lundi 29 mars 2021

Affordable quality

 I just read something from François Rochon about stocks. The title is "affordable quality". 

First of all, let's say that Rochon now manages 1,6 billion dollars. Yes. A fucking pile of money isn't it? The guy must own a yacht and eat lobster every evening. That's what I would do with my commission on such a mountain of money. I would probably get very horny and enlarge my spectrum of sexual possibilities and do some  expensive drugs too, because money and power bring you to a whole other level. 

Basically, Rochon is  saying that he's looking for the best growth under a limit price (something like a PE of 20). It's a prudent way of investing, but you end up with stocks like Berkshire Hathaway and Merkel. Both are good stocks, but they don't grow that much. But, whatever Rochon says, he buys some very expensive stocks too (Heico, Edwards Lifesciences and Five Below, for instance). They're not high conviction picks like his "cheap" stocks are, but they invalidate his argument of not liking paying something like a PE of 40-50. 

Like I've written lately, I've changed my way of looking at stocks. I'm willing to pay more for a great business that grows a lot. For instance, I would pay 30 times forward earnings for Microsoft, a company with exceptional margins, very high predictability, high ROE and low debt.

A stock that would fit well with Giverny, in my opinion, would be Oracle (ORCL). The growth is OK (about 8-10% a year) while the margins and ROE are great. It's a dominant business and you don't pay too much for it.  It's not aggressive enough for me, but Oracle would go very well with the expression "affordable quality". 

But I'd bet that Giverny would go for Microsoft over Oracle, whatever they claim in this article. 

I really believe in my strategy of paying more for businesses that are way better than any competition. It has a very good effect: it makes you check much less your portfolio and almost never doubt about your stocks. Such things are important for me. 

Yes, "not-so-affordable high quality" is something that suits me better. 

lundi 22 mars 2021

4 personal rules for buy and hold

You've probably heard a hundred times that you should buy and hold. Or buy great companies, then sit on your ass (Munger) or that investing is transfering money from the impatient to the patient (Buffett). 

I agree with that. However, a sentence related to buy and hold implies some facts. 

1- You have to hold really good companies. To be sure that you own a really good company, you must be able to compare that company with hundred of others. And you have to be able to understand that this company offers something unique, or, at least, something much better than many companies. The beginning is usually a great track record. 

2- You have to follow that company closely. If growth slows down, you have to be able to understand if it's temorary or permanent. A good way (but not efficient 100% of the time) is to look at competition. Are all competitors affected the same way by a slow down? If the answer is yes, then the problem is the economy, not your company;

3- A real "buy and hold" company is a company related to something that shouldn't change with progress. Waste management companies are a great example. Whatever happens with the electric car, with Google, Facebook, humans will always produce waste, and more and more waste every year. Railroads are very good too for buy and hold: there will always be transport of merchandise.

4- If something stinks, like something related to integrity of management, fraud, or stuff like that, the company should go on the hot seat. It may not always be the right thing to sell. However, I'd rather be safe than sorry. You should too. 

These are my 4 personal rules for buy and hold. If I own something that I like, I try to apply these rules. And yes, there is nothing related to the valuation of stocks anymore. It matters, but not as much as these 4 rules. Of course, a PE of 100 or 1000 is crazy, but sometimes, it may be a good idea to own one of these stocks, for a slight part of your portfolio. 

Any other rule suggestion?

vendredi 19 mars 2021

How to get richer

I've said it many times: After 40, you should think much more about your comfort and invest less money. Because if you've worked right since your 20's, you'll probably be at a place where any extra money saved from your income is useless. That's maybe the case for me now. 

That's what Jarislowsky told in his book and that's what a girl whom I've worked with before learned me indirectly via Facebook yesterday. That girl was a very hot chick 15 years ago but is now dying of multiple sclerosis. She's younger than me but she's almost blind and almost paralyzed. She lost a lot of weight too. Oh my friends, how beauty is temporary...

So, here's my advices to get richer and stop saving money at 40-45 to enjoy life a bit before your senses become affected by a disease or another. Because they will. 

1- Don't buy a house too big and too expensive. Many expenses are related to a house (taxes, electricity...). Do you want to be stressed about your payments? Do you want to spend all your free time in your house? Do you want to die before the mortgage is entirely paid? 

2- Don't buy a car if you can live without it. Of course, many people can't live without a car, but if you don't have kids and live downtown Toronto, maybe you can live without a car, which is a substantial waste of money. However, I know that many people couldn't live without a car. Me included. Anyway, if you need to own a car, don't buy a Ferrari. 

3- Shop at Costco instead of any grocery. Costco is way cheaper and the quality of food is probably better than many other groceries. However, don't buy stuff you don't need. If you buy food, eat it.

4- Buy your clothes at Winners (in Quebec) or Marshalls (TJX), or any similar apparel shop. You'll spend much less and you'll get very nice clothes. You can also buy some clothes at Costco. And, for kids, you may use Marketplace, on Facebook. Very usefeul for winter coats for instance.

5- Cheap stuff for kids such as candies should always be bought at Dollarama instead of any convenience store. Close to my home, there's a Dollarama and there's a Couche-Tard 50 meters away . If you buy Skittles at Couche-Tard, you'll pay 3$. If you buy them at Dollarama, you'll pay 1$. You won't save thousands of dollars with candies, but if you have young kids, it may be an interesting way of saving some money.

