What happened to European stocks starting April 2015?

[Gregmal]

RNO, so we are clear, you are saying that your IRA’s have returned 56% per year for five years (9.5x cumulative return) from buying out of favor domestic stocks and then dodging the market correction, correct?

 

Can you give examples of these stocks? The thing I’m having trouble with is you seem wired against holding the types of stocks that have generated crazy returns in this environment (like say SAAS for example, I am too) but have clearly been doing something right.

 

So what have been say the top 3-5 contributors over that time frame? What maximum leverage (if any) have you utilized?

 

Any notable outliers in there? Again, just trying to understand how you invest as it’s not clear from the posts I’ve read

 

If I had to guess, it seems like he'd probably have a bit of a better understanding than most with respect to the market darlings. From there, just wait on market driven and non fundamental panic points, and then buy the stocks with high yo-yo effects. Probably avoid things like earnings, etc. Without the merits of debating names, you could probably pull stuff like this off with names like SHOP, TTD, MDB if you're full risk on, but even stuff like AAPL, GOOG, FB, AMZN, MSFT, etc if you're risk off.

 

clarification: by "yo-yo effect" I mean a high correlation to whatever your action is predicated on. If you snap your wrist, the yo-yo goes in the direction you desire. If you are betting on the S&P reverting, said security moves with (x) times the S&P, if you're betting on SSS moving, XYZ will move on SSS, if you're betting on credit quality erosion, ABC with move 4x in the direction you wish if you are right on credit erosion. Sounds simple but can be more difficult than one would think. Also quite different than just buying WFC and waiting for some rerating in perpetuity.

[RuleNumberOne]

The inception was in October 2013. I checked some of the statements for the stocks: BRKB, WFC, USB, BAC, CSCO, ANET, PYPL, BRKR, IONS, BIIB, MRK, USG, WAB, Gopro, Perrigo, DaVita.

 

Stock selection is quite bad, i think its just market timing. Each of those stocks could have been bought and sold for a loss or bought and sold for a profit.

[Gregmal]

The inception was in October 2013. I checked some of the statements for the stocks: BRKB, WFC, USB, BAC, CSCO, ANET, PYPL, BRKR, IONS, BIIB, MRK, USG, WAB, Gopro, Perrigo, DaVita.

 

Stock selection is quite bad, i think its just market timing. Each of those stocks could have been bought and sold for a loss or bought and sold for a profit.

 

Wow. So mostly plain vanilla stocks like what the people here buy. Just better timing lol

[RuleNumberOne]

Yeah, i think the returns are just proportional to the timing.

 

I regret not benefiting from FAAMG. I bought and sold GOOG for tiny gains despite having worked there.

 

The 2009-2013 period was great for volatility initiated from Europe. I am afraid the ECB might go crazy and start targeting the stock market P/E. I can't explain why their stock markets are at all-time highs even though they have been in a recessionary state for the last two years. Its a buying panic.

 

The inception was in October 2013. I checked some of the statements for the stocks: BRKB, WFC, USB, BAC, CSCO, ANET, PYPL, BRKR, IONS, BIIB, MRK, USG, WAB, Gopro, Perrigo, DaVita.

 

Stock selection is quite bad, i think its just market timing. Each of those stocks could have been bought and sold for a loss or bought and sold for a profit.

 

Wow. So mostly plain vanilla stocks like what the people here buy. Just better timing lol

[Spekulatius]

^Disclosure: I don't have specialized knowledge about Italy's finances but have followed the banking sector and Unicredit and have shared some sentiment with people living in Italy.

 

The big story for many European and Italian banks (including Unicredit) has been the net interest margin and the evolution of non-performing loans. Unicredit has done a reasonable job at cleaning its balance sheet and the Bank of Italia has recently downgraded the non-performing loans issue from threat to financial stability to a number to simply follow. However, the process has been painstakingly slow and IMO incomplete. Of course, the ECB (and Italy's growing public debt) has allowed that. It is fair to say that slow adjustments are less painful but I wonder if this is not an example of a wasted crisis opportunity as the potentially dead has become a zombie. Private credit growth has been declining (see second link and click max) and how can this trajectory be changed within the Euro construct does not appear possible under present circumstances.

