Last week was disappointing. The portfolio lost 3%, while the market gained 2%. There are further losses today due to a French election being called. As a result, the portfolio is up about 25% for the year to date, from being up 30% earlier.
While some of the underperformance in the last week can be attributed to bad luck (unexpected elections, negative news flow affecting individual companies), bad decisions also contributed.
There was too much China exposure, too much oil exposure, too much French exposure (unfortunately initiated just recently), and little exposure to rate-cut beneficiaries that performed well last week.
Because I see the current environment of increased political instability and decreasing interest rates as being less favourable to banks, I am repositioning the portfolio to have less weight in banks, and more in companies that benefit from lower rates. The risk with banks now is that the market becomes concerned about France’s budget deficit and debt trajectory.
I am still positive on the stock market in general. The French election will not change the short-term momentum of the EU economy, even if it illustrates the increased political instability that investors will have to live with this decade.
In the Financial sector, the focus of the portfolio will be moving towards insurance and asset managers, whose revenues benefit from higher stock market levels.
I will also be adding exposure to the Utilities and Telecom sectors.
Mistakes were made last week, but good investors are happy to talk about them. It is in fact dangerous not to admit to mistakes, because then the risk is that you hold onto losing positions for too long in the hope that they recover, even if the fundamentals of the position have irrevocably changed.
thedecisionlab.com/biases/disposition-effect
2024 performance
@triangulacapital +26.8%
Portfolio changes
Prudential and Vale were sold to reduce the China exposure of the portfolio. Shell was sold to reduce the oil weight of the portfolio. KB Financial, Nordea and Lloyds were sold to reduce the weight of banks in the portfolio. Standard Chartered was sold due to negative sanctions-related news. BNP and Vinci were sold due to the upcoming French election. Marine Le Pen said 2021 she would nationalise French motorways, which are the biggest contributor to Vinci’s earnings. New positions in the portfolio are BT Group, HSBC, Airbus, Amundi, Azimut and ASR Nederland.
