mardi 1 décembre 2020

Portfolio review, december 1st

Here we are, december 1st, 2020. Christmas songs all over on the radio. Like "Do They Know It's Christmas Time" and "Last Christmas" and "Happy Xmas". By the way, it's gonna be 40 years since John Lennon got shot in New-York. What were you doing at the time? Me, I was probably taking a shit in a diaper, being one year and a half at that time.

Before entering into the subject of the present post, I want to adress a specific topic which I'm thinking about when I read some of my ancient posts.

As you probably know, my first language is french. I don't use any english daily, because I live in the suburb of Quebec City which is a place where very few people live in English. So, the english I write is not that natural for me. I don't speak a superb english but I'm probably better in english than 99% of english canadians are in french. 

That fucking english language is surely easier than french, but Guillaume de Normandie hasn't done a perfect assimilation in 1066 when he invaded England. So, while many of your words come from french, you have strange habits like putting capital letters in song titles like "Do They Know It's Christmas Time". In french, we put capital letters only on few words like first and last name and country names. Also, we don't use the verb "have" for everything like you do. It looks like you're all a fucking bunch of illiterate because that verb can be used for everything. Like "I'll have breakfast", "Thank you for having us", "Have a nice weekend". What the fuck? How come don't you make it a little more complicated? And why does your age comes with the verb "be" and not the verb "have"? In french, you say "J'ai 41 ans", you don't say "Je suis 41". And why do you put adjectives or colors before the noun? Like "A green shirt" while in french we put the adjective or the color after the noun. Yes, we say "A shirt green" as stupid as it may look for you, badly assimilated culture. How do your fucking brain works? It amazes me because many of you seem intelligent while using such strange fucking sentence structure. 

Anyway, here's my almost traditional quarterly portfolio review:

Number of stocks: 24

Average ROE of the portfolio: 42

Average forward PE of the portfolio: 30

Average Beta of the portfolio: 1

Performance YTD: 17% (including dividends)

Performance of the S&P-TSX YTD: 1% (excluding dividends)

Performance of the S&P YTD: 13% (excluding dividends)


I probably beat the S&P by 2% if we assume a 2% dividend for the market. It's not bad, but not a glorious victory. And I wonder how my very average beta coefficient has risen to 1. A lot of stocks I own have seen a strange increase of their Beta coefficient. You probably don't care about that. 

A question for those investing only in canadian equities: Why the fuck are you investing only in Canada? Have you seen the performance of TSX vs the performance of the S&P on a long time frame?

You don't invest in the USA because you're afraid of the conversion rate? Yes? Then fuck you. Stick with your fucking oil company and their fucking dividends that are the only fucking thing on earth that gives you a boner. 

jeudi 26 novembre 2020

An exercice of nostalgia

2015: Among all the stocks I owned, only 3 of them are still in my portfolio, 5 years later (Constellation Software, Couche-Tard and Ross Stores).

2016: Only the same 3 stocks are still in my portfolio.

2017: The same 3 stocks plus O'Reilly are still in my portfolio. 

2018: The same 4 stocks are still in my portfolio + Boyd Group + Google + Carmax + Facebook + Mastercard + Edwards Lifescience. 

2019: The same 10 stocks are still in my portfolio + Visa. 

2020: I currently own 24 stocks. So, only 11 of these stocks have been in my portfolio for more than one year. Only 3 of them have been there for more than 5 years. 

That's not really what you could call "fidelity". 

I'm not writing that to preach for an heavy rotation of stocks. Not at all. I'm mostly writing that because it shows how random I've been at picking stocks over time. Not so long ago, I owned stocks like Valeant, Concordia Healthcare, Nobilis Health, Callidus Capital, Chicago Bridge and Iron.  These stocks have only known a few months or 2-3 years of glory. It shows how much a good track record is important.  

Life is full of mistakes. But what's beautiful is that, even if life bring diseases, loss of friends-parents-lovers-job-health and all these things, it also brings experience and, in that aspect, you can't regret getting older. I now know that it would be stupid to sell a stock like Mastercard or Visa. These stocks should always remain on a portfolio because there are 8 chances out of ten that you won't be able to find something better for the long term. 


lundi 23 novembre 2020

"Investir à la bourse et s'enrichir"

Investors from Quebec know Bernard Mooney while those from other provinces probably don't know him. Short story, he's retired now, but he used to write articles in "Les affaires", which is probably the most known website about investment in Quebec. He's also a friend of François Rochon, the CEO of Giverny Capital, one of the best investment firms in Quebec (which you should follow via www.whalewisdom.com if it's not already the case). 

