lundi 10 décembre 2018

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. 

7 commentaires:

  1. You start with very wise words and a healthy perspective:

    "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."

    LOL @ being "satisfied" with your performance. In relative terms you had an OUTSTANDING year. I do not believe the indices fully illustrate how bad a year this was. The volatility has been pretty crazy. When you get a market leader like NVIDIA going from around 350 to 150 in no time, you know things are volatile.
    Personally, I was looking at my results over the weekend and calculated that I was down about 8% on my stock picks (then my only winner dropped another 10% in the last week). I must be down 10% now.
    I took a lot of my money OUT of the stock market on September 20 and another smaller chunk on October 5. With rising interest rates, I did not feel very positive.
    Some statistics: December tends to be the best month for the stock market (October being the worst).
    A detailed quote or two follows from a stats nerd:

    "December is well known as the most bull friendly month of the year, closing higher 75% of the time since 1950. That has been especially true when investors do not expect equities to rally (like now). In the past 70 years, the 4th quarter has been negative at the start of December 19 times and then rallied into year end in all but two cases (90%). The worst failure was in 1957, when SPX fell 4.1%. SPX is already down more than that this month, meaning, it either rallies the next 3 weeks or it becomes the worst such December in 70 years"

    Even more astonishing:

    "Without belaboring the point on the positive seasonal tailwind, it's worth remembering that SPX has risen over the next 6 months following a mid-term election every time since 1946. That's 17 occasions in a row. Since 1962: the average gain has been 15% with risk-reward more than 5:1 positive"

    This time could be very different. It could be time for more than just a correction. But history favors the bulls right about now. I am wrestling with whether I should redeploy more of my capital. I have zero confidence that the China-USA trade dispute will end well. If on top of that the FED continues to raise interest rates, it could get ugly for stock holders. I'm not even waiting for a good settlement to the China-USA trade dispute. I just want the market to fully discount that it's not happening. Their dispute is about so much more than trade. It is a fight for global dominance. The market does not see that yet.

  2. I'm at peace taking the long term. Of my top picks last year (GC +50%, NOVT +22%, SHOP +59%, PYPL +16%, SIS -30%) I still all hold and will continue to hold for at least the next 5 years. I add a bit every month and don't see the point changing my strategy when I don't need the money for another 20 years.

    I'm up around 8% YTD. Took a hit on PBH and SIS and pullbacks to "even" on stocks like NVDA but other stocks have held up well and I anticipate a rebound at some point.

    I take a snapshot of my finances every month. I took what I owned 5 years ago (included CSX, MA, CSU, MTY, GIB but also dogs like HCG, CHE.UN, BAD) and figured out how well I would have done if I just held and discovered my detour in buying CXR, VRX, PHM, RX, CPH, ALGN did more damage then good to my long term results. I recall things were great but were absolute shit and confusing when Donville had his BNN Healthcare Special when things were at the apex on the way down. I wish I just held onto my holdings and understood/appreciated their long term objectives to take advantage of any pullbacks instead of selling.

  3. Although it can be painful in the short term, I’m convinced that long term investing is the way to go. You just have to try to buy at a discount so you have a margin of safety when you first take a position (I have learned this the hard way), but I am learning.

    From the perspective of market breadth momentum (my favourite indicator), the markets bottomed in late October. And the yield on the risk free rate on an historical basis (yield of the US 10 year bill), is still shockingly low. That means the discount rate on the future cash flows of companies is still very accommodative. I would ignore the noise that passes for news from the media…Mr. Penetrator is right, Stocks are on sale right now and its time to buy

  4. I would like to congratulate all of you for very impressive results. I am doing much worse this year... and am still around 7% underwater for the overall portfolio (market value - contributions amount). I am still delusionally holding on to stinkers like VRX, CPH, HCG etc. with 36 to 89% total losses from previous years. How do you guys determine when to sell and overcome the cognitive bias against selling your bad picks (I have instead sold relatively good companies at break-even prices to free up some money)? I am even tempted to add more since some are starting to recover with a new business model/management, even though I should know better.

