My returns for 2017

My picks for 2017 have been the following :

1. Constellation Software (up 26%);
2. CGI Group (up 5%)
3. Alimentation Couche-Tard (up 8%);
4. Linamar (up 26%);
5. Knight Therapeutics (down 24%);
6. Tucows (up 79%);
7. United Therapeutics (up 4%);
8. Mohawk (up 37%);
9. Disney (up 2%);
10. LKQ (up 33%);

Average return : 19,6%

The returns above are the returns of each stock, without the exchange rate between US dollar and CAN dollar. Given the fact that the canadian dollar rose in 2017 (from 76 cents to 79 cents), the return of each american pick has actually been a bit lower than what’s written up there.

The global return of my portfolio has been similar to these 10 picks (18%). 

The return of the S&P 500 has been : 19% and the return TSX/S&P 500 has been about 5%. The Russel 2000 did about 13%. And the Dow Jones did 25%. There’s probably another index which could be appropriate but I’m a little lost among all these indexes. In my opinion, my portfolio should be compared with the TSX/S&P 500 (because my portfolio is 50% CAN and 50% US) so I’ve beaten the benchmark by about 13% which is very good. Feel free to kneel in front of me. And kiss my feet while you’re there.

Give me one year of good results and here I go: claiming blowjobs and not giving any insights about my Valeant years.  

The stars of my portfolio have been Tucows, Mohawk, LKQ, Constellation Software and Linamar… But let’s not forget Credit Acceptance Corp (up 51%), Novo Nordisk (up 50%) Dollar Tree (up 40%) and Ross Stores (up 23%) since the beginning of the year.

My only bad pick was Knight Therapeutics with a return of -24%. Which reminds me that we should never bet on a speculative stock and if we ever own any of these, it should be a small chunk of our portfolio. I still own Knight Therapeutics but I may very well switch for a business that really makes money in 2018. 

 That's probably the last post of 2017. Happy new year to everyone. For 2018, I wich you a transforming experience like swimming in the Ganges or some crazy thing like that. That's what money is for. 

10 lessons learned in 2017

1. Never buy a stock on the speculation that something could happen (merger, acquisition or whatever);
2. Best performing stocks are stocks that are making money and which are growing their earnings year after year… but, the most important point is that the free cash flows are growing year after year;
3. Chuck Akre deserves your admiration;
4. Sequoia Fund and Giverny Capital are very good too, but a little less than Akre. Forget the rest;
5. A high PE ratio relative to the market may not be a high PE ratio when you compare it to histoical levels for a high-quality business;
6. You should buy these “always high PE ratio stocks” when they’re selling for a lower price;
7. A very large cap may offer great returns and grow much more than 95% of the other stocks (for instance: Google, Facebook)
8. A nano or micro cap is almost ALWAYS a bad investment. They suck and the people who are talking about them suck too;
9. Many stocks don’t retain their value. Healthcare stocks are often at risk of losing their value;
10. When you select your stocks with a lot of caution, among not too expensive (on an historical basis) growing free cash flow stocks, you can do well with at about 80% of your picks. Which is better than almost every investor. 

My picks and yours for 2018

Soon, I'll write a review about my picks and yours for 2017.

But, for now, let's take a look at what looks promising to us for 2018. This time, I'll go with only 5 picks and I ask you to do the same, because 10 picks is a lot.

1- Alimentation Couche-Tard (ATD-B.TO);
2- MTY Food Group (MTY.TO);
3- LKQ (LKQ);
4- Credit Acceptance Corp (CACC);
5- Facebook (FB). 

What are yours?

Bitcoin: LOL

The big hype these days is Bitcoin.

I'm a professional. Before writing something about Bitcoin, I’ve been on Wikipedia to read what that thing is.

I didn’t really understand. LOL. Am I some kind of retard LOL? Or is that cryptoshit some kind of joke only Frank Abagnale can understand? At this point, I suck, as a professional.

On wikipedia, they talk about « crypto currency » and « blockchain » (LOLLLL) and the fact that Bitcoin is not a currency but a good. LOLLLL. A good to speculate may I add.

Here’s the price of Bitcoin over the last 2 years (in canadian dollars):

December 31th 2015: 519$

December 31th 2016: 1277$

And now, 2017...

July 14th 2017: 2460$

September 25th 2017: 4974$

November 4th 2017: 9600$

December 5th 2017: 15 000$

December 15th 2017: 24 900$ (LOLLLLLLLLLLLL)
December 19th 2017: About 23 500$ (LOLLLLLL)

If you had bought that cryptostuff one year ago, you would have made almost 25 times your money. It's completely crazy.

I have to admit that, even though I understand jack shit about that scam, I’d really like to borrow a Delorean at the nearest Carmax and go back at the beginning of 2017 to put 100 000$ on Bitcoin. 

But I’d sell everything today.

The quality of content

I've never seriously thought about investing in Netflix. Yeah, the business is great, but the numbers aren't that great. That stock's valuation is mainly related to the amount of members.What I wrote last february still applies. The numbers have changed, but overall, it's not a logic investment at all.

However, I really believe that this business is a quality business. Have you seen how great are the series on Netflix? Many great series are there, but many great series are exclusive on Netflix!

Stranger Things, Black Mirror, Dark, Atypical, Mindhunter, Narcos, House of cards and many many more. In fact, many people would read what I'm writing here and say that I've missed a lot of great series. The point is that it's very hard to produce a very good serie or a very good movie and Netflix has achieved to do it a lot of times.

Just go checking on www.imdb.com to see the best TV series of all-time. You'll see that many of them are on Netflix and some of them are exclusively on Netflix.

I'm not that much a TV guy. If I'm seduced like that by such quality, I believe that Neflix is going to do very well in the future.

Disney may arrive in the business (and I'm a shareholder of Disney), but with such a great quality, I don't think it's gonna be easy to compete. Well, Disney has a shitload of great franchises. But Netflix has built something great before the others, so they're way ahead for now.

I still don't plan to invest in Netflix. But if I'd do, it would be the first time of my life I'd invest in a stock because of the quality of it's products (and a lot of people agreeing with me on that subject) instead of after taking a look at some numbers.

Portfolio review (december 10th, 2017)

Please, enjoy that last portfolio review like you're used to watch once in a while.

The game is that, if you want to start an investment club, a hedge fund or anything similar like a sect, you have to keep a certain mystery about what you're doing. Otherwise, nobody has an interest to join you because you give them everything they need. People want magic and mystery. Not honesty.

Keeping 20 stocks in my portfolio is still my goal. So, when I buy a new stock, I have to sell another one, which is sometimes heabreaking. But that's how it goes. There's only place for 20 stocks in my heart. Heart is obviously a synonym of portfolio.

I know the market can't continue to go up forever like that. There's surely gonna be a crash sooner or later. But so far so good. I'm still becoming richer and richer, month after month. And, steadily, things improve. You reach a point when you have a third of a million dollars and, with the historical performance of the market, your portfolio may grow by 30 000 or 40 000$ every year without any effort. That's almost enough to leave your job. That's almost enough to say "fuck you" to everyone and everything if you want it. And that's the most wonderful feeling in the world.

For now, it's only the beginning of such a feeling. But I can feel it coming. I can feel it coming in the air tonight Oh lord.

That being said, there's been a little clean up in my portfolio lately. I've sold a few stocks since september. Not because I didn't like them but because I've found something better.

