KeyStone’s Stock Talk YouTube Show Episode 1 and Podcast Episode 171
This week – we come to air with the sounds of Video Killed the radio star playing loudly in our heads. We are making the transition from audio to video – moving from a strict podcast to a YouTube show with interactive video, screen sharing and more and we can’t wait to expand on this format.
This week’s show kicks off with a bang as Aaron debates Brennan in a no holds barred analyst showdown. The company in the crosshairs is Algoma Steel (ASTL:TSX) an integrated steel producer in North America with raw steel production capacity of 2.8 million tons per year. Aaron argues the Bull Case and Brennan tries to wrestle him to the ground with the Bear Case. Ryan will sit in as judge jury and executioner.
Ryan will give you 6 things you need to know about the TFSA or Tax Free Savings Account including why it is not for the rich, what you can put into it and the contribution limits.
Brett will handle our Star and Dog of the week. The Dog of the week is Context Logic (WISH: NASDAQ) which has seen its share price drop 51% in 2022. The company’s e-Commerce platform, allows third parties to list products to sell to customers who purchase through its visual-based mobile app. The Star of the week is Viemed Healthcare Inc. (VMD:TSX) and should be no secret to KeyStone clients having been a recommendation over the past 4 years since it traded in the $3.85 range – today the stock trades in the $10.00 range. Viemed, which provides in-home durable medical equipment and post-acute respiratory healthcare services in the United States, has seen its share price jump 38.32% over the last month and 60.38% since the April BUY recommendation.
Welcome Aaron, Brennan, and Brett!
Some of the things we have planned include company interviews with stocks we are looking at or in coverage, the best of FinTwit – funny things and informative items from twitter in the week, profiles on great investors and their philosophies and debating them. Including Buffet, Templton and even recent darlings such as Cathy Wood. We will be doing many more debates and if you have any suggestions – keep them coming – we can answer your mailbag questions on strategies and North American stocks on a weekly basis.
6 Things to Know About a TFSA
- They are not just for the rich!
A TFSA or Tax Free Savings Account is an account in which Canadian residents 18 years and older can save or invest (using after tax dollars). Income earned on contributions is not taxed. The TFSA account-holder may withdraw money from the account at any time, free of taxes. And despite what this guy said, not sure about the new hair – they are not just for the rich!
In fact, in 2015, when the annual contribution limit was rolled back by Trudeau from $10,000 to $5,500.
- More than 2.9 million TFSA holders – 27.5 per cent of the total – had total income of less than $25,000 when the numbers were crunched in 2013.
- 6 per cent – reported income between $25,000 and $50,000.
- So more than half the TFSA account holders in Canada have incomes of less than $50,000.
- That is not the RICH!
Do you think you think sheltering $6,000 annually for the ultra rich even moves the needle – it is not even a rounding error. But for lower income and middle class Canadians – encouraging savings and growth on $6,000 annually is significant.
This rollback was a tax-grab and hurt the middle-class contrary to they way it was sold in that election.
- What can you put in a TFSA – almost anything!
In most cases, anything that is allowed in an RRSP can be put into a TFSA. This includes cash, mutual funds, ETFs, individual stocks (basically securities listed on a designated stock exchange), guaranteed investment certificates (GICs), bonds, and certain small businesses shares.
Of note, there are some investments not or not yet permitted in a TFSA:
- Securities that trade only on OTC or over-the-counter markets are not allowed within a TFSA – for me the rule is arbitrary and does not make much sense.
- Currently, there is no way to hold crypto currencies directly such as Bitcoin & Ethereum in a TFSA — that is, unless you use a Bitcoin or Ethereum exchange-traded fund (ETF).
- Other digital assets such as non-fungible tokens or NFTs because they are not listed on a designated stock exchange are not permitted – this may change!
- How much cash can I put in a TFSA?
The maximum amount you can contribute annually to your TFSA is currently $6,000. This number is called your annual TFSA contribution room.
- Fortunately, the total amount you contribute is cumulative.
- This means that any unused contribution room will be carried over from one year to the next.
Here is a quick table on the TFSA contribution limits and the total TFSA limit cumulative from the year 2009 when it was created to 2022.
If you don’t have a TFSA, you could contribute a total of $81,500 tax-free, as long as you were eligible and at least 18 years old in 2009 — the year the TFSA was created.
| Year | TFSA Annual Contribute Limit | Total TFSA Limit (Cumulative) |
| 2009 | $5,000 | $5,000 |
| 2010 | $5,000 | $10,000 |
| 2011 | $5,000 | $15,000 |
| 2012 | $5,000 | $20,000 |
| 2013 | $5,500 | $25,500 |
| 2014 | $5,500 | $31,000 |
| 2015 | $10,000 | $41,000 |
| 2016 | $5,500 | $46,500 |
| 2017 | $5,500 | $52,000 |
| 2018 | $5,500 | $57,500 |
| 2019 | $6,000 | $63,500 |
| 2020 | $6,000 | $69,500 |
| 2021 | $6,000 | $75,500 |
| 2022 | $6,000 | $81,500 |
#4) Don’t over contribute – or face the consequences.
