Investing in undervalued securities worldwide

Weekly Update 20 February 2023

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We took profits on the majority of our risky cyclical stock positions last week after turning more cautious on the near-term outlook for the market.

Our view chimes with that of eToro Market Strategist Ben Laidler: “A resilient US consumer, plunged EU natgas, and reopening China has cut growth risks. But sticky inflation is raising bond yields and is a valuation ceiling. Whilst depressed investor sentiment, that added fuel to the rally, is now ebbing.”

Investor sentiment measures, which were highly depressed in October, have indeed turned neutral. Sentiment is not yet bullish, which suggests further upside may be available over the next 1-2 months, but risks are more two-sided than before.

At the same time, interest rates have increased this month, reversing their January fall. Interest rates are now unchanged for the year and no longer provide a tailwind for stocks.

Higher US interest rates have strengthened the US dollar, which has weighed on global liquidity. It appears that the market has overshot its liquidity-implied fair value.

None of these indicators – sentiment, liquidity, interest rates – predicts the stock market perfectly, or even with a high degree of accuracy if used in isolation. And since sentiment is not yet bullish, we do not get a clear sell signal. Regardless, we feel that the balance of risks has deteriorated sufficiently that it makes sense to move from an aggressive towards a neutral portfolio positioning.

The new positions in the portfolio are from the defensive Telecom, Healthcare and Consumer Staples sectors. They are value stocks with high free cash flow yields. The high cash flow yields should make these stocks resilient against increases in interest rates.

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@triangulacapital +14.8%
$SWDA.L +7.0%

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The banks Deutsche Bank, Danske Bank, Banco Santander, BNP, ING, Bancolombia, Intesa, Natwest and Lloyds were sold. The auto companies Volkswagen and Stellantis and the insurer AXA were also sold.

They were replaced by the telecom companies Orange, Telefonica Brasil, Vodafone and BT, the tobacco companies Imperial Brands and British American Tobacco, and the pharmaceutical companies Roche, Novartis and Bayer.

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.