ROE reporter - July 2016 (EDIT)

Some people might have read it, but the last number of ROE reporter is out.

On the last number, Jason Donville writes about Stantec, MTY Food Group, Alimentation Couche-Tard and CGI Group, saying that these companies achieve great growth by acquisition along with TIO Networks, Biosyent, Spin Master, Constellation Software, Boyd and Enercare.

He adds, a couple of lines later: "my goal is to find the next Stantec, Paladin Labs or Constellation Software."

In my opinion, most of these names are really good stocks. But there's a few alien names there, like TIO Networks, Spin Master and Enercare. After checking them quickly, I don't believe that these companies deserve a place besides Alimentation Couche-Tard and Constellation Software. And even Stantec and Biosyent aren't such great companies, still in my opinion. I could name at least 50 US stocks better than these names.   

Like I wrote, some months ago, I believe that if you want to find a hidden gem on the venture stock exchange or among small caps with a short track record, you're gonna step on a lot of shit piles along the way. Aim at 5 little companies and the odds are high that you're gonna end up with 4 crappy stocks in the long run.

In this view, I strongly believe that our goal should not to deploy a lot of energy finding the next great company but to find existing great companies that are selling at a good price. The best way to do so is to follow something like 100-150 stocks on your Iphone. By a quick look everyday (the time of a crap), you'll follow all of them. And, as time passes by, you'll see that a couple of times each year, many great business are a little less expensive than usually. Great stocks are rarely on sale (for example, O'Reilly or Priceline). But if you can manage to get them at something like 18-20 times earnings, you'll get a historical low PE ratio for a great business. And you'll do better with ORLY at 20 times actual earnings than with the improbable next Paladin selling at 5 times earnings.

Recently, a lot of great US companies have been on sale. I don't see how any great investor should pass by these names. I'll never say that Jason Donville isn't a great investor by investing only in Canada. But I'll never understand why he doesn't invest in american stocks.

François Rochon (Giverny Capital), is heavily invested in US stocks and his results have always been great. Check his website the see the results.

So, I'm distancing myself a little from Jason Donville. But, I repeat, he's the one responsible for our knowledge of Paladin Labs and Constellation Software. That alone can make us forgive many of his mistakes.

EDIT: Did you notice? No words on Concordia Healthcare. And the last words of the ROE reporter are saying: "We have repositioned the portfolio intelligently ." I bet they're out of CXR after having it as their top position in the beginning of the year.

Or, it's like Valeant: down to 1-2% of the portfolio... or even less.

Portfolio review - July 28th

Many results were released lately. Let's take a look at the results related to my portfolio.

Polaris, Gilead, Apple, CGI, Constellation Software, United Therapeutics and Lithia Motors have all released their results in the last 10-15 days. They represent a very important part of my portfolio. 

Gilead and Apple had similar results: drop in earnings (problems with growth due to their huge size) but a lot of cash in hand to buy a very big company or even a country with all it's cheap labour (then reduce the minimum salary to improve the earnings of the company. Why not?)

The market didn't really appreciate Gilead's results but seemed to like Apple's. To me, they represent good investment because both companies are huge,  have a great ROE and the PE ratio is pretty low,  suggesting a low risk too. I can't sell any of those even if the market is not on my side.

CGI, Constellation Software, United Therapeutics and Lithia Motors had good or great results. The best results were those of United Therapeutics (released today). That business is under the radar of many many analysts but everybody should keep an eye on it even if the CEO is constantly selling shares (he/she's probably billionaire after selling many millions of shares). He/she probably wants to build a pyramid or a spaceship. I don't see why selling so many shares of a good business except if you plan to explore new galaxies.

As you can see below, there is now 19 stocks on my portfolio, which is a lot. Please note that I broke my bond to not go back on the venture stock exchange. I bought some Ceapro shares yesterday at around 2$. With a ROE higher than 100, a pretty small debt and a high growth rate, I thought that it was an interesting move. With about 1,2% of my portfolio on that stock, nobody could say that I'm a liar. I'm a small small small liar. Anyway, in investing, everybody is a fucking liar. I'm just part of the group.

All I need now is a nice suit and a tie. And a more serious name than Penetrator. That's the tragedy of my life: wanting to punch more than wanting to be taken seriously. 

Canada (49%)

CGI: 8,9%
Couche-Tard: 8,4%
Constellation Software: 7,3%
Hardwoods Distribution: 4,9%
Tucows: 4,8%
Knight Therapeutics: 3,9%
Linamar: 3,7%
Logistec: 3,5%
MTY: 2,4%
Ceapro: 1,2%


US (49,2%)

Gilead: 7,2%
United Therapeutics: 6,2%
Ross Stores: 6,1%
Dollar Tree: 6%
Allergan: 6%
Apple: 5,2%
Biogen: 4,5%
Polaris: 4%
Lithia Motors: 4%

Cash: 1,8%

Don't fuck with Hirsch?

Some people seem to believe that Veronika Hirsch even better than Jason Donville with stocks selection. 

Well, she was on BNN yesterday so let's take a look at some of her suggestions (I'll add a tiny comment to each selection):

Top picks:

A&W Revenue Royalties Income Fund (A payout ratio of about 95%? That's crazy. I can't touch that kind of business.)
MacDonald Dettwiler (good company but it had some difficulties in the recent past).
iShares  S&P/TSX Global Gold (I have never touched gold and I don't intend to). 

