jeudi 15 août 2019

A view on some less-known investors

Do you know about Pat Dorsey?

That investor is wild. It may excite some readers here looking for sensations because, what I can see after 5 years writing this blog is that very few people care for traditional stocks like Mohawk or Ross Stores. Most are looking for the next big thing, which is something I'm very suspicious about.

But I live to give. So here's what you're looking for, you fucking bunch of gamblers.

Here's the portfolio of Dorsey Asset Management:

Facebook: 21%
Avalara: 18%
Wix.com: 13%
Despegar.com: 10%
Alphabet: 9%
Paypal: 8%
eBay: 8%
Cimpress: 6%
ANSYS: 4%
The Trade Desk: 4%

There are probably a few names there that you don't know. But before getting to these names, I have to tell that the average PE ratio of that portfolio is very high. We're far from growth at a reasonable price. We're more in the territory of "very high growth at a crazy price". But the guy owns 10 stocks, so he probably benefits from some statistic rule saying that among 10 very high growth stocks, the majority will probably continue to grow a lot for some time. I don't know if there's a rule about that, but it helps me to keep some respect for the guy, thinking that.

The problem with that portfolio in my opinion is that it contains some stocks that don't even make profits (I'm talking here about Avalara and Despegar which represent about 28% of the portfolio). That's something everybody should avoid in my view: stocks that don't make money. Whatever how beautiful the future may look, if they don't earn profit now, I'm not tempted at all to anticipate that their management will be able to reverse the situation. That's the definition of speculation. But, again, most of you fucking assholes are excited about that kind of situation, so fuck my writings and let's buy these stocks with all our savings, and why not putting a mortgage on the house to get more money to invest in these?

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David Rolfe of Wedgewood Partners has the portfolio that looks the more like mine. Actually, we look like cosmic twins. I own many stocks that he owns and I've been interested in owning most of the other stocks he owns. I'll follow him closely in the future.

Here's his top 10 positions:

Apple: 9%
Visa: 9%
Facebook: 8%
Edwards Lifesciences: 8%
Tractor Supply: 7%
Berkshire Hathaway: 6%
Booking Holdings: 6%
Fastenal: 6%
Paypal: 5%
Ulta Beauty: 5%

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Let's complete with the funny Bill Ackman. Because now, Bill Ackman goes Buffett.

Yes, after saying that Valeant wasn't worse than Berkshire that invested money in a sugar-water company (Coke), Ackman puts 11% of his portfolio in Berkshire. It's his way of admitting  that Buffett is better than him. Frankly, Ackman is the funniest investor alive. So cocky, so proud-looking but so inconsitent and incoherent. But still so cocky. He's the Bono of big investors.

mercredi 14 août 2019

Human rights now

China is preparing for a military invasion of Hong Kong. Because Hong Kong wants democracy.

We all know that most investors are heartless. If they can make money somewhere, they’ll go for it. 

For instance, they’ll invest in Alibaba or Tencent or any other chinese company that grows. What may slow them is that, in China, transparence is not a norm. And companies always belong to the state, in a way or another. But no other reason than that is evoked. 

Today, it’s time for many investors to stop thinking about money for a few minutes and start thinking about democracy and human rights.

It’s time to boycott as many chinese products as we can. It’s impossible to boycott everything, but at least, take a look at the origin of goods we buy. And buy something from any other country. Anyway, even if it’s a bit more expensive, it’s gonna last longer or gonna be better for your health or the health of your kids who play with toys full of toxic products made in China. 


China is an horrible country on a political level and it’s our duty to vote against it with our money.

And above all, it's time to see if that blog can have some impact on the economy of a 1.4 billion people country. 

vendredi 9 août 2019

Mohawk Industries (MHK) at book value

In a world obsessed by growth, by Shopify, by Amazon, by The Trade Desk, we sometimes forget old-fashioned businesses like tapestry and carpets. 

I know that very few people are excited about Mohawk. Nobody gives a fuck about that kind of business because it's not "the future". Also, metrics are OK but not great. Frankly, even me, I'm not that excited about MHK. But there's some stuff to like...

I've been a MHK shareholder in the recent past but I decided to sell my shares when I saw that growth slowed down a lot. That's the problem with a stock like Mohawk: it's a cyclical business. But it's one of the few great cyclical business. Which means that it eventually goes down, but when there's a rebound, it's a very interesting rebound.

