Investing in undervalued securities worldwide

Weekly Update 20 June 2022

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Stocks fell 6% last week, leaving them down 22% ($SWDA.L) for the year to date.

Our portfolio has lost 7% this year, as 15 percentage points of outperformance have not been enough to turn a profit. This is rare but it can happen in the worst years.

We have turned very bearish on the economy and, hence, the market.

1. It was reported last week that a New York Fed economic model predicts that US GDP will contract 0.6% in 2022 and 0.5% in 2023, and grow only 0.4% in 2024.

2. Investment bank Nomura predicts that a recession will start in the fourth quarter this year due to tighter financial conditions, weak consumer sentiment, energy and food price pressures, and geopolitical instability.

3. If there is indeed a recession, analystsโ€™ estimates about future company profits are too optimistic.

4. There has been no capitulation. Most investors are still holding onto stocks.

5. The market rarely bottoms durably before the economy. We expect the economy to bottom in mid-2023.

Given this backdrop, the plan is to run an extremely defensive portfolio for the next 9-12 months, with lots of cash and a sprinkling of Healthcare, Telecom and other non-cyclical positions.

Currently, the market is short-term oversold and it would not be surprising if there was a bounce similar to the one we saw in May. In the 2008 and 2001 bear markets, there were 5 and 6 bear market rallies, but they were all ultimately followed by lower lows.

In general, we like risk-taking and run a risk-on portfolio most of the time, but there are exceptions. In particular, we do not like to take on risk when we believe a recession is approaching, yet investors have not yet capitulated. This approach served us in well in 2008 (portfolio return -16% for the year) and in March 2020. Although no one can know for sure if 2022-3 is going to be similar, we believe better opportunities to buy beaten-down stocks will come down the line.

๐Ÿฎ๐Ÿฌ๐Ÿฎ๐Ÿฎ ๐—ฝ๐—ฒ๐—ฟ๐—ณ๐—ผ๐—ฟ๐—บ๐—ฎ๐—ป๐—ฐ๐—ฒ ๐—ฌ๐—ง๐——
@triangulacapital -6.6%
$SWDA.L -22.3%

๐—ฃ๐—ผ๐—ฟ๐˜๐—ณ๐—ผ๐—น๐—ถ๐—ผ ๐—ฐ๐—ต๐—ฎ๐—ป๐—ด๐—ฒ๐˜€
Further de-risking saw us close all our remaining Financials positions except for $IBKR (Interactive Brokers Group) . $META (Meta Platforms Inc) was added, though this position is being re-evaluated at the moment.

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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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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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.