For the year to date, our strategy has returned +20%, beating the +12% return of the MSCI World index ($SWDA.L) by 8 percentage points.
There are reasons to be cautious on the market in the near term. Oil prices have increased and interest rates have broken out of a range. Some argue long-term interest rates might have to go above 5%.
twitter.com/BillAckman/status/1705056634072863102
These macro concerns do not change the fact that the stocks in our portfolio remain cheap.
Take $INGA.NV (ING Groep NV), a new portfolio position. It is a Dutch bank whose shares fell 6% on Friday. The reason for the fall was that the Dutch parliament voted for a 70% increase in the country’s bank levy.
This new tax will decrease ING’s earnings by 2%, estimates UBS, so the 6% fall may have been an overreaction.
ING is highly profitable thanks to higher interest rates, yet trades at less than 7x its 2024E earnings. Historically, the bank has traded at 9-10x earnings, which suggests 30-40% upside is available from the shares if the valuation normalises.
What could go wrong? Any European bank is affected by financial stability concerns, so if Italy’s credit quality were to deteriorate, that would affect ING negatively. Alternatively, if interest rates fell back to 0%, that would hit the bank’s interest revenues. The evolution of interest rates is therefore key to the success of the ING investment thesis.
2023 performance YTD
@triangulacapital +19.8%
$SWDA.L +12.1%
Portfolio changes
BP, BNP Paribas and Deutsche Bank were sold, ING, Commerzbank and Euronext bought.
