In the first 9 months of 2024, the Value & Opportunity portfolio lost -0,4% (including dividends, no taxes) against a gain of +6,8% 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 9M 2024 (values taken from public websites, no guarantees for correctness):
Partners Fund TGV: +7,5%
Profitlich/Schmidlin: +9,6%
Squad European Convictions: 6,8%
Frankfurter Aktienfonds für Stiftungen: 1,8%
Squad Aguja Special Situation: +10,8%
Paladin One: -1,5%
Gehlen & Bräutigam: +5,4%
Performance review:
Some Performance reviews are more fun to write, some less so. This one is clearly in the second category, as was last quarter.
Within my subjective small cap peer group, the portfolio performed significantly below average. In relative terms, the last quarter was one of the weakest relative to the benchmark that I ever recorded. The monthly returns clearly show that both, August and September were bad in relative terms:
Whereas the broader market nicely rebounded, my portfolio stocks kept going down. As in the previous quarter, this is most likely a function of owning unpopuplar sectors in unpopular countries in an unpopular format (small caps). Looking back the last 13,75 years, these months of subsequent underperformance was often followed by significant outperformance, but who knows what is coming ?
Some of my companies were hit by unexpected slow downs in business (Sto, TFF), some went down although guidance was increased (EVS). For this market environment I was clearly not positioned correctly but that is one of the risks of investing “off benchmark” in less liquid markets.
Transactions Q3 2024:
With regard to transactions, Q3 was relatively normal. I sold Admiral after more then 10 years. I bought “Hidden Champion” Fuchs and Ocean Wilson as a special situation. Since then I have reduced Ocean Wilsons as I made a mistake in the calculation which resulted in a somewhat lower upside than initially thought.
Average Holding period is now 3,7 years, cash is at 7,2%.
The portfolio, as always, can be seen in full on the portfolio page.
Comment: “How to train patience during periods of underperformance”
In a year like this, I am more than happy that I never started a fund and took in 3rd party money, as the only ones who could complain are my family and myself. Personally, it hurts me much more if I have a relative underperformance than losing money in absolute terms. If I lose money and I am better than the benchmark, I am a very happy person for some strange reason.
As mentioned above, in the last 14 years since I track performance in a systematic fashion, these periods of underperformance were always followed by periods of substantial outperformance. The worse the situation looked in the past for the companies that I invested, the better the rebound. In 2019 for instance, I underperformed in 9 out of 12 Months, resulting in a total underperformance of -12,9% for the year. In 2020 in turn, I outperformed in 9 out of 12 months and +23% relative to the benchmark. There were at least 5 or 6 similar episodes in this 14 years with the same outcome. Of course it would be great to outperform every year but this is just not realistic. But staying the course and not panicking is clearly the best way in the long run.
Nevertheless, it is not so easy to remain patient for me in the current situation. There is a internal urge to “do something” and try to catch up with the market or peers. However, as mentioned above, in the end it always pays off to stay the course. So I decided to force myself into more patience until year end with a few “hacks”.
Doom scrolling on Twitter, where almost everyone seems to be up between 20% and 250% YTD, clearly doesn’t help at all. I have to admit that I most likely spend way too much time on Twitter, so I might cut that down. In a first step I put a 30 minute per day limit on my Twitter mobile app.
Looking at the portfolio multiple times a day to see if it does better or worse than the market doesn’t help either. I have actually slowed down looking at the portfolio (and updating it manually) from once a week to once a month. No real time updates anyway for me.
Sometimes I also experience a frantic rush to explore a lot of new ideas and extend my watchlist in order to find the stock that will help me to improve my performance but I think this is also not the best way to do things. My goal is not to trade that much until year end, unless fundamentals change significantly or something really “jumps at me”. For Q4, I give myself a limit of 3 transactions (Buy or sell).
So overall my plan for Q4 looks is to slow down significantly my investment activities by
- Reduce Online time especially on Twitter (I don’t use Facebook or Instagram anyhow)
- Trying to compound “deep knowledge” instead of trying to follow the daily news flow
- Focus a little less on the daily movements of the stock market and more on other things like Music, Books etc.
- Accepting that 2024 will most likely not be a good year
And with that, as always a bonus sound track: Guns and Roses – Patience:
