dimanche 18 avril 2021

Quebec Inc.

There was an interesting article this weekend about "Quebec Inc.". It said that the market cap of all Quebec companies went over 500 billion dollars this last quarter.

That's quite a lot of money for my less than 9 million inhabitants province. Actually, some of the best canadian stocks are based in Quebec. Let's see the list and the performance of these stocks over the last 5 years:

1- Canadian National (market cap: 105B$): Performance last 5 years: 83%

2- BCE (Bell) (52B$) Performance last 5 years: -2%

3- Couche-Tard (45B$) Performance last 5 years: 43%

4- Banque Nationale (30B$) Performance last 5 years: 107%

5- Groupe CGI (28B$) Performance last 5 years: 75%

6- Power Corporation (23B$) Performance last 5 years: 15%

7- Dollarama (18B$) Performance last 5 years: 89%

8- Saputo (16B$) Performance last 5 years: -5%

9- Metro (15B$) Performance last 5 years: 31%

10- Bausch Health (13B$) Performance last 5 years: 10%

Of course, there are some bad businesses on that list. For instance, Bell Canada is a very very bad business for it's clients. I've been with that company and I've had tons of problems with their monthly bills. I really hate Bell and their negative performance shows that, even on the financial side, they're bad. 

I don't know that much Saputo, but I don't like the face of the father who runned the business before.Their performance sucked. What's wrong with them? Around me, people are still eating cheese, so why can't they perform better?

Bausch Health is the new name of Valeant. That company is like plague to me. I'll hate them forever, even if they change their name once again. Even if they would find a cure to COVID, I would still hate them for what they did to my portfolio. And what happened to fat Mike Pearson? Did he die of cholesterol? 

Apart from these three names, there are 5 great companies (Canadian National, Couche-Tard, CGI, Dollarama and Metro... and I'd dare to say that Banque Nationale is great too, but I don't like banks that much). These are 5 world-class stocks. Not bad at all. 

mardi 13 avril 2021

Microsoft 20B$ acquisiton

Microsoft recently announced the acquisiton of Nuance Communications (NUAN) for 20 billion dollars.

Given the fact that I knew jack shit about Nuance before the announcment, I thought that it could be a good idea to analyze the company a bit, just to see if that acquisition makes sense. 

I'm a bit worried about big acquisitions since the acquisition of Family Dollar by Dollar Tree (DLTR). That huge acquisition has been a mistake, because Dollar Tree overpaid. Since the acquisiton, Dollar Tree hasn't performed very well. It made me understand how the price paid can turn bad for a company. And there are worse examples, like Valeant that bought many companies and got an incredibly huge debt. 


But let's go back to Microsoft and Nuance...

Over the last 5 years, NUAN revenues have decreased, from 1,9 billion dollars in 2016  to 1,5 billion dollars in 2020.  For the same period, EPS went from 0,07$ to -0,04$. Free cash flows have been positive every year since 2016 but are decreasing too...

Debt VS earnings is very high. It could be a burden, but after being mixed with Microsoft, the debt will look unsignificant.

ROE has always been low for NUAN (negative or under 10). 

With more than 130 billion dollars on hand, Microsoft can buy Nuance without any problem. It won't make any difference for us, shareholders. So, even if they overpay for it (they actually pay something like 65 times forward earnings, which is a lot for a company with such a track record), they'll still have plenty of money. 

Given these numbers, I'm not seduced at all by the acquisition. But what I lack is a comprehension of the possible synergies of both companies. Does Nuance offers something about Artificial Intelligence that will get bigger and more popular via Microsoft? I hope so. The market seems to be positive about the acquisiton, because MSFT went to a record level yesterday. 

I have no problem at all of keeping my MSFT shares. I still love that company, which is one of the best in the world in my opinion. 

