YouSaid · the spoken record

François Rochon

lines on the record: 83
first: 2022-11-13
most recent: 2022-11-13
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Well, personally, of course, I don't like it. It's not a pleasant experience. I try to always go back to the idea that we own companies and try to focus on what's happening with the companies. And what I try to do is every time there's a correction about market, I try to see if there's ways to improve the portfolio. So I'll sell companies in the portfolio that either are not as undervalued as others or that perhaps the fundamentals are not as strong as usually when there's a recession, you can see the companies that are strong and those are less strong than you hope for. So I'll try to improve the portfolio because there'll be opportunities with every bear market as opportunities. And that's what I've been trying to do every time there's a market correction. Probably sell over juice holdings that either the fundamentals are not as strong as”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Down the stock market. And I learned a lot from that. So I said to myself, my goal, my mission is to find great companies, to be an owner of great companies. It's not to predict what the market will do. And when you have some cash, in some ways you're trying to predict the stock market. You're trying to wait for a correction to invest that 5, 10, 20 percent in cash that you keep. And I think the odds of being able to achieve that from my observation are not that high.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, I never tried to predict a stock market. I think it's unpredictable. And one lesson that was very useful to me, and lucky enough it was not mistakes I did myself, but just watching other great investors, but I remember a very, very brilliant investor that was a great stock picker, really. But he was very prudent and he always kept 20% in cash. So his investments, the stock CEO, let's say that 14% annually, but having the 20% in cash yielding close to nothing reduced his overall results to 10-11% unrolling. So I observed that and I said this doesn't make sense. It's such a great topic here. Why not be 100% invested and just live with the absolute?”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Between having enough securities that if you make one or two mistakes, it doesn't hurt too much the portfolio. And at the same time, I think 25 names is concentrated enough so that we're not too diversified, that the more names you have, the closer to the S&P 500 returns you'll have. So you don't want to have too much names and portfolio because the odds of being the index go down very quickly.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Yes, many of the great money managers that I studied, you know, Philip Fisher, Glenn Greenberg, of course, Warren Buffett and Charlie Munger, most of the time they were very concentrated. Let's say sometimes 10 stops, let's say, for instance. And they've done very well, and they waited for the right opportunity with very large margin of safety and they've done well. But for myself, from my personal experience, I thought that 10 is a little low. And I was more, I felt more comfortable with something like 20 to 25 names. So a typical weight between 3 and 5%. Let's say in a single security. For me, seems to be the right balance.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Big companies, yes, they can have a boat, but they're so dominant. They're so big. It's hard for them to grow at high ratios. I'm thinking Procter& Gamble or Coca-Cola, for example, great companies, but they won't grow earnings much more than 6% or 7% annually. So the middle of the road here would be to find a company that is big enough, old enough that they have a strong competitive advantage, a big mouth around their business, but at the same time is not too big so that they don't have any growth prospects in the future. So I think, again, the road applies in our investment process here in terms of size, not necessarily in terms of big cap, large cap, small cap, but really in terms of where they are, their path of growth in the future.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“To 20% announced. And in terms of valuation, of course, we like to pay very low multiple, but even for great companies, we don't want to pay too much a high multiple. Like I said, we don't want to experience a P reduction in the future. So again, the middle of the road is to find probably companies that are not necessarily trading at very low valuation, but not too high valuation either. So let's say 20, 25 times earnings. And I think also in terms of market cap, of course, very young companies can grow very fast, but they're more risky. Usually they're not, they don't have a moat yet around their castle. So usually one companies that have a good history of building a boat around their business. Usually you don't get that for very young companies and with very”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I think the middle role there's many ways to see it, but in terms of our investment process, I would say first we look for great companies that grow the intrinsic value at quite high ratio. We don't want the revolutionary companies that grow 50% a year, but you have to pay a very high P ratio. And sometimes used to say that more companies die indigestion than from starvation. So what he meant by that is that companies that try to grow too fast sometimes create their own doom. So we look for companies that grow the intrinsic value, but we're very prudent for companies that grow at more than 20% annually. So the middle of the road in this case would be companies that grow their intrinsic value, let's say 12.