lundi 9 mars 2020

The perfect storm

Heeeeeee haaaa!

That’s how i woke up today, seeing that many stocks were down 10%. It was an ocean of red with a few green spots here and there (O’Reilly being one of the few).

Frankly, i like these big drops more than I like anything about the stock market. I don’t really like long-term enthusiasm. I fear long-term enthusiasm. However, when there’s a panic, there are obvious occasions.

Swing the bat now. You may get an homerun later but you’ll surely do well if you swing it today. I don’t think I’ll be wrong on that one maybe one year from now.

Anyway, you’ll be dead sooner or later. Meanwhile, you must try things. Buying stocks these days could be a great experience in your relatively short time being alive.

But buy GREAT stocks. Don’t buy shit with a PE of 10 or 12.

6 commentaires:

  1. I'm curious, do you consider JPM or BAC like shit with a PE of 7-8 ?

  2. As of today, my portfolio is down 25.70% YTD and almost everything I own is underwater. Portfolio is yielding 6.5% earnings and 9.3% free cash flow (and quite a bit more if adjusted for losses). Five of my holdings are trading below 2x price to TTM cash flow and fifteen under 10x TTM cash flow (including CCL.B and ATD.B).

    I will get my paycheque on Wednesday and should get my tax refund on Thursday. I am planning to top-up one or two "shit" stocks I already own at about 6-7x PE. There will be a lot of earning calls on Wednesday but I will not have access to computer until evening.

    High quality stocks did not really drop, looking at their historical multiples and longer-term charts. For e.g. CSU is still trading at quite high multiples (while some of my other holdings trade below 2009 multiples). It will probably go up 20-30% in next few months, but if something goes wrong the stock valuation could easily halve and still be more expensive than the index. If I could get a cash flow yield more than the average of my portfolio (9.3%) or at least 5% (where CSU was trading on and off 2016, 2014, and 2012 and earlier) I might consider. The insiders also continue to sell of their shares which is not encouraging. For now, I do not really see any high quality bargains on TSX. I got burned on Valeant, Concordia, and other expensive high multiple stocks which dropped 90+% and even though CSU and other are much more resilient and do not use leverage, I do not want to be annihilated even more than I already am. It is almost impossible to climb out of such a deep hole (my RRSP is still down 46% many years later). The "shit" 6-7x PE stocks might not be amazing companies, but I hope they will not drop any lower than they are... and if they do, I hope that the company boards will initialize aggressive buybacks to take advantage of the carnage. Hopefully I am not completely wrong.

    What stock are you guys looking at and/or buying at the moment?

    1. CSU is still 0.75% up YTD... while some of the "shit" stocks I mentioned above are more than 30% down YTD.

    2. I averaged-down by buying more shares of EQB at about 6x estimated 2020 PE today (using my whole paycheque). I know most of you hate banks for very good reasons. Nonetheless, EQB should grow EPS at 12-15% per year with 15-17% ROE and is currently yielding almost 17% earnings yield. I am hoping to use these types of stocks to build out a steady-eddy skeleton which will hold my portfolio together and help ensure my 1% a month portfolio growth target. Once this will be done, I will be able to allocate more money to higher growth, more expensive stocks without substantially impairing my portfolio metrics. It hasn't worked so far. As of today, my portfolio is down 27.24%.

      If the downturn will continue, I am considering selling some stocks at a loss and buying comparable earnings yield but higher quality holdings in my non-registered account for the first time (for e.g. sell LAS with 6.76% earnings yield at a loss to buy ATD at 6.17% yield). We will see what the future brings. This has been the fastest and deepest stock price collapse in my limited investing experience. Hopefully, I will learn something from it for the future.

  3. I agree with the terminator…this is a buying opportunity. For myself due to my circumstances I put an emphasis on dividend growth stocks so that means I hold through thick and thin…it’s fun when the markets go up (which is most of the time) but it’s very unpleasant when the markets go down (and they go down quicker and harder than they go up.

    I think the key is to know what you own and believe in the management teams that operate their companies and just let the market do what it wants to do…I don’t invest in the stock market per se, I invest in individual companies. In the short term the market can do anything but in the short term but it’s the operating performance of the companies you own that ultimately counts in the long run…

  4. Agreed, well said Terminator! 10% downside, infinite upside. Im down down (5%) YTD, fully invested. This downturn very easy compared to otbers, so far.