Quant Value Newsletter
Last updated: 30 September 2017
Up +8.1% - beating the market in spite of 79% cash
The European portfolio ended the third quarter of 2017 up 8.1% - slightly more than the market in spite of the portfolio being around 79% in cash.
This is an outstanding performance because it means the companies in the portfolio had to increase around three times as much as the index to make up for the nearly 79% of the portfolio in cash.
Up 153% over seven years; index only 53% (3 times better)
If you had followed all of the European investment ideas since July 2010 when the newsletter was started, you would have a return of 153%.
Compare this to the result had you invested in the European STOXX 600 index, in which your return would have been only 53%.
This is nearly 3 times better than the index.
Here is the long term performance of the portfolio:
European portfolio total performance
European portfolio yearly performance
Return on €1000 invested in the European portfolio vs Index
North American portfolio
Up 3.3% in spite of 80% in cash
The North American portfolio ended the third quarter of 2017 up 3.3% behind the S&P 500 index which increased 12.5%.
Because the portfolio was around 80% in cash over the period the companies in the portfolio had a great performance to make up for the cash which of course earned nothing.
I am very happy to hold this much cash in this portfolio as the US market is extremely overvalued at the moment.
As I said last time, if you have a large part of your portfolio invested in the USA please think of reducing your investment as investing in an overvalued market hardly ever leads to good returns over the long term.
The newsletter’s performance in North America has been bad.
The North American ideas have not done nearly as well as in Europe. This is a fact I have never tried to hide, and I have kept you up to date every time I wrote to you about performance.
Here is more information on the portfolio's performance:
North American portfolio total performance
North American portfolio yearly performance
In spite of lagging the index the ideas have been very good as, since October 2011 the newsletter has recommended 103 North American investment ideas, all of which would have given you an average return of +18%.
Change the strategy?
Although the North American investment ideas have lagged behind the S&P 500 index, I am not planning to change the model I use to select investment ideas.
As you know, regardless of how well they have performed in the past, even the best investment strategies can underperform the market as Joel Greenblatt mentioned in his excellent book The Little Book that Still Beats the Market before they catch up and start to outperform again.
Why bad performance is good
In his book, Joel also says that periods of underperformance are a good thing for a good investment strategy, because without such periods, the strategy would be used by so many investors that it would stop working.
We have to be patient
As I have told you in the past - we just have to be patient. It is simply a matter of time before the North American strategy starts outperforming the market.
In the first nine months of 2017 the Asia was up 6.4% less than the index which is up 15.3%.
I was quite surprised to see how much the S&P Asia Pacific index has increased so far this year. This is mainly because of South Korean stock market which is up 18.2% so far this year.
I do not look for newsletter investment ideas in South Korean because of capital controls it is very difficult to open an investment account to invest there.
As the portfolio is new (started tracking performance on 1 January 2017) I have one chart on the performance of the Asia portfolio – up till the end of 2016 the Asia ideas were included in the European portfolio.
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As you can see the investment ideas of all three portfolios have performed very well.
Not everywhere, but as you know in investing, you cannot win them all.
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