Performance:
August was the second best month for the portfolio so far with a performance of +6.5% against +3.2% for the Benchmark (30% Dax, 20% MDAX. 50% Eurostoxx). YTD that means an incredible 24.5% for the portfolio against 16.7% for the Benchmark.
Portfolio Performance in July 2012 was a positve +1.8%, resulting the YTD performance of 16.9%. The Benchmark performed signficantly better in August with +4.4%, resulting in an YTD performance of 13%.
| Bench | Portfolio | Perf BM | Perf. Portf. | Portf-BM | |
|---|---|---|---|---|---|
| 2010 | 6,394 | 100 | |||
| 2011 | 5,510 | 95.95 | -13.8% | -4.1% | 9.8% |
| Jan 12 | 5,972 | 99.27 | 8.4% | 3.5% | -4.9% |
| Feb 12 | 6,275 | 105.90 | 5.1% | 6.7% | 1.6% |
| Mrz 12 | 6,330 | 107.22 | 0.9% | 1.2% | 0.4% |
| Apr 12 | 6,168 | 108.02 | 0.8% | -2.6% | -3.3% |
| Mai 12 | 5,750 | 108.90 | -6.8% | 0.8% | 7.5% |
| Jun 12 | 5,969 | 110.17 | 3.8% | 1.2% | -2.6% |
| Jul 12 | 6,229 | 112.15 | 4.4% | 1.8% | -2.6% |
| YTD 12 | 6,229 | 112.15 | 13.0% | 16.9% | 3.8% |
| Since inception | 6,229 | 112.15 | -2.6% | 12.1% | 14.7% |
This underperformance in such a period is not a surprise, as currently the portfolio carries a 21% cash allocation and many “low beta” stocks which only react very slowly (if at all) to short term market movements. So the “Draghi” effetc which moved the markets was almost not present in the portfolio.
For fun, I added the beta of my stock positions relatively to the respective main country indices in the overview of the portfolio as of July 31st:
| Name | Weight | Perf. Incl. Div | Beta |
|---|---|---|---|
| Hornbach Baumarkt | 4.8% | 4.23% | 0.62 |
| Fortum OYJ | 3.6% | -27.25% | 0.77 |
| AS Creation Tapeten | 4.0% | 3.02% | 0.53 |
| BUZZI UNICEM SPA-RSP | 4.9% | -10.97% | 0.97 |
| EVN | 2.8% | -11.61% | 0.63 |
| WMF VZ | 4.0% | 43.76% | 0.60 |
| Tonnellerie Frere Paris | 5.1% | 15.25% | 0.39 |
| Vetropack | 4.5% | 1.16% | 0.85 |
| Total Produce | 4.2% | 5.43% | 0.45 |
| OMV AG | 2.2% | -11.45% | 0.94 |
| Piquadro | 1.3% | -2.25% | 0.63 |
| SIAS | 5.8% | 14.46% | 0.86 |
| Installux | 2.9% | -4.71% | 0.63 |
| Poujoulat | 0.7% | 3.41% | 0.70 |
| Dart Group | 2.8% | 13.42% | 0.71 |
| Cranswick | 2.7% | 9.43% | 0.59 |
| April SA | 3.2% | 3.05% | 0.76 |
| Drägerwerk Genüsse D | 8.6% | 46.40% | |
| IVG Wandler | 2.2% | 8.29% | |
| DEPFA LT2 2015 | 2.8% | 21.02% | |
| HT1 Funding | 4.2% | 7.03% | |
| EMAK SPA | 5.1% | 16.94% | 0.42 |
| DJE Real Estate | 0.6% | -2.72% | |
| Short: Kabel Deutschland | -2.2% | -28.24% | |
| Short: Kabel Deutschland | -2.2% | -28.24% | |
| Short Ishares FTSE MIB | -2.3% | 6.43% | |
| Terminverkauf CHF EUR | 0.2% | 4.42% | |
| Tagesgeldkonto 2% | 21.3% | ||
| Summe | 97.8% | ||
| Value | 50.1% | ||
| Opportunity | 21.3% | ||
| Short | -4.3% | ||
| Cash | 21.3% |
I am quite surprised that overall beta is so low, avarage weighted Beta of the stock portfolio is only 0.66. Interesting to see that my “low fundamental volatility” investment style translates into a “low market volatility” portfolio.
