Good Investing Talks - How to best invest in Germany? With Roger Peeters of pfp-ADVISORY

Episode Date: March 22, 2022

Roger Peeters is an outspoken expert for the German stock market. With the DWS Concept Platow, he is running a successful Germany fund. Our video was recorded before the Russian invasion of Ukraine. So, we don't facto the recent developments in.

This episode of Good Investing Talks is supported by Interactive Brokers. If you're ever looking for a broker, Interactive Brokers is the place to go. I personally use their service because I think they have a great selection of stocks and markets you can access. They have super fair prices and a great tracking system to track your performance. If you want to try out the offer of Interactive Brokers and support my channel, please click on the link below. There you will be directed to Interactive Brokers and can get an idea, what they offer for you. I really like their tool and it's a high recommendation by me. And now, enjoy the video. Hello audience. Hello, Roche. It's great to have you here today.

Roche is a good German investor. You're in Frankfurt at the moment. Exactly. It's great to have you here. Let's start with taking a look back and you have this 15 years of history of running a fund successfully. I are also happy to show the child. part of the fund for the people who want to get an idea, how he performs in its inception. And in this chart, you see many break-ins, and we are currently in a phase where we also have a certain stock market break-in with the Ukraine crisis and inflation varies. Maybe let's take a step back, and I want to ask you, in the last 15 years as a fund manager, and if you remember your chart, what crises have you experienced then?

what kind of crisis were they, maybe you can say some of the crises you've lived through. I can do. And once again, hello, nice to meet you again, Tillman. And to answer your question, I think I would even start before the fund has been launched, because I'm active in the stock market since almost a quarter of a century or so roughly 25 years. And as you mentioned, in this time, you experience a lot. You see good times and bad times in terms of increasing or decreasing stock prices or stock markets. And of course, I have my experience is affected by the bigger crises.

I would underline maybe three or four. I would focus first on the burst of the bubble at the beginning of the century, which is something people currently remember a lot because the situation could be similar. We had also a bubble in the tech sector like we had maybe in the US 2 in 2020, 2020, and we had a long beer market, which we did not have since then.

We had a beer market over a few years, which was really, I would say, a dramatic experience for many investors. Similar experience I had also in, the financial crises, 2008, 2009. It was not that long. You only had to survive a beer market of, I would say, one and a half a year. But it was also affected with, I would say, some strong decreases all over the market. But also in the recent past, we had some, I would say, stress tests which we have experienced.

One was really, both have been really short, I would say. The one is at the end of 2018, the stock market has plunged only in a few weeks, I would say the fourth quarter of 2018, stock market has been developed very negative. This is relevant for the current situation, maybe also, because the reason in this days has been fear of increasing interest rates. something we also discuss, currently we have discussed it a little bit less since we had turned the focus on Ukraine. And the last, I would say, negative experience I made was, of course, the Corona crisis in February and March 2020, where the stock market has also plunged in four weeks, roughly 30, 35%.

And what I can assume to all this, I would say, negative experience, negative in terms of decreasing prices, normally they end. And you never know the end during this time. So for my view, from my view, point of view, is this important for any investor of a retail or institutional investor that you keep in mind that beer markets are not the end of the world. So it's part of the stock market that prices can also decrease. And during this days, this does not feel good, but it's part of the game and you have to, you have to experience it. That's all. But maybe this answers a little bit your question. Yeah. One crisis you even like

didn't mention was the Greece crisis, the debt crisis. It is not like this question wasn't about collecting all the crisis you've experienced but it's interesting like in hindsight that it doesn't matter that much anymore um how does this how have this crisis shaped your impact or shaped or impacted your style of investing is there anything you've changed substantially after the crisis no no i have to say i'm doing this stuff together with my my partner and fellow christoph Christopher Frank, and we are really focused on a clear investment scheme that is long only. So that we have, I would say, clearly impacts of the markets. We do not try to neutralize the market effects.

We do not do any market timing. So it's more or less automatically that you have in such days, like I have mentioned, decreasing net. asset value in the fund too. What we are doing is focused more on the companies. We are doing a clear bottom-up approach. We are really strong. We believe us in the system where we focus on the companies and the quality of the stocks and the companies.

