How I approach growth

My approach to growth is simple.

First, I'm looking for predictable stocks via Value Line. If a stock has a weak predictability (under 75% for instance), I usually look elsewhere. There's a few exceptions to that rule, but I usually respect it.

Then, the projected growth. I usually use Yahoo Finance for that metric. 

I'm looking for stocks with an estimated growth of at least 10% per year for the next 5 years. Actually, I'm mostly inclined towards stocks with an estimated growth around 15% per year.

How come should we believe that estimated growth? By looking at the growth for the last 5 years. I know it's absolutely not scientific, but it shows us the trend. If the annual growth over the last 5 years has been 5% per year and the estimated annual growth for the next 5 years is around 15%, I usually don't believe it. It means that the stock will do three times better in the near future than what it did in the recent past. It's possible, but highly improbable. 

I prefer stocks with a past growth close to future growth. And if the predictability on Value Line is high, it's fairly probable that the estimated growth will happen. 

Of course, it's a quick explanation of how I work. There's some details missings, but it's close to my mental path. 

That's why I don't buy stocks like Amazon (very high growth but very low predictability) and why I buy stocks like Google (good growth and very high predictability). 

Transunion (TRU) and credibility

In september 2017, I wrote something about Equifax (EFX), saying it was almost the perfect kind of stock (services bought day after day by countless people and institutions). On paper, that's the perfect business: it doesn't have to reinvent itself and everybody needs it.

However, the hacking of Equifax happened earlier in 2017 and I felt that the reputation of the firm would be damaged for a couple of years at last.

Time passed and proved I was partially right. Because about 1 year and a half later, the shares of EFX went from 100$ to 120$. Not a bad performance, but not good either. 

Even tough the recent performance of Equifax has been so-so, it's still a great business that's going through a rough period. And what about something similar? What about Transunion?

Equifax and Transunion. It's like Visa and Mastercard: practically the same thing, with a different name. Let's compare both: 

Forward PE

Transunion: 21

Equifax: 20

ROE last 5 years

Transunion: 11

Equifax: 16

Annual EPS Growth last 5 years

Transunion: 27%

Equifax: 11%

Projected annual EPS Growth next 5 years

Transunion: 15%

Equifax: 3%

Debt level

Transunion: very high (about 20 times 2018's earnings, which is a lot)

Equifax: high

Transunion really looks great to me, but the debt is very high. Once in a while, I have no problems with a company that has a debt a little too high. But this time, it's too high.

Isn't it funny that a credit score company has a high or very high debt level? Doesn't it lack a bit of credibility? Isn't it like an healthcare company would have an obese guy as a CEO? 

Fuck, it happened with Valeant (Mike Pearson was probably 400 pounds with always a donut available in one of his pockets). 

That fucking stock market is such a fucking funny place.

LOLLLLLLLLL.

Your limited options

I'm active on the market for a little more than 10 years and while things went relatively well for me, I still don't like 95% of stocks, of investors, of people writing on forums about fucking penny stocks and crappy companies that don't grow or about companies that grow a lot but don't make any money. 

That investment world is full of hypocrites and crooks. It's a game of appearances. I see it every day. There's a shitload of superinvestors enjoying their visibility a lot for the power or the possibility to fuck gold diggers. You've got wannabe investors trying to get visibility or trying to get closer to other investors to be a real one. You've got hedge fund managers trying to convince us that they're job is useful to retired people while they just fucking snort coke with their money. A lot of nasty motherfuckers are in the investment field. 

I find it intellectually stimulating to read about stocks, but I'm not in love with that. I could very well stop any investing activities if I was really rich. Then, I'd only travel and contemplate the horizon, day after day. 

Money is probably the only aspect of my life where things go pretty well. The rest doesn't necessarily goes wrong, but I wouldn't use the word "good" to describe them. But I don't want to complain, because a lot of people have had a way more difficult time than me while they were in Auschwitz.

I've come to believe that, probably, the only way of living an exciting life would be to live like Alex Delarge in Clockwork Orange. The problem is that it's highly immoral and illegal to live like this. I don't care too much about morality, but for legality it's another thing:  I don't want to experience sodomy in jail. 

But otherwise, if you chose the moral path, what will you get?

You'll get a job that will bore you sooner or later. You'll get bosses you don't like and for whom you've got no respect. You'll get a wife or a husband to whom you'll have nothing to say and many diverging interests as time goes by until there's nothing left between you. You won't even touch your partner eventually. You'll lose your friends, some for reasons, some for no reasons, even if your relation was solid not so long ago. Your kids will get on your nerves every day after work, screaming and crying for no reasons. Your parents will get cancer, suffer and die and you'll feel alone. You'll get health problems of various nature, sometimes light, sometimes heavy. You'll try to understand if 40 years have made you advance or stall. You'll try to understand your place in this fucking world and you won't find an answer. 