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Hundred times. Their markets are painful, but sometimes you have to still focus on the company. And as long as the company is growing its intrinsic value at good ratios, probably it's a good time just to stay patient and accept that if you pay, let's say, 30 times earning, it goes down to 20 times during a correction, you're down 33%. But if you're right on the company, eventually earnings will keep growing and the stock will recoup all the losses and even more gain the good returns. But if you pay a high P ratio to accept that there is that downside,”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think Ben Graham talked about that in one of his books, that the biggest mistakes you make is not in the bull market, overpaying for a great company, because eventually, you know, earnings will keep growing and the P ratio will get back to normal level. It'll do okay. The biggest mistakes in the bull market is to purchase companies of poor quality and they don't come back after the bear market because they're not profitable or the P ratio was so high. They have to be a limit to the P ratio you pay. I think if you pay 100 times earnings for a company and the P ratio goes down to 20 times earning bear market, you're down 80%. It takes a lot of years for earnings to grow, so you can get back to five times the level during the bear market. So there has to be some limit to the P ratio you have to pay. I don't know what's the right number, but I know it's not.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Let's say, for instance, there's Lulu Mat today, which I think is a great company, but the P ratio is a little high. Makes me think perhaps I should learn from the past mistakes and perhaps pay a little higher price than I would like to. And I hope I can always improve and become a better investor all the time by focusing on those mistakes, but also to learn from those mistakes and try not to repeat them too often.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think it keeps me humble because you don't have to search very hard to find mistakes you've made. But having this yearly podium of three mistakes, it makes me think usually in January at the end of the previous year, you know, to look up what would I choose the three best mistakes of the year, it forces you to go back and pass decision, both in things you did purchase and the ones you did not purchase. I think having this section in the annual letter every year, I think it builds kind of a process of always trying to learn from your past decisions. And I think looking at companies that you didn't buy, let's hope that by studying those to the example, very good examples of facts set into it, you want to be sure that in the future you don't make the same mistakes.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Like to the growth rate of the company will be high enough that even if there is a little shrinkage of the P ratio at the end of your investment, you'll still do okay. So if you can find a company that can grow by 20% a year and you lose a little bit on the P ratio after 10 years, you'll probably do okay. So I think many mistakes I did can be intuit or fax set research or Starbucks. I fail probably to see that the growth rate would be much higher than 12 or 18%. I don't remember exactly, but I think in terms of facts that research it was probably 17, 18% annually the growth rates since I've been watching it for more than two decades now. So it warranted a much higher P ratio that I was ready to pay. So I think that's one big lesson. When you do analysis Outstanding company, you have to be able to pay all RAP ratio.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“A great company, and in the future, the P ratio is similar to when I purchase it, if I'm right on the growth rate, of course. It can be an investment. The danger is that if you overpay a little bit, you kind of discounted a few years in advance, the future growth. Also, go back to Ben Graham to have this margin of safety when you purchase a stock. But like you say, I made the mistake of not purchasing great companies because I wanted that P ratio to be lower than the stock traded that I missed great investment because of that. It's to find the right balance of keeping the marginal safety principle in line and always at the same time always trying to see that perhaps if you pay higher than you”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Not easy because if I want to be logical here, if I'm going to own a company, let's say for 10 years, that's going to grow its earnings by 12, 13, 14% annually, to get that reward in terms of the stock, there can be a slight decrease in the P ratio, but not too much. Because let's say if you quadruple your earnings over 10 years, but the P ratio goes down from, I don't know, 30 to 20 times, you don't earn 15% annually on your investment because there was some P contraction at some point in the future. So ideally, you want the P ratio in the future to be similar to what you're paying. So I'm not necessarily looking for, let's say, a bargain company that trades at way below its intrinsic value. Of course, I like it when I do, but to me, if I can find...”