Very last post of 2022

It was probably a tough year for every investor out there except a few ones who invest in stuff that moves with lots of unpredictability like mines or shit like that. 

It was tough for me. Not mentally tough because I'm now almost immune against these wide swings (as long as they concern the whole market and not one specific stock). It comes with experience. I think that not any investor can be too emotive otherwise, it won't even work on the short terme. 

For 2022, my portfolio is down by 22.5% while the market (S&P500) is down by 17.8%. 

I've been beaten by almost 5% which is disappointing for me. 

Everybody should track their performance like I do. Because after a few years of underperformance versus the market, anybody should give up investing and buy a fund that reproduces the S&P. I like the stock market, but I don't play that game to become poorer. 

What's the fucking use of investing if it makes you poorer than a path that requires no brain?

Last post of 2022

Jason Del Vicario is a real bully. Always teasing, always trying to intimidate. If he hadn't the perfect body and the best sex appeal in canadian finance, I'd tell him to fuck off. 

He recently told me to stop whining on my blog and start writing again. Yes, he's right. What about whining? Who fucking cares? I don't even care about my own tragedies. Fuck my tragedies, but fuck yours too. Actually, fuck yours much more than mine. 

I don't care about you because I don't even fucking know you exist, you anonymous reader. 

I'll be back in 2023, angrier than ever about life, investment and everything. Because the good thing about sadness is that it sometimes becomes anger and I'm a good anger generator. 

Since it's supposed to be a financial blog, let's just say that my portfolio is down almost 24% so far this year. 

More precisions at the beginning of 2023. 

A part of the cure

I'm going to explore another country this week. I'm going to Mexico. 

I'm not sure that it's the kind of country that appeals to me, but I'll give it a try. At least, it's gonna be much warmer there than in Quebec and I'll be able to practice a bit of spanish. 

Another thing: I may get kidnapped there or I might be victim of police corruption or something like that. It doesn't excite me, but I think that you have to be exposed to threats or difficulties once in a while to consider your own problems in a different way. 

For instance, if you live a crisis with one of your kids, go to Iran with them. Live a dangerous experience: survival mode will help you to get closer. As ridiculous as it may seem to some people, I think that it would be a good cure to some problems. 

Also, dying while living an experience is probably the best death. I'd rather die at 43 while traveling than living up to 80 and only watching TV. 

 

How do you sleep?

I feel that I have to find a meaning about life. It's been a very tough year so far for me. Life hurting me not directly, but by the sides. 

I need to create a philosophy that will keep me sane and avoid me to fall into depression. I've never thought that much about suicide because I think that it arranges nothing and leaves a big black cloud behind and probably generates cancer to people exposed to it. Your death is not a tragedy for yourself but it is for people around you. Also, there's probably a couple nice chapters left in my book even if I sometimes feel that the story will only be darker and harder as time goes by. 

I've always been worried a bit about the future but now, I'm very worried and I feel alone. Part of that feeling comes from my disdain of most people and from the fact that there are some specific and rare people I would like to be surrounded by. Who are these people? I don't know because there's very little people that I've really liked in my life. I also miss very few people that I've lost touch with over the years. 

It's like dead-end. You are what you are and you can't be different than that. It satisfies you most of the time but makes you very unsatisfied once in a while. 

I wake up most nights at 2 or 3 AM and can't sleep. Is it my worries? Is it my age that comes with perturbations of sleeping? Is it the feeling that I'm in a big hole? I don't know. 

I have to do something. I don't know what. I can't save my kids from all their problems but I have to stay sane and think a little bit more about myself. 

The answer must come from myself. Nobody can help me because nobody knows how I feel and nobody could probably give me the advice I'm looking for. 

A bad day for techno

Since I own Meta, Microsoft and Alphabet shares, yesterday wasn’t a good day at all. They all had a bad day. Very bad in the case of Meta.

Even if these stock’s valuation wasn’t exxagerated at all (actually, we could almost say that they were cheap), they all went lower/much lower (Meta).  

I don’t understand why so many owners of these shares seem to panic. Of course, Meta’s last results were no good (EPS dropped by almost 50% versus last year). But not any of these companies is going bankrupt or will face tough times in the coming years (like lots of debt and little money on hand).

In the case of Meta, it looks like this :

* 14B$ cash on hand (about 50B$ if we add marketable securities and accounts receivable);

* Margins and ROE over 20 in the recent years (which is not that common on the stock market);

* 10B$ debt;

* 300B$ company, so that debt is not that high.

So, what should be the value of a company with lots of cash on hand, a small debt, high margins, high ROE, a company that offers services used by more than 3.5 billion people (which is a also a kind of monopoly). I’m not saying that it’s the best company in the world, but is a PE of 8-10 really rational for that kind of company? When you analyze 100 companies from the stock market, you see that such a PE ratio is usually applied to a very random company. Like an oil and gas company that produces something like 50 other companies. Or a company without growth for the last 10 years.

I don’t think that any company with high margins, high ROE, low debt and used/known by billions of people should be sold for a PE under 15. Because a PE of 15 is the historical mean of the market, which means that it’s also the usual mean of stocks. Which means that 15 is the PE of an average stock.

Meta, Alphabet and Microsoft are not average stocks.

Portfolio review (october 13th, 2022)

It's been almost 7 months since the last portfolio review. I guess it shows how much importance I've put on investing over the last months. 

Even if investing is not that important for me these days, I wish I had more money to invest. If I had 50 000$ right now, I would probably invest all of it in a few of my stocks. But it's not the case. I've had too many expenses this year to be able to invest a big percentage of my earnings. And I mostly want to reimburse my margin, because interests are higher and higher. 

The year has probably been tough on most of investors. It's been a bit tough for me too, but after almost 15 years of investing, I'm not that sensible anymore to market swings. 

I'm much more sensible to specific stock swing. Like a Valeant swing in 2015, for instance.

So, here's a few numbers: 

Number of stocks: 20

Average ROE: 42

Average FWD PE: 20

Top 2 positions: 25% of the portfolio

Performance YTD: -25%

S&P500 Performance YTD: -21%

How's it been for you?

The dangers of margin

Since the last 3 or 4 years, I've been a great fan of margin. In an environment of very low interest rates, why not borrowing lots of money and investing on the stock market with an almost guaranteed return of 9-10% every year (when you invest in the S&P500 on the long run). 

It looked so simple and easy. 

But a lot of us tended to forget that the PE of market was high these last years and interest rates where very low. Two abnormal situations at the same time. 

Recently, interest rates went up quite a lot and the PE of the market went down quite a lot. It was the perfect recipe for a financial suicide or a real suicide for those who were all in on margin. 

Imagine that scenario:

Your portfolio has a value of one million dollars. The PE of your portfolio is about 25. About 50% of your portfolio includes stocks bought with margin. The interest rate of your margin is 3%. 

A few months later, the PE of the market goes to 18 (28% reduction). Interest rates go to 6% (100% increase). Normally, you won't experience a margin call but it always depends on the kind of stocks you own. At the same time, you have to pay much higher interest rate on your margin (which is a debt). That's a substantial financial stress. Plus the stress of a potential margin call. 