And of course, in such days like you mentioned in 2011 or even in 2018, We have mentioned all this negative phases. Also, good companies are affected and also cheap stock can become even more cheaper. But our approach is not to optimize the market timing. I think it would cost more than we would get as return. And the only one thing I can tell you that I took as a lesson, that was also part of your question, is that you learn to stay calm, even in crisis situations. As you mentioned, you added 2011, we could add a lot of more small situation.

For example, in the year 2016, we had several experiences. We had the Brexit votum in UK. We had the Trump election in USA. We had warriors about the Italian fiscal situation. and all these situations led to short-term planches of the market. And you cannot be safe on this. You have to experience that markets increase and decrease. And you should not, from my perspective,

you should not focus on your investment style on these short-term developments. To answer your question, no, I think we learned to stay calm, but we didn't change the investment systems. For sure, we did not do this because we think a good investment system should not be changed after a bull or beer market. Have you shifted to certain stocks more, like more quality after the crisis or was it already in your approach? I would say to argue a little bit with our investment style in general, we are we have a flexible system so we are not pure growth investors or pure value investors we try to put both worlds together both approaches and if i look to the past for example the fund had for example a stronger value approach at the end of the zero decade so in the year 2007 to 2008 to 2009, we had more value concentration, so-called value, because this is not a crystal clear.

And what is the value stock and what is the worst of we know this. And during the years, I would say from 2015, 2020, 21, we had clearly a growth focus in our strategy. But this was not decided top down. This is always derived when we judge all the single stocks in a bottom-up approach is really important to underline this. So the allocation is not the decision. The allocation is a result of a lot of single decisions on several stocks. And to answer your question, obviously you have some changes in a flexible system. There are times where you should be more invested in growth stocks and there are times where you should more invested in value stocks.

There are times where you should invest more in bigger stocks or from bigger companies. And there are times where small caps are more interesting. And we are focused and we are not flexible on the core market. We just only look at the German market because we are local players. We have some local knowledge. and we think it's important to have a clear field where you act. But within this field, of course, we are flexible. And yes, these proportions change.

So maybe outline a bit why you're just focusing on Germany and also on companies that take a lot of the revenue in Germany. Yeah, I would say yes to the first and no to the second. Let me please argue, okay. Our focus is not necessary. We work also with a quantitative system. We could also use, I would say, for the U.S. market or for the French market or for the Greece market, whatever. Whenever you have solid figures to judge, we could do this also for stocks from other countries.

But in Germany, we can also add our local expertise. You have to know, Christoph and me, both of us, we have, each of us, I would say, a three-digit number each year of meetings with companies in this market. So we have a really clear local access to the management board, to the deciders in the company. I would say in Germany you have roughly about 800 listed stocks. And I would say during the last decades, we have met almost all of almost all, companies. There are lots of companies which are at the stock market since 20, 25 years, and we have seen several management changing. So this experience and this knowledge, we would not have the same way like when we would judge Vietnamese or Chinese stocks,

for example. This is an, I would say, an advantage we want to use in addition to the quantitative system. The second question was that you say we focus on companies which make a lot of their revenues and their business in Germany. And I would say this is not the case. I was saying we have really a few decades of strong globalization during the last decades. And what we have seen is there are no more really typical Germany companies. A few yes, more or less. Yes, but most are clearly European companies, most and very many are really global companies. Just to give you an example, a prominent example, if you look on Hadidas and Puma, which are both headquartered in Herzoggen-Ora, which is really a small German city,

and the headquarters are close to each other. You know the history, but they're doing almost all their revenues aboard Germany. they do almost all the production award Germany. It's not a German company, neither Ardidas nor Fuma. And you have this with a very lot of companies. You see this currently because many companies have some problems with that supply change. And then you can see how dependent they are on how it works in China or Taiwan or whatever. And this is a globalized world.

And in Germany, you have the headquarters, but often not more. You normally have really a strong international impact. For the last example, Deutsche Telecom, you would assume this is really a German company. But I think the U.S. business is really very relevant for their figures and also for the development of the share price. So I do not see this as local companies, but we are happy to have the possibility to meet these companies, the leaders here, and to have a strong access to the companies. For these reasons, we focus on Germany, and it's also, maybe I can add this a question of credibility. I think if I tell to our investors that we have some knowledge on the German market, they would say clearly yes.

