jeudi 26 novembre 2020

An exercice of nostalgia

2015: Among all the stocks I owned, only 3 of them are still in my portfolio, 5 years later (Constellation Software, Couche-Tard and Ross Stores).

2016: Only the same 3 stocks are still in my portfolio.

2017: The same 3 stocks plus O'Reilly are still in my portfolio. 

2018: The same 4 stocks are still in my portfolio + Boyd Group + Google + Carmax + Facebook + Mastercard + Edwards Lifescience. 

2019: The same 10 stocks are still in my portfolio + Visa. 

2020: I currently own 24 stocks. So, only 11 of these stocks have been in my portfolio for more than one year. Only 3 of them have been there for more than 5 years. 

That's not really what you could call "fidelity". 

I'm not writing that to preach for an heavy rotation of stocks. Not at all. I'm mostly writing that because it shows how random I've been at picking stocks over time. Not so long ago, I owned stocks like Valeant, Concordia Healthcare, Nobilis Health, Callidus Capital, Chicago Bridge and Iron.  These stocks have only known a few months or 2-3 years of glory. It shows how much a good track record is important.  

Life is full of mistakes. But what's beautiful is that, even if life bring diseases, loss of friends-parents-lovers-job-health and all these things, it also brings experience and, in that aspect, you can't regret getting older. I now know that it would be stupid to sell a stock like Mastercard or Visa. These stocks should always remain on a portfolio because there are 8 chances out of ten that you won't be able to find something better for the long term. 

lundi 23 novembre 2020

"Investir à la bourse et s'enrichir"

Investors from Quebec know Bernard Mooney while those from other provinces probably don't know him. Short story, he's retired now, but he used to write articles in "Les affaires", which is probably the most known website about investment in Quebec. He's also a friend of François Rochon, the CEO of Giverny Capital, one of the best investment firms in Quebec (which you should follow via if it's not already the case). 

I bought the book "Investir à la bourse et s'enrichir" ("Investing on the stock market and getting richer", for you, fucking unilingual assholes from the rest of Canada) as a Christmas gift for my 19 years old nephew which is in a period of his life where he seems to be clueless about his future. He's been saying for years that he wants to work for Google in California, but mostly for the glamour of it. He's got poor grades and is unable to succeed a philosophy class which he failed 3 times in a row or something like that. Also, he  mostly smokes pot and play video games. But he wants to become rich and drive a tesla. Just like thinking about being rich was enough to become rich. That's why I bought him this book. I don't know if he ever read an entire book just for fun, outside of school, but I thought it was a good idea anyway. 

This is the book in my environment of work everyday. Let's admire my jogging pants. 

Anyway, in this new edition of the book (first written in 2001 but the new edition was made in 2020), there's no big changes. I think that the only new thing is a comment from Mooney saying that he thinks that the initial version of his book telling that looking for stocks that grow 20% every year is too ambitious. Even 15% is too ambitious. He says that he thinks that 10-12% is the right growth to look for, but it's partly because he's retired now and wants to preserve his capital. However, he says that companies that grow too much are riskier in the long term that those who grow by 10-12%. 

I don't disagree with him (he's 62 years old now) but I think that a younger investor should be a little more aggressive. In my opinion, with 10-12% per year, you will get something good, but not exceptional. The key is to mix some high growth companies with medium growth companies. And to exclude any company with an annual growth under 10% (realized and expected).  The PE should be considered only on the angle that a very expensive PE (let's say over 50) should be avoided except on very rare occasions. Other than that, with a PE of 15, you'll usually get an average company because it's the average PE of the market. If you're willing to pay a PE of 30, just make sure that this company is twice better than the average company (and that the PE has always been expensive and the results have always been growing in a solid and steady way). If it's the case, paying 30 times earnings may be the right price to pay. 

lundi 16 novembre 2020

Ce que les meilleurs achètent

I think I've never written about that, but I'm fascinated about the Bill and Melinda Gates fundation. There's rarely some action with the holdings of that fund because those who manage it seem to stick with their choices over time. 

