Share your Portfolio 2024

[WayWardCloud]

This is 95% of my net worth. Mostly in taxable unfortunately.

The Real Estate is going to be sold within 12 months.

[Red Lion]

1 hour ago, WayWardCloud said:

This is 95% of my net worth. Mostly in taxable unfortunately.

The Real Estate is going to be sold within 12 months.

 

What do you plan to reinvest the real estate into? Will there be a big tax drag on this? Are you French? Curious how this works for taxes. 

[Red Lion]

Closely held stock - 41%

Ag property - 13.5%

Rental property #1 - 19%

Rental property #2 - 13.5%

Rental property #3 - 13.5%

Rental property #4 - 7%

Taxable investment accounts - 10%

Tax deferred accounts - 9%

Primary Residence - 12%

 

So I'm a total net long of 138.5% with the leverage consisting of deferred tax and mortgages (of 26.5% of my net worth). 

[Spooky]

 

Portfolio as it stands today. Not a lot has changed, still about 50% in CSU. Over the course of 2024 I rotated out of BAC, BN and PARA and into FFH, JOE, VIOO and ENB.TO

 

Very happy with my performance in 2024 and prior, beat the S&P by a good margin. Not sure where to take things from here, need to spend some time thinking.

[rkbabang]

My portfolio is mostly the same names as when I posted a year ago (https://thecobf.com/forum/topic/20512-share-your-portfolio-2024/page/2/#findComment-546304).   I haven't done much selling this year, so I've just incrementally been adding to positions. The main differences are MSTR and BTC going way up and JOE going down (even though I own more shares than I did a year ago). First chart is stocks only and second one is including crypto and real estate.

 

 

 

 

 

[ICUMD]

14 hours ago, Spooky said:

 

Portfolio as it stands today. Not a lot has changed, still about 50% in CSU. Over the course of 2024 I rotated out of BAC, BN and PARA and into FFH, JOE, VIOO and ENB.TO

 

Very happy with my performance in 2024 and prior, beat the S&P by a good margin. Not sure where to take things from here, need to spend some time thinking.

Curious on how you value CSU.  By all valuation metrics it always appears very expensive. Yet, performance has been stellar.  That's quite a chunk you have!  I own a bit of TOI.V.  

[WayWardCloud]

19 hours ago, Red Lion said:

 

What do you plan to reinvest the real estate into? Will there be a big tax drag on this? Are you French? Curious how this works for taxes. 

 

Thanks for your interest!

 

How I reinvest will depend on where I see opportunities by the time I get the cash but if it were today I would simply buy more of VT (Vanguard All World Stocks) and VTC (Vanguard US Corporate Bonds). Probably something like 25% Bonds 75% Stocks. I'm not seeing anything super obvious so better simply sit in the index with a defensive-ish allocation (I usually don't have any bonds) and do something else with my time.

 

I'm both French and American. As you accurately guessed both countries make their claims which makes paying taxes a bit complex. They have entered an agreement called FATCA (Foreign Account Tax Compliance Act) which is very one-sided: the US demands detailed information about every account their fiscal residents own in the whole world but gives absolutely no information back to the friendly foreign countries.

 

This was my grandparents condo. In France, you have the possibility to bequeath a house when you're still alive by splitting the ownership between "nue propriété" (ownership of the walls) and "usufruit" (rights to enjoyment). You bequeath the former to your kids, or in this case grand-kids, but hang on to the later for the rest of your life. You pay a tax right away to do the split but less than what the estate tax would have been at the moment of death. My grand-parents did just that about 25 years ago when my brother and I were still kids so no estate tax was due. The downside is then my cost basis is considered at the time of the split, not of their passing, and since real estate went up a lot the initial bill was super high. However, there are gradual write-offs for each year of ownership until 30 years where profits are completely written off so any real estate sold after 30 years of ownership in France is tax free. Since we're at 25 already there isn't too much due (about 8% of the total value of the place).

 

On the US side you do not have to pay federal inheritance tax when inheriting from a foreign parent so that's taken care of. When it comes to taxing the profits however the IRS doesn't recognize any of this "nue propriété" / "usufruit" split thing. In their eyes the date of effective inheritance and thus the cost basis is the death of the parent, so that's much more recent. For the past three years real estate in Paris has trended slightly down so no profits no taxes. Fun fact: if it did go up in price but the Euro/Dollar went down I would not have been able to claim a loss in my investment due to FX. Exchange rates are not taken into account when calculating the tax basis. Fun fact 2:You cannot defer capital gains tax on the sale of the property by reinvesting the proceeds into a US one because foreign real estate is not considered "like-kind property".

