In the first 6 months of 2023, the Value & Opportunity portfolio gained +5,0% (including dividends, no taxes) against a gain of +12,8% 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. Some other funds that I follow have performed as follows in the first 6M 2023:
Partners Fund TGV: 3,6%
Profitlich/Schmidlin: 16,6%
Squad European Convictions +7,6%
Frankfurter Aktienfonds für Stiftungen 6,9%
Squad Aguja Special Situation +5,3%
Paladin One -0,8%
Alphastars Europe + 11,4%
Performance review:
Overall, the portfolio performance was in the lower third of my peer group. As the peer group is mostly Small cap focused, the overall relative low returns correspond with the returns of European small cap indices and are mosly well below Large cap indices. Looking at the monthly returns, it is not difficult to see that especially January and June were in relative terms very disappointing.
Especially in the last 2 weeks or so, some positions were subject to very “indiviual” impacts, such as ABO Wind and their idea to transform themselves into a legal structure (“KGaA”) that would curtail shareholder rights, or Sto that was impacted negatively by a very weak outlook from competitor Steico. Or Thermador, which suffered for no obvious reason.
That this year would be a difficult one in relative terms was already clear from January. I still think that the portfolio offers great potential, but short term share price momentum is clearly not very good for many of my positions. Luckily, I don’t need to care at all about short term developments, I will continue to focus on the mid- to long term which, I hope, will bring good results.
2023 is one of those years where I am very happy that I don’t manage third party money. I can only imagine what kind of discussions I would need to have with clients who would not understand why the performance is so far behind the benchmarks. Lucky me !!!
Transactions Q2:
The current portfolio can be seen as always on the Portfolio page.
In Q2, I sold Rockwool and Recticel after my deeper dive into insulation companies. Rockwool at a gain of ~28%, Recticel at a loss of -9%. The second half of the year will be tough for European building companies, so maybe there is a chance to increase the exposure to selected players.
I also exited VEF as it become somehow to small to bother at a loss of ~-10%. This had been a nice winner in between but these days, Fintech looks like a dead duck. However I will keep monitoring them. I also sold more Meier & Tobler as the share price is above my mid term target.
There were no new positions, only position increases in Schaffner and Sto.
Comment: “AI has saved the day”
What a difference 9 months make. In Q3 2022, things looked very bad for anything related to technology. The Covid boom was over, Tech companies were reducing their forecasts and cutting jobs and Nasdaq share prices were more or less in free fall. In retroperspective, all of this most likely changed with the November 30th release of ChatGPT.
ChatGPT not only became the fastest growing consumer app with more then 100 mn sign ups after 2 months, it also injected new life into the tech sector. “Generative AI” as it is now known is supposed to be the “big next thing” that will make everyone’s life much better and bring huge amounts of money to Tech companies.
As always, the big Tech companies gained most, as investors consider their moats so strong that they will win even if they don’t have a dedicated product like Apple. In the wake of the Big Tech companies, also a lot of the “fallen ShitCo Angels” have made some spectacular gains and the usual “ShitCo Tech Bros” celebrate themselves for 2023 gains on FinTwit.
“Generative AI” seems to have awakened investor’s animal spirits in record time and even in early stage VC, the money starts flowing freely again like this 105 mn Seed round for a 4 week old AI start-up from France.
Not to be outdone, German investors are already flocking back to newly listed Shitcos like ParTec which combines (of course) Quantum computing and AI.
Marc Andreesen from A16Z already annonced in early June that “AI will save the world”. For now, AI has clearly saved the world for Venture Capitalists and Tech Investors. Recently I was pitched by a VC claiming that Generative AI and Blockchain are inseparable and therefore Blockchain will come back with a vengance, too.
Personally, I am not 100% sure if and how justified the current AI hype is. This is based mostly on my observation of the first AI Boom that happened around 4-5 years in the VC world.
Even back then, every startup claimed to have superior AI capabilities. Some of these start-ups like Lemonade and Upstart made it to the stock exchange. Now after a couple of years it has become quite clear, that these AI capabilities were great on paper but unfortunately did not lead to a superior outcome in business performance for whatever reason. Another much hyped AI case, Self driving cars, also turned oput to be much harder than initially thought and apart from some local successes, full self driving seems still many years away.
Another observation is the following: Many of the current AI supporters like A16Z, Sadya Nadella or others claim that AI will be this perfect “Copilot” for humans, helping us to augment our abilities and no harm will be done to anyone.
However, when I was reading the available AI literature 5 years ago, most authors agreed on one thing: AI will develop and iterate at a digital speed. So once AI is good enough to really help us in many different situations, it is inevitable that AI will be able to this stuff in a very short time without human help as it will iterate incredibly fast. My advice for young people would be: Don’t aspire to become a “Prompt Engineer”, that profession won’t last that long in any case.
So for the future we will have most likely two scenarios and I am not sure which is more likely:
- AI capaibilities, despite ChatGPT and Midjourney are still rudimentary and it will still take a long time until they really make a difference OR
- AI capabilities are already far advanced and in very short time AI based algorithms will create havoc in many areas of life
Maybe I am too pesimistic here, but I do not see the gentle, “save the world” properties of AI yet. The only clear winners of the current hype are clearly VCs and the “tech ShitCo Bros” who are able to pump the next generation of ShitCos.
For the time being, I personally I feel more comfortable with “brick and mortar” business models that are hard to replace with AI than anything that could be impacted severly such as Software.