If you owned a lot of super expensive stocks, the contraction of the PE was probably much worse. For instance, if you own Block (Square), the value of a current share is about 25% of what it was at the beginning of 2022. 

A lot of gamblers and bitcoin lovers may find current times very difficult. 

The lesson is that margin may be interesting but only for a small percentage of your portfolio. In my opinion,  a margin over 10% for a large portfolio may be dangerous. 

My margin represents about 3% of my total portfolio and I feel that interest rates are much less pleasing to pay now than they were 6 months ago. 

Try to remember that during the next bull market. 

Why paying for a firm?

If you're ignorant and want to stay ignorant about how the stock market works, just buy an index fund (Warren Buffett said that numerous times) and leave your money there. 

If you want to know how the stock market works, read a few good books, start to analyze as much stocks as you can (at least one hundred stocks), then, find the 5-10% that are the best (high margins, growth, ROE, low debt) and invest money on these 5-10% of stocks. Focus on these ones and forget the rest. If Bitcoin is up 75% over the last 6 months, remind that, when things go up quickly, they usually go down, one day or another. 

Try to resist to the idea of giving your money to some small or large firm. Because they're not very good even if they dress well. Here's two good examples: 

Performance from january 1st to august 31th 2022: 

Donville Kent: -46%

Barrage: -36%

S&P500: -18%

Barrage doing twice as bad as the market and Donville Kent doing twice and a half as bad. Do you realize that some people are paying these guys to manage their money? You're paying people that generate twice as much loses as an index that anybody could buy? If you had given 1 million dollars to Donville Kent on january 1st, you would own 540 000$ now. If you had bought a S&P500 index, you would own 820 000$ now. 

There are probably some money managers that did well or not so bad this year. But these two examples remind me that I'll never give my money to anybody. Because most firms simply suck, may they have a lot of employees with an MBA or whatever the fuck. 

Deux sur deux

Dans la vingtaine, je répétais régulièrement que la vie c'était de la marde. Que l'existence était dépourvue de signification. Par-dessus le marché, je m'attendais constamment à ce que la vie me réserve de mauvaises surprises. 

Je m'attendais à un cancer précoce ou la mort d'un de mes parents ou une quelconque autre tragédie.

Rien de tout ça n'est arrivé. J'ai eu quelques problèmes, mais rien de grave, rien de dramatique.

La vie avait simplement attendu que j'aie des enfants pour me frapper un grand coup de poing dans le ventre. 

Mes deux enfants ont chacun une condition particulière. Aujourd'hui, j'apprenais officiellement que l'un d'eux allait connaitre un déclin progressif de sa vision, jusqu'à la cécité, autour de 40 ans, si on se fie à la moyenne des gens qui ont cette maladie. Peut-être un peu plus tôt, peut-être un peu plus tard. 

Pas dramatique comme un alzheimer précoce ou le suicide d'un proche dans un garde-robe. Mais ce sont mes enfants, sacrement. J'ai pleinement pris conscience de ce que tout le monde dit: ce qui arrive de grave à nos enfants est la pire chose qui puisse nous arriver. 

Deux enfants sur deux avec un problème sérieux. Essayez de battre ça. Mais non, vous serez pas capable. Essayez de battre le marché à la place. 

Ce que les meilleur achètent

Latest so-called superinvestors transactions are out and we can see what these guys did with their billions. Of course, we only know what they legally did with their billions. Prostitution and cocaine habits are not available on a specific website to my knowledge.

Anyway, here's the investors that interest me more than others...

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

Oh wow, Warren Buffet bought 28 million shares of Ally Financial! Big fucking deal. That represents 0,33% of Berkshire Hathaway while Apple still represents 41%. Why do people get excited so much about a new position even if it's percentage is totally unsignificant? Because it might get significant one day? Yes, but it could also get more unsignificant. So, for the moment, Ally Financial means nothing. 

Apart from that, there's nothing that special with Berkshire for the last quarter.

After buying tons of Netflix shares a few months ago, my good friend Bill Ackman is completely out of this stock now. He probably sold these with a loss for tax reasons, just like he did after losing billions of dollars with Valeant. 

Normal human beings don't sell stocks for tax reasons but supernatural creatures like centaurs, unicorns and some superinvestors do that kind of things.

Pat Dorsey fascinates me with his very agressive portfolio focussed on a few very high-valuation stocks. He took a big hit with this year's bear market but he recently bought a lot of shares of WIX (+19%), ROKU (+110%), GOOG (+20%) and UPWK (+71%). I'm not very comfortable with these stocks except Google but it's one of the few investors who deserves to be followed, in my opinion.

The Bill and Melinda Gates foundation (which maybe will change it's name for "The formerly known as Bill and Melinda Gates foundation") added 20% to it's current Berkshire position and reduced their Canadian National stake by 21%. Their BRK position has a value of about 9.5 billion dollars and their CN position has a value of 1.2 billion dollars. These guys have a lot of money. 

Sequoia Fund (which is now very similar to Giverny Capital for most of their positions), bought a lot of Intercontinental Exchange (ICE) stocks (+87%), Netflix and Wayfair (+43% each) and Charles Schwab (+7%). They sold a lot of their Google shares (about -16%), UnitedHealth (-26%) and Elevance Health (-42%). I never noticed that Sequoia had such a big position in that stock which is unknown to me. I'll take a look at that Elevance Health stock. 

That's about it. I probably forget a few interesting investors. But they're only interesting for a few months or years. The less I write about them, the less ashamed I eventually feel for having granted them some credibility. 

The superiority of Disney against Netflix

This week, Disney's results were out and, for the first time, there were more people using Disney + than people using Netflix. More than that, Disney + is in growth mode while Netflix is in regression mode. 

I love Netflix and I think that it's a great business. However, I think that Disney's model is superior to Netflix. I'm not talking about content but about diversification.

When you buy Netflix, you buy streaming services.

When you buy Disney, you buy a bunch of entertainment businesses (Disney parks, Disney +, ESPN, ABC, National Geographic and much more). Thus, when a sector is having a harder time, there's something else to compensate. And most of these businesses have a link together. 

And Disney ownes many big franchises like Star Wars or Lion King or hundreds of others. Every new Star War movie reaches one billion dollars at the box office. Who can beat that? 

That's why, in the entertainment field, Disney is the best and should remain the best. Maybe not for performance (because who knows on which platform will be the next blockbuster) but surely for safety. 

Finally, let's remind that, while growth is currently impressive for Disney, their EPS are still way below pre-pandemics levels.  

Green and clean

Since I’m back from Jordan and Egypt, I see the world differently.

First of all, I’m now convinced that we are fucked. These two countries are dirty as a dump. Cairo is the most disgusting city I’ve seen in my life, before Lima, which is also a dump. Walking in these cities, you can see trash everywhere : on small streets, on large streets, around buildings, along the road in the desert where nobody lives around… That’s completely crazy. People live among junk.  

I haven’t seen the rest of Africa but since Egypt is not the poorest country of the continent, I guess that it’s not better elsewhere. And what about India, Bangladesh, Philippines and many other countries? I bet they’re all as dirty as Egypt and probably more. Which makes at least half the population of the planet treating their land like a trash. Actually, half the population is probably very conservative. I’d say that it’s probably 75% of the earth’s population that treats it’s land like trash.

