An Ernest Opinion2022-09-13T15:56:25-04:00

An Ernest Opinion is a blog written by Ernest Wong, Head, Research at Baskin Wealth Management. In it, he will provide thoughts on North American markets and companies with a focus on the business strategy and management quality. Baskin Wealth Management may or may not own these stocks and he will avoid the valuation aspect of the business and will not be providing any investment recommendations. We hope you will find it interesting.

Why we don’t invest in oil stocks

By |March 9th, 2022|

Given the current oil price environment particularly with the geopolitical issues in Russia and Ukraine, it is natural to ask questions about whether an investor should buy energy producers.

What’s wrong with COVID winners?

By |February 15th, 2022|

An interesting phenomenon about the recent bear market is that it is not uniform. The S&P 500 is down 8% since January 1, 2022, while the technology-heavy NASDAQ Composite is down 12.5% and funds focused on disruptive companies such as the ARK Innovation ETF are down well over 20%. Many “COVID winners” such as Netflix and Peloton that experienced a surge in demand due to global lockdowns have now underperformed the S&P 500 in the two years since the COVID crisis began while others such as Zoom, Shopify, and Roblox are down over 60% from their all-time highs. This is a puzzling result since there is little doubt that these companies had benefitted from COVID and are larger today than they would otherwise be.

4 thoughts on investing in a falling market

By |January 18th, 2022|

Given the sharp decline in share prices of certain sectors to start the year, particularly among shares of smaller, more speculative technology firms, it is a natural question to ask how an investor should react in such markets. This blog will explore some of my thoughts about behaving in these markets.

Costco’s e-commerce opportunity

By |October 13th, 2021|

In talking to other investors about Costco, the main question is whether Costco can still thrive in a world where Amazon and others can deliver an infinite selection of products to your house in one or two days. As this blog will discuss, e-commerce is more an opportunity than a threat for Costco and the management has cleverly designed its e-commerce strategy in a way that grows Costco’s market share without cannibalizing its core business.

Thoughts on buying Chinese stocks and our circle of competence

By |August 25th, 2021|

One of the hot topics of the day among investors is the regulatory crackdown by the Chinese government and President Xi on various industries, most notably the for-profit tutoring and technology sectors. These issues have driven the benchmark MSCI China Index, which tracks a portfolio of internationally listed Chinese equities, down 13% year to date and over 27% from the high in mid-February with shares of major technology companies such as Alibaba, Tencent, and Didi down even more.  

Thoughts on Netflix’s strategy on video games

By |July 19th, 2021|

Netflix CEO Reed Hastings famously said that Netflix competes against Fortnite more than HBO and demonstrated that on Wednesday by hiring Mike Verdu as the Vice President of Game Development. Mr. Verdu previously led Augmented Reality/Virtual Reality efforts at Facebook, and also led mobile gaming efforts at industry leaders Electronic Arts, Kabam, and Zynga.   

What’s next for Canadian banks after COVID?

By |May 31st, 2021|

Although banks now have diversified their sources of income to include major areas such as wealth management and trading, they still largely succeed or fail based on the performance of the loans they make to consumers and companies.  COVID-19 shutdowns were a big risk to the Canadian banks. People who lose their jobs cannot pay their rent, mortgages and credit card debt, and Canadian household debt was already at historically high levels.

Breaking down CN and CP’s battle for Kansas City Southern

By |April 23rd, 2021|

Canadian railroads are terrific examples of the types of businesses we like to own. They own irreplaceable assets that provide essential services, have a significant cost advantage vs trucking, and have strong pricing power. Given the low population density and reliance of the Canadian economy on resources, CN Rail and CP Rail together move about 70% of inter-city surface freight in Canada and virtually all the lumber, grain, fertilizer, and coal production. Most Canadians simply do not realize the degree to which our lives and the economy rely on the two major railroads.  

Thoughts on the Rogers acquisition of Shaw

By |March 16th, 2021|

After failing to acquire Cogeco Communications in September 2020, Rogers turned its eyes to Western Canada and announced the acquisition of Shaw Communications on Monday morning for $26 billion ($40.50 per share). Shaw’s legacy business is its wireline footprint in Western Canada with 5.1m consumer and small business subscribers in B.C, Alberta, Manitoba, and Saskatchewan. Rogers has no cable footprint in these provinces and does not directly compete with Shaw for wireline subscribers.

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