I bought the book "Investir à la bourse et s'enrichir" ("Investing on the stock market and getting richer", for you, fucking unilingual assholes from the rest of Canada) as a Christmas gift for my 19 years old nephew which is in a period of his life where he seems to be clueless about his future. He's been saying for years that he wants to work for Google in California, but mostly for the glamour of it. He's got poor grades and is unable to succeed a philosophy class which he failed 3 times in a row or something like that. Also, he  mostly smokes pot and play video games. But he wants to become rich and drive a tesla. Just like thinking about being rich was enough to become rich. That's why I bought him this book. I don't know if he ever read an entire book just for fun, outside of school, but I thought it was a good idea anyway. 

This is the book in my environment of work everyday. Let's admire my jogging pants. 

Anyway, in this new edition of the book (first written in 2001 but the new edition was made in 2020), there's no big changes. I think that the only new thing is a comment from Mooney saying that he thinks that the initial version of his book telling that looking for stocks that grow 20% every year is too ambitious. Even 15% is too ambitious. He says that he thinks that 10-12% is the right growth to look for, but it's partly because he's retired now and wants to preserve his capital. However, he says that companies that grow too much are riskier in the long term that those who grow by 10-12%. 

I don't disagree with him (he's 62 years old now) but I think that a younger investor should be a little more aggressive. In my opinion, with 10-12% per year, you will get something good, but not exceptional. The key is to mix some high growth companies with medium growth companies. And to exclude any company with an annual growth under 10% (realized and expected).  The PE should be considered only on the angle that a very expensive PE (let's say over 50) should be avoided except on very rare occasions. Other than that, with a PE of 15, you'll usually get an average company because it's the average PE of the market. If you're willing to pay a PE of 30, just make sure that this company is twice better than the average company (and that the PE has always been expensive and the results have always been growing in a solid and steady way). If it's the case, paying 30 times earnings may be the right price to pay. 

lundi 16 novembre 2020

Ce que les meilleurs achètent

I think I've never written about that, but I'm fascinated about the Bill and Melinda Gates fundation. There's rarely some action with the holdings of that fund because those who manage it seem to stick with their choices over time. 

And that's something I admire. Because a great company usually remains great over time. Sometimes, they become OK or average but they rarely become mediocre and it looks they've understand that, at Gates Fundation. In that specific case, two stocks represent 51% of the fund: Berkshire Hathaway (40%) and Waste Management (11%). You add Canadian National, Caterpillar and Walmart and you've got 75% of the fund. These stocks are not spectacular, but they've all done well over the last 5 years. Once you're rich, you buy 7-8 of these no-brainer stocks and you remain rich and you'll surely get a little richer every year.  Why looking elsewhere? You're already rich and you take virtually no risks. 

But if you want to become rich, following Gates Fundation is probably not the shortest path. For that, you will probably follow Pat Dorsey. He's much more aggressive because he invests a lot of money in stocks that aren't profitable yet but that are growing their sales at an impressive rate. I'm not that comfortable with that approach, but it seems to work for him. 

It looks like, after all, what most people seek is nothing else than a speed that suits them to achieve their goals. And, frankly, it seems that I make my investment decisions based on a speed that suits me. And on some kind of virtue that is probably not always adequate. 

The fucking problem with that market is that it doesn't reward traditional virtue. You'll be rewarded for your patience in the long run, but you may very well be fucking much more rewarded if you're impatient. 

In that regard, "Ce que les meilleurs achètent" is just an exercice of curiosity, because  most of them buy stocks which are not interesting. And they buy and sell stuff in a random way. You try to understand what they do, but there's nothing to understand because they're almost all drug additcs. 

Anyway.
Buffett bought about 5.5B$ of three pharma stocks (Merck, AbbVie, Bristol-Myers). It seems a lot but it's about 2,5% of his portfolio, so please, remain calm. He also sold 46% of his Wells Fargo stake which should never have been bought in the first place. And 48% of his total portfolio is represented by Apple only. 

Akre added 10% to his Roper position. Good stock, but it doesn't grow that much. I don't understand what's so interesting with that stock.

Pat Dorsey added 30% to his Wix position (total position = 16% of his fund). He initiated a 6,74% position in Ebay. Wix is one of those stocks with which I'm not too comfortable but it will probably double in the next 3 months or so. I'm saying random shit here but this stock will surely outperform most of my portfolio. And I still won't buy it, because of my virtues.

Giverny Capital reduced their Berkshire stake by 20%. They also increased a shitload of other positions but very small positions (0,2% positions or shit like that). 

vendredi 13 novembre 2020

Using the money they lend you for almost nothing

I believe that disciplin and strategy are as important as stock picking.  

That post is for those who own a house and have some flexibility to increase their mortgage. I know, I've written about that before, but this time, my example is more precise. To me, that strategy can have the same effect as invest money on a super great stock. 