And that's something I admire. Because a great company usually remains great over time. Sometimes, they become OK or average but they rarely become mediocre and it looks they've understand that, at Gates Fundation. In that specific case, two stocks represent 51% of the fund: Berkshire Hathaway (40%) and Waste Management (11%). You add Canadian National, Caterpillar and Walmart and you've got 75% of the fund. These stocks are not spectacular, but they've all done well over the last 5 years. Once you're rich, you buy 7-8 of these no-brainer stocks and you remain rich and you'll surely get a little richer every year.  Why looking elsewhere? You're already rich and you take virtually no risks. 

But if you want to become rich, following Gates Fundation is probably not the shortest path. For that, you will probably follow Pat Dorsey. He's much more aggressive because he invests a lot of money in stocks that aren't profitable yet but that are growing their sales at an impressive rate. I'm not that comfortable with that approach, but it seems to work for him. 

It looks like, after all, what most people seek is nothing else than a speed that suits them to achieve their goals. And, frankly, it seems that I make my investment decisions based on a speed that suits me. And on some kind of virtue that is probably not always adequate. 

The fucking problem with that market is that it doesn't reward traditional virtue. You'll be rewarded for your patience in the long run, but you may very well be fucking much more rewarded if you're impatient. 

In that regard, "Ce que les meilleurs achètent" is just an exercice of curiosity, because  most of them buy stocks which are not interesting. And they buy and sell stuff in a random way. You try to understand what they do, but there's nothing to understand because they're almost all drug additcs. 

Buffett bought about 5.5B$ of three pharma stocks (Merck, AbbVie, Bristol-Myers). It seems a lot but it's about 2,5% of his portfolio, so please, remain calm. He also sold 46% of his Wells Fargo stake which should never have been bought in the first place. And 48% of his total portfolio is represented by Apple only. 

Akre added 10% to his Roper position. Good stock, but it doesn't grow that much. I don't understand what's so interesting with that stock.

Pat Dorsey added 30% to his Wix position (total position = 16% of his fund). He initiated a 6,74% position in Ebay. Wix is one of those stocks with which I'm not too comfortable but it will probably double in the next 3 months or so. I'm saying random shit here but this stock will surely outperform most of my portfolio. And I still won't buy it, because of my virtues.

Giverny Capital reduced their Berkshire stake by 20%. They also increased a shitload of other positions but very small positions (0,2% positions or shit like that). 

vendredi 13 novembre 2020

Using the money they lend you for almost nothing

I believe that disciplin and strategy are as important as stock picking.  

That post is for those who own a house and have some flexibility to increase their mortgage. I know, I've written about that before, but this time, my example is more precise. To me, that strategy can have the same effect as invest money on a super great stock. 

For instance, a mortgage increase of 100 000$ at a 5 years rate of 1,89% with a term of 10 years implies that you pay 10 000$ of interests (which is very low). There's virtually no use of paying down your debt with such a low rate. For instance, if you reduce your mortgage by 5000$, you'll save only 500-600$ of interests on  a 10 years time frame. 

What's the use of paying down debt under these circumstances?

With such low interest rates, a person who knows how to manage money should take some debt and invest on the market. 

If you own a house and you can borrow more money on your mortgage without having to finish paying your house at 70 or 80, this is for you. Why not add 100 000$ to your mortgage and invest that money?

100 000$ invested on a fund that reproduces the TSX should return about 8% on the long term.

100 000$ borrowed implies that you have to pay about 10 000$ of interests during 10 years.

These 100 000$ invested on a fund that reproduces the performance of the TSX should become about 215 000$ after 10 years. Substract the 10 000$ of interests and you'll double your money without a lot of risk. Isn't it crazy? 

I strongly recommend to anybody that lives a frugal life and is not too much indebted to do that. You do that at 25 or 30 and you'll be richer than all your high school friends and even your parents when you'll be 40. Later, when you'll be 60, you'll be able to buy a mustang and fuck 20 years old girls. 

