KeyStone’s Stock Talk Show, Episode 198.

We are happy to be back with you this week on Brennan’s Day of love – in his month of love. In our Your Stock Our Take segment, Ryan answers a listener question on Aritzia Inc. (ATZ:TSX), a company which clients should be very familiar with as it has been our top Canadian retail recommendation since 2019 and performed very well. A fashion-forward innovative targeting women aged 15-45, Aritzia operates over 100 stores across Canada and the U.S., in addition to an established eCommerce platform. A listener asks if the recent pullback makes it attractive. In the wake of what was an entertaining Super Bowl this past weekend, Brennan takes a look some strange investor projections based on the outcome of the big game. Brennan will also touch on the Effective Dividend Yield of a stock – answering a listener question. Aaron Dunn will answer a listener question on the inverse relationship of bond prices to bond yields and how that can impact investing in various bond products. Finally, In our Star & Dog segment, Brett ranks Lyft Inc. (LYFT:NASDAQ), as his Dog after the second-largest ride-sharing service provider in the U.S. and Canada, which saw its share price collapse 36% last Friday after reporting poor quarterly numbers. Brett’s Star of the week is one of our Top Ranked US stocks, Microsoft Corporation (MSFT:NASDAQ) – the giant has jumped over 13% YTD – Brett will let you know why.


Aritzia Inc. (ATZ:TSX)

Price: $42.67

Market Cap: $4.70 Billion

Clients know Aritizia well as it was recommended in our Canadian Growth Stock Research in January or 2019 at $16.80 – since then, in a tough time for retail, the stock has gained 154%

Founded in 1984, is a long-term growth-oriented innovative design house and fashion retailer of exclusive brands targeted primarily toward women aged 15–45. The company is positioned between affordable luxury and fast fashion, and its loyal customer base cites the design, quality of fabrics, and construction of Aritzia’s offering as key differentiators. Aritzia operates over 100 stores across Canada and the U.S., in addition to an established eCommerce platform.


  • Aritzia modestly lowered its FY 2023 financial outlook, implying lower Q4 guidance than the consensus. Despite annual revenue guidance increasing ~6%, earnings will come in below initial expectations due to an unfavourable outlook for its gross margin and SG&A.
  • Aritzia historically generates solid free cash flow and should self- fund rapid growth in revenues/operating income with a relatively clean balance sheet.
  • Long term, in a tough retail space, ATZ should deliver the above-average top and bottom-line growth potential with forecast ~15 earnings CAGR driven by: organic unit growth, expansions/relocations, and increasing eCommerce penetration.


Recent Financials


Both during and subsequent to the pandemic shutdown, Aritzia consistently and considerably

outperformed most North American retail peers and saw its share price jump to the mid $50 range

before recently pulling back following the company’s Q3 FY 2023 results. An elevated inventory position,

modest lowering of FY 2023 guidance, and the lowering of consensus estimates had a negative impact

on the near-term share price with the company’s share recently closing in the $48 range, we maintained our HOLD rating on the stock in our latest client update. With the stock now in the $42.50 range

A near-term cautionary note – inventory increased to >$500 million in Q3 FY 2023 (up ~187% y/y). This was partly due to management’s strategy to satisfy ongoing demand by increasing order lead times. However, as supply-chain constraints eased, this led to spring/summer merchandise arriving early as well. The resulting stress on the company’s distribution centers caused cost inefficiencies in the quarter that should persist to a degree through the first half of 2024. As such, and while we continue to expect demand to exceed peer comparables heading into a potential recession, we remain cautious near term on the stock.

Long term, in a tough retail space, ATZ should deliver the above- average top and bottom-line growth potential with forecast ~15 earnings CAGR driven by: organic unit growth, expansions/ relocations, and increasing eCommerce penetration.

In Super Bowl fashion, I thought that I would bring up this post from Yahoo Finance’s Instagram, which states: “Investors should hope the Philadelphia Eagles crush the Kansas City Chiefs if they want to see stocks go up… As historically the S&P 500 has outsized gains when an NFC (National Football Conference) team wins, and returns are even higher when the game is a blowout regardless of which team wins.”

Considering the Kansas City Chiefs, an AFC team, won the Super Bowl on Sunday by only a narrow margin of one field goal – does it mean we should expect the market to perform poorly?

Of course not…..

but it reminded me of the Peter Lynch book that I am reading when he says that in hindsight, “studying history and philosophy was much better preparation for the stock market than, say, studying statistics. Investing in stocks is an art, not a science, and people who’ve been trained to rigidly quantify everything have a big dis-advantage.”

He uses an example of how centuries past when people heard a rooster crow, they decided that it was the crowing that caused the sunrise. And Peter goes on to reference this to Wall Street, saying that “experts confuse cause and effect in offering some reason why the stock market goes up” and relates directly to this post, as he uses “a certain conference winning the super bowl” as one of the various nonsense indicators.

