Best idea for 5 year MOIC, if could only own one stock in retirement plan (not ETFs)

[RiskAdjReturn]

Taking into consideration entry price (ie great company and future might not mean great stock):

 

If you are running endowment or childrens trust: you have 1 stock to buy today to prove, 5 yrs out, how good an investor you are, what would it be? I'd like to see folks best idea, risk adjusted (I toggle between credit and equity....I'm allergic to losing capital permanently): we can then dredge up this thread each yr until yr 5 and see the winner. we aren't looking for shiny objects here...but endowment growth! 

 

I benefit greatly from many of you you (some I think miss the boat on concentration though :>) ), and would love to add people and ideas to list.

 

one qualification: goal is to outperform SP500. consider this endowment would already be indexing money, this is active, 1 stock best idea risk-adjusted (sort redundant to say risk adjusted when its a 5 yr call as no one wants to lag bonds/cash, etc with a bad bet

Edited January 5 by RiskAdjReturn

[LC]

Good question and a bit different from the “best idea for 2024…” potential question.

 

i think over a 5+ year horizon, healthcare is a good bet. Demand is not going to decrease, and prices will follow suit. 
 

Technology (as an alternative consideration) will always be improving, but it’s difficult to find winners over a 5+ year horizon. If I had to guess I would say visual AI technology. 

[james22]

1. You can never prove how good an investor you are.

 

2. A good investor would diversify.

 

I'd add a Small Value and/or Info Tech index tilt.

[ValueArb]

Munger's great stock was Tenneco. He only had to wait about 20 years to find it. Otherwise forcing yourself to pick a single "great stock" at any moment is a fools errand. Better to find 5 very good stocks and hope the best two overcome the worst one so you beat the market.

[RiskAdjReturn]

56 minutes ago, ValueArb said:

Munger's great stock was Tenneco. He only had to wait about 20 years to find it. Otherwise forcing yourself to pick a single "great stock" at any moment is a fools errand. Better to find 5 very good stocks and hope the best two overcome the worst one so you beat the market.

fair enough. let me rephrase it, this isn't proving who is good investor. that said, would love to see everyone's best single idea for 5 yr "race"...to see where they have real conviction at the margin . alot of folks portfolios have alot to do with embedded unrealized gains they aren't willing to pay taxes on, rather than marginal "Rebuy" conviction.

[ValueArb]

36 minutes ago, RiskAdjReturn said:

fair enough. let me rephrase it, this isn't proving who is good investor. that said, would love to see everyone's best single idea for 5 yr "race"...to see where they have real conviction at the margin . alot of folks portfolios have alot to do with embedded unrealized gains they aren't willing to pay taxes on, rather than marginal "Rebuy" conviction.

 

There are many different ways to squeeze alpha out of a cat. I don't think I've ever held anything for 5 years except for BRK.B when I was investing passively. Today my average holding period is maybe 4-6 months and I would bet its not much different than Warren Buffett's approach his first decade when he had his highest returns.

Edited January 5 by ValueArb
added buffett comment

[Malmqky]

5 years and the goal is to beat the market?

 

QQQ tbh.

 

Otherwise I like JOE, but I would feel better over a 10-15 year timeframe. 5 years just ain’t that long. Fairfax is good over the next couple, but 5 is a bit long for me to feel certain about it on the otherhand. Nintendo I would pick if it was a 2-3 year timeframe.

 

Personally I think outperforming the market should be a 20-30 year thing…trying to outperform over 5 year periods isn’t the best way to approach things.

Edited January 5 by Malmqky

[Red Lion]

I like APO. I have others that might do better, but if I’m going with one stock I like this one. 

[RiskAdjReturn]

2 hours ago, Malmqky said:

5 years and the goal is to beat the market?

 

QQQ tbh.

 

Otherwise I like JOE, but I would feel better over a 10-15 year timeframe. 5 years just ain’t that long. Fairfax is good over the next couple, but 5 is a bit long for me to feel certain about it on the otherhand. Nintendo I would pick if it was a 2-3 year timeframe.

 

Personally I think outperforming the market should be a 20-30 year thing…trying to outperform over 5 year periods isn’t the best way to approach things.

the 5 yrs is really for me to flush out your best MOIC idea at end of yr 5. ie 1.5x, 2x, etc. I'm not interested in "market timing" a 2024 calendar pop. I want to award the medal 5 years from now, see who is swimming with clothes on then

[John Hjorth]

The topic title is misleading and deceptive :

 

Quote

Portfolio positioning asked somewhat differently , for 2024

 

, compared to content of the starting post, and shoud be accordingly edited to :

 

Quote

Your best one-stock bet with 5 year horizon  for 2024

 

Let me just say, that those two questions appear to me to be far from identical.

[RiskAdjReturn]

nitpicking? intent, stock pick today with 5 yr scorecard.

[Jaygo]

Ill throw my hat in the ring, if anything just to get to look back and think how naive i was in my 30's 

 

I am going to go with Aritzia

 

I would anticipate that they would add roughly 4-5 stores in the US per year bringing them level with the number of Canadian locations. I think 5 years time will also bring us a few international stores most likely in the UK and Australia but Korea or Japan would not surprise me either.

 

So lets say a total of 142 stores. Today you pay just shy of 25 million CAD a location. 2.8 Billion in cap vs 114 stores. (lulu goes at 95 million USD a store fyi) on that basis with some store valuation increases and 25% more stores I could see a double easily from here.

 

I think we will have decent growth in stores, decent growth in SSS and decent growth online. my wild ass guess would put 2029 sales at 4 billion CAD and i think we will have a higher valuation so I could see a double through this point of view as well. 

