Performance review Q1 2025 – Comment: “Negotiation tactics & Achilles Heel”
In the first 3 months of 2025, the Value & Opportunity portfolio gained +0,9% (including dividends, no taxes) against a gain of +7,2% 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.
Performance review:
After 2023 and 2024, 2025 once again looks like a year where it will be hard to compete with my benchmark. This is how the individual parts of the benchmark performed in Q1:
Eurostoxx 50: +7,6%
DAX: +11,2%
Eurostoxx small: +3,1%
MDAX: +7,1%
Again, European small caps were the weakest subsector un my benchmark and large caps, especially German large caps did well in Q1, mostly because of the announcement of a 1 billion/trillion infrastructure/defense spending program.
Unfortunately, I had (too) little exposure to these “hot sectors”. In contrast, especially my French small caps continued to suffer declines alongside a few other stocks. There were a few winners (EVS, Jensen) but not enough to counterbalance the losers like STEF or Amadeus Fire (which I sold). Also my two purchases (Robertet, Bombardier) did not too well.
However with the market carnage in the last few days, it might not make that much sense to elaborate too much on Q1, but once again, 2025 will be a year where beating the benchmark with my approach looks very difficult.
Transactions Q1:
The current portfolio can be seen as always on the Portfolio page.
In Q1, I sold Amadeus Fire, Energiekontor, Sto and partially Hermle. In all cases, my investment thesis turned out to be wrong. As new positions, I added a 2% position Robertet and a sub 1% position in Bombardier.
Average holding is 3,5 years, Cash is at ~11% (vs. 4% at year end).
Comment: Negotiation Tactics & Achilles’ Heel
No worries—I might write a new “panic” post soon. But this time, I want to focus on one specific aspect of the past few days: negotiation tactics as we can currently watch real time in Trump’s tariff war.
The American Approach
The U.S. appears to be negotiating from a (perceived) position of overwhelming strength. The approach can best be described as bullying—especially when it comes to tariffs. The Trump Administration has stated that it will retaliate against any counter-tariffs by increasing its own even further.
We’ve already seen various responses from “opponents” (aka former trading partners):
- Vietnam seems to have offered to lower all tariffs on U.S. goods to zero,
- China retaliated and even escalated its rhetoric over the weekend. As I was writing, China and the U.S. had reached tariff levels of 145% vs. 125%.
- Switzerland, which had already reduced its tariffs on U.S. products to zero, doesn’t really know how to respond.
- The European Union has offered lower traiffs if the US lowers tariffs, too, but said it would retaliate if no agreement is being made
- And I’m not even talking about the penguins of Heard Island and McDonald Islands, who somehow got slapped with a 10% tariff too.
Two Big Questions:
- Is “bullying from a position of strength” a good strategy?
- What is the best counter-strategy for those on the receiving end?
On 1):
Most academic research shows that if you’re aiming for a long-term, stable relationship, a collaborative strategy yields the best outcomes. That means focusing on shared goals and working within each party’s constraints and preferences.
The Trump Administration is using what’s called a competitive strategy—trying to get the maximum benefit from the current negotiation with no concern for long-term relationships. In the case of tariffs, it’s already clear that a downside will be that many outside the U.S. may deliberately avoid U.S. products, even if they’re cheaper. So rather than boosting exports, the U.S. might end up achieving the opposite. There’s also the risk of full-blown escalation.
My impression is that the real aim behind the tariffs is to raise revenue to fund even larger income tax breaks, as promised to voters. So anyone expecting the tariffs to disappear after minor concessions might be in for a rude awakening. In fact, Trump’s style might even be called adversarial, where the goal is to make the other side worse off than before.
Update: While writing this, Trump “paused” the tariffs for most countries—except China, Mexico, and Canada—for 90 days.
On 2):
How should other countries react? Will China or Vietnam come out ahead?
Again, academic research suggests that neither country behaved optimally.
