My portfolio for 2021

It's been another fucked up year. When we thought it was about to stop and we were invincible because of our vaccines, there's a new variant that goes through every protection, just like a fucking X-RAY that goes through concrete. I tell you, lock the doors and put towels at the bottom of every door and window. No oxygen will enter and you may suffocate, but at least, you won't get COVID. In other words, chose the way you want to die.

So, as I lay on the couch with my body full of COVID, I will do like my beautiful friend Jason Del Vicario did on Twitter: I will disclaim my full portfolio as of december 31th 2021. So, all of you, insecure investors, feel free to copy everything if you doubt about every stock you own. 

Penetrator's portfolio on december 31st 2021:

Constellation Software: 12,1%

Alphabet (Google): 11,6%

Meta (Facebook): 10,6%

Microsoft: 8,3%

Mastercard: 7,2%

Keysight Technologies: 6,9%

Amazon: 5,8%

Epam Systems: 5,4%

Copart: 5,1%

Adobe: 5%

Paypal: 4,3%

Five Below: 3,7%

Visa: 3,2%

Lithia Motors: 2,6%

Edwards Lifesciences: 2,2%

InMode: 1,8%

Pinterest: 1,6%

AliBaba: 1,6%

Cash: 1,1%

Here' a little flashback. On may 31st, I wrote:

"Penetrator Portfolio Performance YTD: 6%

S&P Performance YTD:  14%

It's almost certain that my portfolio will be beaten by the S&P this year. I don't plan on changing my strategy to help my portfolio. I just accept, halfway through the year, that an index fund would beat me for the whole year. 

Yep, beaten by something without a brain".

It looks like the market is like a baseball game. All can change with a late home run or some other crap. Because even if I was way behind the market halfway through the year, god knows how I managed to come back. For the whole year, the S&P did 25,8% (24,6% + 1,2% dividend) while my portfolio did 26,5%. It's a tiny 0,7% plus value, but I managed to come back from far far away.  

I just don't know what happened. But I accept the worship that anybody would give me. I probably deserve it.

Happy new year!

I caught COVID!

I just come back from Nova Scotia. It was nice but very quiet. The streets were empty, the shops were almost empty, the hotels were deserted...

And I managed to catch COVID there anyway. Isn't it funny? 

I don't know exactly where I got it but I strongly suspect a restaurant where I ate. Because, the day after my dinner, I got a call from the same restaurant telling me that my reservation for the evening was cancelled because of COVID in the restaurant (I made a reservation two following days at the same restaurant).

So, I probably caught COVID in a quiet province, in a deserted city, in a deserted restaurant with two shots of moderna in my body. 

I'm not an exception. All around me, tons of people get the omicron variant now. I guess that most of you will get it too in the coming weeks. 

What will it be in Brasil, India, Germany, United States with more more population density than in Canada?

So far, it's OK for me. I got a big headache the first day and I was really tired. Since then, I'm much better but I've lost taste and smell. However, I tried to bite an onion today and surprise, it was very strong in my mouth. I had to spit the onion. It was a disappointment because I thought that, for once in my life, I could have eat an onion just like it was an apple. 

I think that we'll have to think about that for 2022: Almost everybody will get COVID. Probably a mild version of it. But a version anyway. Will it be mild for almost everybody and we'll finally get a kind of global immunization? Or will it be hard on every country? I don't know. 

 The world is so unpredictable. 

 

Your picks for 2022

Dear droogies, it may be my last post of 2021 due to holidays (which I will spend outside of my province). 

So, I believe it may be the perfect moment to ask you what are, in your opinion, the 5 best stocks to own in 2021.  

That kind of post usually brings a few new good ideas. So, I hope there will be a lot of comments. 

Here's my top 5:

Constellation Software (CSU.TO)

Alphabet / Google (GOOG)

Meta Platforms / Facebook (FB)

Microsoft (MSFT)

EPAM systems (EPAM)

High-flyers becoming low-flyers

You're a fan of super exciting stocks? You thought that stocks that went up 50% for the first part of the year would never come down?

You didn't see inflation coming, you didn't think that COVID would never stop and you thought that a PE of 100 would be sustainable forever? I can't blame you, everybody does that kind of mistakes. Everybody buys stocks with a PE of 100. 

Here's the performance of a few high-flyer stocks over the last 3 months: 

Sea Limited: -37%

Mercadolibre: -37%

Block (formerly Square): -35%

Paypal: -33%

Wix: -32%

Upwork: -32%

Roku: -27%

The problem with these stocks is that their valuation either didn't make sense or it was very high. When conditions are less exciting (inflation, higher rates, slow economy, etc), these stocks are usually hurt the most.

You've had it in the ass. I just hope that you were intelligent enough to own only small positions of these stocks. Otherwise, you've had it very deep in the ass. 

Internal knowledge

Almost any time I talk with someone about the stock market in real life, I'm disappointed about their approach. 

For instance, last week, a colleague told me that almost all his money (retirement money and everything else) was invested in different mining stocks. He also told me that, since inception, he had an annual performance of 5%.

First of all, it means that this guy doesn't read about stock market. Any serious investor has read multiple times that natural resources are not a good way to make money.

Second, if he had read about the stock market, he wouldn't be satisfied with a 5% annual performance. What's the use of investing when you're beaten by the S&P (8-10% every year). 

Third, what about diversification? How could it be a good idea to put all your money in only one sector? And one of the worst sectors possible.

How can you become a good investor if you don't read about investing and thus, learn how to avoid things that make you lose your time and money? It's a big mistake to think that your internal knowledge is sufficient to succed. There's a vast amount of wisdom that's available on the Internet. All your have to do is to triangulate the information by trying to validate and invalidate certains conceptions. 

How can you become a good astronaut if you don't read about space? 

How can you become a good doctor when you can't tell a kidney from a lung? 

How can you become good at anything if you don't put a lot of time and effort in it? It's true for basketball players, musicians, carpenters, lawyers and investors. And for anybody else. 

Semler Scientific (SMLR)

A guy commented my latest post, giving me the advice to take a look at Semler Scientific (SMLR).

Semler Scientific, Inc. is a company that provides technology solutions to improve the clinical effectiveness and efficiency of healthcare providers. Semler Scientific's mission is to develop, manufacture and market innovative products that assist its customers in evaluating and treating chronic diseases (that's from their website).

I took a quick look at the business and numbers were amazing!

2022 PE: 34 (it's expensive, but plenty of stocks are more expensive than that without the following numbers)

Profit margin: 39% (very rare to see such profit margin)

ROE: 64 (very high ROE)

Debt level: Very low

Revenues: Almost multiplied by 6 between 2016 and 2020 (exceptional)

Free cash flows: growing every year over the last 5 years (very rare)

EPS were negative until 2018, but since then, the company has been very profitable.

Now, let's do a collective work: Help me to find negative points about that stock. First, the track record of profitability is short. But apart from that, what can you see?

Who are you?

 I'd like to know more about you.

Please, use the comment section to write:

1- Where you're from;

2- Your sex;

3- Your age;

4- How long you have been reading my blog;

5- Anything else you want to write. 

Thank you!

Ali Baba and other popular chinese stocks (part II)

Two months ago, I wrote a post about chinese stocks, saying that they were risky and that I thought that we should add 20 to the PE before investing in any of these. For instance, if the PE is 15, I'd add 20, making it a company with a PE of 35. If it's still interesting at that price, I may invest in it... But just a little percentage of my portfolio. 

Recent events proved I was right, because many chinese stocks dropped like crazy in the recent days. Mostly because US regulators said that chinese stocks should be audited by american firms to be listed on the american markets. And China doesn't want that. So, there's a risk of delisting. 

Yeah, I was right, but not because I'm a rocket scientist. Just because I repeat what I've read numerous times and because I don't trust China at all about transparence and honesty. 

So, after the recent drop and as of december 5th 2021, we can buy Ali Express (BABA) for about 15 times next year's earnings. That's very cheap given the fact that this company had an average annual growth of 30% over the last 5 years. Of course, that's China and I'm not sure that we can trust the numbers of any company based in that country. But, to me, that's one of the safest names in China because it's a huge company and many superinvestors have invested in Ali Express. Also, it's a chinese company that we can see operate all around us. A chinese company operating only in mainland China would be tougher to understand. 

I wrote many times that superinvestors weren't that super. I still believe that. But I recently bought some shares, thinking that it could be interesting to put a little less than 2% of my portfolio in BABA. I would never put much more money than that on a chinese company. But I don't think that BABA will be delisted from the S&P500. 

