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Copenhagen stock fund that beats 95% of peers ignores CEO talk, research
[OSLO] Reading brokerage research and meeting chief executive officers are a waste of time for this fund manager.
Both are unlikely to provide any useful information to beat the market, according to Kurt Kara, head of value equities at Copenhagen-based Maj Invest.
"The best research is the one you generate internally," Mr Kara said. "We want to create our own mindset, logic and reasoning."
For the Maj Invest Value Aktier fund, that philosophy has paid off in a 16 per cent return on average in the past five years. That's better than 95 per cent of its peers, according to data compiled by Bloomberg.
Mr Kara and his team members, Ulrik Jensen and Rasmus Quist Pedersen, use three steps in their investment process. The first is a scoring system of 20,000 lines of code that Mr Kara programmed himself. It looks at 6,000 to 7,000 stocks globally, scoring them on about 150 metrics based on fundamentals and valuation. What comes out on top is then culled based on the probability of accounting fraud, internal rate of return and the efficiency of the CEO. The final step is making a decision to invest.
"We combine our knowledge with the machine's knowledge," said Mr Kara, who oversees US$5.5 billion. "That's a better approach than just filtering stocks using screens and just buying cheaply because we're value investors."
The fund, which started in 2005, holds 25 to 35 stocks to give it enough diversification, according to Mr Kara, who previously worked at Danske Bank. The biggest holdings are MTU Aero Engines AG, Taiwan Semiconductor Manufacturing Co, and General Motors Co, which the fund bought three to four months ago.
"General Motors is still very undervalued and the antithesis of Tesla," he said. "And they have a female CEO, which is quite rare. If you can make it as a CEO, ie as a woman, when Caucasian males are over represented as CEOs and in boardrooms etc..., it's probably because you are doing a very good job."
As money has piled into the so-called disruptive tech companies, Mr Kara right now sees opportunity in the "hated" stocks, that are perceived as being "covered by dust", such as railway and trading companies. The fund doesn't hold Apple Inc, Alphabet Inc, Facebook, Inc or Amazon.com, Inc, mainly due to overvaluation.
"The biggest risk right now is related to the disruptive stocks," he said. "People have put too much of a price tag on these stocks and bitcoin as well. Bitcoin isn't an isolated phenomenon. It's happening at the same time as disruptive technology companies' share prices go through the roof."