So, we’re fucked. I’m sure about that.

By comparison, Canada is green and clean. Very green and very clean and having flew over Africa and over Canada, I see how beautiful Canada is from above. I love my country and I love my province now. So much greenery here.

In the morning, when I drive my daughter to summer camp, I drive along a nice river which is a bit brown, but fuck, it’s now very very beautiful to me. After seeing only desert, dust and trash for two weeks in Egypt/Jordan, our Canada is to me the most beautiful thing in the world.

We have a nice country and we must keep it that way. And as an hommage to my country, here’s my 10 favorite places in every province :

1. Signal Hill, St-John’s (Newfoundland) : Signal Hill is a beautiful hill over the capital of Newfoundland where you can see the ocean in front of you and all the colored houses behind you. I haven’t seen anything similar anywhere around the world. One of the best views in Canada. I’d like to go back there and I can’t say that about many places;
2. Port-Royal, close to Sydney (Nova Scotia) : Port Royal was a french fortress in the 18th century. It’s located on Cape Breton Island and it’s a beautiful historical site to visit. Very impressive;
3. Sand Dunes, Prince Edward Island : I haven’t been in PEI in about 20 years, so it’s hard for me to remember exactly how it looks like but I remember these beautiful sand dunes, just besides the sea. It’s also a charming little province, very quiet.  
4. Nothing, New-Brunswick : New Brunswick is the only province that lacks a point of interest. Each time I go to that province, I feel like dying. Actually, there’s Bay of Fundy which looks beautiful but I’ve never been there.
5. Iles-de-la-Madeleine, Québec : These tiny islands located close to PEI and Nova Scotia are beautiful and very quiet. There’s only a few thousand inhabitants so it’s the perfect spot for some quiet time and beautiful sceneries. I rented a scooter and traveled across the islands during the summer of 2021. It was great. I’d like to go back there too.
6. Toronto, Ontario : Toronto is by far my favorite large city in Canada. If you go there, try to visit Toronto islands which are accessible via a ferry in Toronto’s harbour. That’s the best view you can get of Toronto and these islands are great to visit.
7. St-Boniface, Manitoba : I haven’t see anything else than Winnipeg in Manitoba, so there may be a few interesting places in the province. However, I’ve visited St-Boniface quarter which is the main french area in Manitoba and it was an interesting experience to meet people who can speak french so far from Quebec. The streets name are in french too. And there’s a big cathedral which is interesting to visit. Not the most special place in Canada, but it worths a visit. More interesting than most people think it is.
8. Driving in the south of Saskatchewan : Among all the places I’ve visited in Canada, driving in the south of Saskatchewan is probably in my top 3. The sceneries are flat, but not as boring as people imagine. The fields are yellow and infinite. It’s very calming and sometimes, there’s interesting landscapes that are not flat. I loved driving there and visiting Grassland national park and Castle Butte. It was probably my biggest canadian surprise ever.
9. The Banff/Jasper area in Alberta : Without hesitation, that’s the most spectacular spot in Canada. These mountains are so huge, the lakes are emerald, the road is amazing. The best pictures you can take in Canada are in this location. Any tourist should go there first.
10. Golden, British Columbia : This one is not a conviction pick. I’m not sure what’s the best place to visit in BC because to me, nature in BC and nature in western Alberta are similar (lots of mountains, lakes, forests). The location where Jason Del Vicario lives (in the islands close to Vancouver) is very nice too. So, I’d say that as long as there’s a mountain, some lakes and a waterfall not far, you may be in one of the most beautiful spots in BC. I’m sure there are plenty of these spots.

We have a beautiful country. Let’s keep it that way and let’s all be ecologists. Because the end is near for our planet. Let’s preserve and enjoy what we have because it won’t last.

Travelling for free (almost)

Since the beginning of 2021, I've bought 12 plane tickets for me and my family (sometimes, I travel alone, sometimes, with one of my kids, sometimes, with all the family).

Among these 12 plane tickets, I've paid the full price 0 time. I've always used Aeroplan or Air Miles to reduce the bill. Which makes that I've probably paid less than 20% of the full price for these 12 tickets.

And for hotels, I've used points too. For instance, I've stayed 10 days with breakfast included at a nice Marriott hotel in Orlando, 5 days in a nice Marriott in St-John's (Newfoundland), 3 days at the foot of the pyramids in Cairo, 1 day in a nice Marriott hotel at Cairo's airport and 2 days just besides the Dead Sea in Jordan.  All these stays were for free. Full price would have been about 5000 CAN$. 

I estimate that I've saved at least 20 000$ since 2018 with travel hacking. Of course, I have to pay some fees here and there. It's not entirely free. But instead of paying 25 000$ for plane tickets and hotels for all these trips (China, Europe, Florida, Louisiana, Egypt, etc), I've paid maybe 5000$.

Some people have asked me how it was possible to travel for such little money.

The answer is that you have to be aggressive with  credit cards. Because some bonuses are great. 

Where to begin?

With some credit cards, if you spend 3000$ in three months, you'll get enough points to buy 2 round trips in North America for almost nothing. Or you could use these points to get free nights in beautiful Marriott hotels.

You begin that way, slowly, with only one new credit card. But aftter a few months, you get completely crazy like me and you get 10 different cards. 

Then it's a lot of management with your Excel file, but you'll get a shitload of points. And you can basically go anywhere. 

Once retired

Once retired what will you do?

There's three things I'd like to do and for which I think I would be very good:

1-Travelling all around the world with one or two small bags. Seeing the seven wonders, reaching frozen oceans in Northwest territories and in Patagonia. Reaching remote places and taking lots of pictures to help me remind these moments for the rest of my life. 

2- Planning trips all around the world for other people. I'm a champion travel hacker now. For instance, this year, I won't pay a lot of money for any of 8 plane tickets. I will also pay something like 20% of the full price for all  hotels and hostels where I'll stay.  I'd like to help people to do the same.

3- Helping people with their personal finances. Helping them to make a budget. Helping them to cut expenses, to learn to save money, to invest on the stock market.

What are the things that you have to offer to the world or to yourself, once retired? 

We're all wealthier than most people. Let's help ourselves to find hobbies for the time where we won't have to worry about money anymore. 

Who's depressed?

I wonder if there's a lot of depressed investors at the moment? After all, the market has lost a lot of value recently and we don't know when the wind will change. Maybe when Putin will die? 

When the market is down, I see a lot of occasions while when the market is high, I see a lot of risks of it going down. Which means that I'm pretty confident about the market at the moment (in the medium or long run). 

Summer has begun and I'm on the way of more travels. That's now my main hobby: traveling and planning travels when I'm not traveling. And when I come back, I stratch my scracthing map of the world. And then, I look for other places to scracth. 

I just look to enjoy life the most I can. It's hard, but I try. 

The Netflix effect

Some people say that Netflix has lost it's mojo. I don't really know what is a mojo, but it looks special.