For instance, a mortgage increase of 100 000$ at a 5 years rate of 1,89% with a term of 10 years implies that you pay 10 000$ of interests (which is very low). There's virtually no use of paying down your debt with such a low rate. For instance, if you reduce your mortgage by 5000$, you'll save only 500-600$ of interests on  a 10 years time frame. 

What's the use of paying down debt under these circumstances?

With such low interest rates, a person who knows how to manage money should take some debt and invest on the market. 

If you own a house and you can borrow more money on your mortgage without having to finish paying your house at 70 or 80, this is for you. Why not add 100 000$ to your mortgage and invest that money?

100 000$ invested on a fund that reproduces the TSX should return about 8% on the long term.

100 000$ borrowed implies that you have to pay about 10 000$ of interests during 10 years.

These 100 000$ invested on a fund that reproduces the performance of the TSX should become about 215 000$ after 10 years. Substract the 10 000$ of interests and you'll double your money without a lot of risk. Isn't it crazy? 

I strongly recommend to anybody that lives a frugal life and is not too much indebted to do that. You do that at 25 or 30 and you'll be richer than all your high school friends and even your parents when you'll be 40. Later, when you'll be 60, you'll be able to buy a mustang and fuck 20 years old girls. 

Think about the future!

jeudi 12 novembre 2020

About the impact of the vaccine on the market

This week, with the news of a vaccine against COVID, the market was very excited. Many brick and mortar companies were up like if it was trendy to go to a shop and buy stuff. 

Tourism related stocks like Booking Holdings (BKNG) and Marriott (MAR) were also up a lot, just because that potential vaccine would heal the world. 

And, at the opposite, many tech names were down a lot, like if the pandemic was finally over and these tools would be less useful in the future. 

I'm bad to prophetize about the future, but I'm almost sure that work from home will survive in some industries. And I also think that these 8 months of pandemic (which will probably become a 12 months pandemic) will be a trauma for a lot of people. Some won't travel for many years. Some others will just shop for what's essential. Will everybody go back to shops like before? Surely not everybody. Pandemic or no pandemic, shopping online is always practical. 

Also, with all that toxic stuff we put on our hands before entering any shop, I'm pretty sure that a lot of people will get hand cancer and will be amputed of their hands. Nobody talks about that, but to me, it's the main threat of all that pandemic.  

Best case scenario, most of canadians and americans will receive the vaccine during the spring, which is about 4-5 months from now. Will everything be like before the pandemic after 12 months of lockdown? I'm sure not. 

In Quebec, the government is currently thinking about closing schools once again, like it was the case during last spring. I don't think that things will look better in the short term. And in the USA, things are going way worse than in Canada. 

In that regard, I think that:

A- Tourism won't recover before at least 2 years (optimistic scenario);

B- Tech companies related to commerce or work from home will continue to do well after the pandemic;

C- Traditional stores will recover as soon as there's a vaccine but they won't do as well as before the pandemic;

D- Watch out for global debt (governements and businesses). A reflexion about that topic would be useful because I believe that this new reality will result in some opportunities for investors (please, feel free to suggest some opportunities because I don't see any at this moment). 

lundi 9 novembre 2020

Big emotions with big pharmas

Big pharmas are tough stocks to understand. One day, they're up a lot, the next day, they may be down like  if the company's going bankrupt. But no, the company won't go bankrupt. It's only some patent question or some good or bad news about a potential new drug. 

For instance, let's take a look at Biogen (BIIB). Last week, the stock was up 46% on a single day (from 246$ to 360$) on optimistic news about some Alzheimer treatment. Today, the stock is down 30% because the drug may not be that effective. It's not the first time I've seen that, for a pharma stock. It's a frequent thing. 

Today, Pfizer (PFE) announces a vaccine that would be effective by 90%. So, when the market opened, the stock was up 8%. It's not amazing but it's a good performance for such a giga cap (220B$ market cap). However, over the last 5 years, PFE is up by only 20% (including today's performance which helped a lot). And 20 years ago, the stock was more expensive than today. 

Of course, there are plenty of exceptions to these two examples. But I've had my share of pharma stocks in the past and I think that this industry is a bit too hard. And while pharmas are way easier than financials to understand and analyze, I'm not sure that, on the ethical level, they're much better. 

Maybe that Pfizer will do well with their vaccine. Actually, I think chances are high that Pfizer will go up substantially from here, because their announcment about a 90% effectivness sets the bar high and the company will be badly punished if the bar that they set themselves is not reached. In other words, it would be very stupid for them to prepare their own fall. But, who knows, the stock market is full of bad companies and stupid managers.