Investing in undervalued securities worldwide

Weekly Update 13 February 2023

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2023 has started strongly in the stock market. The MSCI World index ($SWDA.L) is up +7%, our strategy double that, +14%.

There are both fundamental and technical reasons for the rally.

Fundamentally, US, European and Chinese economic growth has exceeded expectations. Investors were highly pessimistic about global growth last year and were expecting a recession, but the data has surprised on the upside.

Because of a pessimistic fundamental outlook, investors held a lot of cash in October. They have since been deploying some of that cash into equities, in part because the fundamental picture has improved, in part for fear of missing out.

As a result of the rally, individual investors have turned optimistic for the first time since early 2022.

This makes us more cautious about future returns, because the sentiment of individual investors is a contrarian indicator.

However, we are not quite ready yet to sell our stocks.

One reason is that global liquidity is improving, and that tends to support the stock market.

From a sentiment perspective, we feel there are investors out there who hold onto a recession view, and who could be converted to a more bullish outlook if the market continues to rally. There is still cash on the sidelines.

However, we believe a further rally, if it happens, will ultimately prove self-defeating. The reason is that inflation continues to run at a 5% annual pace, too high a level for any central banker to tolerate.

To kill inflation, central banks will have to hike interest rates higher than the market expects, which will cause significant market weakness starting from May this year, in our view.

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@triangulacapital +14.4%
$SWDA.L +7.1%

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Allianz and Societe Generale were replaced by Danske Bank and KB Financial Group.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% 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.

Higher Risks for Higher Returns

The aim of the strategy is to maximize returns, even if this means taking more risks than usual.

The strategy invests in countries 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.

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.