That would have way too much impact on the american economy. I think China and USA will find a common ground. Both economies can't live without each other even if they hate each other. 

Portfolio review (december 1st 2021)

Penetrator portfolio:

Number of stocks : 18

Average Forward PE : 34

Average ROE : 35

Average Beta : 1,07

Dividend of the portfolio: 0.1% 

Top 5 positions: 48% of the portfolio

Performance YTD : 20,5%

S&P performance YTD: 13,4%

Not so long ago, I was sure that I wouldn't beat the S&P in 2021. It now looks that I will beat it without any problem. That shows how unpredictable the market is. And that also shows how the exchange rate may help you a bit if you own a lot of american stocks. 

I currently own only one canadian stock. I never held only one canadian stock before. And frankly, I don't think that I will buy another canadian stock soon. 

The false tragedy

Two weeks ago, after an appointment with the optometrist, I wrote with a broken heart that my daughter could become blind. That optometrist bitch told me that one of the optic nerves of my daughter had a bleeding and both optic nerves had something unusual. 

Back home, after a look on the Internet, I saw that these optic nerves couldn’t be operated and a damage could result in blindness. Then, I remembered the worried face of the optometrist and it made me worry that the worst case scenario could apply to my daughter.

I fell in the worst depression. I wanted to kill myself. Yeah. I know we’re not supposed to write or express that, because suicide is some kind of taboo. I never really wanted to die before, but I’ve realized that a very bad thing happening to one of my kids could make me want to hang myself. So, over the last two weeks, day after day, I said to myself that I would rather die than see my daughter become blind.

Yesterday, I had an appointment to the ophalmologist with my daughter. The doctor saw some things deserving a follow-up but nothing worrying. She didn’t see any bleeding. And she didn’t even see any bleeding on the pictures taken by the optometrist. False alarm. 

Then, I took a big breath. And I felt a bit stupid for wasting 2 weeks of my life, wanting to die, day after day. I could have made many joyful things and smile and dance. Fucking optometrist. 

I feel a bit bad for those people writing in the comment section, showing empathy. Well, let’s move on. Another problem will surely happen sooner or later, but for now, it’s OK.

Omicron

The new south african variant is out there. Omicron is there. 

It looks like there's another panic coming. I never had the chance so far to use a lot of my margin. But that may be the case soon, if that variant spreads. 

I'm so excited about the possibility of using a lot of debt to invest. 

Despair and anger

If someone hurts your kid, you're tempted to hurt and maybe kill that person. Every parent feels like that.

When it's god that hurts your kid, you're tempted to kill god. However, god doesn't exist, so who can you kill? Life? Earth? Nature? 

Yesterday, I learned that my 5 years old daughter has some serious issues with both her optical nerves. An operation on these nerves is impossible from what I've seen on the Internet. Which means that my daughter may lose her sight.

I've spent a good part of the last night being in a deep state of despair and anger. I don't have any control on that situation.  I can't do anything about it. It's not a fucking exam for which study will allow me to get through. And that situation is hurting a poor little kid that already has other problems. 

If something so serious happens to my daughter, I think that I will change forever. I'll turn bad. I'll go crazy. I'll eat junk food and get drunk. I don't know, what will happen, but I'm sure that it will have a very bad impact on me. 

I hate life. How can I avenge my daughter? 

Now that I have much more money...

When I started this blog (june 2014), I was funnier, more naive and I had much less money. 

Now, I have enough money to retire and live a relatively comfortable life. I'd be able to pay the rent, the grocery and for some travels and hobbies.But I won't because I haven't reach the level where I would be SUPER comfortable. 

What changes with money? Nothing. Same problems. More health problems actually because, usually, when you have more money, you're older. And when you're older, you start to have some health issues. I have some. Nothing super serious, but enough problems to realize that the road ahead will be bumpier than the road behind. However, like everybody says, money brings a lot of freedom. I don't have to go to Old Orchard for my holidays because of a limited budget. I could go anywhere around the world without any impact on my financial future. I could buy a Tesla, but I won't because I've never bought that kind of luxury and I probably never will. 

I have no big restriction. Let's put it this way: I could live any reasonable life I would like to live. The fact that I don't have a big house nor a big car helps a lot. 

I think that I will have enough money the day where a cruise to Antarctica from Ushuai (15 000 to 20 000$) will be something that I could buy anytime without any impact on my life. I could buy that today, but I'd have to make choices. When that cruise will have no effect on any other of my choices of expenses, that will be the day where I have plenty of money. And that will also be the day where retirement will be a short-term option. 

When a stock is too expensive

 It's really hard to tell when a stock is too expensive because some stocks are expensive at a PE of 15, some others at a PE of 25 and some others at a PE of 40. 

I'm willing to pay a high price for a stock that is way above competition and that grows a lot. However, there is a limit to my will to pay a lot.

I think that my limit is something like a PE of 50 and above. 

There are some great companies that have done very well and will probably continue to do well for a long time, but their valuation is in another dimension. Just like they don't obey to the same laws of physics as other stocks.

Among them, there is Tesla, Square, The Trade Desk, IDEXX laboratories. There are also the "Pat Dorsey stocks" which are some negative earnings stocks where revenues grow a lot and should reach a breaking point soon (that way, the company will become profitable). Among these stocks, you'll find Upwork, Smartsheet and Wix, for instance. 

If you take a look at all the stocks I've written above, you'll see that they've all done pretty well over the past. But Constellation Software has done very well too at a much lower PE than many of these stocks. 

EPAM systems (EPAM): Expensive but that's the price you have to pay for a stock that delivers

Every investor with a few years of experience develops his own zone of comfort or niche like we say, us, specialists in the field. Je réclame le droit de m'auto-proclamer sommité, stie. 

Some people stick to the idea that the normal PE is 15 and they shouldn't buy anything that's more expensive than that. Some people don't even know what PE is and buy anything their guts tell them to buy. 

Me, I like expensive stocks, but not too expensive. I'll use once again my analogy about cars and say that I like to buy Mercedes. Mercedes cars are expensive, but they're high quality cars and everybody knows that. I don't buy Ferraris because they're cars of exception. I can't tell if a Ferrari should be sold for 500 000$ or 1 million$. Tesla is good example of Ferrari. You get it? 

My niche is mostly stocks with a PE between 30 and 40. That's expensive, but I buy stocks that are at least five times better than the average stock. Which maybe means that the price I pay is cheap for such quality. Can a specialist about logics can confirm my theory? 

A good example is EPAM systems. I bought 30 shares in march 2020 (168 USD each), just as the market was going down like crazy because of COVID.

Today, these shares hit 700 USD. Just a little more than 18 months later, my shares more than quadrupled. 

Everything was obvious in march 2020 with that stock: good ROE, good margins, great growth, no debt, great track record. The only burden was the price to pay. It was expensive. But guess what? It's still expensive. 

That's why I like these 30-40 PE stocks with high growth. Usually, they deliver. Sometimes, they don't meet expectations and they go down like crazy. But among a portfolio of 20 stocks, when you own 10 of these expensive stocks, most of them do good. The condition is for you to analyze these stocks versus hundred of other stocks to be sure that they're really special and unique. 

Pinterest (PINS)

I never cared about Pinterest. 

Some girls like that website because it gives them ideas to spend their husband's revenue for some home improvement. 

I've spent maybe 20 minutes of my life on that website before and never thought that I had to go back there. 

But I've been a Paypal shareholder since march 2020 and recently, I heard some rumours about Paypal buying Pinterest. On that news, Paypal went down a lot and I understand why because, frankly, what's the justification of that acquisition? How come a payment business would buy a decorative ideas business?

However, I recently took a look at Pinterest and I was surprised by how good things were going with that business. The company wasn't profitable until very recently, but even when it wasn't profitable, revenues were growing a lot, year after year. 

2017 revenues: 473M$

2018 revenus: 756M$

2019 revenues: 1.1B$

2020 revenues: 1.7B$

2021 estimates: 2,6B$

2022 estimates: 3,4B$

EPS 2021 (estimates): 1,06$

EPS 2022 (estimates): 1,39$

FWD PE: 33

I even bought some shares. Not a big position, but enough to keep an eye on it and see how things turn. I think that some other companies might be interested by Pinterest if Paypal doesn't buy it. And even if there's no buyer, Pinterest offers very solid growth.

Actually, the only thing that bothers me a big with that company is the high dilution. But revenues grow a lot. So, if results are impressive, dilution bothers me much less. 

Facebook valuation getting lower and lower

Usually, there's about 16.5 million Facebook shares changing hands every day.

