Charles Schwab (SCHW) VS Ameritrade Holding (AMTD)

If you follow superinvestors transactions, you've probably seen that Charles Schwab is a favorite stock of many superinvestors. Lou Simpson, Lee Ainslie, Bob Goldfarb (Sequoia) Thomas Gayner and François Rochon are some of the good names associated with the stock. 

On the Ameritrade Holding, there's only Chuck Akre. 

But what exactly do these similar companies?

Both offer brokerage services. And Charles Schwab seems to offer some other financial services which are not offered by AMTD. To make it short, both are financial companies. 

Here's a few numbers:

SCHW

Annual EPS Growth last 5 years: 12%

Estimated annual EPS Growth next 5 years: 16% 

Earnings predictabiliy according to Value Line: 85%

Dilution over the last 3 years: 1%

Current PE ratio: 17

Forward PE ratio: 14

Forward PE VS last 5 years historical PE: 50% discount

ROE last 5 years: 12

Beta: 1,2

AMTD

Annual EPS Growth last 5 years: 12%

Estimated annual EPS Growth next 5 years: 18% 

Earnings predictabiliy according to Value Line: 80%

Dilution over the last 3 years: 6%

Current PE ratio: 16

Forward PE ratio: 11

Forward PE VS last 5 years historical PE: 50% discount

ROE last 5 yers: 16

Beta: 1,2

Over the last 12 months, both stocks have beaten the estimates on every quarter. 

So, there's an interesting momentum here. And both stocks are cheap on an historical basis. However, there's a reason for that: their Beta is moderately high and both stocks are sensible to the general state of the economy. 

Both stocks appear interesting but I prefer AMTD. Why? A better ROE, a better growth ahead and a better performance over the last years. 

I prefer stocks with a low Beta, but a little percentage of a portfolio for these stocks wouldn't be a bad idea. They're cheap and highly predictable, two great advantages for a portfolio. 

IPO of the day: Lyft

Today, Lyft had it's IPO. For those who don't know Lyft, it's a competitor of Uber. For those who don't know Uber, I feel bad for you. 

Once again, the IPO implied a crazy valuation. 

We're talking here about a company that's been valued 27B US dollars and that had a loss of 911 million dollars in 2018. So, the company isn't making money, but people are crazy enough to pay 80 US dollars a share for a company that doesn't even have positive EPS. 

And let's talk about the moat of the company. What kind of moat is it exactly? Is it different from Uber? Or is it different to any other business model like Airbnb where the platform links the customer to any improvised service provider? 

No. 

Sometimes, IPOs lead to a good performance for investors, when we're talking about a unique business model. Facebook, Dollarama, Visa and Mastercard are a few examples of IPOs where the price asked was high but where performance was delivered before and after the IPO. But these few stocks about very special examples. I'm not a specialist of the taxi industry, but I don't see how someone could pay a very high price for that kind of company that could be emulated by anybody.

I don't see a bright future for Lyft. 

Let's see next year how wrong or right I'll be. Or, let's see in 2 years to be sure. 

The unusual meeting: hiking and investment

I've just booked a trip to Newfoundland in august with my son.

It seems like very few investors come from that province. And it seems like nobody cares about Newfoundland. Actually, you fucking people from Toronto probably didn't even know that there was a province named Newfoundland in Canada.

So, who wants to come with my 9 years-old son and I? August 21st 2019, we'll be at Gros Morne National Park in Newfoundland, one of the wonder of UNESCO.

If you want to hike that great place with us, just inform me. We could talk about some shit on the Venture stock exchange while taking a look at the scenery. We must be real autists, talking about stocks while taking a look at a breathtaking scene.

The usual names

The main reason why I don't read analysts opinions anymore or have any interest in various investment forums on the Internet is that these places are full of people that talk about or suggest exotic and esoteric stocks that only surf on a very recent momentum and have very little chance of keeping the pace. 

I'm much more faithful to my stocks and to my "50-60 great stocks to follow" than to anything else. 

What came to mind after some recent results is that the usual names that everybody knows are the best place to look. 

Have you seen the last results of Couche-Tard (ATD-B.TO)? They were great. However, they didn't meet analysts expectactions, so the stock didn't surge. 

Have you seen the results of Boyd Group (BYD-UN.TO)? They were great too. 

Yet, those two names are not new to anybody. Five years ago, a lot of people knew these two stocks. They were great then, and they're still great now. These stocks may drop by 10-15% on a specific year, or they may stall for 2 years, but eventually, they go back on track. You don't experience catastrophes with that kind of stocks. Worst case scenario, you'll lose your time and a few bucks. But your retirement won't be threatened like it would be the case with so many other stocks. 

If you're an analyst or an investor seeking attention and don't follow or talk about that kind of very strong names (Couche-Tard, Boyd Group, Constellation Software, MTY, etc), you don't deserve to be followed by anybody.

