Performance review 3M 2023 – Comment: “Please don’t give me a cyrstal ball & How to cope best with massive changes (Covid, Ukraine, Inflation)”

In the first 3 months of 2023, the Value & Opportunity portfolio gained  +4,7% (including dividends, no taxes) against a gain of +11,3% for the Benchmark (Eurostoxx50 (25%), EuroStoxx small 200 (25%), DAX (30%), MDAX (20%), all TR indices).

Links to previous Performance reviews can be found on the Performance Page of the blog. Some other funds that I follow have performed as follows in the first 3M 2023:

Partners Fund TGV: -3,3%
Profitlich/Schmidlin: +8,0%
Squad European Convictions +5,3%
Frankfurter Aktienfonds für Stiftungen 1,3%
Squad Aguja Special Situation +3,9%
Paladin One +4,9%
Alphastars Europe + 4,2%

I have slightly adjusted the Peer Group by eliminating Ennismore as it is actually a long/short Fund and Greiff Special situations. I have added Alphastars Europa, a quite new fund,. What I like about Alphastars is that one has an almost real time view into the portfolio. The Europa funds contains a selection of quite unusual but very interesting selection of European small caps and will be a challenging peer for me going forward.

Performance review:

Overall, the portfolio performance was again more or less in the middle of my peer group. As the peer group is pretty Small cap focused, the relative low returns correspond with the returns of European small cap indices. Looking at the monthly returns, it is not difficult to see that especially January was in relative terms very disappointing.

Perf BMPerf. Portf.Portf-BM

In relative terms, I consider the first 3 months as pretty OK, especially combined with the relative small draw down in 2022. One cannot expect to both, outperform in a drawdown and in a sudden reversal.

On a single holding level, the biggest positive suprise was clearly Royal Unibrew, that without any big further news went up YTD almost +20%. On the other hand, VEF AB lost another 20% despite that overall ShitCo rally especially in January. It seems that one of the big investors is selling independently of valuation.

Transactions Q1:

The current portfolio can be seen as always on the Portfolio page.

In Q1, I sold Gaztransport. This was always meant to be a “tactical” position. I did not sell at the highest possible price (only partially), but overall with a gain of ~+19% it was a decent return for the roughly one year holding period.

I also entered and sold Scor SE. It was also meant to be a tactical position, but I pulled out after the CEO was suddenly fired. This trade resulted in a -2,5% loss. I trimmed down the Meier & Tobler position to around 6,5%. My initial price target has been reached but I keep a full position for the time being as the fundamental momentum looks good.

In Q1, two new positions were entered, both hopefully long term holdings: SFS from Switzerland and a few days ago, Logistec from Canada. Both are unspectacular but durable businesses that in my opinion offer decent return/risk profiles for patient investors-

Comment: “Please don’t give me a cyrstal ball & How to cope best with large events (Covid, Ukraine)

When I checked the performance figures for this post, by coincidence I als looked back what happened since the start of this crazy period with the Covid Pandemic, the Ukraine war, rapidly rising inflation, dramatic Intereste rates, inflation, digitally enabled bank runs etc. began.

If I would have had a purey geopolitical crystal ball in December 2019 and I could have seen the geopolitical things that are going to happen in the next 3 years and 3 months, I would most likely have either hedged my portfolio or even shorted the market at that time.

However, looking at the stock market performance since then, my Benchmark performed in absolute terms around +15% or 4,5% p.a. The S&P 500 (in USD) has gained even +27% in this period. My own portfolio gained even +57% or ~15% p.a., above the long term average.

So the first lesson here is clearly: Crystal Balls are overrated.

Why did the stock market so well despite all these fundamental problems ?

It is always easy (or difficult) to tell a story after something happened, but the simplest is the following: The companies behind the shares and the humans behind the companies are surprisingly adaptable. Yes, some retailers have failed, some restaurants have failed, some automobile suppliers and travel companies. However many companies found new solutions, created new processes and processes and thrived despite or because of these challenges. I think this is one aspect that many doomsayers ignore: Problems do not automatically mean doom. Billions of people are out there trying to solve problems each day and they are quite capable to come up with sometimes surprising solutions. Good and great companies can withstand a lot of problems and often manage to come back stronger.

Question 2 was for me: Why did my portfolio so well ?

I went through my posts since December 2019 in order to actually find out what the drivers were for that performance during that very exceptional period. The surprising answer that I gave myself is the following: On top of a lot of dumb luck, there is no single factor (or a combination) that explains it. Rather I think I have managed somehow to develop a process that allowed me to avoid major mistakes and identify a few opportunities.

This is what I think are the cornerstones of my current process to cope with massive changes:

  1. Write a journal

    I think the discision in December 2010 to start this blog as an investment journal and keep it up is maybe the single most important part of my process. Over the past 3 years or so this especially allowed me to
    – reflect first on what is happening and structuring my thought process in the process of writing posts such as the “Panic series
    – accesss old research which then in turn allowed me quickly to identify opportunities
    – get input from a lot of readers that comment and/or send me emails
    I do like Twitter a lot, however in my opinion, nothing beats writing a long form post over a couple of days or weeks in order to gain real insights and come up with a coherent plan in difficult situations.
  2. Defense first – Look for potential losers in your existing portfolio

    Whenever something big happens, at least on Twitter, a lot of investors seem to focus mostly on “How can I make money based on this ?”. What they often forget is, that they have already an existing protfolio which might suffer severely from the new circumstances. For me, identifying losers is actually easier than trying to figure out who will win and when. Interestingly, trying to figure out who ist losing first, often creates interesting insights into who might win. In early 2022 for instance, understanding that energy prices will remain high for some time and hurt energy intensive industries automatically lead to the insight that energy producers with little variale cost (Renwables) could be among the winners.