Today, more than 65 million of Facebook shares changed hands. And the stock was down 4%.

Why? Because of various things, but mostly because of concerns related to Apple privacy changes. But even if privacy changes seem like a threat, Facebook EPS grew by 19% this last quarter. A growth of 19% for a 900 billion dollars company. 

While I don't think that Facebook is more virtuous than any other business, I believe that it remains an exceptional business with or without Apple privacy changes.

Because there's about 3 billion people using that social media every month. Just that information is like an uppercut. Do you imagine how much information they've collected since 2004? Even if Apple would put it's privacy at it's maximum level, do you realize how much Facebook knows us and knows how to approach consumers for any matter? Plus, they have so much money on hand (about 60 billion dollars) and almost no debt. They could buy any competitor. 

I'm not able to fully understand the impact of Apple privacy changes on Facebook's future earnings. However, I know that Facebook's valuation is pretty low (about 18 times next year's earning if we deduce cash on hand). Yes, 18 times next year's earnings for a company that has more data about you and I than any other company in the world. Plus, a company full of cash, without debt and with 36% profit margins. And with a ROE of 32. 

I defy anybody to find a stock with such margins, such ROE, such penetration all over the world and with such a valuation. 

Don't talk to me about dividends

It's not my first post about dividends, but I feel like it's my duty to be one of the few people who writes publicly against the importance given to dividends.

Everytime someone writes that he received a certain amount of dividend over a specific period of time, they don't tell us how the stock performed over the same period of time. And nobody becomes rich because of dividends. People become rich because of capital appreciation. 

If you like a business because of it's dividend, it's exactly like liking a business because it gives you some money every quarter. But does the business performs well? The dividend doesn't tells you nothing about that. 

Actually, a high dividend shows that a business cares more about it's shareholders than about itself. 

Yes, that's great to receive money. But what about the company? Does it grow? Will it be much bigger 10 years from now or will it stay the same size? If it stays the same size because it gives all it's money to you and other shareholders, you won't get much richer. You'll just have a sideline revenue that allows you to pay for some luxuries like a few lobsters every quarter. You won't buy a Ferrari with your dividends except if you own 50 000 shares of your favorite canadian bank.

For fuck's sake, chose your stocks among the stocks that have the best growth perspectives, the best profit margins, the best ROE or if it's a monopoly or oligopoly. Don't buy a business because it gives you 200$ every quarter. 

I never talk about dividends with Vicario and that guy, besides being highly desirable, knows what's important to consider. 

Be Smart Rich is desirable too but he doesn't like when I show him my appreciation.

Inmode ltd (INMD)

My friend Vicario recently told me about Inmode ltd (INMD), a name I never heard about before.

That company offers minimally-invasive products and procedures, such as liposuction and ablative skin rejuvenation treatments. In other words, they help woman who feel old and ugly to feel younger and more desirable. 

With Instagram, Facebook and all these things that put a lot of emphasis on beautiful girls, it's sure that this company has a bright future. Even girls love to watch beautiful girls (probably to be jealous). 

Anyway, the day Vicario told me about INMD, the stock was about 10-12% up on good estimates for the year to come. 

I took a look at the stock and I was amazed:

Profit margin: 44% (that's almost the margins of Visa and Mastercard!)

ROE: 48

Debt level: Very low

Free cash flows: Super great (they were almost multiplied by 6 between 2017 and 2020!)

EPS 2017: 0,14$ 

EPS 2020: 0,89$

Of course, such numbers come with a high price. The forward PE is about 38. 

But that's a fucking lamborghini. It seems to me like a fair price to pay for a lamborghini. 

Ali Baba and other popular chinese stocks

I've written a bit about chinese stocks in the past and I still think the same about them: they are way riskier than the average nort american stock. In other words, I'd rather pay 40 times the earnings for a high growth american stock than 20 times the earnings for a high growth chinese stock. Why adding the political risk to the financial risk that we already have to cope with? 

But a lot of investors seem to disagree with me. 

For instance, Ali Baba (BABA) is a very popular stock for a lot of superinvestors. Yes, even if Jack Ma (the CEO) disappeared for a while in 2021, a lot of people still believe in this company. On Dataroma, there's 17 superinvestors who own Ali Baba. Some of them have a very large stake of their portfolio on that stock. Here's a few of them:

Greg Alexander: 21%

Mohnish Pabrai: 21%

Charlie Munger: 20%

I don't really know or respect the first two investors. However, I know a bit about Charlie Munger, mostly because he's the close friend and associate of Warren Buffett and because he's very very old and has a very weird face. But I don't think that I like his investing style either (actually, 95% of his portfolio is made of Wells Fargo, Bank of America and Ali Baba... Who would put 95% of their money on these 3 stocks?).  

As a bargain as BABA may look these days, I think that it's not a smart move to put 20% of a portfolio on any stock. And it's worse when it's a chinese stock. 

Here's the performance of some very well known chinese stocks over the last year:

Ali Baba: -24%

Tencent: -13%

Baidu: -11%

Naspers (not really chinese, but south african tighlty linked to China via a big stake in Tencent): -15%

Here's my advice: add 20 to the current PE of a chinese stock that appeals to you. That's the risk factor that you should add to the current price. And then, compare it with any other north american stock. If you still want to invest in the specific chinese stock, then invest in it like a high PE stock. Which means that you shouldn't put 20% of your portfolio on a stock with a PE of 40.

China is a not a democracy. China doesn't allow Google and Facebook on it's territory. China asks for tourists to tell to the authorities where they stay every day. COVID is from China and China is responsible for that fucking pandemic. China is not a good country. 

You still want to invest money in that country? OK, but take all these risks into consideration. 

GDI integrated facility services (GDI.TO)

Medici is one of my favorite investment firms. Most of the times, we like the same companies. Also, they're not into bullshit marketing like that sexy girl who says she lost her job in 2011 and then turned 500 000$ into 1.5 million dollars while dancing like she's in a fucking club. How I hate these fucking pretty girls who know how weak are men. 

Anyway, most of the times I agree with Medici, but at first I didn't agree with them about GDI. That janitor company didn't have appealing numbers in the past, in my opinion. Also, I didn't see the future of such a company in a COVID environment where a lot of people work from home. Who needs to clean office spaces when they're empty? That company needs germs and not shit spots in the toilet to be able to survive. 

Well, given the recent results of the company, it looks like offices owners want to clean more than before. I'm not sure if I understand why it happens, but it happens. 

Apart from that, it's not a very sexy industry and I don't see how competition could be a threat for such a business. Actually, GDI is an integrator that buys competitors. So, they are the Couche-Tard of shit spots. 

I still have a doubt about the new work society after COVID. But apart from that, I think that it's a great company which is not too expensive that will remain relevant as long as there will be humans in shopping centers and work offices.  

Here's a few numbers:

FWD PE:  23

ROE: 18

Long term debt: Very reasonable

EPS 2015: 0,12$

EPS 2020: 2,12$

Between june 2020 and june 2021, revenues grew while EPS decreased a bit. However, it's still great given the fact that we went through apocalypse during that time.

A name to remember.

All 10 provinces

Being a supercanadian who has visited at least one city in each of all 10 provinces, I suppose that I’ve reached a level of wisdom that few people have reached. And that wisdom must be shared.

I must repeat that the only province that I dislike is still New Brunswick. The other 9 provinces had something that appeals to me, some more than the others, of course.

First of all, I declare that, on the architectural and cultural level, eastern provinces are more interesting than western provinces. For instance, cities from Manitoba to British Columbia are usually less beautiful than cities in the east. There are exceptions of course, but Halifax or St-John’s easily beat Calgary or Regina. Actually, Halifax and St-John’s are probably two of the most beautiful cities in Canada and they have a spirit that is not present everywhere in the country of Glass Tiger.

I still have beautiful places to see in Canada. For instance, I’d love to visit Cape Breton Island, some national parks in Nunavut and Yukon, I’d like to see Victoria which appeals to me a lot, I’d like to see Fundy Bay which is probably the only interesting thing in New-Brunswick. I haven’t seen Edmonton but I don’t think I need to see it before I die even if we learned at school that West Edmonton Mall was such an incredible shopping mall with water slides. I guess that the little boy inside of me is dead. 

However, the problem with North America is that it’s just one big uniform culture with 350 million people who speak only English (or Spanish in some parts of the States) and shop at Walmart. The only cultural shock you’ll get is if you come to Quebec and never heard people speaking French before. But apart from that, people from Quebec are exactly the same as you: they shop at the same places and they eat the same things. The biggest difference is that they understand you when you talk in English and you don’t understand them because you only know one language. But it’s just a matter of language. Apart from that, most of us want abortion for our females and don’t want murderers to be killed on the electric chair. 