 

https://www.econstor.eu/bitstream/10419/173102/1/PC-06-2017.pdf

https://tradingeconomics.com/italy/loans-to-private-sector

https://www.bloomberg.com/news/articles/2020-02-08/ecb-s-visco-sees-significant-risks-for-italy-s-economy-in-2020?srnd=markets-vp

I can provide a few quotes from the third link if access is a problem.

 

Spekulatius, I really admire the way you change your mind when facts don't go your way at times and wonder if the ECB and other macroprudential public entities should not apply the same principles when dealing with the economic consequences of superficial peace.

 

BTW, Unicredit tends to produce good research about who's holding what in the public and reciprocal sphere:

https://www.research.unicredit.eu/DocsKey/fxfistrategy_docs_2019_170284.ashx?EXT=pdf&KEY=KZGTuQCn4lsvclJnUgseVEGHysWJl2NsEwG0xblWxFK9BVQAB4eryA==&T=1

 

As I stated before, I am not positive on European banks. As an investor (and A scientist ) however, it  is important to look for non conforming evidence first, especially knowing that the bias for Our brain is to do just the opposite (according to Kahnemann and others).

 

As so someone who lived in Germany most of my life and has family and friends there, I think I have a pretty good handle on how people perceive the economic situation there. One thing I can tell is that fear of a recession is not a big concern generally. Sure, growth has stalled, but there is full employment (unemployment rate is 3.1%, which is lower than the US) so the average Joe is not concerned about jobs, at least not at this point. There is wide dissatisfaction on how immigration has been handled, but that’s another topic.

 

Switching to another country (about which I know much less about ), at least from a 10,000 foot perspective, France and President Macron actually is doing much better than it is given them credit for. Unemployment is still high, but continues to come down. Growth is 1.5%, which considering the demographics is roughly equivalent to the 2% we have in the US. I also like that demographics in France LT is much better than the rest of Northern Europe (higher birth rate, also more immigration ). There are some pretty interesting opportunities in French stocks, Bollore/ ODET.PA are some mentioned here already, Burelle is another one I am looking at . I think it is an interesting hunting ground for value investors.

 

Another country worth investigating is Spain. Also problems there, but they overcame their banking crisis and the economy and unemployment rate are much better than just a few years ago. They benefited from the EU central bank intervention during the European crisis from 2010-13 and recovered much better than Italy.

[thepupil]

RNO, I'm still struggling to get there. Help me out a bit. I'm embarrassed that I just took half an hour off work to run this in excel, but whatever.

 

From 10/2013 to today, here is the buy and hold price return (no divvies) of those stocks:

 

BAC:    15.4%

BRK B:  11.5%

BRKR:  14.8%

CSCO:  12.1%

IONS: 7.6%

MRK: 9.2%

USB: 6.5%

WAB: 3.1%

WFC: 2.3%

DVA: 5.5%

PRGO: -10.9%

BIIB 6.6%

 

A few complicated ones (not 10/2013 start):

PYPL: 29% / year from July 2015

ANET: 34% / year from June 2014

GoPro: Very bad from June 2014

 

So very broadly, you are correct, the buy and hold return on these (excluding Paypal and ANET, BAC and BRKR to a lesser extent) has not been amazing and your returns obviously have a signficant timing component to them.

 

With absolute perfect timing, you could have made some big returns on these names. A rough approximation of "the perfect timing return" on each name (buying at min, selling at max, over that time period) is below (don't have time or desire to do something like "perfect 6 month annualized return"). There's also quite a few names that have not been that volatile or offered huge timing driven gains or compounded at very high rates (Berkshire, Wabtec, Merck, USB, WFC, Davita). and there's two stinkers (Go Pro and Perrigo).

 

In the end, your IRA returns are no one's business and have no effect on my life, but I can't seem to square the stated results with the strategy.

 

The inception date is 10/2013 so that's actually 6.5 years of making 55% / annum for a cumulative return of 16.9x one's initial capital. Even if you doubled your money in the first year and a half (none of the stocks listed doubled in that time fram) and then put your entire account into ANET on its first day of trading @ $43 and sold at its maximum of $330, it wouldn't quite get you there.

