jeudi 30 avril 2020

Marriott: A symbol of a market that's wrong

I like Marriott. These are great hotels.

I also liked Marriott as an investment. Actually, I was a shareholder, not so long ago, for a short period of time. But I sold my shares to buy something else.

However, things have changed in a world with COVID-19. Day after day, I wonder how the fuck the market has recovered so quickly and why there's suddenly a huge optimism about market recovering. Yes, the market is forward looking. But the market seems to have forgotten than many things have changed and many things won't be the same for many years.

For example, tourism.

And that's where Marriott is, to me, the symbol of a market that's wrong.

As of april 30th 2020, Marriott is selling for 25 times current earnings and 18-19 times forward earnings. Well, these numbers imply that an important growth will happen with the stock, which is impossible. And even if the growth happened, Marriott shouldn't be sold for more than 10-12 times forward earnings in my opinion.


1- Borders are closed. It's the first indicator that things are fucking abnormal and tourism is one of the worst sector to invest in;
2- Millions of people all around the world have lost their job. These people won't have any travel plans soon;
3- Social distanciation will complicate a lot of things in tourism. Perhaps that hotels won't have that much problems (except for their pools and restaurants), but a fear will remain among many people;
4- Marriott carries a big debt. Even in normal time, the debt looks like an issue. Probably a controlable issue in normal times, but a worrying issue in trouble times;

I took Marriott as an example. But I could have taken many other names as well.

In other words, the valuation of stocks related to tourism is, to me, the indicator to look at, to see if I should buy stocks. Currently, the answer is NO.

mercredi 29 avril 2020

Mastercard and Google... and Mercedes

Have you seen Mastercard and Google last results?

Google results were good and Mastercard results were excellent. These results are even more great given the fact that both are giga cap (Google = 920B$ and Mastercard = 285B$). But both are still growing a lot and occupy a unique place in the economy.

Many small caps would envy them for their EPS growth:

  • Mastercard EPS went from 1,41$ in 2010 to 7,94$ in 2019;
  • Google EPS went from 13,17 in 2010 to 49,16$ in 2019. 

With these two stocks, you almost don't have to check the numbers. Just with a subjective analysis, you can see that they are two exceptional stocks.

Google has a huge moat. It's probably the first page that opens on your computer. If not, it's one of the first place you go, when you have something to do on the Internet. Google's servers are built close to dams. Which competitor could arrive, given such high barriers to entry? Plus, Google owns Youtube, which is also a place where you surely go often.

Mastercard (like Visa), is the present and the future of transactions. Cash is less and less used. And with COVID-19, many shops incite us to use credit cards instead of cash. This trend won't probably vanish when COVID-19 will be over. Plus, many people have Mastercard and Visa on their phone to pay at the grocery or anywhere else. As humanity grows, transactions grow. It's almost impossible to see a decrease there.

And when you look at the numbers of these two stocks, you see huge cash flows coming in. You'll see a very low debt and, in the case of Google, a mountain of cash on hand. You have everything you want with these two stocks.

But they're almost never on sale. Because they're like two Mercedes. Two high-class stocks, with a very singular signature. How could they have the same valuation as Wells Fargo, for instance? A bank is a bank. Some are better managed than others, but the difference between one bank and another is usually not that huge. Who would pay 25 times earnings for a normal bank with normal earnings?

I try to buy as much Mercedes as I can. One Toyota here and there and, sometimes, a Ferrari. But, mostly, I look for some Mercedes.

lundi 27 avril 2020

Boeing, a typical sector to avoid

Even though Boeing (BA) had good years in the past, I think it's a good example of a sector to avoid:

1- A very competitive industry (mostly airlines, but Boeing is directly related to airlines);
2- No or very low competitive advantages (I'm talking about airlines, once again);
3- A catastrophe with a plane could cause a lot of harm to a company, like it was the case with two 737 MAX (two accidents with more than 350 deaths);
4- A sector related to the general state of economy;
5- A sector where companies are usually heavily leveraged (high debt);
6- A sector with low margins.

Of course, Boeing is better than Bombardier which is Quebec's turd. We're certainly not talking about Couche-Tard here. But even if Boeing is better than Bombardier, it's not an easy sector at all. For instance, Boeing now has liquidities problem. And the dividend will probably be suspended for some time.

Mines, oil, gas, airlines (and all the industry around it) are the hard way to make money in the market. Always been, always will be. I'm not a prophet. I only write what I've read 15 years ago and what's still true.

At the opposite, with Ross Stores (ROST), you've got a company that sells clothes at a discount price. You won't see a lot of effect of the economy there. And you surely won't see any scandal either.

