Investing in undervalued securities worldwide

Weekly Update 20 November 2023

Share Article:

Our portfolio set a new all-time high last week, but the investment case for banks remains strong from these levels.

Bank stocks underperformed the market by a wide margin over the past five years.

Banks had a terrible 2018 when the economy slowed down, a disappointing 2020 due to the pandemic, and a tough 2023 because of the failure of Silicon Valley Bank.

As a consequence, banks are cheap. Some banks in our portfolio, such as Santander, NatWest and BNP, trade at 5-6 times 2024 earnings. The historical average is closer to 9 times, suggesting 50% upside may be available if valuations normalise.

Historically, higher interest rates helped banks make more money. This indeed happened during the 2022-23 interest rate hike cycle: banks became more profitable. Bank stocks, however, failed to keep pace with earnings, and their valuation multiples compressed.

Why did this happen? Fundamentally, higher interest rates did not benefit all banks. Some banks bought too many long-dated bonds and lost money. Others saw their deposit costs increase rapidly with interest rates. Finally, investors became wary about credit losses banks might experience, as higher interest rates might tip the economy into recession and put pressure on borrowers.

For these reasons, the market now unusually appears to treat lower interest rates as good for banks, because lower rates improve financial stability.

Inflation is coming down, so perhaps interest rates can stabilise at current levels. Falling inflation and interest rates have been the story of the past month, which has helped bank stocks recover.

“If there is not a recession next year, bank stocks are too cheap,” concludes Robert Armstrong in the Financial Times.

2023 performance YTD
@triangulacapital +24.6%
$SWDA.L +16.5%

Portfolio changes

Share Article:

Leave a Comment

Your email address will not be published. Required fields are marked *


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. 76% 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.