Post #500

Holy fucking shit. This is my 500th post on that blog! 

You know what? You won't believe it, but I NEVER take a look at the number of posts of my blog. But yesterday, I took a look at it and I saw that the number was 499. What a fucking coincidence! 

What a useless coincidence in the history of mankind! Or, would I say, what a useless coincidence in the history of the basement where I write my posts! Maybe I'm giving myself too much importance here. Let's just qualify that coincidence as a moment like another.  

So, for this post #500, let's take a look at 6 years and a half of blogging here and tell me either what was the first post you've read on my blog or the post that you liked the most. 

My answers to these two questions:

1- First post I've read: the first one I wrote; 

2- The post I liked the most: probably a post where I used some nasty words like the one where I said that technical analysis meant seeing fucking patterns in a curve. Like some fucking shape of a cunt. Or some others where I wrote that you should believe in nothing. 

I could try to make you believe that anything is possible and that a specific recipe will make you rich but I’d rather make you feel some unease. 

Mortgage rate under 2%

If you own a house, you can now have access to money for almost nothing. 

In Quebec, you can now have a 5 years mortgage at a rate of 1,79 - 1,99%. 

Do you realize? Rates have never been so low! Thanks to COVID and all that money spent by the governement. The ship is sinking but even in these circumstances, someone will take advantage.  

In that ultra low rates context, paying down debt makes no sense (if you don't have too much debt, of course). If you have too much debt, you should pay it and, more than that, you should never have borrowed that much money. Kick your ass and get your things together.  

Of course, the stock market is not that cheap (but probably not overly expensive). But why not getting a 50 000$ mortgage at 1,8% and invest that money on the market? Plus, you can deduct the interests on your tax declaration (at that rate, the deduction won't be that exciting, though). If you can manage to get a 10% performance on the stock market, you'll take a lot of advantage of that situation. 

Imagine that: you're 25 years old, you have a house and your mortgage can be raised by 50 000$. Do you realize how helpful will be that money on your portfolio in the long run? OK, you'll have to pay more on a mensual basis, but you'll get 50 000$ for almost nothing. And your small portfolio will take a very interesting proportion overnight. 

I believe that it's better than a margin, because the rate is lower and you're not exposed to a margin call. On a psychological level, it's also quite positive to know that your 1,8% interest won't change for at least 5 years. 

That advice is for those who know how to invest. 

Actually, I'm always writing to people who know how to invest. I assume that the others are somewhere else. I don't know where. Probably on Tik-Tok. 

Nike (NKE)

Few people think about Nike when it comes to investment. That name is known by everybody since bronze age or so. Nobody wants to talk about something that's so old. 

It's a mistake, because Nike is a very good company that's still growing after all these years. Their last results were out yesterday and the stock is up 10% today and we're talking about a stock with a 200B$ market cap. Not that easy to move the needle on such heavy-weight. 

Revenues are mostly flat (which is an achievement during a pandemic), but digital sales were up 82%. It seems that Nike does the right things about electronic commerce. 

Nike is one of the strongest brands that exist. That link shows us that it's ranked 13th on Forbes lists of most valuable brands

With a ROE around 30 and a growth rate much higher than the average, a dominating position, a very high predictability and a product associated to sports (which is not an evil sector... even if they employ 3 years old kids in India), I believe that Nike is a great name for any portfolio. But it's very expensive (about 35 times next year's earnings). 

Once again, if you want Michael Jordan in your team, you have to pay the price. However, you pay a lot for something that's understandable and not overly trendy like so many other hot names. 

Fuck banks

I'm not an expert in the field but, I affirm with confidence: "fuck banks". Oh yes, fuck them hard. 

Frankly, why anybody would invest money in banks? First of all, financials of banks are hard to understand. Second, most banks offer an average performance (most sectors beat banking, except natural resources, of course). Third, it's a sector where there's a lot of irregularities, if not fraud (which is linked to the first point, because when things are hard to understand, crooks have an easier try). 

My first transactions on the stock market were canadian banks, but since I've sold them all, I never wanted to come back (well, I've bought some shares of Bank of the Ozarks a few years ago, but even that performing bank hit a wall, because some crap happened). 

Today, we learn that big banks like HSBC and some others where related to money laundering. 

A few years ago, we discovered that Wells Fargo, the favorite bank of Buffett was involved in dishonest practices with customers. 

"Yeah, but my bank is clean! Nothing ever happened to Royal Bank!". Well, fuck you. Maybe your bank is clean, but in that sector, a lot of things are not that clean. There’s much more chances to see rats in a sewer than anywhere else. 

You'll see other shit like that if you invest in bank stocks. It's 100% sure. They'll sell your data to China or they'll do some shit with your social security number. You'll end up fucked because you deserve it, you fucking piece of shit that thinks that your bank is pure. 

