jeudi 18 août 2016

Analyzing Giverny Capital (EDIT)

This guy may be unknown in the rest of Canada, but in Quebec, François Rochon and his fund, Giverny Capital, are known by many investors.

The results of the fund have almost always been great. I believe that Rochon has been influenced a lot by Sequoia Fund. His stock selection has always been pretty solid. In fact, in my opinion, he's better than a lot of superinvestors.

Here's a very interesting article I found yesterday. It presents Giverny's top 5 positions (about 26-27% of the total portfolio). It's not a magic portfolio (high ROE and low PE). It's more a moat portfolio. 

EDIT: These are not the 5 biggest positions of Giverny Capital. They're 5 favorites of the fund, but they represent a big part of it anyway. Merci à Etienne Pouliot. 

1- Carmax (8% of the portfolio): I prefer Lithia Motors (which I own) to Carmax but that business is solid. However, I wouldn't put 8% of my portfolio in something that much related to the general state of economy (Beta = 1,5). You may say: "Used cars aren't that impacted by a recession", yeah, right, but drugs aren't affected at all by a recession.

2- Disney (7,7% of the portfolio): Good company, grows in a steady way. Temporary problems for Disney but I don't see why the company couldn't get back on track. The ROE is good but not spectacular. I may buy shares someday because that company has a great moat and the balance sheet is very good. Sometimes, I wonder why Apple doesn't buy Disney.

3- O'Reilly (4,2% of the portfolio): Incredible company with a very high ROE. But it's very expensive. I prefer Linamar, which is less incredible but way cheaper, and still good.

4-  Mohawk (3,5% of the portfolio): That stock was one of the worst performers of Sequoia Fund for a couple of years. However, the growth is back in a spectacular way. The PE ratio is at an historical low and the growth is almost at an historical high. The ROE is OK but not great. I may buy some shares of that company too because management is very solid and that business has a great moat (leaders of the carpet).

5- Fortune Brands Home & Security (3,2% of the portfolio): I didn't know about this company. After a quick look at number, I'm not interested by it. The ROE is average and the PE is high. The growth in the last 5 years has however been impressive.

As I said before, I'm more a guy of balance sheet and high ROE. But moats are very important. And Giverny Capital seem to be looking for moats first and foremost.

It's a lesson for me.

14 commentaires:

  1. I'm a big fan of Rochon, so much that I'm thinking about starting a blog : "Don't fuck with Rochon" !

    The article do not list his biggest position, just the position the author think are nice. If you want to see his full portpolio (excluding canadian stock) :

    Giverny Capital biggest position is Berkshire at around 18%. Further more it's the stock that he allow to have more than 10% weighting.

    Just think of it that way, this guy keep on beating the market, even tho is biggest postion (BRK) is underperforming for many years. That just show how good he is.

  2. I became a big fan of Francois Rochon when you introduced him some time ago. I really like his investing style and news letter although some section is for members only. It really seems Francois moats oriented investing.

  3. Actually his main strategy is really simple, find reasonably valued stocks that can grow earnings fast and hold for a long time.

    Moat does heal to grow EPS but it's not an absolute necessity. For example he is a big fan of MTY wich I do not think have a huge moat.

  4. Hey Etienne and Penetrator, Is there anyone else like Donville and Francois? I found reading their news letters are quite entertaining and educational.

    1. I like Francis Chou and Barrage Capital (not sure if he write in english).

      But those two are more value than grow.

    2. I also really enjoy listening to the investor podcast with my phone while driving :

  5. The Sequoia Fund's report should be out this summer. It's my favorite reading. Try that.

  6. I am also an admirer of Giverny Capital.

    But note the small print on the returns: "For example, cash deposits and withdrawals can increase the returns of the Rochon Global portfolio." I suspect that a few percentage points may be because of this "timing", and not just selection of good companies.

    Still, I think selection of companies is a large driver of the returns.

    1. My Returns (2017) matched exactly to the returns published

  7. I just bought some fuckin DCM-T stock at $3.65 today. It was a $500 stock back in the day. It is being restricted and has a high ROE! Any fuckin comments would be appreciated!!!