jeudi 21 octobre 2021

Don't talk to me about dividends

It's not my first post about dividends, but I feel like it's my duty to be one of the few people who writes publicly against the importance given to dividends.

Everytime someone writes that he received a certain amount of dividend over a specific period of time, they don't tell us how the stock performed over the same period of time. And nobody becomes rich because of dividends. People become rich because of capital appreciation. 

If you like a business because of it's dividend, it's exactly like liking a business because it gives you some money every quarter. But does the business performs well? The dividend doesn't tells you nothing about that. 

Actually, a high dividend shows that a business cares more about it's shareholders than about itself. 

Yes, that's great to receive money. But what about the company? Does it grow? Will it be much bigger 10 years from now or will it stay the same size? If it stays the same size because it gives all it's money to you and other shareholders, you won't get much richer. You'll just have a sideline revenue that allows you to pay for some luxuries like a few lobsters every quarter. You won't buy a Ferrari with your dividends except if you own 50 000 shares of your favorite canadian bank.

For fuck's sake, chose your stocks among the stocks that have the best growth perspectives, the best profit margins, the best ROE or if it's a monopoly or oligopoly. Don't buy a business because it gives you 200$ every quarter. 

I never talk about dividends with Vicario and that guy, besides being highly desirable, knows what's important to consider. 

Be Smart Rich is desirable too but he doesn't like when I show him my appreciation.

lundi 18 octobre 2021

Inmode ltd (INMD)

My friend Vicario recently told me about Inmode ltd (INMD), a name I never heard about before.

That company offers minimally-invasive products and procedures, such as liposuction and ablative skin rejuvenation treatments. In other words, they help woman who feel old and ugly to feel younger and more desirable. 

With Instagram, Facebook and all these things that put a lot of emphasis on beautiful girls, it's sure that this company has a bright future. Even girls love to watch beautiful girls (probably to be jealous). 

Anyway, the day Vicario told me about INMD, the stock was about 10-12% up on good estimates for the year to come. 

I took a look at the stock and I was amazed:

Profit margin: 44% (that's almost the margins of Visa and Mastercard!)

ROE: 48

Debt level: Very low

Free cash flows: Super great (they were almost multiplied by 6 between 2017 and 2020!)

EPS 2017: 0,14$ 

EPS 2020: 0,89$

Of course, such numbers come with a high price. The forward PE is about 38. 

But that's a fucking lamborghini. It seems to me like a fair price to pay for a lamborghini. 

lundi 11 octobre 2021

Ali Baba and other popular chinese stocks

I've written a bit about chinese stocks in the past and I still think the same about them: they are way riskier than the average nort american stock. In other words, I'd rather pay 40 times the earnings for a high growth american stock than 20 times the earnings for a high growth chinese stock. Why adding the political risk to the financial risk that we already have to cope with? 

But a lot of investors seem to disagree with me. 

For instance, Ali Baba (BABA) is a very popular stock for a lot of superinvestors. Yes, even if Jack Ma (the CEO) disappeared for a while in 2021, a lot of people still believe in this company. On Dataroma, there's 17 superinvestors who own Ali Baba. Some of them have a very large stake of their portfolio on that stock. Here's a few of them:

Greg Alexander: 21%

Mohnish Pabrai: 21%

Charlie Munger: 20%

I don't really know or respect the first two investors. However, I know a bit about Charlie Munger, mostly because he's the close friend and associate of Warren Buffett and because he's very very old and has a very weird face. But I don't think that I like his investing style either (actually, 95% of his portfolio is made of Wells Fargo, Bank of America and Ali Baba... Who would put 95% of their money on these 3 stocks?).  

As a bargain as BABA may look these days, I think that it's not a smart move to put 20% of a portfolio on any stock. And it's worse when it's a chinese stock. 

Here's the performance of some very well known chinese stocks over the last year:

Ali Baba: -24%

Tencent: -13%

Baidu: -11%

Naspers (not really chinese, but south african tighlty linked to China via a big stake in Tencent): -15%

Here's my advice: add 20 to the current PE of a chinese stock that appeals to you. That's the risk factor that you should add to the current price. And then, compare it with any other north american stock. If you still want to invest in the specific chinese stock, then invest in it like a high PE stock. Which means that you shouldn't put 20% of your portfolio on a stock with a PE of 40.

China is a not a democracy. China doesn't allow Google and Facebook on it's territory. China asks for tourists to tell to the authorities where they stay every day. COVID is from China and China is responsible for that fucking pandemic. China is not a good country. 

You still want to invest money in that country? OK, but take all these risks into consideration. 

jeudi 30 septembre 2021

GDI integrated facility services (GDI.TO)

Medici is one of my favorite investment firms. Most of the times, we like the same companies. Also, they're not into bullshit marketing like that sexy girl who says she lost her job in 2011 and then turned 500 000$ into 1.5 million dollars while dancing like she's in a fucking club. How I hate these fucking pretty girls who know how weak are men. 

Anyway, most of the times I agree with Medici, but at first I didn't agree with them about GDI. That janitor company didn't have appealing numbers in the past, in my opinion. Also, I didn't see the future of such a company in a COVID environment where a lot of people work from home. Who needs to clean office spaces when they're empty? That company needs germs and not shit spots in the toilet to be able to survive. 

