Investing in undervalued securities worldwide

Weekly Update 16 January 2023

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A year rarely starts as well as 2023 has done. In the first half of January our strategy returned +10%, doubling the +5% return of the market index ($SWDA.L).

The catalyst for the rally has been an improving economic picture, especially in Europe. Some analysts no longer expect a European recession. Goldman Sachs, for example, expects the euro area economy to grow 0.6% in 2023.

Can the rally continue? No one knows for sure, but the banks in our portfolio remain cheap. $BARC.L (Barclays), for example, trades at 6x forward price-to-earnings, while historically it has traded at 9x. 50% upside potential remains.

The next few weeks are a busy period for company earnings. The first banks have already reported. In our portfolio, the two banks that kicked off the Q4 2022 earnings season ($BAC (Bank of America Corp) and $WFC (Wells Fargo & Co)) posted earnings that the markets were happy with, as the stocks rallied after their earnings were released on Friday.

Both banks’ results were similar. Interest income grew because of higher interest rates, more than offsetting a decline in fee income due to lower mortgage, trading, and investment banking activity. Credit quality remained good, and the banks are well capitalised. Sometimes, the reaction to earnings is as important as the numbers themselves.

The fact that the two banks’ shares opened down a few percent, but rallied during the day to end up in the green, indicates that investors thought the shares were too cheap after the results. This gives us confidence before European bank earnings start to come in over the next few weeks.

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@triangulacapital +10.1%
$SWDA.L +5.1%

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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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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.