It's important to note that, these days, you can buy a MHK share for around 115$. Which is about the book value of shares. 
 
Take a look at the book value multiple since 2009:
 
2009 BV: 1
2010 BV: 1,2
2011 BV: 1,2
2012 BV: 1,7
2013 BV: 2,5
2014 BV: 2,5
2015 BV: 2,9
2016 BV: 2,6
2017 BV: 3
2018 BV: 1,1
2019 BV: 1,1

 As we can see, the historical book value is much higher than the current level. I won't repeat the exercice for PE ratio, but it's currently 11 and the average over the last 10 years has been a little over 20. So, on a a book value and PE ratio perspective, the stock is about twice cheaper than it's historical average.

Of course, when a stock is so cheap, it's for a reason. EPS have started to drop. There's currently no growth for the stock. But it's a cyclical thing. Nothing indicates that the company will decline and vanish. It happens after a few good years.

 But EPS growth has been pretty good since 2009. See below:

2009 EPS: 1,53$
2010 EPS: 2,52$
2011 EPS: 2,92$
2012 EPS: 3,78$
2013 EPS: 6,55$
2014 EPS: 8,15$
2015 EPS: 10,20$
2016 EPS: 12,61$
2017 EPS: 13,61$
2018 EPS: 12,34$

EPS have doubled a few times over a 2 or 4 years frame (from 2009 to 2011, then from 2011 to 2013, then from 2013 to 2017). It's excellent. But they will surely drop a lot when the next recession hits us.

Also, the current debt level is pretty low which gives a lot of flexibility to the company to buy back their very cheap shares or to make an acquisiton. I think that Buffett could buy that company. However I believe Berkshire owns a tapestry company which could bring some conflict of interest. But there's very few great companies avalaible at 11 times earnings these days.

A very good idea, in my opinion, for a small position in a portfolio. Many insiders and superinvestors are also buying. Most of them are bad, but when they share my opinion, I can grant them credibility.

mardi 6 août 2019

Expensive and predictable stocks... Do you really need to worry about the PE ratio?

I once read some article about Giverny Capital saying that the guys working there usually didn't bet on an increase of the PE ratio for any specific stock.

It was a revelation for me. These guys seemed more inclined towards a stock that's expensive but that's always been expensive and highly predictable.

I had the idea of taking a look at 10 stocks with a PE ratio always high. It's not really a random list, because I know all these stocks. All of them are great businesses, with a great moat. But, even if it's not a random list, it's pretty varied.  You have softwares, healthcare, paint, clothes, chocolate, instruments, payment systems, analytical company, aeronotics parts and stuff for construction. I don't think you can be more varied than that.

Right after the ticker, you have the average PE ratio for the last 5 years, then you have the performance of the stock over the last 5 years:

Hershey (HSY): 30 (performance last 5 years: 70%)
Ametek (AME): 23 (performance last 5 years: 76%)
TJX (TJX): 21 (performance last 5 years: 95%)
FactSet Research (FDS): 27 (performance last 5 years: 127%)
Sherwin Williams (SHW): 26 (performance last 5 years: 145% )
Home Depot (HD): 23 (performance last 5 years: 165% )
Intuit (INTU): 44 (performance last 5 years: 239%)
Mastercard (MA): 35 (performance last 5 years: 256%)
Edwards Lifesciences (EW): 35 (performance last 5 years: 359%)
Heico (HEI): 34 (performance last 5 years: 428%)

These stocks have been expensive for a very long time. However, they've beaten the market easily.

Everybody should have a few of that kind of stocks in their portfolio. Perhaps not exactly these stocks, but stocks that share similar characteristics.

dimanche 4 août 2019

High Liner Food (HLF.TO), a tool to destroy our civilization

A few years ago, many analysts, including Jason Donville, had a positive opinion about High Liner Food (HLF.TO).

To me, it never looked attractive enough to buy some shares. It looked just like an OK stock, nothing more.

On june 19th 2014, a little more than 5 years ago, Jason Donville recommended HLF. At the time, the stock was selling for 24,54$.

Today, the stock is selling for 10,34$. A drop of more than 50% in 5 years. What a bad investment it's been.

