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.