jeudi 4 juin 2020

Main goal in life

What's your main goal in life? What do you desire the most between these choices? 

1- To fuck as much girls (or boys) as I can;
2- To become powerful or popular, to be an influent person;
3- To become rich to buy anything I want (a big car, a big house);
4- To become rich to do anything I want (like saying my boss to fuck himself);
5- To live as much experiences as I can (drugs, sports, books, music, tatoos, penis in the ass);
6- To explore the world (live among different cultures and eat the same shit as they do);
7- Money isn't that important for me. I only want to be with my friends and my family and listen to Pachelbel's Canon;
7- I don't have any specific goal. Life is absurd. 

I'd really like to get as much answers as possible in the comment section, please. 

dimanche 31 mai 2020

Heico (HEI)

Heico designs, manufactures and sells aerospace, defense and electronics-related products and services. They have an aftermarket division which has almost no competition. About half of their sales are related to commercial aviation, which may not seem a good thing at all these days. But they've got a large moat. Something similar to Precision Castparts (which was bought by Berkshire Hathaway, a few years ago).

Thanks to Giverny Capital, I've discovered Heico about 3 years ago, because I've got the habit of following closely the transactions of that fund. However, I never bought Heico shares until recently because that stock has always been expensive (the word "expensive" is relative to what I'm usually willing to pay, because for some people who buy stocks like Shopify, Heico may not seem that expensive).

Here's Heico PE since 2010:

2010: 24
2011: 28
2012: 26
2013: 27
2014: 30
2015: 29
2016: 27
2017: 34
2018: 38
2019: 45
Current PE: 37

I'm always a bit reluctant for such pricey stocks, but, like I've written before, when you've found an exceptional stock, you must pay the price.

In which way is Heico exceptional? First, they've got a large moat, the kind of moat you can't find easily. Then, their net profit margin is close to 20% and their ROE is about 20. Plus, their EPS growth was about 21% for the last 5 years, which is great (very few companies have these 3 numbers above 20%). Then, it's a sector that should continue do to well in the years to come (after a hard time due to coronavirus). Finally, the company has almost no debt.

Over the last 5 years, the stock has risen by almost 300%.

When you can gather all this positive information about a specific stock, you know you've got something special. And HEI latest results which were out recently, right during a pandemic affecting a lot the economy, showed how great this company is.

Heico could probably become one of my forever-stocks. Actually, there's some place on my list since Dollar Tree and MTY are not there anymore.

dimanche 24 mai 2020

Where the autist wins

Many years ago, when I was 17 or 18, I really thought that I could be a musician. I learned musical theory by myself, trying to create chords with what I knew. And I tried to write songs with complex chords, because C, D and G were for losers.

I spent a lot of time, practicing guitar and bass. I remember spending hours with my favorite CD's on my stereo, playing over and over the same songs with my guitar or my bass.

You have to be a little bit autist to do that kind of thing. You have to be very focus. You have to listen to one song, to try it, again and again to recreate the song in a perfect way.

When I was about 26 or 27, I stopped writing songs and recording them. I started to teach music to some people. And once again, the autist stuff came back. Because it was learning things and repeat them, over and over. That's the only thing that works: try something slowly, then try it quicker and quicker and quicker. Very often the same stuff, but quicker.

I finally realized, somewhere in my mid-twenties, that I would never be a professional musician. And probably not a semi-pro musician either. But I never gave up on guitar or bass. Because I liked playing music and I still like it.

Recently, I bought a new bass, for my birthday. I started to play once again, after more than one year without practicing bass at home. It felt great. And I've started to play new songs. And I realized that, when you try to play a complex song, it's about the same thing as learning to invest:

You have to be very careful on details. You have to understand what you do and what the band is doing. If you want to play a song perfectly, you'll have to play it a lot of times. That's where many people won't understand. Because most people don't want to put the effort in something. They'd rather lay on the couch with their phones, watching people masturbating on Tik-Tok or taking a crap on Instagram. Most people want to rest their brains at the first occasion.

