Quant Value Newsletter
Last updated: 31 December 2017
European portfolio up 7.5% - same as the market in spite of 65% cash
The European portfolio ended 2017 up 7.5% - slightly less than the market in spite of the portfolio being around 65% in cash throughout the year.
This is an outstanding performance because it means the companies in the portfolio had to increase more than twice as much as the index to make up for the cash which earned nothing.
Up 152% over seven and a half years; index only 53% (3 times better)
If you invested in all of the European investment ideas since July 2010 - when the newsletter was started - you would have a return of 152%.
If you invested in the European STOXX 600 Index, 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 of €1000 invested in the European portfolio vs Index
The following table shows the performance of all the ideas recommended in the European portfolio:
North American portfolio
Up 2.7% in spite of 80% in cash
The North American portfolio ended 2017 up 2.7% behind the S&P 500 index which increased 19.4%.
Because the portfolio was on average 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.
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. 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.
I was quite surprised to see how much the S&P Asia Pacific index increased in 2017. This is mainly because of South Korean stock market which was up 22.4% in 2017.
The newsletter does not look for investment ideas in South Korean because of capital controls it is very difficult to invest there.
The portfolio was on average about 55% in cash in 2017 - this was a further factor that kept its performance lower than the index.
The Asia portfolio was only started in January 2016 - when it became very hard to find investment ideas in North America and in Europe - I have only included the following chart:
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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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Wishing you profitable investing
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