I'll wait to see where it's heading. But I can't write an excited post for now. 

jeudi 8 avril 2021

A walk in the neighbourhood

I was walking in the neighbourhood around noon and I heard two construction workers talking about Bitcoin. These guys were probably a bit younger than me. Let's say around 30-35 years old. One of them said that one of his friend bought Bitcoins for a value of 30 000$. I didn't hear the rest of the story but I presume that this money was multiplied. And that story is probably now a legend among construction workers of how easy it can be to make money with Bitcoin (or on the stock market). 

Do you meet people who talk to you about Google, Microsoft or Nike? Me, never. People who talk about investment only talk about trends like Bitcoin, Weed, or some new pharma making drugs with dicks of endangered species. If Internet wouldn't exist, I would feel very alone with my conventional companies.

You've probably read or heard that numerous times: getting richer slowly is something that works. Of course, it implies that you have to be able to select good stocks. 

Today, I've reached another round number for my portfolio. It goes up more and more and quicker and quicker every year. Not in a relative way, but in absolute numbers, my portfolio grows a lot (I'll come back to that around my birthday as I usually do every year). But, let's say that, over the last 8 years, my portfolio was multiplied by 8 (I won't reveal the numbers, but let's say that it was much more than from 1000$ to 8000$). And since july 2018 (less than three years), my portfolio doubled.

Of course, it's not only a question of good investments. It's also a question or annual income and expenses. For these two things, I do pretty well. Combine that with a good stock selection and you'll probably be able to enlarge your penis and import russian girls. 

But, anyway, the point of this post would be to tell to everybody to be very cautious abut these fads about the next big thing. Today it's Bitcoin. Yesterday, it was weed.  Tomorrow, it will be some other stuff. You may jump on the train for Bitcoin or some shit, but not for 30 000$ for FUCK SAKE. If you put 30 000$ on Bitcoin and you're not a dentist, you deserve to lose your money because you act like a fucking retard. 

Why the fuck do some people have so much money to gamble with? 

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. 

lundi 22 mars 2021

4 personal rules for buy and hold

You've probably heard a hundred times that you should buy and hold. Or buy great companies, then sit on your ass (Munger) or that investing is transfering money from the impatient to the patient (Buffett). 

I agree with that. However, a sentence related to buy and hold implies some facts. 

1- You have to hold really good companies. To be sure that you own a really good company, you must be able to compare that company with hundred of others. And you have to be able to understand that this company offers something unique, or, at least, something much better than many companies. The beginning is usually a great track record. 

2- You have to follow that company closely. If growth slows down, you have to be able to understand if it's temorary or permanent. A good way (but not efficient 100% of the time) is to look at competition. Are all competitors affected the same way by a slow down? If the answer is yes, then the problem is the economy, not your company;

3- A real "buy and hold" company is a company related to something that shouldn't change with progress. Waste management companies are a great example. Whatever happens with the electric car, with Google, Facebook, humans will always produce waste, and more and more waste every year. Railroads are very good too for buy and hold: there will always be transport of merchandise.

4- If something stinks, like something related to integrity of management, fraud, or stuff like that, the company should go on the hot seat. It may not always be the right thing to sell. However, I'd rather be safe than sorry. You should too. 

These are my 4 personal rules for buy and hold. If I own something that I like, I try to apply these rules. And yes, there is nothing related to the valuation of stocks anymore. It matters, but not as much as these 4 rules. Of course, a PE of 100 or 1000 is crazy, but sometimes, it may be a good idea to own one of these stocks, for a slight part of your portfolio. 

Any other rule suggestion?

vendredi 19 mars 2021

How to get richer

I've said it many times: After 40, you should think much more about your comfort and invest less money. Because if you've worked right since your 20's, you'll probably be at a place where any extra money saved from your income is useless. That's maybe the case for me now. 

That's what Jarislowsky told in his book and that's what a girl whom I've worked with before learned me indirectly via Facebook yesterday. That girl was a very hot chick 15 years ago but is now dying of multiple sclerosis. She's younger than me but she's almost blind and almost paralyzed. She lost a lot of weight too. Oh my friends, how beauty is temporary...

So, here's my advices to get richer and stop saving money at 40-45 to enjoy life a bit before your senses become affected by a disease or another. Because they will. 

