lundi 29 mars 2021

Affordable quality

 I just read something from François Rochon about stocks. The title is "affordable quality". 

First of all, let's say that Rochon now manages 1,6 billion dollars. Yes. A fucking pile of money isn't it? The guy must own a yacht and eat lobster every evening. That's what I would do with my commission on such a mountain of money. I would probably get very horny and enlarge my spectrum of sexual possibilities and do some  expensive drugs too, because money and power bring you to a whole other level. 

Basically, Rochon is  saying that he's looking for the best growth under a limit price (something like a PE of 20). It's a prudent way of investing, but you end up with stocks like Berkshire Hathaway and Merkel. Both are good stocks, but they don't grow that much. But, whatever Rochon says, he buys some very expensive stocks too (Heico, Edwards Lifesciences and Five Below, for instance). They're not high conviction picks like his "cheap" stocks are, but they invalidate his argument of not liking paying something like a PE of 40-50. 

Like I've written lately, I've changed my way of looking at stocks. I'm willing to pay more for a great business that grows a lot. For instance, I would pay 30 times forward earnings for Microsoft, a company with exceptional margins, very high predictability, high ROE and low debt.

A stock that would fit well with Giverny, in my opinion, would be Oracle (ORCL). The growth is OK (about 8-10% a year) while the margins and ROE are great. It's a dominant business and you don't pay too much for it.  It's not aggressive enough for me, but Oracle would go very well with the expression "affordable quality". 

But I'd bet that Giverny would go for Microsoft over Oracle, whatever they claim in this article. 

I really believe in my strategy of paying more for businesses that are way better than any competition. It has a very good effect: it makes you check much less your portfolio and almost never doubt about your stocks. Such things are important for me. 

Yes, "not-so-affordable high quality" is something that suits me better. 

1 commentaire:

  1. J'adore cet article de François Rochon (je ne l'avais pas lu, merci!) J'adore sa façon simple d'expliquer son raisonnement et je m'ennuie de ses articles qu'il écrivait dans The Gazette. Pour Five Below, il aurait payé en moyenne autour de 75$ en mars 2020, donc, à un P/E autour de 25-26. J'aurais aimé ça faire pareil à cet époque, mais esti que tout allait vite durant cette fameuse semaine...