due to rate hikes.

Then realize that this is mostly a problem at smaller and regional U.S. banks — not at the systemically “too-big-to-fail” (TBTF) institutions. I’d argue that the Big Six in Canada are all TBTF, and that the long-term progression of the U.S. banking system is arguably towards the form that industry has here in this country (i.e., a small handful of TBTF institutions).

Plus, the banks in Canada are so large and so diverse in service offerings (traditional banking, mortgages, insurance, wealth management, investment banking, specialty asset financing, et cetera, ad nauseam), so heavily regulated, and so important to the fabric of the country (the government literally brought in a special incremental tax on deemed “windfall profits” last year to help finance their spending plans) that I am confident that this too shall pass.

In summary, I don’t think the Canadian banks are going anywhere. They’re earnings and dividend/cash flow machines, and they’re all priced very reasonably (arguably even cheaply) right now.

And now for an easy way to buy all of them:

Hamilton Enhanced Canadian Bank ETF (TSX:HCAL) is an exchange-traded fund that provides a one-stop solution for investing in all the big Canadian banks. The fund aims to perform even better than the banks in aggregate by using 25% leverage to goose its returns. That leverage was presumably getting more expensive with every interest rate hike, but those hikes are now on pause, meaning that HCAL’s cost increases too will be “on pause.”

HCAL presently yields 7.6%, paying $0.127 monthly: a number I think will be ultimately seen to be defensible and likely to grow in the future. When we consider the potential for bank multiples to normalize, there’s a very attractive total return package on offer.

The post Just Released: The 5 Top Stocks to Buy in May 2023 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in Hamilton Enhanced Canadian Bank ETF. The Motley Fool recommends Hamilton Enhanced Canadian Bank ETF. The Motley Fool has a disclosure policy.

Warren Buffett and Charlie Munger differed on the future of value investing during the Q&A session of the 2023 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) investors’ meeting.

Motley Fool advisor Jim Gillies shares his impressions and takeaways from the meeting.

Transcript

Nick Sciple: Our friend Jim Gillies attended [the Berkshire Hathaway shareholder meeting] in person this year. Annually, tens of thousands of people descend upon Omaha, Nebraska, to hear what Warren and Charlie have to say about the markets and to see lots of other people that share their very particular interest, which is investing.

So Jim, since you were there, what was the vibe of the Berkshire Hathaway meeting this year? I understand you’ve been to some of the meetings in the past as well. Maybe how does it compare to the vibe to previous meetings?

Jim Gillies: Very optimistic, very much a party, it’s very much a lot of old friends getting together, even if you’ve never met these old friends. There’s a very definite sense of community.

I was going in with a little bit of trepidation this year. Let’s be honest: Warren is 92, and I’ve thought the last few meetings he’s been slowing down. I’ve thought the last few times I’ve seen him on CNBC recently, he’s been slowing down. Charlie is 99 and starting to look at. I was concerned. To be perfectly maudlin, part of my rationale for going was this could be the last meeting of the Warren and Charlie show.

I was pleasantly surprised. I thought they were both far sharper than they’ve been the last couple of years when I’ve been watching virtually and, of course, for a couple of years when we all had to watch virtually, I thought they were sharper. I thought Charlie was especially sharp, like rapier sharp – he cut a few sacred cows there! They did slow down in the afternoon, but then again so did everyone else. I can neither confirm nor deny there was a member of the Fool contingent who may have nodded off midway through the afternoon and we had the picture.

But no, I thought it was a good meeting. If you’ve watched any of these, you’ve seen any of these over the past, the questions aren’t terribly new. There’s a lot of stuff that’s a lot of repeats from years prior and questions and answers, Buffett will always talk about, the one very common thing I think I’ve seen practically every time: What country does Buffett say you should bet on for capitalism? America. Buy America, I’m thinking back to, was it ’99 or 2000 when the article in Fortune magazine was Buy America. So that was very popular.