If I say, okay, tomorrow we launch also a Vietnamese fund. They would say, what can you do better in Vietnam than other guys do for a reason? You mentioned these meetings you have with CEOs, board members and experts around the firms. How are they usually structured? what are the topics you discuss there what interests you in this discussions is there usual or is it also very dependent on the company yes it is dependent of course but there are i would say some regular ways how to meet i have to underline during the last two years this has been developed a little bit different like our whole life we have switched much more to the digital world like we discussed here in a video conference we We did it also a lot during the last two years with companies. And many conferences which are often organized by banks, but also are organized by other firms which are focused on this, have been set up in a digital way during the last two years.

So very often companies have presented on the screen and you have the possibility to ask in a Verde conference or in the chat function like we have here. And even the capital market days, normally a listed company does one time a year, a capital market day where they invite analysts and investors to have a closer look on the environment and see the buildings and so on. This has switched to digital CMDs over the last two years. But now this is switching again, I would say, assume that we have in 2022 much more. physical meetings. Last week, for example, I have to part on a on a conference, analog conference in Hamburg, where I have met during two days, I would say roughly 20 board members of different companies. They had one-on-one meetings in a hotel room

where we have discussed. This was another question of your, of you, what is the content of such meetings. This is clearly dependent on the investors approach, I would say, and also on the company's approach. We, Christopher, and me, we are clearly focused on the figures. We are, we like to judge by figures, and we do only invest if the figures convince us. So we discuss a little bit more on figures than maybe than others, I would assume. Other investors, I would say, discretionary, they judge more the business models and the future potential of the business scheme. And so maybe this is more, a little bit more on the products. But of course, we try to put everything in also in our conversations. We also have to judge the market situation

of the company. I mentioned current situation, which is really often part of the discussion in 2020 and also during the last year already is inflation and the supply change. I would say this is crystal clear the most urgent topic for many companies. How do they handle increasing costs and can they transport this to their customers? Are they strong enough to rise their prices? And this is something you can go into deeper into the details with the companies. normally. Interesting.

You also mentioned that you have the network outside of the companies where you not only talk to the board but also get background information outside. How have you built this network? When you are in the job since 20 years, of course, you meet a lot of people and you are in touch and it's just, I would say it's a normal consequence of doing this professional business since more than 20 years. I'm not that young like you and even

other anymore. So I have in contrast the advantage to have a lot of I would say experience in this market and then you, I would say more or less by nature you build up a network. But to bring this

into the wide dimension, I would say it is more important to judge the companies than the network i like the network and i i work with uh knowledge outside but we crystal clear focus on on judging companies and shares and the network i would say helps but not more if there's a non-german investor approaching you to ask you questions about the german stock market are there any key topics you have to explain them because they're not sure

naturally don't understand them because Germany is different for investors. Yeah, yeah. Interesting question. I think on the one side is what I mentioned. These are not, I would say, local players. So if you invest in Siemens, for example, or buyers, these are international companies where you have, I would say, a broad field where these companies act. But, of course, some things on some issues are typical Germany, also for the German stock market. A typical thing I discuss with potential or existing investors which are not in Germany, if they invest into a product of the German market, they have to make more or less some compromises because there are a few industries we do not have. We do not have an oil industry. We do not have

any gold mining. We do not have several things, several industries, but not too much. much. And I have to say in these days where people are not that happy to invest in coal and oil and all this stuff, it's not a disadvantage that Germany has no oil companies, for example. But this is in contrast to other European, I would say, nations. And what I also have to say, that for this reason, I think you can do a single solution for the German market. The stock market is broad enough that you have, I would say, most industries. Not all, as I mentioned, but a lot of. This is much easier than when you judge really small nations. Do not want to blame someone about just, for example, Portugal or Greece or Poland are smaller, and then you have not that broad range of different companies like you have in

in Germany. What you also have as a disadvantage in Germany, you should know, the share of the listed companies in contrast to the economic strength of the nation is, I would say, improvable. For example, in contrast, if you compare it with Scandinavia, with Switzerland or with UK, they have much more listed companies. And I'm a little bit jealous on this, for example, the Swiss guys they really have lots of listed companies for a small company but maybe this will change in future we will see what companies would you love to invest in if they were listed that are currently not listed if there are some names come to you you're asking for companies which we are missing which are not

listed yeah yet I cannot say this because it's not that we are dependent on business model, but I can give you maybe another example. We had, for example, in the first seven or eight years, the fund was launched, we have been invested, I think, nonstop in WMF, which is a manufacturer of several kitchen aids and coffee machines and so on. And the company has been delisted, has been bought by private equity, which is not that wear in Germany over the last 10 years and this was something we would have also to remain invested in these days but just as an example normally I would say the market is

broad enough and I do not really miss something if you think about a German stock market wirecard is also a topic that has been come yeah it's it's hard to find the right words for wire card is the strange topic of the recent German stock market history. If a foreign investor would approach you and ask you for areas in the German stock market, he or she should stay away, what areas would you say that are just like not that of high of quality, like not comparing to to wirecard, but you have this kind of big fraud case still in mind?