With BA, you've got a stock which is at the same price today as it was 6 years ago.
With ROST, you've got a stock that's now selling for 2,5 times the price it was 6 years ago.

dimanche 26 avril 2020

How I screen stocks

A few years ago, I used to screen stocks on Value Line with a lot of metrics.

Then, I realized that only three or four metrics were really useful to find the best companies:

1- Stock predictability;
2- Growth Rate over the last 5 years;
3- ROE.

The order of the list is important. To me, the most important metric is now "Stock predictability". It shows how predictable is a stock and, frankly, that's probably the most useful thing to know, because it shows how confident you can be about the appreciation of your stock.

Then, the growth rate over the last 5 years. Why looking at the past instead of the future? Because I don't see why I should have any confidence about future growth for a stock that didn't grow in the recent past. Plus, usually, when the growth was good or great in the recent past, chances are that it will remain interesting in the near future. Not always, but most of the time.

Then, the ROE. I used to be very picky about the ROE. But, I'm now more flexible. I own some companies with a ROE in the range of 15-20 while I used to look at stocks with a much higher ROE. Well, that metric is important for your whole portfolio. But if you own 20 stocks, I think that it's OK to own 3-4 stocks with a lower ROE, if the growth is interesting.

Then, other things such as debt level, cash on hand, margins, beta, forward PE and some more are important. But a deeper analysis is only done when stocks respect my three criterias. There may be one or two exceptions in my portfolio, but not more.

One stock that respects that screening: Microsoft.

jeudi 23 avril 2020

Chinese stocks *** EDIT ***

Recently, I had a discussion with BeSmartRich, the famous chinese blogger from South Korea.

We talked about Covid-19 and all the shit that came with it.

I said to him that, even if that's gonna be hard, I'll probably change my consumer habits. Like paying more for stuff that doesn't come from China. Or like going less to Dollarama (I don't go there that often but I still could reduce my frequentation).

Because all the fucking shit that happens seems to come from China.

Patent infringement, SARS, COVID-19, companies that are a fraud, governement that we can't trust because they try to grow at our expense (mostly at USA expense, but I think that the chinese despots probably hates all the western countries).

A guy in the comments of my last post asked me about certain China stocks. Here's what I have to say:

If I was a new investor, I'd probably be tempted by some China stocks like Alibaba, or Tencent (or even Naspers, which is a South Africa stock related to China via a major tech investment).

But I've had my share of bad experiences with badly managed north american stocks. I don't see why I should give a chance to the chinese governement which is never far behind anything that happens in China, including chinese stocks, even if they're listed on an american market.

If you want explosive growth, you have many names in North America. I'd go anytime with Shopify or Netflix before any chinese stock, even if these are not two stocks I own. There's enough choice on the american market. And you'll get screwed a few times there anyway, so, don't look at third-world countries because the first-world has enough crooks in it.

At last, there's some regulations to scare them a little.

I'm not a person of conviction about politics or citizen actions. But this time, I really believe that we all must make an effort to reduce our consommation of chinese products and replace them by stuff from ANYWHERE else.

**** Slight edit ****

A few days ago, China said it's death rate was 0,33 per 100 000 inhabitants (for Coronavirus) while the same death rate was 5 per 100 000 in Germany and 11 per 100 000 in the USA. How the fuck can we trust a governement so full of bullshit?

Please, you fuckers who want to trust China, come back here to read this post, once in a while.

lundi 20 avril 2020


Hey, 20 minutes ago, I created a Twitter account.

I invite you to join me. I don’t know what I’ll do there. Probably some trolling once in a while.

But anyway, here’s the details:

dimanche 19 avril 2020

The recent performance of Shopify

Shopify is similar to Amazon, a few years ago: revenues grow at an incredible rate while the company is little or no profitable. 

The secret is probably in the margins: If the company succeed at increasing it's very low margins to a certain level, the company will become profitable.

Before going further, let's take a look at the price of the stock over the last 5 years (in canadian dollars):

May 2015: 33,52$
May 2016: 38,47$
May 2017: 124,72$
May 2018: 192$
May 2019: 372$
Late april 2020: 831$

From 2015 to 2019, revenues went from 205 to 1578 million US dollars.
From 2015 to 2019, EPS went from -0,30 US dollar to -1,10US dollars.

Around march 20th, when the panic on the market was at his highest level, I thought about Shopify and I told to myself that tech companies would surely do better than brick and mortar companies over the near future. But, I decided to buy some other tech companies than Shopify. For instance, tech companies that had positive earnings. 

