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Weekly Update 2 May 2022

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Stocks had a tough April. $SPX500 dropped 8.8% and the technology index $NSDQ100 13.6%, the latter posting its worst monthly performance since October 2008.

Because we do not hold Technology stocks, our month was better, at -3.9%. Since the beginning of the year, our portfolio has outperformed the index ($SWDA.L) by 11 percentage points.

Looking forward, we expect a significant slowdown in the global economy and a manufacturing recession. However, the overall economy should continue to grow thanks to strength in the services sector.

A recession is more likely in 2023. The Federal Reserve will want to avoid pushing the US economy into recession this year if it can. However, inflation pressures have become so entrenched that sooner or later policy will have to be taken to a restrictive level. And “[t]he historical record tells us the Fed has never been able to correct even noticeably smaller overshoots of its inflation and employment objectives without pushing the economy into a significant recession,” notes Deutsche Bank.

Because of the poor state of the economy and the ongoing tightening campaign by the Fed, we expect a tepid year for stocks in 2022. Lacklustre action will probably continue into 2023, due to the inflation problem.

The temptation in this situation is to “sell stocks, hold large sums of cash, and wait for a market crash to buy back in.”

There are two problems with this strategy:

1. Cash yields nothing, leaving investors with a guaranteed loss after inflation.

2. Experience has shown that many do not, in fact, buy back after the crash, preferring instead to wait until the situation has improved, by which time it is too late to buy back in.

We also know that timing the markets is very difficult. Smart people often come to opposite conclusions about what will happen next. Right now, for example, Goldman Sachs is saying that the sell-off has been overdone,

while Bank of America thinks that more downside is coming as the new investors who entered the market in the last 2 years become scared and exit.

We do not know which view is correct. What we do know is that the economy is slowing and there is the very real risk of recession, which is not yet in the price ($SPX500 falls 32% on average in recessions). We thus prefer to keep risk-taking at a moderate level. But we are also not going to sell everything and go to cash. We strongly believe that outperforming the index will lead to a good result in the long run even if there are negative years along the way.

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@triangulacapital -2.1%
$SWDA.L -13.0%

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$SRC (Spirit Realty Capital Inc) was replaced by $BDEV.L (Barratt Developments) .

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.

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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” 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.