NFLX has lost a lot of it's value in the recent months, mostly because of the stagnation of new users and the anticipation of a loss of users in the future. 

However, have you heard about the last season of "Stranger Things"?

In a few episodes of the new season, we can hear "Running up that hill", a 1985 song by Kate Bush. Since the release of that season, that 37 years old song has been back in the charts and it's streaming is up many thousands of percent. You may say that going from 10 streamings a week to 500 streamings a week could result in such statistics. Yeah, you're right. But I think that song has always bit at least a bit popular, because it's been a hit in 1985.

Anyway, I don't want to start a debate about Kate Bush, but I think that what happened with that song shows that Netflix still has a lot of influence on society. They need new exciting content. There will be good and bad years for new content, but Netflix has penetrated a lot of countries. And what you can see on Netflix may have a significant impact around us (let's just think about "Squid Games" and the fact that some schools sent messages to parents to tell them that games in that show would be forbidden at school).

I don't know if Netflix is a buy or a sell. But one thing is sure, that's a great business. 

So, it's probably more a buy than a sell. 

Inflation VS stocks

Common stocks beat inflation. I've learned that years ago and I still believe that it's true, as long as inflation doesn't reach 19% like it's been the case this year in Estonia. 

And even if inflation reaches 19%, what are your other options? Keeping money in a drawer? That's automatically a negative 19% (if you live in Estonia). 

I like these tough periods for the market, because it epurates the market from speculators. And, in the long run, those who are staying in the market will be rewarded. I'm sure about that. And if I allow myself 10 years for this prediction, I'm even more confident. 

Some people change their strategies when the market is red, day after day. Some think that stocks will continue to go down, thus investing only in low PE stocks. Like if a low PE couldn't go lower. Well, I've actually tried this before and it's sad, but a low PE can go lower. Yes, a stock with a PE of 8 can become a stock with a PE of 5, just like a stock with a PE of 25 can become a stock with a PE of 18. 

I think that dollar stores are a good place to be. Dollar Tree's last results were very good and I believe that results should also be good for Dollarama, Dollar General and Five Below. I'm not a wizard. I only believe that this inflation is way too high for people to keep their habits and paying a premium for the stuff they can buy at dollar stores. Of course, dollar stores will have to readjust their prices because of gas prices. But even if they raise their prices, they'll still be cheaper than almost any other shop.

Eventually, I believe that banks will benefit from rates increase. Because rates can't stay that low. These rates are a part of the explanation of this inflation. People don't save money with such rates. When they'll go up, people will save more money and banks will benefit from that. And currently, banks are not expensive at all.

Of course, I still believe in Google and Mastercard. But I think that dollar stores and banks will benefit from the current situation for the short term. 

Happiness

The most important thing in life is not love, family, friends or money. 

The most important thing is happiness and you may achieve it by finding at least a couple of things that really turn you on. Then trying to put your focus on these things as much as possible. Because you'll realize sooner of later that:

1- If you don't have that kind of things in your life, you'll feel empty and your life will seem worthless (and it will actually be worthless);

2- These passions will be your companions in times when you don't have companions;

3- You'll long for these passions when you don't have time for them. They will make you excited about them.

4- Everything comes and go in your life, but if you have a true interest for something, it may stay in your life until you die.

So, if you really want a motorcycle, buy it. If you want to play an instrument, buy it. If you want to travel all over the world, go for it.  

These are an other kind of investment. That's an investment on your well-being and happiness. 

Living among humans

Living among humans is complicated and frustrating. 

I don't really like most of the people around me. I don't hate them, but I'm indifferent or I dislike probably 75% of the people I meet. And when I like somebody, they like me maybe 50% of the time, which leaves me with a little percentage of success in my new relations. 

Please note that these percentages can't be documented with scientific data.  

More thant that, I could live the rest of my life without seeing again most of the people that I call my friends. Because I'm not sure that I really need them.

The problem is that I can't be completely alone. I need some people around me from time to time. But I think that if I had an infinite reservoir of interesting people, I would gladly go from one person to another for the reste of my life. 

Life in general

I think that it's important to realize that, in this life, we have every option.

We could live our life to the fullest or we can simply commit suicide. We can play by the rules, play by our own rules or stop playing the game.

I don't think that suicide is a good option because, as worthless your life seems to be (and probably is), by commiting suicide, you break the life of many people around you, which is the real tragedy. Because your life will end quickly, but those surrounding you will spend the rest of their life with guilt and endless questions.

But suicide remains an option. It's however, in many cases, the worst possible option.

And what means "living your life to the fullest"? Who really does that? Almost nobody. Most of us spend at least 50% of our spare time laying on a couch with our phones, watching stuff on Tik-Tok or on Youtube. Our spare time is mostly wasted time. It doesn't bring us to the next level. It makes us stagnate where we are.

So, I guess that most of us are just living a meaningless life with tons of wasted time. Once in a while, we share on social medias the rare moments where we think our life has a significance. 

This is life in a few sentences.  

Fuck off

I've reached a point of boredom related to writing posts about the stock market at the same time that I've reached a point of anger about life in general. 

I've decided that I would now write stuff about anything that's in my mind, may it be the weather, the war in Ukraine, stupid people, the lenght of my turds, etc. 

I just don't give a fucking shit. 

Discipline

I'm 43 today and each year, at this date, I always write a post titled "Discipline" to show how discipline can make a difference on a portfolio. It's usually a message of hope and trust in the american dream which could be translated as "to become rich as quick as possible with as less effort as possible".

The word "discipline" means to save money and to invest on a regular basis. However, this year, discipline is very deep into my ass because the market is down like fuck. I've always assumed that saving money would increase my portfolio's value, whatever the market does. It hasn't been the case this year.

Euphoria has been replaced by anxiety and even depression for many people. It was about time. When it's easy to make money, a lot of dumb people become rich and then try to teach us the true meaning of investment. 

I wonder how things are going for "investdiva", the so-called investor on Instagram who went from 0$ to I don't know how many million dollars with her crypto investments. I bet she managed to do well even if Bitcoin is down like a rock in the ocean, because these people always have the easy recipe to become richer in any circumstance. They're simply magicians. And they are very rich, even if they seem to need new clients all the time. 

Anyway, I'm not an "Investdiva" because of these numbers: 

Performance since may 16th 2021: -8% (portfolio value in absolute numbers)

Annual performance since may 16th 2009: 31% (portfolio value in absolute numbers)

These performances are related to the absolute value of my portfolio. In other words, it's a combination of increase of value and new money invested. That's why this post is named "Discipline". If I hadn't save money on a regular basis, I would never have reached that 31% annual increase of my portfolio. 

The decrease of 8% over the last year is not that bad because the decrease of value has been almost 27% since the beginning of the year. Let's be honest, even if marketing masters would tell me to avoid saying that. 

"Blood on the streets"... ?

I just come back from a 2 weeks trip through Europe. 

I've been in Lithuania, Latvia, Estonia, Finland and Netherlands. I've sung in a few karaoke. I've seen the mark of communism. I've met a lot of 20 years old kids who become my friends on Instagram. Most of them were pot-heads in Amsterdam. 

