jeudi 28 octobre 2021

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. 

mardi 26 octobre 2021

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. 

jeudi 21 octobre 2021

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.

lundi 18 octobre 2021

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. 

lundi 11 octobre 2021

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.