Yeah. Okay. I have to underline we have never been invested in buyer card. maybe I should mention this in advance. But nevertheless, of course, I have had always a view on Viacart, especially in this day when the share price of Wirecard really has skyrocketed. And you have sometimes to explain to investors why you are not invested in this company. Why were you not invested in Wirecard?

What were you? I would say a lot of questions have been waste in these days. not been answered yet. I think the easy answer is also that the share price of wirecard was not really cheap but also I would say the financial reporting was a little bit I would say somewhat strange and the answers and the way how they acted with critics was never ever so I would say convincing and you have to know the part in germany via card has been discussed since the first time i would say they have been listed via a shell company in 2005 or 2006 i think 2005 and the first time they have been really discussed hard was 2008 so this was long before it really i would say

bursted and to come back to your question i would answer more in general than in this single case i I think fraud happens not only in Germany, but in many countries. You have also a lot of fraud discussions on bigger companies also in the U.S., in the UK, in China. So we should not say this is a dedicated German problem, from my point of view, also not an Austrian problem too. But what I would say in general is just an easy role. You should only invest in companies you really understand. You have to understand what they are. doing and how they earn their money and this is i would say something where you could have had some

problems in wire cards to answer in this example and you see this in many four big fraud case if you remember 20 years ago in the u.s and one a very very good example i would say even bigger than wirecard if you have asked me 20 years ago if i could explain what n1 is really doing i could not explain it to you. And if you ask me, how is my account exactly earning this money and these margins four times higher than the other companies, it's always hard to understand. So it's helpful. No one can say, no investor can say that he and she is always sure on Ford.

But it's helpful to understand the business, to try to understand. And of course, the second protection is diversification in the portfolio. If you go all in in one stock, this is always dangerous. To follow up on this, which areas of the investing universe you have, are you don't understand, which are the areas where you say it's interesting businesses, but we can't understand them? Yeah, okay. I have to say, Christopher and me, we both are generalists. So if we go in deep details on, I would say, the chemical business, renewable business,

or even the consumer business, normally I would say some experts like saleside analysts always have a better knowledge on the single industry. So our approach is not that we say we have the best knowledge on a single sector. But our need is that the business can be explained, as I mentioned, and also that the success of the company can be seen also already in the figures. We are not doing any, we see business, we are not invest in companies which start to earn in five or six years their money. So what we are doing, we invest more or less in all sectors, but some, I would say, are difficult.

I give you an example, the typical biotech companies starts to generate sales in five or six years. And as an investor who's focused on, I would say, solid earnings and retaining earnings, this is not typical. So we are more or less, I would say, agnostic to all industries. We look on everything, but if it's not visible by the figures, it's not visible by the figures, we do not invest. And I would say the business model should be comprehensive and should be to understand in each industry. And this is also, I would say, a need for investor relations to explain it to, not only to an expert, but also to, I would say, a silly investor like me, what is this company doing and how is this company earning? Of course, sometimes people, I would say, flee in technical discussions and say, okay, this is really, I would say, an ankle technical approach, which we have as the only one in the market.

But then we want to see as a result, the earnings from this advantage. Interesting. You have these two fund mandates. One is called Plato and one is called Middlestrand. I'd just like name the short topics that are in the names of the funds. What is your definition of Middlestand, and why is this mandate different or how is this mandate different to the other mandate you have? Yeah, we have no clear, not that we have a clear, I would say, a franchise that we say, okay, everything below one billion market cap is a small cap and everything above one billion, just for example, this would be too technical.

But indeed, the key difference between both products is that the second fund, which we have launched, much. later is focusing more on smaller companies, also due to the fact that the fund is much smaller and is more flexible in this. I would say we have the same strategy. We have the same market, both funds invest only in German companies, and we use the same investment scheme. But we focus a little bit more on the smaller companies in the one fund and a little bit more on the bigger and mid-sized in the other one. And of course, there was an overlay of, I would say, 50, 60 percent is changing.

