Determinant portfolio: situation as of 01.09.2023

$28.88 billion. That's UBS's net profit in the second quarter of this year. However, this amount includes a one-off gain of... $28.93 billion, which reflects the gap between Credit Suisse's purchase price and its intrinsic value. UBS thus carried out an anthology hold-up, in broad daylight (but on the weekend), under the benevolent eyes of our authorities. At the same time, the banking giant achieved perfect icing on a somewhat failed cake., since the bank would realize — in a free and perfect market — a loss of 50 million. 

So that's how you easily amass money. The stock rose by a whopping 18% in August, while the Swiss stock market went into the red. In hindsight (we're always smarter afterward), it was obvious that you had to be in on the action. You still had to have all the necessary information. In this fool's game, where the dice are loaded in advance, only a handful of people knew all the ins and outs of this transaction.

If you are not part of a restricted club, you have to fight with your own weapons and it must be recognized that during this last month it was not an easy thing...

Monthly performance in CHF

While the MSCI Switzerland index fell sharply (-2.5%), the determining portfolio dropped a few more tenths (-2.9%). Unfortunately, the latter was unable to take advantage of the slight temporary weakness of the franc against the dollar, unlike the American index which held up relatively well, with a small drop (-0.8%). 

This is partly explained by the weakness of the yen, but also, and above all, by the very poor performance of the QVM strategy.

The strategies

In detail, here is the performance of the PF and each of its strategies:

Unlike the previous two months, the QVM strategy this time significantly dragged down the overall result. One stock in particular was particularly badly hit, which unfortunately sometimes happens. In recent months, we experienced the opposite situation, with one asset that particularly shone.

Even though in the long term this strategy has proven its effectiveness in various research and backtests, in the shorter term it can prove to be quite volatile episodically. In order to partially reduce these inconveniences, I will see in the future whether it is necessary to underweight it somewhat, by favoring another strategy. I am thinking in particular of Trading Auto Signal, which I have wanted to strengthen for some time now. The latter was also the only one to provide a positive result this last month, with 0.4%, thanks to the relative strength of the dollar against the Swiss franc.

The Blue Chips strategy, for its part, held up quite well, since it only dropped -0.3%. This is a correct result, given what happened on the market, particularly in Switzerland.. Finally, the ETFs managed in adaptive allocation, like the last few months, ended with a loss. It's a bit disappointing, but I remain confident for the future.

Year-to-date performance in CHF

This gives us a performance in CHF since the beginning of the year of 5.6% for the determining PF, with a volatility of 8%. It still remains behind the MSCI Switzerland (which is at 7.1%). It even remains quite far behind the S&P 500 (which shows a nice performance of 13%).

We are still below the expected profitability. This is partly due to the strength of the CHF against other currencies (+4.5% against the dollar and even +12% against the yen). The Swiss franc is currently behaving like a ball and chain tied to the feet of a convict. It should be noted, however, that the "Swissy" is not the only one responsible for this relative underperformance. Indeed, excluding the QVM strategy, the portfolio would have performed as well as the leading American index since the beginning of the year, which represents a more than adequate performance.

That said, there are some reasons for hope. First, the Swiss franc cannot strengthen indefinitely without provoking a reaction from the national bank. So far, the rate hike has certainly been successful, since it has helped to control theinflation, while allowing Swiss companies to buy foreign goods and services at affordable prices. But this policy is beginning to show its limits, because now it is the exporting firms, many of which are on Swiss soil, that are beginning to suffer from the strength of the franc. Exports fell by 6% in July alone.

On the other hand, concerning the QVM strategy, let us recall that it includes in particular in its assessment criteria the P/B ratio (price/book value). As I stipulate in my work, about this indicator:

The various studies carried out on the effectiveness of the price/book value ratio do indeed conclude that it is effective, but with caveats. While historically the P/B is among the most efficient ratios, it can suffer from long periods of ineffectiveness (...). A strategy based on this ratio is also very volatile.

It is therefore not surprising to see this strategy fluctuate and underperform occasionally. This should be seen as the price to pay for it to ensure nice gains over the long term. It is indeed these variations that allow us to continue to trade this type of stock at an attractive price.

Determinant portfolio (01.01.2023-31.08.2023)

Portfolio (2010-2022)

The portfolio will be updated very soon in the members section.