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Weekly Update 16 December 2024

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This content is provided for information purposes only. It is not a recommendation to buy, sell or hold any security.

The portfolio has lost 10% this quarter.

Thatโ€™s because my macro view went wrong.

In late Q2, I rotated the portfolio away from banks towards companies that benefit from lower interest rates.

Interest rates did indeed decline in Q3, and the portfolio did well.

But in Q4, the economy reaccelerated, interest rates went back up, and the portfolio suffered.

The end result is that the year is now OK only – not bad, not great.

In 2025, market performance will in large part depend on how pragmatic a president Trump turns out to be.

If he follows through with his promises, the market could decline significantly. Some predict the S&P 500 could drop 25%. https://x.com/PeterBerezinBCA/status/1867603477771563112

On the other hand, if Trumpโ€™s tariff talk is more a negotiating strategy than a real threat (as many expect), non-US stocks could have a good year.

It seems that US stocks have momentum behind them, and they still do not appear to be grossly overbought. I would thus expect a few more good months of performance from the US stock market, before euphoria reigns and economic momentum turns down.

Given the risk of Trump-induced higher interest rates, I expect to reduce Real Estate exposure somewhat over the coming days. European Real Estate stocks are attractively valued, but they can drop 30% quickly if there is a bond market sell-off due to political events (as happened in the UK during the Liz Truss administration in 2022). If interest rates were stable, these stocks could return 15% or more a year, given their large discounts to Net Asset Value, so it’s a shame that Trump is creating all this uncertainty.

In 2025, I expect the portfolio will gradually be rotated towards defensive stocks, after economic momentum turns. There may be opportunities to buy interest-rate sensitive stocks on sell-offs, should Trumpโ€™s policies unsettle the market at some point during the year. Timed correctly, such purchases could lead to attractive returns, even if 2025 overall turns out to be a tepid year for the markets.

๐Ÿฎ๐Ÿฌ๐Ÿฎ๐Ÿฐ ๐—ฝ๐—ฒ๐—ฟ๐—ณ๐—ผ๐—ฟ๐—บ๐—ฎ๐—ป๐—ฐ๐—ฒ
@triangulacapital +26.2%
SWDA.L +22.2%

๐—ฃ๐—ผ๐—ฟ๐˜๐—ณ๐—ผ๐—น๐—ถ๐—ผ ๐—ฐ๐—ต๐—ฎ๐—ป๐—ด๐—ฒ๐˜€
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Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk. Past performance is not an indication of future results.

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ยฉ Pietari Laurila 2024 | All rights reserved.

Disclosures

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 etoro.com/trading/fees.

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 buy, sell or hold any 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”ย 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.