Que Sais-je Capital
@FRValue
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Paranoid optimist. Virtute duce, comite fortuna.
Joined January 2009
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Why I (still) invest in (beautiful) French companies…and why maybe you should too 1/n
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A few of my quirky (and sometimes inconvenient to some) investing opinions. A thread. 👇👇👇
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If V=FCF/(r-g), then r=FCF/V +g. Let that sink in for a moment. FCF yield plus growth is the name of the game. Always.
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4) The best investors in history (in terms of % returns) are people you don’t know and they don’t want to be known. They all share the same traits: they are frugal, humble, honest and independent. They all play the long game and love what they do.
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This is one of the most unknown 100+x bagger (still) listed on Euronext Paris. A mostly untold success-story made in France, combining engineering savvy, family ownership and a relentless focus on the long-term as well as client needs. Gerard Perrier Industries (GPI): a thread.
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14) The most interesting asset class in terms of potential unlevered returns for the small investor is listed microcaps. You can fish deeper and fish alone. Almost no competition from smart and sophisticated pro investors. Plus, much more liquid than PE or RE.
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Could you name 5 European micro/small/mid cap companies in your portfolio already representing a sizable % of it and that you expect to keep for a long time? Mine would be Robertet, Precia, Thermador, Gerard Perrier and Malteries Franco Belges.
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18) Don’t listen to the pros, ever. They play a different game, mostly fraught with career risk and BS. They wish they could play yours. Stick to the amateur game, which is made of plentiful opportunities, a long runway and no institutional imperative / BS.
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Welcome to Grasse, a small scenic city located on the French Riviera, also known as the perfume capital of the world. It is home to 2 hidden champions in the flavor and fragrance industry. One of them, Robertet, is a 170 years old company and a 70+bagger on Euronext Paris.
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1) Net worth should be calculated after all potential taxes. After paying taxes on their latent gains and inheritance/estate taxes after dying, the picture wouldn’t really look the same for many people. Real wealth is built over multiple generations (and after paying taxes).
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I’m quite stunned by the number of guys in their forties / fifties who are blowing up / have already blown up investing their hard-earned lifetime savings in tech / crypto “projects” or stocks. Not the kind of mistakes you want to make too late in life. Just sayin’.
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16) Don’t buy into the « daily 500 pages reading », « reading entire annual reports » or « 15-page research reports are the best ». With modern tools, common sense and an obsession about protecting the downside, all this is BS to brag and impress the beginner.
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3) Private equity returns expressed as IRRs are BS returns. The only real return is the cash-on-cash return expressed as a MOIC over the life of a fund. You can’t eat IRR. If you think differently, good luck reinvesting those early returns at the same « high » IRR...
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13) Don’t own a house or a property as an investment. The only upside is being at home, paint the walls your favorite color and not to be kicked out by a landlord. Plus, the long and cheap available leverage. Without an unfair advantage, you can ignore this asset class entirely.
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29) Intelligent investing is about focus. Focus on an asset class. Focus on a geography. Focus on a market segment. Focused portfolio. That’s the price to pay to outperform.
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24) Survive. Survive. Survive. That is the first goal of investing. That should have been the first tweet of this storm. That’s the ultimate downside protection.
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7) Simply put, I’d rather have a 10% earnings yield with stable earnings (and a big pile of cash spent overtime in the form of dividends/buybacks) than relying mostly or totally on an uncertain future growth. Call it a lack of ambition. I call it taking care of the downside...
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For various personal reasons, I’ve decided to leave Twitter and quit any writing (other than to myself) for a while. A huge thank you to all the great people I’ve met here. It was a nice and fun run.
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19) Don’t listen to anyone. Not even me of course. Be and stay an independent thinker. Draw inspiration and listen to others only if they are transparent (especially about their failures) and walk their talk with their own money (skin in the game, always).
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So you listen to these podcasts where celeb HF managers sound smart and articulate and where they speak about thinking independently and going off-the-beaten path. And then you check their 13-Fs and they all have the same long portfolios full of the same crowded-trade stocks.
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8) You should have at least 20-30% of your net worth in cash to manage your personal « tail risk ». It’s a laughable statement until s... hits the fan in the form of a health problem, job loss or having to help a family member.