Edited Tuesday at 08:38 PM by WayWardCloud

[Spooky]

20 hours ago, ICUMD said:

Curious on how you value CSU.  By all valuation metrics it always appears very expensive. Yet, performance has been stellar.  That's quite a chunk you have!  I own a bit of TOI.V.  

 

I started buying in 2017 when it was about $650 a share and at that point it still looked expensive. I have now kept it at 50% of my portfolio for a long time but I have not been adding to my position in the open market for a while but part of my bonus needs to be put into the company's shares. I was also buying consistently back when it unjustifiably got caught up in the market sell off in 2022.

 

It is a hard company to value since it is hard as an outsider to know what is going on or how the company works, especially now with minimal communication to investors. You can't really use P/E without making a lot of adjustments since IFRS earnings are kept as low as possible via amortization of acquired IP in Canada to minimize cash taxes. You have to look at FCF and then make a lot of assumptions. They way I approach it is by separating current economic value from the value generated by future growth. The key question is really how long can they keep re-investing / compounding their FCF at very high rates of return. So I approach it more from the angle of how many software companies exist in the world, how many are being created, how many CSU could acquire, etc. Also, if you haven't yet, read the letters from Mark Leonard that are available to get a better understanding of how he thinks about the company.

 

At some point there will be a limit to the potential growth of the company since it has grown so much. There is more competition from private equity and others focused on the VMS space including from the founders of Danaher. There have also been some recent insider sales so the signal now is that it is overvalued. However, it is a wonderful company with excellent management / capital allocation skills as well as management and directors with a significant portion of their net worth in the stock who are aligned with shareholders. VMS is also a great industry with high switching costs and margins. I'm in the Phil Fisher camp that the right time to sell a company like this is probably never, not to mention the tax bill I would receive.

 

 

[Castanza]

1 hour ago, Spooky said:

 

I started buying in 2017 when it was about $650 a share and at that point it still looked expensive. I have now kept it at 50% of my portfolio for a long time but I have not been adding to my position in the open market for a while but part of my bonus needs to be put into the company's shares. I was also buying consistently back when it unjustifiably got caught up in the market sell off in 2022.

 

It is a hard company to value since it is hard as an outsider to know what is going on or how the company works, especially now with minimal communication to investors. You can't really use P/E without making a lot of adjustments since IFRS earnings are kept as low as possible via amortization of acquired IP in Canada to minimize cash taxes. You have to look at FCF and then make a lot of assumptions. They way I approach it is by separating current economic value from the value generated by future growth. The key question is really how long can they keep re-investing / compounding their FCF at very high rates of return. So I approach it more from the angle of how many software companies exist in the world, how many are being created, how many CSU could acquire, etc. Also, if you haven't yet, read the letters from Mark Leonard that are available to get a better understanding of how he thinks about the company.

 

At some point there will be a limit to the potential growth of the company since it has grown so much. There is more competition from private equity and others focused on the VMS space including from the founders of Danaher. There have also been some recent insider sales so the signal now is that it is overvalued. However, it is a wonderful company with excellent management / capital allocation skills as well as management and directors with a significant portion of their net worth in the stock who are aligned with shareholders. VMS is also a great industry with high switching costs and margins. I'm in the Phil Fisher camp that the right time to sell a company like this is probably never, not to mention the tax bill I would receive.

 

 

 

Thanks for sharing Spooky, this is something I've been working through as well. 

 

@ICUMD the CSU thread really has some gems. The first three pages there are some good attempts at valuation based on the approach Mark outlined in his 2013 presidents letter found on their website. It's definitely a completely different beast that has done the unthinkable over the last decade and more. As Spooky said the question is can they continue to move the needle with acquisitions. This has been a question for over a decade now (after doing some research) and has yet to not be true. 

[SongDonkey.AI]

3 hours ago, Spooky said:

including from the founders of Danaher

Thanks for the great post, very insightful!

Could you elaborate on this?