And, but I would say the PFP ACTSA middle stand is a little bit, I would say, even more focused on the same strategy. It's more concentrated also. And so you have the impact a little bit stronger, positive and negative impacts, for example, of the developments of the companies. But normally both funds base on the same or have the same basement as our knowledge on the German market. And what is your definition of middle stand and then for the smaller fund or? As I mentioned, we do not have, there are companies which generate. sales of more than a billion euro and still are, I would say, more or less middle stand because their whole attitude to the capital markets is a little bit more, I would say, a middle stand focus.

They are often, middle stand is also something, an expression which you use more often if the founders and the families are almost. more family owned. I do not have a clear binary judgment on this. I say this is black and white and this is middle stand and this is large cap. Middle stand, but by nature are more smaller companies, are more often dominated by families, as I mentioned, and are also more often focused company with this dedicated business and not a conglomerate.

So you mentioned this orientation to the capital market. Maybe this is also a thing. It might be interesting if you want to understand the German capital market. Is it like in Midlstrand's companies that have a huge family ownership? Is there a strong capital market orientation or are they more like you have to build trust over time to get access and they aren't like really into presenting to the capital market that much? I think yes and no. I think indeed in contrast to the huge international companies, which are mostly part of the Ducks in Germany, I would say many Middlestand companies are not that familiar with the capital market. And they act a little bit more cautious also in the whole communication and in their attitude to the financial market.

But I have to say these companies which are listed off the middle stand are already the more progressive companies which have at least a minor positive attitude. They would not be listed if this is not the case. And I think in Germany in general, I would say we have still to build up a little bit more capital market culture. I already mentioned the difference to Scandinavia, UK, Switzerland, US, of course. But I think this is developing. If I remember 20 years ago, what I have seen from communication, what I have seen as standards, how to communicate with investors with the capital markets, I think we have a good development overall. I'm not that negative on this.

But what I see is sometimes they are a little bit more cautious. but this is not a disadvantage in general because sometimes this goes along with, I would say, an attitude that the owners and the managers do not want to impress the capital markets over the next six months, but they want to develop the company over the next five or ten years. And as an investor, as I would say fundamental investor, I like this attitude. I do not want the companies to beat the expectation each quarter by nature. This is more or less, I would say, a game which you see sometimes also on Wall Street, but also in Germany, which is not that fundamental as I like it. What we want to have is that people really develop the companies. And these middle stand companies, I would say, especially if they are partly owned by the founder of families,

this you see it often this approach and i like it maybe let's take a look at your portfolio now and you sent me a chart i'm showing here that's listing your top 10 positions um but maybe zoom out a bit how many positions do you usually have in your funds yeah in the divas concept plato we normally i would say a broad range between 35 and 60 companies currently we have 54 companies companies in the in the portfolio, in the PFP Act in Middlestand Premium, we act more concentrated with normally less than 30 stocks in the in the fund. And what you have shown now is the top 10 holdings at the end of the year 2021, which I would say had at this day less than 40% of the fund.

which is in comparison with our past, I would say it was less. Normally, I would say the top 10 holdings have roughly 45, up to 50% of the portfolio. Normally we like to have a clear invest. But the situation was a little bit different. However, this is what you refer to. How do you go about sizing? Why don't you decide, like, for instance, a store has 4% and, a saver or 2G energy you also don't have in the top 10 list or like save it is in the top 10 list are sized less what are the factors that contribute to this maybe I'll explain a little bit more about our investment scheme we will be really as I mentioned work with a with a quantitative approach which my partner has developed more than 25 years ago so it's a really a long enduring system where we focus really on a lot of financial

figures and ratios and we make a screening on the whole German market and then the screening filters down to, I would say, investable number of companies where we have to judge then in detail and to have to look on the details. And I would say we work with a scoring system. It's a binary system that you say, okay, fits the score or fits not. the best score at all is zero is that you have no negative breach in the system. And if you have this score from zero, this would lead, say, vertical at least, to a high proportion in the fund, because you say, okay, this fits to our systems almost perfectly right now.