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25) Don’t respect the smart investor. Don’t respect the bright investor. Respect the investor who has survived and thrived for multiple decades. This is the only reason you should worship (if you have to) Buffett and Munger.
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I don’t “invest in the stock market”. I just happen to own shares of businesses which are publicly listed. But I don’t care care about the stock market, except for the opportunities to add to my collection of companies it can present when prices are depressed.
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I’m not a smart person so I might (or even must) be wrong. But this is the way I look at a 100x PE stock. My bar is a 10% pa return (that would equal the S&P LT returns, barely). This company’s stock, in order to clear my bar, would have to x10 its profits.
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30) Ignore the financial advisor’s advice. He’s a salesman and lives to get paid a commission (and he needs it to pay for this latest Mercedes model). If there’s someone whose interests could be further aligned from yours, it’s him. So don’t pay the 1%. Ever.
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5) When investing in a new company, it’s better to approach valuation in terms of expected annual return than multiple (always invert). Keep it simple no matter what: 10% after-tax return will always make sense.
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15) PE and VC are just microcap investing with either too much leverage or too much hype/risk.
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21) The best investing approach for you is that when you sleep well at night. If it keeps you awake with anxiety, just drop it.
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31) Your ultimate financial goal (and one of the primary life goals as there is no real freedom or happiness without this) should be financial independence or a position of f*** you. John Goodman sums it up better than any “expert”.
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39) If you’re still with me, you’re not just into investing, you’re a real nerd. I can tell one when I see one...
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10) Leverage is good when it’s very long-term, limited vs. your total assets, low-cost, with no margin calls attached to it. Otherwise, forget about it.
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23) Munger is fond of saying that 3 things can cause your ruin: ladies, liquor and leverage. Manage those 3 properly and you will protect your downside, avoid catastrophe and survive.
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6) One bird in hand is worth 2 in the bush. I’d rather invest in small but established companies with proven/difficult-to-disrupt biz models as well as stable/moderately growing earnings bought at good prices. Future and high LT growth in new industries is often a mirage...
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22) Risk is not volatility. Risk is not beta. Risk is the downside that makes you lose everything overall or in a single investment. Managing risk is protecting this downside by avoiding too much leverage and keeping a cash cushion. No matter what.
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You won’t understand Buffett or Munger until you realize how high they set the bar. They don’t compromise. They have stringent filters. They say no to almost everything. This is the way.
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@fabianschilcher
@Greenbackd
This table is an investor hall of fame by CAGR (not excess returns). Before fees I believe. 10% definitely achievable over the long term.
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Pro-tip: Lots of publicly-listed French small caps have a buyback program in place indicating the max. share price at which they’re prepared to purchase their own shares. Don’t buy at any price higher than this. This should be your max.
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In 1979, with a start-up capital of €15K partially borrowed from his parents, a 25-year old creates a company in Saint-Vallier, France, with a simple idea: becoming the go-to transportation provider of French exporters to the UK. This is the story of Norbert Dentressangle. 1/n
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Don’t start yet another (hedge) fund. Save and build your own small seed capital. Manage and grow it your way, but carefully. Master the craft. Be happy. Remain an amateur with a beginner’s mind. Don’t write a newsletter. You’re welcome.
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49) Because smart does not win the investing game. Patience, research, consistency and humility do.
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28) Investing is so difficult because you make it so. Because you want to belong. Because you want to follow. Because you want to be liked. It’s not about bragging about what you own. It’s about doing the right thing.
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27) If you’re still with me by now, you should at least like or RT the first tweet of this thread!
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17) Some AR / 10-K footnotes or DD elements are important but not all of them are. Don’t miss the forest for the trees. Keep it simple. Protect the downside: first and always.
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Since I am going down a rabbit hole on Steve Jobs’ emails, this one to James Murdoch is legendary for good reasons. Jobs knew how to craft a text. He also combined simplicity, clarity and attention to details, which is incredibly rare.
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20) If someone writes something about investing and says « it’s not advice », it should then be what they do with their own money. If it’s not, tell them to shut up and stop writing. You should own what you write.
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11) Don’t marvel at Medallion (or anyone else for that matter) 40% p.a. returns. It’s done with a 5-10x average financial leverage and strategies also using questionable tax leverage / loopholes. In short, don’t try this at home...
