Zooplus – Growing Moat

Summary

• zooplus will benefit form the shift from offline to online.
• zooplus will benefit from the premiumization and humanization of pet food.
• zooplus operates in 30 countries across Europe.
• zooplus has a 94 percent retention rate among consumer.

 

Last month, I read two of my favourite books: Sapiens and Homo Deus by Yuval Noah Harari, and I have been fascinated by the history of the human race and the world around us;

While reading the books, I was fascinated by the phenomenon of domestication of animals.

As an investor, I am always looking for opportunities to become an owner in companies that can improve customer’s life or bring benefit to the world.

After listening to a fascinating podcast with Connor Leonard and Patrick O’Shaughnessy, I found out about zooplus, an online retailer of pet supplies in Europe.

zooplus (OCT: ZLPSF) (OTC: ZOPLY) (ETR: ZO1) is the market leader in online pet supplies in Europe with customers across 30 different countries. It has roughly 8 000 different foods and accessories for dogs, cats, small pets, fishes and horses.

Here are the reasons why I believe zooplus is an incredible business:

The shift to online

Although zooplus is the market leader in online pet supplies in Europe, it still has a lot of room for growth. zooplus has achieved 50% market share in the online retail segment which compromises about 7 to 8% of the total market. I believe the online market penetration will continue to grow in the future and zooplus will benefit from this trend. I believe that pet owners will use zooplus and other online pet food suppliers to streamline their purchases of food for their pets. Because pet food is something that doesn’t change, streamlining the process will be an advantage for the owners since it takes less time to order the food online than going to a brick and mortar store.

Source: Eurostat

As you can see from the graph, more and more of the European Union population are buying goods and services online. This is wonderful for zooplus that more people are buying online because it helps them increase their market share.

Source: Company Presentation

Not only more purchases are made online for pet supplies in the recent years, but also the market value of pet care has been growing year by year in Europe.

Fulfillment centres

zooplus operates in 30 countries across Europe and has seven fulfillment centres located in the centre of Europe which enables the company to be fast and efficient when delivering products to its customers. zooplus has this fulfillment centre located in four of its biggest market and one located in the United Kingdom which is a big market for pet supplies. I believe it will be hard for the competing companies to compete with zooplus especially brick and mortar, notional operators, and regional operators because opening a fulfillment centre requires a lot of capital investment. Plus, zooplus offers a wider variety of product compared to its competitions. According to the company, large-scale supermarket and discounters usually limit themselves to a product rage of approximately 150 – 200. This is nothing to the roughly 8 000 different foods and accessories offered by zooplus.

Costumer

One of the biggest advantage zooplus has over its competitor is their customers. zooplus, as of November 15th, 2017, has around 6 million active customers and has been adding more customers every year. Repeat customers sales during the first nine months of 2017 have been 94% of their sales. It is incredible that the company can maintain customers at a rate of over 90% since 2014. According to the company, their customers helped to acquire new customers through word-of-mouth recommendations. And, I believe there is nothing more powerful than word-of-mouth advertisement.

Source: Company Presentation

Risk

zooplus has much competition from the mom and pop stores, regional retailers, national retailers, and the Goliath Amazon which also sells pet food and pet accessories. Amazon has recently entered Spain and Italy with full pet supplies assortments. These two markets are very important to zooplus because they are one of the biggest markets in Europe.

My Two Cents

I believe zooplus is an excellent company and has a great future ahead if it continues to grow its market share and if it can maintain the high percentage retention rate among consumer.

I do not currently own shares of zooplus for two simple reasons: I do not know if I should hedge the currency when I am buying shares of the company and if I should buy it over-the-counter in the US market or directly from the German stock exchange.

Disclaimer

All stock recommendations and comments are my opinions.

Investors should be cautious about any and all stock recommendations. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.

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Brookfield Asset Management: My Thoughts

After reading the book Angle by Jason Calacanis, a very successful angel investor, I decided to copy his idea by writing a blog about the companies I am investing. Before I talk about what I like, what I believe can go wrong and my thoughts here is a summary about the company.

Brookfield Asset Management is a global alternative asset manager with over $250 Billion in asset around more than 30 countries. Brookfield Asset Management started investing in real assets 115 years ago and now invests in different sectors, such as real states, infrastructures, renewable power and private equity. Brookfield Asset Management owns large stakes in thesis publicly traded companies: Brookfield Property Partners L.P., Brookfield Renewable Partners L.P., Brookfield Infrastructure Partners L.P., and Brookfield Business Partners L.P. Brookfield Asset Management is a trader in the TSX under the symbol BAM.A and in the NYSE under the symbol BAM.

