This is the editorial of our monthly Quant Value Investment Newsletter published on 2023-11-07. Sign up here to get it in your inbox the first Tuesday of every month.
More information about the newsletter can be found here: This is how we select ideas for the Quant Value investment newsletter
This month I want to discuss how turning off noise can help you stay focused and increase your returns.
But first the portfolio updates.
Portfolio Changes
Europe – Sell Two
No new recommendations this month as the index is below its 200-day simple moving average.
Stop Loss – Sell
Sell Derichebourg SA at a loss of 19.0%
Sell Zumtobel Group AG at a loss of 13.6%
North America – Buy One – Sell One
One new recommendation this month as the index is above its 200-day simple moving average.
It’s a US-based manufacturer of advanced concrete placing equipment with net cash of $23m, trading at Price to Earnings ratio of 6.9, Price to Free Cash Flow of 9.2, EV to EBIT of 4.3, EV to Free Cash Flow of 8.0, Price to Book of 2.4 with a dividend yield of 8.9%.
Stop Loss – Sell
Sell Cross Country Healthcare, Inc. at a loss of 31.0% because of a 19% price fall after disappointing results.
Asia – Buy One – Hold Two
One new recommendation this month as the index is above its 200-day simple moving average.
The company is a Japan-based information technology (IT) solutions provider also with no debt and cash equal to 41% of market value. It is trading at Price to Earnings ratio of 9.8, Price to Free Cash Flow of 14.5, EV to EBIT of 4.3, EV to Free Cash Flow of 8.6, Price to Book of 1.4 and pays a dividend of 2.0%.
Hold - Two
Continue to hold Doshisha Co., Ltd. +48.0%, and Maezawa Industries, Inc. +59.3% (both recommended November 2022), as they still meet the portfolio’s selection criteria.
Crash Portfolio – Sell Three
No new Crash Portfolio ideas as most markets have recovered.
To date the 15 Crash Portfolio ideas, recommended since August 2022, are up an average of 20.7%!
Sell EVS Broadcast Equipment SA at a profit of +33.3% as it no longer meets the portfolio’s selection criteria.
Sell Jumbo S.A. at a profit of +100.4% as it no longer meets the portfolio’s selection criteria.
Stop Loss
Sell Guillemot Corporation S.A. at a loss of 11.4%
Turn off the noise - how business TV harms your returns
This month I would like to talk to you about investment fears and what you can do to keep them in check.
The fears I mean is that sinking feeling of missing the boat when the market is booming, and the fear of losing when things turn down and losses start showing up.
If we let these affect us, it causes us to make bad decisions.
Something that can help
Something that can help your thinking and, something I stopped doing a long time ago and never looked back, was to never watch market or business TV.
I even stopped reading business news altogether if the headlines were two sensationalists.
The problem with search driven media we have now is that the titles have gotten more sensational.
With social media (Twitter or X and Facebook) it is even worse!
Media has their own agenda
If you put yourself in the shoes of media companies and you want, click or views (as your source of income – remember subscriptions are declining) you must write sensationalists articles.
Also, they must have an explanation of everything happening in the market. These mostly make sense, but it may not be right.
You know the best and simplest explanation why the stock market went up is that there were more buyers than sellers. Why there were buyers than sellers are anybody's guess.
And honestly, does it help your returns if you know this? I found not.
The REAL problem with business TV
But the real problem with business TV is that it tricks your brain into thinking the stock market's a game.
And your problems start when you start playing that game.
By this, I mean you start ignoring your well-thought-out and researched investment strategy and start thinking about taking part in short term market movements.
With business TV you see things that have moved up and down the most all the time. It's hard not to be drawn into that.
Then there is overconfidence
When you see people on TV sounding all-knowing about stocks, keep in mind they are selling themselves. They can't afford to say they don't know.
But admitting "I don't know" is crucial in investing.
If you start thinking you know it all, you start making riskier choices. And if you convince yourself you're an expert on every single company, that overconfidence will lead you down a dangerous path.
You know presenters are masters at answering confidently even when asked questions like "What's next for the economy or the stock market?"
Sounds impressive, right? But here's the truth. They do not know any better than you do. And extensive research has proven that the so called “experts” fare even worse.
Wrong way to think about investing
But this the completely wrong way to think about investing!
The best fund managers out there try as hard as they can to keep these hunches out of their decision-making process.
Why?
Because you can't invest based on hunches, you must have and follow a sound investment strategy.
Simply sticking to a solid investment strategy, like the one we follow in the newsletter, is the only thing that works over the long term in up and down markets!
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