You'll fall into depression or you'll realize you have to change the way to play the game. And I really just see the extreme way of Clockwork Orange as an option of living a non-boring life.

It's very important for you to stop being happy today and fully realize what I'm telling you. 

Don’t giving a shit

I’m currently in Easter Island.

That’s the first time since forever that I don’t give a shit, or even a fuck, about my portfolio.

OK, Internet is crappy here, but I manage to get a refresh on the different quotes that interest me.

But it doesn’t matter.

Discipline *** EDIT ****

Here's my annual post about the progression of my portfolio over time. The performance of a portfolio may bring joy to a heart, but discipline with savings could amplify the joy someone's feel.

This year again, I believe that my discipline did a huge difference on my portfolio. The following numbers show how my portfolio has grown from may 16th 2009 until may 16th 2019 (every may 16th of every year).

2009: year 0

2010: 75%

2011: 41%

2012: 38%

2013: 31%

2014: 50%

2015: 54%

2016: -8%

2017: 22%

2018: 19%

2019: 32%

Compound annual rate since 2009: 35%

Given the fact that my portfolio is currently almost 20 times bigger than it was 10 years ago, it's incredible that I've managed to grow it's value by 30% over the last year. An important part of the growth is due to savings. So, please, do not tell me that my numbers are not performance numbers because I know that.  It's simply a photograph of my portfolio from year to year, without taking care of what's the explanation behind the growth. 

Here's a substantial explanation: My 9 years old car. It's my pride in a certain way. That car is reliable, doesn't cost me anything except some gas and insurances and it helps to me save about 500$ every month (if we had a second car or a newer car, that's what the cost would look like). The money I save there can be allocated to travel or to investment. 

Goal for the next year: 15% growth.


**** EDIT ON MAY 27TH ****

Actually, my performance from 2018 to 2019 has been 32% instead of 30%. 

Uber IPO: another fucking joke

These initial position offering (IPO) are usually a fucking joke. A joke where the owners do LOL a lot and where the super excited buyers don’t LOL at all after a few quarters.

A couple of weeks ago, I wrote about Lyft IPO. Today, it’s Uber IPO and what I wrote about Lyft could very well be applied to Uber.

We’re talking here about a company that’s selling his shares for 45$ (estimated market cap: 82 billion dollars) while the company has a slowing growth and recurring losses. The only hope for investors is to see Uber executives use efficiently the fresh money they’ll get from IPO.

But, so far, executives haven’t done any wonders on a financial level. That’s how I see things. Why should we give our hard-earned middle-class money to already rich people who are unable to make money?

Don’t tell me it’s a good joke. It’s an hilarious joke.

Another reflexion on life

I'm very to close to 40, a number that has some signification for all of us.

A few days ago, I met a doctor who told me that I was probably suffering the Crohn's disease. It's a chronic disease, so I will never recover. I'll have to take pills for the rest of my life.

It's an auto-immune disease, so my intestine attack itself. If I don't use a treatment, the cramps will be more frequent and more painful. And I have 80% of chances to have a surgery, or, if you prefer, to have some doctor removing a part of my guts, sooner or later.

Nobody dies from Crohn's disease, but we may suffer a lot. And we have more chances to get intestine cancer that normal people. So, now, I have the specter of cancer above my head. I've always had it because I'm a fatalist, but now, it materializes. And I'll probably have the unbelievable chance to have coloscopies on a frequent basis. If you have that chance, you'll love it.

It's a little shock for me. It's a life sentence, even if it's not a death sentence. I'll have to pass more tests to be sure, but given the fact that it was a gastro-enterologist who said that to me after a coloscopy, I believe that he knows what he's talking about. The guy probably enters his hose in countless asses on a monthly basis.

I don't want to talk about the disease because it's no use. I just want to say once again that it's great to save money and get a big big portfolio. It's more intelligent than to burn all our money in stupid things. But it's also a very good idea to spend money on some experiences, because life changes and your condition changes over time. Why waiting to be 75 to enjoy life? Will life be enjoyable then?

Even if your portfolio approaches 500 000$ and you're 40, you don't know how long you've still got.

Better being rich and sick than to be poor and sick, but in a case or another, money changes nothing. You may have better healthcare services, but when your body fight against itself, your portfolio has absolutely no utility. Eventually, most of us will find our body fight against itself. A portfolio is no shield against bad cells. But I have to admit that it helps you to sleep better, knowing that you can survive without your job.

Please, visit Patagonia or some concentration camps while you still can.

If you can now, do it now.