2018: A recap

For 2018, the Penetrator portfolio achieved a performance of 4%. 

The S&P500/TSX achieved a performance of -12%.

The relative performance of the Penetrator portfolio has been about 16%. 

The year has been an active one. Out of 22 stocks held at the moment of this writing, only 10 were owned at the beginning of the year. But the biggest positions have been steady. 

I've probably beaten the index because my portfolio is well balanced (learning to pick great stocks is not that hard, but learning to balance a portfolio is a bit harder, in my opinion). And my portfolio has also a low beta, which is interesting at any given moment but even more in times like these. A low beta is great because you manage to face the wind with less worries than many investors.

Talking about the wind, I talked recently to my friend whom I initiated to the stock market about 2 years ago with stocks like Apple, Biogen and MTY. At the beginning he listened to me. But then, he started to listen more and more to some gamblers. And he put a lot of money in weed stocks. These stocks went up and up and my friend was very excited about his performance. I said to him many times that I wouldn't put money there if I was him, but as a casino player, he put more and more money. And he felt that making money was very easy. But he didn't understand why he made so much money. 

And then, a market crash happened and his portfolio lost something like 40% of it's value. 

He said recently to me that he was looking for the right moment to sell everything. But, everyday, the market went lower and lower. So, his waiting made him lost 5000$ more every day. And his father, who lost maybe 10 or 20% of his very recent portfolio managed by his son decided to sell everything because he didn't have the nerve to face the storm. 

Probably that most people coming here are not in that situation. They know what they own. They know the sectors which are bubbles. They know that storms come and go, such as bull markets. But when everything looks easy, many people jump on the train and, after achieving easily a performance of 20%, they feel invincible, they listen more and more to people talking about gold, silver, bitcoins, weed... and they gamble more and more. And they lose 40% of their portfolio while someone who knows what he does manages to achieve a performance of something between -10 and 10%. 

I feel a bit bad for my friend because I realize he's not a real investor. He's a gambler and as long as he won't be interested in what he owns instead of the performance he gets, he's doomed to repeat his mistakes, or just sell everything with a loss and look at another way of making money. That's perhaps the story of some of your friends too...

With my 4% performance, I'm not that satisfied, but I've beaten the market by a wide margin. So, how could I be disappointed? And more, I haven't lived a single traumatism in 2018. No lesson learned the hard way. Experience serves, at last. 

So, here's what it looks for the Penetrator Portfolio, at this end of 2018: 

Performance of the portfolio: 4%

Relative performance VS the market: 16%

Number of stocks held: 22

Average ROE: 42

Average forward PE ratio: 18,7

Average Beta: 0,7

Average growth estimated for next year: 14% 

Predictability of the portfolio: 85%

La petite histoire de Penetrator

It's 1995 or 1996. I'm about 16 years old. My sister works in a videoclub. 

On some quiet day, a friend and I go to visit her. I Don't know why but she takes us through the squeaky doors, (the porno section) (I just remember that my sister used to be fascinated by people renting porno movies because she often told me stories about some teacher or some bus driver renting porno on various occasions). 

Behind the doors, she shows me a VHS cassette which I'll never forget. 

Almost 25 years later, I still remember how I felt at the second she showed me the cover. I started to laugh and I still think it's probably the best cover in the entire history of cinema. 

I didn't do anything with that name then. But it stayed in my mind and reemerged later…

Later, around 2002, there was an online game on the Internet which I liked a lot. It was called "Lycos Fightclub" (it doesn't exist anymore). We had to chose a character and fight a friend who chosed another character. We had also to chose a victory call. My character was frequently called "Penetrator" and my victory call was: "You've been penetrated".

Then, nothing happened for the next 10 years. 

In 2012, I started a new blog and the first name that came to mind was "Penetrator".

I'm stuck with that name forever. Because, once you see the cover of the movie, you can't forget it.

That's the very deep story behind the name "Penetrator". 