Over the last month, while the market went down like crazy, Shopify dropped too. But the rebound has been spectacular: from 500$ a month ago to 831$ today.

I believe that Shopify will probably reach the 1000$ level this year. But I won't probably invest money in that company. Why? Because, at current price, if we suppose that earnings will be 10$ per share in 3 years (let's remind that earnings have been negative over the last 5 years, so I guess I'm very optimist here), the stock would be currently selling for 80 times 2023 earnings.

Too expensive for me. But I guess the stock will continue to do well in the near future anyway. Because my fucking opinion doesn't matter.

jeudi 16 avril 2020

The casino

Today, I spoke to my friend whom I initiated to the stock market a few years ago. Since he's always been a gambler and since he often tells me that he's excited about a penny stock that doubled overnight and he's angry at a more serious stock like MTY losing 25% of it's value in an exceptional crisis like the current one, I sometimes try to convince him to adopt a more rational way of investing.

For instance, today, I talked to him about Value Line and the importance of predictability. I told him to visit the website and put more emphasis on things like predictability of earnings.

But I saw in his eyes that he wasn't curious about that. Even if he has negative emotions about his stocks, he doesn't want to try a new approach. He seems to really like buying mining stocks and seeing them go from 0,45$ to 0,90$ in a few days.

The market is a mystic casino and learning too much about it would dissipate the magic. It seems that it's exactly how he sees it: going to the roulette and having the chance to make a lot of money even if the probabilities of a loss are greater.

Some people don't simply want to put effort in it. Or simply try to be curious about it.

mardi 14 avril 2020

Doom and gloom

Let's consider a few datas available:

1- First, some dates from the IMF (International monetary fund):

Growth rate US 2020: -5,9%
Growth rate US 2021: 4,7%
Growth rate Euro 2020: -7,5%
Growth rate Euro 2021: 4,7%
(In other words, at the end of 2021, we'll still be lower than currently if we add the numbers of 2020 to 2021 numbers).

IMF adds that we will probably face the "Worst economic downturn since the great depression"

2- Johnson and Johnson reduces it's estimates for 2020 by 8% (it's a company not that much sensitive to the general state of economy).

3- JP Morgan and Wells Fargo expect a severe recession in the USA with a 20% unemployment rate.

4- JP Morgan latest earnings were 2,9B$ compared to 9,2B$ last year (a drop of 69%).

5- About 5,4 million of canadians are receiving the emergency response benefit.

I'm only writing all that because I believe there should be much more stocks on sale right now. People should panic much more than that. That's why I can't buy anything at the moment because it seems like there's a panic pending... after the momentary lapse of reason we're going through right now.

dimanche 12 avril 2020

EPAM Systems

A few weeks ago, I was screening the market, looking for some great stocks.

I discovered a name I never heard of: EPAM Systems.

I bet most of you never heard about it too, except on one of my recent posts where I listed that stock as an interesting name.

I have to admit that I'm a bit puzzled by the width of services offered by EPAM: Brand development and communication, multichannel content strategy, process optimization, cybersecurity, automation, cloud transformation, virtual and augmented reality, robotic process automation and many more. So, it's a tech stock combined to a marketing stock. Or a kind of CGI and Accenture. I don't really know how to qualify them.

Anyway, who gives a fuck about what they do, as long as they make money. In that regard, things look pretty good for EPAM systems if we take a look at recent EPS:

2012: 1,17$
2013: 1,28$
2014: 1,40$
2015: 1,62$
2016: 1,87$
2017: 1,32$
2018: 4,24$
2019: 4,53$

EPAM share price 8 years ago: 23$
EPAM share price 5 years ago: 72$
EPAM share price today: 192$

The growth hasn't been ultra steady, but it's been consistent enough to qualify this stock on my watch list. According to Value Line, it's predictability is about 75%, which is an interesting level to me.

Arkadiy Dobkin
Plus, the company has a very low debt in comparison to annual earnings.

The recent growth rate has been high and is expected to stay at a high level for the next year (but who really knows in these highly uncertain times?). If the estimates are OK, the forward PE of the stock is about 25. It's not cheap, but for a high-growth company with a very low debt, it's an OK price.

The CEO is a guy from Belarus. He looks very intelligent but a bit like a killer. A kind of KGB killer, as long as KGB has probably nothing to do with Belarus. Take a look at these eyes. The guy could probably make you shit in your pants if he was your boss. I wouldn't say he doesn't inspire trust, but he surely inspires fear. Like a middle-age king.

Well, EPAM headquarters are in the USA. So, perhaps only his heart is in Belarus.