Portfolio activity:
As mentioned before, I sold the Praktiker bonds and accepted the AIRE KGaA buyout offer. I did not yet record the proposed cash top up from the buyer, which would add ~0.4% of portfolio performance. I will only record it when cash is in the bank account.
Other than that, I recorded coupon payments for HT1 and dividends for Poujoulat and Hornbach as well as a special payment for the remaining DJE Real estate fund units.
Ongoing “programs” are further small purchases of Installux and Poujoulat as well as sales of the DJE real estate fund. I hope the position will be gone by next month.
Market commentary:
The major event was of course the “Draghi Statement” which moved markets significantly higher after a relatively weak start in July. In my opinion, the main purpose of this statement was to avoid another “summer disaster” when “Club Med” is on holiday and evil hedge funds try to exploit the absence of the Club Med financial sector.
So far it has worked but of course it could be only a “dead cat bounce”. Fundamentally, if one ignores the sensationalist mainstream press, there seem to be encouraging signs especially in the Spanish economy. The excellent “IBEX salad” blog has just pointed out the new Export record for Spain achieved in May 2012. So beneath the real estate and banking mess, the industrial sector seems to improve. So maybe this was then really “just” a normal real estate bubble deflating and not the “greek illness”. So maybe Spain is more Irish then Greek then ?
It is interesting to see that almost all of the US “moMo” stocks seem to be faltering, most recently Chipotle and Starbucks. Unfortunately I did not have the courage to short them. However shorting only on valuation is a quite difficult business and in a “no growth” environment, “real growth” stocks are in very short supply.
Outlook:
After continuously extending my Boss database, I will try to analyse more “BOSS” stocks in the next few weeks. My target would be at least one company per week. Let’s see how that works out.
Market wise I do not have a strong opinion at the moment. Although sentiment is relatively negative, overall stock market levels are not really cheap like the were in 2003 or 2009. As I am not a fan of market timing anyway, I will continue to look for undervalued single stocks and invest without really caring too much about macro events, provided that the business model looks stable enough.
June finished with a big bang in the markets on the last trading day. So instead of a 1% outperformance for June on Thursday, the Portfolio underperformed -2.6% for the month. However as discussed before I don’t take monthly numbers to serious.
So quickly the updated Portfolio performance table:
| Bench | Portfolio | Perf BM | Perf. Portf. | Portf-BM | |
| 2010 | 6,394 | 100 | |||
| 2011 | 5,510 | 95.95 | -13.8% | -4.1% | 9.8% |
| Jan 12 | 5,972 | 99.27 | 8.4% | 3.5% | -4.9% |
| Feb 12 | 6,275 | 105.90 | 5.1% | 6.7% | 1.6% |
| Mrz 12 | 6,330 | 107.22 | 0.9% | 1.2% | 0.4% |
| Apr 12 | 6,168 | 108.02 | 0.8% | -2.6% | -3.3% |
| Mai 12 | 5,750 | 108.90 | -6.8% | 0.8% | 7.5% |
| Jun 12 | 5,969 | 110.17 | 3.8% | 1.2% | -2.6% |
| YTD 12 | 5,969 | 110.17 | 8.3% | 14.8% | 6.5% |
| Since inception | 5,969 | 110.17 | -6.7% | 10.2% | 16.8% |
The portfolio gained 1.2% in June, mainly driven by HT1, SIAS, EMAK and AS Creation. YTD, the portfolio is now up +14.8% with a relatively low volatility.