20 great stocks for less than 20 times next year's earnings

It's christmas time and there's no need to be afraid. At christmas time, we let in light and banish shade. And this time, christmas time offers us a good boxing day before time.

I'm essentially writing this for the future. Because I find it very interesting to look at current valuations, given the crisis we're going through. Most growth stocks are almost a bargain while there's some stocks that were growth stocks less than a year ago and which are now value stocks (see Mohawk and Bank of the Ozarks).

It'll be fun to take a look at all these valuations in one year...

So, here's the forward PE of 20 stocks which are among the best stocks you can find in North America:

Bank ank of the Ozarks: 6 (price to book value: 75% which is incredibly low, but maybe there's some issues here)
Mohawk: 9 (Book Value = 110%, which is very low for that kind of stock)
Apple: 10
Carmax: 12
Alimentation Couche-Tard: 14
Lassonde: 14
Facebook: 15 (adjusted for cash in hand)
Canadien National: 15
Dollarama: 16
TJX: 16
Richelieu Hardware: 16
Booking Holdings: 16
Sherwin Williams: 17
MTY Food Group: 18
Ulta Beauty: 18
Berkshire Hathaway: 18 (price to book value: 120%, which is the point of buyback by Buffett)

Google: 19 (adjusted for cash in hand)

Microsoft: 19

Visa: 20 (just slightly less than 20, actually)
Constellation Software: 20 (just slightly less than 20, actually)

How things will turn?

There's always people trying to predict what's gonna happen in the market. I never believe anybody, because nobody is always 100% correct regarding the market. And the better you are, the less you try to predict what's gonna happen.

There's some people like Angelo Dallas (in the comment section) who seem to deeply believe that things will get worse and worse. I don't believe that. Well, in the short term, it could get worse, but I'm a big believer of historical datas and in the long run, things will get better. I don't look 6 months from now, I look 5-10 years from now. And during that 5-10 years time frame, things will probably tend to their historical mean.

If we take a look at the performance of the market VS Berkshire coming with Berkshire Hathaway annual reports, we can see the performance of the S&P500 with dividends from 1965 to 2017. That's more than 50 years. And the annual returns of the S&P500 with dividends has been 9,9% (let's round the number to 10%). I don't believe that things are different this time. Yes, there are tensions between China and USA and between Russia and USA and between some other countries. But, is it worse than the cold war? Is it worse than Vietnam War? Is it worse than the crash of 1987 or the crash of 2008-2009? No. And everytime, the market recovered. A lot of people lack perspective. As human beings, we are very-short sighted. We tend to believe that what we see and what we live at the moment have a lot of importance. There's people like Donald Trump saying the most stupid things on twitter like: "Climate warming? It's never been so cold over the last 10 years here in Washington!" (or something like that). Just like if what that mofo saw through his window could have more significance than what's happening everywhere around the world. When you judge a phenomenon by what's happening in your city or your country that represents at best 5 or 10% of the emerged lands on earth, we could say that you're a dumbfuck. And that dumbfuck leads the most important country in the world. Fuck, if he can rule the USA, I could rule the earth. I should be Emperor of the emerged lands.

So, if we return to the performance of the S&P500 over the last 53 years, we can see that a negative annual performance has happened 11 times (11 years). Which means one year out of five. So, 4 years out of 5, when you have money on the market, you achieve a positive performance. That number alone justifies to stay on the market forever.

Then, if we dig a little deeper, we can see that, over the same 53 years, the performance of the market has been negative two or three consecutive years on only 2 occasions (1973-1974 and 2000-2001-2002). The market has never been negative for more than three consecutive years. Given these numbers, there's less than 10% chances that the next year's gonna be a negative one on the market.

I know that Trump is crazy and stupid and there's probably never been such a stupid president like that over the last 53 years. But a president doesn't control the economy all by himself. And given the fact that Trump believes that his efficiency is related to the performance of the stock market, he's surely gonna do everything he can to do something positive for the market (like concluding a deal with China). Perhaps that 2019 is gonna be a hard year, but the probability of 2019 being a positive year is more than 90%. That's how I see things. And if it's not a positive year, 2020 will compensate, and probably 2021 and 2022.  And I should achieve at least a 10% annual performance, if I project myself in 2028.

