Discovering hidden values

Why do you refer to the work of many of your colleagues as "conventional", so distancing yourself from them?

Most investment fund strategies are laid down by investment committees with a top-down approach. In other words, they start from a forecast of the development of those economies in which they intend investing. The aim is to find sectors which can be expected to undergo dynamic development during the next 6 to 24 months.

But that sounds good, doesn't it?

Yes, it does. As an approach it does not sound bad. But it is doomed to fail from the outset because the underlying forecasts are mostly inaccurate, as our testing of more than 5,400 forecasts form a period of 35 years has shown. As a serious-minded advisor you do not use data which do not yet exist - instead you make use of facts and verifiable information.

And why do such strategies not work?

If the conditions on which the conventional investment strategy is based are false, then how is it to succeed at all? Only if it is lucky. Or in periods in which special sectors or regions experience a particular boom. The chance of really outperforming the market average by this conventional route is extremely low. Particularly if you follow the opinions of popular analysts.

Why is that?

When most analysts or market players have a good opinion of an equity, then mostly they are also holding it. Yet if they - and then those who believe in it - hold this equity, who is to buy it? There is no real price potential left. These equities are anything other than hidden assets.

By the way - why are you called the "pearl fisher" among asset managers?

Let me explain it. Conventional stock management is like collecting lovely artificial pearls: they appear to be the real thing, yet they are actually nothing special. So the pleasure does not last long, and they are actually worthless.  

"We always make our decisions for the company and not for the stock." 
- Frank Lingohr -

And what is your method?

You can only achieve above-average investment results if you invest unconventionally at the right time and go against general opinion. That means we always reach our decision in favour of the company rather than the share. That is why business managers understand the "CHICCO" system best.

So you use the "value investment" method?

Of course, Warren Buffet has also had a considerable effect on me. I, too, started with strategies which Warren Buffet himself later termed somewhat deprecatingly as a bit of a cigarette stub. Value in the traditional sense is a static magnitude. Value is only worthwhile if it is accompanied by long-term growth. Therefore orientation to growth and management qualities is especially important.

What do you mean a bit of cigarette stub?

When you find a cigarette stub on the pavement and light it up, you have a single last puff; although it tastes dreadful, it is always worthwhile because it cost nothing. For a long time the same also counted for equities: however poor the sector or management - if you could buy the share at less than liquidation value, the deal was worthwhile. But Warren Buffet also changed his approach.

In what way?

Warren Buffet himself later coined the saying: value and growth are joined at the hip. So we link the two, use the latest technology to analyse corporate data and carry on developing it. This is where "CHICCO" comes in.

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