And now, I'm back with super red markets. I realize that I was so much richer a few months ago. Like, a few hundred thousand dollars richer. But I don't care, because what I like the most about the stock market is that kind of period.

It's a "Only the strong survive" situation. Weak people sell everything or exit the market. 

Experienced people do nothing or invest more money. 

The only problem is that these recent travels, my roof's refection and my scooter acquisition cost a lot of money and I can't really take advantage of that big drop. I hope you can. Because that's exactly the kind of period that will accentuate your performance during the next 5 years. 

"Everything Elon Musk touches turn to gold"

I'm still shocked by how so many investors think.

For instance, because Elon Musk is the wealthiest man in the world, everything he touches will probably turn to gold... in the mind of some people. 

However, any investor who digs balance sheets before investing knows that Tesla has a very very very esoteric valuation. That stock is not in the same universe as 99% of stocks available. It's a case of "In Musk we trust" more than anything else. 

Twitter is a little more in a rational universe, but that company still loses money on a regular basis. Losing money means negative margins, negative ROE and negative PE. 

As fascinating and mysterious and intelligent and awkward Musk is, he's got a lot of money in unorthodox companies. 

I would never advice anybody to invest in Tesla or Twitter. Actually, I'd rather advice people to invest in a stock where the CEO is a very quiet guy, like Constellation Software's Mark Leonard. 

Quiet people usually stay away from scandals. They don't live to provoke. I'm sure that Musk likes to provoke people. That makes a good show. But does any investor wants to own shares of a company run by someone who likes to create polemics on Twitter? 

Some concerns about Facebook

Facebook is really cheap now. Plus, they have no debt and lots of cash. 

But, if we forget the numbers that investors like to see, who's still active on Facebook?

I thought about that yesterday, and I realized that probably 90% of my Facebook friends aren't active anymore. They post a family picture twice a year and they share stuff about gofundme when one of their relatives has a disease. That's about it.

Of course, Facebook is more than Facebook. It includes Instagram, Messenger, Whatsapp... But are them really a trend?

So, in retrospective, as cheap as Facebook may be, I have some trouble to see interesting growth there. It's mature and, not exciting anymore. 

Is it the new ICQ? 

Canopy growth (WEED.TO): A huge LOL

No so long ago, many people were into cannabis stocks. It was the trendy thing to do. Pot is the next big thing! With legalization, a lot of people will buy pot! Canada will become the new Amsterdam! It's gonna be Woodstock every day in the Great White North! And "Dark Side of the Moon" will once again top the charts!

Of course, nothing happened. Some people started to buy a bit of weed, but only junkies started to buy pot on a regular basis.

I've known a few people who were excited about pot stocks. Their excitation was closely linked to their appreciation of the chart for these stocks. They didn't see a special thing in results or in popularity among consumers. They just thought that this party would never end.

And of course, the party ended.

WEED.TO stock price:

April 1st, 2017: 9,13$

April 1st 2018: 30,11$ (about 6 months before canadian legalization)

April 1st 2019: 67,67$ (about 6 months after canadian legalization)

April 1st 2020: 22,20$

April 1st 2021: 33,15$

March 31th 2022: 9,52$  

LOLLLLLLLLLLL at those of thought that cannabis would become the new Iphone. 

Why looking at new stocks constantly?

I don't understand those who are constantly looking for new exciting stocks.

My opinion is simple: When you select stocks, you should be looking for stocks of exception. Which means that these stocks are among the top 5% of what's available. 

For instance, most people think that Constellation Software is an exceptional company. 

Once you've selected 10 equivalent of Constellation Software in your portfolio (there's probably no equivalent to Constellation Software, but let's say some companies that look as great as this one) and you have analyzed 100 other stocks, you probably know that your stocks have better ROE, better margins, lower debt and better growth perspective than the other stocks. You may find something better, but you have way more chances to find something worse. 

I've liked Chuck Akre for some years now. And he's the kind of investor that sticks with what he selected many years ago. He simply increases or reduces his position because of valuation or perspectives. Which means that, if Mastercard looks to face some headwinds, he's not gonna sell his stake. He will simply rebalance his portfolio a bit, but he still acknolewdges that Mastercard is an exceptional company. 

I think that thinking like that reduces greatly improvisation. We all improvise. I'd like to say that I never do that, but the sad truth is that sometimes I buy too early, without measuring correctly what I'm doing. And sometimes, I buy a specific stock which doesn't respect my criterias, because I think that it may be an exception. Usually, it's not an exception. It's simply not a stock for me. 

That's the beauty of life. We spend such a big part of our lives doing nonsensical things and wasting time. Actually, there's probably something like 5-10% of our lives which is spent on rational things. 

Imagine the kind of Buffett you could have become if you had simply copy his portfolio instead of trying various investment approaches. Imagine the kind of Mozart you could have become if you had play piano all these hours instead of watching random people on Facebook. 

And that's why nobody will remember you when you're dead. 

Portfolio review (march 23rd 2022)

Some people seemed to think that the recent drop in the markets affected me and caused my absence in march. While I may sometimes write things that may suggest that my portfolio's performance affects me, in reality, it's not the case. 

I was on vacation and thinking about many other things than the stock market. Actually, for the last month, I haven't watch the market that much because I had no more money to invest. What's the use of being tempted without the possibility of doing something?

Apart from that, I'm much more concerned about my health and my kids health than about my portfolio. 

Nobody's supposed to die, but there are some concerning stuff that makes me think a lot about the future. 

When you invest money, you're excited about the future. Things are supposed to be better in the future. But with health problems, you're worried about the future. Things are supposed to be worse in the future. So, my appreciation of the future has changed a lot recently. I'm fucking angry and sad and full of hate for god (which doesn't exist, by the way). 

Fuck you god, for doing nothing. Because you don't exist. 

Anyway, let's forget all that stuff and let's put a grin on our face and talk about my portfolio. Because that's what matters the most after all. Who gives a shit about my life and yours? We need information, not emotions. 

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

Stocks in portfolio: 20

Cash position: -4% (use of margin)

Average ROE: 40

Average forward PE: 27

Portfolio performance YTD: -15,5%

S&P500 performance YTD: -6%

It's not a good year at all so far. 

A quick way to become billionaire

Today, I read that JK Rowling's wealth was about 1 billion dollars.

The lesson is clear: If you want to get rich quick, just write a few books for kids. 

Disney brand

Markets are still down a lot and so is my portfolio. But that's OK. I stopped watching at markets over the last weeks (not entirely, but way more less). 

I was in Florida at the beginning of march. I went to Disney parks and spent a lot of money there. It was fun but exhausting and expensive. Also, these parks are huge COVID pools. People without masks everywhere, touching everything. 

But it made me realize how strong the brand Disney is. Even though Disney makes everything to get every dollar we have:

• 150$ US for one entry, for every person over 3 years old;
• 25$ parking (you can't get close to the park without a taxi, a bus or a parking);
• Food is really expensive (5$ for a Coke, 6$ for a small Ice Cream);
• Souvenirs are very expensive too (25$ for a small Mickey Mouse);
• A large part of some parks is there to simply make more money from visitors (for instance, more than 50% of Epcot Center is made of restaurants and boutiques).