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“It is. It is what I'm aiming for. I don't remember exactly, but I think since'96 the increase in the owners earning the portfolio on average, and if you include the dividend, it's close to 13% annual. So it's probably a little more than 12% in terms of earnings per share growth and perhaps less than 1% of dividend because many companies in the portfolio don't pay dividend. So that 13% is probably, like you say, four or five percent better than the average of the submarket, let's say the S&P 500, which probably has grown exactly as you say, probably 9% over the last 25 years. That's what I'm trying to do, when I purchase a stock for the portfolio, is find a company that I believe if you combine the earnings growth going forward and the dividend yield, you come close to 12, 13 percent annually.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“It is amazing. I think the fundamental process that lies behind the approach of value investing, if the value increases by, let's say 1,000% over 20 years, the market will increase the value of the stocks by 1,000%. But over a year or two or three, anything can happen. So that's why I say it's kind of a paradox. If you keep focusing on what's happening to the companies you own, eventually the stock market will reflect it.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Yearnings of all the companies you own that compare with the previous year. By doing this, I think I help myself get more impervious to market quotations. And I know that over the long run, over many, many years, if I'm right, in the owner earnings part, the quotations of the stock market will eventually reflect that. And so far, my experience has been since 1996 that there's been a very, very strong correlation between the increase of the owners we own and the quotation in the stock market.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“But the second part, you have to be patient, you have to accept that it can take some years for the rewards to be returned to you in terms of a good return in the stock market. But I think here lies the key way to deal with this paradox. You have to consider yourself as an owner of the shares of the company you own. Since I think I started in 1996, I was inspired by Warren Buffett. Of course, I started to measure the owner's earnings of the companies in the portfolio. So very simply, I would say that I would try to see my portfolio as a holding of companies and try to measure how much the intrinsic value of the portfolio has increased one year compared to the previous year. And this is done very simply by just adding”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think that's kind of with the stock market, there's a kind of a paradox because in the short term, and short term can be a few years. In the short term, the quotations of any stocks or even the general stock market can be irrational, unpredictable, and totally out of sync with the intrinsic value. But in the longer term, all the forcers seems to balance themselves and every quotation in the stock market eventually will affect the intrinsic value of a company. Any company, I don't think there's any exceptions. So this paradox, once I believe you understand that, you can see that the key ingredients is first to understand the businesses you invest in so you can have a general view of what you think it's worth.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Oh, yes, and I think as the years go by, I think it's very hard not to stay humble and get even a little more humble because it's a very tough industry. It's a very tough. When you want to beat the stock market over many, many years, not just three or four years, but over decades, I think you have to be armed with a lot of humility. And I think humility is kind of the catalyst to help you become a better investor because you always want to learn more and understand more. And I think it turns out that it's kind of a good tool to help in the learning process.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Year out of the tree on the perform the index. And I think when you accept that from the start, you deal better with market fluctuations, the mistakes you've made in securities, and you have to accept from the start that you'll have years underperformed in the market. Even if you do a good job and you study the company very well and you made some intelligent long-term”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“So I realized that most people in the business have the luxury of having a long-term horizon. So when I realized that, I said, well, if I really want to invest the way I believe is the best way to invest, I have to start my own firm. And when I started to gather clients in the early 2000s, I really took the time to explain to all those clients that we needed to have both of us have a long-term horizon and not to focus too much on the short-term results. And I don't know exactly when I started to talk about my rule of three, but pretty early I talked the importance of that rule, which is basically one year out of three, the stock market will go down. One stock out of three that you'll purchase will be a disappointment. And at least”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I don't know if it's misguided. I think most money managers are sincere doing their best. I really do. And so when I worked at that big firm that managed institutional clients, they did the best they could. And they add pressure from the clients to do well on a quarterly basis or at least on a yearly basis. So I just realized and real life, I wouldn't say I lost illusions, I just realized that in real life, it's hard to have a long-term horizon. Your clients in those cases, the institutional clients, have to share your time horizon for the relationship to work because if your clients don't give you the time horizon you need to get the rewards from equity investing, it's a wasted time to invest that way.