jeudi 31 mai 2018

When you pay too much

I once wrote that Dollar Tree (DLTR) was a permanent stock for me. What's a permanent stock? It's a stock you love and with which you plan to spend the rest of your life. In other words, it's place in your heart is equivalent or bigger than the place of your family.

I have to say that I'm not sure anymore that DLTR is a permanent stock for me.

They've released their earnings today and, without being catastrophic, they still struggle with their integration of Family Dollar (the stock is down 12%). I don't know if "struggle" is the right word, but they clearly paid too much for that business that wasn't growing that much. And when you pay too much, like 22 or 25 times the earnings for a business that doesn’t have a spectacular growth, you have at least a couple of tough years ahead.

That's something that never happened with Alimentation Couche-Tard (I think so). Because Couche-Tard has always been very strict on the price to pay for another business. And Richelieu Hardware is a good example too. They prefer many small acquisitions to a major acquisition that would double the size of the company.

You learn that kind of lesson better when you experience it with a stock you own than when you read it on Internet.

That's why I'm not so excited about the Metro-Jean Coutu deal. Metro paid a high price for a business that didn't grow that much. I would be very surprised if Metro would surge a lot in the next 2 years.

dimanche 27 mai 2018

A return on the Beta coefficient

In august of 2014, I wrote a post about the beta coefficient.

It wasn't a masterpiece of litterature, but, I have to say that, after 4 years, I've never ceased to think that a low beta was something important. Of course, in a portfolio of 20 or 30 stocks, we should pick some stocks with a beta over 1 because some very great stocks have a higher beta coefficient. But I believe that, in a global portfolio perspective, we should target an average beta under 1.


Because most of the great stocks have a low beta. So, if your portfolio has a low beta, there's more chances that your stocks are good. The greatest stocks are highly predictable and are protected against a market correction. Well, they're not immuned to a market correction, but they resist better, because they continue to perform in a recession, which is not the case for all stocks. And we ask less questions about our picks when our stocks are less volatile. Some experts will deny this, but in my view, they're full of shit. Nobody likes to see their stocks drop 20% without any reason. 

 When I think about the canadian market, all the great stocks (or so) have a low or very low beta. For instance:

Alimentation Couche-Tard: -0,85
Metro: 0,01
Boyd Group: 0,13
Enghouse Systems: 0,22
Lassonde Industries: 0,24
Dollarama: 0,26
Constellation Software: 0,28
Open Text: 0,4
Richelieu: 0,46
CCL Industries: 0,66
MTY Food Group: 0,7
CGI: 0,73

Is it really a coincidence that this selection of 12 of the best canadian stocks includes only stocks with a beta under 0,75?

lundi 21 mai 2018

The little stock that reached 1000$

On april 16th 2012, I bought 50 shares of Constellation Software for 88,50$ each.

On paper, that stock looked great. I thought it was a total no-brainer. Everything was there: very high ROE, high growth, and a very interesting PE ratio. You didn't have to be a genius at all to buy the stock. You just had to be aware of it's existence. 

Over the last 6 years, I've never had the intention to sell my position. But I lightened it... a lot. I went from owning 50 shares, to owning 65 shares... to selling many of them, because I thought that the stock was expensive or it was too important versus the rest of the portfolio. But it always remained a very important part of my portfolio. For instance, currently, the stock represents about 7,5% of my portfolio. It's my most important stake.

Today, the stock reached 999$. Imagine: if I hadn't sold a single share, I would have 65 000$ of Constellation Software (from 5 750$ bought in 2012). That's most than 11 times your money in a 6 years time frame. That's exceptional. Very few investors can get that kind of returns over such a short period.

Would I buy right now? No, because the stock represents a large part of my portfolio. But everyone should understand that many not so solid stocks are selling for a higher price than Constellation Software.

Constellation Software is, by far, my biggest success on the stock market. 

mercredi 16 mai 2018


It's my birthday. I'm 39 years old.

I've never liked the fact that time flies. But, owning stocks changes your perception of time. Time brings new results, which brings more money. I know, there's not only money in life, but it helps. 

Since the beginning of 2018, the performance of my portfolio has been deceiving (about -2%). However, once again, my savings contributed well to the adjusted performance of the portfolio.