The portfolio composition has changed somehow against last month, especially with regard to the 3 new entries, Dart Group, Cranswick and April. For April SA, I took advantage of the low prices in the second half of last week and bought a 3% position, Installux has now reached 2% (and paid a 8 EUR dividend last week…).
| Name | Weight | Perf. Incl. Div |
|---|---|---|
| Hornbach Baumarkt | 5.0% | 4.98% |
| Fortum OYJ | 4.0% | -20.73% |
| AS Creation Tapeten | 4.0% | 0.50% |
| BUZZI UNICEM SPA-RSP | 4.6% | -17.94% |
| EVN | 2.8% | -11.04% |
| WMF VZ | 3.8% | 33.87% |
| Tonnellerie Frere Paris | 4.8% | 7.03% |
| Vetropack | 4.4% | -3.42% |
| Total Produce | 4.3% | 6.70% |
| OMV AG | 2.1% | -14.04% |
| Piquadro | 1.4% | 1.24% |
| SIAS | 5.9% | 15.58% |
| Installux | 2.0% | 0.04% |
| Poujoulat | 0.1% | -1.57% |
| Dart Group | 2.5% | 1.18% |
| Cranswick | 2.6% | 1.53% |
| April SA | 3.1% | -0.67% |
| Drägerwerk Genüsse D | 8.7% | 44.55% |
| IVG Wandler | 2.0% | -0.64% |
| DEPFA LT2 2015 | 2.9% | 22.53% |
| AIRE | 5.0% | 109.69% |
| HT1 Funding | 4.7% | 9.48% |
| EMAK SPA | 5.1% | 15.59% |
| DJE Real Estate | 2.3% | -3.65% |
| Praktiker 2016 | 2.4% | -2.85% |
| Short: Kabel Deutschland | -2.2% | -25.63% |
| Short Ishares FTSE MIB | -2.4% | 3.56% |
| Terminverkauf CHF EUR | 0.2% | 4.42% |
| Tagesgeldkonto 2% | 13.6% | |
| Summe | 100.0% | |
| Value | 49.3% | |
| Opportunity | 33.1% | |
| Short | -4.4% | |
| Cash | 13.6% |
Outlook & Actions:
As discussed before, I will accept the AIRE KgAA offer at 18,25, so cash will increase again. In parallel, I will still try to collect some more Installux and Poujoulat shares but apart from this I am currently done with buying.
In the next few days it will be interesting to see how the situation at Praktiker developes. If the “locust” succeeds with its “super Senior” loan I might sell the bonds.
As written before, on a macro level I see lower tail risk in the Euro zone going forward, although a real recovery might be still far away. I am still mostly concerned with the situation in China and the other “BRICs”. Everyone takes it for granted that China powers ahead and transitions smoothly from an epic construction boom into a happy consumer economy, but if you look closely to the other BRIC’s like India, one can see the BRIC story is crumbling at an increasing speed.
As a consequence I will try to stay clear of too much BRIC and commodity exposure. At some point in time it might be interesting to short some “can’t lose” stocks with large BRIC exposures.
“Sell in May and go away” is the famous rule which would have been good for many market participants this year.
The benchmark (50% Eurostoxx, 30% Dax, 20% MDAX) lost -6,8% in May, however the portfolio gained +0.8%, making this the best month in relative terms since inception. Performance YTD for the portfolio is now 13.5% against 4.4% of the benchmark, a relative outperformance of +9.1%..
| Bench | Portfolio | Perf BM | Perf. Portf. | Portf-BM | |
|---|---|---|---|---|---|
| 2010 | 6,394 | 100 | |||
| 2011 | 5,510 | 95.95 | -13.8% | -4.1% | 9.8% |
| Jan 12 | 5,972 | 99.27 | 8.4% | 3.5% | -4.9% |
| Feb 12 | 6,275 | 105.90 | 5.1% | 6.7% | 1.6% |
| Mrz 12 | 6,330 | 107.22 | 0.9% | 1.2% | 0.4% |
| Apr 12 | 6,168 | 108.02 | 0.8% | -2.6% | -3.3% |
| Mai 12 | 5,750 | 108.90 | -6.8% | 0.8% | 7.5% |
| YTD 12 | 5,750 | 108.90 | 4.4% | 13.50% | 9.1% |
| Since inception | 5,750 | 108.90 | -10.1% | 8.9% | 19.0% |
Also within each month on a day by day basis, the portfolio is very stable with a low amount of volatility. I am really happy that the portfolio really works as I have wanted it to (so far….), despite some significant “PIIGS” bets.