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“That if you could identify great companies and be able to purchase them at reasonable valuation, it could do very, very well. And I would say at the beginning, it still happens today, but in the beginning, you could find some very great companies trading at very, very low valuations. And so, you know, when I started to really purchase companies the first few years, I did very, very well because there were great opportunities in those days. I'm not saying there is not anymore say it's a little harder today than it was probably 93, 94.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“It was really like discovering how to turn the lead to gold. That was a feeling that obviously I didn't have that much experience yet. So I was perhaps a little naive. But that was an exciting period, very excited. And I do remember reading old value lines from the 60s, from the 70s and 80s, and trying to identify companies at some point were trading at very, very low valuation and studying afterward what had happened to those investments. And I remember reading, I think the 1973 or 74 Value Dialogue and Rock. And I think the stock went down 80% in the correction of 72-74. And at some point, I think it traded four or five times earnings. So these were exciting times because I discovered”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“I think you have to if you're in the investment business probably over decades of investing you'll go through a very tough time at some point the market being down 50% so revenues down 50% it hurts a lot of companies so your goal is to be able to survive such period even if it happens only once in your career so from day one I've been always very very prudent and always have a margin safety in terms of keeping expenses no more than 50% of revenues”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Oh, yes, yes, and Ben Graham made it his key to value investing. He chose those three words, marginal safety. And 70 years later, I think they're still the three right words. And yes, as an engineer, it really resonated with me. And I would say that also this marginal safety principle, I think, can be extended to more than just valuation, but in terms of the quality of a business, the quality of managers, and the quality of balance sheets also. So we see it this year, companies that have a little too much leverage on the balance sheet. They can be quite hurt by the increase of interest rates. So you want to margin safety, not just on valuation, but on all the important part of running a corporation.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Think from a very early age, I was a self learner, so I wanted to know things by reading books or reports or anything. So pretty quickly, I understood that Warren Buffett was the great master of investing. So to me to write, to ask that he sends me everything that is written that is available was just logical things to do, just to study the great master. To go back to the art analogy, if you think if you want to become a great painter, you want to study the great masters of the past. So you go to museums.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“When I programmed it on the computer, I use random formulas. So it was just like a casino, so things would go up and down based just on the odds of eating the right numbers. So to me, science, physics and mathematics. Through engineering Was a more rational way. Earning a living. But when later, because of Buffett and Graham and Peter Lynch, I discovered that you could use your rationality to analyze companies, I understand. The values of companies, it really struck a chord with me because I was someone that liked to understand things and I wanted things to make sense.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I guess, like you say, in those days, Read the market quotes in the newspaper, so do you have all those big pages, small numbers? Going up a quarter, going down a quarter. And I just found that fascinating. I didn't know exactly what it meant, but I thought all those little numbers interested me a lot. And I had interest for mathematics. As you said, I became an engineer. And even though I was interested in the stock market pretty young, I used to play a board game called Stock Ticker. Oh, yeah, dice, and you would own shares of, I don't know, grains or industrial products I found that board games so fascinating that I remember I made a version on a computer much more sophisticated so it got even more interested. But I think the view at that time to me is that The prices of the stock market was really”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“An old adulter. It's probably at the beginning of 1993 really changed my whole views of the investment world, but more importantly, it gave me a real passion to invest in the stock market.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT
“Well, I believe the first book I read was one upon Wall Street by Peter Lynch, and it was the first time really that I read about value investing. The idea that a company has a value and you can purchase it on the stock market way below its intrinsic value. And to me, that was something new because I didn't have any strategy for investing or any idea how investing worked. To me, it almost looked like a casino and was dominated by financial sharks. So overnight, my views of what the market, the stock market was, really changed when I read one of them on Wall Street. And then it led to marrying Ben Graham book, The Intelligent Investor. And then went on to Warren Buffett's letters and really reading those.”
2022-11-13 · We Study Billionaires · RWH016: The Best Of The Best w/ François Rochon · IDENTIFIED FROM THE TRANSCRIPT