 

What am I missing? Was there hyperconcentration in something? Or were options used?

 

Teach us your ways of making 17X in less than 7 years

 

I'm part skeptical, part curious, and part amused. You joined in MAy 2019 and its been an onslaught of random macro commentary about the Europe and the Fed, but apparently are the WORLD'S greatest stock trader and market timer. It's fascinating.

 

ANET: +664%

BRK/B +111%

IONS +317%

BRKR: +230%

BAC: +220%

CSCO +186%

MRK  +100%

PYPL  +296%

USB  +70%

USG +164%

WAB +89%

WFC +63%

DVA +94%

BIIB +212%

 

 

 

 

[CorpRaider]

40% chance he's quoting total return for CAGR.  Remember the Beardstowne ladies?  haha

[thepupil]

no, he specifically said CAGR.

 

On an unrelated note, I think you are joking, but dividends can't go negative because stocks don't mature or have par values*. Again, I think you are joking about negative dividend yields, but no one has commented on the degree to which that isn't possible.

 

*well actually they have par values in a very technical sense but you know what I mean.

[thepupil]

and you "regret not benefitting from FAANGM"

 

Well shouldn't you be happy to know that your IRA has beaten the best performing one (Netflix) by about 20% / year since October 2013?

 

NFLX was dragging its ass at a mere 38% / year CAGR in that time frame.

[RuleNumberOne]

thepupil,

 

I made very little from options, a negligible amount. But what you write below about the individual stock returns proves that the only way to make money from such GAAP-profitable stocks is through timing.

 

The alternative is to buy SAAS or other GAAP-loss momentum stocks which I didn't do. I joined in May 2019 and started posting here so that i don't get bored. Before that i used to bother colleagues with my rants.

 

If a stock has a high return over a few years (like stock XYZ had a CAGR of 40% over 10 years), the pros would have bid XYZ to a very high price because the pros have to stay invested all the time. The pros are always chasing each other's returns. They can't get in and out of the market whenever they want - they have to rely on the CAGR of a stock.

 

To summarize, people should find their psychological strengths and use them. For example, i can't short, it stresses me out too much. Staying invested in long-term buy-and-holds also stresses me out too much (e.g. i haven't made money from FAAMG). Timing is what gives me the most peace of mind.

 

 

RNO, I'm still struggling to get there. Help me out a bit. I'm embarrassed that I just took half an hour off work to run this in excel, but whatever.

 

From 10/2013 to today, here is the buy and hold price return (no divvies) of those stocks:

 

BAC:    15.4%

BRK B:  11.5%

BRKR:  14.8%

CSCO:  12.1%

IONS: 7.6%

MRK: 9.2%

USB: 6.5%

WAB: 3.1%

WFC: 2.3%

DVA: 5.5%

PRGO: -10.9%

BIIB 6.6%

 

A few complicated ones (not 10/2013 start):

PYPL: 29% / year from July 2015

ANET: 34% / year from June 2014

GoPro: Very bad from June 2014

 

So very broadly, you are correct, the buy and hold return on these (excluding Paypal and ANET, BAC and BRKR to a lesser extent) has not been amazing and your returns obviously have a signficant timing component to them.

 

With absolute perfect timing, you could have made some big returns on these names. A rough approximation of "the perfect timing return" on each name (buying at min, selling at max, over that time period) is below (don't have time or desire to do something like "perfect 6 month annualized return"). There's also quite a few names that have not been that volatile or offered huge timing driven gains or compounded at very high rates (Berkshire, Wabtec, Merck, USB, WFC, Davita). and there's two stinkers (Go Pro and Perrigo).

 

In the end, your IRA returns are no one's business and have no effect on my life, but I can't seem to square the stated results with the strategy.

 

The inception date is 10/2013 so that's actually 6.5 years of making 55% / annum for a cumulative return of 16.9x one's initial capital. Even if you doubled your money in the first year and a half (none of the stocks listed doubled in that time fram) and then put your entire account into ANET on its first day of trading @ $43 and sold at its maximum of $330, it wouldn't quite get you there.

