Fabrice Taylor VS Jason Donville (2012)

It's been a while since I've posted some serious shit here. But here I come with some intelligent stuff with a few gross words like "cunt", "dick", "slut" and "dickfuck" to illuminate my sentences.

On stockchase, there's a lot of experts. And a lot of this lot of experts aren't very good. Not better than the average asshole at your bank or at your caisse populaire. Fuck all those assholes that try to sell us some mutual funds with bullshit such as Yellow Pages or Nortel Network on it.

So, about all those experts, Jason Donville is probably the best of them all.

But, wait, there's also Fabrice Taylor who's allright. How much is he allright? I don't fucking know. I'm giving my tongue to the cat, like we say in french.

That's where the plus value of this blog appears.

Fabrice Taylor's got some real cool hipster glasses but he also got some great investment advices

Let's compare both of them and let's extract some knowledge of this blog which is full of useless street language.

TOP PICKS OF JASON DONVILLE BETWEEN MAY AND OCTOBER 2012

2012-05-07

CGI Group: UP 80%
Jean Coutu: UP 59%
Paladin: UP 236%

2012-06-18:

Directcash Payments: DOWN 29%
Jean Coutu: UP 54%
Paladin Labs: UP 208%

2012-10-03:

Badger Daylighting: UP 195%
Directcash Payments: DOWN 31%
Softchoice corp: UP 70%
AVERAGE PERFORMANCE: UP 94%


TOP PICKS OF FABRICE TAYLOR BETWEEN MAY AND OCTOBER 2012

2012-05-25

BCE: UP 19%
The Brick: UP 38% (acquired)
Athabaska Minerals: UP 300%

2012-08-07

Performance Sports: UP 93%
Loyalist Group: UP 90%
Intertape Polymer Group: UP 69%

2012-10-22

Hi-Crush Partners: UP 199%
Birchcliff Energy: UP 51%
AMD Micro Devices (short): UP 86% (pretty bad move)

AVERAGE PERFORMANCE: UP 86% (the short of AMD was the only real bad move here)

Holy fucking cunt! With these results, I understand that I could as well start a blog about Fabrice Taylor who is almost as good as Jason Donville.

Don't fuck with Taylor too!

Using the Magic Formula

I'm seriously thinking about using the magic formula (TM: Joel Greenblatt) in a near future.

This link show us that, from 1988 to 2009, the magic formula compound annual growth was about 24%.

Fuck. It means that in about 3 years, your money has doubled.

I've written a bit about it before, but this method consists roughly of selecting 20 to 30 stocks, of equal weight in your portfolio. You chose all the stocks for which the ratio between ROE and PE is the highest. And you repeat this exercice every year. That's the method used by Jason Donville for selecting a lot of his stocks.

Let's see some examples:

Rifco
Forward PE: 15
ROE: 45
ROE/PE: 3

McDonald's
Forward PE: 16
ROE: 35
ROE/PE: 2,2

Those two would be good candidates for a magic formula portfolio because you get a good ratio (the ROE is at least twice the forward PE ratio). Jason Donville establishes that a ratio higher than 2 means that the company would be a good buy.

One of the biggest ratio you could get is the one of IBM

IBM
Forward PE: 10
ROE: 95
ROE/PE: 9,5

In these times where value is hard to find, maybe we should put our faith in magic. A lot of great investors are in a stand still mode. So, let's be humble and do the same as those rich mofos. Or, let's put all our fucking money in Berkshire Hathaway. Or, dare I say, let's put our faith in magic.

So here's a list of some stocks that could be great choices in a magic formula portfolio.

Canada:

Cipher Pharma
High Arctic Energy Services
Rifco
Carfinco

USA:

IBM
AAPL
Gilead Sciences
Ruger
Smith and Wesson
TJX
Ross Stores
Nu Skin (watch out, but very cheap)
Herbalife (watch out, but very cheap)

The negative investor

Holy shit. My small cap stocks suck big time these days.

I'm so fucking mad.

Loyalist Group, Macro Enterprises, Avigilon and NTG Clarity Network are almost all at their lowest price in a year. I'm so fucking mad about the TSX and the Venture.

Of course, I have some stocks like Constellation Software, Alimentation Couche-Tard, Cipher Pharma and Questcor that are almost all at their highest, and I've put much more money in these stocks than in the ones above.

That's what it takes to make you understand what a negative person is.

What about Beta, bro?

Some investors are proud to tell us that they don’t use beta. They don’t give a shit about beta.

But what the fuck is a beta? An old videotape, just before the VHS? Oh shit, those investors are pretty up to date by letting down an old technology that’s been obsolete for 20 years.

But a beta is also a greek letter, a version of a software and maybe a lot of other very cool things.

In investment, beta exists too. So many fucking definitions of the same greek word, which is in fact a letter. Holy cunt.

So, in investment, a beta is a measure of volatility. A beta higher than 1 means that the price of a stock moves with more emphasis than the stockmarket. A beta lower than 1 means that the price of a stock moves with less emphasis than the stockmarket.

For example, if the beta of McDonald’s is 0,36, it means  that the price of the stock moves with less emphasis than the stockmarket in a normal day.

In his last ROE report, Jason Donville tells that he never watches the beta coefficient of the stocks in which he invests. But it appears that most of the stock he buys have low beta.

Come on everybody, wake up! I’d even dare to say, come on Jason, wake up!