And of course, this is the weights in the fund are, result of our personal, I would say, view on the stock and the existing chances. But of course, it's also, I would say, development is also a consequence of the market development. If you have, for example, I would say, 3% of the fund in a company. And then the company and the share price develop very good and doubles. and the west is steady state. Ceteris parre was, then the share of the fund is almost doubled up to 6%. And this is something which is also reflected.

What we do not do is an automatic rebelling thing, like some funds do. They say, okay, we have 50 positions each of 2%. And whenever something develops good, we cut it and something develops better. We bought instead. This is what we are not doing. So what you see, the rates are also consequences of the share price developments. Is there also a thematic focus in the way you build your fund? Like you have, if you go through this top 10 list, there's store, there's Vervio,

there's also like some energy names in your documents, or there's also like the digitization as a topic that's coming up with Adesso or Bechel. or also mentioned machine. Is it just like your system picks these names and they are generated by this? Or is it like that you also have their interesting topics where we might see more growth as usual in Germany

so they become a... Hey, Tillman here. I'm sure you're curious about the answer to this question. But this answer is exclusive to the members of my community Good Investing Plus. Good Investing Plus is a place where we help each other to get better as investor day by day. If you are an ambitious, long-term-oriented investor that likes to share,

please apply for Good Investing Plus. Just go to good minusinvesting.net slash plus. You can also find this link into show notes. I'm waiting for your application. And without further ado, let's go back to the conversation. Maybe from the list of this top 10 positions, it sometimes feels a bit boring to look at your portfolio because it are like boring planable companies like why are there no stocks of like

for instance e-commerce we had this interview with home 24 recently or other like global fashion group or gaming companies in the space that might be also attractive investments yeah to bring a little bit more light in our approach to to underline what we are what we like and what we do not like in contrast to other stock pickers i would say because some are looking really on the the best situation that they look at the very beginning of a company development or even in a turnaround situation where some fund managers focus on company which have become very cheap and now everything is turning into the better situation this is what we are

clearly not doing say in a simple words we invest in companies where we would enjoy that the next days are very similar to the last days so all these companies are already in a good situation we do not invest in loss-making companies for example and we do not invest in companies with stressed balance sheets with overloads of debt for example this is some these are things we do not do And we do not invest into story, I would say story companies, if you understand what I mean. This is, the company has not yet a business model, but they have an idea. You have sometimes this on the stock market where the company shifts their business extremely. Like, for example, it is a boring real estate holding and it makes a decision to change everything.

and now they want to sell all the assets and now they want to invest in Bitcoin or in mining, infrastructure, whatever. This would be clearly something we would not like. We want to have really continuous business. We want to understand the business of the last years. And we think that these companies are stable enough that they can continue also. Maybe this cuts a few opportunities, maybe, but it clearly cuts also the risks. And at the end, it's a game where you have to look on both. So a hell of fresh or something wouldn't be part of your portfolio because like the

criteria don't fit. Currently or so far the criteria have not fit. Yes, this is maybe an example. I would not say for the future. Lots of things can change, of course. But with regards to the current situation, I would say in this concrete example, the valuation is not as we like to and also the track record of the past. If the company will reach a situation that they really have earned for several years in a sustainable year, margin this is different so i cannot tell it for the future as i mentioned we are open-minded to

everything but uh in the past we have never invested in this company yet to better understand it's so like a valuation approach where you just like focus on the unit economics and say if a certain growth happens this unit economics turns to very positive earnings isn't like a thing you do it's more like you look at the quantitative factors of the existing earnings uh Yes, yes, you're right. But I have to add, we are not a value fund. We have in our investment team also a lot of growth figures. But we want to see the growth in the existing business,

which is a little bit different to the, I would say, to the story stocks where I said everything will skyrocket over the next years, but not yet in the past. And I would say what we are looking for is really a comfortable compromise between value and growth. So you have a sustainable solid balance sheet and not that many risks on, I would say high devs, lots of goodwill and so on and so on what you can have. But in combination with a steady growth, the more important, it has not been a strong growth, but a steady growth over many years, this is important for us. And overall, we want to have also that the stocks are, I would not say, cheap, but affordable.

For example, there was also one name on this investment strategy. is called a garb, a growth at reasonable price. This is a little bit like we are acting. I think at the end, we want to, we say it is not, has to be cheap, but the price has to be justified. To follow up, last question on this point. So does growth have to be profitable? Because sometimes if you grow up, you have to invest a certain amount.