So, you have 90% of chances to make money next year. You really want to stay sidelines?

Picks for 2019

Less than 2 weeks before 2019. It's time to think about where to put money. I've learned that chosing a very solid stock that's growing year after year and that had a great past is often the right place to look.

I still stay away from any scandal-related stock. I may put a little money in these stocks but they’ll never be a major stake. Like Facebook for instance. Perhaps that Facebook is undervalued at the moment. But the situation isn't clear and I believe it's a bad idea to capitalize too much on a stock related to some big concern. So, Facebook is not a conviction pick for me. And Dollarama neither. They're both great companies, but the momentum just isn't there and momentum is important. I’ve learned that a little late.

Here's my picks for the next year:

Alimentation Couche-Tard (ATD-B)
MTY Food Group (MTY)
Five Below (FIVE)
Alphabet/Google/Whatever (GOOG)
Visa (V)

I'm really excited about 2019. Perhaps it's gonna be hard for the first few months of the year, but I'm thinking about all possibilities for having more money to invest. That major drop of the market for no exceptional reason just gives me a big boner. I've busted my limits for some registered accounts and the market keeps going down but I don’t care. It might get 5-10% down from here and I wouldn't regret any investment made over the last month.

I need more money. A blowjob, anyone?

Quebec City: What the fuck?

Some crazy shit happened to my friend last weekend. While he was in a bar, he got beaten by some extreme-right mofo who asked him if he was "antifa" (anti-fascist) before punching him (and breaking his nose) then, finally, kicking his face.

It happened in 30 seconds. I wasn't there, but I'm sure my friend didn't provoke the guy. It's my friend with whom I crash random Christmas parties. The guy isn't aggressive at all. He can say a lot of crap, he can argue with people on Facebook, but he'll never get involved in a fight or some aggressive stuff.

For instance, while we were in a bar, just after crashing some boring christimas party, 2 weeks ago, a little cocky fucker pushed him for no reason and my friend didn't reply. I saw it and I said to the motherfucker: "Hey buddy, what's your problem? I'm a lawyer, and it could go wrong for you with what you just did".

Then, the guy just calmed down like a big pussy. He touched my arm several times, saying: "Hey! Sorry, I'm just here to have fun!" And I gave him my best murderer face which probably stressed him a little because he kept on touching my arm. .

But, anyway, my friend never said anything to provoke or to reply to this guy. It's me who got on the front line with the power of the uniform and some attitude. About 80% of the time, if you get the right costume and the right attitude, these stupid human beings will believe what you say. I can experiment it on every Christmas party.

Does it happen in Montréal, Toronto and Vancouver? I mean, everybody's crazy in these fucking gigapolis with all the smog and the diseases that everybody get from sleeping with whores. But in Québec City… What the fuck? I'm so mad at this little fucker. I hope he'll get fisted in jail.

Portfolio review (december 10th, 2018)

What a tough end of year. But what's beautiful in the investment world is that, when it's tough in the present, it's probably gonna be beautiful in the future. The problem is to determine if it's close or far future.

So, here's how it looks for my portfolio: 

Performance of the portfolio so far in 2018: 3%

Performance of the S&P/TSX so far in 2018: -10%

Relative performance of the portfolio: +13%

Top 5 positions:  MTY Food Group, Alimentation Couche-Tard, Constellation Software, Alphabet, Ross Stores

Numbers for my portfolio:

Average ROE: 42

Average Forward PE: 20

Average Beta: 0,7

Estimated EPS growth next year: 14%

Even if it's not a year to become millionaire, I'm satisfied with my performance. Actually, I think I'll always be happy when I'll manage to beat the market by more than 10%. 

