vendredi 24 juillet 2020

Permanent stocks (july 2020)

I see some people always looking for the next big stock. Or people looking at some obscure names that aren't probably that solid but experience some good momentum.

These approaches seem to work well. Actually, a lot of people seem to do better with high-flyer stocks and obscure small caps than me with my not so original stocks.

I'm reluctant on selling a very solid and growing stock for a lesser known name that grows much more. Quality is as important as growth in my opinion and I'm probably wrong to think that way because the markets values much more growth than anything else.

Anyway, it's important to be comfortable with your approach, as good or as bad as it is. Actually, if you're comfortable with a bad approach, you're probably not very intelligent. But, as science tells us, intelligence is inversely proportional to happiness. So, you're probably an happy person.

A few years ago, I wrote a post about my "permanent stocks". Those were the stocks I expected to keep forever, or at least, for a very long time.. But things change. Pandemics happen out of nowhere and destroys business models. Managers do bad acquisition to keep on growing at any cost.

So, a permanent stock is, after all, not something that you should keep forever but something that, so far, did a great job. So, you're only as good as what you did until today. Make a very bad acquisition like Stericycle or, to a lesser extent, Dollar Tree and all the good job done until today vanishes. However, it's obvious that a company that did well over the last 10 years have much more chances to keep on doing well than a stock that did many mistakes. The trend is usually your friend. 

My permanent stocks are as following:

Constellation Software
Alimentation Couche-Tard
CGI Group
Ross Stores

6 commentaires:

  1. J’ai une liste très très semblable. J’ajouterais Berkshire et quelques banques américaines.
    Je suis curieux par contre. Pourquoi plus Ross Stores que TJX?

    1. TJX et ROST sont très similaires. J'ai choisi ROST parce que j'en possède des actions. Si j'avais eu du TJX, j'aurais choisi le titre sans hésitation.

  2. Great note Penetrator! My permanent stocks:

    1. Microsoft
    2. PayPal
    3. Visa
    4. Intuit
    5. McCormick
    6. Pepsi
    7. J&J
    8. CN Rail
    9. CP Rail
    10. Novartis

  3. I agree with Master Penetrator's list, except that I would take out Facebook and add CNR. Facebook is vulnerable to changes in taste ; already Tik Tok is eating into Instragram's business, and Facebook is for Old People (ask kids). Also, FB's disregard for ethics is starting to eat into their bottom line (ad boycott). As a rule, I don't invest in companies when I don't trust management.

    ROST and TJX were permanent stocks for me but I decided to part with them and take my profits a few months. With virtually no online presence, they are uniquely vulnerable in a pandemic situation. They can't go too much online because that would compromise the "treasure hunt" experience that is at the heart of their business model and the reason why shoppers have to go back often and buy an item when they find it. I might come back eventually but with some many people late on their rent/mortgage payment, the coming period will be tough for retail.

    1. I agree that times are tough for retail. But clothes are not computers. Many people don't want to buy clothes on the web. For myself, I've only had bad experiences with clothes bought online.