samedi 30 septembre 2017


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.


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.

mercredi 27 septembre 2017

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.

lundi 25 septembre 2017

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.

lundi 18 septembre 2017

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?


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

jeudi 14 septembre 2017

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. 

jeudi 7 septembre 2017

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)