Here's my portfolio, on december 10th 2017:

Cash: 8,6%

Alimentation Couche-Tard: 7,2%
CGI Group: 6,6%
Constellation Software: 5,9%
MTY Food Group: 5,6%
Tucows: 5,3%
 Hardwoods Distribution: 3,4%
Knight Therapeutics: 2,6%
CCL Industries: 2,3%
Enghouse Systems: 2,1%

Ross Stores: 6,7%
Dollar Tree: 5,8%
Bank of the Ozarks: 5,7%
Novo Nordisk: 4,9%
O'Reilly: 4,7%
LKQ: 4,7%
Priceline: 4,6%
Credit Acceptance Corp: 4,2%
Disney: 3,2%
Mohawk: 3,2%
Middleby: 2,8%

Average ROE: 28
Average FWD PE: 18,6
Average Beta: 0,8

Share my wisdom with you, once again

The market is more and more expensive every day.

Here's a strategic move I've made. Well, it looked strategic to me, but in a few months, I'll be able to see if it's been really strategic or just a useless move.

I've sold a "class C" free cash flow stock to buy two "class A" free cash flow stocks. These two stocks had better ROE and a similar or a little higher forward PE ratio, plus a better growth. However, these two stocks have a forward PE ratio lower than their historical PE ratio for the last 5 years. So, they're cheap on a relative basis while Stella Jones is expensive on a relative basis (about 26 times current earnings and 21-22 times next year's earnings).

The market is riskier than it's been. I don't want to sell everything and everybody who's got a brain says it's not a good idea to sell a good business because the market is expensive. But I want the best quality, because the best quality does better than the rest in a recession or in a period of growth.

I still think Stella Jones is a good business. It's better than 80% of what is avalaible on the market. But I've just thought that my Stella Jones position could be splitted in two smaller positions of higher quality stocks.

In other words, the stock market is expensive on a relative basis. Many stocks are expensive on a relative basis. But there's some expensive stocks (PE between 20 and 30) that have always been expensive and which are less expensive right now than they've been in the past.


It's probably better to buy stocks that have always been expensive than stocks that have rarely been this expensive.

Obviously, you could come up with a great example to invalidate my post.

Please take note that I'm probably not thinking about the stock you think about.

The power of the balloon

Since 3 or 4 years, each december, I'm crashing at least one holiday party to which I'm not invited.

I go there with a friend. We dress well and we go to the biggest reception halls in the city to infiltrate some big corporate event and try to dance and talk with employees like we were colleagues.

When people ask in which department you work, that's the tricky part: you have to imagine something vague but precise enough to look credible. Small talk is the best thing to avoid pitfalls.

Friday night, we've been to a big insurance company event. The kind of event where there's about 1000 people invited, so it's easy to be incognito. The party wasn't wild enough for us so we stayed there for only about 30 minutes. But before leaving, I saw that there was a lot of big balloons in the place and many people left the party with a balloon. So I took one and we left.

I walked on the street with my big balloon (about 1 meter tall) floating 3 meters above me. Everybody was looking at us. I felt like I was some fucking celebrity. I felt invincible.

So, we went to another place, maybe 500 meters away and we penetrated in some dentists party. We went to the dance floor with my big balloon (which, this time, was the only balloon in the place). Here I am, putting the sandbag of my balloon in my back pocket, on the dancefloor with about 100 dental hygienists and dentists around me and my balloon, 3 meters above. I'm the superstar of the place, because nobody can stay indifferent towards such a big black balloon.

And, let's admit it, when you're a guy at such a party, everybody believes you're a dentist and you earn 350 000$ a year. So, a substantial part of the girls would probably like to fuck with you, even if you're not their kind of guy. I saw that strange look on the faces of many dental hygienists (interest not towards how you look but towards what you represent). But maybe it was just the power of the balloon. 

After about 2 hours, we decide to leave and go back to the first party. Sadly, the party is almost over and the place which included about 1000 people a few hours before is almost deserted. About 30 people are on the dancefloor and that's all. We talk with a few people, and we leave once again.

However, before leaving, I take with me the only big balloon that remains in the place. So, we now own two big balloons. We feel even more indestructible.

And we go back to the dentists party. And that party is almost over too.

Now, it's about 2 AM and we know that holiday partys are probably over everywhere. So we go to a bar. Because bars close at 3 AM in Quebec.

Once again, I take my balloon with me. I'm having it with me on the small dancefloor even if it's way too small for such a big balloon (20 people and the dancefloor is full) and the ceiling is way too low. But I don't care. Tonight, the balloon rules the world and has to be respected everywhere. Respect for the balloon.

I ask the barmaid for a sharpie pen to write on my balloon that it's my birthday party. After writing down a few words, Some people come to me, asking me to sign the balloon. And I ask some other people to sign the balloon. I end up with about 20 people signing the balloon.

At 2:40 AM, one of the waitress comes and ask me why I have this balloon. I tell her it's because it's my birthday. She tells me that I can have a free bottle of sparkling wine. And she doesn't ask for my ID. She just assume that the balloon is a valid proof of birthday.

So, I get my free bottle and share it with my friend and some people around.

Don't ever doubt about the power of appearances.  That balloon taken at some party and brought to other places brought joy, excitement and even fascination . The impact of the uniform and the appearances is a big weakness of human condition.
 

My golden balloon with some signatures.

Excitation at the end of the year

Technical analysis is something very strange. It's an esoteric way of investing. It's like seeing signs where there's no signs. With some weed, I think I could be a very good technical investor. Well, I shouldn't say "good", I should say "creative". I could see and say things that nobody said before on TV or on the Internet.

But, even if I don't really trust that approach, I have to say that there's a strange pattern in the market that puzzles me: how come do the market always go up in the last months of the year?

OK, please, don't cite 1987 with the crash of september. There's always exceptions to a rule. But if you look at the last 5 years, you can see that the S&P 500 has always gone up during the 4 last months of the year (from end of august to end of december). Obviously, 2017 isn't over yet, so I took from end of august til end of november. 

2017: 

S&P August 29th:  2432
S&P November 29th:  2626

2016:

S&P August 30th: 2171
S&P December 30th: 2238

2015:

S&P August 30th: 1970
S&P December 30th: 2044

2014:

S&P August 29th: 1998
S&P December 31th: 2059

2013:

S&P August 30th: 1638
S&P December 31th: 1848

It's not always spectacular, but it's always up. This year, I know that many people hope that the Trump reform on taxation will be accepted. I hope too because I could take advantage of it. And it could be the only thing that Trump would do right after acting worse than any fucking hobo you could have taken on the street and put on his chair.

Facebook and Google

You probably don’t want to read about Google and Facebook because these names are widely popular. There’s nothing new with them. You’d probably better hear about ShitPussy which is on the Venture. That’s a name you haven’t heard before and the EPS have increased from 0,00002 cents last quarter to 0,004 this quarter. Such an increase.

As promising as Shitpussy is, I’ll go to the other end of the specter and examine two giga caps because they both worth a close look. And I believe both are good investments.

Facebook 

Market Cap : 520 billion dollars (incredible that a business founded in 2004 by a 20 years old guy is now this big)

Annual EPS growth last 5 years : 62%

Current ROE : 25

Forward PE / average PE last 5 years : 0,4

Debt level : 0,7 times earnings

Stock performance last 5 years : 835%

Google

Market Cap : 720 billion dollars

Annual EPS growth last 5 years : 13%

Current ROE : 14

Forward PE / average PE last 5 years : 0,95

Debt level : 1,5 times earnings

Stock performance last 5 years : 215%

Both companies are sitting on a mountain of cash, they almost don’t have debt (compared to what they earn), both companies are selling for less than their historical average PE ratio. The numbers of Facebook are better than Google. But in my view, Google is a solid monopoly while Facebook is not as solid for the very long term (everybody loads Google at the start of their computer while many people but not as much load Facebook). Both stocks are great. I’d buy them both over ShitPussy because they're solid and they generate more cash than a third world continent.  

And even if they’re huge, I believe they will keep growing for many years, because they’re mainly advertisements businesses. And people now spend much more time on the Internet than in front of a TV.

A return on baggers

Here's a post with a strange background. That's what happens when you write something in Word.

