Have you heard about the IPO of Canada Goose and Snap (parent company of Snapchat)?
Both are coming, with crazy valuation and questionable products.
Snapchat :
An app with which you apply a filter on your face to look retard,
recording a short message to send to your contacts. I know that nobody reads blogs anymore. And nobody sends personal messages via Hotmail anymore. Everybody's looking for something quicker and quicker. Like a texto. So, a quick video fits with that era in which we live. But stupid things without any meaning serve which purpose? Entertainment? Yeah, right, but I can't believe that anybody could use that app for 5 years and still be excited about it, even with 2 billion new filters. I may be wrong, but I'd rather stay with retail or healthcare business that exist to make money.
Anyway, if you're a big fan of that app and you think about investing a few thousand dollars with that stock, please read the following line:
LOL. What a FUCKING joke. Who would invest in that stock after reading that fucking line?
And now, Canada Goose : 550$
coats with fur from coyotes or some vanished species (dodo, mammoth, whatever). I thought all they sold was these
expensive coats but it looks like their catalog has increased lately. But, their most popular stuff remains those coats.
Who will fucking buy these in California or in
the United Kingdom? Only people living in a polar climate, like us, fucking
canadians, have some interest in buying expensive coats. Well, for
myself, I can’t buy something more expensive than 150-200$. It’s
absolutely crazy to pay something like 550$ for a fucking coat.
Some would say :
« But it’s the warmest coat on the market! ». I’d answer that, with a
regular coat, I’ve never shivered. I only shiver when I don’t wear
gloves and a hat and it’s fucking minus 30 degrees celcius. My belly
button never shivers. Anyway, if you like to invest in luxury brands,
just take a look at what happened with Coach and Michael Kors. They always go out of fashion, sooner or later. So, why would you pay something like 60 times actual earnings for something that will inevitabely fade away?
Even with great products or great companies, IPO's are usually something to avoid. Except for very few exceptions like Mastercard, Visa and Dollarama, it's usually a very very bad idea to buy something at 40-50 times earnings.
I was on a message board reading comments about Constellation Software. One participant wrote that he recently sold some of his CSU because the valuation seems high. He then went on to declare that he was buying Shopify. Here's a 7 Billion market cap company with no earnings yet. SHOP may be going for about 400x earnings next year. They are expected to be slightly profitable in 2018.
RépondreSupprimerIs Shopify growing like crazy? Are they going to take over the world?
I usually dismiss such companies. The funny thing is that a second contributor echoed the same sentiments on that Constellation Software board (he also sold some of his CSU to buy Shopify).
I try to keep an open mind. At first glance, I thought you guys were crazy to hold Knight Therapeutics. It seems like you are paying a dollar to buy 50 cents. Then I researched CEO Goodman's record and decided to buy shares. Snap and Canada Goose are easy for me to dismiss. But I did buy Knight Therapeutics (Market cap of 1.5 billion and revenue around $4 million). Any opinion on shopify?
As I consider Shopify outside my circle of competence I will refrain from making any comments about it but as I’m a shareholder of Knight Therapeutics I would like to comment on my reasons for buying into it.
RépondreSupprimerFirst of all, I’ve been very partial to spin offs ever since I read Joel Greenblatt’s book on special situation investing. But my main reason for buying into Knight Therapeutics was the CEO, Jonathan Goodman. He proved himself over time with Paladin Labs to be a responsible steward of his shareholders assets. In other words he was a good but careful capital allocator of his company’s resources. This alone was my sole reason for buying into Knight Therapeutics. If management invests its retained earnings in a company productively, over time they will be responsible for the deployment of most of the capital at work in the business. The capital allocation skills of management are one of the most important factors when considering investing in a company, far more important than the next quarterly earnings. But as most of the financial markets are so short term orientated these days the capital allocation skills of management are often not considered when making an investment. In other words it is under used information making it all the more valuable.
I'll weigh in on Shopify. We recently bought a toe dip position for our small cap model portfolio around $65. I'll admit that it didn't necessarily fit our criteria and we bought mostly based on technicals. I have however been learning about their business and I really like what they offer and are doing. There are some companies that Motley Fool like to call 'rule breakers' and SHOP is the latest company to earn this title from MF. They basically provide the IT support and back end for small businesses to sell online. For example, a friend of mine has a brew kit business. I first heard of SHOP from him. He relies on them to be the 'go between' between customers and him. He can track who's visited the site, how long they stay on the site, whether the buy or not etc... The customer can in turn track their order and such... all through Shopify. Shopify has 330,000 customers and has been adding them at a steady clip. There are an estimated 10m potential small biz customers so their growth runway is long. They have also recently integrated their platform to Amazon which I think is huge for them. They have also recently launched Shopify Finance... basically they will provide their customers with small business loans. If you think about it, it's kinda brilliant in that they know EXACTLY how a given customer is doing given they are the gatekeepers of all their transactions. Super easy for them to vet credit risk.
RépondreSupprimerSo they don't look super profitable but their are growing their top line like crazy. Netflix doesn't appear to be very profitable... neither does Amazon or Tesla. I think what we need to think about for companies like these is the extent to which they have an economic moat. If the moat is wide or narrow but widening, I would prefer these companies plow cash flow back into the business and increase their moat rather than show large net income and pay a bunch of taxes. So in this case, I think Shopify benefits from being first to market (I know, weak reason for moat) AND high switching costs. Most small business owners aren't tech savvy. If they find a provider who can do what they want them to do and they have an easy to use and understand interface, why would they switch to another provider unless the new provider severely undercuts Shopify? So it becomes a land grab... and Shopify is grabbing customers rapidly. Lastly, Shopify's moat will no doubt benefit from the network effect; much like Amazon and Facebook. The more nodes to the network, the greater the value of said network. There is also the potential for a whole slew of cross selling opportunities. 325,000 small business owners can be marketed to for other services and products.
Now; I wouldn't sell CSU to buy SHOP, but as I said we have taken a small position and I'm watching their progress with a keen eye. They aren't going to be massive ROE generators in the short term but I think if we can look past the hyper growth stage they will do very well.
I'll also second what Gavin said about Knight. We only own it because of the track record of JG. There's no valuation case to be made here other than management has a proven track record of creating and growing shareholder value.
RépondreSupprimerRe: Canada Goose. I think $550 is cheap for one of their jackets? They aren't super popular out here in Vancouver but when I was in Toronto for the last BNN trip, they are everywhere. IF they can move beyond selling jackets with fur collars, maybe they can do well. I wouldn't touch the IPO with a 10' long raccoon pelt.
RépondreSupprimerI invested in Knight for the same reason as Gavin. I mean there's not too many ceo's who have led a company to 100-bagger status at their previous company.
RépondreSupprimerI do fear one thing. Imagine Goodman gets hit by a car while riding his bicycle?
Here's a passage from the globe and mail dated August 17, 2011:
The aggressive, hard driving executive (Goodman) – at the time the CEO of hugely successful drug distributor Paladin Labs Inc. – had just sealed one of Paladin’s biggest acquisitions ever. Taking a celebratory bicycle ride with fellow employees in the hills north of Montreal, he fell off his bike and hit his head. Despite wearing a helmet, the result was a serious brain injury.//
Goodman recovered. Good news. But you wonder about your investment when it's tied so directly to the unique skill set of a very special ceo. Nevertheless, there are greater risks in the markets than banking on the ongoing health of a ceo under 50 years of age.
I just bought freshii 2 weeks ago! I think its going to do well! So lets all get on the freshii train!!!
RépondreSupprimer