A look in the rear-view mirror

This time around I thought I would take a different approach. Recently I walked through all my current holdings: Short comment on all holdings

Today as a year end evaluation I will do the opposite, go through all companies I held but sold. This will also give new readers who hasn’t read through my blog from the start a better understanding what has built my performance over the years. For every holding, if you want to kno more, check through the drop down menu (if you are in a web browser) and select the stock in question. The purpose of this exercise which took quite some time to compile is to evaluate if I’m turning over my portfolio, too much or too little. And even more importantly of all the investment ideas I put in my portfolio over these years, are they of high quality? Have they kept performing after I sold or am I buying too many poor performing businesses?

All stock performance data is converted into USD and total return (meaning dividends are reinvested) and benchmark against my GSP portfolio. Also take note that the Y-axis varies in scale, let’s get started!

Press “Read More” and be ready for a lot of graphs!

In stock code alphabetic order, all stocks I held but sold:


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Portfolio Changes – larger reshuffle – Part 1

Thoughts on investment philosophy

I have recently had quite a lot of time to contemplate my investment style and philosophy. I think I reached some conclusions. After all that is what this blog is about for me, learning from and seeing my mistakes more clearly and then adjusting accordingly.

Before I started this blog I have during periods followed the market and specific stocks very closely. I have used technicals and fundamentals to swing-trading holdings (3-12 month horizon) with fairly decent results. Meaning that I see the stock as fairly/undervalued with a chart that looks good for a move up. I then later sell when the stock is more close to fully valued. To some degree I have implemented such a strategy also for my blog (for example Avanza, Ericsson, YY, Shanghai Fosun etc). But this is very different from believing in a company truly long-term, even if the stock gets ahead of itself valuation wise. Given that I do have a full time job and this is a hobby, the time I can spend on updating myself on holdings vary widely. From another perspective baby-sitting such swing trade positions takes away valuable time from researching new interesting companies and sectors/niches.

All in all the conclusion for my future investment strategy is stop looking at these companies that trade cheaply currently and then start to swing them in/out of the portfolio as they get cheap/expensive. If all stocks in the world would be drifting sideways forever with some volatility this might be a successful strategy, but that’s not a very likely scenario. Instead I will focus on what makes more sense, finding great companies. Preferably currently cheap, but anyhow companies that in 5 years time in my view has a high probability of trading significantly higher. I should also at all times be comfortable turning to stop following my holdings and be happy to own them for the coming 5 years. Currently I do not hold such a portfolio and I intend to spend the coming months to do just that. This means that I am tilting my portfolio more towards Quality, which in general is expensive now. But I intend to find my own type of Quality, not necessarily Nestle and the likes (nothing wrong with Nestle though)

In terms of Portfolio management I will still allow myself to trim holdings that grow very large or add in holdings that have under-performed but I still believe in. And of course I will still make mistakes and mis-judge companies, meaning they will not sit in the portfolio for 5+ years, but till be sold when my view has changed. But preferably the investments should be such so I won’t be easily swayed in my judgement of the future prospects of the company. For example an oil company with great management and execution might be dead in the water if oil production cost is around US$60/barrel and oil drop to US$40, so before I have a very clear and sure long-term view on the oil price, it would be a silly investment to add to this portfolio. I take this as an example because currently outside the blog holdings I do have a swing-trade position in a what I think is a very decent oil company (Tethys Oil).

Reshuffle of Portfolio – Part 1

Not only have i contemplated my strategy, but another reason why I have written so little lately is that I have been very busy re-searching a larger number of companies. Most of these investment ideas will materialize in new holdings over the coming months. It probably won’t be perfect, since I change so much at the same time. Minor adjustment might come later. But all in all it’s holdings more in line with a more long-term investment strategy. The holdings are in general also more defensive than what I currently hold. This I also very much what I seek in such a late stage bull-market. I’m not sure if I should call it new Themes, but I chose to allocate significant capital to two industries below, 1. Funeral Services and 2. Alcohol and Beverage related companies. In due course I will try to expand on my thoughts behind these investments.

Dignity – Add at 5% weight

Funeral service business in the UK. I had my eyes on for some years now and lately a very good buying opportunity arose. I heard about it for the first time from a long only manager and have since understood what a wonderful business segment funeral service is. Firstly from a margin perspective. but also how fragmented the business is and the possibilities for a cash flow generating company to buy these small companies at attractive multiples.