_{I don’t know if English-speaking people have seen this, but for French-speaking people, you can often see people on Facebook that have written “Université de la vie” (University of life) in the education section of their profile.}

_{“Université de la vie” means that you’re a drop-out. You’ve been to high school and that’s all. After that, you’ve had some crappy jobs, without any responsabilities. But, in your opinion, you have a wide experience of life.}

_{Experience is a very wide term and, if you want, you can associate your longevity to experience, even if your life has been empty and boring. So, using “Université de la vie” is a fucking great thing to write to impress people because these four words can punch. However, those who want to see further will realize quickly that this University doesn’t apply quota rules for recruiting.}

_{OK, now, I don’t know what this expression means, but let’s cut the crap and talk about baggers.}

_{If you put your experience at work, you’ll be able to enjoy some baggers in your life. Sadly, that delicious taste quickly fades, just like the first time you enjoy a fix of heroin. For both cases, you’ll need more and more of it to be satisfied, as time goes by.}

_{I can count 11 baggers which I own or owned.}

_{Among them, there’s Alimentation Couche-Tard, CGI Group, MTY Food Group, Constellation Software, Ross Stores and Dollar Tree (my permanent stocks). They were great 10 years ago and they’re still great. Most of them have been pricey for years. But they delivered what was expected.}  

_{I’ve had a few other baggers with stocks with a little less mythic track record: Tucows, Biosyent, Paladin Labs, United Therapeutics and Questcor (now Mallinkrodt). They have all been baggers for me. And if I’d kept others like Mastercard, Apple and Boyd Group, I would have had some other great baggers. Actually, if I had kept Boyd Group, I’d almost have a 10 baggers (bought at 10,50$ sold around 14,50$ and now about 92$). Fuck me.}

_{In the pharma space, l’ve had temporary baggers: Valeant, Concordia and Cipher Pharma. Sadly for me, well, traumatically for me, they didn’t retain their value at all and it vanished very quickly, leaving me mad forever. Sometimes I realize that my portfolio would probably be something like 25% higher without these mistakes and it hurts me. I don’t see anything sader to lose than money. Because money can buy everything.}

_{You just lost your parents? Then buy some others and stop crying, you stupid asshole. You have lung cancer? Just buy some other fucking lungs on Amazon and stop bleeding while coughing, you dirty dying piece of shit.}

<sub>All of these 11 baggers are still going well, except maybe for United Therapeutics and Mallinkrodt which are not going bad, but it’s sometimes complicated with healthcare stocks. 

So, with that sample, I’d be tempted to tell you “You may reduce your position but never sell a bagger with an excellent track record”.</sub>

Ce que les meilleurs achètent

You think the market is expensive?

You would never pay more than 20 times earnings for a stock?

Well, you surely don't work for Giverny Capital.

Because the activity of the fund for the quarter ending on september 30th was out yesterday and we could see that they sold NOTHING over the last quarter.

They just added to their existing positions and even to some very expensive stocks on a value perspective.

Let's see the top positions of the fund and the percentage of shares added during last quarter:

1- Berkshire: 19% (+2%)
2- Carmax: 10,4% (+3%)
3- Bank of the Ozarks: 8,6% (+4%)
4- Ametek: 6,6% (+1%)
5- LKQ: 5,8% (+1%)
6- Visa: 5,2% (0%)
7- Disney: 5,1% (+1%)
8- Markel: 4,8% (+1%)
9- Union Pacific: 4,6% (+7%)
10- Wells Fargo: 4,3% (+1%)
11- Alphabet (GOOG + GOOGL): 4,3% (+6%)
...
14- Liberty Media (Formula one): 3,5% (+7%)
...
16- Heico (3,4%) (+7%)

Heico is expensive as fuck. It seems that it's a kind of Precision Castparts. If you pay 40 times current earnings for a stock like this, you gotta have faith in this stock.  But, if you take a look at the performance of that stock since the beginning of 2017, you'll bite your fingers seeing how much money you could have made (from 63$ to 90$, almost a 50% performance).

These guys are pretty good. They know better than many people how to pick stocks that retain their value, which is not an easy task at all. And they know when to pay a premium for a stock.

Let's take a look at some other people too:

Chuck Akre:

Like Giverny Capital, Chuck bought a lot during last quarter. That guy is surely one of the best investors out there. I believe his picks must be studied by most of us because he inspired a lot some great investors like the guys at Giverney (high PE but good ROE with great growing cash flow machines).

American Tower: added 8% to the position
Moody's: added 41% to the position
Mastercard: added 13% to the position
Visa: added 35% to the position
Dollar Tree: added 16% to the position
O'Reilly: added 130% to the position

Warren Buffett:

Apple: added 3% to the position
Bank of America: new position for about 10% of the total portfolio ($hitload of money)
IBM: reduced the position by 32%

Buffett is admitting his mistake with IBM by selling more and more of it. That stock had a huge ROE and a low PE. The market isn't crazy. When a PE is really low, usually, there's something wrong with a stock and it was (it's still) the case with IBM.

The new position in Bank of America is probably a conversion of warrants or some shit. I don't know. Please, check elsewhere to have the correct explanation.

 Lou Simpson:

Allison Transmission Holdings (ALSN): added 46% to the position
Axalta Coating Systems (AXTA): added 12% to the position

I know almost nothing about these stocks. ALSN looks OK, but I'd have to dig much deeper.

Bill Ackman:

The fact that this guy still manages more than 5 billion US dollars amazes me. How the fuck some people still trust him after all the crap he did? Here’s what he does: buy a large stake of a company, TRY to do something to improve earnings (which doesn’t work 50% of the time) then sell almost everything a few years later with some stupid excuse like capital losses for tax purposes (LOLLLL).

Restaurant Brands: position reduced by 32%
Automatic Data Processing: added 403% to the position

What kind of shit will he try to do with Automatic Data Processing now?

Sequoia Fund's update

Soon, I'll write my usual post about superinvestors, because what they bought lately will be out. It's gonna be interesting to see what they bought in an expensive market.

I'm a little late on this one, but Sequoia Fund's third quarter letter was out about one month ago and it told us the late activity of the fund:

They added to their large position in Google/Alphabet (undisclosed increase);
They slightly increased their position in Jacobs Engineering to about 3% of the total portfolio;
They increased their position in Wells Fargo to 3,2% of the total portfolio;
They initiated a mysterious new position (anyone wants to guess?)

They trimmed their positions in Chipotle, Mastercard, TJX, Waters and Constellation Software bonds. They exited their positions in Croda and Danaher, two stocks about which nobody talks.

Chipotle is still a fucking joke. The stock was selling for about 400$ a year ago and is now selling for about 280$. Bad move, Sequoia. Stay away from whatever Ackman touches,because it transforms into shit. Everybody knew a year ago that it wouldn't be easy with Chipotle. Why trying it anyway?

About 90% of the portfolio is invested and 10% is in cash.

Finally, here's the top 10 holdings:

Berkshire Hathaway: 11,8%
US Treasury bills and cash: 9,7%
Alphabet: 9,4%
Mastercard: 7,5%
Carmax: 6%
TJX: 5%
Constellation Software: 5%
Dentsply Sirona: 4,8%
Rolls Royce: 4,8%
Liberty Media Corp: 4,2%

Whatever I'm saying here, I believe that most of the moves of Sequoia are great and are worth following. Alphabet is a fucking monopoly. It's a huge cap too (720 billion dollars), so it surely won't double over night, but is anyone thinking this stock could seriously be threatened or losing it's ultra dominant position? Plus, they're full of cash. Substract the cash and you'll find that it's not that an expensive stock...

With that top 10, as good as all theses stocks are, do you still believe Sequoia invests mostly in mid caps?

Market caps

Every investor has an opinion about market caps. But few people have the same definition of market caps categories.