Last regrets

I don't have that much regrets related to investment lately. My biggest regret would probably be to have not been enough aggressive in march, at the time of the big drop. I should have opened a margin account sooner, which would have helped me taking advantage of the drop. But, all in all, I did OK, and probably better than many people (let's remind that many people get anxious when a major drop happens, which may lead them to stupid actions). 

However, yesterday, on a complete other register, I made a mistake which will probably remain of the most ridiculous things that happened to me in my life. Due to COVID, the teacher's meeting of one of my kids was on Internet. I logged to the Google platform used for the meeting and I saw the teacher and all the parents of kids of the class. After maybe 5 minutes, I realized that the name associated with my camera was "Master Penetrator".

Do you fucking imagine??? Parents of 11-12 years old kids seeing a parent with such a name? I probably looked like a fucking pedophile or some lunatic or whatever the shit. I usually don't care that much about what people think of me, but this time, I really look like an asshole: "un osti de trou de cul" would I say in french. 

So, after these 5 minutes that killed my reputation forever, I closed the camera, logged out on my Google account (Master Penetrator) and logged in with my kid's account. Probably that the damage's done, but what can I do? I am currently waiting for the police to knock on my door.  

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One of the slight regrets of the recent past as an investor is to have sold Sherwin Williams (SHW) during the pandemic. I said to myself that this stock had a beta coefficient a little too high for a crisis and that paint was the kind of expense that people would trim after losing their job, getting depressed and killing themselves. 

I was wrong. That pandemic didn't destroy entirely the economy. Of course, bars and restaurants are often desert (in Calgary, Banff, Jasper, Vancouver and Quebec City, I've seen how bad things are looking), but people stay at home and invest on their home or their hobbies. I don't know if people bought more paint over the last 6 months, but the thing is that a great company remains a great company in most situations. I sold my shares on march 19th, the same day I bought many stocks that did as well as Sherwin Williams since then. So, is it really a regret when I've simply reajusted my portfolio? I don't know. But it's a great stock and a no-brainer, which is not the case of all the stocks I own. 

I think that Sherwin Williams is one of the best stocks. If we experience a second big drop, that name should be on a watch list. 

Portfolio review, september 9th, 2020

Almost 75% of the year has passed. It's funny how time flies when you're always high on meth and heroin. Days are just like a dream. Well, not me, but almost everybody in Vancouver would tell you that. 

So, after almost 9 months done in 2020, here's a portfolio review: 

Number of stocks: 25

Average ROE: 42

Average Forward PE: 32

Average Beta: 1

Annual estimated growth for the next 5 years: 14%

Performance YTD: +11%

Performance of the TSX YTD: -4%

Performance of the S&P YTD: +4%

OK, my performance includes dividends while TSX and S&P performances don't include dividends (around 2% I guess?). Depending on how we see it, I'm beating the TSX by 13-15% and the S&P by 5-7%. Still good. Not spectacular, but my method worked so far this year. However I find it strange to see my average Beta so high lately. It should be much lower. 

According to my portfolio, the price to pay to get an estimated growth of 14% per year for the next 5 years is about 32 times next year's earnings, which is a lot. But I think that's the right thing to do: pay for performance and have enough diversification to have some stocks that compensate for others in case estimates would not be OK. 

The stock market is probably my best friend now. Not because I like it particularly, but because it's my main companion every day and one of the few that didn't get on my nerves over the last 12 years. 

Not particularly thrilling to spend an evening with a closed market, though. 

Couche-Tard still kicks your ass

We're all talking about techno stocks while Couche-Tard, one of the most boring companies in the world, makes more and more money, every year since 1986.  

I'm a little late about this, but forgive me, I was staring at some mountain in Alberta while it happened: during the last quarter, Couche-Tard earned 70 cents per diluted share, up from 48 cents per share a year earlier. Analysts estimates were 40 cents per share for the last quarter. 

A lot of people still overlook Couche-Tard even if their business model still kicks asses. Their same store sales are still growing in a very nice way, which has hardly been the case of MTY (a business with much more diversity) over the last years. 

Average estimates are about 2US$ EPS in 2021 and the stock is currently sold for 33,60$ US $. So it means that the stock is currently sold for less than 17 times next year EPS. For such a great company, it's not expensive. I wouldn't say that it's cheap, but for a company that may very well double it's earnings over the next 5 years (it's debt level is currently medium but it drops every quarter), it's to me one of the best buys on the market right now. 

It's a recession proof model, what do you want more? You want the next big thing? 

Well, fuck you. 

