Investing in undervalued securities worldwide

Weekly Update 14 August 2023

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Once a year, Morningstar, an American financial services firm, publishes a study that measures how much buying and selling funds, as opposed to simply holding them, costs investors.

The 2023 edition of the study shows that over the past 10 years, investors made 6% a year by investing in funds, while the funds gained 7.7% a year. Investors lost to the funds they invested in by 1.7% a year.

The reason is bad timing. The natural reaction of many investors is to sell a fund after it has performed badly, and buy it after it has performed well. In fact, it would usually be better to do the opposite – invest after recent bad performance.

The Morningstar study also finds that the performance problem the typical investor faces is more severe if the fund is more volatile. Investors in the least volatile funds lost 0.9% a year to bad timing; investors in the most volatile funds, 1.9%.

Performance problems were also faced by investors in Value stock funds, small stock funds, and emerging markets funds. All these fund types tend to experience volatile returns. Only investors in Growth funds were able to match the underlying funds’ performance. Growth stocks had a smooth ride over the past 10 years and so those funds were easy to hold.

This phenomenon of investors attempting market timing by looking at recent past returns can be seen on eToro as well. If a Popular Investor has bad recent performance, they will lose copiers. Investors chasing recent performance – good or bad – will, however, underperform in the long run.

Our strategy is volatile and it is not easy to invest in. Morningstar warns, “the added volatility [concentrated] strategies entail cost investors any excess return they might have earned and then some.”

An investor in our – or any other – concentrated strategy will improve their returns if they keep in mind the results of the Morningstar study.

2023 performance YTD
@triangulacapital +16.8%
$SWDA.L +15.5%

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.