So, I've made a little journey on Wikipedia and here's what I've found. 

Nano Cap: market cap under 50 millions dollars
Micro Cap: market cap between 50 and 300 millions dollars
Small Cap: market cap between 300 millions and 2 billions dollars
Mid cap: market cap between 2 and 10 billions dollars
Large Cap: market cap over 10 billions dollars

I think we could add "Mega caps" for a market cap over 100 billions dollars.

For me, the categories look that way:

Nano cap: Suicidal.
Micro Cap: Risky but could be great if you're very selective and you chose stocks with a market cap close to the beginning of small cap category (200-300 millions dollars).
Small Cap and Mid Cap: Best place to look if you're an individual investor.
Large or Giga cap: Blue chips can stabilize your portfolio. It's a good idea to have a few of them on your portfolio, but not too much because amazing growth is usually not there (except for some exceptions like Amazon, Google, Netflix...)


Although market cap is not my first criteria before investing, on a portfolio perspective, I think it's a good idea to balance market caps in a reasonable way, with, of course, a place close to zero devoted to stocks with a market cap under 200 million dollars.

Another day of despair

We live amongst pedophiles. I mean, if we can't trust Kevin Spacey, who can we trust? That guy was my favorite movie star for many years and now, we learn that he's some kind of fucking predator, wanting to fuck 14 years old boys.

I'll never be able to watch his masterpieces like K-PAX and Superman returns again. Fuck you Kevin Spacey. But I wish you to be fucked by grown up girls. I bet you'll hate it.

I really want to trust and admire some people but fuck, this world is full of losers and mofos. Half of Hollywood is deviant (pedophiles, sexual predators, assholes). More than half of superinvestors are bad or average. And many people on the facebook page of Robin Speziale talk about stocks on the Venture.

Where are we going?

I hope to be your lighthouse because, frankly, except for me, I don't see who could be your guiding light through all that thick shitty fog.

Share a few beers with me

If anyone in the province of Quebec wants to meet me, I want to inform humanity that I will be avalaible in Quebec city and Montreal by the second half of november (november 17, 18, 25 or 26).

So, if you want to meet, share a few beers, talk about anything (investment club, some particular stock or any random shit) just write me a comment, or, better, send me an email and tell me when you'll be available.

Grab that exclusive chance to hear my approximate english!

Robin Speziale and Penetrator: together forever

In the fall of 2016, Robin Speziale told me that he wanted to start a hedge fund. I said to him that I'd like to be with him in that project.

When we met, a little bit later in december, we talked about it once again. And Robin told me that he thought that we should start with something easier: an investment club (click on the link for his version of the story).

What is an investment club? You probably haven't heard about it before. And I didn't too.

It's a community of investors that put money together in a fund that is managed without any fees. In other words, Robin and I will work for free for a community that wants to benefit from our investment knowledge. If everything goes out fine, we'll liquidate the club after a year or two and give the money back to every investor (adding plus value, of course, if there's not a market crash). And we'll start something more official where we'll get paid. And we'll get rich because we'll be good. So we'll drive a BMW with heating seats, eventually.

We both have a fascination for the market. Robin has interviewed tens of great investors and has been active on the market for about a decade, such as me. We're both good guys and honest. But we may fuck up. However, along the last 10 years, I haven't a single year where my performance was negative. Always something between 1 and 55% return.

We've learned from the best and made some mistakes that we don't plan to reproduce.

Why should we remain anonymous?

We deserve to be on www.dataroma.com.


Email me: masterpenetrator@hotmail.com

Canadian Healthcare/Pharma: shitty sector

Once upon a time, I thought that investing in the sector of canadian healthcare/pharma was the best thing I could do.

In retrospect, I was fucking wrong. Actually, the canadian healthcare/pharma sector is great for only one thing: destroying value.

Let's see how things have been for 10 of the most popular canadian stocks in that sector:

Valeant (15,33$)

Performance last year: -48%
Performance last 5 years:  -72%

Concordia Healthcare (0,72$)

Performance last year: -88%
Performance last 5 years:  -89% (the stock was first traded in january of 2014)

Cipher Pharma (4,49$)

Performance last year: -6%
Performance last 5 years:  148%

Nobilis Health (1,40$)

Performance last year: -57%
Performance last 5 years:  1266%

Patient Home Monitoring (0,33$)

Performance last year: 91%
Performance last 5 years:  306%

CRH medical corp (2,97$):

Performance last year: -52%
Performance last 5 years:  747%

Ceapro (0,59$)

Performance last year: -68%
Performance last 5 years:  1080%

Biosyent (9,84$)

Performance last year: 16%
Performance last 5 years:  958%

Knight Therapeutics (8,58$)

Performance last year: -4%
Performance last 5 years:  124% (the stock was first traded in march of 2014)

Prometic Life Sciences (1,61$):

Performance last year: -50%
Performance last 5 years:  973%

If you take a look at the performance for the last 5 years, most of these stocks look great. But if you look only for the last year, the performance has been awful for most of them. And more than anything else, how could you be amazed by a return of 1080% or 1266% for a stock that is selling for less than 3$?

Most of them are small caps. Should you buy something on the venture or something on the TSX selling for less than 5$? Actually, all of them are selling for less than 10$ except for Valeant which is selling for 15$ (and which was selling for more than 300$ not so long ago).

For me, the answer is clearly a no. Do that only if you're a fucking gambler and I bet that things will sooner or later turn out bad for you if you're that kind of investor.

The only two stocks that are a little safe on that list are Knight Therapeutics and Biosyent. But they're clearly not blue chips.

Take a look at that list. Most of the names there are forgotten even if that list is only 17 years old. That sector is simply not safe in Canada.

The ultimate list of growing cash flow generators

As you probably know by now, I'm always looking for the easiest recipe to apply to select great stocks.

To do that, I often analyze stocks on various angles to find out what's so great about them. Some people, like my girlfriend, would call me an autist for doing that. I don't think I am an autist, but she seems to find comfort in that belief to help her to accept the fact that I'm not entirely how she would like me to be.  For instance, the other night, she called me an autist for knowing the year of birth of Morgan Freeman. I don't think that it's an autist trait to know that. Actually, I think that's the poeple who don't know that important fact that are dumb.

Well, thanks to autism, I've made a very special list for you, once again. The group below is a VIP group of stocks, very hard to find, which are what I call "Class A" stocks. These stocks had all growing free cash flows over the last 5 years. I've written a bit about that kind of stocks lately, but they're very special stocks. They're true value creators, which is something rare. 

Constellation Software (CSU)
Enghouse Systems (ENGH.TO)
CCL Industries (CCL-B.TO)
Boyd Group (BYD-UN.TO)
Alimentation Couche-Tard (ATD-B.TO)
Canadian Pacific (CP.TO)
Canadien National (CNR.TO)
Disney (DIS)
Credit Acceptance Corp (CACC)
Middleby (MIDD)
Priceline (PCLN)
Novo Nordisk (NVO)
Robert Half (RHI)
Liberty Global (LBTYK)
Home Depot (HD)
Facebook (FB)
Roper Industries (ROP)
Owens-Corning (OC)
American Tower Corp. (AMT)
Waters (WAT)
Discover Financia Servicesl (DFS)

Average return last 5 years: 210%
Average return last 10 years: 694%

The average current ROE of the group is 32
The average forward PE of the group is 20,5
The forward PE of the group divided byt the average PE of the last 5 years of the group is 0,84, which means that this group is cheaper today than on average for the last 5 years

And now, compare the performance of the group VS the performance of the S&P:

S&P return last 5 years: 75%
S&P return last 10 years: 66%

If you'd seen the individual returns, you'd be even more shocked. Could you believe that, over the 20 stocks listed above, only 3 did worse than the S&P over a 5 years time frame? These stocks were Liberty Global (16%), Novo Nordisk (42%) and Discover Financial Services (60%).