Poles apart

My last travel with a friend of mine made me understand much better his approach to the stock market. I knew we were far away from each other, but this trip made me understand that we were on different planets:

• I introduced him to the stock market maybe 5 years ago;
• Back then, I told him to buy these companies: MTY, Apple, Couche-Tard, Biogen, Dollarama (and some others);
• He bought them all, but sold them all some time after. I don't know when;
• One day, he told me that he had bought some oil and gas company. I told him that it was exactly the kind of company that he shouldn't buy;
• He didn't listen to my advice and started to buy more and more of these companies and he eventually sold all the ones I recommended;
• Lately, he told me that he had buy airlines, mines and he was heavily into oil and gas companies;
• During the trip, he told me that some stock was up 25% or so and he told me that he planned to buy it, solely on the fact that this stock was rising;
• Everyday, he told me that this stock or that stock was up 5% after-hours or another stock was up 20% since he sold it. Everyday, he watched the market with emotions and regrets about stocks that went and gone in his portfolio;
• During the last days of the trip, he told me that one of his stock was up 3000% or so. He told me he had made 8000$ and it was the most beautiful day of his life. The next day, he realized that it was a reverse split and he actually made almost no money during that day.
• While we were in Vancouver, Vicario and me talked about some stocks for a couple of minutes (95% of our time was devoted to fishing or talking about anything else than investment). My friend intercepted this discussion and said that he would buy the stock Vicario was talking about. And also another stock which I talked about that Vicario liked but didn't own. I was shocked. After 5 years of telling him how to invest, he stopped listening to me and bought stocks which I didn't like at all. And now, after 2 minutes of a quick discussion, he told he was going to buy some stocks which he knew jack shit about, just because a guy that works in finance in Vancouver tells a very brief opinion about that stock. 

Frankly, I was sad. How can someone put thousands of dollars on the stock market without trying to understand what he owns? How can someone trusts somebody he doesn't know just because the guy works in investment and live in super expensive Vancouver? 

I tried to make him understand that if we were with Vicario, it was because him and I shared a similar approach about the stock market. Otherwise, how could have we got together if our philosophies were very different? In other words, why trusting Vicario if he didn’t trust me?

I wrote that before but it's as true as ever: that friend wants emotions with the stock market. He sees it all like a big casino and acts with feeling instead of reflexion. He never took the time to calculate his performance and I bet that he would be pretty disappointed to see it VS the market. But I don't think that it matters to him. He wants to come back from the casino one night, telling his friend that he made 1000$ on the roulette. Not poker, not Black Jack: the roulette. The game were your chances are as random as possible to make money. 

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After all, buying a mine or an oil and gas company, is comparable to buying a normal retailer that sells clothes like 100 other retailers. Why would you buy Sears over Macy's? Which one has an advantage over the other? What's promising with these businesses? 

Worse than that, an oil and gas company depends on the price of the resource which is fixed by a cartel and there's a shitload of competition in that field. That's the exact opposite of a company that builds and sells Iphone, for instance (yes, there's competition with cell phones, but each company has it's edge and they can charge the price they want, if they have a big edge). 

Vicario's Costco Basket

I just come back from 10 days in the west (Alberta and BC). I really enjoyed Banff and Jasper because of their incredible sceneries. But the most incredible scenery will probably be getting close to Jason Del Vicario and his family.

Because Vicario invited me to sleep at his cabin located on an island, close to Vancouver. We went to Costco together, we went to some Liquor Store, we took his boat to go to his cabin, we drank beer, we smoked a bit, we swam in the cold water of the Pacific Ocean in front of his cabin, we ate salmon and shrimps together (both caught by him) and we fished for almost 12 hours the next day. Holy fucking shit, what an adventure it was. 

I hear you asking: "What does Vicario put in his basket at Costco?". Yeah, great question my friends. Nothing better than a picture to answer that question:

Vicario is kind of a hippie. He lives in a cabin that is almost autonomous with solar panels and barrels to receive the rain. That guy is surely not the kind that buys a Ferrari and snorts coke. He's much more the kind of guy that lives in nature and that washes in the Pacific instead of in a shower. I wouldn’t be surprised if  he’d piss and shit there too.

It takes a lot of trust to invite someone you've only seen for a couple of hours in a bar in Quebec city to your cabin located more than 3000 kilometers away. 

In contrast, I'm someone who doesn't really like people in general, and I don't usually trust people on the Internet. I usually think that some shit will happen to me if I trust them. But Vicario invited me at the place where he shits every day, among his wife and four boys. He's been very generous and simple and didn't try at all to impress me. Oh shit no. There was food dropped on the floor by his kids at many places, it was really "what you see is what you get". How can you not trust someone like that?

I'm not saying to have a blind trust on Vicario, such as a blind trust on me or anyone else. But he's cool and simple and so many people are fucking assholes or search exposure for the wrong reasons (they couldn't play the guitar and become a rock star, so they try to become star investors). Vicario is not like that... well, I don't think he's like that from what I've seen. 

So, him and Be Smart Rich are, to me, the two only guys related to investment in Canada that get my Penetrator love stamp.