lundi 27 février 2017

Sequoia fund, waiting for a correction too - EDIT

I’ve said it numerous times : I like Sequoia Fund.

...Even after the unforgettable fiasco they made when they put about 35% of their total portfolio on Valeant, they still fascinate me. 

However, they don't seem to fascinate people as before. Check below for the total value of their portfolio over the last 10 years. The decrease in value may be explained by two things: 

1- Bad investments;
2- Investors taking their money off the fund because they believe other managers or themselves can do better.  

Value of Sequoia fund over the last 10 years (4th quarter of each year) :

2006 : 3.39 billion dollars

2007 : 3.41 billion dollars

2008 : 2.04 billion dollars (CRISIS)

2009 : 2.4 billion dollars (CRISIS)

2010 : 2.69 billion dollars

2011 : 3.65 billion dollars

2012 : 4.7 billion dollars

2013 : 6.57 billion dollars

2014 : 7 billion dollars

2015 : 6.24 billion dollars (beginning of the valeant fiasco)

2016 : 3.6 billion dollars

So, if you had invested 1000$ with Sequoia Fund during the 4th quarter of 2006, you'd have 1062$ ten years later. 
What a FUCKING SHITTY PERFORMANCE. Ten years for 62 bucks. Anybody could have done better than those super managers with 1000$ over that period. A fucking hobo can get 62$ in a day or two if he looks dirty enough.

That part above in red is absolutely wrong. I hope that this blog will never be a credible source of information for you. The value of the fund is not an indicator of the performance of the fund. Like Etienne Pouliot wrote in comment section, the performance of Sequoia has been about 85% over the last 10 years. It's not that good, but it's way better than the 6,2% that I suggested.

These guys destroyed value with a single stupid idea. And they destroyed many years of hard work with that too. Because it will take years for them to regain their credibility.
But, all the fault was on Goldfarb's shoulders! The others did nothing wrong! Since he's gone, everything should be OK. 
Let's take a look at their new brilliant investments.

During the last quarter, Sequoia reduced almost all their positions. But they raised their stake on Carmax (KMX) and Dentsply International (XRAY). They also initiated a position in Amazon (they had a position in the past if I remember well).

Their biggest cut :

Mohawk (-54%) to about 3% of the portfolio

Fastenal (-38%) to about 3.9% of the portfolio

TJX (-22%) to about 7.3% of the portfolio

Berkshire (class A and class B)  (-17.5%) to about 19.2% of the portfolio

Mastercard (-10%) to about 7.7% of the porfolio

I don't get at all where these guys are going. Am I fucking dreaming or they really reduced their stake with their most solid stocks like TJX, Berkshire and Mastercard to buy more of that cyclical and expensive Carmax? What the cunt? 
Why cutting Mohawk? Their recent earnings have been pretty good (the stock is up about 15% over the last 3 months and remains at an historical low PE). Maybe they still can't digest how bad it went for them 8 years ago with Mohawk. Maybe they believe it should only be a 3% position? I don't know. But I know that I prefer Mohawk, TJX, Berkshire and Mastercard to Carmax. 
Maybe they simply took some profits to get ready for the next correction. 
Good idea. But, if there's a correction, I bet Carmax will be hurt much more than Berkshire and TJX.  So, I repeat, I don't know where these guys are going.
I don't believe in Zimmerman,
I don't believe in Elvis,
I don't believe in Beatles,
I don't believe in Ackman,
I don't believe in Sequoia,
I just believe in me.
Yoko and me.

jeudi 23 février 2017

Waiting for the correction

I've always thought that Life was waiting to prepare some bad surprise for me. When everything is quiet and soft, life is waiting patiently behind the wall, sharpening a knife.

Well, after 37 years, I'm still waiting for a true vicious move of Life against me.

But, instead of attacking me directly, Life decided to attack by the sides. So, here it is, my son has been officially diagnosed with a slight Asperger.

If you read what Asperger is, you'll see that it's the lightest level of autism. Some say that Einstein and Beethoven (or Mozart?) and many university teachers had asperger syndrom. Maybe that theory was built by some Asperger guy who wanted to feel special, like those fucking images we see on Facebook, saying things like "blondes are more intelligent" (posted by a blonde). If we want to feel special with some disease/handicap, we could also state that cancer is good because Steve Jobs and Warren Buffet have had cancer. 

Anyway, I'm not that worried about that Asperger diagnostic. My son doesn't have any attitude problem. He only has problems to communicate precisely and understanding complex directives. I'm pretty sure he'll do well. Because I'm his fucking father and I'll work hard to make him succeed.

OK for lamentations.