Think about the future!

jeudi 12 novembre 2020

About the impact of the vaccine on the market

This week, with the news of a vaccine against COVID, the market was very excited. Many brick and mortar companies were up like if it was trendy to go to a shop and buy stuff. 

Tourism related stocks like Booking Holdings (BKNG) and Marriott (MAR) were also up a lot, just because that potential vaccine would heal the world. 

And, at the opposite, many tech names were down a lot, like if the pandemic was finally over and these tools would be less useful in the future. 

I'm bad to prophetize about the future, but I'm almost sure that work from home will survive in some industries. And I also think that these 8 months of pandemic (which will probably become a 12 months pandemic) will be a trauma for a lot of people. Some won't travel for many years. Some others will just shop for what's essential. Will everybody go back to shops like before? Surely not everybody. Pandemic or no pandemic, shopping online is always practical. 

Also, with all that toxic stuff we put on our hands before entering any shop, I'm pretty sure that a lot of people will get hand cancer and will be amputed of their hands. Nobody talks about that, but to me, it's the main threat of all that pandemic.  

Best case scenario, most of canadians and americans will receive the vaccine during the spring, which is about 4-5 months from now. Will everything be like before the pandemic after 12 months of lockdown? I'm sure not. 

In Quebec, the government is currently thinking about closing schools once again, like it was the case during last spring. I don't think that things will look better in the short term. And in the USA, things are going way worse than in Canada. 

In that regard, I think that:

A- Tourism won't recover before at least 2 years (optimistic scenario);

B- Tech companies related to commerce or work from home will continue to do well after the pandemic;

C- Traditional stores will recover as soon as there's a vaccine but they won't do as well as before the pandemic;

D- Watch out for global debt (governements and businesses). A reflexion about that topic would be useful because I believe that this new reality will result in some opportunities for investors (please, feel free to suggest some opportunities because I don't see any at this moment). 

lundi 9 novembre 2020

Big emotions with big pharmas

Big pharmas are tough stocks to understand. One day, they're up a lot, the next day, they may be down like  if the company's going bankrupt. But no, the company won't go bankrupt. It's only some patent question or some good or bad news about a potential new drug. 

For instance, let's take a look at Biogen (BIIB). Last week, the stock was up 46% on a single day (from 246$ to 360$) on optimistic news about some Alzheimer treatment. Today, the stock is down 30% because the drug may not be that effective. It's not the first time I've seen that, for a pharma stock. It's a frequent thing. 

Today, Pfizer (PFE) announces a vaccine that would be effective by 90%. So, when the market opened, the stock was up 8%. It's not amazing but it's a good performance for such a giga cap (220B$ market cap). However, over the last 5 years, PFE is up by only 20% (including today's performance which helped a lot). And 20 years ago, the stock was more expensive than today. 

Of course, there are plenty of exceptions to these two examples. But I've had my share of pharma stocks in the past and I think that this industry is a bit too hard. And while pharmas are way easier than financials to understand and analyze, I'm not sure that, on the ethical level, they're much better. 

Maybe that Pfizer will do well with their vaccine. Actually, I think chances are high that Pfizer will go up substantially from here, because their announcment about a 90% effectivness sets the bar high and the company will be badly punished if the bar that they set themselves is not reached. In other words, it would be very stupid for them to prepare their own fall. But, who knows, the stock market is full of bad companies and stupid managers. 

mercredi 4 novembre 2020

Nobody gives a fuck

I thought that the american election would have a lot of impact on the market.

Many people on the media said that this election was the most important for the future of USA.  

Well, on the day following the election, we still don't know if Trump or Biden is elected president. Given the fact that the S&P is up 2,3% today, I would dare to say that the market doesn't give a fuck about a democrat or republican president. The market doesn't give a fuck if there's an actual president, may he be blue or red. 