Fu Shou Yuan – Add at 4% weight

Basically the same story as Dignity above, funeral services, this time in China. This stock I’m perhaps not buying at the right moment short term, as it has traded up and is actually very expensive at the moment, but from a long term perspective I’m very comfortable holding this.

Diageo – Add at 4% weight

Has a portfolio of high quality liquor brands. Also has a minority holding in Moet Hennessy which I find interesting. Overall the thesis here is that they will continue to leverage their strong brands and their tremendous track-record of shareholder returns. For example the portfolio of whiskey brands probably is 50% of all top quality brands available.

Olvi – Add at 4% weight

I have searched for quite some time for a way invest in line with my positive view on the three small Baltic countries, I think this might be one good way. I also have fairly bullish view on Finland, finally coming out of some economically challenging years. This is a family owned (through voting strong shares) beer and beverage company with exposure to the above mentioned countries. They have also shown a tremendous track-record of execution. Overall, smaller listed beer and beverages companies start to be as common as unicorns. I will expand on this later, but not many are listed anymore. As uncommon they are, its seems to be a fantastic business to be in. Since almost all companies shows great returns (until they are bought out) with very strong cash flows. Previously I held Royal Unibrew for mostly the same reasons (I should have kept it), but overall I find Olvi more attractive, with a stronger track-record.

Tokmanni – Sell Full Holding

This was also a play on Finlands recovery and that the company felt cheap with a good dividend. But they continue to under-deliver and the last straw was the mess with the new CEO not being allowed to start due to a non-compete clause. Felt very unprofessional. Also nothing I’m very confident to hold in 5+ years, with what currently goes on in Retail. I’m happy coming out of this one with a small profit.

Microsoft – Sell Full Holding

A great company of course, but current Tech-hype is just too much for me. If/when Tech companies re-price downwards I will definitely be looking at adding 1-2 Tech holdings again. I’m happy for the returns I got and unfortunately I cut my position in half way too early, the part I kept returned almost 80%.

Catena Media – Sell Full Holding

This became the latest of my “swing trades”, with over 40% return in less than 4 months one of the better ones as well. I was a bit torn about this holding, since I do see some good long-term prospects. The online gaming business will grow, and these sites really need channels which supply them with customers. But it’s a way to unstable business case for me to comfortably hold for many years. It is definitely in the “baby-sitting” category, where I felt a need to keep myself updated on a frequent basis. So with a bit of a heavy heart I sell this holding. This could for sure keep performing very well for a long time, but I categorize it in the “too difficult” pile.


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Investment process in more detail

The Funnel

When I evaluated fund managers, I often asked them to describe their full investment process. Most fund managers present this as some sort of funnel, where you start with your whole investable universe at one end, and the stocks in your portfolio in the other and in between the steps how you got there. Just as an example it could look something like this:


This is my first post where I start defining my own funnel, which in essence is a filter process to get a huge universe down to something manageable. This process is currently rather unclear even to myself. An important part of starting this blog has been to force me to define a funnel, or at least something similar. I need a strategy both for which companies I should look closer at and what to focus on when valuing the company. This may sounds easy, but currently I have a huge lack of consistency on what parameters I evaluate a company on. In a similar way I do not have a process for finding what company is most worthwhile to research.

1. The Universe – Global

As the name of my blog implies my universe is global and also not restricted at the moment to any minimum liquidity cap. Meaning I more or less have the full world universe at my disposal. Minimal constraints in theory gives most room for out-performance, but looking at it practically a small one man show as mine has no possible chance in a lifetime to evaluate all existing companies, so something clearly needs to be done to narrow this down.

2. Filtering the Universe

2.1 Liquidity

I henceforth put a minimum cap on liquidity of average 3 month volume at 100 000 USD. This is very low and I probably will revise this in the future, but I currently have one holding which has poor liquidity and that is Highpower International. Given that I just invest my own money I don’t have a need for high liqudity at the moment. In the future I intend to make my process scalable for investing larger amounts and then I want to already have the same process in place. My thoughts for future minimum liquidity is around 1 million USD average daily volume. This will be my first step in narrowing down the universe.

2.2 Investable countries

Currently I don’t have brokerage accounts to invest in every single country in the world (few professional investors do either). My investable markets can be summarized as follows: North America, Western Europe, Turkey,  Japan, Hong Kong, China, Philippines, Korea, Taiwan, Thailand, Indonesia, Malaysia, Singapore and Australia.

