Investing in undervalued securities worldwide
info@triangulacapital.com
SIGN UP

Weekly Update 11 November 2024

Share Article:

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

The portfolio has suffered from weak relative performance lately due to its focus on European stocks.

The performance this year can be divided into two periods. The portfolio had a strong start to the year, rallying 30% from January to May. It then went nowhere from May to November.

The performance of the portfolio during this second period has closely tracked that of the European stock market index ($VGK). European stocks have fallen 3% since May. Although the portfolio has matched or beaten the European index, US stocks have returned +15% over the same timeframe, so relative performance has suffered.

I don’t feel there have been any huge mistakes in stock selection for the last few months and I don’t regret the focus on Europe this year. I have a natural preference for Europe over the US due to the former’s cheaper valuation. I don’t think it would have been easy to predict back in May how strongly US stocks would perform over the following 6 months.

Last week European stocks fell due to Donald Trump’s election win, while US stocks soared. Most investors believe that Trump’s presidency will boost the US dollar and US stocks, but may hurt bonds and non-US stocks.

That view, though, seems a little too obvious. As Bank of America strategist Michael Hartnett argues, there is a case to be made for non-US stocks during Trump’s presidency. The European Central Bank and China could successfully counteract Trump’s tariffs via monetary and fiscal stimulus. The European and Chinese economies could also get a boost if oil prices fall due to Trump’s energy policies increasing the supply of oil.

At the same time, in the US, the Federal Reserve may have to keep interest rates high due to Trump’s deportations putting upward pressure on US inflation.

This scenario is the one the portfolio is positioned for. Loose monetary policy outside the US should benefit European investment banks, asset managers and real estate.

I believe the stocks in the portfolio remain attractively valued under President Trump, so I continue to hold.

𝟮𝟬𝟮𝟰 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲
@triangulacapital +30.1%
SWDA.L +21.2%

𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗰𝗵𝗮𝗻𝗴𝗲𝘀
Arkema, Clariant, Host Hotels and Wacker Chemie were sold. Vinci and Merlin Properties were bought.

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.

Share Article:

Leave a Comment

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

Please refer to important disclosures.

Linkedin-in Twitter Facebook

© 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” 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.