Are you waiting for a correction? If you're a serious investor, probably not. You're probably always fully invested, even when the S&P is at an almost all-time high.

Being fully invested is probably not a bad idea. But, in any portfolio, there's poor performing stocks. And if they perform badly on a bull market, how will they perform when optimism will stop and decrease?

That's how I see things. I don't think we should sell our highest conviction stocks (Couche-Tard, Constellation Software, for instance). But for Gilead, for instance, it's different. That stock is at it's lowest price even if the market is very high. Some might say that the PE of Gilead is already pretty low, protecting it from further drop.

That's not how I see things. I believe that when there's sun and rain and most flowers grow easily, the flowers that don't grow won't get better when the sun and the rain will stop. I hate that fucking botanic metaphor. But that's how I see things: bull markets are made to lighten our position on our worst performing stocks.

So, I'm waiting for a correction, and I have a lot of money ready to be deployed. 

dimanche 19 février 2017

IPO: Canada Goose and Snap (Snapchat)

Have you heard about the IPO of Canada Goose and Snap (parent company of Snapchat)?
Both are coming, with crazy valuation and questionable products.
Snapchat : An app with which you apply a filter on your face to look retard, recording a short message to send to your contacts. I know that nobody reads blogs anymore. And nobody sends personal messages via Hotmail anymore. Everybody's looking for something quicker and quicker. Like a texto. So, a quick video fits with that era in which we live. But stupid things without any meaning serve which purpose? Entertainment? Yeah, right, but I can't believe that anybody could use that app for 5 years and still be excited about it, even with 2 billion new filters. I may be wrong, but I'd rather stay with retail or healthcare business that exist to make money.
Anyway, if you're a big fan of that app and you think about investing a few thousand dollars with that stock, please read the following line:
LOL. What a FUCKING joke. Who would invest in that stock after reading that fucking line? 

And now, Canada Goose : 550$ coats with fur from coyotes or some vanished species (dodo, mammoth, whatever). I thought all they sold was these expensive coats but it looks like their catalog has increased lately. But, their most popular stuff remains those coats. 
Who will fucking buy these in California or in the United Kingdom? Only people living in a polar climate, like us, fucking canadians, have some interest in buying expensive coats. Well, for myself, I can’t buy something more expensive than 150-200$. It’s absolutely crazy to pay something like 550$ for a fucking coat.
Some would say : « But it’s the warmest coat on the market! ». I’d answer that, with a regular coat, I’ve never shivered. I only shiver when I don’t wear gloves and a hat and it’s fucking minus 30 degrees celcius. My belly button never shivers. Anyway, if you like to invest in luxury brands, just take a look at what happened with Coach and Michael Kors. They always go out of fashion, sooner or later. So, why would you pay something like 60 times actual earnings for something that will inevitabely fade away? 
Even with great products or great companies, IPO's are usually something to avoid. Except for very few exceptions like Mastercard, Visa and Dollarama, it's usually a very very bad idea to buy something at 40-50 times earnings. 