I personnaly think that it's too much. Given the fact that a family of 4 people already pays more than 625$ US for a single day at a park without eating or buying anything, I feel that Disney abuses. But that's just my opinion because the parks are full. 

And that's why owning Disney shares makes a lot of sense. The brand is extremely strong and many families dream of living a superficial experience there instead of going to India and catch malaria. 

And I'm pretty sure that this won't change before a long time, because the castle of Magic Kingdom, the big tree of Animal Kingdom, the Star Wars stuff of Hollywood studios and the big ball of Epcot Center are mythical symbols. You can't do otherwise than asking yourself how many hundred million dollars they've invested to build these parks. 

Ouch!

EPAM systems: down 46% today.

It hurts, but Facebook paved the way to pain for me.

Can you imagine what it could be for an investor from Russia? I mean, EPAM systems operates partly in eastern Europe but also in other countries. Imagine what it could be for a company operating only in Russia...

Life will pretty soon become hell in Russia, whatever Putin tries to do. That economy is going through a sewer system. 

Before we all die in WWIII, let's see how we could use that momentum: General Dynamics (GD) and Raytheon (RTX)

 I'm not interested in dirty industries or "politically sensitive" stocks (tobacco, guns, lotteries, casinos...). 

But I guess that General Dynamics and Raytheon (two aerospace and defense companies) could be good investments until there's a nuclear bomb rain all over the earth. 

We're currently in the worst situation ever between Russia and Western countries (maybe the missile crisis in the 60's was worse, but not by far). Putin is now talking about the possibility of using nuclear equipment. I guess he won't because for one bomb used toward NATO, he'll probably receive 10 bombs. He simply can't beat NATO. But he could destroy a few european cities before he precipitates his country into hell.  

The besy solution for everybody, including the russian people, is if russians would start a revolution and chop Putin's head or if someone close to Putin puts a bullet in his head. If it comes from inside, everybody will win. Us and them. 

We all hope it will happen sooner than later. But until then, NATO will spend a lot of money on defense. And these two companies, while having so-so margins, OK valuation and OK ROE should perform well whatever the level of inflation we're facing. 

Who benefits the crime?

Since the beginning of the year, my portfolio has melted like an Iceberg in the Sahara. I actually never lost that much money in all my life. Which is a bit dramatic if we exclude the fact that I never had as much money as I had at the end of 2021. 

I have to admit that I may have overpaid for some stocks. And when you overpay, market drops are harder on you. However, my biggest stakes weren't that expensive. 

How can we explain that many companies recently released great earnings and are still down a lot? Many stocks have beaten expectations by a wide margin and are down 10 or 15% since then. 

That's a tough period. But we've lived in wonderland for many years. Maybe it was time for some difficulties, just to epurate the market from all these speculators that are around. Like all these people that tripled their money in 6 months with a stock they knew jack shit about. 

That fucking Putin probably gets a lot of money from all this crisis. Who benefits the crime? That's always the fucking question that we should ask. Agatha Christie told us that. 

Third world war

President Biden knows how to worry people. He spoke lately about the necessity of getting all US diplomats out of Ukraine because of the fear of a russian invasion. In that case, defending US diplomats or US citizens against Russia could cause a third world war.

I don't see how such a war could happen given the fact that Russia simply isn't strong enough against NATO. How could anybody think that Russia could win a war against USA, Canada, Germany, France and UK plus all other smaller countries? That would be a blood bath of course, but russians probably use planes from the first world war and bows and arrows. These guys have a very large army, but they have the GDP of Spain. Napoleon kicked their ass, Hitler kicked their ass. They can only rely on General Winter when things get bad. 

So far, the market doesn't seem too worried about a potential invasion of Ukraine by Russia. It could happen, but it looks like everybody knows that there would be too much too lose on any side for a declaration of war. 

However, a third world war would probably be the only thing that would give a meaning of our unsignificant lives spent on a couch, with a phone on our hands. Every year, we're close and closer to the state of primats that we once were.

Nothing like a great war and hundreds of nuclear bombs to wake up all these sleepy people that we are. 

Why Disney (DIS) is not as expensive as it seems

Who the fuck is crazy enough to buy shares of Disney? 

Current PE is about 130 and forward PE is higher than 30. That's completely crazy. It's not an high-tech stock selling stuff like there's no tomorrow. 

**********

A lot of people (including me not so long ago) thought that Disney was super expensive. However, it appears that it's a case where current PE doesn't say everything. 

The answer is simple: Disney has been badly hurt by COVID. The stock is currently so "expensive" because earnings decreased a lot during COVID.  

Here's DIS EPS from 2015 to 2021. As we can see, if Disney's earnings go back to 2018 level, the stock would today be sold for less than 18 times earnings. 

2021	$1.09
2020	$-1.58
2019	$6.64
2018	$8.36
2017	$5.69
2016	$5.73
2015	$4.90

That's a company that should grow by more than 30% on an annual basis given estimates. Let's be conservative and let's say that earnings will "just" grow by 15%. Even with that growth rate, a PE of 18 is low for such an high quality stock. 

As we can see by yesterday's results, the company is doing great with parks and Disney +.  Expectations were beaten by a wide margin. 

It's now possible to pay a very reasonable price for Disney if we look 2-3 years in the future. That's probably why some investors are super bullish on that stock (Pat Dorsey put 11% of his portfolio on Disney. He's usually super bullish on very high growth stocks). 

Members of Congress VS Standard and Poor's

A few weeks ago, a guy wrote to me, suggesting to write about Members of Congress VS Standard and Poor's. 

Have you seen by how much these guys beat the SPY? Is it normal? They all have access to informations about where the government's heading and it looks like they know how to use these informations. 

Why do the interest rates don't go up like they should? We probably have a part of the answer above. Because, frankly, with such high inflation, rates should go up by at least 1%. 

Which makes me think about how little we know about a lot of things around the stock market. Many companies try to pump their stocks with super positive news which are probably less positive than they make us believe. And sometimes, the opposite happens. For instance, Facebook last results weren't as bad as it seems but call transcript looked like Facebook was going down. Does Facebook going down or does Zuckerberg and his communication team want make us believe that things are worse than they are just to push the stock lower and then, initiate a massive buyback?

I may be wrong, I may be right. But one things is sure, we never see the whole iceberg. There's a lot of other things going on and most of them are not pretty. 

Cocaine, teen boys, easy and quick money, bullshit earnings... What a wonderful world. 

At least we have friends around us. Oh I forgot. With COVID we lost almost all of our friends. What a wonderful world. 

Advice for the young at heart

If someone has been waiting for months or years to start investing on the stock market, I think that it's the right moment.

There are many wild movements these days. Giga caps stocks are going up or down 10% for no reason. 

So, just use your money to buy shares of a stock that's doing good and that faces no problem... but that's impacted by bad news related to other stocks. 

It's much better to invest in turbulent times like these than in times where every stock seems to be rationnaly valued. 

What a bad day

Wow. What a bad day. I can't add any exclamation mark. Because I'm not happy. I prefer to remain as stoic as possible. 

Paypal is down 25% today.

Facebook is down 23% in after hours.