Penalties for breaking the rules
- Over-contributions – If you contribute too much to your TFSA, you’ll pay a penalty of 1% per month on the excess amount until you remove it. If you over-contribute deliberately, you’ll pay a 100% tax on any gains or income you make on the excess amount.
#5) Access your money anytime! (hugely flexible)
Many savings accounts such as the LIRA (Locked-in retirement account) and the RRSP (Registered retirement savings plan) are savings accounts that have some penalties and conditions if you withdraw from them.
TFSA:
- You can take money out when you want, for any reason, without paying any tax.
- If you take money out, you can re-contribute it the following year, in addition to the annual maximum.
Do keep in mind is if you have reached your total contribution limit then you can’t deposit that money back in until the next year.
The money in your TFSA is yours and you are totally free to access it whenever you want. This makes the TFSA a great emergency savings account, rainy day fund, but we advocate it as a great long-term investment account as well!
#6) Will a TFSA really make a difference – the answer is YES!
Example. You make $4,000 on your investments in one year – say your tax rate is 15%. $600 saved in the TFSA account versus a regular account in one year and that compounds until you take it out.
My thoughts – if you don’t have one, get one. If you have one – max it out if you can. Contrary to what some politician will tell you, they are not devices of the rich. They are great tax free accounts for average Canadians to legally keep some dollars away from the hands of the taxman and get ahead by building wealth – USE IT!
That is all for TFSAs for today!
FOR & AGAINST
Algoma Steel (ASTL:TSX)
Current Price: $12.24
Market Cap: $1.29 Billion
Yield: 1.64%
Algoma Steel is an integrated steel producer in North America with raw steel production capacity of 2.8 million tons per year. The company has a 100-year history of operations. It was public in the past and just recently returned to the TSX with a reverse merger in October of 2020.
Algoma Steel Group Inc. (ASTL:TSX)
Against Case:
- According to The World Steel Association – Steel demand is to slow in 2022, growing at just 0.4%, down from its 2021 growth rate of 2.7%.
- The price of steel recently declined from its late 2021 highs – where Steel futures were trading at $1,900 and are down over 50% to $860 – making Algoma’s forward fundamentals not so sparkly.
- For example – For Q1-to-Q3 of Fiscal 2021 while Steel traded in the $500-$800 range, Algoma was losing up to $1.00 per share in earnings and was just generating slight Adjusted EBITDA margins of about 4%. This compares to when steel was at its peak and Adjusted EBITDA margins were up to the 40% range.
- The fundamentals of the business look solid – but even if management does everything right and the price of steel declines – the stock will likely do poorly. To quote Mr. Aaron Dunn when he discussed Algoma last “Don’t get too caught up in the current fundamentals, cash flow and valuation, as they can change quickly.”
The Dog of the week is: Context Logic, symbol W-I-S-H on the Nasdaq.
Plummetting 51% year-to-date and 93% since its IPO in December 2020, WISH is
currently trading at:
Price: $1.56
Market Cap: $1.04 billion
Description: Context Logic’s product is its WISH e-Commerce platform, which allows third parties to list products to sell to customers who purchase through its visual-based mobile app.
Driving the decline: Monthly active users have fallen from 101 million in Q1 2021 to only 27 million for Q1 2022.
Similarly, Q1 revenue fell from $772 million to only $187 million, merely 25% of the previous years. Further, the gross margin shrunk from 57% to only 34%. Ultimately, leading to a net loss of $60 million for the quarter.
WISH has started an attempted turnaround, slashing the marketing expense by over 90%, which can largely explain the collapse of users and revenue.
The only positive highlight is WISH has a cash cushion with just over a billion in cash and marketable securities. But, Wish has been burning through cash, losing a whopping $148 million in free cash flow in Q1 2022; the company is going to test how far this cash cushion can take them in the coming year as it ramps up marketing again into Q3 this year.
Moving away from the finances, the company has a poor underlying product rife with scams and fraudulent products, many e-commerce platforms face these issues, but WISH is the pinnacle of deceptive products causing the French government to ask search engine providers to remove Wish from searches. Even after the shift in CEO at the beginning of the year and a promise to fix these issues, they are still rampant.
That is the fundamental issue with WISH; the product does not have an intact value proposition for its consumers and is on borrowed time until it does,–if ever making it our Dog of the Week.
The Star of the week is: Viemed Healthcare Inc. symbol V-M-D on the TSX it should be no secret to KeyStone clients having been
Recommended initially in May 2018 at a Recommendation Price of $3.85 and later upgraded to a BUY in April 2022 @ $6.28, now trading at a Current Price of $10.07.
Gaining 38.32% over the last month and 60.38% since the April BUY recommendation.
Description: The company provides in-home durable medical equipment and post-acute respiratory healthcare services in the United States. Specifically, Viemed provides non-invasive ventilation therapy to patients with terminal respiratory conditions, enabling them to stay home and out of more expensive institutional settings.
Driving Share Gains: In its Q1 conference call, management Q2 guidance indicated a return to core revenue growth of 22-25% year-over-year and a return to a historical sequential
growth of 6-8%, referring to clinics having essentially fully re-opened post-COVID. For a company then trading at 9 times cash flow with a cash-rich balance sheet holding US$29.2 million in cash – this renewal of historical organic growth levels has driven the stock to 52-week- highs, making it our Star of the Week.