Since may of 2009, I keep track of the worth of my portfolio for each one of my birthdays. Here's how it looks (2009 being 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%
May 2018: 19%

Adjusted average annual return: 36%

I believe that I've reached a point where it's gonna be very hard to achieve a performance over 20% given the size of the portfolio and given the fact that my savings don't have the same relative weight that they did in the past.

First and foremost, what's behind these numbers is a lot of discipline and control of costs. Some years, I’ve managed to save about 50% of my income. You have to be very very gifted to get a 36% annual performance without considerable savings.

samedi 12 mai 2018

Ce que les meilleurs achètent - Giverny Capital

Another batch of last quarter's transactions is coming, and Giverny Capital is the first to be presented here.

Giverny Capital has made small buys here and there. But here's the most significant transactions of the fund:

Carmax: +5%, now represents 9,1% of the total US portfolio
GOOG + 5%,  now represents 4,1% of the total US portfolio
Disney + 6%, now represents 3,8% of the total US portfolio
Edwards Lifescience + 5%, now represents 3,2% of the total US portfolio
Credit Acceptance Corp + 7% now represents 2,8% of the total US portfolio

What whalewisdom doesn't show is the canadian positions of Giverny Capital. I know that about 20% of the fund is occupied by three canadian stocks which are MTY Food Group, Dollarama and Constellation Software. However, I don't know the exact percentage of each stock.

So, if we do the math, we could reduce each US position by 20% to know the real percentage of a specific stock in the fund. For instance, Carmax would represent about 7,2% of the fund (9,1% X 80%).

I really like Giverny because they know how to combine the most important metrics in a big performant portfolio. You learn a lot when you study the metrics of the stocks bought by your favorite investors.

dimanche 6 mai 2018

People on Seeking Alpha

Do you follow some stocks on Seeking Alpha? If so, you're probably familiar with the "Notable earnings before monday's open" or "Notable earnings after tuesday's close". Or any other day of the week.

On these posts, you can follow the latest results of your favorite stocks.

If you read the comments of these short posts, you'll see people encouraging their stocks like they would encourage their favorite hockey or football team. What's the problem with these people? Do they feel alone? Do they think that the executives of the stocks they own read these comments and will be thrilled by supportive comments about a quarter that's already over? Or are these comments simply like a prayer sent to god?

I really don't understand what's going on with these people.

jeudi 3 mai 2018

My schedule

Being at the point of mid-life, my worry is that life passes besides me at a high speed. I like my job, I have a very good income and I know I'm close to the top of the pyramid, but I spend my working time along many people who don't really appreciate me (a few truly hate me). But I spend little time with my family and even less with my friends, parents and other relatives.

Here's my schedule:

6 AM: Waking up
6:30 AM: Running to the bus
7:30 AM: Arriving at work
16:30 PM: Leaving work
17:45 PM: Arriving home
From 17:45 PM to 19 PM: Eating, bathing the kids, helping my son with his homeworks
19 PM: Doing the lunches for tomorrow, cleaning the floor because the baby spills her meal at every dinner. Trying to learn her a few words or to stimulate her in any way.
20 PM: Putting the kids to bed and being exhausted.
22 PM: Going to bed

I fucking spend about 2 hours a day with my family and these 2 hours are spent eating at high speed then doing all the stuff a father should do, but being often irritated by all the noise in the house. That's it, 2 fucking hours over a 24 hours period where I try to develop something constructive.

You may earn 100 000$ a year, or even 500 000$ a year, that schedule is simply crazy. Isn't it crazy to realize that you spend more time on the bus than with your kids?

And you don't even have to have a family to find something crazy there. How the fuck evolution has lead us to spend so much time with people that we don’t like?

mercredi 2 mai 2018

Stanley Ma retires

Today, we learn that Stanley Ma will leave his CEO position at MTY Food Group in november. However, he will retain his role as the chairman of the board. So, he's gonna be like Alain Bouchard for Couche-Tard.

The market didn't seem to like that news because MTY was down 3% today, close to it's lowest level for the last 52 weeks.

For me, MTY is one of the very few stocks that could be a big part of someone's portfolio. I see very little risk there. There's a lot of diversity among all the franchises of MTY. The company is very solid. It's growth has been steady and high. That company has everything I'm looking for. Even if they'd get a scandal like Chipotle Mexican Grill, it would probably be limited to a specific franchise among all they own.

So, in my view, it's an occasion, just like when Warren Buffett will die.