lundi 29 juin 2020

The Facebook boycott campaign

If you're a Facebook shareholder, you've probably heard about the Facebook boycott campaign that's going on these days.

A lot of companies like Unilever, Coke, Hershey, Starbucks and many others have said publicly that they wanted to pause their ads on Facebook because of racism and violence on social medias.

Well, if you think that the only reason why they pause their publicity is mean things said on Facebook, you've been fooled.

In an economic crisis, when sales drop a lot, one of the first things that companies cut is publicity.

They now have a great occasion to cut these costs for a "good" reason: they can associate to a social movement against racism. So, they can turn that economic decision into something virtuous.

Because, with all it's imperfections, Facebook (and Instagram) is not a creation for haters and ku klux klan. It's one of the best ways to reach millions and even billions of people for companies. Who can really stay away from that kind of company to reach consumers? Nobody.

Unilever, Coke and Hershey want one thing more than any others: sell their stuff, more and more every year. After that, they want to preserve their image. And they want to look as virtuous as possible simply because not any company can afford to not look virtuous.

That's, in my view, the only two reasons behind the Facebook boycott campaign: cutting the costs and try to look virtuous.

I'd be curious to see how employees are treated in these virtuous companies. Because virtue is not only saying that you're against racism. It's also to respect your employees and your consumers on a daily basis.

vendredi 26 juin 2020

Trapped with high PE stocks

This morning, I was updating my portfolio and I realized that my average forward PE was close to 30 (29 to be precise).

I own 24 stocks. I really like all of them. But, I'm worried about the increase of their forward PE ratio. Some stocks had a forward PE of 20 before the crisis and the recent negative perspectives have had a negative impact on forward earnings. So, many stocks are now more expensive than before COVID.

The cheapest stocks are in retail and I don't think that it's the best place to invest money now. There are still some excellent names in retail (Ross Stores, TJX, Dollarama, Couche-Tard) but some of them have been closed for months and they'll carry that absence of revenues for a long time even if they're very well managed. So, why should I sell some Microsoft shares to buy more Ross Stores shares? Just because Ross is less expensive and I want to reduce my global forward PE ratio?

You see, there's no escape from a high PE. Actually, the only escape is selling stocks to own cash and I don't think it's appropriate.

My cheapest stock has a forward PE of 16 while my most expensive stock has a forward PE of 100. Between these extremes, I own many stocks with a FWD PE of 30 or more. I'm not comfortable with that kind of high PE. The cure to that would be to buy stocks with less quality. I wouldn't be comfortable with that either.

Do you have a solution?

jeudi 25 juin 2020

The sad recent past of Donville Kent

Once in a while, I take a look at Donville Kent's Website to see how things are going for them. After all, not so long ago, many of us were big fans.

But now, Jason Donville looks like most of the stocks he chosed as top picks many years ago: faded. It's sad, because we're all looking for a messiah and Donville wasn't our messiah. Who's gonna be the next one?

So, when you get on Donville Kent website, you can see "ANNUALIZED RETURN SINCE INCEPTION: 15,31%". Then, you push the "Learn more" section and you can see the details for the last years. And then, things look way less interesting...

For instance, for the last 5 years, here's Donville Kent returns VS S&P 500 returns:

2015: 4,06% VS -0,73%
2016: -1,66% VS 9,54%
2017: 10,85% VS 19,42%
2018: -4,85% VS -6,24%
2019: 19,24% VS 28,88%
2020 (until end of may): -11,89%  VS -6,5%

Since 2015, Donville Kent has been beaten by the S&P500 by a wide margin. It's not even close.

So, the 15,31% since inception looks great, but the recent past wasn't very good. The most important thing is a relative performance because an absolute performance means nothing. Plus, you can set the beginning date that you want if you want, to impress people.

vendredi 19 juin 2020

First experience in a pub after 3 months and a half

Yesterday, I went out with a friend. Restaurants have opened this week in Quebec and I needed to drink some beers to remember who I am outside of home.

At around 7 PM, the weather was 30 celcius degrees. So, many people were looking for a terrace. There were line-ups in front of many downtown restaurants. Inside, however, with social distancing practices, I believe that the pub was at least 25% (probably more) under it's usual capacity because of fewer tables.

The waiters were wearing masks but they stood close to us. When I went to take a piss, I had to walk between two waiters who were chatting. They both stood on my way and I probably touched their clothes on my way. Nothing to worry, but it shows, in my opinion, that apparent measures are applied (masks and disposition of tables) but less apparent measures are way less applied.

Later, after smoking some weed with the same tool as my friend who refused to shake my hand 3 hours before (because of a fear of contamination), we went for a walk on the desert streets of my city (on a very beautiful and hot thursday night), we realized that almost every bar closed at 11 PM or before (the usual closing time is 3 AM). The crazy orgy night that I thought it would be (after 3 months of lockdown) was actually something similar to a monday or tuesday night in november.

I believe that the impulsion is there, but it didn't started over like I thought it would.

It's only my experience, in my city. I don't know the value that this story has. But, if I apply my experience to the economy, I would say that the economic life won't be back with force until a few more months. At least for restaurants and pubs.

mardi 16 juin 2020

A little self-flagellation

Once in a while, I think back about all the crap I've written about Valeant in the past and I feel ashamed. I feel ashamed because I've been brainwashed by what I wanted to hear. And I used my blog to tell what I wanted others to believe.

That's probably why I now hate to see some investors try to convince us about the greatness of their stocks. I now associate all that promotion to a very self-interested purpose. And I believe that most people acting like that are not interesting investors.

Here's a few things that I think everybody should know and apply: never invest too much money on a single position (the usual maximum is 10% of a portfolio), never take as a guarantee of quality  the picks of superinvestors and, most of all, know what you're doing.

