My review of 2020 (a SPAC-tacular year)

The year 2020 was a very special one. The global corona pandemic on its own, is more than enough reason to make it a special year in so many perspectives. All of us experienced the pandemic and the national economic lockdowns differently. Some of us were hit harder than others, emotionally or economically …

This is not investment advice. Please read the disclaimer. I might own discussed stock(s) currently or at a later time. I might transact in any securities at any time.

(I dicovered the term SPAC-tacular year at seeking alpha and for me, personally it refers to an (alarming) trend within financial markets which is also reflected in my December article The markets temperature)

The pandemic

The global pandemic started in China, other governments acted too slow to prepare in a sufficient way. Of course that is easy to say, especially with hte benefit of hindsight. Since I live in Germany and both myself and my gildfriend went on working full time with more homeoffice (a big plus for me personally), I was surely affected below average. That is true with regard to any financial impact as well as any potential mental impacts. Different societies and different groups within these societies were hit very differently as were financial market segments. Personally, I enjoyed workig-from-home saving 2h of (stressful) commuting time daily and dsoing much more sports (living healthier overall). I very much missed all the social contacts, parties and just having a good time with friends!

Different groups of people will remember the crisis in differnt ways according to their personal circumstances and thus learn different things (read more here).

Financial Market Turmoil

How did I feel during the financial market turmoil? To be honest, I was quite relaxed, even seeing the market value of my investments tumble with the broader market. When talking to friends, I even expressed positive feelings, since I (and my generation) was able to buy into equitites at lower prices — pls do not get me wrong: I was not happy that this crisis brought mischief to many people and families!

Equity markets bounced back within three months, supported by unprecendented financial stimulus from governments and central banks around the world. An army of retail (day) traders seems to have lend a hand (or two), pushing the market and some securities higher (even of bankrupt companies, Hertz anyone?). The bounce back was too fast for me to deploy as much cash as I wanted to. The initiation of my Quicky series on new companies was partially a reaction to that, hoping to extend my watch-list.

  • Here you can re-view Novembers markets’ reaction to vaccine news (funny)

Thank you!

A big thank you goes to my readers! Seeing high(er) numbers for visitors and views motivates me a lot to keep going (or writing). The more readers come to my blog, the higher the probability to get involved in cirital discussions about methods or specific investments. I hope for much more interactions with my readers in the years to come.

  • My blog counted more than 3500 of total visitors in 2020 resulting in a total of 9300 views.
  • Nonetheless, my guest contribution at valueDACH about Bolloré (BOL FP) is by far my most read article as of today
    • Btw: valueDACH relaunched its beautiful English webpage. So please take a look at after reading my review of 2020. There is so much highest-quality content to discover!

Seeing my blog grow is a huge motivations to keep going and publish my analysis. If you want to help, please follow, like and share my blog and my posts 🙂 I am currently thinking about upgrading to a payed wordpress subscription (and maybe monetizing my blog at all). If and how is still completely undecided …

As written before, it always makes me smile to see that my readers are all over the world. I would love to see more coloured countries in on year.

Portfolio review

My portfolio started the year with a total of 22 positions. I stated the goal to reduce my total positions, and especially some ‘legacy positions’ during the year. I sold the following of my legacy positions during the year: E.ON and Uniper, Shell, Greece ETF. I ended 2020 with a total of 25 positions with more than half of my total portfolio value in the top five.

Trading activity was high with a total of 58 buy/sell transactions. I want to reduce this!

In general I strive for a more concentrated portfolio in high-conviction investments. My watch-list is getting longer and should help in this regard (relative evaluation). The smallest five positions are most certainly more of a distraction (drag on time available) than a significant performance contribution.

Present (risk) factors in my portfolio might go unnnoticed. I feel comfortable with the (risk) factors in my portfolio I am aware of. I do not own many high-growth companies directly (Baba via SBG, Tencent). That is because I usually feel them to be richly valued. But, missing high-growth is another (missing) risk factor as well and can ‘cost’ performance in certain market cycles, as we have recently seen. Put another way, I have not many (maybe none) potential x-baggers in My Portfolio.

FX risk is always present in an international stock portfolio and to a varying degree within many companies as well. In the end of 2020, I felt a weakening USD and Asian currencies as a drag on portfolio performance.

Russian investments (Gazprom, Sberbank) performed well and I feel comfortable with the level and the (perceived) risk/reward situations. I might even increase/add some more Russian stocks. My Krka investment is also located in the East European region with a high exposure to Russia.

Luxury / discretionary retail (Pandora, BBBY, Oriental Watch, BMW) represents a high 19% of my current portfolio’s market value despite usually boasting higher-than average risks. But: Pandora’s turnaround seems to work and resulted in a very strong performance (Q4 better than expected) resulting in a high portfolio value despite reducing my position during the rebound. Oriental Watch seems rahter safe to me with high net cash.