Portfolio activity in May was relatively limited. I sold Wal Mart, increased SIAS to a full position.
Ongoing are the build up of positions in Installux and Poujoulat (Poujoulat goes really really slow…) and the ongoing sale of the DJE Real estate fund.
This results in the following portfolio composition as of May 31st:
| Name | Weight | Perf. Incl. Div |
|---|---|---|
| Hornbach Baumarkt | 5.1% | 5.04% |
| Fortum OYJ | 3.9% | -22.13% |
| AS Creation Tapeten | 3.8% | -6.14% |
| BUZZI UNICEM SPA-RSP | 4.3% | -23.79% |
| EVN | 2.8% | -13.15% |
| WMF VZ | 4.1% | 41.26% |
| Tonnellerie Frere Paris | 4.8% | 6.41% |
| Vetropack | 4.5% | -1.57% |
| Total Produce | 5.0% | 19.91% |
| OMV AG | 1.9% | -22.81% |
| Piquadro | 1.5% | 4.73% |
| SIAS | 5.4% | 3.24% |
| Installux | 0.5% | 1.71% |
| Poujoulat | 0.0% | 0.11% |
| Drägerwerk Genüsse D | 8.7% | 43.93% |
| IVG Wandler | 2.1% | 3.88% |
| WESTLB 6.9% | 5.6% | 36.25% |
| DEPFA LT2 2015 | 2.9% | 21.93% |
| AIRE | 5.1% | 111.40% |
| HT1 Funding | 4.4% | 0.76% |
| EMAK SPA | 5.0% | 6.97% |
| DJE Real Estate | 3.3% | -4.58% |
| Praktiker 2016 | 2.5% | 0.54% |
| Short: Kabel Deutschland | -2.1% | -20.17% |
| 0 | 0.0% | 0.00% |
| Short Ishares FTSE MIB | -2.1% | 16.63% |
| Terminverkauf CHF EUR | 0.2% | 4.41% |
| Tagesgeldkonto 2% | 16.7% | |
| Summe | 100.0% | |
| Value | 47.5% | |
| Opportunity | 39.7% | |
| Short | -4.0% | |
| Cash | 16.7% |
With a current quash quota of 16.7%, I am at the upper bound of what I would normally like to have. As the WestLB Genußscheine are actually maturing today, June 1st, cash will increase to 22%. As the build up of Poujoulat and Installux need a lot of time, I will have to come up with some ideas pretty soon.
Outlook and market comment
As expected, we are still in “rough waters” and in my opinion this will persist for many months to come. Despite the head line Euro mess, the BRICs finally start to crumble. Brazil and India show massive slow downs in growth rates, in China despite the official numbers everything points to the end of the real estate and infrastructure boom. If history is any guide, after an epic real estate boom one nromally gets an epic bust.
At the moment, this is one of the strangest investment environments I have ever seen. On the one hand record profites of multinational companies (esp. US), on the other hand large parts of the world economy are in deep sh… ah problems.
Interest rates are so low that it is hard to understand who invests voluntarily into a 0% two year Bund.
For the value investor however this opens up a lot of opportunities. Whole sectors and countries are getting cheaper by the day. Of course this does not mean that a stock is “cheap” just because it has fallen dramatically in value. For many companies, the actual business prospects have worsened significantly. The trick will be to sort out the “good value” companies against the “terminal decliners”.
Many so called “value investors” prefer “stable” companies which perform well at the moment but are realtively expensive. In my opinion, this “trend” will turn not so far in the future, as even the best company cannot compensate a real global donwturn forever. Already in late 2008 and 2009 we have seen, how quickly this can turn, especially for the more cyclical companies.
For the portfolio I will continue to look for interesting special situations as well as “boring” off the map companies which trade at depressed prices. I will try to avoid all “great” companies, this is somthing for people who buy lunch with Warren Buffet for a million Dollars. I will also try to avoid any “hot potatos” however there is always the tmeptation to buy into those.
