I thought it would be interesting to look back on the 35 years of our company. What were our worst mistakes, our best strategic decisions, the biggest changes within our industry, etc., both for our business and in the management of our portfolios under management? In short, what have we learned from our long journey, both at the corporate and investment levels?
This is probably something to write a book about! To get the ball rolling, here are two lessons I learned from our investing experience:
1- An investment philosophy evolves, but its foundations remain unchanged.
Looking back, it seems clear to me that we have evolved significantly in the way we invest. In the 1990s, our investment universe was concentrated in Quebec, particularly small and medium-sized Quebec companies. Over the years, our universe has gradually expanded to the rest of Canada, then to the United States and finally, in recent years, internationally.
My observation on this subject is that there are high-quality companies all over the planet and that the “value” investment method applies to all companies.
The basis of our investment philosophy has been based since our beginnings on the COTE 100 System. Even today, it allows us to more easily identify the stocks of companies that meet our basic criteria: good balance sheet, excellent historical financial performance, and reasonable valuation. We adjusted the COTE 100 System in 2000 by incorporating, among other things, the level of interest rates for the stock valuation component; otherwise, the system has remained the same and it will remain the foundation of our research in the years to come, although other adjustments are possible.
We analyze stocks in the same way today as when we started. However, we have evolved over the years by paying even greater attention to the quality of a company and its business model. Over time, the qualitative aspect of a business has taken on more importance in our eyes, even if the quantitative aspect still remains essential.
2- Even fewer transactions.
Compared to when we started in the 1990s, we are doing significantly fewer transactions. The average turnover rate of our portfolio has hovered around 15% for several years. I don’t have this statistic for the 1990s, but I suspect it was significantly higher than 15%.
Over the years, I realize that the less we transact, the fewer costly mistakes we can make. We all tend to act, to be hyperactive. This tendency may serve us well in most areas of our lives, but in my opinion, it is very counterproductive in investing.
For 35 years, the COTE 100 team has been fully committed to sharing its experience and perspectives with you. My plan is to continue this mini-series of blogs about our 35th anniversary, once a month for the coming year. Once again, please send me your comments and suggestions.