So, my advice to any investor would be to find a selection of that kind of stocks and stick with them. When they're too pricey, keep your distance but follow them. When they become cheaper, buy them. Forget the rest of the market.

Repeat until you die. 

What I value the most

I don't like the investment world. Most investors are not interesting people. Most professional investors are crooks and play the game of appearances. When they talk, it's like these gamblers who go to casinos: they only talk about their good moves. They keep the bad ones for them.

In other words, I don't like them and I don't trust them.

What I like about a guy like Be Smart Rich is that this guy is a great guitar player. He showed me a video of himself and fuck, he plays like Eddie Van Halen or some other alcoholic. I like it when something comes from the guts of someone and the investment world is not that suited for that kind of people.

When I take a look at my portfolio, I can see that I have much more money in it now than 5 years ago. And way, way way more money in it than 10 years ago. But am I happier? NO. It brought a lot of security and satisfaction, but not happiness.

Actually, I still read a lot about finance and investments. I spend every lunch in front of my computer, eating my food, reading various stuff on the Internet about a company or another. I like that. But it's not an obsession. Anyway, I don't have friends at work and I'm not interested in Instagram or Facebook. I could however play Candy Crush but I'm a male and I'm 30 years too young.

If I had to write a top 4 of the things I value the most in life, it would probably look like this:

1- Experiences (travel, going out with friends and improvise and things like that)
2- Friends and family;
3- Music;
4- Investment.

The things I value the most are related to excitement, emotions and memories. They make you feel alive. That's why I don't really like Warren Buffett. While the old man seems like a very nice guy, he doesn't look interested in anything else than making money. All his life has been devoted to money (and bridge for a lesser part). OK, he may play a bit of banjo or ukulele, but he's not very good. He doesn't qualifiy to be an artist.

And that's why I liked Steve Jobs. He may have been a despot and a tough guy to deal with, but fuck, he had something in his guts. He wasn't just a fucking playboy like Bill Ackman.

I think that's the point: I associate a lot of investors to Bill Ackman.

Visiting Five Below

I'm still in Florida, still enjoying the weather, the water, the bikinis and the key lime pie. Holy fuck, I realize how much I hate my canadian life while I'm here.

Yesterday was my second visit in a Five Below store (just a few meters away from the Ulta Beauty shop). I was mostly there to buy some candies, because my son and I love Skittles. Even if it was my second visit there, it was the first one as a shareholder, So, I took a deeper look to the store, once again with my sister who's a shareholder too.

Here's my beautiful son, pushing the door to enter a Five Below. Notice the beautiful immaculate blue sky. How I fucking hate Canada. 

The sugar section: nothing really better than a Dollarama or Dollar General and a similar price, but a better presentation.

Look above: some cheap banjos and ukuleles that probably stay in tune for a few seconds but that you could give to your kids who probably don't care about the tuning of an instrument. They'll make irritating noises anyway. 

After a nanosecond in the shop, I notice that the floor looks as cheap and dirty as the usual american dollar stores. That's great. They put little money in general aspect of the store. And people like it when it's dirty. They think that dirty = cheap. So the more there's crap on the floor, the more customers come back. That's a marketing trick. I've already written about that in the past (about a Ross Store).

Second, the shop is divided by big sections in a way more interesting than Dollarama, Dollar Tree or Dollar General. The customer's experience is more interesting here. There's more colours and more atmosphere. I'm sure that kids prefer that to Dollar Tree or Dollar General.

1,9 LBS of sour candies for only 5$, now that's what I call a deal!

The tech section where you can buy a case for your Iphone for 5$ or less, which is way better than these fucking Best Buy shops where some cases are sold for more than 50$. Ok they're probably in Kryptonite or some other mystical material, but it's crazy to pay that much money for a fucking case. 

All in all, I like these stores. The experience is nice, the prices are nice, it's for everyone, but probably a little bit more for kids than the usual dollar stores.

I like it. More edge here than with Ulta Beaty.

Visiting Ulta Beauty

Every year, I come to Florida. It's the occasion to visit some great companies that aren't present in Canada.

Today, I've visited a Ulta Beauty shop. Here's the images taken by me, around noon, on march 6th, 2019 in Dania, Florida. 

My sister was with me. And my mother went there a few weeks ago, so I have the opinion of two women. 

First, an Ulta Beauty shop looks exactly like many other beauty shops. In Quebec, we have "Sephora", which is exactly the same kind of place (well, maybe there are some differences but on the general atmosphere aspect and on the products level, it's probably very similar).

My sister and mother told me that it was expensive. Not exactly "very expensive", but not cheap either. So, their advantage is not on the bargain side.

However, they have a lot of stuff. So, like my sister told me, perhaps that Ulta Beauty is the place to go when you need some specific stuff.