If the price of a stock moves with more emphasis than the stockmarket, it’s mainly because this stock is affected by the economy in general. If a stock is affected by the general state of economy, it’s because it’s earnings fluctuate in relation with the state of economy. And if you're looking for stable growth like Jason Donville or a lot of other good investors, you'll be looking for companies that grow in a steady way.

So, if you buy a stock with a low beta, earnings are generally more predictable than a stock with a high beta. That’s why beta coefficient tells something and has some importance in my opinion. It GENERALLY (there are some exceptions) reveals that the earnings are stable whatever the state of economy is.

Below are the Beta of some stocks. You’ll see that healthcare stocks have a low beta. And construction related stocks have a high beta:

SOME BETA'S

Alimentation Couche-Tard: 0,04 !!!

Berkshire Hathaway: 0,35

McDonald’s: 0,36

Merck: 0,39

Pfizer: 0,68

Valeant: 1

Deere: 1,29

Caterpillar: 1,59

Bombardier: 1,65 

Appreciate low beta's, bro.

How much would you pay?

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Outside the crisis: Canadian Banks

Once upon a time, I was a big fan of Canadian Banks. My knowledge was limited about investing, so, I took up every advice from my friend at work.

He was a big fan of Canadian Banks. So I became like him. The first shares I bought were some Nova Scotia Bank shares, in the autumn of 2008. Then, I bought some Royal Bank shares and finally, some TD Bank shares.

I didn't know about the importance of growth at the time. I thought that choosing a blue chip was the most important thing in investing. Yeah, I can hear you laugh, motherfuckers. Laugh at the stupid cunt I was back then.

I sold all of my shares of these banks in 2012. I realized that I couldn't evaluate banks with the same precision as some retail or healthcare companies. So I took a big breath and sold about 40 or 50% of my portfolio in a couple of days. In retrospective, it was a good move.

Because Canadian Banks may be a secure investment. They may be some of the greatest banks in the world. But their growth rate isn't that high. Too many people are blinded by the fact that they're "blue chip" and about their high dividend yield.

Today, I don't own a single company with a growth rate inferior to these banks. Let's take a look at the earning per share (EPS) growth rates of the Canadian Banks in the last 5 years:

Royal Bank: 10,4%
TD Bank: 7%
Nova Scotia Bank: 11%
National Bank: 13,5%
Montreal Bank: 11,8%
Laurentian Bank: 2%
CIBC: -3,6%

That explains why not a single of those banks doubled in the last 5 years while a lot of other companies did.

Those numbers don't mention if the bank made a big acquisition that took a lot of money and resulted in a decline of EPS. So, don't take these numbers at the foot of the letter like we say en français. You should also take a look at the ROE to see the quality of the business.

ROE of Canadian banks is generally good but not excellent (between 15 and 20 for most of them). That's better than keeping some money under your bed, but you could easily find something better in the last 5 years. Just take a look at a chart of these banks VS some great American companies (TJX, ROST, DLTR, GWW, AAP, ORLY, GOOG, etc).

If you compare Canadian Banks with champions of the TSX (Dollarama, Home Capital Group, Badger Daylighting, Enghouse Systems, Alimentation Couche-Tard, Constellation Software, Stella Jones, etc), you'll see that in the long run, a big bank (or a blue chip) isn't generally a champion of performance.

It's mostly a good investment for insecure people or old people about to die.

Top picks from 2009 to today (Part III: 2012)

Today, we'll take a look at Jason Donville's Top Picks of 2012.

Once again, every Top Pick for which the price has rised from 100% at least gets a rating of "good". Every Top Pick for which the price has rised between 0 and 100% gets a rating of "average". And finally, every Top Pick for which the price has declined gets a rating of "bad".

The Standard and Poors (S&P) index has been up 56% since January 1st 2012. That's why it's still required to get a 100% yield to get "good". 

Precision: Some companies could go private or be bought a little after Jason made his picks. I don't consider anything else than the price at the time when the Top Pick was made and the last price recorded for the shares. Only the result in appreciation is considered.

2012-01-16

Paladin Labs: UP 230% (GOOD)
Carfinco: UP 23% (AVERAGE)
Constellation Software: UP 233% (GOOD)

2012-03-05

Carfinco: UP 15% (AVERAGE)
Constellation Software: UP 193% (GOOD)
Total Energy Services: UP 25% (AVERAGE)

2012-05-07

CGI Group: UP 74% (AVERAGE)
Jean Coutu: UP 55% (AVERAGE)
Paladin: UP 236% (GOOD)

2012-06-18:

Directcash Payments: DOWN 35% (BAD)
Jean Coutu: UP 50% (AVERAGE)
Paladin Labs: UP 208% (GOOD)

2012-10-03:

Badger Daylighting: UP 272% (GOOD)
Directcash Payments: DOWN 37% (BAD)
Softchoice corp: UP 70% (AVERAGE)

2012-11-23

Badger Daylighting: UP 273% (GOOD)
Enghouse Systems: UP 134% (GOOD)
High Liner Food: UP 79% (GOOD)


A few stats about those 6 appearances on the TV:

1/6, Donville has had 3 good top picks
2/6, Donville has had one bad top pick
2/6, Donville has had 2 or 3 good top picks
6/6, Donville has had at least one good top pick

If we attribute a note of 10/10 for each good top pick, a note of 5/10 for each average top pick and a note of 0/10 for each bad top pick, Donville would get the global score of 125/18 which is equivalent to 6,9/10. So, his top picks for that period were "average plus".