jeudi 29 avril 2021

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? 

lundi 26 avril 2021

What happens after this?

Have you tried to buy something via Facebook's marketplace? 

All things related to hobbies are sold out pretty quickly. If you're looking for a bike, a skidoo, a motorcycle, you better buy quickly because after 24 or 48 hours, almost everything has been sold. It's crazy. I was looking for a scooter and prices went up like crazy. Actually, last week, 2017 models were sold for almost the price of a 2022 model. 

And what about real estate? My sister recently sold her condo for 30 000$ more than what she asked for. She got that money even if she had to disclose that she recently had cuckroaches (because of some shit-smelling neighbour). 

So, it's completely crazy. It's probably true everywhere in Canada. Everybody tries to have hobbies and his willing to pay an high price for these hobbies. Because they're probably going mad in their houses. 

The only hobby sector  where it's not too crazy seems to be musical instruments. I'm actually on the way of buying a drum and I managed to lower the asked price. Well, musical instruments are not for everybody, contrary to bikes, skidoos, houses, etc...

Given the fact that we're going through a very unusual period where there's so much money everywhere and people are spending like they all got AIDS and have only 6 months to live, I need your help. 

Because everything eventually goes back to the mean, what should happen after this? What will be the occasion for investors? When things are abnormal, there's always an occasion coming. But I can't see what will be this occasion... HELP ME TO SEE CLEARLY. 

mardi 20 avril 2021

The battle for Kansas City Southern

There's a battle for a railroad named Kansas City Southern (KSU) between the two canadian railroads: CP and CNR.

First, CP offered 25 billion dollars (about 275 USD a share) 

Today, CNR offers more than 30 billion dollars, via a combination of cash and CNR stock (about 325 USD a share). 

First, I thought that CNR would overpay, but after a quick look at KSU, it looks like that business is interesting. Not as good as CNR and CP, but not bad either. 

KSU numbers

Forward PE (after CNR bid): 24

Profit margin: 24%

ROE: 13

Debt level: medium-high

Annual EPS growth last 5 years: 9%

Estimated annual EPS growth next 5 years: 15%

Free cash flows: Growing nicely every year since 2015

Kansas City Southern

Kansas City is not as well managed as CP or CNR, but that's probably the key of that acquisition. These two great operators would probably improve a lot KSU by buying it. And the successful buyer will own a very large territory. That's more strategic than most acquisitons in other sectors. Because if you control roads, you're very powerful. More powerful than if you buy another company in a sector full of competition.

Imagine that, you already control a vast portion of railroads in North America, and now, you can control the midwest of the states and the eastern part of Mexico!

I think that it's a very exciting acquisition.

dimanche 18 avril 2021

Quebec Inc.

There was an interesting article this weekend about "Quebec Inc.". It said that the market cap of all Quebec companies went over 500 billion dollars this last quarter.

That's quite a lot of money for my less than 9 million inhabitants province. Actually, some of the best canadian stocks are based in Quebec. Let's see the list and the performance of these stocks over the last 5 years:

1- Canadian National (market cap: 105B$): Performance last 5 years: 83%

2- BCE (Bell) (52B$) Performance last 5 years: -2%

3- Couche-Tard (45B$) Performance last 5 years: 43%

4- Banque Nationale (30B$) Performance last 5 years: 107%

5- Groupe CGI (28B$) Performance last 5 years: 75%

6- Power Corporation (23B$) Performance last 5 years: 15%

7- Dollarama (18B$) Performance last 5 years: 89%

8- Saputo (16B$) Performance last 5 years: -5%

9- Metro (15B$) Performance last 5 years: 31%

10- Bausch Health (13B$) Performance last 5 years: 10%

Of course, there are some bad businesses on that list. For instance, Bell Canada is a very very bad business for it's clients. I've been with that company and I've had tons of problems with their monthly bills. I really hate Bell and their negative performance shows that, even on the financial side, they're bad. 

I don't know that much Saputo, but I don't like the face of the father who runned the business before.Their performance sucked. What's wrong with them? Around me, people are still eating cheese, so why can't they perform better?

