lundi 28 septembre 2015

Ayoye tabarnac

Today, I've been feeling like I had a pole in the cunt. I don't really know how it feels because I actually don't have a cunt. But, two of my favorite stocks, Valeant and Concordia Healthcare, are down like crazy these last days.

Concordia lost about half of it's price in the last weeks and Valeant lost about 1/3 of it's price in the last days. These two represent a big part of my portfolio so it hurts a bit. But, in a way, it doesn't hurt that much because these two are down for no dramatic reason.

Valeant is down about 20% because of an Hillary Clinton tweet about abusive drugs price that had repercussion among the american politicians.

Concordia is down about 50 fucking percent because of a public offering and maybe because of the politicians discussions too.

Not any of these companies has released bad news. It looks to me exactly as the same thing that happened to Visa and Mastercard 3 or 4 years ago, when the governement talked about abusive fees for credit card companies. These two stocks were down a lot and bounced back like fuck months after.

It's a little panic now. The panic won't last forever. Cash is king and pharma stocks are full of cash. And more, some pharma like Valeant, Concordia and Allergan seem 100% commited to value creation for shareholders.

Can you imagine hundred of billion dollars vanish from the market if american government regulates drugs price? What kind of government would like to be responsible for that?

mardi 22 septembre 2015

About excitement (EDIT)

One of the things that make me the most angry about human nature is when I see that Jason Donville says that company X is his top pick and the day after, a bunch of brainless assholes buy without any reflexion. I was like that about one or two years ago. It reminds me how a brainless asshole I was back then. Now, I'm much more mature (36 years old instead of 34).

At least, these people follow Jason Donville you may say. Yeah, you're right, they don't follow some fucking technical analyst who's saying that he sees some fucking pattern in a curve. Some fucking shape of a cunt. 

Some people keep asking me what I think about two stocks in which Donville seems to have a lot of convinction: CRH medical and Patient Home Monitoring.

I've written about Patient Home Monitoring before. So I won't write a lot about it, but let's just write down some important information.

Patient Home Monitoring (PHM.V)
Market cap: 225 million$
EPS last quarter:  -0,06$
EPS 2015 estimates: -0,02$
EPS 2016 estimates: 0,11$ (which seems pretty optimistic)
Actual PE ratio: Negative earnings. Fuck the PE ratio.
Forward PE ratio: 6 (for very optimistic analysts. How could a small cap go from -0,02$ to 0,11$ within a year?)

CRH medical (CRH.TO)
Market cap: 328 million$
EPS last quarter: -0,01$
EPS 2015 estimates: 0,11$
EPS 2016 estimates:  0,20$
Actual PE ratio: Negative earnings. Fuck the PE ratio.
Forward PE ratio: 25 (for very optimistic analysts. How could a small cap go from 0,11$ to 0,20$ within a year?)

Big point: The track record is small for these two companies. More, activity in these companies is pretty recent (about one year). Before, nothing seemed to happen. So, they still have to prove that they can acquire other companies in an accretive way. THEY'RE ABSOLUTELY NOT IN THE SAME LEAGUE AS COUCHE-TARD, CGI OR CONSTELLATION SOFTWARE.

Let's compare with Callidus Capital, a financial company which I like but which is new on the stock market (so, the track record is small there too). Take note that the market doesn't like Callidus because it lends money to distressed companies. However, management is buying back a lot of stock recently and they initiated a 5.5% dividend too.

Callidus Capital (CBL.TO)
Market cap: 603 million$
EPS last quarter: 0,36$
Actual PE ratio: 9
Forward PE ratio: 6,6

I don't see a lot of downside possible with Callidus and I can see that management believes in the stock. The street seems to loathe Callidus at the moment. But I'd buy it before CRH and PHM even if Jason Donville has said that he didn't like Callidus the last time he was on TV (some months before, he said he liked it though..., it looks like he doesn't always take the time to analyze everything he is talking about, just like you and me).

samedi 19 septembre 2015

Portfolio review - september 19th

A lot of selling and buying has been made in the Penetrator portfolio in the last days of august. I was disapointed with the results of some of my companies, I saw other opportunities and I added to my position in some cases.

I sold all my shares of Mallinckrodt, Dorman Products and Cipher Pharma. I initiated a position in Allergan and Chicago Bridge and Iron. I bought more shares of a lot of companies. It's been a while since there was so much activity in the porfolio. In fact, I'm not sure there ever was so much activity in my portfolio.

At the moment, I think there's a lot of stocks that look attractive. Home Capital Goup is still pretty cheap, Callidus Capital is dirty cheap (and the last results were good, such as the 5% dividend recently initiated). I still believe a lot in Valeant and Corcordia Healthcare (they made a huge acquisition recently). In the US, Portfolio recovery, Gilead, Allergan and Chicago Bridge and Iron are cheap. Dollar Tree and Ross Stores are a more expensive, but their price is more fair now than it was a month ago.