3. Generating Investment Ideas

Mainly I use what I see, read and experience around me to find interesting prospective investments. I try to think far ahead, what the world will look like in 10 years. I travel quite a lot, that helps for being able to invest globally and to understand consumer around the world. For example I never visited South America and I’m much less confident to invest in that region just for that sole reason. I also spend a lot of time online reading forums and news. This is close to the core of why I love investing. I’m curious about what people think and I like to learn and understand new things. My investment ideas are seldom totally unique, it’s hard to be in a world full of investors, so I steal ideas without shame from all possible sources: fund managers, sell side research, investment blogs, podcast, news articles etc.

4. Specific Screening

Here all types of screens could be applied that is relevant for the current Investment Ideas. Something that makes sense in most cases is screening down to Sector/Sub-sector/Industry for a specific country or region. This comes in handy later when doing peer valuations or just comparing which company is most interesting to look further into. As examples one could try to screen for companies involved in battery production all around the world or consumer staples in China.

5. Factor/Style Screening

I’m a big believer that its favorable to invest along with some well known factor risk premia. When analyzing famous fund managers that have fantastic track records of generating alpha, their out-performance can often be explained in large part through their investment process. Knowing or unknowingly they have built their investment process tilted towards a risk premia that over time has generated some or all of their funds out-performance. One famous example is Warren Buffet’s value investment-style, in combination with a company structure which has enabled him to take on some leverage to the Beta he has been exposed to. Other famous fund managers have exploited Low Vol strategies or more recently Quality and High Dividend tilts.

So the first step for me is to understand/decide what risk premias that are worth investing along with. From the research I read and the experience I gained professionally I have decided to initially focus on Value and Momentum. The reasons for this I will need to explain in further detail later, although some explanations have been given in earlier posts.

6. Invest with tailwind

One important aspect of my investment style is finding some sort of future tailwind in my investments. For me these tailwinds can be of very different types, one example would be investing in stocks with Value characteristics. The normal way of thinking about tailwinds would be and industry that has potential for good growth. This type of tailwind that I focused during the last year has been the development of Electric Vehicles (EVs) and the emerging Chinese middle class. Another tailwind I use frequently is just what the market tells me about the price of a stock (price momentum). During the 15 years I invested I always looked at charts and been intrigued by how Technical Analysis (TA) try to capture psychological aspects of investing. My belief is that there predictive power in price momentum and this has also been shown in numerous research papers.

Long term (5-20 years) upwards price trend is also important to me. It tells me that the company has created share holder value over the long-term, surprisingly many large companies have not. Positive price trend over the long term I also call a tailwind.

6.1 Timing / Short term Momentum

Short term price movements I use to try to time the investment and enter at an attractive level. This is less of a tailwind and more of a proven market anomaly (price momentum) and a personal preference that I like to buy on short term weakness (in general I like to buy stocks on days when the market is down). I realize these attempts at timing might be futile, but I do feel over my 15 years investing I developed some type of fingerspitzengefühl. I might need to back that up with some statistics at some point, that I currently don’t have. When I have more time I will analyze as many past trades as possible and see if I entered the stock at a favorable price point.

6.2 Value Investing

This is such a big topic and also something I still have much to learn about, so I will cover this in Future posts separately.

7. Analysis

For the stocks that passed my filters and requirements I want to do a deep analysis of the company and it’s peers. This step will also need a separate post to go through in further detail. Here I also have much to learn, since by profession I’m not an equity analyst, although I have been analyzing companies for many many years in my spare time. The CFA also helped with some techniques and account knowledge.

8. Portfolio Construction

Finally portfolio construction. My aim is to have a portfolio diversified over sectors, countries, style/risk premias and sometimes even currencies. A colleague of mine used to say, diversification is the only free lunch. The meaning of that is that diversification gives you a higher sharp ratio and less company specific risk for free. What you possibly pay is if you have one outstanding idea and you still just invest with a small amount in the idea, to not give up diversification. But this to me is nonsense (as long as you don’t have insider information, which I don’t). In my belief there are no such investment cases which warrants you to go “all-in”. Here I also have some work to do, one reason I have not come so far, is that the amount of stocks I have researched is too narrow. I don’t have a pool of 50-60 good investment ideas to chose from and select those that give me good diversification in the way I mention above. So i don’t expect to develop these last stages of my investment process before I have come further in the earlier steps.