Source: Brookfield Asset Management

Percentage of Ownership In the all the LP. Source: Q2 2017 Corporate Profile p.20

What I like?

Brookfield is a diversified company that invests in real assesses across all its sectors. Essentially, they are the backbone of the economies in their sectors. Brookfield has a world-class management team that manages this business wonderfully with a long-term horizon.

What can go wrong?

The impaction of Brexit or any political situation such as the corruption in the Brazilian government can impact the company, but only for a short amount of time. I believe a global recession can affect the real estate division of Brookfield. Moreover, if the trend continues in the retail, it can also affect the company, which is a big position in their property portfolio.

My thoughts

I really like Brookfield Asset Management for the future because it is one of the world’s best value-investment firms. I believe Brookfield Asset Management is a low-risk company that will go nowhere and that will bring wonder in the future. I certainly will hold my stake in Brookfield for as long as I can or for the next couple of decades.

Disclaimer: I own Brookfield Asset Management and I have invested in Brookfield Property Partners LP, Brookfield Renewable Partners LP, and Brookfield Infrastructure Partners L.P. for my dad. These are my personal thoughts. They are NOT an advice and I do not recommend to buy stocks before doing your own research about the company.

 

The biggest mistake to avoid if you are investing in a different country.

Since I started investing, most of my investments were domestic investments. To diversify and reduce risks, I wanted to be more exposed to the rest of the world. Especially the US stock market, which is the biggest market. In the rush to diversify my portfolio, I made a big mistake. This mistake was that I purchased US stock in CAD instead of USD. It may seem that this is not a big deal, but it is. I bought shares in Solar City long before its acquisition by Tesla. The process did not go like I was expecting. I thought if I bought the shares in the currency which are being sold ( USD). I would have that amount in my investment account in USD. It went in a whole different way. My SolarCity shares were both in CAD than transferred to USD and then back to CAD.  Not only I paid the commission fees, I also paid a premium for the exchange of currency, which brought my average cost higher than the stock bought. If I had converted the amount in USD and it would’ve stayed in that amount. After the premium by average transferred was 44.08$ instead of 43.44$.  0.64$ doesn’t seem a lot but when you multiplied by the number of shares you can clearly see the difference. Not only the problem with this is that I had a higher average cost I had to worry about the currency rate. There are two things to worry about and the volatility is transferred. There is a simple solution for this I wish I found it before but if I had you wouldn’t know the mistake and prevent form. The solution I found,  is to open a brokerage account in USD. From that account to buy companies from the US stock market. Like this, you don’t have to worry about the exchange rate because the money will only be converted once.

Book reviewed: Learn to Earn by John Rothchild and Peter Lynch

“Learn to Earn” by John Rothchild and Peter Lynch is a book for any investor and anyone interning to learn how a company earns money.

The book accomplishes on what it sets out to accomplish by showcasing that capitalism is the best economic system.

The author, John Rothchild, is most know for his work as the former editor of Washington Monthly as well as a former columnist for Time and Fortune.

The co-author, Peter Lynch, is an investor know the As the manager of the Magellan Fund at Fidelity Investments between the years 1977 and 1990. Peter Lynch averaged a 29.2% annual return with is mindblowing.

I enjoyed reading the book. The book helps me confirm my thought that the best economic system is capitalism for the company, the consumer and the investor.

I enjoyed the first chapter where the author briefs a quick history lesson of capitalism and explain without a capitalist country like the United-stade would it prosper as it did. I also like the appendix two where the author helps ride a company balance sheet.

The only thing the I did like is that the book isn’t updated and the references are old. Unless this I enjoyed reading the book.

I would recommend this book to anyone interning to learn how a company earn money and to learn about the stocks.

 

A beginner’s guide to investing – best resources – Infographic

A lot of my friends and family members ask what are the best resources for a person who’s starting to invest. So I decided to make this infographic. These are the best resources that I have found.

What I have learn during​ 1 year of investing

This is what I learned after one year and a couple of months investing on the stock market. I have learned a lot from my first, second experience until now on the market.

The biggest mistake that I made when purchasing ownership in a company was buying stock without learning about the company, especially for my first investment. I bought the stock hoping it will go up and I failed terribly. The stock crumbled down. In fact, I lost 48% of my book value. Regardless of my loss, now when I find an interesting company, I research about the company even if I don’t buy the stock.