To me, the current level of valuations is interesting. I don't see why the market couldn't offer us a performance of 10% for the coming years. OK, there's probably gonna be a third world war soon with all the crazy leaders that we have on earth. But, us canadians will survive. Because nobody thinks of bombing us. It would be like bombing Finland. Who the fuck thinks that bombing Finland would send a message? 

Anyway, you've probably seen charts about the stock market after the missiles crisis in the beginning of the 60's or the Vietnam War in the 70's or any other war or negative diplomatic event. The market always recovers. I don't think we're going through a worse crisis now than those from the 20th century.  

And after 10 years of investing, I've never been through such a market crash and wanting so badly to invest every penny I hold. Fuck all those bad analysts who say to hold cash right now. 

They're fucking late. 

A little value investing with Banque Laurentienne (LB.TO)

Value investing doesn't appeal to me. I despise most value investors because almost all of them have done pretty bad over the last years. Many of them invested in Sears Holdings, which was one of the worst moves one could do 5 years ago (and almost everybody knew it back then, but they invested in SHLD anyway). However, sometimes, a particular situation appears, and, with a value perspective, it looks interesting.

Banque Laurentienne is an interesting case to me.

It's another of these Quebec's stocks. However, this time, it's not one of the best canadian stocks. It's not one of the worst either, but it's probably a so-so stock. The stock is selling at 75% of Book Value, which is something we usually see only for stocks that go through a crisis that will probably lead them to bankrupcy. That was the case with AIG and Bank of America a few years ago, for instance. Both survived because they were "too big to fail" but the road since then has been hard and still is for AIG. I don't think that LB.TO is similar to these two. LB.TO faces some challenges, doesn't grow that much and has a lower ROE than most banks, but the situation looks better than many other stocks. 

So, for LB.TO, if you pay about 40$ for a share, you'll get a 6% dividend (the payout ratio is lower than 50% so the dividend appears to be safe), a share that should be at least 25% more expensive if it just respected it's book value and a sector that isn't at risk of a change of habits or a technological clash. I'm not sure that it's a good investment, because I respect what the market thinks about most stocks. In other words, the market is usually right for fixing prices. However, it's tempting to gamble a bit on that stock.

I don't do it, but I think it would be a good idea for most investors to gamble about 5% of their portfolios on stocks that don't follow your usual rules of investment but that appear interesting in a way or another (very expensive, unconventional, under book value…). 

It's all a question of balance. You don't have the same opinion of a portfolio with 5% on Weed Stocks than a portfolio with 25% on weed stocks.

Lowest point

We worry all the time about that question: « Is it a good price to pay? Is it the right time to buy this stock? ».

It’s impossible to get the answer. But when the TSX\S&P500 hits about it’s lowest point of the last two years, you know that an occasion is there. It may go lower, but over the last 750 days, the market has been this cheap only a few days.

Marriott and the whores

I don't have a lot of things to hide, because I don't go on the dark web. I don't buy weapons and drugs, I don't look at porno with young kids or animals. 

But I don't like hacking issues.

So, I'm upset about the news about a massive hacking of 500 million guests at Marriott. I'm probably one of them because I've been to a few Marriott over the last 12 months: in Florida, in China, in Denmark and in Norway. I wasn't there with a whore so I'm not afraid of any information about my presence there. But I mind about my fucking credit card and my passport.

And I mind about the fucking reputation of Marriott because that's where their fucking edge is: the quality of their hotels. If we can't trust them anymore, where will all the businessmen with whores will go? To a fucking Best Western or any other fucking hotel.

That's why I sold all my shares of Marriott today. I've seen enough of these fucking hacking issues with Equifax, Facebook and some others. And usually, a lot of shit comes with it (many investments, loss of trust, blah blah blah).

I don't think everything will be quickley forgotten. So, fuck Marriott. 

Who the fuck thought Couche-Tard wouldn't be back?