Also, It’s impossible to eat a pangolin or a bat in North America and that’s what makes us all the same.

I dream of a country with dozen of different languages, religions and political regimes.

I dream of something like the Balkans in 1913. 

Intuit (INTU): A great company

Intuit (INTU) is an excellent example of the kind of company that everybody should follow. I've never been a shareholder, but I've followed that company for years. And one day, I might buy shares. 

It's a very simple company: they produce tax softwares for individuals, companies and accountants. Plus, they own Credit Karma (on which you can see your credit score). And today, we learn that they buy Mailchimp (a kind of Shopify) for 12 billion dollars. It's a huge acquisition. 

Here's what's great with this company:

First of all, it operates in a boring industry where fad has absolutely no importance (contrary to clothes, to restaurants, to technology). Nobody talks about trends related to tax software. Then, it's a dominant company. It's not a monopoly, but it's a bit like Microsoft: it's the biggest in the industry. 

Everybody or so buys such a software every year. As the population grows, that company has more and more customers. 

Intuit has a very small debt. Their cash flows are growing, year after year, like very few companies can do (EPS growth is good, but it doesn't show everything while cash flow growth is more revealing of the greatness of a company). 

Plus, their profits margins are great (21%) and their ROE is 27. Very few companies have that kind of margins and ROE. 

To see how great it is, you have to analyze about 100 companies. Then, you'll see that Intuit is among the best 5%. 

All you have to decide is if 40 times next year's earnings is too expensive for you. 

The impact of a catastrophe on the stock market

Today, it's been exactly 20 years since september 11th, 2001. I won't tell where I was or what I was eating because nobody cares. 

However, I think that it's important to remember what happened to the stock market. Because, sooner or later, a similar event may happen. And the reaction of the market may also be similar.

Here's a chart about what happened between august 31th and december 31th (2001). 

On the chart, we can see the S&P and one of the biggest canadian companies (Royal Bank) and one of the biggest american companies (Microsoft).

First, the S&P was down about 10% right after the explosion of the towers. At the last day of the year, the market was up by about 26% (from september 11th to december 31th). The variation of Microsoft and Royal Bank is less impressive, which shows probably that blue chips are less affected by panics than small or medium caps. That's my personal hypothesis. I may be wrong.

Actually, we don't even have to think about 9/11 because COVID had much more impact on the market about one year and a half ago. 

Fact is that so far, there's not a single catastrophe that had a negative impact on the market in the long term. Of course, catastrophes may have a huge impact on certain sectors of the economy, but when you have a diversified portfolio or you invest on the S&P500, you always recover and, most of the times, the recovery is quick. 

Next step: The east

I'll complete my visit of Canada in a few days by visiting Halifax and St-John's (Newfoundland). These two cities are very attractive to me. Even though I've never been there, I expect that at least one of these two will be one of my favorite places in Canada. 

The only province I've never visited so far is Nova Scotia. So, by visiting Halifax, I'll be able to claim with a lot of pride and pretention that I've visited all 10 provinces. Is it an achievement? I don't know. Probably.

What will be my next step after that? I don't know. Everything depends on COVID. But probably that I'll wait to visit the three territories. COVID or not COVID, I'll need a real adventure soon. So, I'll probably chose among the countries where it's not too complicated to penetrate. Something like Mexico. 

Anyway, next trip won't happen before Christmas time. Maybe we'll all be dead because of Delta Variant by then. 

So, maybe making plans is a waste of time right now. I should enjoy my last weeks alive.

Seeking Alpha and Stockchase

Is it me or you now have to pay to see everything that's written on Stockchase? Actually, you can see a part of the information without paying, but you quickly come to an end of what's free. 

Maybe I'm many months late, because I don't really go on that site anymore. But it was a favorite of mine for many years. 

After Seeking Alpha (which now offers a very shitty service unless you pay), here's another website that wants your money against some general information. We're not talking about super useful information. We're talking mostly about opinions. 

There's probably a lot of alternatives offered to investors out there, so I believe that forcing people to pay to consult information/opinions on these websites will only make them less and less popular. That's what they deserve. Because nobody wants to pay for such general information. I would never pay to read the opinion of dozens of investors that I don't respect (on Stockchase, 90% of investors don't deserve any attention from us). 

Young investors will have to look elsewhere to copy opinions of so-called experts. The result will probably be the same because "experts" are bad everywhere. And whatever I'm saying, young investors just want to be convinced by somebody who looks sure about what he's saying. 

I repeat what I've once said: forget all that and buy stocks with high margins (over 20%) and high ROE (over 20%). Of course, don't pay too much for these two metrics (like a PE of 50 for instance) With both these metrics, you're better than at least 80% of investors. And you can afford to never visit Seeking Alpha and Stockchase again. 

Five Below (FIVE): incredible results

Five Below is a company that everybody should follow: it's the most promising cheap stuff  store in my opinion. And it's not new. It's been the most promising cheap stuff store over the last 5 years at least. 

Five Below's latest results: 

Net sales: up 52% compared to same quarter 2020

Net sales: up 55% compared to same quarter 2019

Comparable sales (2021): up 39% 

Comparable sales (2020): down 12% from the year before 

EPS last quarter: 1,15$

EPS comparable quarter 2020: 0,53$

EPS comparable quarter 2019: 0,51$

New stores open last quarter: 34

New stores planned to open in 2021: 170-175

Current number of stores: 1121

Even if the latest reults were great, the market wans't convinced because the stock dropped by about 14% yesterday. I don't understand that reaction. But there's many things I don't understand. 

Of course, 2020 has been a tough year for many businesses including Five Below. But if we compare the latest sales to sales two years before, an increase of 55% is amazing to me. And the EPS have more than doubled since 2019 and since 2020 too.

The debt level of FIVE is way higher than it was some years ago. However, excluding this item, Five Below has everything I'm looking for as an investor. Plus, we can currently pay about 34 times earnings for this exceptional company. Of course, it's not cheap, but many companies are growing much slower than that and are much more expensive. 

So, in a relative way, it's a great company to buy,. 

In my not-always-right opinion, of course. 

Portfolio review: august 31th, 2021

In 2010 and 2015, I filled an Excel document with financial objectives for the next 5 years. 

I learned that at University: you have to set some objectives in life, otherwise, you never really know where you're going and you can't validate if you're doing good or not. Also, objectives motivate you to take action.  

For instance, in 2015, I planned that, five years later (2020), my portfolio would reach an ambitious number. Today, less than one year after that objective of 2020, my portfolio worths almost twice my objective for 2020. I'm sure that this Excel file motivated me to put efforts in my portfolio. I didn't watch it often, but I had it in the back of my mind.  

My 20 years-old nephew is the exact opposite of that. He finished high school but became a drop-out afterwards. He had the spontaneous idea that getting some big tatoos on the leg and on his side would be a good idea. He even got his ears pierced and got a perm. Recently, he bought a 27 000$ car and planning to find a job to help him to pay for that car (instead of getting a job and having a car to help him to get to his job)... To me, it's impossible that he will do well later on a financial level. He's cruising in total fog. And he'll probably never read the Bernard Mooney book about investment that I gave him last year. 

If you want to get rich, you have to make some efforts, you also have to save money and don't start life with useless debts. Buying a 27 000$ car at 19 years old is one of the worst financial decision of your life. But I guess that some people have to make stupid decisions to learn. 

***************

Sell in may and go away. Fuck that expression. I knew it wasn't said by Socrat or Winston Churchill, but this year, the famous expression bites the dust like rarely before. 

Last time I wrote a portfolio review was on may 31st, and, at the time, my portfolio was up 6%. I was beaten by the S&P500.   

Three months later, my portfolio is up 27% since the beginning of 2021. I'd never thought it could be possible, but my portfolio has been up more than 20% in three months, without any major transaction. Exchange rate is a little more on my side than 3 months ago, but not that much (it helps because I'm more than 80% US). That's crazy. 

And what's even crazier is that my performance was worse than the S&P500 and is now 5% above the performance of the S&P500. Talk about a turn-around!

Here comes the usual numbers about my portfolio:

Number of stocks: 20

Average ROE: 31

Average FWD PE: 37

Average Beta: 1

As you can see, my portfolio is very expensive (FWD PE: 37). But I like every stock I own. Most of them grow rapidly and are very predictable. So, I don't see why I should sell them for a less performing stock. 