But then you see it's OK, if it's growing, we see this scale effect. hitting in at a certain point yeah yeah this is a good question normally this is a trail off you often have in if you if you want a company is exactly what many companies have to decide shall I invest in marketing and then I have less margin and so on and so I would say if I look in the consequence at what we have invested it is fine that companies invest a lot in growth and have less margins, but at least the business should remain profitable. This is what we think. If companies really invest that much that they are creating

huge losses, this is not our, I would say, typical investors. Great. Maybe let's take a look at two titles for the end let's start with Stowe. What is the company doing and why is it interesting for you as an investment? Yeah, it's a construction supplier. Stowe is

I would say they make systems of building coatings so they gain some profit on all this discussion on reducing energy costs in the

in the housing sector and they distribute also on the building of new of new buildings but also on existing buildings and what we have seen our decision is as i mentioned not story driven is not top down on the sector but what you see in this stock is that you have really a solid and enduring and uh and uh and uh and uh and uh I would say steady growth over the last years. I would say the company is growing internally, not via M&A. And all this is, I would say, combined it also with, I would say, valuation which is not that high. You currently pay two times the price, I have a price book ratio of around two,

which is, I would say, not that high also in comparison the market cap or the EV with the sales as far as cheap in comparison just to give you two examples on the valuation. So I would say it's a moderate price for a company with a good market position and it's a market

which where you can understand that the company will be able to increase of also their earnings and their sales over the next years. Of course, they have also, like other companies, there's some worries on their costs and their supply chain. But I would say this is something you have as normal currently. But if you would ask me to say what is currently SWAT analyzes, I would also underline this.

But to come back to your question, I would say it's a typical example which fits to our investment. system and maybe let's also take a look at bechtler why is it interesting for you as an investment and what is the company doing yeah is an IT company or which one of the leading in europe i would say was more than six billion revenues a year and we have it the company or the share in the portfolio since 10 years or something like this as a core position and is similar situation You have a lot of digital, you could also argue top down because you have a lot of digital in the companies, also in the public sector, which is also servicing the public sector in a strong intention. And what we see is also since, I would say since 10th year, a really steady growth with, I would say, organically between 5% or 10% each year.

Last year I think seven percent organic growth, mostly organic growth, and also improving margins over the years and really a business where you can see or when you can assume that it will not end this year because the perspective is still there. And the valuation overall, I would say it's not cheap anymore. If you just look on how the stock has developed over the last 10 years, it can't be. cheap in all figures, but I would say it's still on a level where you have also some chance, which we see. So typical for us is not a company which develops in a skywalking, a changing environment, but it's, I would say, in a constant way. This is something we like. Very interesting. Both companies have founder family. behind them maybe it's just me picking them out but our founder families or people who just like

stay behind the company and hold them for the long term an important factor in your investment decision i would say it's not an important factor in our investment decision but it happens really often and it's it's always also interesting for us that we see our systems often leads to to companies with a strong stake of families. And obviously, these companies are led in a way like we like it, not the short-term effect, not the short-term consequence, which you see sometimes in, and I would say, management-linked companies where the management want to optimize its bonus

for short-term development. but what we like more is a sustainable development. And if I have a look on our portfolio, not only now, but also on the last years, I would say we had always in this proportional high footprint of these companies. Yes, it's typical, it's nothing we want to reach or we have a look on, but I would say it happens often. For the end of our interview, is there anything you want to add about investing in Germany, your approach, something general? No, what I can say to any investor, to come back to your question, really in the beginning, I think a good advice, if I may give an advice, is always to look on long-term developments.

because by nature, human's nature is to discuss, oh, what will happen in Ukraine or what will happen with the interest rate. And in the morning, you look in a newspaper or an online screen and you are affected by the current situation, which can change very, very fast. And I was thinking investing is something different. Investing is something you should do really for many years or for decades. You should not invest into a strategy, for example, like our. was within a horizon of less than five or ten years. Stock markets do not work in this, I would say, volatile. Of course, there are traders in the market which like it,

but this is trading. This is not investing. Investing, and I think this is also an approach of your channel, is something where you should have really a long horizon. This is what I would say as a general hint or advice. and thank you very much for your insights and your wisdom on the german stock market thank you and also for the audience thank you good time staying here bye bye as in every video also here is the disclaimer you can find a link to the disclaimer below in the show notes the disclaimer says

always do your own work what we're doing here is no recommendation and no advice so please always do your own work thank you very much