Be curious

Many people think investing is only about reading stock charts, going through the different financial parameters, reading quarterly and annual reports, and determining the future growth of a company. Although all of these are valid and one must be reasonably proficient at them, I believe there is one additional crucial factor that every investor must practice, if they are to be successful. 

Be curious.

As children, we are curious by nature. We ask questions and we seek answers. So we bombard our parents, grandparents, teachers, and everyone we know with questions like – Why is the sky blue? Why does the sun go up and down each day? Why do we need to go to sleep at night? Why do we eat? Why do we take baths? And so on and so on (I certainly have been answering these types of questions from Baby T1.0 and Baby T2.0. Good times!). 

Through these questions, we learn and evolve as human beings. 

Similarly, I believe we as investors must ask questions and be curious in order to become better investors.

Be curious

Be curious as an investor. What do I mean by that you may wonder. Well, we must ask questions that aren’t being asked during quarterly result calls and annual general meetings. It is important to ask odd and insightful questions and find the answers. 

As below, so above and beyond, I imagine

Drawn beyond the lines of reason

Push the envelope, watch it bend” 

From Lateralus by Tool 

Be curious about the companies that we plan to invest money in or companies that we’re already investing in. Be curious about the products these companies make. Be curious about the customers using these products. Be curious about the company’s competition. Be curious of their past as well as their future. Be curious about their management team and how that team is perceived in the investing community.

Let me demonstrate this concept with a few examples. 

First, let’s take a look at Apple, one of the biggest companies and most recognizable companies in the world. 

Being curious means asking questions like:

  1. Why can Apple sell products at a higher premium compared to its competitors? What makes Apple products different when consumers typically go with the cheaper products available? 
  2. Why do people stick with Apple products like iPhones, MacBooks, iWatches, iMacs, iPads when there are similar and arguably better products available? Why do people keep buying Apple products once they have bought one? Why is there such a powerful brand loyalty with Apple?
  3. What is the Apple ecosystem? What makes people stick with Apple products? 
  4. What makes people stay away from Apple products? Is it price? Performance? Or something else? 
  5. Is there one thing that Apple has done in the last five years that made me say “wow, this is amazing?”

Here are some of my answers:

  1. Apple is a premium brand. This premium brand positioning allows them to sell products and solutions at higher prices than its competitors. Over the years, consumers have developed the perception that Apple products are of a higher quality, thus consumers are willing to pay for that premium. Apple products are highly desirable, often associated as “status symbols.”
  1. It is the belief that these products are superior and just work better. There is no need to troubleshoot and take hours to get an Apple product to work. You do not have to be a techie to get a MacBook or an iWatch to work. Out of the box, Apple products just work; and work easily.  Period. (And speaking of the box, look how meticulous all Apple products are designed, not just the product itself but the box it comes in.) To many people, Apple is a trusted premium brand.
  1. Apple has been focusing on building a solid user experience such that users can seamlessly go from Macs to iPhones to iPads and have their data synced across their different devices. Apple has also consolidated the operating systems and user interfaces so everything looks and feels the same across the different devices. Providing a similar user experience is extremely important. This is directly tied to the idea that Apple products just work better. Everything just works better and more easily, not just on its own. Your iPhone works with the other Apple device you own. By wrapping users in the Apple ecosystem, it is becoming increasingly difficult to switch to a competitor’s product.
  1. Apple can not please everyone. Some users will stick with Windows desktops and laptops and some users will stick with Android phones. Some people simply do not want to pay the premium for the seamless user experience. Take us for example, we have an iMac at home and we love the macOS but we are OK having Android phones and not able to sync between our phones and iMac. Having said that, although we prefer Android phones over iPhones, we own an iMac, because I think iMac is so much superior to any other window-based all-in-one desktop both hardware and software-wise.  
  1. Over the last five years, Apple has made some big announcements. For me, the biggest wow factor was not the new Apple iPhone 13 Pro Max, the MacBook Pro with M1 Max, the latest iWatch, or Apple TV+. It was the AirPods. Almost everyone I know with an iPhone has AirPods. Apple gets that wired earbuds can get tangled, can break easily, and can get easily misplaced. AirPods are known to never fall out of ears, have solid battery life, are easy to find if lost or misplaced (i.e Find My AirPods), and can be synced to Apple devices quickly and flawlessly. Many of my coworkers and friends got fed up with replacing their wired earbuds regularly so they paid extra money to get AirPods that would last longer. By creating a new accessory like the AirPods and charging a premium, Apple created yet another revenue stream. Did you know that after three years of sales, Apple has sold 61 million pairs of AirPods on a cumulative basis? In comparison, during the first three years of sales, Apple “only” sold 60 million iPhones. In 2020, AirPods had revenue of $23.05billion or about 31% of Apple’s revenue from the Wearables, Home and Accessories category. As Apple releases the new versions of AirPods, the revenue numbers surely will continue to increase. The revenue will continue to increase as people upgrade to new iPhones that do not have a headphone jack, forcing them to buy AirPods. Needless to say, AirPods are one heck of a brilliant product category for Apple! 
Apple airpods
Airpod revenue
This should give you an idea how profitable AirPods are for Apple

Next, let’s be curious about Costco, one of the major membership-only big-box retail stores.