Today, I know that there isn't any fucking stock in the market that deserves adulation. Even Google and Constellation Software, which are two stocks that I love, may bring bad surprises, one day or another.

You never know. Capitalism and profits are a great excuse for many illegal things.

Here's what I wrote, about 5 years ago, on june 20th, 2015, about Valeant. I hate myself for writing that. If I would read something like that today about any stock, I would probably write a post about the author telling how much that guy is stupid.


Three of my favorite superinvestors (that achieve great returns year over year as said in a recent post on this blog) own big positions of their portfolio in Valeant;
  1. Robert Goldfarb (Sequoia Fund): 30%
  2. Bill Ackman: 26%
  3. Lou Simpson: 13%
Nobody among these three guys has sold a share of Valeant in the last quarter. Even more, Lou Simpson added to his position in the last quarter and Bill Ackman has INITIATED a 26% position in the last quarter (an investment of more than 5B$!).

With these guys beside me, I feel pretty safe. It's one of my advice to you: sometimes, it may be a good idea to select an investment in which you'll have great companions. These guys had excellent returns in the last few years and if they have so much money invested in Valeant, it's surely because they believe that it's one of the best companies to contribute to their returns.

mercredi 10 juin 2020

Profitability of restaurants

I'm concerned about restaurants during this pandemic. First of all, they represent an important part of the economy. I don't have any statistics about it, but I wouldn't be surprised if restaurants would represent 50% of the businesses of downtown Toronto, Vancouver and Montreal. And it's surely similar in almost every other country in the world.

In other words, if restaurants go badly, the economy goes badly. If they go bankrupt, it means a lot of people go bankrupt. Right now, thousands of little businesses are going bankrupt. The place where we buy helium balloons for birthday parties is closing after 25 years. And businesses way bigger than that are closing their doors too. It's a fucking tragedy. But the stock market doesn't care because these businesses are not listed on the TSX. 

Restaurants (and bars to a wider extent) are the worst kind of business someone could own in a pandemic because they relate on a model where you have to combine volume and proximity (except for those where takeout is a concept widely used). For most restaurants, profitability comes with the notion of packing people in a room with a lot of chairs and tables and make them eat or drink in a social atmosphere.

With social distancing (2 meters between the tables) and a maximum number of people around the same table, will it be profitable for restaurants to open their doors? If a restaurant needs to liberate a lot of place and receive 50 clients instead of 100, will they still make money? Will they really want to open?

I still like MTY and restaurants from a shareholder point of view. However, it's the complicate way to invest money these days and I don't think that problems are over. They will have at least a quarter with almost no revenue and probably a few other tough quarters.

Lately, people got excited once again with MTY because of the reopening of the economy. Me, I don't know. I don't know, because it's the best thing to say. You don't look like a fool when you affirm your ignorance.

When we eat, we use our hands, which is the most dangerous part of our anatomy now. I'd rather invest money in a sector where our hands and our mouths aren't involved, in a public place.

Anyway, do what the fuck you want to do. Buy MTY shares if you want to. Buy all the fucking shit you want. I'll still beat the fuck out of you and the market. 

vendredi 5 juin 2020

Outsmart the market

It's gonna be hard not to offend some people here, but frankly, what happens with the market these days makes me despise a lot of investors.

It's been said countless of times: you can't predict the market. The only way to predict the market is to time travel. Which hasn't been done since 1985 (Back to the Future). For the last 35 years, I haven't seen anything related to time travel, so I think that this shit is over. 

Lately, I've read about some people selling most of their stocks. Like selling 75% or more of what they owned to raise a lot of cash to take advantage of the big crash that should come. Well, guess what? That big crash didn't come. At the opposite, the market goes higher and higher everyday. These people, selling 50% or 75% of their shares lost a lot of money with the recent comeback, trying to speculate on what could happen next.

That's what we could call "market sodomy".

I must admit that I still don't understand why the market surged so much during the last 2 months. But, even if I thought things should get worse, by the end of march, I was only 3% cash. I had a margin that I wanted to use if prices dropped too much, and that's all. In other words, I reduced my positions when the market was high and I bought back shares when the market dropped. I ain't a fucking genius. I just did what everybody told to do. In other words, I copy what intelligent people have always said to do for the last 100 years. I don't try to follow my own path like some fucking prophet. IT DOESN'T WORK! I'D LIKE TO BE SPECIAL, BUT SADLY, I'M NOT SPECIAL. MY SHIT IS SPECIAL THOUGH, BECAUSE I'VE GOT CROHN'S DISEASE.

During march, I kept the stocks I owned, which I thought were great. But I sold some stocks and bought some others. An adjustment to face the crisis. For instance, I sold some stocks linked to retail and I bought some others which, in my view, should do well even if the pandemic would last many months. You may do some mistakes, doing this, but, at least, you're still on the market.

Nobody is smarter than the market. Those who try to impress us with their magical skills are usually fuckers. That's why I despise many investors: they are either liars, cocky or pedophiles. Sometimes all of these.

P.S. Today, my portfolio reached another milestone. Another round number. Never thought I'd reach this point so soon.

jeudi 4 juin 2020

Main goal in life

What's your main goal in life? What do you desire the most between these choices? 

1- To fuck as much girls (or boys) as I can;
2- To become powerful or popular, to be an influent person;
3- To become rich to buy anything I want (a big car, a big house);
4- To become rich to do anything I want (like saying my boss to fuck himself);
5- To live as much experiences as I can (drugs, sports, books, music, tatoos, penis in the ass);
6- To explore the world (live among different cultures and eat the same shit as they do);
7- Money isn't that important for me. I only want to be with my friends and my family and listen to Pachelbel's Canon;
7- I don't have any specific goal. Life is absurd. 

I'd really like to get as much answers as possible in the comment section, please.