But, a FWD PE of 37 is not normal. Not normal at all. I have to think a bit more about that... No changes expected on the short run, but when the historical average is way behind, you have to think about it. 

 

Winnipeg: much better than everybody thinks it is

Winnipeg was not a mistake of creation. Actually, it’s been my favorite city of the prairies. Much better than Regina and more interesting than Saskatoon. 

I could even say that some parts of the city are more beautiful than Quebec City which is, as many people know, one of the most beautiful cities in Canada (surely in the top 3).

Anyway, I really liked Winnipeg. The architecture of Exchange District is very nice. Lots of publicities of the first half of the 20th century on many buildings. Also, in St-Boniface (the french area), you can talk in french with many people. You can also see that most business signs are written in french first, which is impressive given the fact that you’re 2000 km west of Ottawa and almost noboby speaks french in between these two cities.

Of course, nothing will change your life in Winnipeg and you won't see a breathtaking scenery. It’s possible to live an entire life without ever going there. But it’s an interesting place for a few days. I’d recommend anybody to visit that city for 2-3 days because there's something to see and something to do.  Actually, it’s the perfect size for a city. 

Not too big, not too small, an interesting cultural aspect (french speaking communities), nice architecture, good atmosphere. 

Yep, everybody will look at you with disdain if you tell them that you’re going to Winnipeg. But screw them. Most people just want to go to Florida or Mexico anyway. They have no curiosity for anything. 

But, they’re probably right to go to Mexico if their plane ticket is less expensive than a plane ticket to Winnipeg. Yeah, I have to change my mind. People are actually clever to pay 600$ to go to a warm place with beaches and girls in bikini instead of going to Winnipeg. 

Next step: Winnipeg

If it wasn't for COVID, my holidays would have been in Chile, in Egypt, Jordan or something like that. It would have been exotic and I would have had to communicate in a foreign language with people for whom women have less rights than dogs. 

But COVID made things complicated and I decided to stay in Canada and, by the end of the summer, having visited the few provinces that I hadn't visited yet. 

My next step is Winnipeg, by the end of the current week. Frankly, I don't know what I'm gonna do there. Saskatchewan inspired me a bit, but Manitoba doesn't inspire me at all. But it's one of my rare privileges after two Moderna doses: I can go to Manitoba without having to self isolate. So, I claim the privilege of being able to enter Manitoba without burdens. 

My expectations are basement-level. I can only have interesting surprises or getting what I expect to get (nothing).  

I spent a few minutes watching the map of Winnipeg today and I was so bored. That city is a mistake of creation. That's the most poetic I can be.  

But I hope I'm wrong. 

An ode to the road

I love to travel. 

Why?

I don't know. Maybe because it breaks routine. Maybe it's because I discover cities and places that only existed on a map for me before. Maybe it's because I come back a little bit different after each one of my trips. Actually, I believe that, for each travel, a little bit of myself stayed where I was and I came back with a little bit of the place I've been. Isn't it crazy to visit amazing places and meet special people that didn't exist the day before? 

I remember wondering a few times why it took me so long to see a specific place. Why I've spent half of my life ignoring something so amazing?   

It's a certitude for me: travels bring me something that nothing else brings to my life. 

Money allows me to travel many times a year. That's the reward of a solid portfolio. Actually, that's not my portfolio's money. That's my income money. Because I'm able to spend my income money how I want to. My portfolio doesn't really need any new money (even if I continue to add some money here and there). 

You have to find what you love as soon as possible and put a certain focus of your life on that topic. If it's free, good for you! But if it costs money, you'll thank your "past self" for helping you to be your "present self". 

Constellation Software reaches 2000$

One of the most beautiful things I've seen - thanks to the investment world - is Jason Del Vicario shirtless. I've seen him a few times like that and, holy macaroni, it was beautiful. I sometimes wake up at night, completely wet. That guy is the real thing. 

But on a purely capitalist level, the best thing I've seen - thanks to the investment world - is the performance of Constellation Software (CSU.TO). 

When I bought 65 shares of CSU in march 2012 for about 88$ a share, I didn't think that I'd keep my shares for 9 years (actually, I sold some of them, but I've always kept some). I didn't think either that these shares would be sold for more than 2000$ less than 10 years later. 

That's almost a 25 bagger for me. My best investment ever. 

CSU has always been expensive and still is. But, all high-quality stocks are always expensive (except for some short periods during a crisis or after disappointing results). In other words, if you don't have problems paying 40 times next year's earnings for Mastercard, you shouldn't have problems to pay slightly less for CSU. You want a lamborghini? You have to pay the price. 

Here's a few interesting numbers about CSU:

At the end of 2011, CSU's free cash flows were 130M US$

At the end of 2020, CSU's free cash flows were 1161M US$

That's about 9 times more, which is excellent. But the stock price was multiplied by 25 or so. Which means that the PE multiple increased a lot during the same period (the Forward PE went from 10 to 40). Which means that the market now recognize the excellence of CSU. That's how it works: the more you wait to be sure that a stock is good, the less risk you take but you let go some performance. 

I don't think that a share of CSU will be sold for 25 times it's current price in 2030 (46 000$ a share). However, I'm pretty sure that the stock will at least triple before 2030. I may be wrong, but how could a stock among the 1% of best stocks in the whole wide world could go from amazing to bad, or even average in a short period? Yes, it could happen, but chances are pretty low. 

So, my prediction is much more conservative than if I tried to predict the price of some not-so-excellent company.  

Great company 9 years ago, great company today. 

My portfolio 2011-2021

 You want to see something magic?

That's my portfolio from the end of 2011 to the end of july 2021. Here's about 10 years of investment on a chart. Almost 10 fold over 10 years (it could be 10 fold by the end of the 2021, actually). 

All around me, I know a few people who could have achieved something similar. But they're too lazy to learn about the stock market or they're interested by the stock market only for speculation. So they buy and sell stuff they know nothing about. I even know a guy who has bought a stock related to magic mushrooms.  That's the exact definition of speculation in my opinion. 

Many people like Bernard Mooney (a great financial journalist who retired some years ago) and François Rochon have said it a few times: the best moment to invest on the stock market is now and if you chose great stocks and keep them for many years, you will have more and more money in your portfolio, year after year.  

You can't really understand that after only 2 or 3 years on the stock market. But after 10 years or more, you have hindsight and you can see what went wrong and what went right. 

What went right will most of the time be related to stocks that were great when you bought them (meaning that they had a great track record before you buy them). Sometimes, you're lucky and you find something out of nowhere, but most of the times, you better go with something that already has a great track record. 

I have a very good revenue. It helped me to get that chart. But if I hadn't make some stupid mistakes, that chart would be even more impressive. Most investors accept it: you'll do some shitty things but as time goes by, you should do less and less of these shitty things. So a big drop on a chart related to some personal mistakes should be less and less probable as time goes by. 

If everybody could get such a chart for their personal finances, there would be less fighting among couples, less stress, less anxiety, less people disliking their job (because they would leave it), more comfort, more time for families... So, I hope that everybody aim at something like that. Because your wealth doesn't bring me sadness. At the opposite, your wealth would be a motivation for me to reach something similar. 

And our governement would need less money to put in social programs if people didn't need these social programs. 

Cute Ontario

 Who cares about Ontario? Ontarians probably care about it, but who dreams about Ontario? Who dreams about Thunder Bay? Apart from Toronto, Ottawa and Niagara Falls, there's lakes and forest on 95% of the territory, just like in Quebec, but without the Chateau Frontenac and the Rocher Percé. 

That's what I thought because I'm a guy full of opinions about things that I don't know. But I was wrong because there are some truly beautiful places in Ontario.  

In my recent trip, I went first to Owen Sound which is a nice little town that I used as a central place to sleep. The City park is beautiful: there's a little river where you can rent a canoe, there's also a mini golf and lots of attractions for kids. I've loved that park which was one of the most beautiful that I've visited. 

I've also been to Bruce Peninsula. It's a beautiful place. It looks like some carribean scenery. But the water is too cold to swim. And there's lots of people. If you pay to go to the grotto (which you should), you'll be able to admire one of the most beautiful spots of the region (maybe the most beautiful spot?). However, you'll only be allowed to stay there for half a day so you have to be lucky to get a sunny day (I had the change to get a sunny day). It's an amazing place, but if you drive from Quebec for 8-10 hours, that makes a lot of road just to see that place for 3-4 hours. 

That's why you have to find other places, like Sauble Beach, for instance, which is a cute beach close to Owen Sound where you'll be able to relax with you family. The water is quiet and there are lots of people, so there's some action there. However, contrary to Bruce Peninsula and the grotto, a lot of people in Sauble Beach isn't too bothering. 