  1. Are Costco warehouses busy and full of people? Are people’s carts full of stuff? 
  2. Why do people keep coming back to shop at Costco despite all the Costco-associated craziness? (i.e. parking lot, inside the store).
  3. Are Costco warehouses strategically located? 
  4. What has Costco done to compete against online retailers like Amazon? 

Here are some of my answers:

  1. I think it’s a mix of habit and convenience. Some people have been shopping at Costco for groceries and household items for years. It is the place they go once a month to get most of their shopping done. It is also one of the few, if not the only place, that you can buy items in bulk quantities. Before the COVID-19 pandemic, we usually bought about $200 to $300 worth of goods whenever we went to Costco. Since the pandemic, our Costco shopping trips usually cost from $500 to $1000 each time (we were buying for three households at one point). If I had to estimate, about 80% of the shoppers have their carts full of items. It is not unusual to see someone buying expensive items like a TV and furniture.  
  2. Although it is hard to find a parking spot in Costco lots and there are always a lot of people inside the warehouses, people keep coming back to shop. Again, I think it is a mix of habit and convenience. Offering price-competitive items also attract price-conscious shoppers. According to the different studies I’ve done, Costco food items are consistently cheaper than other grocery stores. Produce from Costco also tend to be of better quality than the likes of Superstore and Walmart. For some, Costco is the preferred place to shop. You can even say Costco is the “trusted” big-box retail store brand.
  3. Here in the Lower Mainland, there are nine Costco warehouses located in different cities – one in downtown Vancouver, one in Surrey, two in Burnaby, one in Port Coquitlam, one in Surrey, one in Langley, and one in Abbotsford. There are three Costco warehouses on Vancouver Island, one serving the greater Victoria area, another serving the Nanaimo area, and another in Courtney. Looking at these warehouses, I think they are situated such that there are no redundant locations anywhere. Costco warehouses are strategically located so they get the consumers to come to them. This is a very different strategy than your local grocery stores. 
Costco locations in Lower Mainland
Costco locations in Lower Mainland
Costco locations on Vancouver Island
Costco locations on Vancouver Island (not showing the Courtney location on this map)
  1. Over the last number of years, Costco has ramped up their presence. First, they allowed members to shop on their website by providing items that were not available in the warehouses. Recently, Costco also teamed up with Instacart for a same-day online grocery delivery service. Costco has stayed true to its founding principles by selling only certain items. It is not trying to be Amazon or some other online retailer by offering every item you can imagine. 

Finally, let’s be curious and take a look at a Canadian brand, TD.

  1. Are TD branches and ATMs strategically located? Are the branches open every day and have long hours to serve their customers?
  2. How much are TD’s monthly banking fees? Is there a minimum balance to avoid the monthly fees? When was the last time TD raised its monthly fees and minimum balance requirements?
  3. Do I know anyone that went from TD to another bank? If you do, what were the reasons for switching?
  4. What makes people pick TD rather than another Canadian financial institution? 

Here are my answers:

  1. I quickly searched for TD branch and ATM locations on Google Maps in Vancouver, Richmond, and Burnaby. From my quick search, it appears the branches and ATMs are strategically located but there could be further expansions in the future. For example, in Vancouver, there is nothing by Marine Drive and West 41st Ave. Also, in Burnaby, there is nothing by the Burnaby Lake area. All the TD branches are open Monday to Saturday, usually, 9 AM to 6 PM. Some branches are open until 8 PM on certain dates. The long branch hours should allow TD to serve most of its customers. 
TD branch locations in Vancouver
TD locations in Vancouver
TD branch locations in Richmond
TD locations in Richmond
TD branch locations in Burnaby
TD locations in Burnaby
  1. Excluding student accounts, TD has monthly banking fees ranging from $3.95 to $29.95. To avoid the monthly fees, one needs to have a minimum monthly balance ranging from $3,000 to $5,000. The last time TD raised the monthly fees and minimum balance requirements was last year in the midst of the pandemic. All these monthly fees and minimum balances allow TD to continue to increase its cash capital reverses. TD then uses the cash reserves to invest or lend out to people while charging fees, which in terms allows them to make more money. 
  2. I do not know anyone who has recently switched from TD to another bank. In fact, I do not believe many Canadians switch banks regularly. If I had to guess a number I would say that less than 5% of Canadians switch banks regularly (it is probably a lot lower than 5%). Once someone picks a financial institution, they typically stay with this institution for life.
  3. I believe convenience is one of the keys. TD is one of the largest banks in Canada and has a lot of branches and ATMs. Another reason is that parents that have been banking with TD would typically open accounts for their children with TD, rather than going with another financial institution. So once someone in the family banks with TD, is it highly likely that the rest of the family will bank with TD and use TD’s financial services. I believe this “family influence” is true for all Big Five Canadian banks. 