1- Don't buy a house too big and too expensive. Many expenses are related to a house (taxes, electricity...). Do you want to be stressed about your payments? Do you want to spend all your free time in your house? Do you want to die before the mortgage is entirely paid? 

2- Don't buy a car if you can live without it. Of course, many people can't live without a car, but if you don't have kids and live downtown Toronto, maybe you can live without a car, which is a substantial waste of money. However, I know that many people couldn't live without a car. Me included. Anyway, if you need to own a car, don't buy a Ferrari. 

3- Shop at Costco instead of any grocery. Costco is way cheaper and the quality of food is probably better than many other groceries. However, don't buy stuff you don't need. If you buy food, eat it.

4- Buy your clothes at Winners (in Quebec) or Marshalls (TJX), or any similar apparel shop. You'll spend much less and you'll get very nice clothes. You can also buy some clothes at Costco. And, for kids, you may use Marketplace, on Facebook. Very usefeul for winter coats for instance.

5- Cheap stuff for kids such as candies should always be bought at Dollarama instead of any convenience store. Close to my home, there's a Dollarama and there's a Couche-Tard 50 meters away . If you buy Skittles at Couche-Tard, you'll pay 3$. If you buy them at Dollarama, you'll pay 1$. You won't save thousands of dollars with candies, but if you have young kids, it may be an interesting way of saving some money.

6- Bring your lunch at work (if you ever go back to work after the pandemic). Some people eat in a restaurant every day. It probably represents close to 100$ a week. That's a lot of money on an annual basis.

7- Check your telecom bill. If you pay 200$ per month, there's something wrong with you. I pay about 70$ every month for Internet (unlimited) and the phone. I don't pay for cable TV. You shouldn't pay for it too. Just plug Internet on the TV and you'll be able to watch Netflix and Youtube. All the major networks are accessible via Internet.

8- Buy used stuff as often as possible. For instance, for sport equipements. 

It's possible to apply all these advices without actually looking like a fucking hobo.

The goal is simply to eliminate every useless expense. Buy the best that's available at the cheapest price. Costco is the answer to a lot of your needs at the lesser price.

After this epuration, put your money where it's really important: on the stock market (for your security and the security of your familiy) for the education of your kids, for some comfort (stuff in the house that's useful), for travel , to go out with friends in bars and restaurants once in a while. To buy a good wine, a good wisky or some excellent canadian cannabis. 

Well, in other words, to buy something that really makes you happy on a regular basis. 

If it's a Harley Davidson, then buy it (if you plan to use it regularly). Because, don't forget: life is short and sometimes, you don't die quickly. 

Sometimes you die slowly and painfully. And during that time, you're too sick to be able to go 180 km/h on your motorbike. 

So, do it now. Buy the motorbike you've always wanted . Then go for a very quick ride on the highway, wih shorts, T-Shirt and without a helmet. It's now or never.  

vendredi 12 mars 2021

5 years and a half later : a return on Carmax and Lithia Motors

Almost 5 years and a half ago, I wrote a post about Carmax (KMX) and Lithia Motors (LAD), trying to determine which one was the best stock to own.

Considering some metrics, it was obvious to me that Lithia was a better investment than Carmax. However, Carmax seemed at least OK. 

In the following years, I've bought and sold Lithia Motors and Carmax shares. Sadly, I'm no longer a shareholder of any of those, because I got tired of some short-term stagnation at a moment or another.

Just before switching to the performance of both stocks over the last 5 years, let's remind that it was obvious that this industry wasn't exposed to some important threat. In other words, investing in auto sellers didn't seem very risky back then and is probably not riskier today. It was not at all like finding the next big thing.

Performance since april 1st, 2016

Lithia Motors: 330%

Carmax: 187%

S&P500: 91%

Once again, when you've found a good or great company that has a great track record and operates in an industry that isn't changing fast, stick with that stock. 

Go take a 5 years walk and take a look back at that stock once you're back home.Most of the time, you'll be satisfied.