So now I have created my first own “Funnel” going from the full investable global universe down to Portfolio construction. All steps are not finalized and I have much more work to do, which will probably take me another year or two to iron out. After that I expect to have a professional investment process to follow. This process will both be built in such a way that it will increase my probability to generate out-performance (by quantitatively filtering out companies with favorable metrics) and suit my investment style and the way I like to invest. Both are equally important to me. I believe that merging quant with stock picking skills is the future and exactly what the most advanced investors are already doing today.


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Investing through Themes

Is Investing through Themes a sensible approach?

Most of my portfolio holdings are tied to a theme, with a few exceptions. The idea is to give me some tailwinds in my investments over the long-term. A risk is that you overpay for the tailwind, due to Mr market already pricing in a rosy future. When I evaluated other portfolio managers, we would say it’s extremely hard to call Macro events, a pure bottom-up stock picker has a better odds to create alpha. The problem for me is that this is a hobby, so I do not have the time, to sift through that many companies, to find the undervalued few gems. I need to think in bigger strokes and trying to exploit that I can see where the world is moving before the crowd does. I also see some edge in how long term I can hold the strategy and that I can express my views globally through big and especially small companies, that a fund manager can’t trade in. So let’s go through the Themes, I list the weight to the theme and the companies I invested in to ride the theme.


Virtual Reality (5%) – Sony

First up is a brand new theme in the Portfolio and therefore as of yesterday close, the portfolio has a new holding – Sony Corp bought at 5% weight. (Sorry I am a bit late to announce it). My bet is that VR products will be the Christmas gift of the year 2016. It’s not a hype, it’s real, and it will become mainstream very quick. Sony is well positioned to ride this trend.

Electric Vehicles (17%) – BYD, Coslight Technology, Highpower Int

I have talked a lot about Electric Vechicles, when I started my research about a year ago, it was not such a hype yet. Now a lot of junior Lithium miners with a potential mine up and running in 6 years have gone up 300% the last 6 months. Well the hype is here, I have struggled a bit how to express my view and belief that we will all be buying electric cars in 5 years (Getting it right). Currently I’m riding a shorter trend more geared towards China and how Chinese subsidies are helping my current holdings, which all are battery makers and BYD who also successfully sell electric buses around the world.

Modern Web-based Banks (11.7%) – Skandiabanken, Avanza Bank

I work in banking, I know what is happening, most us do and we are scared. Because we know a lot of the things we have been making money on for ages is going away – and it is going fast. It’s niche players as the companies I own that will be able to navigate this and come out as winners as Titans as Deutsche Bank and others fall helplessly. Or better yet, are bought by a Titan.

Growing Chinese Middle-class (29%) – NetEase, Ping An Insurance, Ctrip, Yuexiu Transport

So almost everyone that invest in China/Asia is bullish on the whole Chinese middle-class consumer play. It’s easy, 300-400 million new people enter the middle-class and they want all the products and services we westerners consume, so buy companies that produce what they consume? Yes and no. Yes because the underlying story still holds, No because the obvious ways to play it through regular consumer staples companies etc is too expensive, the multiples are really high. I found my ways to play it, which I think brings a nice risk-reward.

Strong Growth/Consumption in Nordics (12.4%) – Ramirent, MQ

The Nordic consumer is today rich, richer than ever before, for a few reasons. Unemployment is low, interest rates are negative, house prices are at top or close to top levels, equity market is OKish. All in all, there is spending power. So we will build and we will consume, I found two companies were one is a bit of turnaround and the other has found a strong CEO/leader.

Stock Specific (16.8%) – Criteo, Zhengtong Auto, Microsoft

This is a mix of Criteo being a high growth company, Zhengtong Auto being a deep value play and Microsoft being somewhere in between.


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Investment styles and lifelong learning

Thoughts on investing styles

Around the same time as I started this blog I also switched into a new area in my team at work. I’m once again faced with the struggle and joy of learning new things at work, this time in understanding factor risks also called styles. So the new role is spending less time meeting brilliant fund managers and more time on analysis. But I did learn a lot from all the great investors I met and I would like to share some thoughts.  As everyone interested in the field of finance, I read a tremendous amount of financial news stare at stock charts, etc. I also dedicated a lot of my time both for a Msc in Quant Finance and later a CFA. But the deeper I delve into Finance there more I get the feeling how incredibly much there is left to learn. When I still was in University I was a more confident investor than I am today, when I today know probably 10 times as much.

