May makes everything new?

At least I finished my monthly update again - you can find the blog post here at Getquin and the graphics/tables at this link:

https://www.valueinvestments.ch/vermoegensverwaltung-value-und-momentum-mai-2023

I'm glad to see stocks outside the energy sector again that meet my value criteria and show positive momentum. In 2022 the performance was quite ok with -4.5 vs. -15% in the MSCI World. But in 2023 I am still not quite happy - we will see at the end of the year how it will develop.

For you, here is the current update with some thoughts on the current situation:

In May 2023, the sideways trend has continued to consolidate. We have been seeing this trend since the beginning of 2022, which means that the return in the Value and Momentum Portfolio has dropped a bit again: to 11.6%. We see since the start a return of 43.4%. This is still 23.6% more than the MSCI World has produced over the same period - in just over 3 years.

Asset management - purchases and sales in the portfolio

Again in May, three new companies made it onto the shopping list. I am glad that none of the three companies come from the energy sector. We already have enough of those in the portfolio in all sorts of forms, and I feel more comfortable when the portfolio is not quite so dependent on a single sector. In 2022, we were spot on with that. Now, however, it is time to reduce the overweight in the energy sector somewhat. Among the newcomers, there is once again a company from the real estate sector. This is surprising, because the real estate sector has actually suffered in the USA with the interest rate hikes. However, M/I Homes managed to triple its profits in the last three years in a difficult environment. However, the share price does not seem to reflect that yet: The company is still very cheaply valued - despite an excellent track record. More details about the other two companies - German DEUTZ Aktiengesellschaft and Australian MYER Holding - can be found below.

I have divested from two companies in the commodities sector, which have been destroying returns in the portfolio instead of bringing returns to it. Jastrzebska Spólka Weglowa rose by an incredible 91% from October 2022 to January 2023 - but it has fallen again almost as quickly since February 2023. What remains is a sobering result - not overall, but as far as this one stock is concerned: the momentum has been completely lost - the company is still favorably valued, but purely in terms of the figures, the money is better off in the new acquisitions. I act here according to the motto: Nowhere is it written that you have to make up for the losses of a stock with the same. This would not have worked with our big banks UBS and CS in the last more than 10 years. I know many people who are still desperately holding on to their UBS shares, which they bought in 2007/2008 for a "cheap" 50 or 30 Swiss francs. The fall in Credit Suisse's share price is even more dramatic: In April 1995, Credit Suisse's share price stood at over 20 Swiss francs. Today it is less than 80 Swiss centimes. Buy-and-hold in all honor - but here, too, it makes sense to diversify a bit. The second company that was sold also produced a negative return and must therefore leave the portfolio for the time being. All companies in the portfolio have to pass a strict selection process - not only when buying, but also when regularly reviewing them: It is possible that the fundamentals change so much within a year that they have to be replaced.

News and developments on the stock market worldwide

Energy prices have normalized somewhat and solutions have been found for many bottlenecks. However, I think that the energy issue is far from being solved: finite energy sources must be replaced step by step by renewable ones.

Unfortunately, renewable energies became the new playing field of speculations with sometimes absurd prices: Similar to the .com bubble at the turn of the millennium, for example, inflated prices were paid for everything with "hydrogen" or "electric car" written on it. This was just to watch it all come back down. That doesn't mean the companies are all worth nothing - but you can still overpay for a top company. This is exactly what has happened in the past with renewable energy. If you want to be sure not to overpay, you should NEVER just buy any stock of hyped companies on gut instinct. Instead, you should take an in-depth look at the companies - not only qualitatively but also quantitatively.

What also doesn't help is that many financial service providers are running a huge marketing circus here. If you look closely, however, you will quickly discover that there is often not quite as much "green" in it as there is on it. And if you then take a look at the fees for financial products that are labeled "sustainable" or "renewable," you will quickly realize where the motivation for this circus comes from. The result is that a lot of people buy individual shares or get financial products without knowing how much they are paying (too much) in relation to the actual value they receive. This continues to drive prices up until the first ones question the whole thing or the hyped companies don't produce the profits to justify the prices paid. From my point of view, however, this is not the fault of the companies, but the responsibility of each individual who justifies overpriced prices with a lot of fantasy.

Inflation remains another major issue. However, this has eased somewhat. Even more prominent is once again the dispute over the debt ceiling between Democrats and Republicans in the USA. The whole thing is pointless, because the whole world can only watch and shake its head - but it affects practically every pension fund and also Privatanleger:innen quite directly. In the end, there will most likely be another last-second settlement and the financial world will breathe a sigh of relief. As Warren Buffett at the Generalversammlung von Berkshire Hathaway 2023 rightly said, "It would be a disaster if the debt ceiling wasn't raised ... which is the reason it's being raised."

Just after I published the blog post, I was able to read the news that an agreement between the Republicans and the Democrats is emerging in the debt ceiling dispute. You can find my original blog post at this link:

https://www.valueinvestments.ch/vermoegensverwaltung-value-und-momentum-mai-2023

$MHO (+0.94%)
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