It's a formative experience because I would never have thought that such optimism would come out of ambiguity. So, for all those stupid people who sold 25 or 50% of their holdings prior to the election, remind that day and slap yourself on the face until you bleed. You deserve it. 

lundi 2 novembre 2020

A few well known names that nobody talks about these days

 While the market is still expensive, there's a few very well known names which are available at a fair price and I would even dare to say that are a little cheap.

Couche-Tard (forward PE: 16) is probably my favorite stock of these three. About 40 years after it's beginning, Couche-Tard still knows, probably more than ever, how to make cash. And even if electric cars are coming, the vast majority of cars will remain powered by fuel for a lot of years. That company is incredibly well managed and they do wonders with margins that are so small that most of us would do bankrupt. There's a very short list of stocks that we should just buy and let go and Couche-Tard is one of them. 

Dollarama (forward PE:20) Even if I hate China, Dollar stores will continue to make a lot of money selling their cancerigen stuff made in China to canadians. That company makes a lot of money. It's ROE is astronomical, debt level is OK, business operates in a free-market, in a sector where a big scandal has little chances to happen. One of the best, if not the best, in retail in Canada. 

CGI (forward PE: 15 ) is probably my least favorite of these three stocks, but still a very good company that reduced a lot is debt during the last years and is now in a very good position for a big acquisition. I feel it coming. But I've felt it coming for at least 5 years. My prophet skills don't seem to be very helpful. But anyway, even without a big acquisition, that stock will do at least OK. 

I don't see any big risk of buying any of these three names now. They're all solid and they're all not pricey at all. Plus, they all got a good or great track record, which is one of the most important things to consider.

dimanche 1 novembre 2020

Two new stocks: CDNS and FICO

 Quebec City is a beautiful place. It's surely part of the Top 3 most beautiful cities in Canada. 

The problem is that some of the worst tragedies in Canada have happened here in the last few years. In 2017, it was Alexandre Bissonnette who shot a lot of muslims. Yesterday, it was a 24 years old guy from Montreal that came to Quebec City to randomly kill two people and hurt about 5 people more with a sword during the Halloween night. Imagine that: the guy used a japanese sword to open the chest of a 61 years old woman then he sliced her throat without even knowing her. 

That's completely crazy. You must be pretty fucked up to use a sword to almost decapitate your victims. It requires a lot of determination to do that. Much more than to just shoot randomly with a gun without seeing your victim and feeling her guts with your weapon. 


Last week was a very red week. Red like a sword full of blood. All stocks went down a lot. And while many people seem to think that it's time to buy, let's remind that the stock market is more or less at the same level than it was at the beginning of the year (when the pandemic didn't exist) and that a lot of stocks related to tourism are still sold at a PE of 20-25 (Marriott, for instance, has a forward PE of 28). 

But, I think that we should stay ready for the right moment to buy which may come soon. Here's two names I've discovered when I screened the market yesterday: Cadence Design Systems (CDNS) and Fair Isaac Corporation (FICO).

Cadence Design Systems, Inc. provides software, hardware, services, and reusable integrated circuit (IC) design blocks worldwide. The company offers functional verification services, including emulation and prototyping hardware. 

Fair Isaac Corporation develops analytic, software, and data management products and services that enable businesses to automate, enhance, and connect decisions

Both are expensive but great stocks. Not too expensive though. They have qualities which qualify them as high quality stocks, which allows them to be expensive. That's how it works. Here's some numbers:


Stock performance in 2020: 67%

Stock performance over the last 5 years: 391%

Fwd PE: 38

Debt level: very low

Net profit margin: 28%

Average ROE: 30

Annual EPS growth last 5 years: 19%

estimated EPS growth next 5 years: 15%

Predictability: 95%


Stock performance in 2020: 29%

Stock performance over the last 5 years: 322%

Fwd PE: 39

Debt level: medium

Net profit margin: 18%

Average ROE: 60

Annual EPS growth last 5 years: 31%

estimated EPS growth next 5 years: 16%

Predictability: 85%

I like both stocks. I'll probably end up buying both if the market drops enough. And I'll perhaps buy them even if the market doesn't drop anymore. That paragraph has no value, finally.