And the trip ended in Toronto, my favorite city. I stayed at a great hotel, just besides the ferry to the Toronto Islands. At my hotel, there was a tennis court on the roof. I had to walk only 10 minutes to get to the CN Tower. And I met Be Smart Rich who brought some korean pastries for my family and eventually bought me an ice cream at La Diperie, downtown Toronto.  

So, it was a great trip and I've discovered a part of Ontario that was a mystery to me.

We don't have that many beautiful cities in Canada. The beautiful cities are mostly in Europe. However, we have great nature everywhere, even in ugly New Brunswick. I love our Canada for the calm and beauty of many places, from BC to Newfoundlad. 

And I like the fact that we can drive for 3 hours on a road without seeing anybody. It makes more oxygen for ourselves. 

Cute Saskatchewan

I just come back from a trip to Saskatchewan. 

I thought that it would be more boring than what it was. 

First, the fields are endless, like everybody imagines. But they're beautiful: yellow, green and sometimes even blue (I don't know which culture causes that color). It's very relaxing to drive among these fields. And they're more beautiful that the fields we see along the highway in Quebec. 

Saskatoon was a nice city. The industrial and commercial areas are not really nice, but the downtown sector is lovely. There's a river crossing the city, with a beach along the river. There's many bridges. Some people even call Saskatoon "The Paris of the prairies" (which is a fucking joke if you ask me, because if that's Paris, then Edmonton is Shanghai).

It's probably more beautiful than what people imagine. Of course, your expectations have to be low, in my opinion. Because if you expect to be breathless before a majestic scenery, you may be dissapointed. But if you want to discover a nice and quiet place, it may be a good pick for you. 

I'd go back there, which indicates that I liked it. 

Please, go there, once in your life. 

You have to see and feel the prairies because otherwise,

there's a big part of Canada that you're missing. 

Random list about special places in Canada

 1- Most overrated place: Vancouver

I like Jason Del Vicario and I know that he will probably be angry by this, but let's face it: Vancouver is a fucking dump. There's homeless people everywhere, the streets are not that clean, the downtown buildings are not that beautiful. It’s a correct city at best. The only interesting thing about Vancouver is the weather. You won't freeze there, like everywhere else in Canada. But I think that I prefer cold to syringes. 

2- Most underrated place: Newfoundland

I haven't seen everything in Newfoundland but I've loved that province. To me, it's the most special province in Canada because of the fact that it's remote, it's an island (which always has some impact on a culture), people are cool and the view is amazing in many places. I can't wait to go back there and visit St-John's. 

3- Favorite big city: Toronto

Among the large cities (more than 1 million people), I've visited Vancouver, Calgary, Toronto, Ottawa and Montreal. My favorite is, by far, Toronto. What a nice city. The architecture is nice, there's action on the streets, most people look nice, there's a kind of Time Squares downtown. However, I think that my favorite thing to do was to visit Toronto islands. That's the best view you can get of Toronto. 

4- Least favorite big city: Ottawa

Yes, Vancouver is a dump and that's probably the best place to get AIDS in Canada. But, at least, there's some action there. On the other hand, Ottawa is probably the most boring big city I've seen in my life. Nothing ever happens there. You go for a walk on the streets at 8 PM on friday night and you meet nobody. It looks like a fucking ghost town. How come? It's such a beautiful city (surely one of the most beautiful cities in Canada) but it's so boring that it makes it a place where you wonder what the fuck you're doing there.  

5- Surprising city: Saskatoon

I suppose that 90% of canadians will live their entire life without ever thinking about going to Saskatchewan and they’ll probably live a fine existence. However, in my opinion, Saskatoon downtown is a nice place to visit. There’s a nice river, with nice bridges crossing it. It looks a bit like Ottawa but with a much less impressive architecture. However, it’s far from being as dull and charmless as many people would expect.

6- Worst province: New-Brunswick

I haven't visited Manitoba and everybody says it's dreadful. But, so far, the most boring province I've visited is New-Brunswick. What a boring place. There's only forests and ugly houses that look like shacks. People are nice, but they neither speak french nor english. They speak like settlers from the 18th century. The acadiens have names that quebecers had 50 years ago. For instance, you can meet 40 years old girls named Louise or Denise, which are names of 70 years women in Quebec. I wonder if I will meet someone from New-Brunswick that will surprise me in a positive way, one day. 

7- Most beautiful scenery: Rockies (Banff)

Of course, I haven't seen everything in Canada. I believe that Nunavut and Yukon could really surprise me (mostly for their national parks that look amazing), but, among what I've seen so far, the most spectacular views are in the Banff area (Lake Louise, Lake Moraine and the road between Banff and Jasper). That's really beautiful. Every canadian (and foreigner, why not?) should visit that place at least once. 

Tourism: Les Iles-de-la-Madeleine (Magdalen Islands)

Everybody in Quebec knows les Iles-de-la-Madeleine but I think that nobody outside Quebec knows about these tiny islands lost somehwere in the Gulf of St-Lawrence.  

To reach these islands, you either take a plane (from Montreal, for instance) or a ferry from Prince Edward Island. 

These islands are pretty small. Very narrow but relatively long. Only 12 000 people live there and a lot of artists from Montreal go there in the summer. Which makes this place a summer lair for people who think they're cool. 

I went there 3 weeks ago, something like 30 years after my last visit which was around 1990 (with my parents). It's a nice place. A remote place with a lot of wind, where you can see the sea almost everywhere you are on the islands. Plus, there are very lovely coloured houses and people are nicer than in most places I've been. 

I rented a scooter and went from north to south. It was cool. I even took a small ferry to Entry Island (which is the only island of the archipelago that you can't visit without taking another ferry). That island was my favorite place. Only 50 people live there, but there's a big hill on the island (the highest of the islands) that you climb and up there, you can sea the gulf all around you. And you can have a very nice little tour of the coasts of the island. For instance, you'll see that:

The scenery is varied on the islands. You can see red cliffs as much as gray cliffs, as much as red sand, white sand and grey sand. You'll see little hills here and there and usually, when you're on a road, the see is at your right or your left, and many times the sea is each side of you. 

It's a nice place to visit. However, you have to like contemplation. Because it's mostly what these islands have to offer. 

But all in all, it's surely one of the most beautiful places in the province of Quebec. 

A change of vocation for the summer

I decided that I wanted to write about something else than investment. After all, investment should only be a tool to get what we want or what we need. 

In my case, investment is a hobby that I like. But it's not what excites me the most and something that I really need to be happy.

What I need is to meet people and have fun with them. Sometimes, I like to make fun of people too, but not in a mean way. Let's say that I like unease much more than the average person. So, in a way, I seek unease. 

But I think that what I like the most is to play music with people and traveling. Both activities completely vanished for me during the pandemic. But possibilities of travel are coming back. So far, I've travelled two times this summer and I will travel once more in a few days. If everything is fine, I'll probably do one last travel in september which will make 4 travels during 4 months. Not bad.

So, for the next months, I will write some stuff about travels. It's what money - and holidays - allow me to do frequently.  

I'll write a lot about Canada, because in a few days, I'll be able to say that I've visited 8 provinces out of 10 (and 0 territory). I'll write about what I like the best and the less in Canada. 

And I'll write some other stuff too. Once I start writing, I never really know what kind of crap will emerge.

Nike: Never sell a good asset

Last thursday, Nike (NKE) results were out and, holy fuck, they were amazing.

For the last quarter, EPS raised to 0,93$ from -0,51$ the year before. These 0,93$ EPS beat the 0,51$ estimates by 82%. It's phenomal, tabarnac.  

Not so hard to go from negative to positive. But let's take a look at quarterly EPS over the last 10 quarters:

2018-11: 0,52$

2019-02: 0,68$ 

2019-05: 0,62$

2019-08: 0,86$

2019-11: 0,70$

2020-02: 0,53$

2020-05: -0,51$

2020-08: 0,95$

2020-11: 0,78$

2021-02: 0,90$

2021-05: 0,93$

If we compare may 2021 to may 2019 (thus, we exclude 2020 which was a year of panic), the EPS went from 0,62$ to 0,93$, an increase of 50% over two years. It's incredible for a 240B$ company that sells shoes. 

It means that Nike managers have exceptional skills to drive their business.

Friday, the stock was up 15%. It's very big surge. But is Nike expensive?

At current price, Nike is sold for about 30 times next year's earnings. It's not cheap, but for such growth, such predictable earnings, a ROE of 55 and such a dominant business, I would say that its a fair price. Plus, the estimates for years to come are exceptional. 

