dimanche 27 juillet 2014

dimanche 6 juillet 2014

Outside the crisis: Canadian Banks

Once upon a time, I was a big fan of Canadian Banks. My knowledge was limited about investing, so, I took up every advice from my friend at work.

He was a big fan of Canadian Banks. So I became like him. The first shares I bought were some Nova Scotia Bank shares, in the autumn of 2008. Then, I bought some Royal Bank shares and finally, some TD Bank shares.

I didn't know about the importance of growth at the time. I thought that choosing a blue chip was the most important thing in investing. Yeah, I can hear you laugh, motherfuckers. Laugh at the stupid cunt I was back then.

I sold all of my shares of these banks in 2012. I realized that I couldn't evaluate banks with the same precision as some retail or healthcare companies. So I took a big breath and sold about 40 or 50% of my portfolio in a couple of days. In retrospective, it was a good move.

Because Canadian Banks may be a secure investment. They may be some of the greatest banks in the world. But their growth rate isn't that high. Too many people are blinded by the fact that they're "blue chip" and about their high dividend yield.

Today, I don't own a single company with a growth rate inferior to these banks. Let's take a look at the earning per share (EPS) growth rates of the Canadian Banks in the last 5 years:

Royal Bank: 10,4%
TD Bank: 7%
Nova Scotia Bank: 11%
National Bank: 13,5%
Montreal Bank: 11,8%
Laurentian Bank: 2%
CIBC: -3,6%

That explains why not a single of those banks doubled in the last 5 years while a lot of other companies did.

Those numbers don't mention if the bank made a big acquisition that took a lot of money and resulted in a decline of EPS. So, don't take these numbers at the foot of the letter like we say en français. You should also take a look at the ROE to see the quality of the business.

ROE of Canadian banks is generally good but not excellent (between 15 and 20 for most of them). That's better than keeping some money under your bed, but you could easily find something better in the last 5 years. Just take a look at a chart of these banks VS some great American companies (TJX, ROST, DLTR, GWW, AAP, ORLY, GOOG, etc).

If you compare Canadian Banks with champions of the TSX (Dollarama, Home Capital Group, Badger Daylighting, Enghouse Systems, Alimentation Couche-Tard, Constellation Software, Stella Jones, etc), you'll see that in the long run, a big bank (or a blue chip) isn't generally a champion of performance.

It's mostly a good investment for insecure people or old people about to die.

mardi 1 juillet 2014

Top picks from 2009 to today (Part III: 2012)

Today, we'll take a look at Jason Donville's Top Picks of 2012.

Once again, every Top Pick for which the price has rised from 100% at least gets a rating of "good". Every Top Pick for which the price has rised between 0 and 100% gets a rating of "average". And finally, every Top Pick for which the price has declined gets a rating of "bad".

The Standard and Poors (S&P) index has been up 56% since January 1st 2012. That's why it's still required to get a 100% yield to get "good". 

Precision: Some companies could go private or be bought a little after Jason made his picks. I don't consider anything else than the price at the time when the Top Pick was made and the last price recorded for the shares. Only the result in appreciation is considered.


Paladin Labs: UP 230% (GOOD)
Carfinco: UP 23% (AVERAGE)
Constellation Software: UP 233% (GOOD)


Carfinco: UP 15% (AVERAGE)
Constellation Software: UP 193% (GOOD)
Total Energy Services: UP 25% (AVERAGE)


CGI Group: UP 74% (AVERAGE)
Jean Coutu: UP 55% (AVERAGE)
Paladin: UP 236% (GOOD)


Directcash Payments: DOWN 35% (BAD)
Jean Coutu: UP 50% (AVERAGE)
Paladin Labs: UP 208% (GOOD)


Badger Daylighting: UP 272% (GOOD)
Directcash Payments: DOWN 37% (BAD)
Softchoice corp: UP 70% (AVERAGE)


Badger Daylighting: UP 273% (GOOD)
Enghouse Systems: UP 134% (GOOD)
High Liner Food: UP 79% (GOOD)

A few stats about those 6 appearances on the TV:

1/6, Donville has had 3 good top picks
2/6, Donville has had one bad top pick
2/6, Donville has had 2 or 3 good top picks
6/6, Donville has had at least one good top pick

If we attribute a note of 10/10 for each good top pick, a note of 5/10 for each average top pick and a note of 0/10 for each bad top pick, Donville would get the global score of 125/18 which is equivalent to 6,9/10. So, his top picks for that period were "average plus".