Investing in undervalued securities worldwide

Weekly Update 31 October 2022

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Stocks rallied last week despite poor earnings reports from the big technology companies.

The market is going up in the face of a deteriorating economic situation and still high valuations because:

1. Central banks are becoming more worried about growth. “Australia, Canada and now Europe are … beginning to consider a slowdown in the pace of hikes and most likely a complete pause relatively soon,” notes Alfonso Peccatiello on the Macro Compass.

2. Positioning is light. Hedge funds and mutual funds hold a lot of cash. Their managers are worried about missing any rally after a bad year, especially into the year end.

3. “High excess savings and strong employment mean individual investors can sit on their losses and wait for better days ahead rather than capitulating,” notes Barclays Capital.

4. Political stabilisation in the UK and an improving energy situation in Europe have removed tail risks from investors’ minds.

It is unlikely that this bear market has ended, however.

When will the next down leg come? Morgan Stanley’s Mike Wilson argues it will be in Q1 2023,

while Stifel opts for May 2023.

Like Wilson and Stifel, we view the current market action as a tactical rally and believe that the final destination for the $SPX500 is 3000.

In addition, like Stifel, we see a lost decade ahead for stocks. Active management, Value stocks ($VTV) and a macro-driven approach will be required to produce excess returns during this decade, in our view, while the winners of the past, such as technology stocks ($XLK) and cryptos ($BTC), will struggle.

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@triangulacapital -3.5%
$SWDA.L -20.7%

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Positions were initiated in $ALV.DE (Allianz SE), $REP.MC (Repsol), $INGA.NV (ING Groep NV) and $VNA.DE (Vonovia SE) .

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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. 76% 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” 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.