Sunday, September 10, 2017

Bull runs and crashes since 1999

Troughout the year I have been checking our performance against main indexes in U.S. and Europe. I have thought that we will do badly this year against our benchmark (MSCI All world country index or 'ACWI') until I actually checked out ACWI net performance this year in euros. Currently it's only slightly above year end 2016 level. Given continued bull run of broad U.S and European indexes in 2017, this seemed strange at first.

Then I checked dollar vs. euro and that partially explains what I am seeing.

USD to Euro in 2017 to date with 100 day moving average.
Chart courtesy of

Since I am measuring ACWI in euros decline of dollar against euro smoothes out bull run of dollar denominated investments.

Our market and currency exposure is heavily tilted to European markets and euro compared to ACWI being exposed much more heavily to U.S market and dollar. That's why falling dollar is tail wind for us.

If we look at the entire history of Euro (since its birth on 1.1.1999), we can see that euro had bull run from 2002 to 2008 which pushed dollar far from parity. Since 1.1.2009 dollar has climbed back towards parity, but not reaching it.

USD to Euro from 1.1.1999 to date with 100 week moving average.
Chart courtesy of

The bull run of both Nasdaq and Dow Jones indexes have been phenomenal from 2009 onwards. The crashes of 2000 and 2008 are clearly visible in the Nasdaq chart. Since 2000 was tech bubble it obviously does not show up in the DJ chart.

Nasdaq Composite index from 1.1.1999 to date with 100 week moving average.
Chart courtesy of

Dow Jones Industrial Average index from 1.1.1999 to date with 100 week moving average.
Chart courtesy of

Compare above two U.S indexes with Euro STOXX 600 index:

Euro Stoxx 600 index from 1.1.1999 to date with 100 week moving average.
Chart courtesy of

Quite a difference. It would be easy to jump into conclusion that European markets are still moderately priced in comparison to U.S markets that are far above their 2008 level. I am not going to do that just by looking at these charts.

Also, since our investments are either to individual companies or specific market segment ETFs the market as a whole isn't really meaningful yardstick. Outside of emerging markets, we do not invest via broad all-market-index tracking ETFs or other such instruments.

I am sure there are individual companies - especially within Nasdaq - that are priced sky high.

However, Looking at companies within our U.S portfolio (Micron, Intel, ..), I do not see alarming P/E or P/B levels when looking both at current and forward levels combined. Berkshire Hathaway is our highest priced investment in U.S. in terms of P/E and that's around 20, which is still fair valuation to that company in my opinion.

[ was used to check P/E and P/B levels]

Monday, July 31, 2017

On success as an investor

According to Peter Lynch (the legendary fund manager of Fidelity Magellan) the qualities related to success as an investor are:
  • patience
  • self-reliance
  • common sense
  • a tolerance for pain
  • open-mindedness
  • detachment
  • persistence
  • humility
  • flexibility
  • willingness to do independent research
  • willingness to admit mistakes
  • ability to ignore general panic

Out of the above list I think willingness to admit mistakes is the hardest. Acting on a mistake is actually even harder as this typically involves selling a stock at significant loss.

Over the 20+ years of investing I have gradually got better at avoiding mistakes. It is extremely rare to find a bargain selling at open market. Low P/E and P/B are typically there for a reason (look for them!). Same with very high yeild.

Out of the all "great ideas" I have had over the years very few have been actually great. I think roughly equal amount (if not more) have been in the exact opposite category. So I tend to be sceptical with regards to any "great idea" that I come up with.

Mistakes do happen when inveting directly into individual stocks as opposed to picking a safe ETF tracking sensible idex.

That's why adequate diversification is paramount.

Tuesday, June 27, 2017

Allocation update mid 2017

Time for mid-year portfolio update.

Currently our portfolio is allocated as follows:

  Stocks 98,5%
  Gold 1,4%
  Cash 0,1%

No bonds. We simply substitute bonds with quality dividend payers in our portfolio.

Geographical Allocation (stocks):

  Europe 63,3%
  North America 26,6%
  Emerging markets 10,1%

Actually, place of incorporation is pretty meaningless for most corporations we have invested in.
Most operate and sell globally.

Sector Allocation (stocks) - in order of weight in portfolio:

  Technology – Other
  Technology – Semiconductor
  Clean Energy
  Basic Materials & related services
  Broad Emerging Market ETFs
  Industrial Goods

Top 5 positions - in order of weight in portfolio:

  Siili Solutions (Finland)
  Nokia (Finland)
  Fortum (Finland)
  UPM (Finland)
  Berkshire Hathaway (USA)

18,8% of all stock positions are done via ETFs.
None of those positions made it to top 5 though.

Sunday, April 30, 2017

Which stocks famous money managers hold?

Dataroma tracks famous value oriented money managers that they call "superinvestors". Among them are legendary investors like Warren Buffett.

I regularly take a look what they hold, what they have bought and what let go.

Here is "Top 20" by ownership count compared to situation I had on file from September 2016 (please click to enlarge):

I included all stocks that had up to 10 owners among the famous investors tracked by Dataroma.
The notable changes since September 2016:

  • Apple ownership increased significantly (+5)
  • Wells Fargo made to pole position by continuing to rise in the list (again +3 since last time I checked)
  • Allergan, Comcast and Amazon made it to the list (I have not tracked these before)
  • JPMorgan made again to the list (have been in top 20 before)
  • United Health Group, Liberty Global and Wal-Mart Stores dropped from the list (less than 10 owners this time)

Sunday, March 19, 2017

Helsinki Top 10 Over Billion Euro Companies

There are currently 32 companies listed in NASDAQ OMX Helsinki that exceed market cap of 1 billion euros. I ran my personalized screen to get top 10 list out of those companies.

I use a service provided by via Pörssisäätiö to screen stocks listed in NASDAQ OMX Helsinki. I was not able to rank the following companies due to missing data: Nordea, Sampo, SSAB, Amer Sports and DNA.

Top 10
  1. Citycon - score 2,2 - market cap 2,0 billion euros
  2. Sponda - score 2,2 - market cap 1,4 billion euros
  3. Orion - score 1,9 - market cap 7,3 billion euros
  4. Telia - score 1,8 - market cap 16,8 billion euros
  5. Nokian Renkaat -  score 1,8 - market cap 5,3 billion euros
  6. Sanoma -  score 1,8 - market cap 1,3 billion euros
  7. Elisa -  score 1,7 - market cap 5,6 billion euros
  8. Kone -  score 1,4 - market cap 21,2 billion euros
  9. Fortum  -  score 1,4 - market cap 12,8 billion euros
  10. Neste  -  score 1,4 - market cap 8,9 billion euros
Average Score of all 122 companies in the research database: 1,3
Median Score 1,3

Parameters used in screen (weight):
 P/B estimate current year (13%)
 P/E estimate current year; next year (8%; 10%)
 Dividend yield estimate current year; next year (8%, 8%)
 ROA estimate current year (10%)
 ROI estimated 3 year average ending current year (8%)
 ROE estimated 3 year average ending next year (8%)
 Turnover estimated increase in 3 years ending next year (8%)
 Net Profit estimated increase in 3 years ending next year (8%)
 Gross Margin estimate current year (8%)
 Profit Margin estimate current year (8%)

The used parameters emphasize attractive valuation (31%), profitability in broad sense (26% weight), growth (16%) and dividend yield (16%).

The screen relies on estimates about future. Those combined with volatility of stock prices means that you should not try to chase screens like these (I don't). Ultimately any investment decision should be based on much more than just looking at the current numbers and estimates of future numbers.

Disclosure: Author is shareholder in Citycon and Fortum.