Both represented about 15% of my total portfolio at the beginning of the week. So, these two stocks have a negative 4% impact on my portfolio.

That's a lesson for people praising and applying concentration. That's a lesson for me. 

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

Now, a little comment: I agree with the Paypal drop today. Because Paypal was expensive and priced for a high growth. It looks like there won't be that much growth this year. Maybe no growth at all. Who wants to pay 40 times earnings for a stock that doesn't grow?

On the other hand, I don't understand why Facebook is punished that much. If the drop still is 20-25% tomorrow, Faebook will be priced like Kellogg's (PE: 16-17), a company that grows about 3% a year with margins much lower. 

Interest rates VS stock market

 

There's nothing like a graph to picture a situation. 

In orange, the stock market and in blue, interest rates

The stock market usually goes in the opposite direction than interest rates. 

However, let's not forget that the current rates are extremely low. If they go 0.5% or 1% higher, they will still be way way way way way lower than historical average. 

If rates go to 10%, it will be very bad for investors. But as long as they're somewhere in between 0 and 3%, I don't see what's unusual and dangerous. 

Higher rates will force people and businesses to be more cautious with money. Because when it's too easy to access money, people and businesses tend to become stupid. They create needs for themselves that don't exist. They buy stupid things. It has always been like that and always will be like that. 

Good companies will do well if interest rates are 0% or 5%. Probably not as well with 5% rates than with 0% rates, but, good enough.

Anyway, catastrophes with a specific stocks usually happen because of something within companies, not oustide companies. 

Passé le cap des 40 ans...

J'ai lu le livre "Dans la jungle du placement" de Stephen Jarislowsky il y maintenant près de 15 ans. 

C'est un livre que j'ai beaucoup apprécié, bien qu'avec le recul, je réalise que d'autres livres sont davantage formateurs pour un investisseur débutant (ceux de Bernard Mooney et de Peter Lynch par exemple). 

Voici un des passages du livre de Jarislowsky qui est resté dans ma tête:

"Passé le cap des 40 ans, veillez aussi à jour de la vie. À ce stade, vous aurez probablement accumulé un joli pécule et, à mesure que votre horizon de placement rétrécira, vous n'aurez plus besoin de mettre autant d'argent de côté. Le temps sera alors venu d'améliorer votre bien-être matériel de façon durable, mais toujours à l'intérieur des limites de votre revenu". 

Je repense quelques fois par année à ce passage. Je pense qu'on à tous besoin d'avoir quelques lignes de ce genre qui nous dirigent (ça pourrait être pour n'importe quel autre sujet que l'investissement). À chaque année, je réalise de plus en plus à quel point ce passage se doit d'être visé et vécu.

Probablement que bien des gens de 40 ans n'ont pas accumulé un "joli pécule", mais ceux qui ont été assez chanceux et/ou disciplinés pour le faire pourront pleinement profiter de la deuxième moitié de leur vie... si leur santé le permet.

Ceux qui, comme moi, sont dans la jeune quarantaine commencent sûrement à connaitre des gens dont la santé déclinent. Par exemple, autour de moi, de nombreuses femmes pas si vieilles ont eu le cancer du sein. Aujourd'hui, j'apprenais d'ailleurs que l'une d'entre elles, qui a exactement mon âge, a non seulement le cancer du sein mais aussi des métastases aux os. Quand vous apprenez ça, vous voyez sûrement dans votre tête un sablier se retourner...

La vie ne nous fait pas de cadeaux. On doit s'en faire nous-même. Même si c'est fataliste, j'ai choisi de vivre avec l'idée que de grands malheurs allaient survenir tôt ou tard et que je devrais m'y préparer financièrement. 

Je vous suggère de faire la même chose. 

C'est bien d'être optimiste, mais l'optimisme ne nous protège pas des coups du destin. 

A great day to start to use margin

 I recently talked to my friend who chosed the dark side of investing. 

Over the last year, he's been much more quiet about his performance. When I ask him about how things are going with his stocks, he's a man of few words. Like:

Me: How things are going these days?

Him: How do you think it's going (without a question mark). 

He told me that his portfolio was down 80%. But he didn't tell me what was his reference period. I know that it was down 80% between january and march 2021. Is it down another 80% since march 2021? I wouldn't be surprised. But I guess I'll have to drink a few beers with him to get that information. 

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

My portfolio is down almost 14% since the beginning of the year. It's a bit too much for my taste, but I'm excited about all these stocks at their lowest point. I'm looking at Disney, Netflix, Intuit, even Shopify... Of course, I don't really have to look at these stocks because my own are down quite a bit.

I'm excited because it's in days like these that I start to use margin. And if the market go down even more,  I may become an heavy user of margin. Just like I would buy a second house. 

Some people ask themselves if it's the right moment to buy a stock they like. We never know the exact answer, but when you own predictable and growing stocks and they're down 15-20% for no reason, what are you waiting for? 

Stick with high quality

 Like everybody else, when I see somebody being excited about the drop of a specific stock (saying: "That stock is now down 50% and it went up 200% last year!", I'm not indifferent. Excitation of other people, as long as I respect them or I have a vague positive impression of the person has sometimes a slight effect on me.

These days, we can see many high-flying stocks of the recent years down by 50% or more. 

For instance:

Sea Limited (SE) is down 55% over the last 3 months;

Block/Square (SQ) is down 50% over the last 3 months;

Avalara (AVLR) is down 40% over the last 3 months;

Shopify (SHOP) is down 40% over the last 2 months;

Mercadolibre (MELI) is down 35% over the last 3 months

There are many many other examples. And while everybody is worried about the rising of interest rates and many more months or years of COVID, these stocks with very high valuation took a hit. 

That's not where I'm looking currently. I'm looking at more boring stocks than that.  I'm looking at stocks which offer a nice growth, don't carry too much debt (less impacted by rising interest rates) and have a rational valuation. Almost all the stocks I own respect these criterias in my opinion. 

Another one could be United Health (UNH). Their results were out today and they were great. That company has a very rational PE (about 20-22) and isn't part of the folly around interest rates. 

Considering it's valuation and current growth, that stock should double over the next 5 years. Of course, Mercadolibre may decuplate over the same period, but the road will be much bumpier. 

A lot of people seem to have forgotten that doubling your money with a boring stock in 5 years is actually great. 

Microsoft (MSFT) buys Activision Blizzard (ATVI)

We all carry great traumatisms in life. Some have been raped, some have been beaten, some have been raised by social care. And, when we grow up, traumatisms are still there. Actually, it's a life of sparse traumatisms.

When you're an adult, you think that you're safe from these traumas. You become an investor and everything is serious and rational. But no. You invest your money in Dollar Tree and that company which was great until then decides to buy Family Dollar and overpay a lot for it. Then, many years of stagnation follow and a great company becomes just a normal company.

Of course, it wasn't my worse investment. But it's the one that made me become fearful of acquisitons (I don't know why but Valeant crazy acquisitions like the feminine viagra which was way overpaid didn't traumatize me that much). 