    I have only been learning about investing for less than five years and in that time had oil implode on me (my holdings were taken out by foreign companies at a double digit net loss), healthcare stocks collapse (I came across BNN and Donville shortly before crash and trusted Mr. Margin Call Lamborghini's "firing on all cylinders" presentations), alt-a bank runs (HCG seemed like a great deal at 40s with high profitability, low multiple, large top notch mutual fund ownership, shortly before the whole disclosure short), and I hope that right now I did not find yet another way to destroy my savings with GARP / capital compounders... I am quite disappointed with myself and that I naively trusted companies and did not see the many landmines and toxic zombies that seem to populate the Canadian stock market with impunity. Even with the little knowledge that I have learned, I do not see many good opportunities on the Canadian market and do not understand why portfolio managers and market behave the way they do. After spending several months and going through the TMX listings, SEDAR, endowment fund reports, and company websites, I was not able to find any true global leaders - or at least any which would not command extremely high valuations (compared to US peers), would not be a one-trick pony, would not be in cyclically sensitive industries, or would not dilute or out right rip off their shareholders. We have some second-class interesting companies, but overall, I wish we had more diverse and higher quality opportunities domestically (or that the CND was not trading at a discount to USD or even better that I would understand why I am blind to the opportunities on the TSX).

    The past few months have been bad for most of my largest holdings from the start of the year. Do you guys have any thoughts on CMG (my total return -43%), LNR (total return -35%), DOL (total return -20%), LAS (total return -13%), SJ (total return -10%), NFI (total return -1%), RCH (total return -1%)? I have held some of these for several years and have been trying to add to them over the past year but after several lower lows have only around 3% cash left (tied up mostly in GICs). I have ploughed more than my one year gross earnings into the market over the year so far and my stock portfolio is worth less than it was in 2017... I seem to have a bad luck with catching falling knives since I usually buy during the first drop after waiting for a more affordable price for months, only to see much larger drops in the coming weeks to months. The only company on which I have had some more meaningful returns is CSU and I only have a half position in it since it always seems to be too expensive (and I only held it for about a year and a half during which its PE has actually compressed).

  5. My top 5 holdings by market value are currently: Equitable Group, Constellation Software, Home Capital Group, MTY Food Group, and CCL Industries.

    For my overall portfolio, the weighted average descriptors include:
    -- TTM ROE 21.78%; Canadian portion only 15.58% (DOL was kept as 0 due to negative equity - how do you guys deal with this in your calculation?)
    -- TTM PE 23.20; Canadian portion only 30.70 (very high partly due to some losses reported by companies)
    -- forward PE 17.18; Canadian portion only 13.76
    -- beta 0.86; Canadian portion only 0.61
    I do not know where to easily get the projected earnings growth (and since I don't trust the analysts' projections anymore [if they were right, my portfolio would be probably more than four times bigger], I am not sure how relevant it might be).

    Good luck everyone. I am grateful that you share your insights with the community, including ignorant plebs like me.

  6. 1) how to deal with losers... I would challenge you to ask yourself. If all my money was in cash and I was building a portfolio would I choose ? If the answer is 'no' get rid of it. You won't always make money with every stock. Period. Accept it and move on. Now there are times when a good company is down and you should add to it, but that's a whole other can of worms.
    2) re: dealing with stocks with negative equity... this is right up my alley as I was dealing with this recently. Two things you can do... run a screen based on ROA; set it to >20%. So run two screens and the ROA will help you identify the likes of DOL. OR... you can break down the DuPont formula where ROE = Margin x Turn x Leverage. The Leverage term (assets/equity) is where things get tricky for the likes of DOL. So you can screen based on just Margin x Turn and then set a separate parameter to deal with the leverage... for example, I use Net Debt/EBITDA <3.
    3) Regarding projecting earnings growth, you're right. Ignore the street. Simplest is to extrapolate their previous growth into the future. Of course this could be fraught with risk too. This is what Buffet does. He's mildly successful.

    Hope this helps. Happy Hols to all JDV.

  7. btw it cut off something in 1) above.

    Basically if you're building a portfolio today with everything in cash... would you include HCG, VRX or other duds? If answer is 'no' then dump...