Buy:

Stella Jones (good company but expensive and not so high ROE).
Tricon Capital Group (great growth but so-so ROE).
Trevali Mining Group (is it really a serious investor that wants to invest in mining?)
Uni-Select (super great growth but poor ROE).

Good opinion:

Alimentation Couche-Tard (terrific company, probably in the top 5 or even top 3 in Canada).
Badger Daylighting (good company but not so effective for the last 2-3 years).
Boyd Group (good company but not so great numbers: a lot of leverage).
CCL Industries (great company but too expensive).
Dollarama (probably the best company in Canada in my opinion. But too expensive).
Enbridge (not interested in oil/gas companies).
Gibson Energy (a historical payout of more than 100%, What is wrong with you Veronika?)
Alphabet (good company, a monopoly, but expensive and not so high ROE)

I'm probably wrong because Hirsch is surely a better investor than me. But, fuck, I really don't see a lot of great stocks in that fucking selection. The three top picks look pretty average to me. I don't agree with maybe 80% of her selection.

We're not soul mates.

I'll stick with Donville. 

What'so great with Lassonde?

I've been watching Lassonde (LAS-A.TO) for a couple of years now and I'm amazed at how the stock performed since then, given the fact that, on paper, it's not such an amazing stock.

First, what is Lassonde? Plain simple: A company that produces and sells a wide variety of juices (mainly fruit juice).

The company hits an all-time high today at 206$. At the beginning of 2016, the stock was selling at 162$. It's quite a performance.

But, as I said, on paper, it's not that incredible:

Beta: 0,29 (pretty low)
PE ratio: 22 (pricey based on historical norms)
highest PE ratio last 5 years: 20
lowest PE ratio last 5 years: 12

Dividend yield: 1%
Dividend growth rate last 5 years: 7,5% per year
Payout ratio: 18% (pretty low)
EPS growth rate last 5 years: 11% (OK)
EPS growth last quarter VS same period last year: 67% (great!)
ROE: 14 (absolutely average)
ROE last 5 years: 14 (absolutely average)
Total debt: medium-high (more than 10 times earnings)
Number of shares oustanding: no dilution since at least 2006

I look at that and what I can say is that company has had an exceptional growth in the last year. However, the historical ROE is average and the debt is too high for me.

But it's probably one of the least risky investment anyone could do (precision: not risky at a fair price, and I'm not sure that 22 times earnings is a fair price). How could a business selling juices could have any problem with actual politics or be involved in any scandal (except of course if they put some rotten fruits in their juices)?

So, my thoughts are: great sector, great growth, price a little high and OK business.

The only reason why I'm writing about this business is because of it's performance. It may look a little arrogant but, with such numbers, I don't see how I could have been interested by that business. Usually, great performance comes with more great numbers than that. 

Valeant dumped by Sequoia Fund

Two days ago, Sequoia Fund released a letter stating that:

1- They dumped entirely their position in Valeant, Idexx Laboratories, Allergan and Cabela's;
2- They trimmed their positions in TJX, Fastenal and O'Reilly;
3- They initiated a position in Carmax, Chipotle Mexican Grill, Charles Schwab and Wells Fargo.

First, I didn't know that they had a position in Allergan. Second, I never understood why they invested in Cabela's in the first place (that business has always been so-so). Third, while Carmax and Wells Fargo are surely good business, I don't think that CMG and Charles Schwab are the best ideas they could have find.

I still admire Sequoia. They made so many great investments in the past that it's hard not to consider how they manage their fund. But they made one of the worst mistakes in the recent history of investing by putting a huge amount of money in Valeant. And now, they sell it all, making us understand that they didn't know what they were doing with about 25% of their portfolio. That's fucking scary. And it's a scar that Sequoia will keep for a long long time. They deserve it.

At the same time, we learn that Michael Pearson, the mastermind behind that fucking Valeant scam has made about 100 millions $ (US) by selling shares in the last weeks. Fuck him.

And Andrew Left, Citron's leader, told once again some bad comments about Valeant too. So, VRX shares were down a lot yesterday. Now, it really looks like VRX is heading pretty pretty low.

The people that knew the business more than anybody else don't want to be associated with it anymore.

VRX is truly toxic now.

Statistics

Once in a while, I take a look at Google or at the statistics of my blog to see where the visitors come from. There's not that much references to my blog out there. In fact, there's maybe 4-5 direct references from other blogs. The traffic usually comes from direct hits.

Lastly, I wrote "Don't fuck with donville" on Google and I found this, on twitter:

Who is Marc Cohodes? Sorry but I know jackshit about most investors out there. I only know a few famous names like Warren Ackman and Carl Einhorn.

Google tells me that Marc Cohodes is a famous former short-seller that now sells eggs and/or chicken in California.

And who is Amber Kanwar?

That chick is the sexy Yoko Ono on BNN!

Well, she's not really a Yoko Ono. She's probably from India or Pakistan. But come on, what's the difference between Asia and Japan? It's the same fucking thing. From the Ural to Indonesia, everyone is a Yoko Ono to my eyes. Even males are Yoko Ono with a dick.

Things are so much simpler when 4 billion people are exactly the same in your mind. 

So, from my basement in the Quebec city area with my 2 weeks baby on my chest, I'm still surprised to see that a little part of Bay Street knows about my existence... which is mainly constituted of diapers, feeding-bottles and vomit spots on my shoulder.