    In addition, regular portfolio reviews are also important in order to distiguish between high conviction ideas and others, where for instance some kind of “thesis creep” has already occured.
  3. Look for potential winners in your “back catalogue”

    When a large event occurs, future winner can be in principel divided into two groups:
    a) companies that win outright from what has happened
    b) companies that have been beaten up unjustified and will most likely recover or come back stronger

    Personally, I find category a) much harder to identify and execute. Often, the share prices of the winners move quickly. In June 2020 for instance, I was of the opinion that it is already to late to go into “digital winners”. This turned out to be very wrong in the short term, as many of these stocks continued to go higher by 2x,5x or even 10x. However in the long term, this assessment wasn’t so bad. One example was Just Eat (JET):

Food delivery looked like an obvious winner and the stock didn’t even go up that much and was effectively even “cheaper” than before the Pandemic. Back then, this really sounded like a no-brainer.

Now we have of course learned that with such new, unproven business models, a lot of things can happen that result in the curious effect that strong growth destructs value. In JET’s case, additional factors such as overpaying on a major acquistion and brutal competition took its toll. Naked Wines was a similar story. I was lucky that I got out relatively early based on one insight: When an (unproven) business doesn’t make money in a scenario where everyone wants/needs its products, it will be even harder in normal times. Maybe JET comes back at some point in time but looking at the past, it can take many years.

Because of these difficulties, I find it easier to look at “beaten up quality companies” that I already know and might have a good chance to recover and come back even stronger. During the pandemic, this approach worked well with stocks like Sixt, Riuchemont and Brenntag.

I think it can also help to have a list of stocks at hand that one would want to buy at a certain valuation.

Another source of winners that I tend to overlook are the stocks that are already in one’s portfolio. With regard to the UKraine crissi for instance, my biggest winner, Meier & Tobler was already part of the portfolio. In theory, I could have allocated even more money into the position whixh I didn’t do.

4. Spread your bets

Yes, I know, Charlie Munger always recommends to make a “fat pitch”, but as I have mentioned in the past, what works for Warren and Charlie might not work for the “average Joe” investor. Therefore I find it much better, especially in situations with very low visibility, to spread the bets across companies and sectors. One can always concnetrate positions if things go into the right direction at a later point. The last 1-2 years have been quite humbling for many concentrated investors, esepcially if you concentrate at the inception of an investment.

It is clearly a dfferent thing if your portfolio becomes concentrated because of a very good performance of one or a few stocks, but few investors understand the difference and onyl think: Concentration is great because Charlie recommends it.

5. Don’t hesitate to take profits and correct mistakes quickly

One thing that I learned over the past years is also that especially if you have found a nice winner and the stock moves up violently, it is mostly a good idea to take some profits out of a position, especially if the move is not fully justified by fundamentals, but rather on significant mutliple expansion.

On the flip side, one should really correct mistakes quickly if the thesis doesn’t work out. For insatnce, I bought back into tourism stocks much too early. I think I was overconfident because of all the research i did in that sector, but luckily i corretced that mistake early enough when there was no traction in the underlying business.

I think the best way to cope with volatility and “regime changes” is to have a robust process on how to manage one’s portfolio. The points I have described above work for me, but might not work for other people. However, trying to avoid mistakes and also trying to identify opportunities based on a somehow repeatable process are clearly essential for long term success.

For individual investors, the ultimate goal must be to “stay in the game” in order to benefit from the long term “wonder of coumpounding”. “Defense wins championships” is an old saying from professional sports. Maybe defense doesn’t always work out in the short term, but in the long term, a good defense increases the probability of survival a lot.


  • Many Thx for years of outstanding content provided in your blog. This week we featured your article in our weekend newsletter Keep up the great work ! It´s highly appreciated.

  • Will the Portfolio Page be updated to 31.03.23? It still shows the data from 31.12.2022.
    Kind regards

  • Handballwerfer

    Hey MMI, any activity on Knorr Bremse ? I thought you would go for it after China reopening. Cheers

  • Handballwerfer

    No Activity on Knorr Bremse?

  • Just a reminder. In November it was considered a nobrainer to go for S&P500 or the US Stock Market in general. So how did this bet go ? Just have a look at the GPO Fund for instance…, good old germany is not dead after all.

  • Thanks for sharing. Reminder… you are still passing on ASRNL

  • Incredible that some funds charging 2 and 20 have fared terribly in the past couple years.

  • A question a 10yr old (or ChatGPT) might ask:

    How likely is your portfolio in its current construct finish the year up 18.8%, if the benchmark is highly unlikely to reach 45%?

    • Not sure if I understand the question right. In any case, reaching a specific perfomance number is extremely unlikely. Reaching or surpassing 18,8% based on the past 13 years or so might be a historic probability of 1/4 or 1/3 but without statustic significance.

      • So I went back to the 10yr old and asked them to clarify and rephrase the question. They came back with:

        If (i) one “cannot expect to both, outperform in a drawdown and in a sudden reversal.” and (ii) one should expect to outperform in either a drawdown OR sudden reversal then why would one not simply just hold the benchmark and 50% in cash to tamper the volatility both ways?

        • Because the long term expected return will be a lot lower. With my portfolio, I expect to earn long term full equity returns plus small/cap liquidity premium plus a little outperformance.

        • The 10 year old had a good think about your last reply and is asking how much cycle-adjusted outperformance would you want to justify your time-investment in this hobby vs something else (like fishing)?

        • Well, first of all, I have fun doing this. Most hobbies cost a lot of money, so even some underperformance would be tolerable. Nevertheless, i expect something like 2-5% outperformance p.a. (pre Tax) in the long run.

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