Latest Stock Buy or Sell? Make More Informed Decisions!

When you're putting together an investment thesis, rarely do you think about extramarital affairs as a risk that people have on their bingo cards. Yet here we are. Not the first leader to go down this path, won't be the last. A risk that was extremely difficult to predict.

One of the key lessons here is the risk of a concentrated portfolio. Even ~8% of a US index fund would have been NVDA.

His team has taken a hard look at it over the past week. It's valuation is starting to be compelling. Though people may find the behaviour of the CEO unethical, does that impact the long-term viability and intrinsic value of what it offers to the market? He suspects that, in the long term, the answer is no.

The Chinese character for "crisis" also means "opportunity". So with any crisis, you'd be remiss not to look at the opportunity ahead. 

Long-term investor should focus exclusively on business quality, not on things that are beyond our control (interest rates, inflation, geopolitical risk, extramarital affairs). When your time horizon is 5-10 years, you accept that you're going to encounter all sorts of these macro conditions.

Companies with low debt and consistently high ROIC will generally be on their front foot during periods of economic weakness. Economic weakness plus a price disconnect from a stock's intrinsic value are friends to the long-term investor.

Generally, yes. All things being equal, the discount rate will depress the price of risk assets -- real estate, bonds, stocks. He was 6 years old during 1982, when interest rates were 20%. In the early 1990s, interest rates were pushing double digits. So current times are not without precedent.

He'd urge all Canadians to tighten their purse strings on budgets, as more capital will need to go to mortgage payments, etc. But over the very long term, companies that aren't indebted are less affected by the ups and downs of interest rates.

Great question. His firm uses National Bank, which lets them directly access 35 markets around the globe. Many of the companies also have fairly liquid ADRs that trade over the counter in the US. However, OTC stocks can't be held in registered accounts.

An investor might check out Interactive Brokers (though a TFSA might have challenges) and TD's online discount brokerage.

Consumer brands aren't what they used to be. Brands can now pop up out of nowhere, without much capital, and go viral; but the opposite can also happen.

Leaders who have had success tend to go from strength to strength. If shares were available at 15x PE, that would allow a strong forward rate of return. (He doesn't have the PE in front of him.) Regardless of the quality of management or the company, anything over 20x will deliver a mediocre return.

Your forward rate of return when investing in any security is:  Earnings yield + Growth in those earnings +/- Expansion or contraction of the multiple. Starting valuations matter a lot.

Jason, too, has a substantial position. The #2 holding at his firm, about 10% of their equity weight. Assuming the investor doesn't need the $$ for at least the next 5 years, then hold. Extremely well run. Trading at fair value. Wonderful, decentralized business model.

Question marks around how AI will impact vertical software companies. He's checked around and, at this point, fears of AI obliterating software are unfounded. New CEO says strength is deep, understanding of niche client needs.

Founder-run, founder-owned. Some debt, used to fund extremely aggressive (almost 20%) buyback program. Customer retention is ~94%, indicating a sticky and mission-critical product. Now ~27x PE. Forward rate of return from here probably 10-15% long term -- not terrible, but not as fantastic as it was.

Great company. Bit richly valued. Expects to hold for many years.

(He bought shares of Christian Dior, which was acquired by LVMH.) Founder-run, founder-owned. Owns 75 luxury brands around the world, making a fortress in the luxury space. The moat is that some of these brands have been around for decades, as well as that part of human nature is showing off your wealth.

Consumers have been feeling the pinch, so discretionary income isn't what it was. That situation won't last forever. Lots of bad news already priced in. Will continue to grow shareholder wealth over the long term.

One of his pet peeves is the constant "gamification" of the financial markets. When the barrier to buying and selling securities is so low, you invite short-term trading (which is just speculation and gambling). Philosophically, he takes some exception to the business model.

In the 1970s, average holding time for a stock was 5 years. Now it's below 10 months. He'll die on the sword of encouraging investors to understand that they own pieces of businesses. The leaders of those businesses aren't buying and selling them every couple of months.

Margins are extremely low because of no trading commissions, so has to generate income by other (unsustainable) means. Richly valued. Doesn't meet his firm's criteria. 

Instead, pay more attention to the business financials. Strong ROIC? Little to no debt? Ignore shot-term stuff like tax-loss selling, unless you want to use that as an opportunity to buy. If you have confidence in the fundamentals, keep holding.

(Note the short timeframe.)  His firm's largest position. One concern is amount of $$ being spent on data centres -- via cash, debt, and issuing shares. Debt and share issuance OK short term, but not in the long term. AI has helped business generate strong returns on ad spend for customers.

(Note the short timeframe.) (Now intertwined with LVMH.)  The arbitrage opportunity no longer exists.

(Note the short timeframe.)  One brand affected by ad algorithm hiccups, 2 brands doing well, launching fourth brand in 2027. Believes it's a short-term issue. He sized the position accordingly on heightened risk. For the patient investor, upside is considerable.