Bausch Health is the new name of Valeant. That company is like plague to me. I'll hate them forever, even if they change their name once again. Even if they would find a cure to COVID, I would still hate them for what they did to my portfolio. And what happened to fat Mike Pearson? Did he die of cholesterol? 

Apart from these three names, there are 5 great companies (Canadian National, Couche-Tard, CGI, Dollarama and Metro... and I'd dare to say that Banque Nationale is great too, but I don't like banks that much). These are 5 world-class stocks. Not bad at all. 

mardi 13 avril 2021

Microsoft 20B$ acquisiton

Microsoft recently announced the acquisiton of Nuance Communications (NUAN) for 20 billion dollars.

Given the fact that I knew jack shit about Nuance before the announcment, I thought that it could be a good idea to analyze the company a bit, just to see if that acquisition makes sense. 

I'm a bit worried about big acquisitions since the acquisition of Family Dollar by Dollar Tree (DLTR). That huge acquisition has been a mistake, because Dollar Tree overpaid. Since the acquisiton, Dollar Tree hasn't performed very well. It made me understand how the price paid can turn bad for a company. And there are worse examples, like Valeant that bought many companies and got an incredibly huge debt. 


But let's go back to Microsoft and Nuance...

Over the last 5 years, NUAN revenues have decreased, from 1,9 billion dollars in 2016  to 1,5 billion dollars in 2020.  For the same period, EPS went from 0,07$ to -0,04$. Free cash flows have been positive every year since 2016 but are decreasing too...

Debt VS earnings is very high. It could be a burden, but after being mixed with Microsoft, the debt will look unsignificant.

ROE has always been low for NUAN (negative or under 10). 

With more than 130 billion dollars on hand, Microsoft can buy Nuance without any problem. It won't make any difference for us, shareholders. So, even if they overpay for it (they actually pay something like 65 times forward earnings, which is a lot for a company with such a track record), they'll still have plenty of money. 

Given these numbers, I'm not seduced at all by the acquisition. But what I lack is a comprehension of the possible synergies of both companies. Does Nuance offers something about Artificial Intelligence that will get bigger and more popular via Microsoft? I hope so. The market seems to be positive about the acquisiton, because MSFT went to a record level yesterday. 

I have no problem at all of keeping my MSFT shares. I still love that company, which is one of the best in the world in my opinion. 

I'll wait to see where it's heading. But I can't write an excited post for now. 

jeudi 8 avril 2021

A walk in the neighbourhood

I was walking in the neighbourhood around noon and I heard two construction workers talking about Bitcoin. These guys were probably a bit younger than me. Let's say around 30-35 years old. One of them said that one of his friend bought Bitcoins for a value of 30 000$. I didn't hear the rest of the story but I presume that this money was multiplied. And that story is probably now a legend among construction workers of how easy it can be to make money with Bitcoin (or on the stock market). 

Do you meet people who talk to you about Google, Microsoft or Nike? Me, never. People who talk about investment only talk about trends like Bitcoin, Weed, or some new pharma making drugs with dicks of endangered species. If Internet wouldn't exist, I would feel very alone with my conventional companies.

You've probably read or heard that numerous times: getting richer slowly is something that works. Of course, it implies that you have to be able to select good stocks. 

Today, I've reached another round number for my portfolio. It goes up more and more and quicker and quicker every year. Not in a relative way, but in absolute numbers, my portfolio grows a lot (I'll come back to that around my birthday as I usually do every year). But, let's say that, over the last 8 years, my portfolio was multiplied by 8 (I won't reveal the numbers, but let's say that it was much more than from 1000$ to 8000$). And since july 2018 (less than three years), my portfolio doubled.

Of course, it's not only a question of good investments. It's also a question or annual income and expenses. For these two things, I do pretty well. Combine that with a good stock selection and you'll probably be able to enlarge your penis and import russian girls. 

But, anyway, the point of this post would be to tell to everybody to be very cautious abut these fads about the next big thing. Today it's Bitcoin. Yesterday, it was weed.  Tomorrow, it will be some other stuff. You may jump on the train for Bitcoin or some shit, but not for 30 000$ for FUCK SAKE. If you put 30 000$ on Bitcoin and you're not a dentist, you deserve to lose your money because you act like a fucking retard. 

Why the fuck do some people have so much money to gamble with?