6- Bring your lunch at work (if you ever go back to work after the pandemic). Some people eat in a restaurant every day. It probably represents close to 100$ a week. That's a lot of money on an annual basis.

7- Check your telecom bill. If you pay 200$ per month, there's something wrong with you. I pay about 70$ every month for Internet (unlimited) and the phone. I don't pay for cable TV. You shouldn't pay for it too. Just plug Internet on the TV and you'll be able to watch Netflix and Youtube. All the major networks are accessible via Internet.

8- Buy used stuff as often as possible. For instance, for sport equipements. 

It's possible to apply all these advices without actually looking like a fucking hobo.

The goal is simply to eliminate every useless expense. Buy the best that's available at the cheapest price. Costco is the answer to a lot of your needs at the lesser price.

After this epuration, put your money where it's really important: on the stock market (for your security and the security of your familiy) for the education of your kids, for some comfort (stuff in the house that's useful), for travel , to go out with friends in bars and restaurants once in a while. To buy a good wine, a good wisky or some excellent canadian cannabis. 

Well, in other words, to buy something that really makes you happy on a regular basis. 

If it's a Harley Davidson, then buy it (if you plan to use it regularly). Because, don't forget: life is short and sometimes, you don't die quickly. 

Sometimes you die slowly and painfully. And during that time, you're too sick to be able to go 180 km/h on your motorbike. 

So, do it now. Buy the motorbike you've always wanted . Then go for a very quick ride on the highway, wih shorts, T-Shirt and without a helmet. It's now or never.  

vendredi 12 mars 2021

5 years and a half later : a return on Carmax and Lithia Motors

Almost 5 years and a half ago, I wrote a post about Carmax (KMX) and Lithia Motors (LAD), trying to determine which one was the best stock to own.

Considering some metrics, it was obvious to me that Lithia was a better investment than Carmax. However, Carmax seemed at least OK. 

In the following years, I've bought and sold Lithia Motors and Carmax shares. Sadly, I'm no longer a shareholder of any of those, because I got tired of some short-term stagnation at a moment or another.

Just before switching to the performance of both stocks over the last 5 years, let's remind that it was obvious that this industry wasn't exposed to some important threat. In other words, investing in auto sellers didn't seem very risky back then and is probably not riskier today. It was not at all like finding the next big thing.

Performance since april 1st, 2016

Lithia Motors: 330%

Carmax: 187%

S&P500: 91%

Once again, when you've found a good or great company that has a great track record and operates in an industry that isn't changing fast, stick with that stock. 

Go take a 5 years walk and take a look back at that stock once you're back home.Most of the time, you'll be satisfied.

mercredi 3 mars 2021

Isn't it supposed to be a crisis?

My Nostradamus skills are very bad. 

One year ago, I thougth that world expenses would drop to an never-known level since 2008, and maybe even before that. 

Against all odds, many sectors of the economy did very well since the beginning of the pandemic. And one of these many surprises is the real estate sector. 

For instance, home sales increased by 70% between this year and last year in Vancouver. In Toronto, the same number increased by 53%. And the average price of a home is now over 1 million dollars in Toronto. In Montreal, the median price of homes increased by 100 000$ on a single year. Crazy.

Half of canadians aged between 25 and 35 are owners of their home. About 25% of them bought their home since the beginning of the pandemic. 

I would NEVER have thougth that such thing would happen if I had to make a prediction last year. But I would never have thought that the Bitcoin would raise this high, such as Tesla, such as a million other things. 

That's why I'll never have a very concentrated portfolio. I'm very bad at predicting things even if I read the fucking newspaper. 

What's the fucking use of reading the news if it doesn't give us superpowers? 



lundi 1 mars 2021

Portfolio review - March 1st 2021

I've recently had a discussion with someone about passions. And I've realized that investment is not a real passion for me. I really like it. I find it challenging and it's a topic that forces you to read a lot of stuff, think, take risks, reevaluate constantly, and so on. 

But, if I had, say, one billion dollars, would I still buy stocks? Frankly, I think not. What would be the goal? To get 2 billion dollars? To start a charity fund? To help poor and sick people? What the fuck? 

It's not like playing piano or travelling around the world. Investing is a hobby with a goal, a target. Maybe that some investors will disagree with me here. And maybe that some will even be disappointed about my opinion. Actually, it's exactly an aspect of Warren Buffett's personality which disgusts me: his desire of getting more and more money and his disinterest of almost any other topic.

So, let's enjoy my posts about investing because as soon as I have enough money to enjoy the rest of my life at the fullest, it's gonna be over. Fuck you all. 

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

It is time for the quarterly portfolio review. 

Number of stocks: 22

Three biggest stakes: Google, Facebook, Constellation Software

Average ROE: 30

Average forward PE: 34

Average Beta: 1

Estimated annual EPS growth next 5 years: 19%

Performance YTD: 2%

Performance of the S&P YTD:  5%


I'm a little behind the S&P so far, but Couche-Tard hurt my portfolio. 

I hold Alain Bouchard responsible for that 3%.