Performance review 6M 2017 – Comment “Resisting the Siren’s songs”

Perfomance 6M 2017:

In the first 6 months of 2017, the blog portfolio gained +16,0% (including dividends, no taxes) against 9,28% for the Benchmark (Eurostoxx50 (Perf.Ind) (25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%)). Since inception, the score is now +174,6% vs. 89,4% for the benchmark. The full details (and graph) as always on the performance page.

Some other funds that I follow have performed as follows in 6M 2017:

Partners Fund TGV: +10,88% 
Profitlich/Schmidlin: +6,04%
Squad European Convictions +17,65%
Squad Aguja +9,48%

Ennismore European Smaller Cos 1,87% (in EUR)
Frankfurter Aktienfonds für Stiftungen +10,24%
Evermore Global Value +2,22%
Greiff Special Situation +8,55%

Perfomance attribution

The top positive contributors in absolute terms were the following:

Tonnellerie Frere Paris 2,9%
SAPEC 2,1%
Miko 1,0%
Installux 0,9%
G. Perrier 0,8%
Gagfah 0,8%
Italgas 0,7%
Stada 0,7%
Ashmore 0,7%
Van Lanschot 0,6%

As in Q1, only 2 positions contributed negatively which were Silver Chef (-0,4%) and TGS Nopec (-0,5%).

The performance for Q2 in relative terms was even better than in Q1 but has to be put into context: European small caps did very good in the first 6M.

The SDAX made 13,9%, the French CAC90 Small +18,77% and the Italian STAR small cap index 26,6%. So clearly a relative large part of the outperformance can be explained by my general overweight in small caps. On top of that, as I have written a few days ago, my 4 largest special situations all “catalyzed”. So there is clearly a lot less “juice” left in the portfolio and those return will not repeat themselves.

Q2 transactions

In April, the Delta Lloyd special situation was closed out with an overall profit of  +4,05% for around 7 months. Not huge but nice and with very little downside. There was a theoretical chance for more. I also sold Romgaz more or less after break even as the case was far away from my initially assumed assumptions due to the large fall in energy prices.

In May I sold Italgas with a nice profit of around +53%. A very “classic” spin off story with a nice rebound. In June finally I tendered Actelion and sold the spun off Idorsia shares.

New positions were Kanam in April and HP Enterprices in June. So I staid within my limit of max 1 new position per month in this quarter. So I have at the moment 24 positions (compared to 27 at year-end) with 2 more (Sapec & Vonovia) sure to go in the coming weeks.

From the existing positions, I slightly increased Silver Chef during their capital increase, I fully reinvested the Kanam payout back into Kanam and I doubled the DOM Security position to 4,8%.

At the end of June, available cash was around 6,6% plus ~1%”receivable” for reimbursement of the Belgian withholding tax.

The cash percentage will increase as I am currently selling the remaining Sapec shares and will soon sell the Vonovia shares that I receive through the merger. Anything above 10% cash will be reinvested ib my “higher conviction” ideas with the Kanam fund as default investment until it reaches my max.

The portfolio composition as always can be found on the portfolio page.

Comment “Resisting the Siren songs”

Although I am not really very knowledgable about Greek myths, I remember the famous Odysseus saga quite well. Especially the part with the Sirens is one that stuck in my mind. Here is a quick summary:

Odysseus is warned by the Goddess Circe that on his way back he will need to pass an Island with the Sirens on it:

First you will come to the Sirens who enchant all who come near them. If any one unwarily draws in too close and hears the singing of the Sirens, his wife and children will never welcome him home again, for they sit in a green field and warble him to death with the sweetness of their song. There is a great heap of dead men’s bones lying all around, with the flesh still rotting off them. Therefore pass these Sirens by, and stop your men’s ears with wax that none of them may hear;

However if he really wants to listen to the song he should do the following:

but if you like you can listen yourself, for you may get the men to bind you as you stand upright on a cross-piece half way up the mast, and they must lash the rope’s ends to the mast itself, that you may have the pleasure of listening. If you beg and pray the men to unloose you, then they must bind you faster.

Odysseus does exactly as Circe has advised him. When he hears the song (being bound to the mast) it is irresistable but his men stay the course and they successfully pass the danger zone.


Investing Sirens

I guess it is not hard to see the analogy in investing. The only difference is that contrary to Odysseus, the “Investing Sirens” are not on a single Island but everywhere. Those Siren’s come in many forms such as:

  • the latest hot IPO
  • the unstoppable tech stock
  • the fantastic turn around opportunity
  • the juicy dividend stock
  • the crash guru who predicts the sure next crash

So for an investor it is generally wise to have a lot of “Beewax” in his ears. For myself for instance, I tried to do this by reducing the news sources I read (no zerohedge, no Business Insider, no noisy stock forums) and looking less at actual stock price movements. The ideal state wold be just to read good books, annual reports and maybe the Economist but this is a state which is hard to reach especially if you are genuinely interested in economic issues.

