value and opportunity

2024 overview
There is no way around it: 2024 was a in absolute terms AND relative terms really bad. The Value & Opportunity portfolio lost -2,5 % (including dividends, no taxes, AOC fund as of 30.09.2023) against +4,9% for the Benchmark (Eurostoxx50 (25%), Eurostoxx small 200 (25%), DAX (30%), MDAX (20%), all performance indices including Dividends). 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 2024:

Partners Fund TGV:  4,8%
Profitlich/Schmidlin: +9,0%

Over the 14 years from 12/31/2010 to 12/31/2024, the portfolio gained +387% against +168% for the Benchmark (before taxes). In CAGR numbers this translates into 12% p.a. for the portfolio vs. 7,3% p.a. for the Benchmark.  

As a graph this looks as follows:

Current portfolio / Portfolio transactions & New positions:
In 2024, portfolio activity was medium busy as already mentioned in the “23 (+1) stocks for 2025” Post.
New positions were: Hermle, Amadeus Fire, Eurokai, EVS, STEF and Fuchs plus one undisclosed one.

Sold positions: In 2024, I sold Solar Group, DEME, Admiral and ABO Energy. Logistec was taken out due to a buy out. . The only temporary member was Ocean Wilsons (Special Sit). The current portfolio per 31.12.2024 can be seen as always on the portfolio page. 

Some Portfolio statistics
The weighted holding period as of 31.12.2024 has been 3,8 years and is within my target of 3-5 years. It declined slightly mainly because of the sale of Admiral. The 10 largest positions account for around 52% (52%) of the portfolio, the largest 20 for around 91% (86%).

“Active share” vs “do nothing”
The “Do nothing” approach, i.e. just letting the Portfolio run from 31.12.2023 and collect dividends would have resulted in a performance of -1,7%, so my “active contribution” in 2024 was a negative -0,8%. Some of the sales were timed well (Admiral, DEME, Solar), on the other hand I invested in losing shares like Hermle and Amadeus Fire.

Monthly returns 2024
In relative terms, the first half of 2024 was relatively in line with the benchmark.

The relative underperformance happened from August to November after the portfolio reached an ATH in July. Other than the year before, I had no big winners like Schaffner or Logistec and so the underperformance persisted until year end.

Annual returns 2011-2024
2024 was now the third year in 14 years in which I underperformed the benchmark (and the second in a row) and the fourth with a negative return. Again, this was driven by the significant underperformce of small caps especially in France and Germany as mentioned above. My benchmark consists out of 50% German/European Large caps, in contrast, my only large cap is ACT with a 5% weight and even that stock had a flat performance in 2024.

If I would need to sell my strategy to investors, I might argue that the last time when I underperformed so badly, the next year was fantastic, but honestly, I have no idea what happens in 2025.

Mistakes made in 2024
As always, I made a lot of mistakes, mostly not pulling the trigger on some quality stocks I had been watching (Games Workshop, Goodwin) and instead buying “cheaper” cyclical ones with the hope of a 2024 recovery (Hermle, Amadeus Fire). Although I realized that I was wrong with my timing, I didn’t reduce the effected stocks enough (only small reductions of Hermle & Amadeus Fire)

Overall, I clearly did not focus enough on diviersifying the underlying business exposure enough and therefore ended up holding the bag of too much exposure to cyclical German and French stocks.

What went well in 2024
This section is short. I think I increased to quality of the portfolio to a ceertain extent but without much too show for performance. I also managed to review some of the existing positions (Sixt, Admiral) which is often a struggle as lokoing at new stocks is always “more sexy”. I also worked on my “investment infrastructure” like developing a core structured watchlist approach.

Lessons learned 2024
The major lesson was clearly that betting on a “macro turn-around” in 2024 for “core Europe” was a bad idea. I should not do this again and focus on companies that do well in any scenario.

Another leasson that I learned is clearly that my underlying strategy, which is not to explicitly look for winners but to mostly avoid losers, does not work well in a market where the returns are driven by a few stocks. In the next weeks I will therefore review the strategy including the benchmark more thoroughly.

Comment “Extrapolate the past at your own risk”

As mentioned before, I actually started investing as a teenager in the second half of the 1980s (Yes, I am that old). Besides starting to invest or rather amateurish speculate in the stock market, I devoured every books that somehow had to do with the then very popular “Cyberpunk” theme. I especially liked the “Shadowrun” series.

The Shadowrun books were a pretty crude and and dystopian (but fun) mixture of Fantasy and “tech fiction” with one interesting aspect: In the Shadowrun universe, the period where most of the stories played (2050 or so) was dominated by a few huge Tech conglomerates, which funnily mostly had Japanese names. Why was that the case ? I guess it was most likely a reflection of the dominating “story” in the late 1980s and early 1990s that Japan and Japanese companies are unstoppable and will dominate the world forever. And just to be clear: Those books were written mostly by American authors.

Back than, companies like Sony, etc. were taking over everything that had to do with electronics and Japanese companies went on a buying spree fueled by their ever increasing stock and real estate markets.

Of course we all know how that story ended, but back then most people just extrapolated the past years into the future. I just recently read the very interesting biography of Masa Son, “Gambling Man”, which covers that era and how obvious in retrospect it was that this boom would end at some point. But back then it wasn’t obvious at all.

In the past 20 years we have seen two similar stories playing out: The first one is the Chinese story. Quite similar to Japan, China looked unstoppable until very recently. Now it has become quite obvious that the economic model of China from the past, relying on massive infrastructure and real eastate investment has run out of steam. How this is going to end, no one knows, but the “Japanese Scenario” is becoming more and more likely.

The second story, which is still going strong, is the “American Exceptionalism” story, now embodied mostly via the “Magnificient 7” (or 8) stocks that have been driving returns in the past two years. Whenever I discuss investments these days, the first question is always: Why don’t you just invest into US stocks ? Many investors these days just extrapolate the past and once again believe that “this time it’s different” and the American stock market in general and these stocks in particular are once again unstoppable forever.

If something like Shadowrun would emerge these days, I am pretty sure that the Megacorps of the future would be named based on Amazon, Microsoft, Google or Meta.

Although history doesn’t repeat itself, it always rhymes. So also in this case , at some point in time, cyclicality will kick in and those unstoppable giants will suddenly look much more vulnerable. To be clear: I have no idea when this wil lbe the case. This year ? Next year or in 3 years time ? But in retrospect, it will look much clearer what will have caused this and why once again, just extrapolating the past into the distant future is never a good idea.

But what about generative/agentic AI ? Who knows. Maybe once again, Microsoft & Co manage to capture most of the economic upside, maybe not. 3 years ago it was the Metaverse, maybe in 3 years time it’s something else. For the time being, only one thing is clear: Their business has become much more capital intensive and the only company which is really earning money here is Nvidia and semiconductors have always been cyclical.

Maybe it turns out that Tibetian monks are best equipped to train the ultimate AGI ? I am personally very sceptic that the Magnificient 7 and American companies in general will always win in any scenario. But that is to a certain extent priced into their stocks. So be extra careful and don’t simply extrapolate the past.

Bonus track: “Virtual Insanity”