“The dumbest reason in the world to buy a stock is because it’s going up.”
-Warrant Buffet

I have learned only to invest in an excellent company and for the long-term. Why in the long-term? Because an excellent company will always go up, from the technology industry to the waste industry.

I find it hard to be informed about a company announcement, what the market is saying about the company. To be more informed, I use stock apps as a news feed for the company I follow. This is very useful for me, I personally use Yahoo! Finance.

I have acknowledged being patient because there will be days and even weeks where you are losing money. The key is just to be patient and it will eventually go up. Of course, it applies only if you invest in an excellent company.

I have been able to learn if the market will react in a way that I will be losing or gaining money on a day. For example, during the election day, when Trump was winning, the market went down because of the news that Trump was winning. On the other hand, when Trump has been elected president, the market went up and nowadays is high almost at all time. During the quarter earning, if analyst expects that a company will not perform as the predicted, there will most likely have a sellout. This is a good time to buy a stock at discount prices before it gets back up if you believe that the company will perform in the long-term.

When one of my companies was being acquired, I have learned that a company acquisition is a long process. Indeed, it takes months for the acquisition and any news can affect the company stock prices. In my case, I had to vote for the acquisition.

I learned that I can reinvest dividend every quarter even though the number of shares will not be a lot, in the long run, it will grow. That’s the beauty of compounding.

I have learned utilizing fundamental analysis is better that technical analysis. This is if you want to own a company because technical analysis is entirely unconcerned about the companies from which they are buying stock.

For next year, what I want to do is to diversify more my portfolio. I would like to own 15 to 25 companies, both grown and income companies. I want to read more books about the stock market and especially The intelligent investor by Benjamin Graham, the father of value investing.

If you are willing to learn about investing, I recommend Investment 101 by Michelle Chang. I have written a review about the book just click on this.

Book Review: Investment 101 by Michele Cagan​

Investing 101 by Michelle Cagan is a book for the newcomer in the vast world of investing.

The book accomplishes on what it sets out to accomplish by giving a good overview of every branch in investment such as stock, bonds, ETFs, Mutual funds, currency commodity trading and real estate.

The author, Michele Cagan, has worked in several fields involving money such as financial planner, accountant, and tax advisor. She also wrote several books on personal finance and business.

I very much liked the book. I had some knowledge about investing prior but reading the book probably gave me a better understanding than the average person. I was still able to learn a lot which is never a bad thing. I have expanded my knowledge about the stock market and learned about new ways to invest especially in the bonds market.

The book has a dry and academic tone but is very easy to understand and not boring at least for me and the author doesn’t implement fancy words. It is written for the new learner with no or very little knowledge about personal finance.

I enjoyed the last two chapter where the author writes about how a person can build a profitable portfolio built according to the person’s needs. I also loved the chapter where the author introduces successful investors and gives their advice to the reader. Finally, I loved the part where the author gives an exercise where you can learn about your risk tolerance which is an important aspect of investing.

I did not enjoy parts where the author talked about mutual funds, currency, and commodity trading because I have no interest in this type of investment.

Event though I did not enjoy some parts of the book, I would change nothing about it. I believe that every part is important because every person has different ways to invest and all of them are important even if all these branches are not meant for everyone.

I would recommend this book to everyone because I truly believe everyone should learn the basics of investing.

Bombardier, my second experience in the stock market

After a major loss with my first experience in the stock market, I was in the search for a company that I knew how they make their money in general. I have decided on the 11th of November to buy 100 shares of Bombardier (BBD-B.TO).Bombardier is an aerospace and transportation company. Their headquarter is in Montreal, Quebec.

Before I bought any stock of Bombardier, I knew they were struggling as a company with the C Series Jet. Despite this, I had an optimistic view about the company and it is a quite popular company with a big impact in history here in Quebec.

Source: Bombardier

As time passed, my stake at Bombardier grew, I had 850 shares at one point in time. Last week, I sold 750 of my shares with a positive return, to diversify my portfolio. So my investments are not settled only to one company. If it was not the diversification of my portfolio I would’ve never sold my shares for a long time because I believe it is a good long term investment. I also think the company will perform better with the help of the government of Quebec who Invested $1 billion to help the company and from Caisse de depot et placement du Quebec‘s help.

Bombardier stocks decline when Boeing won the contracte against Bombardier.

Boeing stocks raise upon the winning of the contract.