 

What am I missing? Was there hyperconcentration in something? Or were options used?

 

Teach us your ways of making 17X in less than 7 years

 

I'm part skeptical, part curious, and part amused. You joined in MAy 2019 and its been an onslaught of random macro commentary about the Europe and the Fed, but apparently are the WORLD'S greatest stock trader and market timer. It's fascinating.

 

ANET: +664%

BRK/B +111%

IONS +317%

BRKR: +230%

BAC: +220%

CSCO +186%

MRK  +100%

PYPL  +296%

USB  +70%

USG +164%

WAB +89%

WFC +63%

DVA +94%

BIIB +212%

[Gregmal]

If you operate opportunistically, and employ high concentrations, its not really that unbelievable(although certainly not an easily replicable strategy). It also, kind of filling in some deduced details, probably explains Mr. RuleNumberOnes ranting about lack of market volatility; he exploits them and feels the Fed is costing him opportunities.

 

If you are highly disciplined, this is probably the best strategy, but the downside is you arent invested heavily much of the time and should the market just stay in a largely peaceful state, you're losing money. But the opportunities are there. CVS earlier this year was a no brainer in the $50s. I know a bunch of us here traded DVA a bit back, quickly going from $50s to $70s in a few months. AXP in 2016 another. Target a few years before that. WFC right now is probably the closest thing to a special situation like that, but probably doesnt offer the same upside. But if you're willing to take big concentration risk, this is probably the easiest way to achieve hugely outsized returns with low adjusted risk.

 

[ValuePadawan]

 

As I stated before, I am not positive on European banks. As an investor (and A scientist ) however, it  is important to look for non conforming evidence first, especially knowing that the bias for Our brain is to do just the opposite (according to Kahnemann and others).

 

As so someone who lived in Germany most of my life and has family and friends there, I think I have a pretty good handle on how people perceive the economic situation there. One thing I can tell is that fear of a recession is not a big concern generally. Sure, growth has stalled, but there is full employment (unemployment rate is 3.1%, which is lower than the US) so the average Joe is not concerned about jobs, at least not at this point. There is wide dissatisfaction on how immigration has been handled, but that’s another topic.

 

Switching to another country (about which I know much less about ), at least from a 10,000 foot perspective, France and President Macron actually is doing much better than it is given them credit for. Unemployment is still high, but continues to come down. Growth is 1.5%, which considering the demographics is roughly equivalent to the 2% we have in the US. I also like that demographics in France LT is much better than the rest of Northern Europe (higher birth rate, also more immigration ). There are some pretty interesting opportunities in French stocks, Bollore/ ODET.PA are some mentioned here already, Burelle is another one I am looking at . I think it is an interesting hunting ground for value investors.

 

Another country worth investigating is Spain. Also problems there, but they overcame their banking crisis and the economy and unemployment rate are much better than just a few years ago. They benefited from the EU central bank intervention during the European crisis from 2010-13 and recovered much better than Italy.

Spekulatius,

 

I always enjoy reading your comments and I'm curious if you are negative on all European banks due to the macro environment? Or do you have a checklist of attributes you look for when researching banks that most banks in Europe can't check off?

 

If you do have a formal or informal list of attributes you look for what does it include?(low NPLs, favourable demographics, business friendly country, low taxes, stable regulatory framework, barriers to entry, competent ceo, bank culture??)

[Spekulatius]

 

I always enjoy reading your comments and I'm curious if you are negative on all European banks due to the macro environment? Or do you have a checklist of attributes you look for when researching banks that most banks in Europe can't check off?

 

If you do have a formal or informal list of attributes you look for what does it include?(low NPLs, favourable demographics, business friendly country, low taxes, stable regulatory framework, barriers to entry, competent ceo, bank culture??)

 

Yes all the above are I portent, but if I ad to pick a few it would be

1) favorable macro / local economy

2) favorite market structure , ideally and oligopoly with a few banks holding large market share. (U.K. and Ireland are examples of this)

3) competent management based on ROA achieved, NPL.

