Performance review Q2 2025 – Comment: “Just keep going or reflect & adapt ?”
In the first 6 months of 2025, the Value & Opportunity portfolio gained +5,8% (including dividends, no taxes) against a gain of +15,6% 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:
As mentioned in Q1, in relative terms 2025 turned out to be a tough year. Despite my traditional overweight in European stocks, I didn’t have enough exposure to performing sectors (Financials, Defense) but instead too much exposure to weak sectors like Oil/Energy related (ATD, DCC), Alcohol (TFF) or construction (Thermador, Samse etc.). I also had no expsoure to takeovers or buy outs.
The only positive news is that June was a relatively good month, in relative terms the best month since December 2023 and the first few days in July looked quite good as well.
For the record, this is the monthly development of the relative performance for 2025:
Transactions Q2:
The current portfolio can be seen as always on the Portfolio page.
In Q2, I sold Royal Unibrew and the rest of Hermle. Royal Unibrew has been a pretty OK investment, returning around +40% over slightly less than 2,5 years. The main reason for selling the position is that I see limited upside compared to other investments.
As new positions, I added a 3% position in Fraport and a yet undisclosed a 1,8% in German Holdco GESCO. I added to Jensen to make it a full position and I also added to Bombardier and Eurokai. In all cases, the operating business developed better than expected. Unfortunately I added not enought to Bombardier (only from 1% to to 2%) looking at the recent news.
Average holding is 3,6 years, Cash is at ~9,7% (vs. 4% at year end).
Comment: Just keep going or reflect & adabt
As in many areas of life, if things are running smoothly and successfully, why should you change anything ?
If a football team is winning, the coach might use the same players and the same tactic for every subsequent match.
But of course, if things don’t run so smoothly anymore, there is always the question: Should you continue to do the same (and “hunker down) and hope for things getting better or should you make changes ?
In Football, the answer is usually: Make changes quickly before you get fired as a coach. Hunkering down as a coach usually doesn’t work out very well for the individual coach. As a side remark: In football, if at all, firing coaches only has short term positive effect on average.
In investing however, it can make sense just to continue what you have been doing because the reason for underperformance is maybe only temporary or cyclical. Chasing the latest trends or past performance can actually be quite harmful.
On the other hand, even in investing, it might be very advisable to change or refine the approach in order to improve results. A famous example is Warren Buffett moving from “Graham” stocks to GARP stocks after teaming up with Charlie Munger. He actually ajdusted his approach a second time by concentrating on full take-overs compared to minority positions.
With my portfolio now underperforming for the 3rd year in a row, I have been thinking for quite some time if and what I should change.
My current assumption is that the overall strategy, which is to invest mainly into well managed, solid companies with decent prospects at moderate valuations with a certain focus on small caps, is still valid in the long run.
However, the way I execute the strategy might require a few updates and upgrades as I identified some recurring mistakes and weaknesses such as:
- having a too extensive non-prioritized watchlist
Following my various A-Z journeys, my watchlist has grown to several hundred stocks which I am not really able to cover - not having a systematic way to combine Qualitative and quantitative aspects
I have no clear rule to decide if I should buy something that looks very cheap but is not so high quality vs. something that is very high quality but not as cheap - not having a systematic way to measure existing positions against potential replacements
I don’t want to replace existing positions on a daily basis but comparing potential alternatives systematically on a regular basis might be a worthwile exercise - selling too early when stocks perform well
This is a recurring issue over the past 15 years since I write this nlog. It has gotten a little better but I have no systematic way to decide on this. - not buying if a stock on the watchlist gains momentum (often waiting for a cheaper price too long)
Somehow I have this mental bias that I prefer to buy with a “discount” compared to historic prices although this is clearly the wrong perspective if for instance the fundamentals improve significantly for a business - Buying instead underperforming stocks only to get surprised by worsening fundamentals
This is the flipside of the previous post. I often buy into falling stock prices because the stock looks cheaper, only to find out that “Mr. Market” actually had a point. My “bet” on a recovery in the second half of 2024 was a prie example for that. - cumbersome manual processes when screening companies, especially when I do my A-Z country review This exercise has yielded some great new investments, but the process is really annoying and the reason why I have not started a new series.