[Spooky]

12 minutes ago, SongDonkey.AI said:

Thanks for the great post, very insightful!

Could you elaborate on this?

 

Can't remember where I heard this but the founders of Danaher are getting involved in the software space. Might have been on the podcast with Mitch Rales on the Art of Investing.

[SongDonkey.AI]

1 hour ago, Spooky said:

Can't remember where I heard this but the founders of Danaher are getting involved in the software space. Might have been on the podcast with Mitch Rales on the Art of Investing.

Thanks.

[thowed]

It's called Arcadea - don't think Rales is involved, but has backed it privately.

[SongDonkey.AI]

16 minutes ago, thowed said:

It's called Arcadea - don't think Rales is involved, but has backed it privately.

Many thanks!

[Eldad]

13 minutes ago, thowed said:

It's called Arcadea - don't think Rales is involved, but has backed it privately.

Yes. See page 45 of CSU thread. 
 

Also Mitch Rales owns around 15% of Chapters Group which is a European CSU copycat. 

[DooDiligence]

ABEV 0.9%

ABT 2.2%

BRK.B 18.0%

DPZ 9.0%

EW 12.9%

GOOGL 9.2%

JACK 1.9%

NTDOY 18.8%

NVO 14.3%

 

Investable cash 12.7% + enough cash for the next 2 years expenses. Debt free.

[thowed]

5 minutes ago, Eldad said:

Also Mitch Rales owns around 15% of Chapters Group which is a European CSU copycat. 

 

Yep, at risk of taking this further off-topic.  I can't really figure out Chapters.  Rales likes it - the Chair is a respected Value Investor (with his own fund) but not yet clear if this is the real deal or another over-priced attempt at a copycat.

 

Any thoughts?

[Eldad]

33 minutes ago, thowed said:

 

Yep, at risk of taking this further off-topic.  I can't really figure out Chapters.  Rales likes it - the Chair is a respected Value Investor (with his own fund) but not yet clear if this is the real deal or another over-priced attempt at a copycat.

 

Any thoughts?

I have not done the work yet. I listened to the serial acquirer conference RedEye did in Spring 2024 and Mohr stood out as completely honest but also eccentric and just kind of weird. He was talking about buying tiny VMS from retiring boomers which sounded great, but then the financials are a bunch of funds and seem overly complex. Figured I would just buy more Topicus when cheap instead. 

[ICUMD]

@Spooky  thanks for the overview on CSU.  Would love to get my hands on a few shares during a pullback.  Do you think Topicus will be able to follow in CSUs path?  Or better to own CSU instead?  I bought TOI with the thought that Europe is a relatively unpenetrated market for their business model and strength of management track record. 

 

@Castanza thanks for the recommendation, I'll take a close read of the CSU board.

[valueventures]

Figured I'd quickly add to the CSU conversation, as I'd also love to get my hands on a few shares during a pullback. Have looked at Topicus and Lumine too, but always struggle with valuation.

 

Broadly, I think serial acquirers provide more optionality (and diversification) than one-trick organic ponies. I've been fortunate to own Terravest under this logic (still holding, but probably not a net buyer at these levels).

 

Has anyone looked at VitalHub? I've seen it floated on Twitter as a baby CSU (albeit with more of a healthcare focus). Similar case where valuation has run up, but I like the fact that it's much smaller and should theoretically have a lower base from which to compound (and a resulting longer runway for M&A). No position yet, just light diligence so far...

 

Thanks all!

[Spooky]

13 hours ago, ICUMD said:

@Spooky  thanks for the overview on CSU.  Would love to get my hands on a few shares during a pullback.  Do you think Topicus will be able to follow in CSUs path?  Or better to own CSU instead?  I bought TOI with the thought that Europe is a relatively unpenetrated market for their business model and strength of management track record. 

 

@Castanza thanks for the recommendation, I'll take a close read of the CSU board.

 

I am pretty optimistic about the two spin-off companies. Generally studies show that spin-off companies tend to outperform their market peers and also benefit the parent company. They are also much smaller than CSU so have a longer runway. That being said, I have a soft spot for investing in diversified conglomerates so I still prefer the mothership. I don't have to think too hard about geographies or industries and I would prefer to simplify my portfolio as much as possible. CSU also retains a significant economic stake in the spin-outs and my guess is that there will be more spin-outs in the future.