jeudi 24 mars 2016


That Valeant story made me mad.

First of all, mad about myself. Then, mad about Sequoia Fund, Lou Simpson, Bill Ackman and even Jason Donville...

Ok, nobody forced me to buy some Valeant shares. I'm the main idiot here. But I trusted all these guys above. I've trusted them too much.

And, for myself, I thought that I knew what I was doing even if I knew that investing without using traditional metrics was a risky move. But I was convinced by what I read about Mike Pearson and Valeant. And I was blinded by the great results of some big Valeant shareholders like Sequoia Fund, Bill Ackman, Lou Simpson, Jason Donville and a couple of others (some great investors from Quebec like Bernard Mooney and François Rochon owned Valeant shares too).

Lesson learned: If the metrics of a company aren't used in a traditional way, forget it. Fuck all those companies that use ADJUSTED metrics. Like adjusted ROE. Adjusted EPS. Adjusted management performance. Adjusted SHIT.

Fuck Patient Home Monitoring. Fuck Valeant. Fuck Concordia Healthcare. Fuck all that shit that have more chances to be run by crooks than those companies that are using traditional metrics. It's way easier to manipulate numbers when you adjust them. If you adjust it correctly, you'll make a pile of shit look like a gold nugget.

It's been painful for me. Very painful because I've lost maybe a year of performance with that scandal. But it opened my eyes. And here's some lessons painfully learned:
  • Never invest again in a company that doesn't use traditional metrics;
  • Never trust again all those superinvestors (I won't reproduce their moves but I'll take them as a bonus if they chose the same companies as me);
  • Never believe what anybody says on television. I still trust Jason Donville and still believe that he's one of the best in Canada, but I'm pretty disappointed about his fall appearance on BNN about Valeant as previously said. Everybody having media exposure without any exception is using that exposure at their benefit. 
  • In retrospect, you have to be the judge of what is good and what's not good. So, better read a couple of good books about investing as soon as fucking possible to get rid of all the people that want to convince you to buy the same thing as them (to pump the price of their shares). 
Bob Goldfarb, the great, great investor at Sequoia Fund resigns today from his position at the fund, because of that Valeant scandal. So, some heads rolled and a lot of people including myself must learn lessons about that story.

To conclude, here's some words of Buffett about the use of EBITDA (which is used a lot with companies like VRX, CXR, PHM and many others):
"We’ll (Berkshire Hathaway) never buy a company when the managers talk about EBITDA. There are more frauds talking about EBITDA. That term has never appeared in the annual reports of companies like Wal-Mart, General Electric, or Microsoft. The fraudsters are trying to con you or they’re trying to con themselves. Interest and taxes are real expenses. Depreciation is the worst kind of expense: You buy an asset first and then pay a deduction, and you don’t get the tax benefit until you start making money. We have found that many of the crooks look like crooks. They are usually people that tell you things that are too good to be true. They have a smell about them."

12 commentaires:

  1. Remember CA$H is King!

    You can use Adjusted EPS excluding non cash expenses (typically Depreciation and Amortization). But you need to add Capital expenditures to maintain the fixed assets productivity. There is a lot of depreciation regarding intangible assets or development fees (common for pharma products).

    It is the same when you are developping a plane over several years that you plan to sell during 10-15 years after... When you are selling those planes, those developping fees are not cash expenses during those years ;-)

    Jason is generally talking of the cash EPS on his ROE quaterly letters. So interest and actual taxes are true cash expenses...


  2. Since we’re sharing mistakes, here goes… I bought both Cenovus and Encana in the summer of 2010 and am still holding them. I also bought Calidus and Biosynt in Sept 2014 near the top for both stocks. I am down huge on all those holdings. But as I have 22 stocks in my portfolio it didn’t cripple me. It’s not fun losing money in the markets but I’ve learned more from making those mistakes than anything else. And because I made those mistakes I feel I’m a much better investor now than I was before.

    Allow me some further observations...The metrics of a company (ROE, ROIC, Operating Margin, etc…) are only a guideline. I think it’s a mistake to assume precision in the numbers as they are based on a lot of estimates and assumptions in the Income statement and Balance Sheet. I think they put you in the ballpark but are not meant to be precise in and of themselves. They become more valuable when used to track trends in a company over time.