I don't see how anybody could pass by Alimentation Couche-Tard. The stock is cheaper than it's been for years. And even if there's been a slump for the last 2-3 years, the results of the last 12 months show that the company still delivers. Actually, they don't just deliver, they're still one of the best companies in Canada even if they're one of the biggest companies in this country.

I see very few other examples of companies able to buy other companies, change their model and rise their same store sales. That's the secret of Couche-Tard. They know exactly how to make money. They take a convenience store that achieves just moderate success, they change the recipe and that's now a classic Circle K store that makes a lot of money. 

Dollar Tree has been unable to do that with their Family Dollar acquisition. They paid too much for a chain of stores that didn't perform that well and had a different population as a target. And Dollar Tree still struggles with their acquisition made many years ago while Couche-Tard has achieved a 11% EPS growth during the last quarter, not so long after their huge 4,4 billion US$ acquisition of CST Brands in the summer of 2016. That's fucking phenomenal. 

Achieving such success in such a competitive environment, with such low profit margins (3% for Couche-Tard VS 43% for Mastercard) is something very few people on earth would be able to do. You'll find very very little stocks with such low margins and such a market performance over the long run. 

The executives have recently said that they planned the company to double over the next 5 years. I'm sure they will succeed. For me, there's only a few of my stocks that I'm sure will double before 2024. Among them, there's MTY and Couche-Tard. 

God probably doesn't exists but Alain Bouchard does. That's a good substitute. 

A white guy with European DNA in Toronto

Last weekend, I was in Toronto.

It’s a beautiful city that I never visited before. The city is nice and most people look friendly. The Chinatown stinks a bit, but it's the same smell that in every Chinatown. 

I've met some great people: Mike, the guitar player, Jack the blonde chinese (which is a strange mix), and Leia (or Laya or Leah) the blonde Estonian-jewish girl (which is a strange mix also). If you know them personnaly, salute them for me.

I was mostly in Toronto to meet Robin, Be Smart Rich and some unknown people who read our blogs/Facebook pages.

I'm sure that all the people who came have either found me very boring or antisocial because I was in a fusionate relationship with Be Smart Rich who looked absolutely stunned by my charisma which I responded to by giving him almost all of my attention (70% to him, 25% to Robin and 5% to the others).

Around 10 PM, I was a little tired of being seated and I didn't have anything to say to the people around the table. So, Be Smart Rich and I went out to smoke the peace pipe to reach a higher level of conscience. We walked to a bar called "2 cats" which is a very nice place in Toronto that I've liked a lot. People are older there than in other bars, but they're cool and the ambiance is fun. Plus, the drinks are cheap (4$ before 11 PM). A good indicator of that bar being a nice place is that some guys and some girls came to talk to me (without knowing me, of course), which is something that doesn't happen very often.  

But Be Smart Rich didn't seem to like that place. So, before having some real fun, he brought me to some fucking discotheque ("The Citizen") where the average age was way younger. My mind was somewhere else now but I remember saying that it was a place for barely legal girls. It's the kind of place that I hate: Full of sluts and douchebags. Frankly, I don't remember exactly how the people looked so I may be a little too hard here, but I'm sure that I didn't feel at the right place.

During that time, that poor Robin was left alone with the other people who came to the get together. Eventually, he rejoined us. But we soon lost Be Smart Rich. And even if I was still there physically, I was somewhere else mentally. I was wasted. Robin wanted to go back to "2 Cats" which we should have never leaved in the first place (Fuck you Be smart rich) and while we were doing the line up, I felt dizzy and I had a growing urge to piss and vomit. So I went back to where I was staying because I felt it was the right place to combine both activities. After a little internal clean up, I wanted to change my clothes but someone in the hostel had taken my bag and took it somewhere else. So I couldn't find my clothes. That's how the night ended: with the not glorious achievement of letting Robin down after being let down by Be Smart Rich.

One person fell in love with me (Be Smart Rich) while 9 others probably thought I wasn't interesting at all. So, my only achievement is to have seduced Be Smart Rich but even there, there’s a negative side because I left the day after and surely broke his heart.