mercredi 15 février 2017

Ce que les soi-disant meilleurs achètent

I don’t know why I’m doing this, because I don’t trust most of these superinvestors anymore. Isn’t it strange to realize that people managing 4 or 5 billion dollars for their clients don’t have more skills than you and I… who manage only a few hundred thousand dollars.  
Those guys invest in some shitty stocks, but they make public declarations to convince the lemmings to buy the same thing as them, thus creating a demand for what they bought. You control the media, you control the people. They have at least understood that and it compensates for their very average skills.
Ok, let’s see what those averageinvestorsmanaging5billionsdollarsormore have done during the last quarter. Let’s begin with my pal, Bill Ackman, the guy who knew « very well » what he was doing with Valeant and who knew « very well » what to do when the crisis with that stock happened.
Bill Ackman likes complicated things. That’s why he increased his stake in Shitpole Mexican Grill by 420% during the last quarter. That fucking stock now represents about 18,4% of Ackman’s portfolio (more than 1 fucking billion dollars). Have you seen the sales of Shitpotle over the last years? They’re free falling.
There wasn’t an easier investment to think about or what? After the incredible Valeant fiasco, why didn’t he looked for something quiet safe? In other words, after the roulette, chosing one specific number over 36 numbers, why did he still picked only one number instead of a colour?  
Speaking about Valeant, the stock represents now about 4,5% of Pershit Square. The stake of Valeant has been reduced by 16% (16% of all VRX shares have been sold during the last quarter).
Please, dear reader, don’t ever go back read the archives of this blog to see that I once praised Ackman as a good investor.  I can’t live with the fact that I wrote that. If I could turn back time, if I could find a way, I’d take back those words that I wrote, and I’d look more credible…
Now, let’s take a look at Buffett. 
Buffett seems to like Apple because the stock now represents 4,5% of Berkshire (number of shares held increased by 277% over the last quarter!).
Buffett also bought much more airlines stocks. The stake of airlines in BRK is now more significant (but not major). The stake in Delta Airlines (now 2% of BRK) has been increased by 848%. The stake in Southwest Airlines (LUV) is a new buy and represents 1,5% of BRK (which is  not that much in percentage but nonetheless represents a lot of money in absolute numbers).
Finally, representing both about 1,4% of BRK, there’s American Airlines (increased by 109%) and United Continental (increased by 538%).
Carl Icahn, one of the investors liking the more the limelight increased his stake in Herbalife by 15%. The stock now represents about 4,8% of his holdings. Hertz has been increased by 126%. The stock represents 2,8% of the holdings. Is Herbalife a pyramidal scheme? I don’t know, but I’ve learned to stay away from potential scandals. Icahn, seems to think that he can put a couple of hundreds of million dollars in a possible scandal. I don’t think that’s clever. 
As last transactions by Sequoia Fund haven’t been released yet (my favorite fund to follow), let’s complete with David Einhorn.  That guy is a very active investor, from quarter to quarter. I’m suspicious about that. The guy buys lots of shares of a specific stock one quarter, sells lots of the same stock the next quarter, buys back later, etc. It’s not what I’m expecting from a professional investor. But his picks aren’t that bad in my opinion.
During the last quarter, Einhorn increased his stake in Apple by 12%. That stock now represents 14% of his holdings.  Mylan is now 7% of his holdings (increased by 35%), Voya Financial is now 4,9% (increased by 15%) and, finally, Rite Aid is now 3,5% (increased by 52%). 
Did these informations help you? I hope not.
I hope you can make your own judgment on what is interesting on the stock market.

lundi 13 février 2017

Giverny Capital update

As you probably know, my new spiritual father is François Rochon from Giverny Capital.

I'm not totally in praise of Rochon because I don't agree with all his picks. Also, his portfolio's average ROE is a little low for me. But the guy don't seem to follow fads, which is good. And he mainly looks for business that don't face too much competition, which is a plus too. A medium ROE (15, 16, 17) is not very high compared to IBM or Gilead, but you won't get 10 new competitors over night with such a ROE. Think about it.

I've came to realize that Giverny has some high conviction picks among stocks that have a low PE ratio on an historical basis (but a higher PE that the market in many cases). For instance, Mohawk is historically cheap at around 18 times earnings. It may look pricey for many people, but the historical average is something like 25. Same thing for LKQ and Fortune Brands and Home Security. They're usually pricey stocks. These days, they're still pricey, but less than what we're used to. And that's something to think about: quality has a price. And it looks like quality stocks are rarely selling for less than 18-20 times earnings.

Let's take a look at the new update of Giverny Capital via Whale Whisdom (update: december 31th, 2016). Check the 15 top positions of the portfolio. Very few stocks are selling for less than 18-20 times earnings.

Berkshire Hathaway: 18,3%
Bank of the Ozarks: 10%
Carmax: 9,3%
Disney: 7,2%
LKQ: 6,7%
Ametek: 6,5%
M&T Bank: 5%
Wells Fargo: 4,8%
Union Pacific: 4,4%
Markel: 4,3%
Visa: 4,1%
O'Reilly Automotive: 3,8%
Mohawk: 3,5%
Alphabet (GOOG + GOOGL): 3,1%
Fortune Brands and Home Security: 2,8%

Over the last period, Giverny increased slightly it's stake in Carmax, LKQ, Markel, Mohawk, Fortune Brands and Home Security and Alphabet. I don't understand why Carmax represents 9,3% of the fund. I've written about that before, but I'm puzzled about a fund which gives such a high place to a cyclical stock for a company that's not growing that much. It's OK to own some cyclical companies, but 9,3% of the portfolio, really?

And a quick word on Mohawk. The last results were out last week and they were good. With a ROE of about 17-18, few investors get excited about that stock. Maybe some remember with pain how the stock got hurt during the crisis of 2008-2009. Yes, it was a bad period, but the stock has recovered in a beautiful way since then.