Well, given the recent results of the company, it looks like offices owners want to clean more than before. I'm not sure if I understand why it happens, but it happens. 

Apart from that, it's not a very sexy industry and I don't see how competition could be a threat for such a business. Actually, GDI is an integrator that buys competitors. So, they are the Couche-Tard of shit spots. 

I still have a doubt about the new work society after COVID. But apart from that, I think that it's a great company which is not too expensive that will remain relevant as long as there will be humans in shopping centers and work offices.  

Here's a few numbers:

FWD PE:  23

ROE: 18

Long term debt: Very reasonable

EPS 2015: 0,12$

EPS 2020: 2,12$

Between june 2020 and june 2021, revenues grew while EPS decreased a bit. However, it's still great given the fact that we went through apocalypse during that time.

A name to remember.

samedi 25 septembre 2021

All 10 provinces

Being a supercanadian who has visited at least one city in each of all 10 provinces, I suppose that I’ve reached a level of wisdom that few people have reached. And that wisdom must be shared.

I must repeat that the only province that I dislike is still New Brunswick. The other 9 provinces had something that appeals to me, some more than the others, of course.

First of all, I declare that, on the architectural and cultural level, eastern provinces are more interesting than western provinces. For instance, cities from Manitoba to British Columbia are usually less beautiful than cities in the east. There are exceptions of course, but Halifax or St-John’s easily beat Calgary or Regina. Actually, Halifax and St-John’s are probably two of the most beautiful cities in Canada and they have a spirit that is not present everywhere in the country of Glass Tiger.

I still have beautiful places to see in Canada. For instance, I’d love to visit Cape Breton Island, some national parks in Nunavut and Yukon, I’d like to see Victoria which appeals to me a lot, I’d like to see Fundy Bay which is probably the only interesting thing in New-Brunswick. I haven’t seen Edmonton but I don’t think I need to see it before I die even if we learned at school that West Edmonton Mall was such an incredible shopping mall with water slides. I guess that the little boy inside of me is dead. 

However, the problem with North America is that it’s just one big uniform culture with 350 million people who speak only English (or Spanish in some parts of the States) and shop at Walmart. The only cultural shock you’ll get is if you come to Quebec and never heard people speaking French before. But apart from that, people from Quebec are exactly the same as you: they shop at the same places and they eat the same things. The biggest difference is that they understand you when you talk in English and you don’t understand them because you only know one language. But it’s just a matter of language. Apart from that, most of us want abortion for our females and don’t want murderers to be killed on the electric chair. 

Also, It’s impossible to eat a pangolin or a bat in North America and that’s what makes us all the same.

I dream of a country with dozen of different languages, religions and political regimes.

I dream of something like the Balkans in 1913. 

lundi 13 septembre 2021

Intuit (INTU): A great company

Intuit (INTU) is an excellent example of the kind of company that everybody should follow. I've never been a shareholder, but I've followed that company for years. And one day, I might buy shares. 

It's a very simple company: they produce tax softwares for individuals, companies and accountants. Plus, they own Credit Karma (on which you can see your credit score). And today, we learn that they buy Mailchimp (a kind of Shopify) for 12 billion dollars. It's a huge acquisition. 

Here's what's great with this company:

First of all, it operates in a boring industry where fad has absolutely no importance (contrary to clothes, to restaurants, to technology). Nobody talks about trends related to tax software. Then, it's a dominant company. It's not a monopoly, but it's a bit like Microsoft: it's the biggest in the industry. 

Everybody or so buys such a software every year. As the population grows, that company has more and more customers. 

Intuit has a very small debt. Their cash flows are growing, year after year, like very few companies can do (EPS growth is good, but it doesn't show everything while cash flow growth is more revealing of the greatness of a company). 

Plus, their profits margins are great (21%) and their ROE is 27. Very few companies have that kind of margins and ROE. 

To see how great it is, you have to analyze about 100 companies. Then, you'll see that Intuit is among the best 5%. 

All you have to decide is if 40 times next year's earnings is too expensive for you. 

samedi 11 septembre 2021

The impact of a catastrophe on the stock market

Today, it's been exactly 20 years since september 11th, 2001. I won't tell where I was or what I was eating because nobody cares. 

However, I think that it's important to remember what happened to the stock market. Because, sooner or later, a similar event may happen. And the reaction of the market may also be similar.

Here's a chart about what happened between august 31th and december 31th (2001). 

On the chart, we can see the S&P and one of the biggest canadian companies (Royal Bank) and one of the biggest american companies (Microsoft).

First, the S&P was down about 10% right after the explosion of the towers. At the last day of the year, the market was up by about 26% (from september 11th to december 31th). The variation of Microsoft and Royal Bank is less impressive, which shows probably that blue chips are less affected by panics than small or medium caps. That's my personal hypothesis. I may be wrong.

Actually, we don't even have to think about 9/11 because COVID had much more impact on the market about one year and a half ago. 

Fact is that so far, there's not a single catastrophe that had a negative impact on the market in the long term. Of course, catastrophes may have a huge impact on certain sectors of the economy, but when you have a diversified portfolio or you invest on the S&P500, you always recover and, most of the times, the recovery is quick.