 

Examples are Lloyd’s (UK) and possible the AIB Group in Ireland mentioned  in these bards occasionally. Ireland is interesting because it is an oligopoly ( 2 banks control the banking business ) and I think the macro looks better than the rest of the EU. The UK has an independent interest rate policy as they kept their currency so they may avert the negative EU interest rates, which could become a “meat grinder” for financials (banks and insurance companies). Then on the other hand the macro in the UK has higher risk due to pot. Brexit disruption.

[thepupil]

If you operate opportunistically, and employ high concentrations, its not really that unbelievable(although certainly not an easily replicable strategy). It also, kind of filling in some deduced details, probably explains Mr. RuleNumberOnes ranting about lack of market volatility; he exploits them and feels the Fed is costing him opportunities.

 

If you are highly disciplined, this is probably the best strategy, but the downside is you arent invested heavily much of the time and should the market just stay in a largely peaceful state, you're losing money. But the opportunities are there. CVS earlier this year was a no brainer in the $50s. I know a bunch of us here traded DVA a bit back, quickly going from $50s to $70s in a few months. AXP in 2016 another. Target a few years before that. WFC right now is probably the closest thing to a special situation like that, but probably doesnt offer the same upside. But if you're willing to take big concentration risk, this is probably the easiest way to achieve hugely outsized returns with low adjusted risk.

 

RNO has mentioned nothing of his concentration or exposure levels (feel free to chime in: are you holding one or two of these stocks at a time, or a combinatino of all of them). IRA's can't use margin and he said no options, which makes this even more of a herculean feat.

 

I understand the benefits of piling in and out and using vol to your advantage...but this is more than that.

 

17x in 7 years is some serious moneymaking and deserves a little more exposition on RNO's part, for the benefit of the class here.

 

 

 

[mcliu]

Thankfully i didn't waste any of my life learning to build an "economic model". Probably you are an expert at economic modeling which is why you would obsess over tiny fluctuations in WFC financial statements.

Have nothing to add to the topic, but just wanted to echo this sentiment.

Having spent some time as a junior in IB/PE, I realized building detailed financial models add very little, if any, value to the investment process.

[writser]

If you operate opportunistically, and employ high concentrations, its not really that unbelievable(although certainly not an easily replicable strategy). It also, kind of filling in some deduced details, probably explains Mr. RuleNumberOnes ranting about lack of market volatility; he exploits them and feels the Fed is costing him opportunities.

 

If you are highly disciplined, this is probably the best strategy, but the downside is you arent invested heavily much of the time and should the market just stay in a largely peaceful state, you're losing money. But the opportunities are there. CVS earlier this year was a no brainer in the $50s. I know a bunch of us here traded DVA a bit back, quickly going from $50s to $70s in a few months. AXP in 2016 another. Target a few years before that. WFC right now is probably the closest thing to a special situation like that, but probably doesnt offer the same upside. But if you're willing to take big concentration risk, this is probably the easiest way to achieve hugely outsized returns with low adjusted risk.

 

RNO has mentioned nothing of his concentration or exposure levels (feel free to chime in: are you holding one or two of these stocks at a time, or a combinatino of all of them). IRA's can't use margin and he said no options, which makes this even more of a herculean feat.

 

I understand the benefits of piling in and out and using vol to your advantage...but this is more than that.

 

17x in 7 years is some serious moneymaking and deserves a little more exposition on RNO's part, for the benefit of the class here.

 

You know what is the most impressive part? In July 2019 the 5-year CAGR of his IRA’s was ‘comfortably above 25% - 30%’ (link). I guess the last few months he really upped his game.

[thepupil]

The 5-year return in my wife's IRA accounts is 38% (I invest the money.)

 

My own IRAs have moved between WellsFargo, BofA-ML, Schwab to get a mortgage rate reduction, and on top of that I have Fidelity, Vanguard accounts that have been moved and merged etc. But my returns should not be too different (same portfolio contents and decisions.)

 

Actually, upon checking my returns more closely, they are lower because of some losses - took more risks with my money. The returns should comfortably be above 25-30% though.

 

Well that makes things more interesting. Mr 55% CAGR regularly stopped his compounding machine to shave an 1/8 or 1/4 off his mortgage? And made 4-5x in the past few months to beef that CAGR from a shitty 30% to a respectable 55%.

