Author Topic: Two recent articles by Francois Rochon  (Read 24941 times)

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2328
Re: Two recent articles by Francois Rochon
« Reply #40 on: March 17, 2017, 02:07:58 PM »
--Interesting comment about turnover:

"In other words, average "passive" investors hold their ETFs only about 47 days!  It’s even worse with the SPY index fund (linked to the S&P 500), with an average holding period of around 12 days, or an annual turnover rate of around 3,000%.  This compares with an average turnover rate of 120% for stocks in general.  Just to give you an order of magnitude for the purpose of comparison, the turnover rate of our model portfolio is around 14%, which means that we keep our stocks on average for about 2,500 days at Giverny Capital!"
 
So now long term investing is when you hold your investment for more than 3 months? How will this crowd behave if/when somebody shouts fire?

-Mr. Rochon talks about his podium of errors. Impressive.

--On Valeant: "Our confidence in the CEO was, in retrospect, a serious misjudgment of the person and his leadership qualities.  Clearly, under pressure to maintain a high rate of growth, deleterious decisions were made.  This was coupled with a significant increase in indebtedness."

Valeant has a separate thread. Mr. Rochon considers the investment a mistake even if they made money on it. I prefer this kind of mistake but like, the Giverny guys, it may be important to learn from those as well. Leverage is beautiful when there are no headwinds.

--On Alimentation Couche-Tard: "In 23 years, the stock has multiplied by more than 200 times." "This omission mistake has been haunting me for more than 20 years."

Me too (in a big way). For those who are not familiar, this company is not about technology or revolutionary products. It has become a global consolidator in the convenience store industry! The history is fascinating. I am reading (in the huge pile on my desk) the founder's biography. This may be an idea for another thread.
The conclusion here is that, if you can spot, a true long term wonderful compounder, be ready for pay for a good price. When I was in university, I bought myself a car (VW). If, instead, I would have put the money in ATD.B, today the investment would be worth around 3 millions (that's a lot of Ferraris). Food for thought. I know, we should not think like that. Shakespeare had something to say about this line of thinking: "We know what we are but not what we may be." (Hamlet, Act 4, Scene 3) I say that, maybe, it is better not to know. This story is particularly frustrating because I was able to witness (scuttlebutt) first hand the transformation that the acquired stores went through after the serial acquisitions and this was within pretty much anybody’s circle of potential competence. In the years 2000's, I was always behind the ball on this one. In 2008, I finally put my finger on the trigger. Chose other targets.
The founder CEO Alain Bouchard pulled the trigger himself in 2008 and  purchased 16.9 million shares. Since then the share price went up at least 12x and they introduced a dividend since. Do I need to say more?

One of my long term goals on this Board (my take of long term is not 3 months, it's more like 10 years) is to help uncover and dissect such a long term compounder going forward.

--On Mohawk industries (carpet manufacturer): The Giverny group did not double down in the 2008-9 downturn.

I have held MHK too and my mistake is different. I picked it up in the 2008-9 period as a investment that was blasted by the real estate downward spiral of the subprime unraveling and that would recover to intrinsic value relatively rapidly. I got that right but failed to see the long term compounder characteristics of the firm after. It became a bagger. Could have been a multi-bagger. Food for thought.

--On politics, Mr. Rochon says: "It would be a mistake to let our political ideas, as valid as they may seem in our point of view, to blurry our investment decisions". I would tend to agree but then again who I am to say?


mranski

  • Full Member
  • ***
  • Posts: 151
Re: Two recent articles by Francois Rochon
« Reply #41 on: December 29, 2017, 04:05:30 PM »
I watched a Google Talk YouTube video with Francois dated dec 5/17, and thought it was good. Apologies if it was posted elsewhere.

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2328
Re: Two recent articles by Francois Rochon
« Reply #42 on: December 29, 2017, 06:52:02 PM »
You are probably referring to his "art of investing" talk.
Liked it too. Refreshing and full of candor.