Over a 10 years time frame, only two stocks did worse than the S&P. These stocks were Liberty Global (37%) and Robert Half (59%). And probably that Liberty Global had some accounting tricks over the period, like doing some spinoff generating value (which isn't something we can see on a chart).

So, over a 10 years time frame, you'd have 90% of your stocks that would have done better than the S&P? Isn't it fucking incredible? That group may look expensive (some current PE ratios are high), but most of these stocks have always been pricey. We should take a look at them on an historical (relative) perspective, not on an absolute perspective.

You should be eternally thankful to me for giving you such a list, you fucking ingrate readers. You give me nothing but statistics and I give you the recipe to become rich. I should keep all that for myself  because we have a fucking one-way relationship. I give, you take. You give me nothing, I take it. And so on and so on. And I don't mind, because I'm a fucking autist and I don't realize when people are wiping their feet on me.

Constellation Software, great but too expensive

Constellation Software is a great, great stock which I own since 2012. At the time I bought it, the stock was selling for about 90$. Today, it's selling for about 720$. It's my homerun. It's an 8 baggers.

But even if I've had a 8 baggers with that stock, I still haven't found what I'm looking for in this life. It's so sad to realize that an 8 baggers doesn't make you happier.

Maybe if it gets to a 10 baggers, I will finally see life differently. I gotta keep the faith. Otherwise, fuck, what will it take to be happy? I think I will fall off a cliff if that 10 baggers target doesn't have a positive impact on my mind.

Everything you've read about Constellation Software is true: It's a wonderful business that has everything you're looking for: A high ROE, very nice cash flows which are growing steadily, a nice growth in earnings year after year, a low beta, high insider ownership and more... If you find a business with a similar profile, just buy it now. If you have a coffee on one hand and a baby around your arm, just leave them fall on the floor and go in a hurry to your computer to buy this stock while your baby and your boiling coffee are meeting on the floor.

The only problem with Constellation Software is that it's very expensive. The price you have to pay today is 28 times next year's earnings. I know that a lot of great stocks are selling for such a price or more than that. For instance, Mastercard is selling for about the same ratio (PE of 28) and it has a very high ROE like Constellation Software. But it's not because everybody is willing to pay a high price that they're right.


Constellation Software is now a medium/large cap (15B$ market cap) and the PE is high. At such a high multiple, I don't think the stock will double in the near future. I think we could expect about a 10% return every year, but with a lot of volatility because at 28 times earnings, that stock should be volatile to any slight bad news.

I've trimmed a bit my position this week. But I won't sell it entirely. It's a too good stock. But it's probably unwise to have a large part of a portfolio on that expensive stock. I believe there's a limit to a multiple's expansion and CSU is close to that limit.

The hidden (often absent) value of a bad player

When you build a portfolio, you should really do it like you would participate to a hockey pool.

You should chose the best 20 players you can. Why should you chose a player who had several cerebral commotions and who has difficulties to skate on the same ice than other players? People and businesses don't change that much. When they don't have a lot of potential now, they probably won't have much more potential in a few years.

And even with these 20 players, you'll get some bad surprises.

Some of your players will get caught in some scandals. They'll be part of a fraud. Or they'll get caught in some whorehouse and make everyone ashamed around them.

But most of them will act like the best, because they're the best. 

So, why should you chose a player like Sears Canada among your team? How could a bad skater could become a good or even a normal skater? Anybody knows for years that Sears (and many others, like Bombardier for instance) aren't good investment choices. Why chose the complicate path? Because your fucking life isn't complicated enough?

When you chose retail, you chose a thin ice. If you're not afraid of thin ice, chose the very best players.

I don't like hockey at all. Why the fuck am I talking about it?

If you had follow Jason Donville so far...

Nobody hears from Jason Donville anymore. Why? Because Donville Kent bites the dust since the last 3 years. More precisely, the returns have been 4% in 2015, -1,7% in 2016 and 0,78% so far in 2017 (source: www.donvillekent.com).

Plus, as you can see below, the top picks of Jason Donville have had a very tough time over the last 2 years and a half (source: www.stockchase.com): 


March 7th, 2016:

Concordia Healthcare (CXR.TO): -96%
CGI Group (GIB-A.TO): 15%
MTY Food Group (MTY.TO): 58%
Average return: -8%


December 23rd 2015:

CRH Medical (CRH.TO): -15%
Concordia Healthcare (CXR.TO): -97%
Freehold Royalties (FRU.TO): 34%
Average return: -26%


October 19th, 2015:

Concordia Healthcare (CXR.TO): -96%
Nobilis Health (HLTH-A.TO): -51%
Valeant (VRX.TO): -91%
Average return: -79%


August 25th 2015:

CRH Medical (CRH.TO): -18%
MTY Food Group (MTY.TO): 51%
Valeant (VRX.TO): -94%
Average return: -20%



June 30th 2015:

CRH Medical (CRH.TO): -31%
Constellation Software (CSU.TO): 41%
Tucows (TCX): 110%
Average return: 40%


Last time he did good (not great, but good) was this time. Since then, it's been terrible. We've lost our messiah.

However...

Equifax (EFX), is exactly the kind of stock an investor should buy:

A ROE between 15 and 20 (which is not spectacular, but good enough).

A company that sells services (credit score) at repetition, to a variety of clients. Used world wide, and more and more every year as the population is growing.

Free cash flows grew every year since 2010, which is a great indicator of value creation. You can't find that kind of steady growth of cash flows very often.

And, finally, check these earnings per share:

2010: 2,11$
2011: 1,88$
2012: 2,22$
2013: 2,84$
2014: 2,97$
2015: 3,55$
2016: 4,04$

If you had bought Equifax in january 2010, you would have paid 31$ for a share.

That same share is selling for 106$ today. And it was selling for about 145$ last july.

Equifax had everything you were looking for.

However...

With the hacking of their site and about informations taken about 143 millions americans and 100 000 canadians ,the reputation and the image of the firm are seriously hurt. Very few businesses could afford to have such a big hacking problem.

I wouldn't touch Equifax even if the forward PE (17) is now much lower than it's been in the last 5 years (average = 28).

One of the most important lessons you have to learn is: avoid scandals. It's been the case with many stocks. It's not at all the same kind  of scandal but, for instance, SNC Lavalin hasn't yet recovered for the scandal that happened 5 or 6 years ago.

In my opinion, there's probably 8 chances out of 10 that Equifax will go through some important turbulences over the next 2-3 years.

I may be wrong. But reputation is something very important on the stock market. Don't be a stupid contrarian.

Metro (MRU.TO) buys Jean Coutu (PJC-A.TO). NOT SO GOOD MY DROOGIES.

There's some great businesses in Quebec. Couche-Tard is among them and it's almost at the top. Metro is among them, probably in the top 10. And Jean Coutu has good ROE and is well managed but is not very agressive. It's more passive than agressive. So, I don't think that Jean Coutu is among the top list.


Over the last years, there's been some speculation about Metro buying Jean Coutu. It made sense to a lot of people, me included. After all, Jean Coutu seemed to have some problems to grow.

Just take a look at Jean Coutu's EPS since 2011 and you'll understand quickly:

2010: 0,48$
2011: 0,77$
2012: 1,03$
2013: 2,57$
2014: 2,12$
2015: 1,16$
2016: 1,14$

Do you see something exciting there?

Not me.

I surely wouldn't pay 23 times actual earnings or 22 times next year's earnings for such a business. But that's the price Metro is willing to pay to get Jean Coutu.

It's expensive. Metro is not paying for growth. Metro is paying for consolidation (because Metro owns Brunet, which is a pharmacy chain). 

And Metro will probably sell a lot or all of their Couche-Tard stocks to finance the acquisition.  How could they sell something agressive like Couche-Tard for something passive like Jean Coutu?