 

C’mon RNO, I was really trying to give you the benefit of the doubt and explain your strategy.

 

Now explain the giant factual discrepancy here. That’s some serious track record endpoint sensitivity you’re working with.

 

Also how did we go from a lack of precision (25-30%) to having 5 year CAGR’s to the precise percentage point, particularly with your assets spread across all those accounts

 

 

[RuleNumberOne]

thepupil,

 

Schwab reports 5-year returns as 49% and returns since 2013 inception as 56%. It is not 17x, more like 13x.

 

 

The 5-year return in my wife's IRA accounts is 38% (I invest the money.)

 

My own IRAs have moved between WellsFargo, BofA-ML, Schwab to get a mortgage rate reduction, and on top of that I have Fidelity, Vanguard accounts that have been moved and merged etc. But my returns should not be too different (same portfolio contents and decisions.)

 

Actually, upon checking my returns more closely, they are lower because of some losses - took more risks with my money. The returns should comfortably be above 25-30% though.

 

Well that makes things more interesting. Mr 55% CAGR regularly stopped his compounding machine to shave an 1/8 or 1/4 off his mortgage? And made 4-5x in the past few months to beef that CAGR from a shitty 30% to a respectable 55%.

 

C’mon RNO, I was really trying to give you the benefit of the doubt and explain your strategy.

 

Now explain the giant factual discrepancy here. That’s some serious track record endpoint sensitivity you’re working with.

[thepupil]

Only you know your returns.

 

I find the July post, the stated strategy, the stocks mentioned, and the various explanations when questioned  to be at odds with those returns. If you are truly compounding at that rate, you need

Not pay one iota of attention to me or anyone else.

 

You can ignore this hater or you can provide a morenpotentially satisfying explanation

 

Others can draw their own conclusions

[writser]

Thepupil, I appreciate your effort but surely you know deep inside that nothing good will come from this. There’s an unverifiable 5 year CAGR (that changes every other post ..) implying “investing god” but a verifiable 10 month post history implying “ignore list”. I prefer verifiable track records ..

[ValuePadawan]

 

I always enjoy reading your comments and I'm curious if you are negative on all European banks due to the macro environment? Or do you have a checklist of attributes you look for when researching banks that most banks in Europe can't check off?

 

If you do have a formal or informal list of attributes you look for what does it include?(low NPLs, favourable demographics, business friendly country, low taxes, stable regulatory framework, barriers to entry, competent ceo, bank culture??)

 

Yes all the above are I portent, but if I ad to pick a few it would be

1) favorable macro / local economy

2) favorite market structure , ideally and oligopoly with a few banks holding large market share. (U.K. and Ireland are examples of this)

3) competent management based on ROA achieved, NPL.

 

Examples are Lloyd’s (UK) and possible the AIB Group in Ireland mentioned  in these bards occasionally. Ireland is interesting because it is an oligopoly ( 2 banks control the banking business ) and I think the macro looks better than the rest of the EU. The UK has an independent interest rate policy as they kept their currency so they may avert the negative EU interest rates, which could become a “meat grinder” for financials (banks and insurance companies). Then on the other hand the macro in the UK has higher risk due to pot. Brexit disruption.

 

Ok I'll keep an eye on those as well. I'm long a little bit of AIB actually for all the reasons you laid out above but another European bank I've been digging around on is Svenska Handelsbanken which has less market share than AIB at 22-23% while AIB in Ireland is closer to 31% market share.

 

Another nice thing about Svenska is Sweden has its own currency and while the krona is quasi-pegged to the euro they have more ability to stray from the ECB's policies than anyone using the euro for sure. They also don't have any issues like Lloyds may have with Brexit so it could be an interesting alternative.

 

If you want a quick summary of Swedens banking sector this may be helpful [https://www.swedishbankers.se/media/3854/competition-in-swedish-banking-sector.pdf]

 

Full disclosure I got these ideas from reading an interview with John Hempton at Bronte Capital so he deserves full credit for sniffing them out.

[RuleNumberOne]

My non-IRA reports 30% since 2011 inception. Lot of money went in and came out due to home purchase and home sales, and so on. I don't know what is the true rate of return in the non-IRA.

