We invest when a security’s fair value is higher than its market price. We invest in undervalued equities, countries, sectors, funds, or fixed-income securities. In our funds we hold value, growth and turnaround securities that are trading at a substantial discount to their fair value. Where necessary, we hedge against price shocks. With our systematic methodology we achieve significantly higher returns over the longer term compared to other investment techniques.
Financial markets have seen marked improvements since August 2011, mostly unnoticed by most investors, and even though the economy has not improved all that much.
Where do we go from here?
The future is uncertain. It is volatile. And cannot be planned to the last detail. It is subject to reciprocal effects.
Forecasters are often expected to provide very detailed estimates of future events. Where will the DAX be on 31 December 2013? However, in actual fact, real life is much like a growing tree, where one branch gives way to the next. The Fukushima flood disaster, for example, was such an unforeseen event, which gave rise to interconnected and unexpected effects, e.g. on the German energy policy.
There are a number of different branches for the year 2013:
As finance portfolio managers, we have to manage these multi-layered uncertainties. Yes, the world is complex, but we still have to act. This type of multi-branch development gives rise to three cornerstones in investment terms:
Warren Buffett, the most successful investor ever, who built up a fortune worth more than $40 billion through smart investing and donated the majority to good causes. We use his investment style as orientation. His motto is: “Price is what you pay, value is what you get”.
Benjamin Graham, Warren Buffett's mentor, who in 1934 laid the foundation for financial analysis and value investing in his book "Security Analysis." Scientific studies and practical experience have shown that his investment style still functions extremely well today. His comments on the manic-depressive “Mr. Market” are just as valid today as they were then.
We take a long-term approach in our models for valuing companies, looking back 10 years and forward 10 years. On this basis, we invest if we identify a substantial undervaluation versus the past 10-year average. Our current portfolios are nearly 40% undervalued and therefore offer long-term protection. If the assumptions of our models are sufficiently cautious enough, we can earn long-term returns of over 10% with our stock picking.