lundi 30 mai 2016

Great names, now and then

About 2 years ago, it was the beginning of this blog.

Donville is the shit, my portfolio says so was the first official post of this blog (well, the first one in english).  Looking back at that post, I'm amazed to see how my portfolio has changed.

I thought I was a good investor back then. But, looking at this portfolio, I'm a little bit ashamed:

Canadian Shit
Rifco: 12,7%
Constellation Software: 9,8%
Cipher Pharma: 8,9%
Valeant: 7,5%
CGI: 7,2%
Carfinco: 5,8%
Alimentation Couche-Tard: 5%
Loyalist Group: 3,1%
Macro Enterprises: 2%
NTG Clarity Network: 1,9%

American shit
Questcor Pharma: 7,1%
Portfolio Recovery and Associates: 6%
Dollar Tree: 3,3%
Ross Stores: 2,1%

CASH: 17,6%

Two years later, let's see the performance of some stocks:

Cipher (1%), Portfolio Recovery and Associates (-50%) Macro Enterprises (-68%), NTG clarity network (-67%), Rifco (-75%), Loyalist (-99%) have been pretty bad performers.

At the time, they all looked very promising to me.

I wrote about that be fore. But, once again, they all had a good ROE, but not a great track record over a long period of time (except for Portfolio Recovery and Associates).

Dollar Tree, Ross Stores, CGI Group, Constellation Software and Alimentation Couche-Tard are still there and represent a bigger part of my portfolio now (except for Constellation Software which is slightly less important now).

They were all great names back then and still are.

Warren Buffet once said: "you better buy an outstanding company at a fair price than a fair company at an outstanding price."

I'd precise: "you better buy an outstanding company that faces temporary difficulties than a new company with an outstanding beginning."

mercredi 25 mai 2016

MTY Food Group (about their acquisition of Kahala Brand)

I was a shareholder of MTY Food Group in the past but I sold my shares some years ago because there wasn't enough growth for me.

But today, the company has bought Kahala Brand, a chain of fastfoods in the USA, for about 300 million dollars (US). It's a huge acquisition for MTY which is still a small cap. And that acquisition looks very promising.

A lot of companies make acquisitions. But not a lot of GREAT companies make acquisitions. And MTY is one of those very few great companies, with great operators and a CEO which is famous for his low salary (an exception in this business world full of crooks).

The acquisition looks to me like when Couche-Tard bought Statoil Fuel: the size of the company explodes with a single trade.

OK, it's a very big bite and there's some execution risks. Also, the company will have a big debt (the company has been debt-free for a long time). But Stanley Ma and his team have made a very good job in the past with their acquisitions. I trust them much more than many many managers.

I bought some shares today even if the stock rose by about 18%. At the actual price (about 42$), the stock has a forward PE of 24 which excludes the acquisition (the forward PE should now be 10-12). With a ROE of 17 and an average ROE of 20 in the last 20 years, this company looks pretty interesting.

People don't like to have that much details. They just want to hear: "Buy", "Sell" or "Top Pick". Well, for me, MTY is now a top pick and I wouldn't be surprised if Jason Donville would say the same on his next TV appearance.

lundi 16 mai 2016

Portfolio review, may 16th 2016

It's my birthday. I'm 37. And there was snow in Quebec city today. Can you imagine that? Snow on may 16th, for my birthday. I'm hating more and more this country as time goes by.

And by now, I'm entering my mid-life crisis.

What will it look like? I don't know. I think I've been in my mid-life crisis since I'm about 10.So I guess it's gonna be the same as for the last 27 years, except that I'm going to have more grey hair and a little belly that's gonna grow year after year.

Are you here to read about weather or existantial crisis?

No? Ok.

The Penetrator Portfolio has had a tough year so far. I'd never thought that the great returns I've achieved in the last 3 years could end so abruptly. But reality is a great teacher. I've learned much more by losing so much money than by making money in the past. And I can see now, with my 37 years of life experience that it's impossible that everything goes well at the same time in your life.

For example, this year, almost everything is going well, except for my portfolio.

Exactly one year ago, my portfolio was doing very well, but my job was almost a nightmare. My boss at the time was on a mission to destroy everybody's self-esteem around him. And on a mission to fire everybody on his way.

So, I prefer my actual position. I'm a little frustrated, but I'm much less anxious than I've been in the past.