So for most investors one has to accept that some of those Siren’s songs will come through and therefore one should prepare for it.

Binding oneself to the mast like Odysseus did is  a strategy which functions best when there is only one Island with Sirens on it. For a very long journey, this would be maybe too uncomfortable.

Nevertheless, generally restricting ones movements to a certain extent in my opinion ist still a very good idea. That’s why I try to keep the number of transactions as low as possible ( general target 1 per month) and try to react even more slowly.  Intuition or “fast thinking” is in my opinion much more likely to lead to bad decisions than slow deliberate decision-making.Another great idea from a fellow investor is the following: When you have found a really great stock and you are eager to buy it, put everyting down and do something else for a month. Then look at your great idea again if it is still great…

Yes, you might miss one or the other short-term opportunity but I am sure this will lead to less long-term mistakes and better outcomes in the long run.

On the other hand, burdening oneself with too many restrictions is also not great strategy. From my own experience I know well that the myriad of regulatory restrictions in large institutions is a big drag on performance and in my opinion explains a lot of the observed underperformance of mutual funds and other institutional money pools (despite fees).

In my opinion, especially as a private investor, one should not restrict oneself too much what you buy/sell but rather how you buy/sell. As I have mentioned in the last review, consistent money management as such is important and should be formalized to a certain extent.

In some situation, “mast binding” however might be a very good solution. As we are now already some years into a bull market, some form of correction (or even crash ?) becomes obviously more likely.

In the past during a big correction or a crash, I would have been glued to a terminal all day and look at stock prices real-time to decide if I would buy or sell. Going forward, I plan to tie myself to the mast and mostly do nothing spontaneous but only to take deliberate action.

For this to work, I need to make sure that 2 conditions are fulfilled:

  • I should only own investments that I am prepared to hold long-term or that are not (or little) effected by a correction
  • I should know in advance which stocks I am prepared to buy at which price.

This includes resisting the Siren’s song of “Buying what’s still cheap” but rather the opposite, to increase the quality of the core portfolio but also resisting the strong urge to go into cash after the first very nice 6 months and “wait for the crash”.

This is what I will be working on for the rest of the year.





  • Is there a reason for not beeing able to comment on your 9M Performance Review?

    Congratulation for outperforming not only your benchmark but ALL funds you follow!
    Regarding your “transaction per month limit”: I liked your idea and cloned it in a softer way: Only buying one new company per month. It is a good way to take more time to think about new companies and to smooth the investment process over time.
    I did by purpose not clone the selling limit – if something happens I have to be able to react.
    And additional purchases where also not counted as the main analysis has already been made, I just react to updated information.
    I suppose you have still met these softer limit in the last quarter. 🙂

  • bm=bmk, benchmark

  • Do you use perf excluding dividends for comparison with bm?

  • Weshalb willst du die Vonovia Anteile verkaufen?

  • Dear MMI,

    congrats to your performance and thank you for your thoughts. In my opinion you have a well-balanced strategy of short (special situations) and long time investing. In addition, your focus on low risk helps you to avoid the “sirens” like the latest hot IPO or the unstoppable tech stock.

    I think too, that long-term holdings should be of the highest quality. But what about price? Take Tonnellerie for instance. I think it’s a well-managed, high quality company. But currently it’s priced like a hot growth stock with a forward! P/E of 20. Well, they grew 10% p.a. over the last years, so most likely it will continue. But it is surely priced in, so let’s hope they deliver.
    Would you buy at this price or would it not be more reasonable (in terms of risk/reward) to switch Tonnellerie with another high quality company that is not priced like a hot growth stock?

    The most difficult part nowadays is in my opinion to judge the sustainability of earnings. I don’t think that all the free/cheap money is allocated wisely. Maybe some of it goes into old vines or expensive wiskey as investment opportunity (and not consumption) that drives the demand? Is that sustainable? Who knows? I don’t, but one possibility is to stay away from companies where growth is aggressively priced in, independent of their quality. Except if there is nothing left with a better risk/reward ratio.

    All the best

    • very good points. With Tonnelerie I have asking myself for the last 3-4 years if the stock is maybe too expensive. My current view is that I keep the stock at least another 3 years (to make it 10) and decide then….

      • Agree. My point is that good quality stocks should be kept as long as there is no better options (ie. cheaper high-quality stocks). Probably the reason to keep it another 3Y is that immediately it is difficult to find stocks with better perspectives.

  • Coherent and brilliant if you let me say so.

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