value and opportunity

February performance for the portfolio was again very satisfactory. The portfolio gained 2.5% against 1.4% for the benchmark (50% Eurostoxx, 30% Dax, 20% Dax). YTD the portfolio is up 11.3% against 4.7% for the BM.

Since inception (1.1.2011), the score is now 46.6% for the portfolio against 14.2% for the BM.

Portfolio as of February 28th 2013:

Performance drivers were Tonnelerie (+15%), Buzzi (+13%), Draeger GS (+10%) and Gronlandsbanken (+13%). Underperformers were April (-11%) and SIAS (-6%). I find the Buzzi performance especially interesting, it seems to be that the market has realized that they are much more an international than an Italian stock.

The only notable change in February was the new -1% short position in Kabel Deutschland. Additionally, I trimmed back the Draeger Position, but again it increased above the 10% threshold.

At the moment, a lot of “preliminary” 2012 numbers are coming in but I find it hard to base any decisions on those preliminary numbers. I prefer to wait for the annual report in order to really see how the companies have developed.

Comment: “Filtering out the noise”

If you follow the financial media, the world seems to be jump from one life threatening event to another. “Fiscal cliff”, vote in Italy, “the sequester”, speech of Japanese BOJ chief; Bernanke speech etc. etc. The media wants to promote the picture that thw whole world is “walking on a tight rope” and if any one event goes wrong, doom is ensured. As a result, people are “glued” to their TV sets, Bloombergs etc. in order not to miss the one “big event” which will change it all.

In reality, in my opinion this is all bullshit. The world doesn’t stop if Bersani gets elected or Monti or Berlusconi or if Bernanke is changing the order of words in his statements. The big problem with all the “sensational” media reporting is in my opinion that the “average investor” is driven into bad and sometimes fraudulent investments.

In Germany for instance, despite the relatively good economic background, many people are scared to death about financial markets and the inevitable hyper inflation, that they are easy prey for all kind of scams, like the recent “S&K” scandal or schemes like WGF. The basis theme of those scams is always the same: The world is going to end soon and the only way to protect is to buy “real assets” like precious metals or real estate. Many people are so scared that they forget to make even basic due diligence. The same applies to the mad rush of people in large German cities to buy on a highly leveraged basis residential properties at price level where rent doesn’t even cover depreciation.

Often, i try to discuss this with people but they think I am a madman if I tell them that most of my money is in stocks. What the “man on the street” doesn’t seem to notice is that a stock in a solid company is a very “real asset”. And yes, the price may fluctuate but good companies (or cheap companies) will create real value over time no matter what happens.

The other extreme is of course the permanently bullish sell side information stream, but that is a topic for another comment.

But I admit, it is very hard not to be influenced by the constant stream of mainstream media news. Some of the “tricks” I try to handle it (and filter out the noise) are the following:

– follow only blogs of people who have a long term horizon (see blogroll)
– focus on media appearances of proven long term thinkers (Buffet, Chanos)
– actively ignore media appearances of sell side analysts, market timers etc.
– don’t watch Bloomberg television, cnbc etc.
– take time to read investment classics, biographies, economist articles etc.