Almost every long-term investor will tell you that they've made huge mistakes that made them lose a lot of money. I've read that at the moment I started as an investor. And even if I knew it was a danger, I've made exactly the kind of mistakes that all these people were talking about. Because, at a moment or another, we're all tempted to go out of the official road and find a shortcut in the woods. And that's where we get fucked.
Last fall, it was 10 years since I was on the stock market. I thought it would be a good moment to look back and see the path I've been through.
It all begins in 2008 with my colleague/office neighbour who's a long-time investor. He talks to me about the market and I'm getting more and more interested. During the fall, the subprime crisis has begun. I open an account and my first buy is 49 shares of Scotia Bank. Then, some Royal Bank shares. In may of 2009, my portfolio looks like this:
Royal Bank: 35%
Scotia Bank: 25%
Transcanada Pipelines: 19%
Yellow Pages: 15%
Biosyntech (an obscure bio-crap penny stock now dead): 6%
I don't really know what I own at this time. Of course, I know that Royal and Scotia banks are banks. But how strong are these businesses? I don't know. I'm seduced by the thoughts of my colleague about "blue chips" in that turbulent period. When everything crashes and the apocalypse is ringing at the door, what's better than a big company that's gonna survive? Obviously, with some perspective, I can now see that if I'd knew how to find a great company back then, I'd have much more money now. But it didn't turn bad. It was an OK start but not much better than "OK".
In 2009, it's still the crisis. In march of 2009, the market reaches an absolute low and it's completely crazy to read all the articles about how long it will take for the market to recover. We don't know that the market will soon start to recover. We all think that it may stall there for a lot of time. Anyway, at this time, I have a relatively small portfolio, so, the apocalypse isn't destroying all my lifetime's saving. I'm zen, or so.
In 2010, I'm still easily influenced or even manipulated by what others think (actually, I'll be easily manipulated for many years to come). My portfolio now includes all the stocks of 2009 (minus Biosyntech which is now dead) plus Johnson and Johnson (I bought it because of my neighbour and because of a post of Bernard Mooney on www.lesaffaires.com) and Cominar, because of it's juicy dividend (such as Yellow Pages). I know a bit about the sectors in which operate my stocks, but I still don't know what are their economic strenghts or weaknesses. I don't really care about it. I just want dividends first, than appreciation of the capital.
In 2011, the market has recovered a lot from the crisis. I'm starting to be much more informed about the market. I read a lot of stuff on the Internet and I've read some interesting books about investment. In may of 2011, my portfolio is as weak as the one of 2010, but at the end of the year, I own some good businesses, which makes me understand that I've learned some important stuff along the year about ROE, PE ratio and the very abstract notion of "a good business". I still own some crappy stocks but I also own MTY Food Group, Grainger, Boyd Group, Mastercard and Apple. I'll sell all these great stocks in the months or years that will follow. So, 2011 appears like a brief moment of discernment.
Early in 2012, I sell all my banks shares, which means that I sell what I don't understand (banks are hard to understand). It's a step in the good direction and it shows that I was knew more what I was doing, even if these banks weren't bad investments. It's also in 2012 that I discover Constellation Software which is by far my best investment of all-time. I buy 50 shares for a little less than 90$ each. I'm proud about that buy because, at the time, that stock wasn't very popular. Very few people talked about it and to me, it was obvious that it was a great stock. On my check-list (which I developed during that period), CSU scored incredibly high. Here's the top 5 of my portfolio in may of 2012:
MTY Food group: 7,4%
Advance Auto Parts: 7,2%
Boyd Group: 6%
In 2013, I'm heavily into high ROE stocks. In the beginning of the year, I own a very solid portfolio of great stocks. But, towards the end of the year, I discover the venture stock exchange (TSV) and I start to gamble a bit with crappy stocks like Macro Enterprises (MCR.V), Loyalist Group (LOY.V), NTG Clarity Network (NCI.V) and Rifco (RFC.V). At the end of the year, 25 fucking percent of my portfolio is on the Venture.
In 2014, I start this blog because I like Jason Donville and his picks. Now, he's my guru and I follow him like people follow Forrest Gump while he's running in the desert. Here's the top 5 of my portfolio in may of 2014, just a few weeks before the inception of this blog:
Constellation Software: 10%
Cipher Pharma: 8,1%
CGI Group: 7,6%
In 2015, I'm crazy about Valeant. Because a lot of people are. It's probably the period where I'm the less intelligent as an investor, because I have enough knowledges to do well but I don't use these knowledges. I rely on the opinions of so-called great investors. At less, in 2008, I had the excuse of little experience for making bad choices. In 2015, I don't have any excuse. Here's how my portolio looks in august of 2015, at the height of the Valeant madness:
Constellation Software: 10,4%
CGI Group: 9,3%
Portfolio Recovery and Associates: 8%
In 2016, it's a violent awakening. With the Valeant fiasco (and some other fiascos such as Concordia Healthcare), I understand that a lot of so-called great investors improvise much more than what we think. They look confident and even cocky in front of a camera, but they're not smarter than a guy who has read 5 or 6 classic investment books and has invested for 5 or 6 years. So, in 2016, I start to despise most investors which now appear like a fucking bunch of pee-wees to me (and still do, to this date). It's in 2016 that I almost close every orifice of my head to the opinion of others. And I go back to my approach of 2011-2012 with some adjustments. The shock is brutal and a lot of money vanished with it, but I'd almost say that it was necessary. There's nothing like losing 50 000$ to change your mind about something (well, perhaps that we learn even more when we lose 60 billion dollars like Jeff Bezos after his separation).
In 2017, my approach to investment has reached a mature level. I'll probably keep on getting better over time, but I really think that from this year, I really know what I'm doing. I put a lot of attention on forward PE ratio, ROE, Beta and predictability of the results. It helps me to build a very solid conglomerate of stocks that grow more than the market but are also not much more expensive than the market, with a smaller beta.
It's the approach I have to this date and it served me well. I know it may sound pretentious, but I'm convinced that I'll now beat the market most of the time. I've suffered enough to learn a lot.
I think that my advices would worth a lot of money to a new investor. I've lost so much money on the market, doing so many mistakes, that I really do think that, if a new investor would come to me directly, seeking advices, he'd probably do much better than all by himself.
In retrospective, it's hard to tell how long it took me to become a good investor. I think after 3 years, in 2011, I started to do the right things. But I tried another approach in the following years which served me badly. I became really independant-minded in 2016, after about 8 years. So, it's been a long journey.
And you, how long did it take to become a good investor? Or, if you're not a good investor, for how many years have you been learning?