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).