Too young to die

I have to confess that if I have wide knowledges about a variety of things, it's because I've read a lot on the throne over the course of my life. I've even listen to some series like Game of Thrones while I was (funnily) on the throne.

But spending so much time in that wonderful environment may have consequences. Hemorroids for instance. And sometimes, hemorroids can bleed.

When you type "hemorroids and blood" on Google, you'll surely find some links about colorectal cancer. Actually, when you type almost any syndrom on Google, you'll find something about cancer. Cancer is everywhere: in little symptoms such as in big symptoms. You have a headache: you have brain cancer. You cough: you have lungs cancer.

So, even if there's been some blood going with my poo in the past (it was hemorroids and some doctor put me elastics to correct that problem), I've had some big concerns about it being a real cancer this time. I'm a little bit of a hypocondriac.

So, I went to see two different doctors over the last month. The first one was expeditive but was formal: it was hemorroids. The second went further. He touched my belly. And he even made the rectal touch to see if I had some mass in the rectum. He saw nothing worrying and he said to me that it was probably intern hemorroids that bleed. But I'll get a coloscopy (a tube with a camera in the ass) in a few months to see if everything is OK. Meanwhile, I'll take some stuff to soften my poo. And meanwhile, I still have pain in the ass, four days after receiving some fingers in it.

Learning things on the throne can be very interesting. But some problems may occur over time if you spend too much time there. When comes blood, then comes worrying and thoughts about your imminent death. What will your family do without you? Why having saved so much money while being on the edge of death? Why leaving this world halfway through? Why haven't done some "Breaking Bad" stuff before dying? Will there be some suffering before dying? Will it be fast? Will it be slow? How many people will spit on my grave? That's not funny at all.

If you want to talk about a similar experience, leave a comment or, better, come to Fynn's of temple bar in downtown Toronto next saturday at 8 PM (november 24th) to talk about that. I'm sure you all read my blog while you take a shit.

You're all guys and real guys only read while shitting.

Market crash

The only reason to be unhappy when the market goes down is to have no peso to invest on the market or to be very close to retirement.

Otherwise, you should be excited because there's so many great stocks available at a nice price.

Personnaly, I'm a bit sad because I don't have that much money left to invest. So, I'm watching the carnage, totally helpless.

Have you seen Facebook? It's so cheap now (given the fact that FB has no debt and is full of money). And there's some super great stocks like Mastercard which is available at about 24 times next year's earnings. Yeah, it's a lot, but for that stock, it's almost cheap.

Plus, the government just announced that the TFSA limit is now at 6000$. It's not a huge difference (500$ more than before) but, it's better than nothing. If the market stays this low up until the first days of january, you may have 500$ more to invest in cheap stocks.

In 10 days, it's gonna be december. I'm thinking more and more about my wonderful idea of busting my TFSA limit. Because, if you can buy something with a 20% discount and you have a 1% penalty to pay, it's not a big deal. For instance, if you invest 6000$ on december 1st in your TFSA, you'll have to pay 60$  to the governement for busting your limit for 2018. 

Does it hurt when you can buy something that should probably be 20% more expensive (1200$ more than the 6000$ you'll pay)? OK, some people will say: It may go lower! Yeah, but everybody should always look at an historical PE before investing. If your stock has a PE substantially lower than it's historical average and the stock has been performant as always in the recent past, I don't see how someone could say it's not a good buy.

If I had 15% of liquidities right now, I'd probably invest everything.

Sadly, I have 0,2% liquidities. I have to sell a kidney. 

Ce que les meilleurs achètent

The last transactions of super rich people living a degenerate life are released these days. Let's take a look at all these crazy party animals .

Warren Buffett:

Buffett mostly bought banks in the last quarter. His transactions are usually boring in my opinion, but it works. He's one of the few investors for which it all steadily goes up. People will probably be very excited about his 1% position in Oracle which will make people say he's now a techno guy. Fuck off. He's so rich that he can't ignore techno anymore. He's in almost every sector. That's all. 