Have you looked at the latest 13-F?
https://whalewisdom.com/filer/giverny-capital-inc

Often see common targets on the radar.

mranski

  • Full Member
  • ***
  • Posts: 151
Re: Two recent articles by Francois Rochon
« Reply #43 on: December 29, 2017, 08:53:07 PM »
Thanks, I didn't have current holdings.

Charlie

  • Sr. Member
  • ****
  • Posts: 310

John Hjorth

  • Hero Member
  • *****
  • Posts: 3096
Re: Two recent articles by Francois Rochon
« Reply #45 on: March 22, 2019, 12:13:32 PM »
Thank you for sharing, Charlie,

It's much appreciated. Somehow, over the last few years [since I got aware Mr. Rochon, his doings and his writings], reading stuff written by Mr. Rochon has been growing on me - quite a lot.

There is however one paragraph in the client letter that I'm a bit puzzled about:

Quote
A few words about big American banks ...

... That's why we own shares in four US banks at the time of writing this letter.

How do you perceive it? -Personally, I read it as if Mr. Rochon has bought more big US Banks since after the "as per" date of the last 13-F/HR filing for Giverny Capital [in 2019, as per EOP 2018Q4]. - Please note the word "big" in the paragraph header. In the last Giverny Capital 13-F/HR I only see JPM as one of the "big ones".
« Last Edit: March 22, 2019, 12:18:08 PM by John Hjorth »
”In the race of excellence … there is no finish line.”
-HH Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates and Ruler of Dubai

Cigarbutt

  • Hero Member
  • *****
  • Posts: 2328
Re: Two recent articles by Francois Rochon
« Reply #46 on: March 22, 2019, 01:59:04 PM »
^This is all speculation of course but the wording and the overall philosophy of the firm would tend to confirm that they would, like the Oracle, tend to build positions in the US-based too-big-to-fail banks.

I have a media article from 2012 (not in Danish or English) that features a member of the Giverny team (who came from the banking sector) who described his line of thought on the topic. He underlined the long-term orientation and the capacity for strong banks to eventually benefit from more difficult environments.

As you likely know, the Giverny group still had (as of Q4 2018) a large position in the Bank of the Ozarks and that bank was not mentioned in the 2012 article. What was discussed then was a position in Wells Fargo and M&T banks and it was explained that both could reasonably be expected to double in the next five years, which is a typical benchmark for them. For M&T, they have historically described respect for Bob Wilmers, the previous leader of the bank and the stock has basically doubled. For WFC, a double would have been within reach absent a temporary lapse in governance but that was hard to predict.

Hope this helps.

BTW Charlie, thank you. The Giverny letter usually comes out contemporary to Mr. Chou's letter who has been a big fan of large US banks through warrants.

Charlie

  • Sr. Member
  • ****
  • Posts: 310
Re: Two recent articles by Francois Rochon
« Reply #47 on: March 22, 2019, 02:01:00 PM »
I find Mr. Rochon doings and writings always interesting, too and always learn something.  :)

I thought his arguments about the index investing were a little bit weak and his comparison with 1998. He wants to keep his clients.  ;)

I have no idea, but it looks like he bought the additional US banks in 2019. As a Buffett student I would guess he bought BAC, US Bancorp and
Wells Fargo.

investmd

  • Full Member
  • ***
  • Posts: 163
Re: Two recent articles by Francois Rochon
« Reply #48 on: March 26, 2019, 06:09:25 AM »
Thank you for sharing link to 2018 Giverny letter.
Annual outperformance of index by >4%/yr is amazing. Rochon is one of only a very few managers that has done that consistently over 5/10/15 year periods. Whilst there are some historical comparisons for consistent outperformance, who are the comparisons to Rochon's results that are actively managing money today?

I looked at Giverny a year ago and they were not accepting new money from Canadian investors outside Quebec & Ontario I think. Had to do with them applying for some regulatory approval.

Charlie

  • Sr. Member
  • ****
  • Posts: 310
Re: Two recent articles by Francois Rochon
« Reply #49 on: April 08, 2020, 11:48:30 PM »