The best response is often not to react too quickly, as that can trigger further escalation. A measured approach, where all options and negotiation dimensions are carefully analyzed, usually leads to better outcomes. Of course, this can be politically difficult—voters expect fast responses—but patience may yield far better results.
In this context, it might be smart for U.S. trading partners to team up with American companies (like Nike) that are obvious losers of the tariffs. Or, if European companies were planning U.S. investments anyway, they could bundle projects and present them as a big negotiation package.
So far, we’ve seen that the U.S.–China exchange escalated quickly, while Vietnam’s early surrender didn’t yield any benefits—though Trump clearly enjoyed the “ass kissing.”
In any case, this remains a fluid situation. But one thing seems certain: America’s reputation as a reliable trading partner has suffered in the medium to long term, regardless of what happens in the coming days and weeks.
Achilles’ Heel
Human history is full of superhuman heroes who seemed undefeatable—until their one fatal weakness was exposed.
The most famous example is Achilles, who was dipped into the River Styx by his mother to gain immortality—but she held him by the heel, which remained vulnerable.
Similarly, the Germanic hero Siegfried bathed in dragon blood for invincibility, but a single leaf covered a spot on his back—through which he was later killed.
Why am I mentioning this? Because the U.S. under Trump is acting like an unstoppable superhero, attacking friend and foe alike.
But last week already revealed an Achilles’ heel: the U.S. is more dependent on financial markets than almost any other country. A 15–20% stock market drop forced the Trump Administration to “pause” the tariffs. And this may not be the only weakness.
For example:
- ~70% of global copper is produced in China.
- ~80% of all rare earth minerals are mined and refined in China.
- A U.S. F-35 fighter jet requires 920 pounds (~450 kg) of rare earths per unit.
So if trade with China stops, fighter jet production will also stop—at least until alternative sources are developed and scaled.
Conclusion
In my opinion, the U.S. could achieve far better results if it didn’t try to punch everyone in the face at once. There are real structural issues in the global economy that need to be addressed. My home country, Germany, is too dependent on exports, which does not lead to an optimal outcome for its citizens. So there would be clearly a common goal to fix things in a more sutainable way.
But the current U.S. negotiation strategy will most likely expose even more weaknesses in America’s position, with potentially severe long-term consequences. My feeling is that this trade war won’t have many winners—and that irreversible damage may already have been done.
value and opportunity 
Respect for your perseverance but isn’t it a bit crazy?
How many more years/decades of under-performance do you need to see, until you just buy a cheap diversified world ETF and keep playing/trading/gambling with just 5-10% of your portfolio?
Same goes for the other funds run by very intelligent (lucky) people:
TGV Partners Fund = 9.30% since 2015. So they can pretend they are good because they chose DAX as their BM but even VWCE made 8.86%, with a lot less volatility. S&P completely obliterated them.
Paladin One = 40% in the last 10 years! Shocking how bad it is.
Well, the fact that I am blogging here since 15 years might indicate that I don’t get nervous anytime soon. Same applies for TGV Partners. I don’t know about Paladin.
@Siegfried: It’s been years that I pointed this to V&O. He adresses the issue in a talibanic approach. It’s like discussing with a MAGA moron. Lost cause, save your valuable time
Thanks for the comment. “Value Taliban” is my new nick name…
The weird thing is that the worse Value performs, the more value investors think that “value is just about to shine, just a little bit more” – repeat ad infinitum. Very self-destructive behavior. Not dissimilar to gamblers that are sure that the jackpot is right around the corner.
And I have nothing against stock picking or trading, I’m all for that, but I’m not going to risk my family’s future while I try to find out if I’m the next Warren Buffet. Can still trade with 10-20% of the funds while the rest is slowly compounding.
As a qualified doctor, with long experience in Psychiatry, I can confirm V&O is the same pathology as a marginalized gambler. Next time you see a homeless ruined by his addictions, check if he has a V&O tatoo.