In the recent months, I sold some NKE shares, thinking that this year would be difficult for them. I was wrong. And today, a Stephen Jarislowsky quote came to mind:

"Never sell a good asset". 

 

Don't fuck with Donville: 7 years later

On june 22nd 2014, I started this blog. Although I was a blogger since 2005 on a more personal level, I never blogged about serious topics such as finance and even less using the english language.

The first question that comes to mind is "where has gone my naivete?" I'd say that maybe it went at the same place where virginity goes after the first sexual intercourse. 

Here's some observations: 

1- I had much more conviction in my opinions at the beginning of this blog;

2- I thought that many stock were worth of consideration (now I believe that about 1 or 2% of stocks are worth of consideration);

3- I didn't consider profit margins or earnings predictability at all (they both are very important for me now);

4- I bought canadian stocks, mostly (65% of my portfolio was in CAD); 

5- I believed in some analysts and superinvestors;

Yes, my blog was probably funnier back then, but fuck, I'm so ashamed of my 2014 portfolio. Let's take a look at it:

Canadian stocks

Rifco: 11,7%

Constellation Software: 10,6%

Cipher Pharma: 8,9%

Valeant: 7,5%

CGI: 7,4%

Carfinco: 5,6%

Couche-Tard: 4,9%

Loyalist Group: 3,5%

Macro Enterprises: 2,2%

NTG Clarity Network: 2%

Avigilon: 1,3%

US and foreign stocks

Questcor Pharma: 7%

Portfolio Recovery and Associates: 5,9% 

Dollar Tree: 3,3%

Ross Stores: 2%

Cash: 16,1%

I owned a few great stocks but many crappy stocks. Among them, Rifco was sold for about 6,10$ at the end of june 2014 and is now sold for 0,90$. Loyalist Group is dead. Macro Enterprises lost about 50% of it's value. NTG Clarity Network was a 0,28$ penny stock and is now a 0,04$ penny stock... And I don't want to talk about Valeant because I've written too many posts about that fucking stock. 

However, I owned 70 shares of Constellation Software which had a value of 19 000$ back then. If I hadn't sold any share, that stake would represent almost 140 000$ today. 

In retrospect, I would say that I was  bad investor in 2014. Not a super bad investor like those who speculate about stuff which they know jack shit about. But I bought some really crappy stuff. 

Yes, I was bad, but do you imagine how bad readers were to give some attention to a guy with such a portfolio? I probably had the worst readers in the history of the world in 2014. 

What's the best dollar store?

 Dollar stores are great businesses. Even though they operate in the retail sector, they manage to do well. I assume that it's because people want to feel the cheap stuff they buy with their hands. Also, when you buy for 5 or 10$ of cheap stuff, do you really want to search on the Internet and probably pay for a shipping that will be more expensive than the stuff you buy? 

There may be other reasons why dollar stores continue to do well. But I don't think that things will change in the short and even medium term. So, it may be a good idea to invest in that kind of stock. I'll compare the four names I know the best: 

Dollarama, Dollar General, Dollar Tree and Five Below. 

Dollarama

Stock performance over the last 5 years: 85%

FWD PE: 22

Annual EPS growth last 5 years: 20%

Estimated EPS growth next 5 years: 14%

Debt level: Medium

ROE: 784 (!)

Profit margin: 14%

Dollar General

Stock performance over the last 5 years: 133%

FWD PE: 19

Annual EPS growth last 5 years: 14%

Estimated EPS growth next 5 years: 8%

Debt level: Medium

ROE: 40

Profit margin: 8% 

Dollar Tree

Stock performance over the last 5 years:  12%

FWD PE: 15

Annual EPS growth last 5 years: 14%

Estimated EPS growth next 5 years: 9%

Debt level: Medium-High

ROE: 21

Profit margin: 6%

Five Below

Stock performance over the last 5 years: 353%

FWD PE: 34

Annual EPS growth last 5 years: 40%

Estimated EPS growth next 5 years: 33%

Debt level: Medium-High

ROE: 28

Profit margin: 9%

I like all of them but I'm more neutral towards Dollar Tree which still struggle from the Family Dollar acquisition, many years after it happened. That's probably why their FWD PE is substantially lower than the others. 

If I had to make a choice among these four, I'd probably buy Five Below and Dollarama because they have the best margins and the best estimated growth. Also, they operate in different locations, so you have a global exposure to North America with both of them. 

A Donville Kent stock that checks all their growth boxes and checks none of my boxes

 Some of you may have received that email:

***************

Dear Friends,

Ask Jesse Gamble what his favourite stock is right now and he won’t miss a beat. The Senior VP & Portfolio Manager at Donville Kent Asset Management is pumped about this software company that checks all his growth boxes.

**************

What's that stock? It's Vitalhub (VHI.V). A 128 million dollars cap stock. What do they do? 

Vitalhub Corp., together with its subsidiaries, develops technology solutions for health and human service providers in the hospital, regional health authority, mental health, long term care, home health, and community and social service sectors in Canada, the United Kingdom, and the United States. Its solutions include electronic healthcare record, case management, care coordination, patient flow and operational visibility, and DOCit mobile apps. Vitalhub Corp. is based in Toronto, Canada.

And what about their numbers? 

ROE: negative

Profit margin: negative

Beta: 1,5

EPS 2018: -0,10$

EPS 2019: -0,04$

EPS 2020: -0,08$

Sales growth: only positive point (up 56% from 2018 to 2020)

Dilution: massive from 2018 to 2020 (+100% shares)

I wouldn't touch that fucking stock with a pole. First of all, because it's a fucking micro cap. You have 9 chances out of 10 to do bad with such a market cap. I know because I've lost a lot of money with that kind of stocks. 

Then, they don't make money. Then, they dilute a lot their float. Then, it's so fucking easy for an  investment firm to pump a micro cap stock. You just have to excite a few people and the needle moves on the stock you recommended. You can't do that when you recommend Google or Apple. 

I don't fucking understand how people who manage other's people money would invest money in any fucking micro cap listed on the fucking venture. I don't even do that with my own money. 

Good for them (and their clients) if they're right and I'm wrong. Actually, I hope they're right because I have nothing to gain from other people failure. But I guess that I'm a bit disappointed that, after all these mistakes on the venture, Donville Kent would have learned to stay away.

Portfolio review, may 31st 2021

 Another quarter, another review. That's how it goes. 

It's harder and harder to find something to write here. I feel like I'm 80 years old and I always repeat the same obvious things that nobody care about. I'd like to write about something else, but, let's face it, nothing happened in my life during the last year. I don't even know if I'll ever go out and have some fun. Maybe the best part of my life is over?

I'm currently planning a few trips during the summer. I'll go to a remote part of Quebec, I hope to be able to go to Ontario if borders reopen, I'll probably go to Saskatchewan and, if I get my two vaccine shots before summer is over, I'd like to go to Yukon. That would make 4 canadian trips this summer. Not very exotic but varied and probably a lot of experiences during these travels. By contrast, my life in my basement implies zero experiences.

It is time for the quarterly portfolio review. 

Number of stocks: 20

Three biggest stakes: Google, Facebook, Constellation Software (30% of the portfolio)

Average ROE: 30

Average forward PE: 32

Average Beta: 1

Estimated annual EPS growth next 5 years: 19%

Penetrator Portfolio Performance YTD: 6%

S&P Performance YTD:  14%

It's almost certain that my portfolio will be beaten by the S&P this year. I don't plan on changing my strategy to help my portfolio. I just accept, halfway through the year, that an index fund would beat me for the whole year. 

Yep, beaten by something without a brain.

The difference between Bitcoin and a company

Bitcoin is a strange thing. I'm not really sure what it is. But I know that it's not a company and that it doesn't grow. To me, it's like gold or silver. It's something that we can buy and use it to buy other things. 

So, buying gold is like buying Bitcoin for me. It's speculation. There may be good reasons to buy gold or Bitcoin, but even with a lot of macro-economics information, we don't know how things will go and how people will still think that Bitcoin is the next big thing. Currently, the thing that's related the most to Bicoin's value is Elon Musk opinion.

And when the opinion of someone, whatever his intelligence level is, is the main influence on something's price, I think that it's a very big warning sign. 

Also, there's so much volatility on Bitcoin. Between may 10th and may 23rd, Bictoin went from 59 000$ to 33 000$. What the fuck is that ? Nothing really happened meanwhile. Do you often see that kind of volatility on great stocks? 

Some people will say that, even if Bitcoin is down a lot these past days, it's price still went from 9000$ one year ago to 33 000$ today. That's right. It's still a great performance.