 

With this investment, I have learned that airplane companies quite depend on airline companies. If an airplane manufacturer wins a contract against its competition, the stock of the airplanes manufacturers will rise. For example, on January 21st, the news came that Boeing (BA) won a contract against Bombardier for United Airlines with a decline of Bombardier’s stock by around 16% and Boeing stock increase by 5%. I think that airline companies influence quite a lot for airplane manufactured companies. Every time, when Bombardier loses a contract their stock decreases especially when their C Series Jet is involved.

Compared to my first encounter with the stock market, I was very satisfied with the purchase of Bombardier’s stock and I hope it will stay in my portfolio for a long time. I also hope Bombardier will perform better so the company gets out of any struggle and participate to the growth of the economy of Quebec and Canada. During this week,  I have increased my steak in Bombardier.

Stock App – Yahoo! Finance

After using several Stock apps for the couples of months, I found Yahoo! Finance to be the best stock app in the App Store. Yahoo! Finance is better than Stock Tracker which is one of the top stock market apps on the App Store. Yahoo! Finance has a better design than Stock Tracker which is ugly and a better design than Apple own stock app, by the way, iOS native stocks app is powered by Yahoo! Finance. Yahoo! Finance is also better than Stock Touch which is a paid app in the App Store because it takes less time to get the information of a company compared to Stock Touch.

The app is divided into three sections. The first one is watchlist where you can track the stock price of companies that are in the NYSE and NASDAQ in real time and the price of a company listed on the TSX with a delay of a couple of minutes. I don’t know if there is a delay for the other major stock exchanges in the app. You can also add in this section you hold in the app to track your daily gains and your total gains. To add your holding it’s quite simple, just up the price you paid, the numbers of share you own and your trade date.You can also have different watch lists and you can rename them whatever you want to be more efficient. Under the watchlist table, there is news about all companies you follow.

Every company that is listed have their own page with a graph to see the price through time, the company history and all the information such as previously closed, open, low, high, market cap and mush more. They also have a newsfeed for the company coming from different media companies.

In the news section, you have news aggregating from differents website such as Yahoo! Finance, Reuters, Business Insider, CNBS, The Motley Fool and mush more. I don’t personally use this part of the app because I read the news about the company I follow on the page or in the watchlist section. You kind also find adds thought the app where they are news section. They are not that annoying compared to other stock apps.

In the market section, there is 3 sections for all the major market (US, Europe, Asia) and an overview of all the market moves, top gainers, top losers, bonds, currencies, commodities, mutual fund and EFTs for all tree market. In this compartment, I come to see mostly the market movers, top gainers, top losers.

Yahoo! Finance is the best stock app because it has a beautiful design with beautiful graphs, animation, a nice font. Yahoo! Finance compare to other app has a life it has colors! It makes you want’s to check the stock market more often. It is easier to use, it has less crap than the competition. Yahoo! Finance, is the best app in the App Store. The only thing that I would like to change is to bring the real-time price for companies listed on the Toronto Stock Exchange.

My first experience in the stock market

My first stock purchase was on November 9th 2015. I was in my school cafeteria during my break. I have just gotten my Tax-Free Savings Account (TFSA) from the bank and I was able to buy and sell stock. I was sitting in the back of the cafeteria surfing the web when my friend came and sat with me. He told me that he and his brother (who has more experience than me) bought a couple of hundred shares of a company. I asked what was the company and he told me Nobilis Health Corp. (NHC.TO). He started to compliment the company by telling me that the company had potential to make money and it was a good investment. After listening about the benefits of owning NHC.TO stocks, I decided to do as they did because, compared to me, his brother had more experience in the stock market. Therefore, I decided to buy 35 shares at 5,02$ a share of NHC.TO. It was all that I could afford at the time. I did not do any research and I had no information about the company. Until now, I thought Nobilis was a pharmaceutical company. During the writing of this post, I googled and learned that it is not a pharmaceutical company, but a medical company that owns and manages ambulatory surgical centers (ASCs) and surgical hospitals in the United States. After two weeks of owning the stock, I decided to sell the shares of the company at about 48 % less than my book value because I had no idea how the company made money. Plus, the prices of the shares were constantly falling everyday. Until the April 14th, the price never came back at 5,02$.

After this experience, I decided that I will not invest in the healthcare sector because I have no knowledge about it. I told myself to do my own research about every company and to learn how they makes money. I promised myself to invest in a company that I use or that I am familiar with. Therefore, I will be investing for medium to long term results instead of short team results.