Investing in undervalued securities worldwide

Weekly Update 2 January 2023

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2022 was a strong year for our strategy.

The strategy returned +1.6%, beating the -18.0% return of the MSCI World index ($SWDA.L) by 20 percentage points.

The first reason for the outperformance was that in 2022, our Value investing style came back into favour. The bubble in Growth stocks that had formed in 2020 and 2021 deflated, and Value stocks ($VTV) outperformed Growth stocks ($VUG) by 30 percentage points.

The strategy also managed to outperform the Value stock index $VTV by a few percentage points, through stock selection.

20 percentage points is an unusually large outperformance. We certainly do not expect the strategy to beat the market by such a wide margin every year, even though we do of course try and expect to beat the index in the long run. Most professional investors would be elated to outperform by 5 percentage points a year over a span of 10 or 20 years.

Of the 97 Elite and and Elite Pro Popular Investors tracked by @TradeBetter, our performance was the second best overall and the best of any investor focusing on stocks.

So it was a good year. But it is important as an investor to focus on the future. Sometimes, good past performance leads to poor future performance, as the stocks in a portfolio have appreciated and become expensive. That is what happened to many Growth investors this year.

Luckily, the stocks in our portfolio remain inexpensive. In an extreme positive scenario, in which the energy crisis in Europe abates, the war in Ukraine ends, inflation comes down, and central banks take their foots off the brake, our portfolio has 50% upside, assuming the banks in the portfolio return to their long-term average valuations.

Obviously, there are risks. If oil prices surge, inflation re-accelerates and central banks push the world economy into recession, our portfolio has significant downside. Banks tend to fall 50% in recessions.

In the face of uncertainty, we maintain our focus on the strong expected performance of Value stocks over the next 5-10 years. Given cheap starting valuations, we believe that over the next 5 years, our strategy has significant potential to outperform. We would not be surprised if the experience of 2000-2006 repeated, when Value stocks beat Growth stocks every year for seven years straight.

Investing in our strategy is not easy, as the strategy experiences large drawdowns from time to time. But we believe the potential long-term rewards for investors who are willing to stomach the volatility are significant. It feels as if Value stocks turned a corner in 2022 and that this decade will be very different from the last in terms of what and who outperforms.

𝟮𝟬𝟮𝟮 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲
@triangulacapital +1.6%
$SWDA.L -18.0%

𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗰𝗵𝗮𝗻𝗴𝗲𝘀

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” 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.