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When everyone tries to get rich quickly and nobody talks about preserving capital or protecting the downside, you know something’s fundamentally wrong.
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12) Don’t marvel either at the average private equity returns. Assuming an IRR could be trusted, the average 12% IRR is not even 6% unlevered (and pre-tax). Yuck.
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9) This cash can also be used to seize opportunities when markets tank. How many times have I heard in March 2020: « But I am fully invested... ».
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Own. Free. Cash. Flow. Generating. Assets. Purchased. At. Reasonable. Prices.
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I know you guys are suckers for that kind of post. So there you go. No short-term meaningless performance reporting here. No $BRK position either (sorry). Just my portfolio top 10 positions (and their respective weight) as of now. Enjoy…
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62) All the good investors I know also share another common trait: an insatiable curiosity. Investing has often become a hobby through which they can learn daily about various topics and thus quench their thirst of knowledge. Without it, you might want to leave the game early.
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I read about these 3/4-digit % returns for 2020 on Twitter. Sounds fantastic, right? Now, take a step back and think about risk. Does it feel like some have been playing red at the roulette table and won three times in a row (that’s a x8)?
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Someone recently asked me how I think about valuation. The answer is simple. I don’t really think about it the way people usually do. I don’t do DCFs and all that BS. 1/n
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If there was a small-cap equivalent of Air Liquide on the Euronext market, this company would come really close. A 65+bagger (incl. dividends) since its IPO, it is a value creation machine that has rewarded its shareholders handsomely over 30+ years. This is Thermador $THEP. 1/n
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26) I have a simple heuristic with investments as a buyer. If I can’t figure out the payoff and it’s mechanics, I pass. Especially when the seller is smarter than I am. Which is most of the cases.
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84) Investing is 99% reading, thinking and learning. So read! Buffett, Graham, Greenblatt, Greenwald, Lynch...Philosophy, history, science...Twitter, forums...Read, read, read. If you don’t like reading, there’s not much anyone can do for you as an investor.
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Any rational or normal person would find it difficult to idolize financial or business “wizards” (unlike star athletes who are everyone’s superheroes). I have a few personal favorites in that space. Charlie Munger is one of them. Another one is Ed Thorp. Small thread on a genius.
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In 2019, after 28 years and rather than selling their management company, Jousse and Morillon liquidated Stock Picking (one of the best small cap funds in France) and gave the money back to their investors. They had been struggling to carry on in an expensive market. Legends.
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A track record doesn’t mean anything if it’s not at least 10, 20 or, better, 30 years long. In the meantime, be humble and consider yourself lucky. Let’s try and not discuss performance before then. Anyone can look smart in a bull market.
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58) What makes investing so hard is the absence of permanent positive feedback. You need to have the faith (or the arrogance) to believe your approach will eventually prevail. You also need to have the humility to admit you’ll make mistakes and will often be wrong.
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What really matters is not a high ROIC/ROE. What matters is how long you can sustain them at an above-average level while also surviving various internal and external crises and coming out stronger.
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Starting a very concentrated portfolio: 50% $WFC, 50% $BABA. Wish me luck…
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44) There’s no such thing as value or growth investing. Buying an asset (especially of quality) at the right/good price will never go out of fashion as it is as old as our world. It made sense for Ancient Greek traders. It still makes sense today.
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Before getting obsessed about 100-baggers, I’d suggest to be able to obtain and then hold on to a double-bagger first.
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55) Always look for skin in the game in your investments. You will rarely be disappointed by an owner-operator with a demonstrated track record of value creation and treating his stakeholders fairly. You might be disappointed by a large corporate suit CEO...
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42) I believe that 99.99% of angel investors also fall into the same category as me. But, as mentioned earlier, in a dinner, you look 100x better discussing your latest early-stage SaaS start-up investment than my shares in a weighing equipment manufacturer based in Ardèche.
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If you spend your life (especially your early adult years) obsessed with just saving, compounding and counting your beans while missing out on traveling and enjoying what the world has to offer, you might realize (too late…) this was not a life best lived…
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Another Saturday. Another French hidden champion. Another 25x-bagger listed on the compartment C of Euronext Paris! A collaboration with the excellent
@FoxCastlehold
!
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The risk for an investor is the over-eagerness to show off his/her brilliance to impress other smart people. That’s one of the traps you need to avoid if you want to do well over time. Don’t try to be brilliant. Try to be non-idiotic. Try to be rational.