Buffett has also mastered the art, I think, of occasionally answering the question he wants to answer rather than the question you just asked, which I love. So when people wanted to talk about AI, Buffett talked about the risk of nuclear. He did compare AI to nuclear: Some things can’t be unintended, some things can’t be undone once they are known and understood. He mentioned AI there and then of course went on a bit of a talk about nuclear and not in the power sense, which of course, but we’re interested in, but in the, shall we say the weapons potential.

They talked a little bit about value investing. Charlie, I thought was surprisingly dour about the future for value investors. They were both well, “Value investors might have to get used to lower returns because there’s so many people doing it.” I think there was some allusion to AI. (I don’t have my notes in front of me here.)

Fools, Nick and I will be doing a session together later today for recording. It will probably go out to various places, about more digging in deep, so we don’t destroy the entire show here today talking about this, but just talking about how value investors would have to maybe accept lower returns. There’s so many people, there’s so much competition. That was Charlie’s assertion. Warren disagreed with him somewhat and I vehemently disagree with Charlie Munger and I love Charlie Munger’s impact. I might like Charlie more than Warren, frankly, because he’s just more my jam of investor. So yeah, no. I very much disagreed with that assertion. But then again, I was like, “Lower returns than what?” That would be my question, like multibaggers in 18 months? That’s difficult to do for everything including growth or whatever, but I’m not sure I’m buying it.

The post Berkshire Hathaway Annual Meeting 2023: The State of Value Investing appeared first on The Motley Fool Canada.

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Fool contributors Jim Gillies and Nick Sciple have positions in Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Premium content from Motley Fool Hidden Gems

Greetings,

To succeed in the stock market, my colleagues and I at Motley Fool Hidden Gems believe you should have a portfolio of at least 15 stocks — and commit to owning them for at least 5 years. Ideally, you’re working your way up to 25 or more stocks.

But where should you start?

Our yearly list of “Starter Stocks” is our attempt to identify the best small caps trading in the Canadian market. If you’re looking to add smaller companies that have plenty of growth potential to your portfolio, look no further than our list of a dozen standouts.

A strong candidate for most boring small cap around – Stella-Jones (TSX:SJ) – makers of fine railway ties and utilities poles – has long followed its own path, while market interest has waxed and waned.

Looking forward, we expect it to continue what it’s long been doing.  Railway tie demand is reasonably consistent, as North American operators upgrade and maintain their networks (indeed, most of Stella’s business comes from replacement work.) A similar dynamic exists for utility poles, although such sales are usually via multi-year contracts in response to public tenders.  It’s a simple business with slow organic growth, with that growth goosed by an intelligent acquisition strategy/history, run by competent capital allocators who stick to their niche.

In a nutshell, Stella, with its entrenched business, generates a goodly sum of cash. It then capably allocates this cash in the service of shareholder via growth-driving acquisitions, dividends (which it typically raises every year), share buybacks, and debt repayment (taking out any leverage used in those aforementioned acquisitions).  It’s a boring business that, over the long term, has ably outpaced the market.

Stella had a pretty good 2022 – up about 22% assuming reinvestment of dividends, but really, it’s only back to where it was in late 2015 when investors bid up Stella’s valuation to 29 times earnings and nearly 20 times EBITDA.

Since then, even as the business performance has been excellent (revenue has grown at more than 11% annualized; earnings have outpaced revenue at an 11.5% annual clip, and this is while Stella’s leverage ratio has dropped/improved by 15%) the valuation multiples awarded by the market have more than halved to about 12.6 times earnings and 9 times EBITDA today.

This makes little sense to us.  And we’re pretty sure that similar multiple compression isn’t in the cards over the next few years (for one thing, it would necessitate that Stella then trade below 6 times earnings and around 4 times EBITDA – which isn’t going to happen) – particularly given the business stability, ability to raise prices, and reasonable growth in the business over time.

Stella is a small-cap Starter Stock you can buy and then let quietly go about its boring business!

The post Small-Cap Investors: Our Favourite 12 Stocks for 2023 [PREMIUM PICKS] appeared first on The Motley Fool Canada.

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Fool contributor Jim Gillies has positions in Stella-Jones. The Motley Fool recommends Stella-Jones. The Motley Fool has a disclosure policy.