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Weekly Update 21 February 2022

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Stocks fell last week for the second time in a row as tensions between Russia and Ukraine escalated.

Some are now saying there is an 80% chance Russia will attack.

The likely immediate consequences of an attack would be higher oil and other commodity prices, and lower stock prices.

However, most equity analysts agree that the impact of an attack should prove fleeting.

As Alex Barrow of Macro Ops puts it: “The public has a tendency to overweight the market importance of geopolitical events. The truth is that the vast majority of the time, these things donโ€™t really matter except for a very short while.”

Russia represents only 2% of world GDP. And as Hamish McRae argues in The Independent, an invasion is likely to last for only a few weeks. After that, investors will go back to worrying about inflation.

McRae makes the interesting point that an invasion may make central banks more cautious about raising interest rates. That could be positive for the markets over the next few months.

In the short run, though, markets may well fall further, since although individual investors and investment advisors are already pessimistic,  
other tactical indicators such as the CBOE Equity Put/Call ratio do not yet show excessive pessimism. The market correction this year has been orderly and mild by historical standards, so people have not yet become properly fearful, and more bad headlines about the war could entice them to sell.

Ours is not a market-timing strategy, so we will not be trying to time the bottom. The portfolio has no direct Russian or Ukrainian exposure, while medium-term fundamentals continue to be positive for Value stocks. We expect more volatility over the next few weeks, but our strategy only goes to cash if we see existential risks to the world economy, which the conflict does not present at the moment.

๐Ÿฎ๐Ÿฌ๐Ÿฎ๐Ÿฎ ๐—ฝ๐—ฒ๐—ฟ๐—ณ๐—ผ๐—ฟ๐—บ๐—ฎ๐—ป๐—ฐ๐—ฒ ๐—ฌ๐—ง๐——
@triangulacapital +3.8%
$SWDA.L -7.5%

๐—ฃ๐—ผ๐—ฟ๐˜๐—ณ๐—ผ๐—น๐—ถ๐—ผ ๐—ฐ๐—ต๐—ฎ๐—ป๐—ด๐—ฒ๐˜€

๐—”๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐—ผ๐—ณ ๐˜๐—ต๐—ฒ ๐˜„๐—ฒ๐—ฒ๐—ธ
“Investment Mistakes to Avoid: The 2022 Edition”

– GMO’s Ben Inker presents 4 mistakes that he thinks investors might be tempted to make in the current environment:
#1. Buying past winners ($VUG and $SPX500) and selling past losers ($MCHI and $VWO). #2. Investing in private equity and venture capital, without having any special access to the best managers.
#3. Assuming that assets that performed well during the pandemic carry low fundamental risk. This would apply to $TLT and $XLK .
#4. Assuming future returns will be as high as the returns of the past few years or decade.

Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.

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eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFD assets.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 51% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

eToro (Europe) Ltd., a Financial Services Company authorised and regulated by the Cyprus Securities Exchange Commission (CySEC) under the license # 109/10.

eToro (UK) Ltd. is authorised and regulated by the Financial Conduct Authority (FCA) under the license FRN 583263.

Your capital is at risk. Other fees may apply. For more information, visit

Pietari Laurila is not a registered investment advisor and does not offer investment advisory, fund management or wealth management services.

Triangula Capital is a brand name, not an incorporated entity.

This page is provided for information purposes only. It is not a recommendation to copy the Triangula Capital strategy or to invest in any fund or security.

2009-2020 performance figures are from Pietari’s personal Interactive Brokers account. They are time-weighted returns calculated in accordance with the Global Investment Performance Standards (GIPS).

From 2021, performance is calculated by eToro.

Past performance is not indicative of future results.

Track Record

It is often said that past performance is not a guarantee of future performance.

That is true. But there is also some evidence indicating that portfolios that performed better in the past, do perform better in the future.

“[…] top-decile prior-alpha funds produce annual future alphas of about 150 bps, net of fees”ย Source

Risk warning: That is only one study. In general, past performance is not indicative of future results.

Aligned Incentives

Pietari invests the majority of his net worth in the strategy. This ensures that his interests are aligned with investors who copy the strategy.

“Funds with high-incentive contracts deliver higher risk-adjusted return, and the superior performance remains persistent. The top incentive quintile of funds outperforms the bottom quintile by 2.70% per year” Source

Risk warning: Pietari holds accounts with multiple brokers and may therefore have a conflict of interest when deciding which accounts he should trade in first.

Unconstrained Investments

The strategy has fewer constraints on its investments than traditional mutual funds.

The strategy portfolio can be invested in stocks, bonds or cash and these allocations can vary over time.

Compared to traditional mutual funds, the strategy also:

  • holds fewer securities
  • trades more
  • avoids following the index

Each of these points has been shown to be an important predictor of portfolio performance.

“We […] find that portfolio concentration is directly related to risk-adjusted returns for institutional investors worldwide” Source

“A one-standard-deviation increase in turnover is associated with a 0.65% per year increase in performance for the typical fund” Source

“We find that truly active funds significantly outperform closet indexers. Further, we find that the truly active funds are able to outperform their benchmarks on average by 1.04% per year” Source

Risk warning: Concentrated portfolios with few positions can suffer large losses if bad news arrives about any of the companies in the portfolio.

Cheap Stocks in Cheap Sectors

The strategy invests in geographies and sectors where values have collapsed due to macroeconomic problems.

Within these geographies and sectors, the strategy overweights stocks that trade at low valuations on measures such as price-to-earnings or price-to-net asset value.

Every stock in the strategy portfolio must also be a good company, with no obvious red flags or long-term threats to its business model.

The aim of the strategy is to maximize returns, even if this means taking more risks than usual.

Risk warning: The strategy portfolio tends to be concentrated in risky stocks, which means that its losses in any market downturn will likely exceed those of the market index.