April 2012 was a relatively good month for the Portfolio. Against a Benchmark Performance in April of -2.6%, the portfolio showed a gain of +1.2%. YTD, the portfolio is now up 12.6%% against 11.9% of the Benchmark.
Performance overview:
| Bench | Portfolio | Perf BM | Perf. Portf. | Portf-BM | |
|---|---|---|---|---|---|
| 2010 | 6394 | 100 | |||
| 2011 | 5509.87 | 95.95 | -13.8% | -4.1% | 9.8% |
| Jan 12 | 5972.48 | 99.27 | 8.4% | 3.5% | -4.9% |
| Feb 12 | 6275.00 | 105.90 | 5.1% | 6.7% | 1.6% |
| Mrz 12 | 6329.66 | 107.22 | 0.9% | 1.2% | 0.4% |
| Apr 12 | 6168.20 | 108.02 | -2.6% | 0.8% | -3.8% |
| YTD 12 | 6168.20 | 108.02 | 11.9% | 12.6% | 0.6% |
| Since inception | 6168.20 | 108.02 | -3.5% | 8.0% | 11.6% |
The outperformance in April was mostly triggered by the jump in the share price of AIRE KGaA, which went up from around 11 EUR to 17 EUR at month end. Luckily, I only sold a very small amount after the 10% tender offer from the company itself (~1000 stocks) before the AIG offer of EUR 17 was announced on Monday April 30th.
The relatively weak performance of my Italian positions (EMAK, Buzzi, Piquadro, SIAS) was partly off set by the gain in the FTSE MIB short position.
Other notable outperformers in April were WMF and AS Creation.
Portfolio Changes April:
Nestle: fully sold
Piquadro: 0.5% added at around 1.43 EUR (50% hedged with FTSE MIB short)
AIRE KGAA As discussed above, I sold 1.060 stocks at 13.52 EUR (25% of trading volume) before the announcement on Friday April 30th with a gain of 54.50%. On Friday April 30th, the volume was so high, that I sold 22.952 stocks (position down to 5%) at 17 EUR with a gain of 94.26%, almost a double.
Installux: Beginning on April 30th, the first 55 shares were bought. This will be a long way to establish a position…
Portfolio composition April 30th
| Name | Weight | Perf. Incl. Div |
|---|---|---|
| Hornbach Baumarkt | 5.1% | 4.92% |
| Fortum OYJ | 4.4% | -14.56% |
| AS Creation Tapeten | 4.0% | -4.02% |
| BUZZI UNICEM SPA-RSP | 5.1% | -12.75% |
| EVN | 2.8% | -13.72% |
| Walmart | 3.9% | 18.75% |
| WMF VZ | 4.2% | 44.32% |
| Tonnellerie Frere Paris | 4.9% | 7.07% |
| Vetropack | 4.6% | -2.99% |
| Total Produce | 5.0% | 15.98% |
| OMV AG | 2.2% | -14.99% |
| Piquadro | 1.6% | 8.78% |
| SIAS | 2.4% | -6.40% |
| Installux | 0.1% | 0.00% |
| Drägerwerk Genüsse D | 8.9% | 44.61% |
| IVG Wandler | 2.2% | 7.70% |
| WESTLB 6.9% | 5.6% | 35.25% |
| DEPFA LT2 2015 | 3.1% | 29.04% |
| AIRE | 4.8% | 96.72% |
| HT1 Funding | 4.7% | 5.92% |
| EMAK SPA | 4.8% | 0.96% |
| DJE Real Estate | 4.2% | -3.18% |
| Praktiker 2016 | 2.5% | 0.75% |
| Short: Kabel Deutschland | -2.2% | -23.07% |
| Short: Green Mountain | -1.6% | 14.30% |
| Short Ishares FTSE MIB | -2.4% | 3.74% |
| Terminverkauf CHF EUR | 0.2% | 4.43% |
| Tagesgeldkonto 2% | 14.9% | 0.00% |
| Summe | 100.0% | |
| Value | 50.1% | |
| Opportunity | 40.8% | |
| Short | -6.0% | |
| Cash | 14.9% |
Outlook & Strategy:
As a contrarian investor at heart, current times are quite exciting. There are a lot of industries and entire countries (PIIGS, utilities, financials) which trade at very cheap valuations. Of course there are a lot of macro risks on the horizon. As a value oriented contrarian investor one should howver focus on the long run. The “This time is different” argument should also be applied on the positive side, meaning that the world will not end, people will still need bank accounts, electricity or want to travel in the future.