When you buy Google, you can see that it makes more and more money every year since the beginning or so. So, you understand that you own a company with a worth that's growing. But when you buy Bitcoin, you only hope that people will believe more in Bitcoin next year than this year. 

Discipline

Every year, around mid-may, there's a tradition: I take a look back at my portfolio since may 2009 to see how things are going.

I bought my first shares during the fall of 2008. So, at mid-may 2009, my portfolio was something like 6 months old. It's more or less the beginning of my investment life.

In 2020, I put a lot of money on my portfolio via a new mortgage. Since interest rates were very low, I thought that getting access to many thousands of dollars for something like 1,89% was a good idea. That's why my relative performance has been so fantastic between may 2020 and 2021 (on the other hand, there's a debt that comes with it, but a debt with almost no interests).

Don't forget that this increase of value is not only related to performance. It's also related to savings and I have to say that, in that field, I'm way better than at stock picking. So, don't take these numbers as an indication that I'm a great investor. I'm however a great frugal person. 

2009: year 0

2010: 75%

2011: 41%

2012: 38%

2013: 31%

2014: 50%

2015: 54%

2016: -8%

2017: 22%

2018: 19%

2019: 32%

2020: 16%

2021: 39%

ANNUAL ADJUSTED PORTFOLIO GROWTH SINCE 2009: 34% 

In other words, my portfolio grew about 31 times since may 2009. And I've made big mistakes. Imagine if I knew how to select great stocks from the start? Imagine if I had kept all my 65 shares of Constellation Software bought in 2012?  

So, to achieve a 34% annual growth of your portfolio, I recommend the following:

1- Read great books about investment and analyze as much stocks as possible to be able to find exceptional stocks (you won't be able to find them if you don't compare at least 50 stocks, or even 100 stocks);

2- Save as much money as possible, year after year. Start early. And when you'll have 500 000$ or more, you'll be able to slow down and enjoy life before it's too late. With 500 000$ on the stock market, your annual savings may do some difference, but not a huge difference. That's when you'll have to be intelligent with your stock picking because it's gonna be all that matters (until then, your savings could mitigate your mistakes);

3- Learn how to balance your portfolio. Don't own any position over 10%. Yeah, Buffett is almost 50% Apple but I don't think it's a good idea. Why not 5 great companies with 10% each instead of only one for 50%? If you wanna gamble with speculative stocks, gamble small (like 1 or 2% of your portfolio);

4- After a few years, you must aim at being as independant as possible. It won't come before at least 5 years, maybe 10. But it should come, because you'll be an immature investor until then.

5- Probably not a great advice but you should try to get a job that pays a lot. You won't be able to save money if you don't earn money. In a world where everybody says that loving your job is the most important thing, that advice may appear not very popular. But I don't see how a passion at minimum wage could help you to get a massive portfolio. Well, try at least to not HATE your job. If you don't love it, be neutral about it. It could be a compromise. 

So, you the young 25 years old, apply all that. And when you'll be 37, you may contemplate your portfolio and see a 31 fold growth. You'll be able to say that you've achieved the zero-level-stress-related-to-money. 

A cautionary tale

Many years ago, I taught many things I knew about the stock market to one of my friends.

He opened an account and started buying stocks I recommended to him. Mostly blue chips. 

That's not a new story, I've written about that many times before. But there's a whole new chapter in the story, and if that story was written by Stephen King, it would be the chapter where the monster shows. 

So, my friend eventually sold everything I told him to buy and started to buy more adventurous stuff. Then, it was speculative stuff. Then, it was crazy stuff. 

Everything was fine and funny. My friend sometimes called me to tell me how a great day it was for his portfolio. Sometimes he made something like 20 000$ one day, then 10 000$ the day after... His life was perfect.

But, in february 2021, a market sell off happened. And all the stocks he owned got hurt like fuck. They didn't really recover in the coming weeks. 

Then, the may selloff hurted his portfolio even more.

In february, he had a portfolio of 1,1 million dollars.

Yesterday, the portfolio was slighlty under 200 000 dollars. 

And, worse, he used margin like there was no tomorrow. So, the market selloff forced him to sell many, many shares.

And, even worse, he managed his father holdings. His father is something like 75 years old. And all his portfolio went down too. 

My friend told me yesterday that he was freaking. He had dark thoughts. 

Pretty sad story, but fuck, I told him many, many times to not buy that kind of stocks. I actually told him that I would NEVER buy that kind of stocks when he asked for my opinion. But he bought these stocks anyway. 

****************

Since the beginning of the year, my portfolio is still positive (not by much, but positive anyway). He's down 90% since february with margin calls, day after day.

That's exactly what happens when you see the market as a big casino. You really want high emotions? You'll get them. But be sure to play with money that doesn't matter to you. Otherwise, you're going directly to depression or suicide. 

Use that story as a reminder: if you buy nonsense stuff, you'll eventually get nonsense results.

This is perhaps the most important post on that blog. 

Being hurt by the exchange rate

The last days have been hard on my portfolio. But, more than the performance of certain stocks, the exchange rate is probably what had the more impact on my portfolio over the last months.

In november 2020, we could buy 0,76USD with one CAD

In February, we could buy 0,79USD with one CAD

Today, we can buy 0,83USD with one CAD

That's a 9% difference in only 6 months. So, if your portfolio is mainly made of american stocks, you've probably took a hit. Like me.

But, what is better? Being on the best market of the world and being exposed to some short term turbulations or being on the canadian market and having very little choice for great companies?

I'm on my way of underperforming the market this year, mostly because of the exchange rate. But, whatever. In the long run, such things as exchange rate and dividends don't matter. 

NASDAQ *** EDIT ***

Since the beginning of the year, my portfolio had about the same performance as the NASDAQ. Not surprising because I own a lot of stocks that are listed on the NASDAQ. 

What's the composition of the NASDAQ ?

These 10 stocks, represent a bit more than 50% of that stock exchange: 

1. APPLE INC.
2. MICROSOFT CORPORATION
3. AMAZON.COM, INC.
4. TESLA
5. ALPHABET INC.
6. FACEBOOK
7. NVIDIA
8. PAYPAL
9. COMCAST
10. ADOBE INC.

By taking a look at the names on that list, we can see that most of the high-margin and highly predictable stocks are listed on the NASDAQ. 

So, for now, my performance is not as good as the S&P. But I own businesses that are first-class and it took me years to reach that. It wasn't that complicated after all. I just thought I could find gold nuggets by myself. But I couldn't do that. It was just a fucking dream. 

As of may 2021, I stick to the NASDAQ for more than 75% of my portfolio.

Correction: More than 60% of my portfolio. I'm not even able to add simple numbers. Don't trust me too much. 

Why avoiding FAANG?

Have you seen Amazon last results? They were amazing.

Have you seen Alphabet last results? They were amazing.

Have you seen Apple last results? They were amazing. 

Have you seen Facebook last results? They were amazing... 

Some people ignore FAANG (Facebook, Amazon, Apple, Nettflix and Google/Alphabet) for some strange reasons. Maybe these people think that these companies are too big, not obscure enough, not related to "the next big thing"... Some people prefer to dig in the ground instead of going for something that is obviously interesting. 

But, even if FAANG are known by everybody,  they all do well, year after year. They have all you should be looking for. 

Yes, they're all huge, but they still grow a lot and they are dominant. Plus, some of them don't need to build new offices to grow. And their names are franchises. It's harder than we think to become a household name like that. 

Personnaly, more than 25% of my portfolio includes some FAANG stocks. If we add Microsoft (a similar stock), it's about one third of my portfolio. I really like all these stocks, because, while they are expensive, they're not sold at a crazy price (Amazon is very pricey, but it always been and it's more dominant, year after year).

Let's take a look at some numbers that show how amazing these stocks are:

Profit margins (profit margin above 20% = exceptional company):

Facebook: 34%

Amazon: 6%

Apple: 22%

Netflix: 14%

Alphabet: 26%

ROE (ROE above 20 = great company):

Facebook: 25

Amazon: 27

Apple: 82

Netflix: 35

Alphabet: 24

Performance 1 year / 5 years:

Facebook: 58% / 161%

Amazon: 46% / 424%

Apple: 86% / 470%

Netflix: 23% / 462%

Alphabet: 76% / 233%

Have you seen how much this group beats the market? Someone who bought these 5 stocks in 2016 achieved a performance of 350%. Yes. 350 fucking percent with 5 ultra obvious names that were already huge, 5 years ago. 

Who can afford to turn their back to these kind of companies?