Telecommunication investments account for 14% of the portfolios market value. These is not an industry known for outstanding longterm shareholder returns. However, holding defensive telco investments during the pandemic did not feel wrong, and I believe the investment case is still valid (for SES). I sold NTT.

Portfolio performance

My portfolio performance was +20.9% in 2020. This is calculated as periodical profit (before tax, after fees) over an approximation of average invested capital. Profit is calculated as my portfolio value as of Dec 31st (Vt+1) minus its value one year ealier (Vt+0) minus cash used for buys, plus cash from sells and dividends/income. Avgerage invested capital during the year is approximated as Vt+0 + 0.5 x net additions, with net additions being (+b -s -i).

  • My net additions in 2020 were skewed to the second half of the year, with half of total net additions occuring in Q4 (as written here, the markets rebound happened’too fast’ for me). Thus …
    • approx. average invested capital is overstated
    • annual (time weighted) portfolio performance understated

Individual investments review

The covid lottery was coined by some other investors / bloggers and refers to individual investments (stocks) with good or bad returns which were mostly driven by an unforeseeable event (the pandemic) and related changes in i.e. consumer behavior as well as political decisions on how to handle the pandemic. Keep this one in mind, when reviewing my (or your’s) investments’ performance.

»Investment performance is what happens when a set of developments […] collide with an extant portfolio. Many futures are possible […] but only one future occurs.« – Howard Marks

Howard Marks, The most important thing

For example, I sold my investment in a british pub operator in Sept 2019 based on a Cash Offer from CK Noble for Greene King (with a nice profit). I did value GNK based on my model, including the different segments and transformation capex supporting the strategic turnaround, but sure as hell, I did not incorporate a global pandemic in my forecasts. In hindsight, that was pretty much a lucky sell, since pubs is a pretty tough business curently and close to non-existent.

Check Point (CHKP US) is one of my biggest investment positions and at the same time one of my highest conviction investments. Operational development was solid and I believe it will continue to deliver steady growth with high poriftability. In March it dropped to a low of $82, but I was not lucky/fast enough to buy at these depressed prices. Performance so far is rather flat with an average buy price of € and a year-end price of . After the infamous Solarwinds hack, cybersycurity ETFs saw some inflows, resulting in technical support for Check Point. Note how CHKPs performance (in €!) would be flat for 2020 otherwise (longer term this is not even a positive, since CHKP buys back fewer shares at higher prices now).

(+20.8% in $)

SES (SESG LX) performed rather well this year, at least if we consider my buy prices in 2020. My investment thesis is well on track (to play out in 2024 with high relocation payments). Until then, the network segment should continue to grow and video should stabilize. During this turbulent year, I liked the defensive nature of the business. The 5G spectrum auction is going well, telco incumbets splurging billions of $. Longer-term I want to reduce my total telco exposure (I also hold held NTT and Deutsche Telekom). I always wondered about (perceived) high and often daily price swings in (a defensive) SES during the year — price volatility is good for us value investors (believers) offering opportunity (read here: returns = skill x opportunity).

Pandora (PNDORA) was strongly impacted by the pandemic as other physical retailers, resulting in a low of DKK 200 in March. But, investors not only liked its turnaround progress but also their way to handle the crisis operationally and financially (securing liquidity for a worst case scenario by selling treasury shares, securing new loans and amending loan covenants). Shares reached a price of DKK 650 end of November but I already sold shares in between. Other (luxury) retailers like L’Occitane (973 HK), Bed Bath & Beyond (BBBY), and if you want let’s include BMW offered a wild ride and mostly came out of 2020 on the winning side (for different reasons).

It is much too easy to only look at realized performance, but what truly matters (but can’t be measured) is risk-adjusted returns (not talking about volatility!) over a very long period. Just imagine an alternative history for 2020 (and its stock charts) without validated hopes for vaccines and with much less decisive global stimulus! Would cruise lines and airlines still exist (in todays form)? Would shareholders still own these companies? Maybe not. Many equity investments could have indeed performed very differently. So I would like to write some words about risk-adjusted returns.

»High absolute return is much more recognizable and titillating than superior risk-adjusted performance. That’s why it’s high-returning investors who get their pictures in the papers.« – Howard Marks

Howard Marks in The most important thing

My risk-adjusted returns are impossible to measure. Nonetheless, I believe my purchase of a Grenke bond (3.95% 2025) after the short-attack will most likely deliver superior results on this metric. Sure, it was possible that Grenke had no cash (like wirecard) but I thought it highly unlikely and did not see any other factors mentioned in the short-report seriously impairing the value of Grenke bonds. I thought it much more likely that Fraser wanted to draw lines between Wirecard and Grenke. By the way, that was my first bond purchase and that’s why it was for a very small investment. My investment in Oriental Watch (398 HK) also scores very well due to its fundamental undervaluation, high net-cash and a strong near term catalyst (conditional cash offer for some shares at HK$ 3).

