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.

9 commentaires:

  1. I got in the Valeant trap too!

    My guru on that was Mr. Rochon from Giverny Capital. I should had followed how he was investing in Valeant: despite that he was impressed by the track record on Valeant, he was not confortable to invest more that 2% of the portfolio because of the accumulating debt.

    So everytime Valeant was going over 2% of his portfolio because of the rapid rise, Mr. Rochon was selling some of it to get back to 2%. Result: despite the crash of Valeant, Giverny made money overall with Valeant, but recognize it was still a mistake to have trusted so much the (hyper greedy) CEO of Valeant.

    Lesson: As you say sometimes too, it could be ok to have 1-2% of the portfolio invested in unorthodox bet like Valeant, but STICK TO IT AND REFRAIN FROM BEING GREEDY !!!

    1. With hindsight, it was an intelligent way to invest money in Valeant. Well, actually, the intelligent way would have been to invest no money at all and put money elsewhere. In Constellation Software or in Microsoft, for instance.

  2. MTY was my preferred stock few years ago. The stock lost 60% on its value and it barely recovered, and it won't because more people will work from home and will not pay 15$ anymore for at Thai Express.

    My position in MTY was 5% of my portfolio. Despite the loss, my portfolio is still doing pretty well.

    The 10% rule of thumb on max ponderation on a position is, I believe, a very good way to manage your risk, and keep a piece of mind when things get bad and take a knee jerk decision that can hurt your portfolio

  3. En faisant cette technique... est-ce que tu te prives des gagnants exemple des 10 baggers ?

    1. Je n'investi pas assez longtemps pour avoir un ten baggers, mais assez longtemps qu'un ten baggers prend des années à avoir. J'ai appris assez rapidement à ne pas vendre mon grand gagnant, mais en investissant son épargne dans ses autres prospects,on peut arriver à équilibrer son portefeuille sans vendre partiellement son grand gagnant.

      Mais la règle du 10% peut être élastique. Ce n'est pas un absolu. Mon ultime limite est 15%.

      Tout est une question de gestion de risque. J'ai appris à la dure qu'il est plus rentable de prévenir les pertes que de les subire. Une baisse de 20-30% sur un titre de croissance est très probable, et peut faire mal sur le portefeuille si la pondération est trop forte.

      Ça demeure un choix personnel

    2. On ne sait jamais de quel niveau de performance on se prive au moment où on prend nos décisions. Par contre, je pense que de miser sur 10 compagnies qui ont du potentiel est bien plus sage que de miser sur une seule compagnie qui semble avoir du potentiel.

      J'ai presque un 20 baggers avec Constellation Software (acheté à 88$ et maintenant à 1500$).

    3. Je me suis mal exprimé... ce que je veux dire même si tu as 10 compagnies si tu trimes toujours ton gagnant pour respecter jamais plus que 15 % VERSUS en avoir 10 mais tu l'as trimes jamais et elle devient exemple 35 % du portfolio! Parles nous un peu de EPAM! beau petit comeback

  4. Thank you for sharing your story. If Valeant had gone the other way though you might not be writing this post. We all wish we went 100% Amazon 5, 10, 20 year ago. Sometimes it's just a case of risk to reward. I was 80% marijuana stocks between 2016-2018. If I listened to the conventional rules I'd be one of those guys bragging about his 15% annual return calling Canopy Growth investors a bunch of know-nothing speculators. Having 100% of your portfolio in one stock doesn't sound as crazy when you look at it like being all-in in your own business. I lost some profits though not selling the rest of my marijuana stocks in 2019 -- enough that I could write a post like yours warning people not to have more than 10% in a stock.

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