    Based on my experience so far if I was to teach someone about the markets I would stress the following in order…

    1) Psychology (both your own and the Markets)
    2) Current Market Environment
    3) Stock Selection
    4) Portfolio Management

    Actually I feel there a lot of good fund managers in Canada but even the best are only right about 66 per cent of the time. Investing in the stock market is not for perfectionists. Sometimes the markets will rotate away from a fund manger’s style and his fund will fall out of favour for awhile. This may be happening now.

    The market has shown me that my greatest weakness is my impatience.

    I like Jason Donville very much. I feel unlike most people he empowers investors that yes you can invest for yourselves but he is not a God. He’s only human and like everybody else he can be wrong about things, even as you and I.

    On market call on BNN I’m partial to the Mid and Small cap stock pickers, especially if they can impart valuable or hidden information about a company. My favourites are…

    Stephen Takacsy
    Michael Smedley
    Jason Donville
    Peter Hodson
    Jerome Hass
    Peter Imhof

    They can be wrong sometimes but they all hang put in my Stock Market neighbourhood (Mid and Small Caps)

    My apologies for running off at the mouth like this but I love to talk about the markets.

    Cheers, Gavin

    1. Again, don't forget Veronika Hirsch... According to another contributor, she is in 2nd or 3rd best manager with BNN top picks recommendation. You can see her comments on

      Talking about Stephen Takacsy from Montreal, he was on BNN market call recently and he said that he sold his Nobilis NHC position because the management deceived him- lack of faith following statement and moves against short sellers... They will need to deliver without missteps before he can consider to look at this co again... I will keep an eye on Nobilis and will be ready to pull the trigger on their next bad action.


  3. Yes I heard Stephen’s comments about Nobilis. I think he’s wrong about it. Just my opinion of course, it’s okay to disagree with someone but still admire them. Nobody agrees about everything in the markets because disagreements are what make a market.

    I almost fell out of my chair reading Nobilis last reported numbers. I think it is a real comer and I love the growing market their serving but I think the stock is in the penalty box right now, a combination of the sector their in and the auditor fiasco last fall. I’m holding it. By the way I bought it last October 9th. Twenty minutes after I bought it the seeking alpha short report came out and I was down 20 to 25 percent…all in 20 minutes. To make matters worse I sold my position in CGI to buy it. As Howard Marks, says ’Experience is what you get when you didn’t get what you wanted.’

    I don’t pay a lot of attention to top picks of the managers on market call because once the information is out in the public the market is already in the process of discounting it. What I’m looking for is interesting information about a company they may hold. There are some fund managers who are really good that never appear on market call.

    I’ve endured a lot of pain the last 18 months in the market but it has also highlighted some personal short comings I have, impatience and inflexibility to name two. I hope to improve in the future.

    1. Agree with you, those investment managers are inspiring us to investigate several potential ideas not only with their Top picks, but also with their rational, their comments and explanations...

      Veronika is not patient and she is not shy to sell a bad performer and replace it with another GARP stock...Applying her rational, I would had sell VRX at 25% below his high instead of 65% below it... because VRX was my top performer for the last 4 years before, I was always expecting a bounce back... until I decided to pull the trigger late 2015...


    2. Hey would anyone buy CXR now at about $34 after the earnings(March 24,2016)? Any comments from the penetrator or any one else?


  4. Réponses
    1. If you are now out of these stocks, do you decide on which stock you will redeploy your capital? I like SJ, RCH, BYD.un, GUD-as I said, I think Knight will be able to take several products from bigger pharma who will need cash in the coming months- and CP from Canada...

    2. I'll be back soon with a new company that looks interesting to me.

  5. Dean A......Well, since I bought it at 40.49…impatient remember…… I think it’s even a better buy now. The best time to buy something is when everybody hates it. I’m sure CXR is on sale right now but you never know what will happen in the future. So why not take a small position and add to it later if you want. Remember to spread your risk and don’t put everything into one or two stocks. Just my opinion of course…

  6. What's your source for the Buffett quote. I can't find it anywhere in his shareholder letters. I believe it's a fake quote.

  7. Yo Bro, just Google "Warren Buffet crooks EBITDA" and you'll find many links to that sentence.