vendredi 29 avril 2016

ROE reporter - april 2016

Another quarter, another ROE reporter.

This april, the ROE reporter is interesting. Jason states once again that the two best sectors to invest in are healthcare and technology. I agree with him. Even with the huge shitstorm I've been through with Valeant, Concordia Healthcare and, to a minor extent, Allergan and Gilead today, I still love healthcare stocks. Some of these stocks offer the best mix "high ROE - low debt - low beta" you can get (see Gilead, Biogen and Novo Nordisk for instance).

And I like tech stocks too. Not as much as healthcare stocks, but these stocks usually have a low beta and achieve good growth (Constellation Software is the only great name with a super ROE in Canada in my opinion. Enghouse and Open Text are OK but they have an average ROE).

The ROE reporter presents some established names with a a good ROE and a fair PE ratio. It presents also a list of emerging companies that look promising (like Biosyent, CRH medical (still don't like that one) or Tucows (I like that one)).

You should take a look at these two lists of great canadian companies. It's a great way to find new ideas.

In my opinion, the best listed companies on the ROE reporter are:

CGI Group
Constellation Software
Nobilis Healthcare
CCL Industries (the ROE is not as high as the others, but everything else looks great with that company)

I have to admit that I don't understand how Jason gets his ROE numbers for some companies (for instance, the ROE of CRH, Pulse Seismic, Enghouse, Open Text and Concordia Healthcare is way lower on Reuters and some other websites than the numbers of Jason). If a company doesn't earn money, I don't see how we should adjust the numbers to make like they generate money. Well, if you ask me, I'll tell you I'm not giving chances to any fucking company anymore. I ain't no fucking Mother Teresa.

Anyway, she's fucking dead.

6 commentaires:

  1. Very insightful letter from Jason as usual... I enjoyed the MTY Food appendix; first time he added such details.

    Some discussion points:

    1) I own 8 "Compounders" and 1 "Emergining Compounder" out of 20 Canadian stock portfolio. I susepct most readers of this blog will have similar - as the premise is that we are all Donville followers.

    2) Having 9 of his picks, I was surprized that I actually beat Donville's Q1 -9.3% performance versus my -6.5% when I equal-weight (for simplicity) my 20 stocks. I will stuggle for the rest of 2016 due to my -69.1% Valeant disaster weighing down. As we last know, Jason was down to 0.5% weigh in VRX - so it would not have affected his results much in Q1 whereas it affected 5% (1 out of 20) of mine. He did not list it in his "Compounders" anymore... OK let's move on!

    3) Someone should tell Jason that it is "Alimentation Couche-Tard", not "Alimentation Couche-Tarde"... If I recall, this is the second time he has that typo. Maybe he extracts from the database and never fixed!

    4) I am concerned with Concordia Healthcare, and hope Jason won't pull another Valeant stinker (say he sold all after having top picked and defended several times like he did with VRX out of the blue - and out of his style). I notice that he greatly lowered his expectations for CRX:
    - April letter ROE=21, P/E=6.8. assuming P=? Say P=$33 on 3/31
    - Jan letter: ROE=24, P/E=3.6, assuming P=? Say P=$56 on 1/1.

    5) I recently got into Logistec too when I sold VRX (depressing that it may take me 7 years to recup one-day 50% loss in Valeant - but a much safer and better pick going forward). What are Substitutes to container loading at ports. They cannot fly containers that weigh tons of tons. Add honest Paquin as CEO and share buyback...

    Anyways, interesting that Jason mentions Leon's Furniture... This is high on my watch list and owned it in the past. Not high growth like Jason mentioned, but like Philippe Cote (COTE100 for the Quebecers on the blog) said, you don't need high growers to make money. Having slow growers who are great capital allocators with honest management over the long term will add value. He was quoting Metro.... I think Leon's fits this. OK stock did not do much in last 5 years. But they finally integrate the Brick now (IT system integration done), pay $50 to 70M of debt per year, have long term competent Management. I will wait one year though as Alberta economy will whack their results this year. But Buffet liked the furniture business, quoting his Mrs B stock from the furniture owner from Nebraska... Anyways, not a Donville type stock but interesting he mentioned it.

  2. I don't really like Philippe Leblanc with his fucking lessons that always look like: "here's how I invest and how I live my life, you should do the same".

  3. I also read the ROE reporter with enthusiasm today. For me, I've decided it's time to sell my CSU shares and go full throttle into Nobilis. I can see myself going back the other way in 6 to 8 months. Alternatively, perhaps some of the other picks Jason pointed out.

    I still love CSU, but my average SP was below $100 and I really feel like Nobilis is about to hit its stride in a very big way.

    I'll definitely be following MTY a lot more closely now. It was great to read all that detail today.

  4. I don't see what's so great with MTY these last years: OK growth but high price.

  5. What are your thoughts on linamar? ROE is decent and so is growth in top and bottom line. I suppose it's autos so it's cyclical but its trading at less than 7x

  6. I own some shares of Linamar. It'a a great company, in an industry full of volatility. The ROE is not decent: it's great.