Now, it may be fun to contemplate that a football game can somehow predict stock market returns, but to the Intelligent Investor, an article like this is just noise. The key is to focus on what you know – buying an array of quality businesses.

We have referenced Effective Dividend Yield a few times on the podcast, but I received a question from a listener asking us to break down what the Effective Dividend Yield of a stock is, and how an investor would calculate their own Effective dividend yield on a stock in their portfolio. 

Now this will be review for most podcast listeners, but first we need to describe what the current dividend yield on a stock is and how to calculate it. So the current dividend yield on a stock is what percentage return in the form of cash dividends an investor would receive when purchasing a dividend yielding stock at the current price (and we usually quantify dividend yields in annual terms for comparison purposes). So, using a real-world example on Dynacor, the current dividend yield on the business is 3.9% because the stock currently trades at $3.04, and pays a monthly dividend of $0.01 cent. So considering Dynacor is expected to pay us $0.12 cents in dividends over the next year, the dividend yield on Dynacor is the $0.12/$3.04 = 3.94%

The Effective dividend yield on the other hand is the percentage return in the form of cash dividends an investor would receive based on the initial purchase price that they paid. So this is the defining difference, where normal or current dividend yields are based off of the current share price, the effective yield is based off of the price we actually purchased the stock for.

And the effective dividend yield becomes ever more important to focus on for dividend growth stocks, as the price one pays for the stock never changes, but the dividend increases, amplifying your effective dividend yield earned.

For example, I personally purchased Dynacor at $1.80 on July 2019 when it paid a current dividend yield of 2.2%. But since then the company has increased the annual dividend from $0.04 per share to $0.12 cents per share. So rather than calculating the $0.12 cents divided by the current market price. I would simply take the current dividend divided by the actual price that I paid for the share of stock to get my effective yield.

And thus, if we take $0.12/$1.80, my effective yield that I earn on Dynacor every year is about 6.7%. Much higher than the dividend yield of 2.2% when I initially purchased the stock.


Price per ShareAnnual Dividend per ShareYield
  DNG’s Current Dividend Yield (Feb 2023)$3.04$0.123.94%
My personal portfolio:
  DNG’s Current Dividend Yield (July 2019)$1.80$0.042.22%
  My Effective Yield on DNG (Feb 2023)$1.80$0.126.67%


Dog of the Week – LYFT

The Dog of the Week is LYFT Inc. symbol L-Y-F-T on the NASDAQ. Lyft is the second-largest ride-sharing service provider in the U.S. and Canada, connecting riders and drivers over the Lyft app.

Lyft shares collapsed on Friday the 10th, from the previous day’s close of $16.22 to only $10.31 a 36% drop by the end of regular trading hours, and as of the time of recording on Monday the stock has been relatively flat, so there has been no quick reversal.

So, why did the shares collapse overnight? Well, the company had earnings, where it posted revenue growth of 21% to 1.2 billion and the highest in the company’s history. The company still had a negative adjusted EBITDA of $248 million but that was better than what they had previously guided for.

So far so good, the problem is the future guidance, like I said before the company had $1.2 billion in revenue and has historically been growing it quarterly, but the company is now guiding for revenue of only $975 million, a substantial setback. This immediately causes effectively all analyst forecasts to substantially decrease as growth is lower or at least more volatile as well as a lower baseline, ultimately lowering the claimed fair value of the company.

This is effectively the risk being realized when you are valuing a company purely off of revenue growth with the hope of a shift to profitability in the future. If the revenue shrinks or does not continue to grow revenue it collapses the price.

In summary, guidance is extremely impactful and growth-dependent concept stocks have significant risk embedded in them, and LYFT realized this risk making it our Dog of the Week!

Star of the Week – MSFT

The Star of the is Microsoft symbol M-S-F-T on the NASDAQ. Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite, but also has operations in cloud computing and AI or artificial intelligence.

The stock had a rough 2022, but 2023 has been positive, the stock is up over 13% year-to-date at the intra-day price of $272.

Microsoft has benefited from a broad recovery in the tech sector, but on the company level Microsoft has benefitted from the surge in interest in AI, specifically chatGPT and Dall-E. Microsoft has had an ongoing partnership with OpenAI the creator of chatGPT and Dall-E since 2019 and recently extended its partnership with a multi-year multi-billion dollar investment, although Microsoft hasn’t gone into the specifics of the deal, sources have cited a $10 billion dollar investment.

Microsoft might finally get you to Bing it after over a decade, over Googling, as it is integrating ChatGPT into its search engine. As well, the company is integrating ChatGPT in its Azure services.

Additionally, Microsoft reported its fiscal Q2 2023 in January which was a mixed bag with mixed reactions from the market. The bearish argument is generally weakened short-term growth should lower valuations, but ultimately the stock price pushed past the bear’s arguments for the time being, favouring the long-term bullish outlook.

In summary, the company has had a poor price performance in 2022 but has since had heightened interest due to AI, while weathering mixed perceptions of earnings.


Google Trend ChatGPT


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