I'd never do that. More so given the fact that Couche-Tard is actually cheaper than Jean Coutu.  But please, if your intelligence is superior than mine, explain to me what I'm missing here. I just see nonsense.

It's hard to see exactly what's is gonna be. But I'd rather stay away for now and watch how things turn. There's many stocks we can understand easier than that possible merger at an high price.

Faithful = boring

It's harder to write some post as I'm more and more faithful to my stocks.

My portfolio management is much more passive and less passionate than it was in the past... In this recent past when everyone, me included, got a boner when Jason Donville said something on BNN about a brand new stock.

Now, I follow only my 20-22 stocks (almost). And I go to stockchase about once a month, and for 3 or 4 minutes. Not interested anymore about the canadian "experts".

What's the most exciting thing I do? I add to existing positions which are cheaper than usual. And that's all. It's much less exciting than when I was looking for a new sensation.

Even though I made a lot of mistakes in my investing years (from fall 2008 to today), my portfolio grew in an amazing way with a combination of great performance for some years and great savings for other years. I've written about it in the past, but with my savings, I've managed to grow the portfolio and mitigate a lot of the impact of my bad decisions.

See for yourself (growth from year to year since may 2009):

May 2009: (year 0)
May 2010: 75%
May 2011: 41%
May 2012: 38%
May 2013: 31%
May 2014: 50%
May 2015: 54%
May 2016: -8%
May 2017: 22%

What explains the -8% performance of 2016? Of course, it was Valeant, Concordia Healthcare and Allergan (to a lesser extent).

Isn't it great to see that? A lot of people could do the same if they tried to live their life in a reasonable way. I don't think I've done a miracle here. And I've never had an incredible income. It's always been more than the average of the people of my age, but not that much. In the recent years, it's been comfortably above the average, but I'm definitely not rich.

It's cool to approach your 40's and see that you won't have to bother about your retirement. And to see that 10 years of investing have made you at least an OK investor. And now, you won't have to save that much money every year. You just have to do the right moves with your portfolio and avoid bad businesses. With 10 years of experience and some fiascos along the way, you should be able to avoid catastrophes.

With your annual savings making less and less difference on your total portfolio, you can spend a bigger part of your savings on things you like. And, more important, you can survive to a big kick in the crotch from fate.

Start now. While you're in your twenties. Save your money. Buy some great stocks with a high ROE and growing free cash flows in the last 5 years.  Do it NOW.

You'll be able to concentrate on other problems than money when you'll be 40.

Portfolio review, september 18th, 2017

I sometimes ask myself about other guys who are 35-40 years old. How do they occupy their time?

I don't think I refuse to grow up, but a big part of me is very conscious of the fact that time flies. I want to live a mature, yet a reasonably wild life. Thus, I sometimes go out with friends and I try to live special moments by dressing like Bruce Springsteen or some other shit.

It's probably the thing I like the most in life. I wonder what a normal 35-40 years old guy prefers the most?  Playing hockey with his kids? Doing Sudokus?

I have a young friend which has a lot of potential. He's 15 years younger than me but he's funny, intelligent, curious and wild. He also admires my way of seeing the world and tries to do the same as me, sometimes.

But he's a little too much looking for experiences. For instance, recently, he told me that he snorted coke on a toilet in a gay pub.

I was disgusted. How could someone snort cocaine in a place that received so much dicks and smegma and AIDS? I have nothing against gay people but I don't want to have anything to do with their dicks. Can you imagine the content of the dick of Freddy Mercury mixed with something going in your nose?

SHIT, YOU MUST BE PUKING BILE RIGHT NOW.

Ok, now, let's take a look at my portfolio. My performance so far in 2017 have been a little disapointing given the fact that my biggest positions have stalled and given the fact that the US dollar has lost about 7 cents (my US stocks represent about 50% of my portfolio).

Alimentation Couche-Tard: 8,1%
Constellation Software: 6,9%
CGI Group: 6,7%
Linamar: 6,1%
MTY Food Group: 5,5% 
Tucows: 4,8%
Hardwoods Distribution: 3,8%
Stella Jones: 3,3%
Knigh Therapeutics: 3,2%

Ross Stores: 6,4%
Bank of the Ozarks: 5,4%
Novo Nordisk: 5%
Dollar Tree: 4,8%
Biogen: 4,6%
LKQ: 4,5%
O'Reilly: 3,5%
Credit Acceptance Corp: 3,3%
Disney: 3,2%
Mohawk: 3,1%
Middleby: 2,5%
Bioverativ: 0,9%

Cash: 4,4%

Average ROE: 29
Average forward PE: 16
Average Beta: 0,8

The average price of your shares

A few years ago, Bernard Mooney wrote something about the average price of your shares as an indicator of the quality of your portfolio.

It's surely not the best way to evaluate a portfolio. After all, many stocks went from pricey to cheap overnight (AIG, Valeant, Blackberry and many many others). Nonetheless, usually, a pricey stock is better than a penny stock.

Only crazy fuckers will say that a penny stocks portfolio could be solid. I always face palm myself when I read people writing that they have some great fucking idea investing in a super new penny stock. All I can say is that you don't get lifetime products in a Dollarama. You can't prepare your retirement with products from a Dollarama. Because that's what penny stocks are: cheap worthless stuff, 9 times out of 10. If you consider yourself as a serious investor and a large part of your portfolio is occupied by stocks under 1$ (and even under 10$), you surely had some problems with your ombilical cord at birth. Admit that you're only a gambler.

One of my first advices to any new investor would be to avoid the Venture at any price, whatever the ROE of a stock is. Don't think you are smarter than the market. You can't do well if you buy cheap shit. Don't buy cheap fucking shit. If you do it anyway, fuck you. Lose all your money because that's what you deserve.

Ok, so, if I take a look at my stocks, my cheapest is Knight Thrapeutics (about 8,50$ CAN).

I have a few "hundred dollars stocks":

Constellation Software (685$ CAN)
Biogen (320$ US)
Credit Acceptance Corp (265$ US)
Mohawk (250$ US)
O'Reilly (210$ US)
Middleby (120$ US)
Disney (100$ US)

Most of my other stocks are priced at something between 40 and 80$.

Please, don't take this post too seriously because there's nothing that rationnal here. The main argument here is not that pricey = quality... but cheap = crap.

Those inclined towards these stocks are not investors. They're pee-wees. Bantams at best. 

Keep it simple like AC/DC but don't choke in your own vomit

I like AC/DC. They always keep it simple: three or four chords songs with lyrics about only two topics which are sex and hell.

See for yourself:

Hells Bells
Highway to Hell
You Shook Me Hell Night Long

They've done that for 40 years and it still works. They won't be worshipped as geniuses in the history of rock and roll but they should be remembered for a recipe that works again and again by just singing about sex, hell and sex in hell.

As an investor, we should do the same. For myself, I try to do that. I'm always looking for the simplest yet best recipe to apply to find a good investment.

For a while, I thought that ROE was everything.

Lately, I've found out that growing free cash flows was a great indicator of performance.

And more recently, by analyzing some rare but great investors, I've found that combining these two factors (ROE + growing free cash flows) was the best thing to do to find winners.

I've took my spreadsheet about the great stocks I follow and I've added the A-B-C-D factor.

A is a stock with growing free cash flows over the last 5 years without any exception
B is a stock with growing free cash flows over the last 5 years with one or two years with a decreased followed by an increase
C is a stock which isn't steady with free cash flows
D is a stock with some negative free cash flows

I know I've written about that in the last few months, but I've improved my view.

Try that. Try to find growing free cash flows for 5 years. You'll find it very hard. But once you'll find them, you'll see that, in the long run, these are the best stocks. Combine that with a high ROE and you've got an handful of winners. Almost none of these stocks will do badly in a long period of time.  You may find an exception here and there, but if you build a 20 stocks portfolio sharing these similarities, you may see something like these five "A" rating stocks.