We all know examples of extremely clever people, still making huge mistakes in investing, maybe the most famous one being Long Term Capital. You can be one of the world’s best at company valuations, knowing all the ins and outs of a balance sheet but still makes big mistakes. Investing requires you to be a master of so many fields, it’s more or less impossible for a single person to be all that. We can see how people try to handle this by narrowing the universe of what they are looking at, for example only one country or one sector across countries. Another way to slice it, is to become a master of an investing style. Many bloggers and investment professionals focus on one style, for example Small-caps, Value, others look at Growth, and some try to combine styles for example GARP (Growth At Reasonable Price), small cap Value etc. Other skip companies and invest more through Macro views, or given the low interest rates, Quality companies and High Dividend strategies has gained popularity. I have also seen a trend (hehe) more recently of Momentum investing gaining traction also outside of the CTA/Trend-following hedge fund space. All these styles requires tremendous effort to master fully – and I’m sure nobody is master of all.

Don’t choose your style to quick

In essence, the more knowledge you gain, the larger the chance is that you can skew the odds in your favor and generate alpha. It’s a never-ending learning journey where curious knowledge seeking people can express their knowledge into investment ideas – and potentially reap the rewards. I think that is the core of why I love working in and with Finance. I have still not reached the stage where I found my “style”. But I don’t want to rush it. I feel a lot of people for example read about Buffet and Munger’s success in investing and then they just decide – I want to be a value investor. They then gather up all great written books about Value investing with the mindset of, I want to learn to become a great Value investor. But they never really gave for example Growth investing the same chance to shine. They did not have a good picture of what the different investment styles had to offer, they already plunged in and decided Value investing is my thing. Well maybe it is, but for me personally I want to spend a few more years understanding both stock markets around the world, different sectors, as well as different investing styles. Because if it’s one thing I learnt from meeting all these great managers out there, with great track-records of alpha generation – there is not one style that is superior to others, all different styles of investing can work, if you do it right. And maybe as important, different investing styles will outperform during different times. We all know the story of how people laughed at Buffet around year 2000, and how his Value investing style came back with a vengeance when the bubble burst.

Weekend reading

In the spirit of learning more I have spent a larger part of the weekend reading up on different blogs, and also watched a fair amount of material on Youtube. Internet truly is a marvelous place for all us knowledge thirsty people. I wanted to share some good material I have come across.

I recently read a book by Guy Spier called The Education of A Value Investor. I read it after a recommendation from the blog Value and Opportunity.


In the book Guy talks about how he transformed his life in the pursuit of becoming a better investor. The book kind of grew on me, from being a bit skeptical in the first 3-4 chapters on what the “Value” for me was reading about Guy’s life, but it came around towards the middle of the book, delivering a lot of thoughtful insights. So I would also recommend a read, not so much for investing insights, but rather for personal change. One of Guy’s mentors is his friend Mohnish Pabrai, which he talks warmly about in the book as a great investor. Today I came across a blog that promoted a Video-lecture by Monish. I found the full material somewhat to long-winded, but I loved the short 5 min quick version of what Mohnish talked about, please check it out: Presentation on Stock Bubbles

I found the material resonated a lot with my own thinking, that the markets are currently a bit crazy, pricing FANG stocks (Facebook, Amazon, Netflix, Google) and others like Tesla at crazy multiples. We are in something of a new Nifty-Fifty scenario – and I don’t like it (since I don’t do shorts).

A hated guy who gives a lot

I read on another blog about someone called Martin Shkreli. I googled it and found out it’s that hated guy in the US that raised prices for a drug he bought the patent for. Well I guess I had too much time, but I spent like 2-3 hours watching videos of him and how he is building a fan-base through YT and other channels by actually responding to all the hate. He sits hour after hour and answers his phone from angry callers (you can watch it all through his YT live-stream) and explain things from his perspective, and his arguments are actually convincing. Anyhow, what I wanted to mention is that he also spends lots of time to educate the once interested in learning more about investing and valuation of companies. So if you would want to learn more about how to value companies do check out his videos, here is a link to his first lesson on Finance: Introduction to Investing


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