Thorsten Polleit: “Many people share my concern about our monetary system and wonder how to make the right investment decisions. Since the financial crisis, I have begun working with a value investor because history shows that a long-term owner-oriented investment strategy is best suited to protect and increase wealth over time”.
Why is investing so difficult?
||As a bond portfolio manager, you cannot achieve your yield targets anymore.|
|•||As a private investor, you do not receive an adequate return on your savings.|
|•||You worry about the stability of our financial system.|
||With stocks you feel exposed to the ups and downs of the market and fear permanent losses.|
|•||You have no confidence in investment advisors.|
We offer a solution to these problems.
However, before we begin, we need to tell you something important. We do not possess a crystal ball to predict share prices, interest rates, or exchange rates in the short term, i.e. in the next weeks or months. We simply accept short-term price fluctuations. Because of this, our solution is only suitable for investors who can tolerate temporary price drops and do not equate price volatility with risk.
We focus on selecting a few outstanding companies that we deem capable of increasing their per share value over a long time. With these investments, we can best protect your wealth and achieve long-term above average returns.
This is how successful investors have built wealth historically. In the period from 1973 to 1982, a period of high inflation and recession, Warren Buffet, for example, achieved an average return of 34.7% p.a., while the S&P 500 went up by only 8.6% p.a. – less than the average annual rate of inflation.
History also teaches us that long-term investment success, measured over at least ten years, does not result from luck or good feeling. It is the product of a focused effort and the application of sound principles. For us, this means that we spend a long time analysing the quality of a company before we invest.
Deep, intensive research
Matthias Riechert: “The challenge in value investing is the implementation. My job is to identify and evaluate great businesses. Good candidates are rare because they must possess certain qualities to be able to withstand competitive pressures for as long as possible. They must also be run by a manager who thinks and acts like an owner and who understands capital allocation. Therefore, I spend most of my time reading, visiting companies, trade fairs, and conferences, as well as communicating with managers, industry specialists, and other investors. In this way, I collect information allowing me to assess and compare investment candidates”.
We only invest in a company if (1) we find evidence for all those elements that make a business great and if (2) the stock market offers the company at a price that is sufficiently below our estimated value. The latter is the simple principle of value investing. Applying this principle reduces our risk and makes us relaxed in dealing with market price fluctuations.
To allow you to stay calm and relaxed as well, we put a lot of effort in writing our semi-annual letters. Your investment is not just an ISIN Code with a quoted price. It consists of shares in real companies. We, therefore, explain in detail which companies we have bought for you and how the investments have panned out.
As part of our research, we have become customers of several of our companies. We have, for example, recently opened private and business bank accounts with Metro Bank to test their product offerings. With every new branch opening, we feel thrilled and proud to be a (part-) owner. You should feel the same because with the mind-set of an owner you can enjoy a healthy, long-term relationship with your investment. We have stored all our letters on our website, and you can download them here.
Two large insurance companies have supported our idea and have invested with us since inception. In addition, our families, friends, acquaintances, private and institutional investors and, of course, we personally invest in our P&R REAL VALUE fund. We trust that our investors invest with us long-term (perhaps until the next generation). This allows us to enjoy the wonderful effect of compound interest, which is underestimated by so many (often young) investors.
Partnering with us as an investor only makes sense if you understand how we invest and if you seek a long-term solution. Only then can we achieve a stability that allows us to buy when others have to sell. This results in a virtuous cycle benefiting all stakeholders.
To learn more, please read our Questions and Answers.