They're almost all expensive. But that's probably the only stocks for which you shouldn't bother paying more. 

Priceline (PCLN)
Credit Acceptance Corp. (CACC) 
Constellation Software (CSU.TO)
Boyd Group (BYD-UN.TO)
Enghouse Systems (ENGH.TO)

Robbing a beggar

Have you found ways to make money with Hurricane Harvey?

Not me.

Here's the only way I've found to make money lately. Very little money in an absolute way, but maybe a lot of money in a relative way.

Yesterday, I went out to play some music in a bar where I sometimes go. Between songs, I go out with a friend who smokes and we speak mostly about music in general and the making of "Trout Mask Replica" in particular. That's a completely fucked up album made in 1969 by Captain Beefheart. It sounds mostly like a pile of noises. But many very big music fans rank it as one of the best albums of all time, like my friend.

The recording of the album was crazy. Beefheart forced his band to disguise themselves during the sessions. And they had no money. So they rationed food and they had something like a can of beans each day for all the band. Even if you don't like this music (which is my case), you should read a bit about the story of that recording. You'll get to another dimension.

Anyway, we're talking and laughing about that album and suddenly, a beggar comes to us on his bicycle:

Beggar: Do you have some spare change?
My friend: No
Me: No. You, do you have spare change? Because I need it too.
Beggar: I only have 25 cents.
Me: Ok, I'm gonna take it.
Beggar: Ok, here it is.

And the guy actually gave me his quarter.

And he goes to see other people outside the bar to ask them for money.

That's the craziest money I ever earned.

Much more memorable than 10 000$ mare on the stock market.

The price to pay

About 3 years ago (july 2014), Dollar Tree announced it was planning to acquire Family Dollar.

  

About one year later (summer 2015), each Family Dollar shareholder got 79,55$ for each FDO share they owned (59,60$ cash + each stake of 4 FDO shares got transformed into one DLTR share).

Given the fact that FDO EPS was about 2,50$ in 2014, DLTR paid a high price. More than 30 times FDO earnings. And FDO wasn't growing like a stock that should be selling for 30 times earnings.

At the time it happened, I said to myself that it was expensive but exciting.

The integration can’t be fast and very effective when you're doubling the size of your business (it was a 9B$ transaction) by buying something that doesn't grow that much for 30 times earnings. 

 Managers weren’t wise to pay that price. That's exactly the opposite of what Couche-Tard managers usually do. 

DLTR managers were probably nervous that Dollar General would buy Family Dollar. So they raised their offer and they paid a generous price.

I was tempted a couple of times to sell my shares. But I liked the sector. And I thought the transaction was promising.

As seen below, it took time for the market to recognize the benefits of the transaction:  

***************

Price of DLTR shares, August 2014 : 53$ 

EPS released in august : 0,59$

Price of DLTR shares, August 2015 : 76$ 

EPS released in august : (0,46$)

Price of DLTR shares, August 2016 : 83$

EPS released in august : 0,72$

Price of DLTR shares, August 2017 : 80$

EPS released in august : 0,98$

****************

If it wasn’t for this week’s soaring, the price of DLTR shares would have been the same as in 2015. 

Yes, it took time. But this week, the results were great. DLTR beat estimates by 12 cents (14%) which is great. After a few years of stalling, DLTR is going in the right direction.

My advice would however be to sell a stock when a big acquisition is going for a high price. Just sell, and keep a close look. Jump back in the train if it goes well after a certain time.

John Malone and Liberty Media (FWONK)

My 14 months daughter eats hair. That's true. She crawls everywhere in the house and when she finds some hair (my girlfriend has long dark hair), she takes it and then she puts it in her mouth.

My girlfriend told me that my daughter also eats grass and that she once tried to eat a spiderweb.

These fucking babies are so crazy and stupid!

Us, investors, are much more rationnal and wise. That's why we eat transformed food flavored with cancer and we invest in Valeant.

For some people, the ultimate level of intelligence and wisdom is John Malone. Let's precise that these people are investors because if you go on the street and ask who John Malone is, I bet you a handful of dark hair that nobody will answer correctly.

Personnaly, I don't know the guy. That's why I made a little research about him and his creature, Liberty Media, which is a stock I wrote about recently (it's a new position of Sequoia and Giverny Capital).

Who is John Malone? 

Age: 76 (born in 1941)
Citizenship: American
Personnal wealth: 7,8 billion US$
Nickname: Cable cowboy
Chairman of the board of Liberty Media

What is Liberty Media?

Liberty Media owns interests in a broad range of media, communication and entertainment businesses. Below is a list of most known entities that are part of Liberty Media and the ownership percentage of Liberty Media in these positions.

Atlanta Braves: 100%
Formula One: 100%
Sirius XM: 68%
Live Nation Entertainment: 34%

These 4 businesses are great. A sport team, a huge car's race festival, a satellite radio company and the largest live entertainment company in the world (many famous bands and artists are associated with Live Nation, such as Shakira, Katy Perry, Roger Waters, Bruno Mars, etc).

Entertainment is, in my opinion, a great sector to invest, as long as it could resist to technology evolution. Which is the case here, at least for the next few years. 

Some sources on Internet are relating that John Malone has achieved to compound capital at an annual rate of 30% for about 25 years. I'll say they're right because agreeing with any Internet source is the easiest way to live your life.

Malone has the reputation of being a low cost operator focusing on long-term after-tax cash flow instead of short-term accounting profits. If you take a look at FWONK numbers, you'll see it's not that easy to understand. Personnally, I think that the accounting is a little bit complex. Malone likes depreciation and spin-offs a lot. That's what he uses to create value. That's super great to read, but harder to analyze.

Three years ago, many people said that Michael Pearson was an unbelievable manager with lots of skills for value creation... although Valeant accounting practices were complex. I'm not saying here that Malone is similar to Pearson. But I like to see clearly into numbers, which isn't the case with Liberty Media.

Nonetheless, I believe that this stock is a conglomerate of great businesses and that we should look deeper into it.
 

Sequoia fund investor day transcript

My favorite financial reading of the year is out:

Sequoia fund's investor day transcript.

It's gonna be easy for me today because I'm only gonna copy some main ideas about the transcript. These are all facts that I like and that I agree with.

There's a little bit jerking-off here and there in the transcript. But we're all humans. Who never wanted to cum in public?

First of all, on june 30th, Sequoia's top 5 holdings were:

Berkshire Hathaway: 11,3%
US Treasury bills and cash: 8,7%
Mastercard:7,7%
Alphabet: 6,5%
TJX: 5,9%

Between december 2016 and march 2017, Sequoia reduced their stake in Berkshire from 17% to 12%. Berkshire is still a great business but growth shouldn't be spectacular.

They are very focused on owning high-quality companies and they measure it by the return on equity of their portfolio which is significantly higher than the ROE of the S&P.

The PE multiple for Sequoia is about 10% higher than it is for the index. They believe they own first rate companies and management teams, which deserves at least a small premium to the Index.

The market is smart. Business quality is clearly well appreciated. High quality business rarely trade for truly bargain prices. But businesses do periodically trade  at a discount to their intrinsec value (INTRINSEC VALUE: A concept as vague as god or love, in my opinion).

Priceline is a kind of duopoly with Expedia (such as Mastercard and Visa). It's expensive but it deserves a premium valuation because the growth rate should continue to be very high for the next years.

O'Reilly has a very sustainable moat on the commercial side of the business. They have by far the most efficient distribution system in the business. The company can deliver a part in a garage in a matter of minutes, which isn't the case at all with Amazon.