  • It is of utmost importance to review ones decisions independently from its outcomes (also a topic in Thinking in Bets — book-review follows). One of my worst decisions was probably to buy much more Grenke shares instead of Grenke bonds. I was quite sure that the risk/reward or risk-adjusted returns for the bonds were far superior, still (for above reasons) I invested much more in the stocks
    • So far, the performace of my bonds (+43%) is much higher than for the shares (+31%). But:
    • Shares can be hold forever. This could change the (very) longterm view on the positions

Am I satisfied ?

My investment decisions during 2020 were executed based on (hopefully) sound and rational analyses. Most of them I did publish. Some were derived from a rather detailed valuation and a deeper understanding of a company’s value drivers. Others were derived on a rough notion on the odds being on my side, like adding to my Gilead position (down so far 😉 ). As is mostly the case with my SOTP valuations such quickies do not result in high conviction investments. Longer-term I want to tilt my portfolio much more to long-term high-conviction investments. These are the titles you can (realistically) buy during a market crash, because (i) you know them and (ii) the relevant value drivers and (iii) your conviction is high enough. So, overall, I am satisfied with my investing journey despite knowing many people with much higher achieved performance (you just needed to buy Tesla^^, ARK, or sexy IPOs or many other things). This is a game for the long-term and I fear that many people will have a bad awakening (in a few years?).

I have a few regrets about actions (mostly not) taken during the year. Most companies I looked at performed strongly. Often, I was not fast enough buying them, i.e. Flow Traders (FLOW NA) before March. I only bought it later. Saldy, I did not buy into Quadient right away when publishing my Quicky on Quadient, betting on a quick turnaround. After my post, it performed very strongly. I also (surprisingly) liked Tencent Music (TME US) but it never touched my buy price derived from my October analysis, so I demonstrated much needed discipline. But these regrets are a two-sided sword. Yes, I missed some good performance, but that is always the case during a bull market if you thoroughly analyse investments, but: This is the way (for value investors)! (FYI: from The Mandalorian which was much better than the last three Star Wars films).

Selling Microsoft in June 2013 is my biggest regret so far. I sold with a little profit, being afraid that my paper profit will vanish. I only bought into it in November 2012 as my first stock purchase as a student. My investment was based on the notion that the company has a very strong position in the corporate and private office despite the google suite. Nowadays, I (want to) believe I would not be so foolish. In fact, I know I would act much more rational. This illustrates the use of a public blog.

During 2020, I started many posts on interesting companies, that I did not finish (yet). Most of them performed rather strongly. For example, I started a quicky on Where Food Comes From on Sept 23rd, when shares (WFCF) traded at $1.82. At December 2nd, shares already traded at $2.87 (+57%).

Most my 2020 todos stated in my 2019 review are checked-off from my 2020-todo-list.

Non-investment stuff

I read many books in 2020 and enjoyed it really much to learn some new stuff and to read things that are still valid. Most of the daily news we consume today has very little value tomorrow, I believe. Books provide content, concepts and reasoning with longer-term value. I wrote book-reviews about some books (not all). Learning new things is one or even the best aspect that I love about investing (and a good reason for a professional investing career)!

I hope you enjoyed healthy Christmas holidays, maybe even with your loved ones despite special conditions, and I wish you all a happy new year 2021. May it be a better year that brings lots of positive developments to many people around the world (I do not read much about vaccines for developing countries in German mainstream media but I observe many (underserving) companies being bailed out).


3 thoughts on “My review of 2020 (a SPAC-tacular year)

  1. Thanks and congrats to your performance! I strongly agree, esp. with the parts about missed chances and knowing if decisions are right in the long-term, and considering also alternative scenarios where things might have gone worse.

    The one thing I disagree is that there are no multi-baggers in such portfolios (missing high-growth) – take company like krka, a little growth, a little margin expansion, a little multiple expansion and a little time – I think there is enough Potential 😉

    Glad you are blogging, I really enjoy it and am looking forward to 2021 😉

    Liked by 1 person

  2. Hi Tobi,
    Thank you for your kind words! I can write them back to you! True, taking a longer-term prespective many (of my) companies could turn into multi baggers taking into account the alignment of the above factors, but probabaly not in many todays market participants’ shorter time frames (one could call them ‘lottery ticket buyers’).


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