Therefore I am currently working on a couple of improvements that I can cluster into 3 categories:
- Improve the screening process, especially on the qualitative side and combine it with the quantitative side (valuation)
- Reduce my watchlist to a manageable amount of companies that I track more closely and prioritize them better
- Measure existing positions vs. Watchlist portfolio on a recurring basis
- Make use of AI tools to avoid cumbersome manual research work
- Add Momentum as one factor into the decision process instead of completely ignoring it
I will write more about this in the coming weeks as most of this is “Work-in-progress”.
It clearly would be far too optimistic to assume that these changes will change the performance overnight, but I am very optimistic that this will increase the odds of better performance (vs. the old approach) in the mid to long term. And it is maybe even more fun.
Maybe one final remark: I will deliberately NOT use AI for writing the blog. Why ? Because I fully subscribe to this staement from legendary “VC Philosopher” Paul Graham:
Stay safe and cool & enjoy the summer (if you live in the Northern hemisphere).
value and opportunity 
Respectfully disagree. As a longtime follower of your vapourware, best option is to take up a new composite benchmark, an easy one, in order to always outperform it.
Personally, I would consider a mix of Botswana and Bangladesh indices (maybe NorthKorea/Venezuela too) plus some Cannabioid Index.
Have you any thoughts on TFF’s results?
This is a share I had on my watchlist as a potential buy if the price got low enough. The share price has gotten low, but now I am not so sure I want to buy.
A BALANCE SHEET THAT REMAINS SOLID
TFF Group’s balance sheet structure continues to strengthen with an increase
in shareholders’ equity to €519 million (vs. €511 million) and a controlled net
debt of €314 million (vs. €266.6 million), i.e. 3.9 times EBITDA. This has allowed
us to finance the development of our bourbon division, the strengthening of our
inventories (€451 million vs. €417 million) and our external growth for the year.
Finally, TFF Group still has a high level of available cash at €80 million.
There has been a real and consistent deterioration in the balance sheet over the last few years and it’s now the weakest it’s ever been. For the first time I look at TFF and when I asked myself is the debt manageable, the answer is that I am not so sure anymore.
I think balance is still okay. Real problem is wine- and whiskeymarkets. People tend to drink less alcohol and the tariffs in the USA can worsen the situation. TFF is 100% depending on these two industries, so my guess is that The stock will trade lower in the near future.
Second problem is that small cap stocks are not the best place to invest at this moment.
I think that a part of your performance problem is the investments in (very) small stocks. These stocks tend to perform worse than bigger names during the last 2-3 years.
So stop with buying French smallcappers and buy more Fraport and bigger names.
That is simply not true, eg. SDAX ~30% YTD, MDAX ~20%
Hi,
I’ve been a silent reader of your fantastic blog for many years and wanted to finally reach out to say thank you for the incredible, high-quality work you do.
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On a separate note, and for what it’s worth, my intuition on why disciplined value strategies may be seeing a headwind is the sheer volume of capital flowing into “fast twitch” momentum strategies at the large hedge fund pods. I believe this is creating a temporary performance differential that favors those shops, and that the dislocation won’t last (given the 10 to 1 leverage these shops use).
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Keep up the great work and thanks for sharing such a thoughtful self-reflection post.
Comment to 007´s 2025-halfyear review.
Know from own experience, that many value-investors can put themselves in the sell/buy dilemmas you very accurate describe(ad 4,5,6). This touches the most vulnerable part of being valueinvestor. Its in every way difficult and though learning should be taken, there will never be a formula to do this right. I am not sure, that putting momentum into your decision is the way to go – its there until it suddenly isn´t. But fully understand why you bring it up.