Here's the Penetrator Portfolio, on may 16th 2016:

Canadian stocks:
CGI Group: 9,1%
Alimentation Couche-Tard: 8,6%
Constellation Software: 7,8%
Knight Therapeutics: 4,2%
Hardwoods Distribution: 4%
Logistec: 4%
Tucows: 3,8%
Linamar: 3% 
Valeant: 1,7%

US stocks:
Gilead: 8%
Ross Stores: 6%
Allergan: 5,7%
Dollar Tree: 5,4%
Apple: 5,3%
United Therapeutics: 5% 
Polaris: 3,8%
Lithia Motors: 3,6%

CASH: 10,2%

Portfolio ROE: 31
Portfolio forward PE ratio:14

mercredi 11 mai 2016

Nobilis Healthcare: bullshit detector going mad

First lesson for any investor: If you don't trust management, you shouldn't invest in a business, even if the PE ratio or the ROE look very good.

I've said it numerous times before but I lost confidence in Valeant and Concordia Healthcare this year. I don't care if Concordia Healthcare is being bought by Blackstone. I don't trust this company anymore.

Both CEO's from Valeant and Concordia Healthcare were from Biovail, a company that wasn't clean. You don't find pearls in a pile of shit. Both companies have used weird accounting practices that have been very hard for anybody to understand. Actually, these business are harder to evaluate than banks (which are not that easy to evaluate).

Second lesson: If a management team isn't able to bring you straight numbers, just look somewhere else. You have to be able to understand the health of a company.

And if a management, like the one of Concordia Healthcare is saying bullshit, just sell your shares.

For example, today, the results for the first quarter are out. What does it looks like?

Nobilis increases first quarter revenue by 35%

First, when you see that kind of title, prepare yourself for some deception. If a company is writing mostly about revenue or sales instead of earnings or EPS growth, it's a sign that this business has missed the estimates and uses the numbers that make them look good, without putting any emphasis on the only numbers that matter (earnings and EPS growth). If they don't make money, they'll write a shitload of numbers to drown the awful truth under layers and layers of informations and numbers that don't have (the same) importance.

Please, take a look at this part, which makes my bullshit detector going BEEP BEEP BEEEEEEEEP:

"In the first quarter of 2016, we increased revenue by $13.4 million, or 35%, to a record $51.3 million, driven by increased case flow and a higher average revenue per case. Similar to the first quarter of 2015, we recorded a negative bottom line, specifically a net loss of $5.0 million as compared to $4.5 million in the prior corresponding period," said Harry Fleming, CEO of Nobilis. "In the first quarter, we invested heavily in new technology and infrastructure to support our forecasted growth in 2016, which impacted our bottom line. Additionally, we were still feeling the impact of significant legal and accounting expenses related to the October short attack," said Fleming.

Wow! Revenue is 35% higher but they achieve to get a fucking loss. And they invest heavily in new technology and infrastructure, knowing that the market wants great earnings to compensate for the fact that this company had problems releasing earnings on time in 2015 and chosed in a very strange way to sue some blogger on seeking alpha that wrote that this business was not that clean. And they fucking blame the short attack for their poor results? WHAT THE FUCK!? If the short attack didn't have valid points, why did it had such an importance on the results?

When I saw that shit, I couldn't do anything else than selling my shares. Selling the shares of my father, mother and sister too. I don't want to be associated with that fucking company anymore.

I realize how it's hard to find a great management team behind a great business. And it's not the case here.

mardi 10 mai 2016

Tucows (TC.TO), fucking great growth for a fucking great price

On june 30th 2015, Jason Donville had a new name on his top pick's list: Tucows (TC on the TSX or TCX on the NYSE). 

I never heard the name of the company before. And, a year ago, I wasn't particularly interested in the name. Like a lot of people, it seems. Because nobody seems to be interested in that company wherever the funk I go on the web.

But, as many people, once Jason Donville says something about a company, I tend to remember.

What is Tucows? It's a business that offers Internet services to end users and business, including: domain names and mobile phone service. Pretty simple.

A couple of months ago, I remembered the name and I came to see how expensive it was. I was surprised to see a company not so expensive, with great numbers and a certain momentum.

In fact, in my last investment sheet (numbers gathered in april), Tucows ranks as one of the best investment ideas. See for yourself:

Performance last 5 years: 530%
Annual EPS growth last 5 years: 48%
Actual ROE: 37
ROE last 5 years: 23
Beta: 1
PE (2016): 14
Forward PE: 10-11
Buyback: About 30% of the shares have been bought back by the company over the last 5 years
Debt: Medium-high (8,5 times earnings)

The last results are out today. Check it out:

EPS: 0,42$ (US) compared to 0,25$ for the same quarter, last year
Price of the stock: 24$ (US)

It's probably my biggest conviction in the market right now.

I may be wrong.

I'm actually wrong in a very consistent way this year.

mardi 3 mai 2016