Performance January 2013 – The importance of being patient

In December I said the following:

To be honest, I don’t think that the current portfolio has an equal upside potential like in the beginning of last year, mostly due to the lack of really interesting special situation investments. For instance, the upside of athe Draeger Genußschein was much higher when it trades at~2.5 times the pref shares than the current 4.5 times.

Well, I was obviously very wrong on that one. The portfolio gained gained 8.6% in January, the largest single month gain in the 25 months of the portfolio’s history. The Draegerwerke Genußschein alone gained 25%, other top performers were Tonnelerie (+19%), KAS Bank (+17%) and Dart & Cranswick 15% despite the strong Euro.

The outperformance again the Benchmark (4.9% outperformance) can be almost fully explained by the typical January small cap effect which has been covered quite well by Mebane Faber. The German small cap index SDAX for example gained 10% in January.

Portfolio as of January 31st

Name Weight Perf. Incl. Div
Hornbach Baumarkt 4.3% 9.5%
AS Creation Tapeten 4.0% 29.0%
WMF VZ 3.5% 57.0%
Tonnellerie Frere Paris 5.4% 56.2%
Vetropack 4.4% 4.6%
Total Produce 5.8% 55.9%
Installux 2.9% 6.7%
Poujoulat 0.9% 6.4%
Dart Group 3.8% 100.7%
Cranswick 5.1% 12.9%
April SA 3.4% 39.0%
SOL Spa 2.4% 6.8%
Gronlandsbanken 1.1% 24.4%
KAS Bank NV 5.1% 27.5%
SIAS 6.1% 59.5%
Bouygues 2.7% 8.7%
Drägerwerk Genüsse D 10.6% 142.9%
IVG Wandler 4.5% 13.7%
DEPFA LT2 2015 2.8% 56.6%
HT1 Funding 4.6% 44.9%
EMAK SPA 4.2% 23.1%
Rhoen Klinikum 2.2% 3.0%
Short: Focus Media Group -0.9% -2.7%
Short: Prada -1.0% -10.8%
Short Lyxor Cac40 -1.2% -8.5%
Short Ishares FTSE MIB -2.2% -13.7%
Terminverkauf CHF EUR 0.3% 7.4%
Tagesgeldkonto 2% 10.0%  
Value 47.0%  
Opportunity 48.1%  
Short+ Hedges -5.1%  
Cash 10.0%  

The only change to year-end is Sol Spa which was bought in the beginning of January. Cash is now exactly at my target level of 10%. that means any addition will trigger automatically a sale of another position.

Comment: The importance of being patient

A few days ago, the longterm value blog had a great post about patience in investing.

He mentions one of the cardinal sins in current markets:

I’m writing this, of course, to focus myself. One of the hardest things to do is…. to do nothing. The instinctive reaction to a rising market is to pile on, add shares, up your leverage. But really that’s the absolute worst thing you can do. Don’t kid yourself.

Clearly, jumping into the market because you missed out the rally, especially in risky “high beta” stocks will most likely end in tears.

However another potentially big mistake should also not be underestimated: Taking profits too early. Most investors (including myself) get nervous if their stocks climb quickly 20-30%. What you then often hear is something like “It never hurts taking a profit” or “No one ever got bankrupt by taking a profit” or something similar.

The truth is: In order to generate above average returns, taking profits too early hurts badly. Statistically, the vast majority of investment ideas will be rather average, some will be bad, but some of them and usually only a small amount will be really really succesful.

If I look at my portfolio, most the outperfomance of ~23% over the last 25 months can be attributed to only a few positions especially Draegerwerk, Aire KgAa, Dart Group which have all doubled.

In all cases, it was and is always tempting to sell out and “take the profit” quickly. For Draegerwerk and Aire, I started selling too early, however I was lucky to start only with small amounts. Looking back over my 25 year investment “carreer”, I made many mistakes. However the most costly ones in the end were selling companies like Fuchs, Rational or Fielmann much to early.

Fuchs AG Vz. for example was one of the stocks I bought during the 2008/2009 around 12 EUR (adjusted for the split) and happily took the profit end of 2009 at 20 EUR, feeling like an investment genius. However, with the stock now at 58 EUR (plus a few Euros dividends in between), it looks pretty stupid. I knew that Fuchs was an outstanding company. Even worse, if I would have kept those shares the gains would have been tax free as they would have not been subject to the “Abgeltungssteuer” introduced in January 2009.

So looking back, “taking the profit” on a share like Fuchs (much) too early was maybe one of the biggest and most expensive mistakes in my investment career.


  • I gather that – apparently for the first time ever since inception of your portfolio – the opportunity based investments outweigh the value oriented picks. However, this appears to be mainly a result of “regrouping” some of your former value stocks. Any insight into this ?

    • Hi Shortguy,

      you are right. I was rethinking my classification a little. As “core Value” i consider those companies which I might be prepared for a really long time.

      Companies like Buzzi, EMAK, Bouygues or KAS Bank, where I rather invest for turnaround are rathe “special” as well.


      • Despite the risk of appearing impatient, the Draeger Genußscheine now account for 11% of the portfolio. So I will cut back to 10% weight as of today. This is however more a risk management exercise than anything else.

  • hi max, 3 reasons for investing in Sol:

    – Since April, the company earned another 9 months of profit, so at the time of purchase, price was below book
    – everything else got more expensive, so Sol is relatively cheaper now
    – I heard good things about management


  • Great results in 2012 and starting on tear this year, you da man!

    On a different note, I am somewhat surprised that you invested in Sol SpA. I cannot see that the companie’s results and valuation satisfy the investment requirements you laid out last April (post from 10.4. Am I mistaken or what has changed your thinking?

  • I have not sold a single old position established before 2009. If this was for the best, I don’t know.

    Regarding Fuchs AG: Why do you judge your sell decision by comparing prices one could’nt know at that point in time?
    If fundamentals were good for 20€ and ROE high and taxfree this was a clear mistake. If the price of 20€ was high, well then performance was probably driven by multiple expansion and luck. Imho you are a great investor.

    • sure, i didn’t know future prices at that time. But I knew that Fuchs was a very very good company at a reasonble price. I just wanted to lock in teh quick gain and maybe buy it back cheaper. Which was a mistake.

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