My humble and not scientific advise to increase average yield is to focus on:
high earnings quality and low debt
cashflow-yield as helpful indicator
larger companies, smallcap tend to stay cheap too long
I admire your very honest and to-the-point written post. Maybe you are too hard on yourself. Don´t lose faith, you do plenty of good analysis and have well-argumented thoughts.
oh No !
please change nothing.
Else we won’t have our worst-in-class type to illustrate what happens when you are a stupid narcissist.
Didn’t we agree that it is not worth your time to read my blog ?
this is probably obvious, but transition from individual stocks to funds with philosophies you align with.
there may be small things that you do not like, but we have to face the uncertainty regarding whether these differences matter. i am in this process myself, slowed by tax implications.
e.g., if your biggest worry is cutting winners too early, find a reliable GARP manager.
some of the tools these mid-large funds have, in terms of analytics and block trading, are impossible to replicate.
if you are still interested in small illiquid stocks, make these no more than 10% of total net worth.
Nice and sincere post!
My 2cents. After too many mistakes (especially selling too early), I now tend to use a few rules:
Regarding price & momentum: It all depends whether something has actually changed. If nothing has changed, or maybe even if it’s merely a cyclical improvement, I think historical price comparison DOES play a role for the longer term (see below). A high price hints that you buy relatively expensive. And since many stocks always remain cheap relative to others, they might be already too expensive, even if they are still cheaper than others. (Although you rather don’t usually buy such stocks, anyway)
But if things did change fundamentally, then I agree that the historical comparison might not play a role anymore.
And don’t forget that momentum is a factor that mainly works over the medium term, that is up to a year. Over the longer term, the factor “long term reversal” works, that is poor performance over the past 5 years.
Using momentum might make more sense regarding the timing of the exit of a position – not selling too early – than the purchase, when your intended holding period is at 3-5 years or longer.
LTR corresponds well with the contrarian common sense.
Man, don’t change… a bit. Your long-term and calm approach to investing has always been a great inspiration.
I started used Koyfin simply to track discount to (somewhat) historical P/E or NAV (settled on 5 years, as 10 years has basically become a century in these Rage-Tweets-Rule-The-World times) of about a hundred stocks I find interesting. If they approach a decent discount, I dig deeper and possibly buy, otherwise I stay the course. Of course most of my recent short-term hits have been dumb luck after a bit of reasoning (Rheinmetall, Campine, Moury Construct), but in the long term, it’ll probably all average out.
Thanks for sharing. Campine was one of those stocks where I always waited for a cheaper price to get in 😦
“selling too early when stocks perform well”
This is the core issue.
One of the best books about trading is “Best Loser Wins”. His thesis is that if you choke your winners, it doesn’t matter at all what system you use, and what criteria you use to trade/invest – you will always underperform. It is originally written for traders but I believe it’s also applicable for investors.
The 80/20 rule is alive and well: Most of your performance will always come from 5% of your trades/investments. Most of Buffet’s profits came from Apple. If you remove Apple and 3 other picks, Buffet’s performance drops like a rock.
The only conclusion is that you must ride your winners as long as possible to ensure positive expectancy.
Unless you have a methodical way to handle winners you will underperform.
You can split-test some strategies by going over your past winners and analyze how different strategies would have worked. Maybe selling a small part of your position after 10-20% gain and then letting the rest ride use a technical took like the 10-SMA on the weekly chart. This ensures you ride the winners as long as you can, and get out when it starts losing steam (for example- BNTX).
Thank you for that comment. Very helpful.
I can only confirm what Fritz wrote about letting the winners run, from reading about, and also based on my own learning curve. Looking back at the growth stocks bought over the last years, it had become obvious to me that my technical alert to sell 50% of a winning trade/investment and letting the remaining 50% run had usually triggered to early. I should have just let things be.
I find this the trickiest to adjust: A) You do not want to let a winning trade/investment turn into a losing one. So you need to sell at some point. B) You do not want to exit the winning ones too early.