Answers to your questions
update week 41 2024
It’s unusual that I have only one small news item from a list of 25 companies, not counting the holdings.
Starting next week, things will pick up again with new figures. This week, we’re focusing on the survey and your comments and questions.
Company news
The only noteworthy news this week is that River Capital has increased its stake in Cake Box to 7%. Previously, River Capital made a takeover bid for Cake Box, but the board immediately rejected it as too low, and rightly so.
Since then, River Capital has been steadily and patiently increasing its stake. The offer was lower than what they’re paying now. Will there be a new bid, and if so, will it be reasonable?
Articles this week
On Tuesday, the article 'Our Portfolio as a Company' was published. It offers a different perspective on our portfolio of value stocks, compared to the Magnificent 7 and the S&P 500.
Results Survey
Everything below is not only from the English newsletter, but also the Dutch version Smart Capital, which I have been writing since 2014 when my previous newsletter merged with Smart Capital.
Some things may seem odd because of this, but I want to include everything, to be 100% transparent.
Some Statistics
Women are in the minority: only 6% of respondents are female. Or perhaps they simply don’t enjoy filling out surveys as much.
74% of readers are older than me (44 years), and only 6% are younger than 34.
You're here mainly for company updates, followed by new ideas and solid investments.
At a greater distance came emotional support during tough market times and learning new things.
You get your financial information from newsletters (like Smart Capital/Valuing Dutchman), newspapers/magazines, YouTube, and Twitter/X.
Smart Capital / Valuing Dutchman was discovered through:
searches
referrals from family or friends
longtime reader - can’t remember anymore
book 'Double Your Money in Five Years’ (Book I wrote in 2019 in Dutch)
It’s remarkable that searches took the number 1 spot.
I’m very grateful for positions 2 and 3, as they show that my work is appreciated! I’d like to use this moment to make a request: referrals to Valuing Dutchman are highly valued. Our reader base could use some growth.
It’s great to see that the book has also attracted some new readers. I’m working on an additional chapter for the book: '5 Years Later.' I don’t have a set deadline yet.
Your questions and comments
The survey was, of course, anonymous. If you asked a question or want to clarify a comment that wasn’t discussed here, feel free to email me at sam@valuingdutchman.com.
Unfortunately, the reply function via Substack hasn’t worked properly in recent weeks, so not all responses reached me. For now, please manually update the reply address to sam@valuingdutchman.com until this issue is resolved. Sorry for the inconvenience.
One frequent comment was about honesty and transparency.
honest and clear presentation and follow-up
honest about mistakes
the good and the bad are mentioned, no fake good-news show
openness and honesty are always very refreshing and build trust
honest and self-critical where necessary
…
That means a lot to me. It’s not always easy, and from a marketing perspective, it may not always be the best choice, but I follow Warren Buffett’s saying: 'You can spend a lifetime building a reputation and destroy it in five minutes.'
Enough praise for myself, let’s move on to the comments and questions.
I just hope the results will start to pick up. After 3 years, I’m now at a very modest, almost negligible, small profit. I started around mid-2021, and the outbreak of the Ukraine war didn’t help. It remains emotionally challenging, especially while ETFs have had three fantastic years. Still, I’m trying to stick to the strategy.
The same goes for me, and I won’t shy away from that. This is the longest period I’ve ever experienced with such modest results. Still, I’m convinced that we have a strong selection of undervalued stocks and that we are on the verge of a trend reversal.
That’s why earlier this year, I took the bold step of launching the 'Doubler Portfolio.'
The next comment came in various forms. I’ve chosen the most detailed one to respond to.:
A bit more focus outside of individual stocks, like allocation, your thoughts on the market, trends, new insights, and what you’ve recently learned (I assume you’re still learning, even from mistakes). I always found your openness and honesty very refreshing and trust-building, but I’m seeing less of that lately. It feels a bit less personal than before—back then, it felt more like a small community and 'our little newsletter.' Maybe you’re aiming for a broader audience now, I don’t know. Personally, I’d be willing to pay double if we could bring back that approach.
You’re right, I missed that personal touch too. The focus shifted solely to stocks, partly due to the extra workload that landed on my plate.