So the focus should be less on guessing and interpreting daily Central Bank actions or election outcomes but on analyzing cheap companies with lasting business models, no matter where they are located.
Greed and fear are the two worst investment advisors available. Because of this, one should not fear investing in currently depressed businesses if they are deemed to be lasting, on the other hand one should try to avoid chasing expensive past “winners” like consumer stocks, flats in Munich etc.
However this is often easier said than done, especially if one takes the daily news “tsunami” too serious. My personal technique is to read a historical finance book from time to time in order to get the “right perspective” and that current problems are nothing new. At the moment I am reading “Lombard Street” from Walter Bagehot, I hope I can post a rview soon.
In March 2012, again the portfolio slightly outperformed with +1.2% against +0.4% for the Benchmark (50% Eurostoxx 50, 30% Dax, 20% MDAX). The outperformance for March was basically created on the last day of March, when there were significant jumps both in Hornbach and Draeger Genußscheine. This might be also the result of some quarter end “window dressing” for Hornbach, Draegerwerke continue to perform well.
YTD, the portfolio is now up +11.7% against +14.9% for the benchmark, since inception (01.01.2011), the protfolio is up +7.2% against -1.0%.
| Bench | Portfolio | Perf BM | Perf. Portf. | Portf-BM | |
|---|---|---|---|---|---|
| 2010 | 6394 | 100 | |||
| 2011 | 5509.87 | 95.95 | -13.8% | -4.1% | 9.8% |
| Jan 12 | 5972.48 | 99.27 | 8.4% | 3.5% | -4.9% |
| Feb 12 | 6275.00 | 105.90 | 5.1% | 6.7% | 1.6% |
| Mrz 12 | 6329.66 | 107.22 | 0.9% | 1.2% | 0.4% |
| YTD 12 | 6329.66 | 107.22 | 14.9% | 11.7% | -3.1% |
| Since inception | 6329.66 | 107.22 | -1.0% | 7.2% | 8.2% |
Portfolio activity:
Portfolio activity was relatively limited in March. As posted, Autostarda was sold completely which turned out to be a good decision as the shares dropped a further -20% after I sold them. Tonnelerie was increased to a full position.
So the current portfolio as of MArch 30th looks like the following:
| Name | Weight |
|---|---|
| Hornbach Baumarkt | 5.3% |
| Fortum OYJ | 5.0% |
| AS Creation Tapeten | 3.7% |
| BUZZI UNICEM SPA-RSP | 5.8% |
| EVN | 2.9% |
| Walmart | 4.0% |
| WMF VZ | 3.8% |
| Tonnellerie Frere Paris | 4.8% |
| Vetropack | 4.8% |
| Total Produce | 5.0% |
| OMV AG | 2.4% |
| Nestle | 2.2% |
| Piquadro | 1.1% |
| Drägerwerk Genüsse D | 9.3% |
| IVG Wandler | 2.3% |
| WESTLB 6.9% | 5.6% |
| DEPFA LT2 2015 | 3.3% |
| AIRE | 5.5% |
| HT1 Funding | 4.9% |
| EMAK SPA | 5.4% |
| DJE Real Estate | 4.4% |
| Short: Kabel Deutschland | -2.1% |
| Short: Green Mountain | -1.5% |
| Short Ishares FTSE MIB | -1.0% |
| Terminverkauf CHF EUR | 0.2% |
| Tagesgeldkonto 2% | 12.9% |
| Summe | 100.0% |
| Value | 50.8% |
| Opportunity | 40.7% |
| Short | -4.4% |
| Cash | 12.9% |
Further comments & outlook
My biggest position, Draegerwerke Genußschein now approaches the 10% portfolio weight which is usually a threshold where I will take a explicit decision either to hold or to cut down. At the moment I am inclined to hold, as the “catalyst” has brought even more attention to this interesting situation.