I won't write anything about EPS, ROE, and the usual metrics. I will only state that at my local grocery, I often visit the fish departement and, among all the frozen fishes, when I see High Liner packages, I can see that almost all (if not all) are fishes from China.

Do you trust China food, even when it's not transformed? I don't.

These fucking chinese put paint in their milk. They feed their fishes with shit. I don't trust chinese stuff. I think my opinion has some credibility because I was in China last year and I've smelled a lot of bad smells there.

So, in retrospect, I don't think that we should feel proud about that company because it's canadian. Eating safe stuff is important. Chinese want to destroy our civilization. They want us to buy their spy phones and eat their fishes full of shit.

That's how they'll destroy us for good.

jeudi 1 août 2019

Portfolio review

Here comes the moment when you can compare your performance to mine and thus, have some respect or some disdain for my approach. After all, who can have esteem for an investor who gets a worse performance  than the market, year after year? Even if that person gave a kidney to some poor guy and was helping people dying from scorbut in Azerbadjan, I would laugh at him. You are what you achieve. Anybody can give a kidney (we have two), but few people can beat the market. 

Personally, I think some reorientation would do some good to people who can't beat the market. For instance, some guy wasn't good at arts. He became dictator and things went much better for him for many years.  

So, here's a look at my portfolio:

Number of stocks: 20
Cash: 12% of the portfolio
Average ROE: 40
Average Beta: 0,73
Average forward PE: 19
Performance of the portfolio (YTD): 21%
Performance of the TSX/S&P500 (YTD):  14%

I haven't lived that much emotions with my portolio this year. Don't get me wrong, I almost never feel euphoria with my portfolio, but I sometimes feel excited or feel bad after a sudden drop. 

Either because I want to buy more, either I'm mad because I just deployed money and I should have waited 24 hours. 

Actually, I've been waiting for the last 6 months for a substantial drop and I'm still waiting. That's why 12% of my portfolio is cash. I'd like to deploy this cash but I'm willing to wait. Because the best moment to buy is when everything goes down. And very few stocks go down these days.

All the stocks I own were in my portfolio at the beginning of the year. I've only sold two stocks (Lassonde and Enghouse) and I've kept the rest, adjusting some positions and keeping most of them intact. There's not a lot of action but I like it that way. It looks like each stock completes the other and that's the wonder of a well-balanced portfolio. You can own a stock with a PE of 30 but the position is small and is compensated by a bigger position of a cheaper stock. That way, you can stop listening to people saying that this stock is too expensive. 

Yeah, it's expensive, you fucking asshole, but it grows much better than everything else and it's only 2% of my portfolio, so fuck off. In fact, a stock is truly risky when it represents a large percentage of your portfolio. Otherwise, it's probably "riskier" to own only stocks with a PE of 12 than to own some expensive and some not expensive stocks. 

For instance, I own 5 stocks that I would qualify as expensive stocks and they represent 15% of my portfolio. These 5 stocks gave me the best returns among all the stocks I own over the last year or so. They were meticulosely chosen and they fit perfectly among all my other stocks so please don't interpret that as "buy as much expensive stocks as you can and you'll get rich". That's a stupid shortcut. 

Anyway, I'm beating the market by 7% right now. And you?
 

vendredi 26 juillet 2019

Google's latest results

The problem with businesses is that they are living beings. They eventually die. Almost all of them.

So, even if some businesses are extremely solid at one time, they eventually grow old, get cancer and die. 
 
I mean, I really like some stocks, but most of them ride a wave. They benefit from a certain fad which will fade. 

Google is in another dimension to me. OK, Google probably won't last forever, but among all my portfolio, it's probably the stock for which survival won't be a issue for a long time.

When I read, a few years ago, that Google build their servers close to dams, I realized that it was one of the strongest barriers to entry. Who could, overnight, start a company that will have sufficient funds to reach that level?

Their last results were out yesterday. What about a 20% growth for a 870 billion dollars company? Isn't it incredible? And don't forget that Google is the center of our world when it comes to Internet. It's a reflex. It's a no-brainer. You go on the Internet? You use Google. 

These results would be very good for a small cap. How could we qualify them for a giga cap? 

"Excellent" would be the weakest word we could think of.