Today, we learn that Microsoft will buy Activision Blizzard (a video game company). They should pay 95$ a share which is something like 25 times 2022 earnings. It's a bit expensive, but Activision grows by 12-13% on an annual basis with 29% margins (excellent) and a ROE of about 17. Also, their debt is low. 

It look like a good acquisiton. It may even be a great acquisiton.

I'll keep my Microsoft shares. 

Inflation

We hear that inflation could be around 7% this year, which is huge. Actually, it's been at least 20 years that inflation hasn't been so high. 

So, the cost of living should go up by 7% this year. 

Given the fact that houses are more expensive than ever (you ask 400 000$ for your house and you end up with a seller offering you 500 000$), it's not that hard to see that something doesn't work. Something similar has happened with the price of wood and various construction stuff, used cars, used motorcycles, used skidoos, etc...

Of course, it won't last. Because excesses like that blow sooner or later. It may last 6 months or 2 years, but it won't last 5 years because a significant percentage of the population will declare bankrupcy before that time. 

That's why interest rates will rise. Because when there's too much money available at a ridiculous cost, people and businesses borrow a lot and spend this money. Then, there's inflation because of high demand for everything. Then, the governement has to rise interest rates to reduce the access to money, thus reducing inflation. 

I finally understand what I've learned at University, 20 years ago.  

What to do as an investor in a period of high inflation? 

Maybe rebalancing our portfolios (for instance, Dollar stores would be a safe bet in an economy where everything is more expensive). 

However, I believe that an investor should stay on the market. Because astute companies always manage to do well in any condition. 

So, to resume all these lines in a very few words, I don't really care about inflation, as an investor. 

I only care about it as a consumer. 

So I shop mostly at Costco. 

Excitation

Some rookie investors may currently shit their pants, seeing their portfolio going down a lot. 

Mine is down almost 10% since the beginning of the year. I'm not unhappy at all. Actually, I'm excited because I like my stocks and I thought they were great companies before the drop. So, I think they're even better purchases now. In fact, I bought a lot of shares of my favorite companies today. 

I don't use my margin for the moment. But I'm very close because I almost got no money left. If the market goes down by a few percent more, I may very well use my margin. And if there's a crash, holy fuck, I'm gonna use my margin like a junkie would snort a line between the two extremities of a piano.

Which is actually what some people used to do in the 80's.  

ICON (ICLR)

I've recently discovered Polen Capital Management. I think it's my favorite investment firm listed on dataroma. So much of their stakes look like mine. 

For instance, here's their first 10 positions which represent more than 55% of their entire portfolio:

Facebook

Google

Amazon

Adobe

Microsoft

Mastercard

Salesforce

Abbott Labs

Visa

Accenture

Polen seems to like the same stocks than me. So, when such a firm owns a stock I don't know about, I'm always tempted to look further. This time, the stock is ICON public limited company (ICON). It's a company based in Ireland (they probably like to pay as little taxes as possible). Their website states the following: 

We are a global provider of consulting, and outsourced development and commercialisation services to pharmaceutical, biotechnology, medical device and government and public health organisations. We focus our innovation on the factors that are critical to our clients – reducing time to market, reducing cost and increasing quality – and our global team of experts has extensive experience in a broad range of therapeutic areas. ICON has been recognised as one of the world’s leading Contract Research Organisations through a number of high-profile industry awards.

The first thing I take a look at is growth. For the past 5 years, average annual growth was 16%. For the next 5 years, estimated annual growth is 25%. Why growth is supposed to get this high? Because of organic growth but also because of recent acquisitions like PRA Health for 12 billion dollars, last year. 

Then, their earnings are highly predictable (90% on Value Line). That shows the quality of the business. High growth and high predictability. 

Forward PE is "low" given such estimated growth and predictability. Actually, the FWD PE is about 21 (but if you add debt, it's higher than that). It shows that the market is cautious with the last acquisition because these days, we pay much more than that for such growth. However, the stock went up 58% in 2021. Recent history shows a great performance. 

Before the last acquisition, ROE was about 25 (very good) and margins were about 12-15% (good). The debt was well managed before the acquisiton but it's now high. There's also been a lot of dilution. But I believe that this acquisiton will pay. Of course, I may be wrong. But this industry is very specific and the last acquisiton made that company much bigger than it was. Actually, they now have a formal partnership with most of the top 20 biopharma companies in the world. 

So, I decided to reduce one of my stakes to enter a small position with that stock. 

Buy the S&P500!

Is it really worth it trying to find a good investment firm that will invest your money with a good performance? 

Of course, there are some good firms, but there are much more bad firms (surely 8 bad ones for 2 good). So, your chances are at least 80% to do worse than the S&P500 with a specific firm. And there is surely a substantial percentage of these firms that are simply fraudulent. Let's never forget this. 

Is it really worth it trying to invest by yourself? Making lots of mistakes buying crappy stocks that you should never buy and having lots of stress about the market? Doubting constantly about your stocks, trying to find something better, buying at the worst moment, selling at the worst moment? Having a performance most of the times worse than the S&P500. Sometimes better, but with lots of effort or chance. 

Buffett said that and many others said that. And now, having seen the performance of many firms for the recent years, I'm pretty sure about it: the S&P500 (SPY) or any index that reproduces its performance is the best place to put your money. 

Wether you own 5000$ or 1 billion dollars, just put it all there and stop thinking about it. Collect your annual 10%, year after year, until you die, without any effort. 

That index doesn't try to look smart. Or doesn't try to impress you. Or doesn't show you made up numbers.

Many investment firms try to do all that. 

Charlie Munger going crazy

Charlie Munger is very old. He turned 98 a few days ago. He has been an investor for many decades. And while I don't know him that much, the fact that he's very close to Warren Buffett makes him very respectable in our minds. 

Both of them have always been honest (I guess) and they invest with intelligence (usually). I don't like all their investments, but they never go crazy on some obscure stuff or some hype. There's so much investors doing weird stuff that Munger and Buffett often look weird just because they're normal.

Anyway, recently, I saw that Munger DOUBLED his investment in Ali Baba. 

This stake now represents 28% of his portfolio.

Now, that's crazy. I'd never ever think about having such a sizable stake in my portfolio. Even my favorite names like Constellation Software and Google would never be this important. And I trust their management teams at least 10 times more than I trust any chinese company. 

Is Munger crazy now? 

Will Buffett do the same and thus, pump Ali Express shares?  

A return on my 5 picks for 2021

On december 27th, 2020, I wrote that my 5 picks for 2020 were as following:

Square (SQ)

Facebook (FB)

Fair Isaac (FICO)

Epam Systems (EPAM)

Nike (NKE)

An astute observer would notice that I still own only two of these five companies. Which shows how faithful I am with my conviction picks.

Here's the performance of these 5 stocks in 2020:

SQ: - 27%

FB: + 25%

FICO: - 14%

EPAM: + 92%

NKE: + 19%

Average performance: 19%

Not bad, but easily beaten by the S&P. 

That's why I prefer to hold 15-20 stocks. You can manage to do a few mistakes with such a portfolio. With only 5 stocks, it's gonna be harder. 

By the way, I'd like to highlight the fact that most of the people who submitted stocks last year did pretty bad. Some of you suck big time. Fuck you.