The portfolio itself in the moment is very stable, as a lot of the investments are hardly moving at all. Economically, especially WestLB is basically a cash position now. So the “economic” cash portion is now already 18.5% which is a little too high.
In general, it is relatively hard to find “value” in German stocks these days, but in my opinion there are lots of interesting companies in France and the PIIGS, also the UK seems to be becoming more interesting. Of course some of those companies are a lot more risky than “normal” shares so I still think of adding a “basket” of some 1% PIIGS recovery opportunites as well as a “French” basket with some relatively illiquid samll caps.
So as Peter Cundill would say “there is always somthing to do”…..
As to be expected, with the Benchmark performing 8.40% in January, the Portfolio underperformed significantly with only +3.45% in January. Since inception (01.01.2011) the portfolio is now down only -0.74% against -6.59% in the Benchmark, leaving us with a outperformance of 5.86% absolute since the beginning.
Read more
Performance (see also the current portpolio page)
December 2011 was the best month for the portfolio in absolute terms so far with + 4.03% against -1.62% of the Benchmark (50% Eurostoxx50, 30% Dax, 20% MDAX). For the whole year, this results in a performance of -4.1% against -13.8%. On a monthly basis, the picture looks as follows:
Read more
In the month of November, the Portfolio underperformed by -2% with -3.4% against -1.2% of the Benchmark (50% Eurostoxx, 30% Dax, 20% MDAX).
However, year to date the performance shows still an outperformance of 4.6%.
This is the second “down month” where the portfolio underperformed. The main and simple reason was the incredible bounce on the last day of the month. On November 29th, the portfolio would have shown an outperformance of 2% against the BM for November, but many of the portfolio positions have realtively low beta to the market.
Performance 2011 on a monthly basis:
| Bench | Portfolio | Perf BM | Perf Portf. | |
|---|---|---|---|---|
| Start | 6394 | 100 | ||
| Jan | 6567 | 101.46 | 2.7% | 1.5% |
| Feb | 6645 | 102.49 | 1.2% | 1.0% |
| Mrz | 6559 | 103.92 | -1.3% | 1.4% |
| Apr | 6833 | 105.07 | 4.2% | 1.1% |
| Mai | 6645 | 101.23 | -2.8% | -3.7% |
| Jun | 5646 | 95.35 | -15.0% | -5.8% |
| Jul | 6486.69 | 99.03 | 14.9% | 3.9% |
| Aug | 5504.92 | 91.73 | -15.1% | -7.4% |
| Sep | 5154.68 | 92.75 | -6.4% | 1.1% |
| Okt | 5667.92 | 95.46 | 10.0% | 2.9% |
| Nov | 5600.83 | 92.19 | -1.2% | -3.4% |
| YTD | -12.4% | -7.8% |
Portfolio Transcactions
In the last view days, the following transactions have been made:
Einhell:
The remaining shares (1% of the portfolio) has been sold for an average price of 32.31 EUR at a loss of 20.52%.
EMAK:
Between November 24th and November 30th, 65,734 EMAK shares have been bought at 0.5493 EUR per share and 200.000 subscription rights at 0.2567 EUR per right. As the rights will be exercised into 5 EMAK shares each at 0.425 cents, this is implicitly a position of 1.065 mn EMAK shares at an average purchase price of around 0.495 EUR. This will result in an 5% position for the portfolio, the maximum position I am willing to invest for any single investment.
