Reader’s email- Lassonde, Dollarama, Constellation Software, Winpak, MTY, New Flyer, Stella Jones


I mostly get emails from advertisers and collaborators several times daily but sometimes I get emails from worthwhile readers of my blog. Here comes Mike who is an university student but has already started his investing journey. That’s very early. When I was in university, all I cared about was music, partying and girls so kudos to you Mike.

Here goes Mike.

 

Dear BSR,

I am one of your and Penetrator’s longer term readers. (Penetrator is another solid investor/blogger and my friend. Check out his blog if you have not already. Don’t fuck with Donville)

I am a university student.

I was wondering what your position is on Lassonde. Are you still holding? Are you buying more? Are you buying something else like DOL or CSU instead? LAS is 40-50% below its one year max which is quite a substantial clearance sale. I am around 25% underwater on it.

I have a fairly small portfolio of only Canadian companies. I am still in the minus overall after the HCG, CXR, etcDKAM fiasco… but I guess we all learn best from our own mistakes.

I bough some additional shares of ECN and NFI in January and have been waiting for another drop since then. Lassonde, Winpak, MTY, NFI, Stella Jones are a few of my holdings which are currently lower or at similar levels as at the start of the year… unlike the rest of the market which is up 12% so far this year. I do not have much cash right now (only 4%) but I am tempted to average down into some of these since they are lowest they have been in a few years. What is your strategy? Are you waiting to see what happens? Do you like or are you buying any of the above companies? I had most of my money in GICs so I could not even make a full TFSA contribution in January (I also had a big tuition bill in the same month) which is a big lesson for the future about liquidity.

I am curious about your perspective.

With best regards,

-Mike

 

 

 

Let’s talk about Lassonde first.

I am still holding Lassonde, although I trimmed some when it was around $280-290 but I still hold quite a bit.

Cramer taught me about importance of trimming and that goes like this.

When a stock is up by let’s say 50% then take 25% off the table.

When a stock is up by let’s say 100%, then take your original investment off the table.

Let the rest run until something is really off.

You can change how much to sell based on your judgment but ringing the register is important because stock price basically represents behaviour of buyers and sellers at given time and you know they are never rational. They often drive it too high or too low.

 

Lassonde has been having some tough time with the increased input costs as their price increase can’t keep up fast enough. That got me thinking. Would it be the first time happened to them? Not likely. They have experienced this probably many times in their lifetime of the business. Also one good thing about increased input costs is it would be affecting everyone in the business and there will be some weak ones gets kicked out of the stage and Lassonde will be around to buy them with their cash flow.

The management is very experienced and the company carries the founder’s (current CEO’s grandfather I believe) last name so they are taking their brand and operations seriously. I found them to be relatively ethical as well. No share issuance for a while and no dilution through options. They recently did some buybacks (about $1M in Jan and $1M in Feb) not a huge amount but I don’t think they have done any buybacks for last decade or so until lately. It seems like a good signal to me. The management thinks that it is a good capital allocation decision and I agree. 

The sales still grew so it is a good thing. As long as sales is growing, profit and cash flow can come back. When they come back it can be swift.

I like how Pierre Lassonde ended his most recent news release. Conservative but maintaining long term position and thanking his employees. He knows what he is doing.

 

 

For your info, I got some at $170. and my next bid has been set at $160 for a while. If they get executed, good, if not, that’s fine. 

 

 

Are you buying something else like DOL or CSU instead? 

Dollarama- I have stopped buying DOL ever since they have been going up. I have been buying quite a bit when it was around $33 ish. I have some bid at $31 but I think that won’t get executed probably ever in this lifetime…

 

Constellation Software- I massively bought CSU around $830-$850. I have not been adding any ever since its blowout quarter which was expected by many of my readers. Great job to you guys!

 

 

 

I am still in the minus overall after the HCG, CXR, etc DKAM fiasco… but I guess we all learn best from our own mistakes.