You’ve probably noticed that since September, there’s been more attention given to background information in the weekly updates. I’ll keep doing this, but from now on, they’ll be on Thursdays instead of Fridays.
Do you have any questions, comments, or want to know my opinion on something? Feel free to ask. You can use the comment function on the website or the chat, but I must admit, I still work best through email.
It’s great to read that some of you would be willing to pay double if that personal touch returns, but that won’t be necessary. I want to keep things personal.
Our investment style doesn’t appeal to the masses, but to achieve different results than the crowd, you have to do things differently.
I’d rather focus on a loyal and engaged audience than on large numbers.
But to be honest, the audience could grow a bit. So, I’ll have to be a little more commercial from time to time.
Between October 2023 and April 2024, when BeursMagazine readers enjoyed their six months free, I discovered that living without incoming cash flow and relying only on investments is possible but not pleasant. In the long run, this can affect your investment decisions.
A price increase isn’t planned yet; I’d like to first grow the number of subscribers.
However, due to inflation, a price increase can’t be avoided in the long term—the price has been unchanged for more than ten years.
Existing subscribers will keep their current price as long as they remain customers. Any price increase will only apply to new subscribers.
In the past, there was more focus on allocation, division into 'chess pieces,' and the balance between value and holdings based on age or investment horizon. Now, it seems to be solely about individual stocks, without much attention to the composition and structure of the portfolio.
I was very proud of using the 'chess pieces' as a benchmark for the stocks. However, I’ve let that go. This is an important part of the extra chapter I’m working on, so I’ll leave you waiting a bit longer on that.
I will update the previous piece on this topic and put it back on the website, so the vision regarding the weighting between holdings and the individual portfolio is clear again. However, some other things on the website need to be adjusted and improved first. I’ve noticed that available certain information isn’t easy to find.
Another common comment was: 'I enjoy learning new things, and I sometimes miss that now.'
I must admit, I didn’t focus specifically on that before; I simply shared my experiences and opinions. I hope to bring that back with the Thursday section. But again, feel free to email me with what you’re specifically looking for. If it’s within my reach, I’ll include it in the writing schedule.
There was also a request for more. More content with regular patterns, more articles...
This is a tricky one. First and foremost, I’m an investor, not a publisher. In the newsletter world, it’s well-known that you should spend about 80% of your time on marketing and 20% on your product. As an investor, I can’t handle that.
Many of those articles with regular patterns also serve as marketing, and I need to approach things more commercially. So, if you share your favorites with me, I’ll try to include them on Tuesdays.
One interesting suggestion was to occasionally discuss a company I’ve reviewed but didn’t recommend, explaining why. That way, everyone can learn from it.
In most cases, the reason comes down to price, but I’ll keep this suggestion in mind for when the outcome is more interesting.
Further elaborating on valuations / which discount rate was used.
I thought I was already doing this, particularly by clearly stating which valuation method I use, such as DCF, EPV, reproduction value, or multiples. A discounted cash flow (DCF) isn’t always the most suitable method.
When I do a DCF valuation, I usually provide my growth estimate and the discount rate, as these are the two most important factors. You can then decide whether to apply them to free cash flow or earnings.
As for the discount rate, I typically use between 10% and 15%, depending on the risks I see. Often, I simply use 12%, my required return.
What I want to make clear: every valuation is an opinion, not a fact. It’s always based on assumptions and estimates. I combine these into a single number, but it should be a range, like between €10 and €12, instead of exactly €11.
As an investor, it’s better to be roughly right than precisely wrong. The direction and magnitude matter more than the exact valuation.
In recent years, I’ve found that there’s been too much focus on (too?) cheap companies, which isn’t necessarily wrong, but often there’s a reason something is cheap. Today, I’m willing to pay a bit more for a company that is (consistently) growing and has solid prospects, without having to deal with assumptions like 'if this' and 'if that.' A steadily growing dividend can be a sign of this.
I remember you once mentioned that the automotive sector isn’t your favorite industry, yet there are two stocks in the portfolio (Kamux and Stellantis) that haven’t delivered so far.
