Investing in undervalued securities worldwide

Weekly Update 28 November 2022

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Stocks rose last week after the US central bank indicated it was prepared to slow down the pace of interest rate increases.

Deutsche Bank recently published its 2023 economic outlook. The bank predicts that:

1. GDP will decline 1% in the euro area and 2% in the US.

2. $SPX500 will rally to 4500 in Q1 2023, before slumping to 3250 in Q3 as the recession hits. The index will recover to 4500 by the end of the year, as focus turns to the better 2024 outlook.

3. US bond yields will be stable, while German bond yields will increase.

4. $EURUSD will rally to 1.10-1.15.

We think this is a reasonable take on what to expect. Like Deutsche, we are bullish in the near term, but expect a volatile 2023.

In terms of what investments should outperform the market, the data show that European equities are under-owned at the moment. This makes sense given that Europe was hit by the war in Ukraine and an energy crisis this year. The energy situation seems to have stabilised, with gas inventories still well stocked, while some expect a ceasefire to the war in Ukraine will eventually come about. The market cares about the direction things are moving in, so if the situation improves even slightly, European stocks should do well.

Within Europe, we believe cyclical stocks should outperform. Cyclical stocks, such as banks, have historically benefited from Chinese stimulus, so if China reopens in 2023 as we expect, European banks should outperform.

We thus continue to hold a portfolio full of banks. Banks are performing well operationally: their profitability is at its highest level in 11 years. Yet their valuation relative to the market remains extremely low. We believe that sooner or later the market will close this disconnect, and when it happens, bank investors will make money.

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@triangulacapital +0.8%
$SWDA.L -15.0%

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The oil companies $PBR (Petroleo Brasileiro SA Petrobras), $BP.L (BP), $SHEL (Shell PLS (ADR)) and $REP.MC (Repsol) were sold because the oil price declined. We may re-enter oil positions should the oil price recover.

A position was initiated in $UNI.MC (Unicaja Banco SA) .

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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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.