 

My expectation is we get a change of heart about Aritzia, not the 60pe stupidity of 2021 but the businesslike understanding of a modest grower that is very profitable. The stores are generally built from cashflow as has been the several hundred million dollar distribution centre in the Toronto area so it kind of always looks like they are not making money. Management say the average store recoups its cost in under 18 months and some far better so I do like those economics. 

 

Lets say for fun they get to 400 million in earnings, a little boost from going international, get some more adults in the room and maybe a better CFO I dont think an 18 pe is too much to ask and a 7.2 billion CAD valuation. Call it a 20% a year cagr.

 

just like a nude you cant scrub from the web, here's my retail stock pick for perpetuity.

 

 

 

 

 

 

Edited January 5 by Jaygo
editing

[Spooky]

I don't have many good ideas right now unfortunately. My pick would be the S&P 600 index (through VIOO). Much lower P/E than the S&P 500 at 13.3x (as of Nov. 30) and a much higher dividend yield. Given that 30% of the S&P 500 is the magnificent seven now I think small caps could outperform over a five year time frame if they stall out for some reason.

[Spekulatius]

I would agree with @Spooky here that the SP600 is a better bet than the SP500 now.

 

I do have a related question - what is the baseline probability that a stock from the SP500 beats the SP500 index within the latest (or better even former). 5 year timeframe. It’s got to be less than 50% because the distribution of returns is quite skewed.

[Sweet]

31 minutes ago, Spooky said:

I don't have many good ideas right now unfortunately. My pick would be the S&P 600 index (through VIOO). Much lower P/E than the S&P 500 at 13.3x (as of Nov. 30) and a much higher dividend yield. Given that 30% of the S&P 500 is the magnificent seven now I think small caps could outperform over a five year time frame if they stall out for some reason.

How do they manage / weight VIOO?

 

My concerns with the ‘small cap’ ETFs is they cut the winners.  For example, let’s say the next NVIDIA is hidden in there, does it get cut above a certain market cap?  That would seem like a dumb thing to do. 
 

I agree that I like looking here than the SP-500 because of the Mag 7 dominance, but concerned about how the portfolio is managed.  Cutting companies because they are no longer ‘small cap’ would be counter productive.

 

Edited January 5 by Sweet

[Spooky]

11 minutes ago, Sweet said:

How do they manage / weight VIOO?

 

My concerns with the ‘small cap’ ETFs is they cut the winners.  For example, let’s say the next NVIDIA is hidden in there, does it get cut above a certain market cap?  That would seem like a dumb thing to do. 
 

I agree that I like looking here than the SP-500 because of the Mag 7 dominance, but concerned about how the portfolio is managed.  Cutting companies because they are no longer ‘small cap’ would be counter productive.

 

 

This is definitely a concern since if companies win they will get too big and cut out of the index. Another option would be VTI which would let the winners ride but then you don't get a profitability filter like with the S&P indexes. The mag 7 is also a smaller proportion of VTI but still pretty significant (over 20% last time I checked).

 

With the S&P 600 I'm aiming to keep reinvesting the dividends in my tax free account (RRSP) hoping to match the long term return of ~12% a year.

 

Edited January 5 by Spooky

[Sweet]

Just now, Spooky said:

 

This is definitely a concern since if companies win they will get too big and cut out of the index. Another option would be VTI which would let the winners ride but then you don't get a profitability filter like with the S&P indexes. The mag 7 is also a smaller proportion of VTI but still pretty significant (over 20% last time I checked).

 

Yeh 20% is too big still.  Always a problem when they cut the winners, that’s the inherent advantage of indexing with the SP-500, it lets the winners run.  A quality filter for profitability is important too - very important.

[ICUMD]

My core strategy is around quality dividend companies.  Focusing on increasing personal cash flow is a more quantifiable goal than trying to pin the tail on the 10 bagger donkey. The optionality of cash flow is tremendous.

 

I'd take a highly profitable, under valued equity paying a good dividend as my pick. Bank of Nova Scotia paying 6.5% would be a great example currently.

 

Rinse and repeat should generate an exceptional cash flow machine over the years.

 

[Spekulatius]

5 hours ago, Sweet said:

Yeh 20% is too big still.  Always a problem when they cut the winners, that’s the inherent advantage of indexing with the SP-500, it lets the winners run.  A quality filter for profitability is important too - very important.

Well, the Mag 7 are winners too. When you get rid of those, you also get rid of the largest winners. If cutting the winners is your concern, then you should not cut the Mag 7 either.

[Sweet]

6 hours ago, Spekulatius said:

Well, the Mag 7 are winners too. When you get rid of those, you also get rid of the largest winners. If cutting the winners is your concern, then you should not cut the Mag 7 either.

Depends.  Yes those are winners but they are a huge portion of the index.  Apple is sitting at 30 PE on flat revenue.  Nvidia is 64 PE with huge growth expectations.  There is too much of the index hinging on those 7 companies which in my opinion are quite richly valued already - it’s a double whammy.  I’d prefer to hold the SP-500 less those companies.

[Spekulatius]

My pick is $ELV

 

I think it’s reasonably priced and will likely grow earnings in the low teens for the next few years. It’s one of my larger positions. 
 

Others I have considered are $NNI and $BTI I think $BTI dividend alone may be enough to beat the market even with the share price flat for the next few years. $NNI is also a low teens compounder trading for book value.

[thepupil]

$TFG, hasn’t worked for last 10 years so maybe the next 5 will be good

[shhughes1116]

I’ll bite, although split between two picks.  50% Ally Financial and 50% Calumet Specialty.  You aren’t buying at the lows (especially with Calumet), but I think both are reasonably priced today for what I think their share price will be in five years.  

 

 

[Junior R]

fairfax india lol but at 1.2x book value I would sell