That’s funny. Kindly let me know where you practise. I guess i (and some o my readers) want to avoid that place.
Like I would waste my time w lost causes… Anyhow, >90% chances you cannot pay my rates. (And if you could, I would raise them, just to avoid wasting my time)…
I don’t want to pay your rates, just avoid your Shop.
I also wonder why you read the blog and waste time on comments. Maybe you should consult a doctor yourself ?
Hi MMI, I love your blog. In your analysis on the tariff war, I think a small error has crept into your analysis. While I’m sure the yellow man has his eye on the stock market (but probably only because of insider trading?!), I think the bond market is the only market that makes him nervous. Due to the enormous increase in government debt in the United States over the last 10 years, yield increases of 30-40 basis points for a president who has been delivering favors to his constituents (and especially the billionaires) is not a good thing.
THE last time a president fell without being punished by the voters was the “Liz Strus moment” when the bond markets were not buying into the conservatives’ crazy ideas.
Nobody knows where the whole thing will lead. But one can be sure of one thing. Uncertainty is already increasing enormously, which is not necessarily the worst thing that can happen to a value-oriented investor. If China wants to escalate the situation even more, they could simply sell their bonds (depending on sources) between 750-900 billion US dollars. Then a “pretty” panic would surely break out in the global markets. Then we would no longer be talking about 30-40 basis points.
The next few weeks will certainly be interesting to see whether Trump backs down even more. In the case of Apple devices exported from China, he has now done a 180-degree turnaround (insight or pressure from GOP-friends and/or Apple?!).
I think that the EU has reacted quite well so far. Since (I can’t remember which American economist coined this term) weapons are used in the tariff war that shoot yourself in the knee, a wait-and-see approach is certainly not the worst thing to do. However, it must be clearly communicated that the bazooka will be used, if an agreement can’t be reached. Based on van der Leyen’s hints, it should be clear that the Internet giants will suffer in the event of a customs war. In this respect, I am not unhappy with the reaction.
Vietnam’s strategy definitely seems a bit half-baked to me, while China’s behavior is not so stupid in terms of game theory (tit-for-tat strategy). In any case, I’m not sure whether the US has the upper hand against China (while China can credibly threaten to dump bonds on the market, Trump can only threaten to export). That would certainly be unpleasant for China, but then they would simply flood other countries with cheap goods. If I had to bet, it would be more unpleasant for America.
But these are only my 10 cents.
Greetings,
Stefan
P.S.: I am surprised that you are no longer convinced by your Hermle analysis. A company with total returns on capital always greater than 10% (exceptions: 2003 and 2009) in the last 25 years and a PB value estimated below 2.4 seems to me to be extraordinarily cheap.
Thanks for the comments. I t is pretty clear now that nothing is clear. Trump just made another 180 degree turnaround on electronic devices yesterday. so it is anybody’s guess where this is all going.
With regard to Hermle: I still own some Hermle shares. However, with a global recession looming and Hermle only producing in Germany, things could go south very severely for a couple of years.
Thank you for the Update.
Why do you say, that Energiekontor did not deliver according to your expectations?
Ok, 2024 was a little weak, but the Medium term Outlook is unchanged.
Are you afraid of changes in the political Support of renewables?
Thank you for the Update.
Why do you say, that Energiekontor did not deliver according to your expectations?
Ok, 2024 was a little weak, but the Medium term Outlook is unchanged.
Are you afraid of changes in the political Support of renewables?
Just to be clear, this is what I actually wrote “In Q1, I sold Amadeus Fire, Energiekontor, Sto and partially Hermle. In all cases, my investment thesis turned out to be wrong”.
I did not sday that Energiekontor didn’t deliver accoridng to my expectations. For renewables as such however, I do see a lot more issues going forward than I originally anticipated. I find it hard to understand where this could be going, especially for the value of any renewable development pipeline, so I decided to get out until I have time to analyze this better.