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47) To step up your game, you must learn. To learn you must read and/or have mentors. Twitter and forums are fantastic tools where you can learn from the best in the niche/space you decide to pick. Build your small network and make friends. It makes the game even more fun.
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2) Your investing strategy should take into account the tax benefits you have access to, your AUM and the rotation (and therefore resulting fees) of your portfolio. Potential and abstract gross returns don’t mean anything if those 3 factors are not considered.
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Some of us look for 100-baggers. Some of us, more humbly, look for non-stupidity and doing OK in the end.
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32) I repeat this just in case John Goodman wasn’t clear enough (if there is such a thing). The goal is not to own things (as they always finish by owning you) but a position of f*** you. And taking risks from such a position becomes even more of a game than a burden.
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Investors I admire are not trying to sell anything, to be/stay famous at any cost, to get rich(er) quick, are not cutting corners, are not bragging about it, are not trying to convince others they’re right and are teaching something every time. They’re a rare and anonymous bunch.
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I mentioned Hermès so many times here over the years. But this recent Bloomberg article perfectly captures what makes this company so unique. $RMS.PA
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There are a few ways of becoming a millionaire. The most underrated: 1) pick a small pond with no big and/or too sophisticated investors and 2) take advantage of mispricings / illiquid opportunities that come your way. It’s not sexy but it works.
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Very short story of a young investor I once met who purchased shares of a beautiful enduring company he fell in love with at the market peak of 2007. Market crashed in 2008 and he waited for 7 long years before breaking even. He was considered a loser but he knew what he owned.
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46) Don’t take yourself too seriously. You will make mistakes. You will underperform. You will learn along the way. If your approach makes sense rationally and intuitively (not in models), you’ll do well over time if you’re patient and stick to it. It’s simple but not easy.
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Pas besoin de formation payante. Petite thread sur comment se créer un patrimoine ou, pourquoi pas, devenir un jour indépendant financièrement. Ce n’est pas un conseil. C’est mon approche.
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A mini-thread on $ALLUX Installux (a 7% position for me) focused on capital allocation. 1/n
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37) Therefore, the earlier you start investing the better. The longer you keep at it, even better. But to get there, you have to love this game. Think Federer or Nadal. At some point, it’s no longer only about money.
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A 175-bagger over 27 years and a French leading supplier of electrical solutions: Gérard Perrier Industrie.
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The wisdom of old Lou Mannheim in Wall Street…Thank me later, kids. 😉
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68) Find your investing niche. I love niches. I mostly invest in companies dominating a small niche. Because there are riches in niches. It’s that simple.
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Hidden Champions. Who are these small but highly successful companies? What does it take to become one? A thread! Inspired by the excellent work of
@HermannSimon
,
@StGuinchard
and the French authors of the “Owner’s Strategy”. And the Daft Punk analogy pic? More on this later.👇👇
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Investing 101 in 6 bullet points:
-Start early and don’t stop, in order to maximize your runway and compounding horizon.
-Buy good (or great) companies at reasonable (or cheap) prices. Think margin of safety.
-Minimize transaction costs and taxes by holding winning positions LT.
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You won’t be remembered for anything and even less for your investing performance track record. So make it count now by living a good life and helping people (for free).
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50) Podcasts are an invaluable resource to learn about companies and investing. One of my favorite is
@InvestLikeBest
of
@patrick_oshag
. Patrick is an outstanding interviewer who has hosted a diversity of guests. I learnt so much from these discussions.
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The French Hidden Champions threads:
Babolat
1929: Lacoste, the most famous of the « musketeers », wins the French Open. 2019: Rafael Nadal wins the same tournament...for the 12th time! Both tennis players have one thing in common: they have triumphed with equipment supplied by the same company:
#Babolat
🎾🎾🎾
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60) There’s a price to pay for investing success or any success for that matter (no matter how you define it). It’s mostly paid in loneliness. You can be around like-minded investor friends but, ultimately, you face your decisions and their outcomes alone.
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Investing success doesn’t matter if you realize later in life you messed up the rest (family, friends,…), haven’t traveled the world, don’t speak / read / understand foreign languages and cultures, don’t read, haven’t made any effort to self-improve and live a good life…
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