dimanche 31 juillet 2016

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.

10 commentaires:

  1. actually i think donville will be starting a fund to invest in the us market this fall

  2. Here is an old link giving you the names of 145 usa ROE champions. you can put them in your phone or make a chart. This is greatness across years and years. how does this author define ROE champion?

    "I screened by hand for companies with: 1) a 10 year average ROE over 20%, AND 2) Zero years in the past decade with a ROE below 15%.

    Just 145 out of 1705 companies (or 8.5%) passed both of these two hurdles from 2004-2013."


    You are giving very sound advice. Some of Donville's latest picks are ridiculous (toy company? really? why not play the lottery instead?). Of course his pick of Concordia Healthcare is downright shameful (down another 17% today). He may even have been dumping Concordia while recommending it to viewers. I have no proof. But if you're a pro investor and you did your due diligence and did not see warning flags with Concordia healthcare, try to find another line of work.
    donville is my #2 pick among investing experts right now (number 1 is anybody else...chou, penetrator, a monkey throwing darts at the stock pages of a mining stock newspaper, etc). He will continue to do poorly. This is not the stage in the economic cycle for his style of investing...and his picks lack the quality (strong business franchise / powerful moat) of his previous picks like constellation software.

    1. Hey angelo dallas, what is your position on CGI Group and CRH Medical?

    2. I think CGI Group and CRH Medical are very good investments.

    3. I think CGI Group and CRH Medical are very good investments.

    4. @ angelo, much better money managers to read up on and follow vs. Donville. His inability to see Valeant an Concordia for what they are should tell you something very important.

  3. Concordia is a red flag for sure but the risk may pay off eventually. I was quite surprised to see no mentioning of Concordia from Donville.

  4. Mark Thomson is suing Marc Cohodes. Pretty Bad move and I believe the market doesn't like it either.