Increased his stake in Bank of America by 29% (now 11,7% of Berkshire Hathaway);

Increased his stake in US Bancorp by 24% (now 3% of Berkshire Hathaway) 

Increased his stake in Goldman Sachs by 38%  (now 1,9% of Berkshire Hathaway)

New buy: JP Morgan (now 1,8% of Berkshire Hathaway)

New buy: Oracle (now 1% of Berkshire Hathaway)

Chuck Akre:

He just very slighlty reduce some positions and he bought Focus Financial Partners (now 1,5% of his fund). It's boring to follow such a quiet portfolio but it shows that Akre knows what he does and is in control. I love you Chuck. 

Bill Ackman:

I only follow Ackman because he's so cocky and so bad at the same time. It's a strange mix because usually, when you're bad, you're not cocky. But Ackman manages to combine both. What a mofo. 

Added 9,4% to his Lowe's position (now 18,6% of his fund)

Added 9% to his United Technologies position (now 13,3% of his fund)

Reduced his position in Chipotle Mexican Grill by 29% (now 18% of his fund)

Giverny Capital (Frank Rochon):

It's probably been a hard quarter for Giverny with stocks like Bank of the Ozarks, Fortune Brands, Mohawk and Dollarama dropping like fuck. I wonder why Giverny seems to copy that much the moves of Sequoia Fund, Thomas Gayner and Buffett. For instance, a few months ago, Sequoia sold their entire O'Reilly position. Now, Giverny sells half of his position. They also bought Credit Acceptance Corp a few months ago and sold everything pretty quickly (Sequoia have kept their position). It's probably one of the best funds in Canada and even North America but why these guys don't have their own personality? 

Reduced the Visa position by 11% (now 5,1% of the american portfolio)

Reduced the O'Reilly position by 46% (now 2% of the fund)

Added 10% to the Google position (now 5,4% of the american portfolio with both classes of actions)

Added 11% to the Littlefuse position (now 2,3% of the american portfolio)

Added 13% to the Fortune Brands position (now 2,3% of the american portfolio)

Added 1300% to the JP Morgan position (now 2,6% of the american portfolio)

New buy: Charles Schwab (2,8% of the american portfolio)

Sold all their Wells Fargo shares. 

 

There's a ton of other transactions made by superinvestors in the last quarter, but most of them don't have any interest at all. They buy shitty stuff. Why can these people buy so much cocaine with so little skills? 

Permanent stocks (new ones)

In august 2016, I wrote something about permanent stocks. A permanent stock is a stock with which you have a romantic relation. You're faithfull to them. You believe in them. You think about them at night. You wanna punch the face of someone saying nasty things about that stock.

At that time, I wrote that my permanent stocks were Alimentation Couche-Tard, CGI Group, Constellation Software, Ross Stores and Dollar Tree.

Dollar Tree went in the trash while all the others are still in my heart.

Some other stocks have entered my heart in 2018, by the moment Dollar Tree was out.

I'm talking about MTY Food group, Boyd Group, Google, Mastercard and Booking Holdings. I see them all as very solid businesses that either operate in a kind of monopoly or duopoly (Mastercard, Google, Booking Holdings) or that are very efficient operators that couldn't get down overnight because they're either very diversified or offer a product that won't fade away (MTY and Boyd).

It goes without saying that I would love to share a moment with the CEO's of these companies. Everybody knows that very rich people spend their time doing some very degenerate stuff like doing coke and make 3 weeks orgies with gay people with AIDS. When you're that rich, you can't do what other people do. You have to reach another level, and usually it's a level besides or over the law. So, perhaps that some of these CEO's do that kind of stuff. Actually, when I take a look at the picture of an highly respected CEO, I always say to myself that this guy has probably a lot of sperm in the ass.

But that's what makes them excellent. So, what's wrong there?  

Very high growth stocks

There's different growth stocks.