Well, I really like to rest my brain. Actually, it's probably my favorite hobby. But, once in a while, I like to stimulate my brain or another part of my anatomy. That's why I like to invest on the stock market and why I like to play music.

Both are an intellectual challenge. And they're two of few places where the autist wins over normal people.

Yeah, if you're a good investor, you're probably a fucking autist.

mardi 19 mai 2020

Exceptional stocks (looking for the 5% or the 1%)

Here's some stocks with exceptional numbers. These stocks were picked from a database of about 2500 stocks. So, the ones that are showed in this post really standout. I think that there's not a bad stock in that list. Every one is either good or excellent.

Super high predictability stocks (5% of the database)

Canadian National
Home Depot
Ross Stores

Super high profit margin stocks (5% of the database)

AbbVie (40%)
Arista Networks (36%)
Facebook (35%)

Super high predictability + EPS growth over 15% for the past 5 years (1% of the database)

Carmax
Sherwin Williams
Starbucks

ROE over 20% + profit margin over 20% + EPS growth over 15% for the past 5 years + super high predictability (0,2% of the database)

Booking Holdings
Edwards Lifescience
Visa

When you realize that only 1 or 0,2% of the stocks available possess what you're looking for, how much are you willing to pay? About 15 times earnings, like the normal price that you have to pay for 50% of the stocks on the market?

I've compared that situation to luxury cars in the past. But now, with the documentary "The Last Dance" about Michael Jordan on Netflix, I'd be more tempted to make a comparison with sports:

If you have Michael Jordan or Wayne Gretzky in your team, do you think they will accept to be paid like the average player of the league?

lundi 18 mai 2020

Portfolio review (may 18th, 2020)

Penetrator portfolio

Number of stocks: 24
Average ROE: 50
Average Forward PE: 25
Average Beta: 0,88
Biggest position: Alphabet (8,6%)
Smallest position: Heico (1,4%)
Cash on hand: 0,8% of the portfolio
Performance YTD: 2%
Performance of the S&P500 YTD: -10%
Relative performance: +12%

On december 31th 2019, my portfolio was about 10% cash. It helped a lot to have that much money left to face the crisis.

Plus, almost all the stocks I own recovered quickly from the crisis. So, I wasn't hurt that much, except for a few weeks. And I used these weeks to invest all the money I had. I could have done a bit better, but not that much.

I own less and less canadian stocks. There are a few great stocks here, in Canada, but most high-margin stocks are located in the USA. Actually, we have nothing that could be compared to Mastercard, Visa and Microsoft margins in Canada. And usually, a company that grows a lot (+15% each year) and that has high margins is a company that you should never sell (as far as things still look OK for these companies). How could these companies with a profile shared by only 1% of stocks should be sold for the same price as the usual stock?

Once you assimilate and accept that fact, you've made a giant step.

samedi 16 mai 2020

Transactions of the last quarter (especially in march)

I'm changing the formula of my traditional "ce que les meilleurs achètent" posts. This time, I'll write about interesting transactions (in my view) from interesting investors.

Giverny Capital
They bought a big chunk of Five Below (FIVE) shares during the last quarter. Their FIVE stake now represents 2,35% of their portfolio (0,04% before). By the way, I was a big supporter of FIVE in the past, but I've sold all my shares some time ago.

There was a substantial increase of their stake in Bank of America (+34%) and Progressive (+25%). Both companies are at least OK, but I don't think that financials and insurance companies is an easy way to invest.

They sold their entire stake of O'Reilly, which is in my opinion one of the best US stocks. I don't understand why they did that. Perhaps they're crazy? They also reduced a lot their stake in Union Pacific (-67%), a great company, almost as good as Canadian National (CNR.TO).

