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!