Who knows who we can trust in that stock market? Since big fat Mike Pearson of Valeant fame put his small dick in my ass, I feel cheated and I can't trust blindly any CEO.

If I can't trust canadians and americans, what about a CEO from an ancien communist country?

It's so complicated. I just want to love someone.

jeudi 9 avril 2020


I honestly don't see any reason to be optimistic about the market for now. For the very long term, yes, we should be optimistic. But for the next year or so, I think things be will be ugly and stinky.

One million persons recently fired in Canada plus 2000 more deaths due to Coronavirus each day in the USA (that number will surely continue to grow for some time). Governments investing a crazy amount of money to support an economy which is in coma for now. People like me getting paranoiac about the virus and about every people at the grocery. And breathing as little air as possible while I'm with strangers at the grocery.

I really believe that this crisis will have significant impacts in our mind, our shopping habits, our public finances and international relations (probably on many other levels which I don't think about right now). For instance, Trump will probably want to crush China after what happened.

Personnaly, I can't refrain to use the word "fucking" before the word "China" these days. Because what's happening is all the fault of these fucking bat-eaters. How come all the fucking bullshit we've faced over the recent years comes from China? What's wrong with them? Germs and virus are not supposed to be in India instead of China?

I'm a much more moderate person than Trump... So, let's imagine what that big mofo's gonna do and say after the crisis. I believe that relations with China will be much more complicated.

So, tell me, how come does the market is so optimistic these days? Anticipation of a better future? Yes. But since when does the market is optimistic about something that will happen so far away and after so many problems?

mardi 7 avril 2020

Risk related to debt

We're at war, and at war, we need some strategy. We have to understand the battlefield as much as we can. Of course, this is a completely new battlefield and a very unusual one.

But one thing is clear to me: debt levels must be low for the stocks we own. Because, even if interest rates are incredibly low, many companies won't make money for months. Those that will remain profitable will make much less money. And, when you make less money, it's much harder to face your obligations. Any of these 600 000 quebecers who lost their job over the last month and recently bought a new car will probably understand very well what I'm saying here.

So, I believe that it's very important for us to take a look at our portfolio and reduce significantly our positions in stocks with high debt levels.

For instance, even if Boyd Group is a great canadian company, with an incredible growth rate and great cash flows, it's debt level is too high for me to be comfortable in that turbulent period. Plus, let's remember that most of the cars aren't currently driven because many people are in quarantine. So, a stock related to car accidents is not exactly in it's golden period.

Take a look at every stock you own and fix a percentage of stocks with high debt level with which you're comfortable. For me, this percentage is currently low. I'm comfortable with about 15% of my portfolio in stocks with higher debt levels.

I think that debt level is probably the most important metric to look now. Because it's directly related to the life expectancy of your stocks.

lundi 6 avril 2020

MTY Food Group: ouch!

I have a confession: I'm no longer a MTY Food Group Shareholder.

I'd like to convince everybody that I'm a genius, but I've been simply lucky on that one: I sold all my MTY shares on march 11th (selling price: 42,72$)

On march 16th, the price dropped to 23$.

On march 18th, the price dropped below 15$, a price similar to the price you could pay in 2011 for a share of MTY. If I still had my shares, I would have feel the horror of a loss of about 66% on a single week.

The company said today that the dividend was suspended. Plus, half of the employees are momentary fired and the income of executives is lowered. Today, you would have to pay 16-17$ to buy a share of MTY.

It only begins. You will see that more and more often. Because a lot of businesses are poorly managed. And I don't think that MTY is badly managed. It's only not a good business model for a plague.

At current level, I wonder if it would be a good idea to buy some MTY shares. Perhaps a very small position. But one thing is sure, investors should look much more at companies that haven't been hurt that much.

dimanche 5 avril 2020

My favorite stocks at the moment

I've been very, very active on the market these last weeks.

Here's a few interesting names in my opinion. These stocks have great growth prospects (well, when the coronavirus will be over… which may not happen before many months), have low or very low debt, hold some cash or a lot of cash and are available at a very interesting discount over their historical valuation:

1- Google
2- Facebook
3- Alimentation Couche-Tard
4- Groupe CGI
5- Edwards Lifesciences
6- EPAM systems
7- Align Technologies
8- Berkshire Hathaway
9- Visa
10- Mastercard

These are probably my favorite names on the market right now. Not a single company on that list is threatened by the crisis. Well, actually, every company is threatened by the crisis, but these will survive a long time.

Because they're solid.

Like my cock when I watch some pictures of Jason Del Vicario.