Chuck Akre
Chuck initiated an important position in Adobe (3,5% of his portfolio or 363 million dollars if you prefer) during last quarter. He also initiated a position in Live Nation (LYV), a concert company. I'm not sure that it's a good idea to invest in that kind of company in 2020. Actually, it sounds like a very dumb idea. But I respect Chuck anyway, even if that investment may indicate an early stage of dementia. On the buy side, he also increased his positions in Mastercard (+8%), Visa (+7%), Roper (+8%) and Carmax (+21%). All of them being great companies. But my favorite are by far Mastercard and Visa.

An interesting thing about his selling is that he sold about 90% of his Berkshire Hathaway (class A and B) shares. Probably to have more money to invest in stocks that dropped much more than BRK (that was the strategy of someone in the comment section, a few weeks ago). It's an interesting strategy, if that's really what Akre did. Because when Berkshire drops by 10% and Mastercard drops by 30%, you're probably right to sell the first to buy the second, when it's available for 22 times earnings.

Warren Buffett
What the fuck? He did almost nothing during the last quarter. Of course, he sold his airlines stocks, but apart from that, the only important thing he did was to reduce his Goldman Sachs stake by 84% (now 0,17% of his portfolio... why keeping such a low position?). Frankly, I'm puzzled about so little transactions by one of the richest conglomerate in the world.

Ok, now let's take a look at 3 stocks I've talked about recently and which seem attractive to me: Google, Facebook and Berkshire Hathaway.

Google
Pat Dorsey (+352% to his position, now 13,7% of his portfolio);
Seth Klarman (new position representing 5,2% of his portfolio);
Thomas Russo (+25,9% to his position, now 4,6% of his portfolio).

Facebook
Pat Dorsey (+35% to his position, now 25,5% of his portfolio);
Michael Burry (new position representing 12,7% of his portfolio), I don't know who is this guy BTW;
Seth Klarman (new position representing 4,9% of his portfolio).

Berkshire Hathaway:
Bill and Melinda Gates Foundation (reduced their position by 10%, now 47% of the portfolio);
Allan Mecham (reduced the position by 26%, now 38,3% of the portfolio);
Glen Greenberg (+18%, now 18% of the portfolio);
Bill Ackman (+36%, now 15,2% of the portfolio).

Many other people were active on these 3 stocks. I neglicted some of them. You may look by yourself because there's a little bias here.


vendredi 15 mai 2020

Discipline

Here's my birthday once again and here's the moment to take a look at my portfolio over time.

More precisely, heres the growth of my portfolio from mid-may to mid-may, since 2009.

2009: year 0
2010: 75%
2011: 41%
2012: 38%
2013: 31%
2014: 50%
2015: 54%
2016: -8%
2017: 22%
2018: 19%
2019: 32%
2020: 16%

Compound annual growth of the portfolio from may 2009 to may 2020: 34%.

In other words, my portfolio grew by 22 times since 2009.

The important thing to notice is that this growth is in absolute numbers. For instance, if the value of my portfolio was 1000$ in 2009 and I added 750$ to the portfolio on may 15th 2010 with a 0% increase of value of my shares during the year, I would set 75% as an increase of the value of my portfolio. So, that tracking doesn't show the performance of my portfolio at all. And it doesn't matter that much for this post, because that's not my goal to write about performance.

To me, the most important thing, just after finding an approach that works, is to have the discipline to invest more money on your portfolio, every month and every year. That means saving as much money as you can (if you're able to save 50% of your net income, that will make a huge difference over time).

Since 2018, I write a post around may 16th which is titled "Discipline". Because I think that discipline is the recipe of my success, if I can qualify my performance as a "success". I've bought a lot of crappy stocks, I've done some terrible mistakes. But my savings did a substantial difference in the end.

If you're in your 20's or your 30's, go for 10 frugal years and see the impact 10 years later. Your frugality will bring you a freedom that few people have around you. And you won't have that much to care about saving any more money.

That's very important to be free. Perhaps you don't understand that when you're 25, but when you're 40, you must be pretty stupid if you don't see the priceless value of getting rid of any financial stress.