There were also comments about focusing on MOAT stocks and ETFs. For those unfamiliar with the term MOAT: these are companies with exceptional competitive advantages, allowing them to sell their products or services more easily or charge higher prices.
I can be clear about ETFs: you won’t find them here. Not that I’m against the product, but why would I choose the market average? If I want to invest passively, I’d opt for holdings that have been beating the market for decades.
An ETF means settling for the average, and that’s not what I want. They may have performed better in recent years, but over my 20-year career, even with this recent weak period, I’ve still averaged a compounded return of about 11% per year. If something represents the average, you can do better, and that’s what I aim for.
I understand that people want diversification. In that case, make sure you’re following real experts in their field, not marketing gurus who try to cover everything at once. If you want to invest in ETFs, listen to Tim Nijsmans, Yoran Brondesma, or Pieter Slegers.
MOAT stocks are what the question refers to. The problem is that everyone is willing to pay more for these quality stocks. This is an overfished pond, which drives up prices.
Pieter is a friend, and I can see he’s doing great work, but his success has also sparked a wave of newsletters that either parrot the same ideas or go too far in their search.
I wonder how 'MOAT' or 'quality' is defined by many today. It often seems like straws are being grasped to label something as quality. There’s an assumption that everything will remain the same, but my experience shows that true MOAT companies are rare. There are few Coca-Colas that have kept growing for decades.
The norm is that companies are successful temporarily—sometimes for years—until competitive pressure lowers margins. Or something technological happens, consumer behavior changes or a political decision works against them.
Many of the MOAT stocks being praised today will only be temporarily successful.
True quality and companies with exceptional competitive advantages are rare. And when they are predictable, they are never cheap—at best, fairly priced. This usually happens during a market downturn, and not today.
In today’s market environment, I prefer companies where the price already accounts for all the negative scenarios, and where the chances of a positive surprise are higher than a disappointment. The downside: it requires patience, until sentiment and rationality return.
Stellantis is a good example of this. After a strong profit, the stock has fallen back, and today we can buy it for less than our original purchase. The only reason I’m still making a profit is because of the generous dividend I’ve received.
A lot can and will go wrong, but at the price we paid, we face little risk, and any positive surprise delivers a solid return. I accept the unattractiveness of the tough automotive sector as part of the deal.
Some practical matters
There were also a few comments and concerns about existing matters.
For example, there was a fear that the chat would replace emails. That’s absolutely not the case. Emails and the website will remain the most important.
The chat is meant as an extra for those who want to engage further, not only with me but also with each other.
If you don’t want to participate in the chat, that’s perfectly fine. You won’t miss anything. If something interesting does come up, I can always include it in the Thursday email.
The survey showed that there’s relatively little interest in this extra feature, but we’re going to give it a try for a few months.
Also, know that if you don’t participate in the chat, no one will know you’re a subscriber to Smart Capital. Your username only becomes visible once you actively post something.
A portal where you could easily find the companies being followed, along with references to previous discussions.
This is still available today, though without prices and purchase data, which were included before. You can find it under the 'Selection' tab on the website. Each stock is listed by name, and when you click on it, you get a list of all discussions about that stock.
This is also an important reason for keeping the financial follow-ups separate now so that everything remains clear and organized for each stock.
Online Portfolio in Google Sheets
A suggestion was to create an online portfolio in Google Sheets. Currently, there is the selection list in PDF format, which is sent out every Thursday.
A PDF seemed more practical to me via email than a link to an online file, but I will see if I can offer both options.
Average purchase prices in the Doubler Portfolio
The monthly overview indeed doesn’t include a column with the average purchase prices. That’s because the Portfolio Performance software I use converts these prices to euros, which can cause confusion with other currencies.
Additionally, the 'Purchase Value' and 'Market Value' columns are always shown in the base currency, euro.
If the Google Sheets option becomes available, I’ll also create a tab for all transactions to ensure full transparency.
Contact me
That was quite a lot of questions and comments. But of course, you don’t have to wait until I send out another survey to make suggestions or ask questions.
Feel free to send an email to sam@valuingdutchman.com. I’ll be happy to answer your questions.