There's growth stocks that don't make money and that operate in a sector where everything has to be proven but for which there's a lot of excitation  (ex: cannabis stocks).

There's growth stocks that don't make money. Their sales are growing a lot but they don't earn profits (ex: Shopify, not so long ago).

There's growth stocks for which sales are growing or users or consumers, but they don't make a lot of money (ex: Netflix).

There's growth stocks for which sales are growing a lot, such as earnings (ex: Five Below).

All of these kind of stocks are usually selling at a very high PE ratio. You'll be very lucky if you can find one of them at a PE ratio under 25. Actually, some of them don't even have a PE ratio because they don't have earnings. LOL. Isn't it funny?

No, it's not. 

I keep a place in my portfolio for some high growth stocks, but it's not a large place. When these stocks disappoint, the reaction of the market is merciless.

It's a question of balance. When you have one of these high PE stocks in your portfolio, you should compensate with a lower PE stock.

Let's take a look at The Trade Desk (TTD): a new stock that's selling for a crazy price (about 100 times 2018's earnings).

Pros:

• They operate in e-commerce (ad buyers), which is a nice sector;
• The company doesn't carry debt. It's a major pro because if you're looking for a sustainable growth, a large debt would make it much more difficult;
• These last quarters, the company has achieved an incredible growth rate of about 50% each quarter. That's fucking crazy; 
•  Their return on equity is over 20, which is great for such a young company.

Cons:

• You need an incredible growth rate to get that stock at an intesting price. Actually, the growth rate should be 100% per year to make it affordable in my opinion (let's see the evolution of the PE with a growth rate of 50%): 
• 2018: 100
• 2019: 68
• 2020: 45
• ... You have to look for 2022 to find an attractive PE, which is too far for me;
• Datas about the stock are only avalaible since 2016. It's a major con and only young investors may not pay attention to that very important (lack of) information;  

I think that TTD is an interesting stock. But the short track record should be the reason to stay away for a moment. Another way of keeping an eye on it may be to put 1% of your portfolio in that stock and watch how it goes. Or look elsewhere. For instance, you could get Five Below with a PE twice lower and similar EPS growth (but lower sales growth). 

On the throne

Robin Speziale has written a new book. It's called "Capital Compounders" with a long subtitle: "How to beat the market and make money investing in growth stocks". 

Your life is limited. You have only a few decades left to live now (if you read this blog, you're probably in your 30's or more, so, probably something between 2 to 5 decades to live). That's not so long. And perhaps you currently have a cancer that's not been discovered yet (which is something that I have in mind most of the time), so bad surprises are just around the corner. And if it's not a cancer, maybe your girlfriend will leave you. Or you'll lose your job. Or your kids will need special help because they will have special needs. You'll surely fall into one of these categories sooner or later. And it's gonna occupy your mind full time.

That's why you have to be interested about your finances right now, when you're in a situation where you're not too distracted about other problems. But first, you have to know as much as you can about the stock market to do the right moves. And you have to invest that 1000$ you've managed to save during last month. Because when you'll be 60 years old, it will be too late. 

So, you have to read about the stock market even if it's boring as fuck. Incredibly boring. Yeah, You'd rather be back from work, lay down on the couch, drink a beer and watch that fucking drama crap "This is Us" on Netflix with that fucking enormous 400 pounds girl.But it won't get you anywhere. They're all fictional characters. But the weight of that girl is not fictional.

So, you should read the new book by Robin. And invest your money following his advices. Because you'll float when you'll be liberated from financial preoccupations.

We all float down here.

The book is good and interesting. It features a lot of advices from Robin which should be read. There's also some articles written by great bloggers like Penetrator and Be Smart Rich...

So, you should read that book. However, for me, the masterpiece of Robin will always be Market Masters, because there's an incredible load of work behind that book and tons of interviews with the greatest investors from Canada and some others not so good from some other countries (Bill Ackman). I recommend that book first and foremost. Then, the new book would be a great addition, after that one. 

Anyway, both books deserve to be on your throne.