Finally, the current compostion of the portfolio:
| Name | Weight |
|---|---|
| Hornbach Baumarkt | 5.2% |
| Fortum OYJ | 5.4% |
| Magyar Telekom | 4.9% |
| AS Creation Tapeten | 3.1% |
| Westag & Getalit VZ | 4.1% |
| BUZZI UNICEM SPA-RSP | 5.2% |
| Autostrada Milano Torino | 5.1% |
| EVN | 3.5% |
| Walmart | 4.5% |
| WMF VZ | 3.8% |
| Tonnellerie Frere Paris | 3.3% |
| KSB | 2.5% |
| Vetropack | 2.9% |
| Total Produce | 5.0% |
| Frosta | 2.8% |
| OMV AG | 2.5% |
| Sto AG VZ | 2.5% |
| Nestle | 2.3% |
| Microsoft | 2.5% |
| Drägerwerk Genüsse D | 7.6% |
| IVG Wandler | 2.5% |
| WESTLB 6.9% | 5.5% |
| DEPFA LT2 2015 | 3.0% |
| AIRE | 4.8% |
| HT1 Funding | 4.0% |
| EMAK SPA | 0.4% |
| EMAK SPA-RTS | 0.5% |
| Short: Kabel Deutschland | -1.3% |
| Short: Green Mountain | -2.0% |
| Short: Dräger VZ | -6.5% |
| Terminverkauf CHF EUR | 0.4% |
| Tagesgeldkonto 2% | 10.3% |
| Summe | 100.0% |
| Value | 70.9% |
| Opportunity | 28.3% |
| Short | -9.4% |
| Tagesgeld | 10.3% |
Outlook:
Including the EMAK new shares, the portfolio will have a 95% net position. As my current target is max. 90%, I will have to sell 5% exposure in the coming days or find suitable short candidates.
One of my quarterly “must reads” are the FPA Crescent quarterly letters.
In the current one, they show in the attached slides a very interesting way of presenting performance (page 5).
What they are doing is the following:
– they seperate up and down months in a first step
– in a second step they look how much they particpate in up periods and how in down periods
– the goal over the long run is of course to participate relatively more in up periods than in down periods
For me this is very interesting, as their investment style is very similar to my own strategy.
Unfortunately, I have only 10 months of data, but here are the monthly performance numbers against the Benchmark:
| Start | Jan | Feb | Mrz | Apr | Mai | Jun | Jul | Aug | Sep | Okt | |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Bench | 6394 | 6567 | 6645 | 6559 | 6833 | 6645 | 5646 | 6486.69 | 5504.92 | 5154.68 | 5667.92 |
| Portfolio | 100 | 101.46 | 102.49 | 103.92 | 105.07 | 101.23 | 95.35 | 99.03 | 91.73 | 92.75 | 95.46 |
| Perf BM | 2.7% | 1.2% | -1.3% | 4.2% | -2.8% | -15% | 14.9% | -15.1% | -6.4% | 10% | |
| Perf Portf. | 1.5% | 1% | 1.4% | 1.1% | -3.7% | -5.8% | 3.9% | -7.4% | 1.1% | 2.9% |
In the first 10 months of 2011, the benchmark had 5 down months and 5 up months whereas the portfolio had 7 up months and only 3 down months. So far so good.
Howver if we look at the cumulated numbers:
| Cum Months up | |
| BM | 33% |
| Portf. | 10.4% |
| Participation: | 31.52% |
| Cum months down | |
| BM | -40.6% |
| Portf. | -14.4% |
| Participation: | 35.47% |
One can clearly see, that the relative “particpation rate” in down months is higher then in up months.
I interpret this as follows:
– the portfolio outperformed, because it was more defensive than the benchmark and the benchmark went down.
– However, if the benchmark would have been zigzaging and ending flat, I would have most likely underperformed
I am not sure where this comes from, but one of the reasons could be the short side. The short of the momo stocks actually added volatility in the down months because those stocks where outperforming the BM by a large margin. Usually the short side should reduce volatility.
If we look at the FPA statement in the same presentation they say the following:
So this is something to remember that shorts primarily should help to reduce the volatility. Shorting explicit momentum stocks might not be the best implementation of this goal.
Another reason could be that the portfolio is geared towards special situations, which are expected to “sleep” for some time before they are hopefully “exploding” to the upside.
In any case I will look from time to time into this measure, if I can improve those relative ratios somehow.
value and opportunity 