Who doesn't give a fuck about carpets? Almost everybody, including excited investors and entrepreneurs. That's one of the reasons I like that stock.

mercredi 8 février 2017

Netflix (NFLX)

Do you have Netflix? 
If the answer is yes, have you ever watch "The OA"? My god, that fucking series is so stupid. A fucking girl comes back after being disappeared for 7 years. She reunites a crew of weird people who become her disciples, listening to her tragic story of being held prisoner by a guy who killed her on multiple occasions to study the phenomenon of death. But she never died for good because she and her hostage friends had the ability to survive to death experiments. And they sometimes come back from death with a special power: a strange movement that they can use mainly to look stupid but also to do things like bring back people from death. That fucking movement looks like some crazy fucking contemporary dance with guttural sounds. My god, I was ashamed to see them do these fucking movements for 5 minutes, looking like a band of retard. And the link between that dance and resurrection is one of the worst thing ever happening in the history of entertainment.
But, on the other hand, still on Netflix, you have Stranger Things which is a masterpiece and a mix between E.T., Poltergeist, The Goonies and the Labyrinth of Pan. I've really liked that series. It's great from beginning to end. The scenario is much more solid than "The OA". 
Going back to Netflix...I don’t know if I’ll ever invest in that company, but this is a business in which I have a lot of faith for the future.
DVD rental is over. Cable providers are facing short-middle term death. In Quebec, we have Bell and Videotron. With Videotron, I have to pay about 45$ each month to have access to cable TV. A few boring channels, most of them I never watch. If I want to watch something really interesting, like Game of Thrones, I have to pay for HBO.
With Netflix, we can have access to a lot of series, films and documentaries for less than 10$ a month. Plus, every week, there’s a lot of additions on Netflix. And every year, Netflix is becoming more and more a like a big studio, releasing dozens of new series and threatening Hollywood. 
If I want to watch a movie, I don’t have to spend kilojoules. I don't have to take my car to the videoclub to pay 6$ for a movie that I’ll have to bring back the following day (spending more kilojoules). I now just have to chose something on Netflix and stay on my couch, keeping for myself my precious kilojoules.
Yeah, I really like that Neflix business. It’s the future of passive passtimes. And as the animated movie « Wall-E » told us, the future is for obese people, unable to get up on their feet.
I may love Neflix but the valuation of the stock is crazy.
Actual PE : 340
Highest PE last 5 years : 408
Lowest PE last 5 years : 79
ROE : 8
ROE last 5 years : 9
Annual sales growth last 5 years : 23%
Annual EPS growth last 5 years : -7%
Debt : About 40 times earnings (heavy debt)
If you’re a serious investor, you probably can’t invest in a business that has a PE of 340 and that is not that profitable (ROE of 8). Almost any random stock is more profitable than that. But Neflix represents the future. And investors are crazy when they believe they've found the future of a specific industry. That's why they paid a PE of 100 for Cisco in 2000. Isn't Cisco the most important thing in our life now?
The only big problem I have, is that I ask myself if Netflix is not the next ICQ. Were you there in 1998? We had ICQ to send short messages to friends online at the time. Then, a few years later, ICQ disappeared and we had MSN. Then, MSN disappeared and we had Facebook. Technology is so often associated with "the next big thing", which is not something that happens in most other industries. 
 But anyway, I like Netflix. And if I had an irrational investment to chose, Netflix would be considered. 

lundi 6 février 2017

Alain Bouchard ou l'audace de réussir

I recently got this book at the library. I haven't read all of it yet, but so far, it's a great reading.

If you read this blog, I hope you know who Alain Bouchard is.

OK, I assume that you're looking for vacations on the beaches of Normandie and you came on this blog to learn about Donville-les-bains. First, I must inform you that this is not a blog about travel. Second, Alain Bouchard is the founder of Couche-Tard.

If you read the book, you'll learn many interesting facts. The most interesting being: "How did he get there?". Well, first of all, you'll learn that almost like every rich person, he is not a billionaire by luck. He worked much more than everybody you know. For instance, when he was 21-22 years old, he usually worked about 84 hours a week. I never did that. In fact, I never worked half that number.

Before that, his father went bankrupt when Alain was 9, which was quite an humiliation for all the family. Bouchard says that there was a "before" and an "after", referring to that bankrupcy. Adding to the tragedy, a few years later, his mother went mad, going to an asylum in Quebec city, avoiding lobotomy by little. Just not like Randall Patrick McMurphy.

Man, that guy had a long way to the top. He got fired by bosses for which he worked like crazy in various convenience stores. But he eventually bought some of them, because vengeance is a dish best served cold. 

With such deceptions, rejections and problems in his youth, if Bouchard was born in Austria in 1889, he could have become the Furher. But he was born in Chicoutimi in 1949 and instead made a living of selling cigarettes and beers. And he became rich for that. Much richer than all the rock stars you know, including Paul McCartney who is a living legend now and for centuries to come. But Bouchard will never be a living legend. Nobody knows him except you and I. 

You must read this book. I don't know if it's translated in english, but if it's not the case, it's time for you to get a french class.

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