Credit Acceptance Corp (CACC) has a different business model than other lenders in the auto industry. Their ROE is high (in the 30's). They also have a very shareholder friendly management team (they bought back more than 50% of the shares since 2005). The founder of the business is the most important shareholder. Personnal note: I like that stock even if analysts seem to hate it.

Mohawk is a cyclical company (related to housing market). It has however changed a lot and is now very well positioned for the future. There is no other flooring company that has the product range, the geographical exposure and the management talent that Mohawk has.

Many home runs for Sequoia have been midcap picks (TJX, Fastenal, Mohawk, Idexx). They mainly look in that space for investment ideas.

And much more about Google, Carmax, Liberty Media and others...

Ce que les meilleurs achètent (august 16th, 2017)

Let's take a look at ce que les meilleurs ont acheté dans les derniers mois.

Once in a while, I do what I can to promote our canadian cultural diversity by writing a bilingual sentence like that.

Warren Buffet:

Most important transactions:

Buffett sold about 16% of his position in IBM. As we seen last quarter, Buffett seems to admit that he made a mistake of investing in IBM (now 5,1% of his fund);
He added 52% to his position in Bank of New-York (now 1,6% of his fund);
He added 20% to his position in GM (now 1,3% of his fund).

Top 3 Berkshire positions:

Kraft Heinz: 17,2%
Wells Fargo: 16%
Apple: 11,6%

Chuck Akre:

Most important transactions:

Akre bought a lot during the last quarter. Many positions were increased. Two positions were increased most than the others: 

Dollar Tree: added 16% to his position (now 5,6% of the total portfolio);
O'Reilly: Added 45% to his position (now 4,3% of the total portfolio).

Top 3 Akre positions:

American Tower Corp: 14,8%
Moody's:  11,4%
Mastercard: 10,7%

David Einhorn:

Einhorn is a poker player and I can't forget this when I take a look at his picks. He's a gambler but he sometimes plays well. But he's not the typical buy and hold investor.

Mylan: added 23% to his position (now 6,9% of the total portfolio);
AABA: New position (now 3,9% of the total portfolio);
Perrigo: added 49% to his position (now 3,2% of the total portfolio);
Dillard Inc.: added 33% to his position (now 2,4% of the total portfolio);
Chemours: reduced his position by 28% (now 2,3% of the total portfolio);
Micron: added 66% to his position (now 1,3% of the total portfolio);
Hewlett Packard: New position (now 1,2% of the total portfolio).

Top 3 Einhorn positions:

GM: 31,8% (What the fuck?)
AerCap Holdings: 9,6%
Apple: 9,4%

Sequoia Fund

The last transactions haven't been filed yet but there's an interesting new pick which is FWONK (Liberty Media) which is a conglomerate including Atlanta Braves, Formula 1, Live Nation, Sirius XM and many others. In a way, it's a kind of Disney for adults. Giverny Capital has also bought shares of FWONK lately.

Giverny Capital 

Most important transactions:

Heico Corp: + 6% (now 2,8% of the portfolio)
O'Reilly: +5% (now 3,2% of the portfolio)
Bank of the Ozarks: +4% (now 8,9% of the portfolio)
FWONK: New position (now 3,5% of the portfolio)
Ametek: -13% (now 6,6% of the portfolio)
Disney: -15% (now 6% of the portfolio)
M&T Bank: -16% (now 4% of the portfolio)
LKQ: -18% (now 5,8% of the porfolio)

Top 3 Giverny Capital positions (US stocks only):

Berkshire Hathaway: 18,9%
Carmax: 9,2%Bank of the Ozarks: 8,9%

And let's conclude with that Ackman joke and his titanic, Pershing Square. There may be a documentary on Netflix about him and his shorting of Herbalife, I believe there should be an Ackman strikes back episode (Valeant) and a Return of the Ackman episode (Shipotle Mexican Grill) to follow his path to the dark side.

Most important transactions:

Mondelez International: Reduced his position by 27% (now 10,4% of the total portfolio)
Howard Hugues Corp: Added 32% to his position (now 9,6% of the total portfolio)
Automatic Data Processing: New position (now 3% of the total portfolio)

Top 3 Ackman positions:

Restaurant Brand International: 40,7%
Shitpotle Mexican Grill: 20%
Mondelez International: 10,4%

Buffalo Wild Wings (BWLD)

In the past, I've never been that much aware of the hype about Buffalo Wild Wings. Having been aware of it, I could have made a lot of money, buying some shares at about 35$, in the summer of 2007, then selling them today at about 112$.

But I could also have lost a lot of money, buying the shares at about 195$, in the summer of 2015, then selling them today at about 112$. Because the EPS of Buffalo Wild Wings grew a lot in the past, but the growth has been disappointing lately.

I've recently been in the states for an amazing journey. And I've had to occasion to eat at Buffalo Wild Wings. And I didn't really liked the experience. Not because it was bad. But simply because I don't have the right profile to eat there.

That chain is an equivalent of "La cage aux sports" which you surely know if you live in Quebec. You probably have something similar if you live in Toronto or Vancouver. I don't know what it could be because I don't leave very often my province. Why should I? The best poutine is here.

But, anyway, Buffalo Wild Wings is that kind of fucking restaurant which is full of TV, with a game of baseball there, and a game of hockey there and a game of basketball there and a game of tennis there with that incredible Eugenie Bouchard and her amazing selfie skills.

Customers are overweight boys eating fat meals watching athletes who only eat vegetables. And there's noise. Lots of noise. Some people call that noise "ambiance. And you'll applause when your favorite hockey teams scores. It makes you forget about how boring and meaningless your life is. Because you feel part of a group. A group of supporters of a team that doesn't know who you are and that surely wouldn't give a shit about you even if they knew you. But you applause nonetheless because you need to be part of a group.

And you eat your chicken wings, and you have sauce on the face and on your fingers. And you lick your dirty fingers which were dirty even before touching the wings and you drink your beer and you have a great moment in that noisy environment.

Well, anyway. I didn't invest in that company and I'll probably never do. Not only because I didn't like it that much but because numbers are just OK with that business.

That's a picture of my chicken wings up there. They were good and sold at a fair price. It's not because I didn't like the ambiance that everything was shitty.

Earn easily 500-600$ more a year with your credit card

For a couple of years, I've been interested about offers of various credit cards companies. Because you can make a couple of hundred dollars against very little effort.

Some credit cards offer you something like 200 or 300$ of rewards at subscription. However, take note that, sometimes, you have to have a specific annual income (ex: 60 000$). But almost anybody can find an interesting credit card, given their profile.

Some of the best offers come from American Express, which is sad because that fucking card isn't accepted in a lot of places. But Walmart, Petro-Canada, Shell and Metro accept it. With these, you can buy sufficient stuff to help you to reach the minimum billing required to get your reward (sometimes you have to buy for a minimum of 750 or 1500$ over your first 3 months owning the card). 

Why wouldn't you take advantage of these companies that claim a 20% annual fees on poor and stupid people who don't reimburse their bill? Suck my cock, you motherfuckers. So, take one of these cards for a period under one year, claim your reward, cancel your card (save the annual fees that usually don't apply the first year), and go for another card. If you're astute, you'll get 500-600$ a year, without any fees. And that's the "normal person" way. If you're really into it and you want to bleed these credit cards companies, you'll do much better.

If you read a blog about investment, probably that you have a certain income and your free time is precious and isn't devoted to make 300$ more each year. That's how I am. Never closed to make a few extra bucks as long as it doesn't require too much time and effort.

If you're interested, here's a few resources to help you chose the best credit card given your situation.

There's many websites about credit cards, but here's a good one:

https://www.ratehub.ca/credit-cards/rewards

Then, lately, someone wrote to me to tell me about his website about credit cards. The website is interesting, and the person running it tells about how to travel for free (or almost), using rewards to get free nights at specific hotels.

http://donnycoupon.com 

Don't say thank you. I live to give.