I've stayed there only for a few minutes. The edge of the business didn't strike me at all. And while it's a very very good business on paper, the moat seems pretty narrow. Probably that girls like to touch, smell and see the beauty products they use. They probably like to get the services of a beauty professional. But many girls may also use Amazon after they found what they looked for at Ulta Beauty. 

I'll keep my shares for the moment. But it's surely not a "to the death" case of ownership here. 

GDI integrated facility services (GDI.TO)

GDI is an interesting canadian stock. It's the equivalent of MTY in the cleaning sector. They play the game of acquisition in a sector which is immuned to technology and that's an essential service. Because nobody likes to work or shop in a place full of piss and traces of shit.

It's a good sector. But GDI has had some tough years in the recent past. Things are looking better now. Actually, the last results were pretty good:

Q4 2018 revenue of $303.3 million, an increase $55.7 million or 22.5% over Q4 2017

Q4 2018 Adjusted EBITDA1 of $18.4 million, an increase of $4.3 million, or 30.1%, over Q4 2017

Q4 2018 net income of $3.6 million, or $0.17 per share compared with $3.4 million or $0.16 per share in 2017.

On an adjusted basis, results were pretty good. On a regular basis, not so good (0,17$ per share VS 0,16$ per share last year). But, so far, it's still interesting. Let's continue...

Forward PE: 29
Average annual EPS growth last 5 years: -5%
Market cap: 475 M$
Current ROE: 5
Average ROE last 5 years: 1
Beta according to Yahoo Finance: 0,30
Free cash flows: Very interesting lately, but not so good a few years ago.

It's enough for me. With such a high forward PE, such a low ROE and such very ordinary results in the past, I wouldn't pay 29 times next year's earnings.

I wouldn’t pay that price with Constellation Software. Si, why should I pay that price for a stock which is very far from Constellation Software on the quality scale?

I'm not interested to go further. Maybe I'll miss something, but there's a lot of much more interesting occasions out there with a better track record. 

Reader's mail

Once in a while, I get some emails from all sorts of people. Usually, these people want my opinion about a specific stock. They're probably insecure about it and they're looking for someone to stand by them, because they probably feel alone.

When I answer to these people, they usually don't reply. Well, most of the times, my answers are laconic because I simply don't understand why they need my opinion. This blog is mostly for entertainment purposes, not for educational purposes (even if there's some not too stupid stuff sometimes).

That's why I'll always stay under the radar and why that probably not any big firm will approach me to offer some 500 000$/year job. I simply swear too much. And I have the bad habit of writing the word CUNT in capital letters in sentences where it doesn't belong at all. That's what happens when english is not your first language. You find it very funny to swear a lot and say nasty things. Did you know that in french, a CUNT is a PLOTTE? Here we go, another nasty sentence which will keep me away 5 more years from a 500 000$ job in a big investment firm.

You know what? I'd like to monetize this blog. OK, there's some ads here and there to monetize it, but that gives me about 100-150$ a year. It doesn't even pay the grocery for one week.

But, even if I have a job with a very, very good income, I'm still dreaming about the wonderful possibility of a job in the investment field. There's some bloggers who achieved to get that opportunity. But I won't. Because I keep on swearing. Again and again.

Anyway, I'd like to make money with my investment knowledges. I'd probably get more satisfaction with 1000$ made with this blog than 100 000$ done with my job. Because that's not a task for me to write stuff here or to analyze some stock.

So, when I received the following email, I was interested:

********

Mr.  Penetrator,

I am a regular reader of your blog and I really am impressed with your knowledge,guidance and free advise. Though it is difficult for me to sometimes digest your language, The content makes me come back to your site often.

The purpose of my email is do you offer any service to let people know of your stock portfolio and just keep updating the changes to them. Simply put if I would like to know your portfolio and it's continuous updates along with percentage investments, will it be possible for you to share with a fee?

Please let me know.

Thanks

Mallik

***********

Hello Malik,

Yes, it would be possible. So, in other words, you'd like to pay a certain amount to know the exact positions in my portfolio?

Penetrator

*********

Yes please.

*************

Monsieur Penetrator

Mon 2019-02-18 6:34 AM

Mallikarjuna

Ok, make me an offer!

*************

Monsieur Penetrator

Mon 2019-02-25 10:02 AM

Mallikarjuna

What is your offer?

************

Monsieur Penetrator

Fri 2019-03-01 9:51 PM

You've had me. I can't wait anymore. Give me just a few bucks (3 or 4$) and I'll tell you everything. 

Sadly, that guy never replied. It's probably a fake email by some motherfucker who wanted to see if I'd finally give my secret portfolio. As you can see, I'm a real easy whore. If you just ignore me after an obscure offer, you can expect me to drastically lower my price.