Hahaha. Agreed!

 

 

 

I bough some additional shares of ECN and NFI in January and have been waiting for another drop since then. Lassonde, Winpak, MTY, NFI, Stella Jones are a few of my holdings.

I don’t know what ECN is but it seems that you did well on that. Is it any good?

 

I have been always coming back again and again to read NFI filings but always ending up not investing any penny for some reason. Seems like a solid company but could be cyclical.

 

Winpak- I like the mentality of CEO or chairman (not sure). I remember reading one of his interview transcript and he said he extremely dislike dilution so never issue shares. Probably more ethical than many CEOs out there but I never invested in them. Been on my watch list for last 4 years or so though.

 

MTY- No word is necessary. A great company.

 

Stella Jones- I completely exited a while ago and bought probably CSU with that money. I liked the company and I think I still do a lot. Very disciplined, a frugal acquirer and I don’t know any company that is in more boring industry than making railway ties and utility poles. Any competition in North America? I don’t know. I can’t name one at least in the same scale. Their revenue is still growing at a rapid speed while maintaining basically no share issuance for last 5 years. Its revenue was $1B in 2013 but it is reaching $2B in 2018. Could be worth a lot more in the future… But, I exited because of the following reasons

  1. One of the founder family exited completely. Well could it be one of those many distorted rich family conflicts over money and power? Like the ones we often see in movies? Of course I did not like it. If founders think it is not worthwhile then why would I be? I don’t want to take my chances.
  2. It was hard to predict future earnings and cash flows for me. Overall, I like the direction of where the company was heading but I as I am aging older, I like predictability. Probably the most important factor for me in investing. Predictability…

I could be wrong on this but I like my decision so far.

 

 

What is your strategy? Are you waiting to see what happens? Do you like or are you buying any of the above companies?

I have been patiently low-bidding many companies and wait. Sometimes I lose my opportunity cost on big runup but as I learn, I believe my decisions more than any others’ lately.

I have been hating the uptrend markets lately. I really am not happy about that. During December 2018, my net worth dropped quite a bit but I emotionally accepted it and ready to go full front taking advantage of the cheap markets. I ended up deploying only little as it took time to getting my funds ready. All I could do was re-balancing my portfolio at the time which helped me a bit.

I wish the crash comes. It should be good for many young investors like me. Anyone who are below 50 and have monthly funds to invest should embrace the market downturns with two open arms as that will make them much richer as long as they keep their heads cool.

 

That’s it for me for today. I will come back with more of his and other readers emails and questions in the coming weeks.

 

 

 

Here are my most popular posts.

5 Key Tips to Boost Your Investment Returns Today!

11 most important Warren Buffett’s stock picking tips, especially 7th one.

How to save $200,000 in 6 years and retire before 45

50 most insightful Warren Buffett quotes that you need to read to be rich.

Legendary investor Peter Lynch’s Top 13 best stock picking tips from ‘One Up on Wall Street’

Why Quality Matters the Most- Linamar, MTY, Enghouse, CGI Group and Google

Investing is Art, Science and Your Own Homework.

Why is Cash the King when investing?

One question you must ask yourself before buying any stocks

My one of the most stupid investing mistakes- BUY IT WHEN YOU CAN!

Insider ownership is almost everything when it comes to stock performance2017/02/05

Can you save $10 a day? If so you will be a millionaire in about 30 years.

Do you know how much your CEO make?

Why I strongly dislike all time high stock markets and Buffett seems to agree with me?

Why is a liberal arts degree useless?

Canada’s Warren Buffett, Mark Leonard’s Constellation Software

Constellation Software’s another blowout earnings under Mark Leonard, the best capital allocator in Canada or possibly in the World!

Constellation Software and MTY Food Group’s blowout quarter

Canada’s Warren Buffett, Mark Leonard’s Constellation Software growth story continues with Q4 earnings results

Leave a Reply