 

The only accurate measurement i have is the Schwab IRA accounts opened in October 2013 (because i have moved around the other accounts a lot due to mortgage bait-and-switch from WFC and BAC.) Schwab reports returns since inception of 56%.

 

 

Only you know your returns.

 

I find the July post, the stated strategy, the stocks mentioned, and the various explanations when questioned  to be at odds with those returns. If you are truly compounding at that rate, you need

To pay one iota of attention to me or anyone else.

 

You can ignore this hater or you can provide a morenpotentially satisfying explanation

 

Others can draw their own conclusions

[Gregmal]

Well, as usual, the forum police arrive. But I dont think its really worth the effort or energy getting bent out of shape over what some guy on the internet claims his returns are or arent.

 

I think, but he can correct me if I am wrong, pupil asked questions out of interest, particularly to see if there was anything inherently useful in the purported strategy that he could explore further. If there isn't, discard and move on. If there is, valuable information has been attained; one of the main purposes of existing on an internet based investment community.

 

I think its probably wise to view places like this as an ecosystem where one can both learn, and contribute. After all, one's market timing strategy works for them, no different than others who purport to fervently search for any sort of irregular M&A spread or deal with an attached CVR, buy without spending "much time on the proxy"(despite admitting "In my experience the 'background' section is usually one of the most interesting parts of a special situation proxy"), apply some plug in input from the Kelly criterion based largely on inexactly quantifiable judgment calls, and then "hold on for dear life", because after all, if it doesnt work out, its just another "short term trade that becomes a long term investment"....

 

All jokes aside though, I think its counter productive to the purposes of an investing community to go out of ones way to be a jerk to another contributing member(at least in the non politics section), as we recently saw in the Altius Minerals thread; it can have unintended(or more malignantly, intended) consequences. Read and explore/discard. Or if you're frail, just ignore the user if they bother you that much.

[Cigarbutt]

 

I always enjoy reading your comments and I'm curious if you are negative on all European banks due to the macro environment? Or do you have a checklist of attributes you look for when researching banks that most banks in Europe can't check off?

 

If you do have a formal or informal list of attributes you look for what does it include?(low NPLs, favourable demographics, business friendly country, low taxes, stable regulatory framework, barriers to entry, competent ceo, bank culture??)

Yes all the above are I portent, but if I ad to pick a few it would be

1) favorable macro / local economy

2) favorite market structure , ideally and oligopoly with a few banks holding large market share. (U.K. and Ireland are examples of this)

3) competent management based on ROA achieved, NPL.

 

Examples are Lloyd’s (UK) and possible the AIB Group in Ireland mentioned  in these bards occasionally. Ireland is interesting because it is an oligopoly ( 2 banks control the banking business ) and I think the macro looks better than the rest of the EU. The UK has an independent interest rate policy as they kept their currency so they may avert the negative EU interest rates, which could become a “meat grinder” for financials (banks and insurance companies). Then on the other hand the macro in the UK has higher risk due to pot. Brexit disruption.

Ok I'll keep an eye on those as well. I'm long a little bit of AIB actually for all the reasons you laid out above but another European bank I've been digging around on is Svenska Handelsbanken which has less market share than AIB at 22-23% while AIB in Ireland is closer to 31% market share.

 

Another nice thing about Svenska is Sweden has its own currency and while the krona is quasi-pegged to the euro they have more ability to stray from the ECB's policies than anyone using the euro for sure. They also don't have any issues like Lloyds may have with Brexit so it could be an interesting alternative.

 

If you want a quick summary of Swedens banking sector this may be helpful [https://www.swedishbankers.se/media/3854/competition-in-swedish-banking-sector.pdf]

 

Full disclosure I got these ideas from reading an interview with John Hempton at Bronte Capital so he deserves full credit for sniffing them out.

If interested in learning more about the culture of that bank and its potentially enduring edge:

A Blueprint for Better Banking

Svenska Handelsbanken and a proven model

for post-crash banking

by Niels Kroner

[ValuePadawan]

Thanks Cigarbutt I'll look into it!