Summary – Be curious

I was quite surprised to learn a few more things about Apple, Costco, and TD by being curious. For example, I knew AirPods are selling well and becoming a new major revenue stream for Apple, but I had no idea Apple has sold 61 million pairs of AirPods in three years of sales and that sales number has only increased over the last couple of years. That is the power of the Apple ecosystem. Imagine what would happen when Apple comes out with one or two “key” accessories to go with its products.  

I also did not realize that $29.95 is the highest monthly fee that TD charges for their All Exclusive Banking account. If TD has 250,000 customers paying every month for this account type that is almost $7.5 million in revenue every month, or $89.85 million in a year! Now if TD decides to increase this fee from $29.95 to $30.95, all of a sudden TD will generate an additional $3 million in revenue a year. By increasing the monthly fees and minimum balance requirements regularly, TD literally is a money-making machine! 

I hope this exercise showed that it is important to be curious as an investor. As Warren Buffett stated, one must always know what you are investing in and being curious will help you understand this. When we ask questions and examine companies from a different point of view, we often learn more things about the company, which will aid us in determining whether to invest our hard-earned money or not. 

So be curious! 

Share on:

13 thoughts on “Be curious”

  1. Interesting analysis as usual from your comments

    Not certain from the above if you are actually recommending Costco

    Also would be very interested in whether you would recommend individual Canadian banks or an ETF that covered them all

    Hopefully will be able to chat with you about such things going forward

  2. I was blown away by the AirPod only revenue against other entire companies. Somehow, I have avoided getting them for my iPhone- lol.

  3. A side note….there are actually 3 Costco locations on Vancouver Island. There is one in Courtenay as well. Love all 3 of the stores on the island.

  4. COST has always stumped me. It has PE of over 37! Also it’s a retail outlet with low margins. Inflation is going up people are losing their jobs so this will cut margins more.
    I wouldn’t call it a growth stock as it’s retail. It doesn’t have AWS like AMZN.
    The current environment shows that these high PE are being beaten down.
    I have a Costco card but some things aren’t available. I recently couldn’t buy tires because out of stock also other stores have way more variety and availability

    • I never called Costco a growth stock in the article. 😉

      Historically Costco always had a low margin, it makes money from membership fees. It is different than the typical retailers like Walmart and Target.

      • Agree, COST is not a growth stock. It’s a low margin retailer priced like a growth stock with a huge premium. The membership fees won’t grow 10-20 % a year so that part of the business is stagnant

    • I recently tried to buy a basic antibiotic like doxycycline. Ironically I was told it was out of stock and it would take approximately 20 days to get to the pharmacy. The pharmacist and told me that close to 90% were made in China ( bulk of supply anyway ) and supplies have been up and down. I use Doxycycline as a anti-malaria drug, in the tropics. Costco is much like any other business these days , run by the economically prowess. I bought Costco stock back in 1980s for about $8.50 a share. Its business model is unique, comparable to other retailers, or wholesalers. It’s traction in other countries is growing , and in different modalities such as online…. is gaining momentum. Earnings per share is always above three dollars per share. I was going buy my first new car back in the 80s for $15,000. After many months debate … I ended up buying Costco shares at around $8.50 on average. I was worried I thought I made a wrong move . That net me proximately 1800 shares . Close 1800 shares , are now worth about 885K . I still have every share that I bought back in the 80s. My son will be happy , as I will leave him the bulk of the shares . This company owes me nothing, I monitor it closely, and I am quite confident it will be a market leader for many many years to come.

  5. Thanks, Bob, some refreshingly lateral analysis. Love the AirPods chart, an update for 2021 would be nice once data is available. Andrew

  6. Interesting read . Costco does tremendous research into where to locate their warehouses – they locate their warehouse generally where the population is growing over the next 50 years ( or is already established . One correction to your article – there are THREE (3) Costco’s on Vancouver Island . The largest one is located – Their Flag Ship , by no surprise is in Courtenay/Comox, BC . Courtenay/Comox has had HUGE influxes of populations from the western USA states recently ( LA, Portland, Seattle , et al ) , as well as people from Calgary , Toronto and Edmonton and so on . Costco’s – “where the people are going studies- net inflows studies ” …. are usually “bang-on ” . In the Courtenay/Comox region they are 100% correct again !

    • Ah, thanks for pointing out my mistake about Vancouver Island Costco stores. Yup, Costco does tremendous amount of research into where to locate their warehouses. Many companies do that as well.


Leave a Comment


This site uses Akismet to reduce spam. Learn how your comment data is processed.