The start of 2020 turned out to be a major setback for value-based equity investors. After approximately four months of positive development and catching up with other investment styles, this turnaround came both as a surprise and to a considerable extent. One of the main drivers was the spread of the Corona virus in China. We often observe such recurring phenomena: bad news come out, investors rashly evaluate them and (over-)react hastily. And yes – at first glance, there seem to be numerous reasons to want to minimize risks and leave the stock market. In the medium- to long term, however, the effects are oftentimes much less extreme than initially feared. As we consistently state: investing is primarily about the development of the company’s future cash flows, whereby short term results rarely have a lasting effect on the company’s development in the coming years or decades. It is precisely that exaggerated extrapolation of individual developments into the future that contribute to the fact that value based strategies work at all.

In addition to the Corona virus, quite a few popular tech-companies have shown themselves rather independent of market developments and have reached new highs day by day. This in turn leads the expectations for their fundamental development to be bigger and bigger with each passing day, making us question the likelihood of how much potential there still is for upside surprises – or even if current expectations can be fulfilled.

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