Here's the Penetrator Portfolio:

Canadian stocks:

Valeant: 15,1%
Constellation Software: 10,8%
CGI Group: 8,7%
Alimentation Couche-Tard:  7,4%
Home Capital Group: 6,8%
Concordia Healthcare: 6,5%
Nobilis Health: 4%
Knight Therapeutics: 3,8%
Callidus Capital: 2,8%

US stocks: 

Portfolio Recovery and associates: 8,4%
Gilead: 8,3%
Allergan: 5,3%
Chicago Bridge and Iron: 3,8%
Dollar Tree: 3,6%
Ross Stores: 3,6%

Cash: 1,1%

mercredi 9 septembre 2015

About some emails and comments

Since I've written my email adress at the right of this blog, some people have sent me some email, asking me what were my thoughts about this or this company. I've also recieved some comments on this blog, asking what was my opinion about a particular stock.

In the world of investment, the game is simple: be confident and act like you are the best at making great picks. In other words, say directly: "It's a good stock! Buy it!" or "Don't touch that with a ten foot pole!". You'll look great and you'll convince people that your homeworks have been made.

I can't do that. I would feel like a fucking peddler if I did that. I'm not a fucking expert. I'm not sure about my own choices, how could I tell my opinion about stocks which I don't own and which I don't follow closely (I don't even follow that closely some of my own stocks...).

I can see that a lot of people aren't that sure about their investment choices. It looks like some people need to be reassured when they write me a message. I understand that. But I don't feel qualified to hug you and tell you that you made a great decision.

Let's look at this recent email that I've recieved.

I like your blog.

What does Donville Kent think about FOSL? RoE seems high (>20%). CEO doesn't take cash compensation and owns 10%. Has grown EPS at a very good rate for the past 10 years. Market thinks watches will go out of fashion.

1- I don't have an opinion about Fossil (FOSL). Well, I have a tiny opinion, but I've never been interested in that company. I may have an opinion about maybe 100 companies. Other than that, I don't follow everything out there.
2- How the fuck could I know what is the opinion of Donville Kent about FOSL!?!? I've never read anything about that company from the mouth of Jason Donville. Maybe he has an opinion, but I'm not his agent or a relative. I don't even know his opinion about Google, Apple or any other US blue chip. He doesn't talk about american stock, so I just know what is written on I don't represent anybody else than myself and sometimes, I'm not even comfortable to represent myself.
3- Your email says a lot of what I look when I check a company (ROE, EPS growth, insider positions...). You have a part of the answer with these metrics. Except for that, it's a question of moat and I don't really think that Fossil has a big moat, but I may be wrong. I'm not a fashion guy.

In retrospect:

You surely would have liked to read something else, but one of the greatest quotes in the history of humanity is that one from "Thus spoke Zarathustra" (Friedrich Nietzsche): "I wouldn't want to be part of any group that would want me as their leader. Leave me now and I'll be back only when you will all be gone".

It's not the exact words, but the idea is something like that. 

In my opinion, it means that nobody deserves to be blindly followed. 

samedi 5 septembre 2015

The importance of dividends

The first book about investing that I've read was the one from Stephen Jarislowsky. I really liked that book, but as time goes, I can see how it was just an average book.

One of the quotes that had the more resonance for me was the line where Jarislowsky says that he choses to buy stock of companies that offer a dividend because every employee of the company gets a salary. Shareholders should have a salary too. In fact, they're the ones that take all the risk, it's obvious that they should be paid!

That idea became essential for me. How could I choose a company that wouldn't bring me any appreciation and no dividend?

You buy companies that don't offer a dividend? You haven't understand how investment works!

Me, I understand. So, I choose to invest in excellent dividend companies like Yellow Pages.

Eventually, I read a lot of things written or said by great investors. Like that famous Warren Buffett's quote where he says that if a company can reinvest 1$ in a way that produces more than 1$ of profit for the company, that company shouldn't pay a dividend. In other words, a company that invests in itself with great results shouldn't give away it's money.

The words of Jarislowsky were so much printed in my brain that I wasn't sure that Buffett gave such a good advice.

But now, with more experience, I can see that the words of Buffett were right. Dividends are good, but not in every circumstances. 

Constellation Software is a notable exception, but except for that, my best performers pay either a small dividend or no dividend at all. Here's a small list of good growth companies, in Canada and USA. You'll see that most of them don't give away a lot of their money. In other words, they surely can manage their money better than you will do if you recieve a dividend from them.

Couche-Tard (small payout ratio)
Stella Jones (small payout ratio)
Concordia Healthcare (small payout ratio)
Dollarama (small payout ratio)
Gilead (small payout ratio)
TJX (small payout ratio)
Ross Stores (small payout ratio)
CGI Group
Berkshire Hathaway
Dollar Tree
Portfolio Recovery and associates
Jazz Pharma

The list could go on and on. I know that there's a lot of exceptions that people could bring. But, in general, a good grower will continue to grow better without giving any of it's money.

So, if you compare a big bank (for example: Royal Bank) and a middle cap pharma (Concordia Healthcare), you have the choice:

10% annual appreciation with a 3-4% dividend (RY.TO)
50% appreciation without a dividend (CXR.TO)

Final words: Once upon a time, dividends were on my checklist before buying anything. They're not there anymore.