mardi 4 octobre 2016

Canadian VS US market

I'm seriously thinking about changing the name of this blog. Jason Donville seems to have vanished. I'm constantly writing non-Donville related stuff and I feel more and more uncomfortable about it. It looks like he commited hara-kiri, ashamed by his poor performance.

I could say that this fucking Directcash Payment (DCI.TO) is being bought by a company that's probably going straight into a wall, because that fucking industry of cash machines is going nowhere. If you had buy that shitty DCI 5 years ago, your purchase price would have been the same as the actual price of the stock. Lucky you, you would have got a great dividend to forget all the emotions you've been through with that shitty stock.

OK, let's forget that name forever now and let's talk about the canadian market. 

I've read an interesting article today on double-v, double-v, double-v point les affaires point com saying that the canadian market was expensive and it was probably a better idea to look south of the border.

I know that some people disagree with me but I'm still thinking that Linamar is pretty cheap. Some might say that the auto industry is reaching the end of it's cycle. Well, the results of the company seem to show that everything is doing well. Too, the balance sheet is great. And even if the cycle is going to an end, Linamar looks mucho better to me than Carmax, a darling of many investors, on every metric. At 6-7 times earnings, that stock is selling at the price of a stock losing money or going bankrupt. I can't sell LNR even if the market is not excited at all about it.

Stella Jones looks good too. Not exactly cheap, but the last results were great and this stock had an amazing performance over the last years. The beta is very very low, which is a great indicator of a stable business if you ask me. This industry is so boring that it's probably very safe to invest in it. It's like Mohawk. Leaders of a boring industry about which nobody gives a fuck. Google likes to try a lot of things not related to their core business but they probably won't start making carpets and poles.

Hardwood Distribution is not too pricey and their last results were great. It's another lumber stock like Stella Jones and probably that some investors are worried about lumber discussions between Canada and USA. Well, if everything looked well on every aspect, the PE ratio of SJ and HWD would be much higher and I wouldn't be writing about them right now.

Home Capital Group is very very cheap on an historical basis. You won't get a lot of growth here, but that stock is a great candidate to be bought by a big bank. I know, people have been talking about that speculative buying for many many years and nothing happened. Well, don't forget that very average stocks like Rona, Directcash Payments and Cabela's (today) have been bought by larger companies. A good business like Home Capital Group is superior to these three names.

Alimentation Couche-Tard is expensive, but it's one of the few stocks I'd always be confident about, whatever the price is, to a reasonable extent. That stock is probably a buy.

Except for that, I'd probably look to the States. A lot of great stocks are not too expensive there. Big biotechs like Biogen, Gilead, Jazz Pharma, United Therapeutics. Novo Nordisk (a danish stock listed in the US) had an important correction recently. The stock is still a bit pricey, but what a fantastic company on every aspect.

Mohawk, Bank of the Ozarks, Disney (Giverny Capital stocks) are all attractive. But they're just OK ROE stocks (ROE = between 15 and 18). Berkshire Hathaway is not that expensive. Dollar Tree had a big correction too and with their merger with Family Dollar, I believe this stock is a great addition to any portfolio. And Apple hasn't been expensive for many many years.

There's some banks too like Bank of America, Wells Fargo or the insurer AIG. All cheap names.

So, yeah, even when the market looks pricey, there's some good stocks to buy out there. 

9 commentaires:

  1. So who is now worthy of replacing Donville as the guy we follow on BNN? I miss wanting to hear the picks these bozos make.

  2. I'd like to see Donville interviewed one more time.

    "Mr Donville, when you were last on here, you recommended Concordia as a steal and your best pick at ~ $44. Are you buying aggressively now that it is ~ $6?"

    Half the time, these guys are pushing a stock on tv that they need to unload from their portfolio without losing even more money. Get on tv and tell the sheep-le what a bargain it is. LOL

    1. Everybody knows that Donville is absent for that exact reason. His fund doesn't need bad publicity.

      BNN is a great free ad for fund managers.

  3. Jason Donville was successful for a long time, maybe too successful. Perhaps he got careless in his thinking, maybe even sloppy. Risk management should always be top most in your mind when you invest. But he’s only human like we all are and he wasn’t the only money manager who was wrong about Concordia and Valient. I’ve always liked him as I felt he was there to help empower the DIY investor at home. I think it’s just another lesson the markets teach. Humility… no matter how successful you’ve been you can get caught without a chair to sit down on. The Gods of Investing and Trading must be soothed and appeased. His present silence on Market Call is deafening. The markets will keep you humble. That’s been my experience. You just have to try to learn from it and move on.

  4. I pulled the trigger on Stella Jones. I have been watching closely and when it dropped by 5% during last 5 days, I had to deploy my cash. This could be my permanent holding going forward. We will see... I love everything about the company. Historical EPS and revenue growth, decent quarter, aggressive expansion plan, solid market share with competitive advantage, quite reasonable PE, Solid ROE, reasonable leverage ratio of 2, 1% of dilution last 5 years, etc... Everything checks off well BUT there was one thing scares me the most which is cash flows. Their cash flows have always been quite bad last 10 years compared to net incomes. Maybe it is due to integration of all acquisitions to date (by bringing in ARs, inventory etc...) but I wasn't a big fan of the fact for sure.

    Home Capital Group, what a cash maker. Its free cash flow is around $900M trailing four quarters. That's crazy amount of cash compared to its market cap of $1.6B. Traded at less than 2 times of free cash flows. What a bargain. I think I bought it around $40 and have been holding it so far. Recent Government movement of tightening mortgages and imposing foreign tax in real estate is hitting them even harder lately. I want double down badly considering its tremendous value but honestly, I am scared of Canadian housing big time.

    What are your thoughts guys?

  5. I don’t really like commenting on other people’s holdings but I will say this. I ran my metrics on SJ last year and I noticed the same thing you did, the disparity between net income and their operating cash flow and it scared me. I also didn’t find it very cheap. Too many people seem to like it. Anyway I passed on it. I bought HCG last Feb and frankly I’m worried about it, mainly due to the state of Canadian housing but as everyone’s worried about Canadian housing, perhaps it’s nothing to worry about at all. HCG does seem cheap right now and there is only 2 stocks in Canada in the mortgage sub prime lending area…HCG and EQB, so they seem to have the a lot of the field all to themselves.

    Anyway, it’s not always about your individual holdings but your investment portfolio as a whole.

  6. Yeah, that's the real issue with SJ but still better than other 80% of TSX traded stocks.

    If holding HCG for let's say 5-10 years then this downward pressure should not be a big deal but if we wait, I think we can get it cheaper.