Author: Marius Schober


  • In my book The Value Dividend Strategy, which was published at the end of November 2002, I provided readers with two portfolios that at the time met the criteria of Value Dividend stocks. This article analyzes the performance of these portfolios after one year.

    Background

    On October 21, 2022, I screened the U.S. stock market against the criteria of The Value Dividend Strategy. As a result, I created two portfolios: one focused on value stocks that paid significantly high dividends, and one focused on value stocks that paid no dividends at all.

    In this performance review, we will evaluate the one-year performance of the two portfolios I created as of October 2022. Due to the publication date of my book, this performance review looks at the 1-year performance from October 21, 2022 through October 20, 2023. In the future, I will track and publish performance updates on an annual basis from January 1 through December 31. Therefore, as a subscriber, you can expect updated Value & Dividend portfolios on January 1st, 2024.

    At the time of creation, all stocks in the Value & Dividend portfolios had a low price-to-earnings ratio, high or no dividend payments, an Altman Z-score of >2.99, a Piotroski F-score of >6, and an equity-to-asset ratio of <0.5.

    Incidentally, in my book I emphasized that the value dividend strategy is particularly effective and yields the best returns when implemented toward the end of a recession. Keep in mind that this was not the case on October 21, 2022.

    The Dividend Portfolio

    The high dividend Value Dividend Strategy portfolio consisted of 14 stocks.

    The 1-year performance since inception of the portfolio is 17.31% excluding dividends paid.

    The average dividend yield of this portfolio at inception was 4.2%.

    The average performance was 17% with a standard deviation of 21%.

    The average dividend yield was approximately 4.19% with a standard deviation of 1.84%. This indicates a wide range of dividend yields among the companies, with a maximum yield of 8.98%.

    Hypothetically, if we’d only invested in the five best performing stocks, we could have returned 38% on undervalued value stocks.

    The question I’ll be answering in this publication through selected deep dives is how we can identify these winners early. If you haven’t already, please consider subscribing.

    The Non-Dividend Portfolio

    The non-dividend paying Value Dividend portfolio consisted of 21 stocks.

    The total 1-year performance since the portfolio’s inception is 15.04%.

    The Value Dividend portfolio, which pays no dividends, had an average performance of 15% with a standard deviation of 36%. This standard deviation is quite high as some stocks performed exceptionally well (100.70%) while others had large losses (-60.06%).

    Hypothetically, investing in the 5 best performing stocks would have resulted in a 64% gain – on low P/B value stocks!

    With non-dividend paying value stocks, the challenge is to weed out the bad performers while focusing on the high performers. That is what I will be focusing on in this newsletter. If you haven’t already, please consider subscribing.

    Distributions

    The Dividend Portfolio shows a more or less normally distributed performance curve, with most stocks clustered around moderate returns. This distribution suggests a relatively stable and less volatile investment landscape where gains are modest but more consistent.

    On the other hand, the non-dividend portfolio has an intriguingly skewed performance distribution, with returns spread over a wider range, including some significant outliers. This implies a higher risk/reward profile, with both significant upside potential and downside risk.

    Interestingly, the data shows that this higher volatility is positively correlated with lower price-to-book ratios, suggesting that undervaluation may be a catalyst for these extreme performances.

    Outpacing the Indices

    Let’s put those performances into perspective. Over the same period, the S&P 500 gained a respectable 10.75% and the Vanguard Value Index Fund ETF (VTV) lagged with a modest gain of 1.44%.

    In stark contrast, both Value Dividend Strategy portfolios delivered returns that significantly outperformed these benchmarks.

    1. The Dividend Portfolio outperformed the S&P 500 by 61% and the VTV Index by 1.100%.
    2. The non-dividend portfolio outperformed the S&P 500 by 40% and the VTV Index by 942%.

    This serves as a powerful assertion that the Value Dividend Strategy may be more than just a theoretical construct – it may be a roadmap for achieving superior returns with undervalued stocks.

    As a result, I will be constructing Value Dividend Strategy portfolios on January 1 of each year, including an annual performance review. If you haven’t already, please consider subscribing.


    If you want to learn more on how I discovered this strategy and how the portfolios were created, you can read my book online or order a copy from amazon.com.


    Legal Disclaimer

    The content provided in this newsletter is for informational purposes only. The information, analysis, and opinions expressed herein are solely those of Marius Schober and do not represent, reflect or express the views of any other person or entity.

    This newsletter does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and you should not treat any of the newsletter’s content as such. Marius Schober does not recommend that any securities, transactions, or investment strategies mentioned in this newsletter are suitable for any specific person.

    The information provided in this newsletter is obtained from sources believed to be reliable, but Marius Schober does not guarantee its completeness or accuracy, or warrant its completeness or accuracy. Readers are urged to consult with their own independent financial advisors with respect to any investment.

    All information and content in this newsletter are subject to change without notice. Prices, quotes, and other financial information may be out of date or inaccurate. Past performance is not indicative of future results. Investing in securities involves risks, including the potential loss of all amounts invested.

    Marius Schober does not accept any liability for any loss or damage which is incurred from you acting or not acting as a result of reading any of our publications. You acknowledge that you use the information we provide at your own risk.

    By subscribing to this newsletter, you acknowledge and agree to the terms of this disclaimer.

  • Is it okay to bomb and starve 1.000.000 children and many more civilians to find and kill 20.000 radicalized crazy Hamas terrorists?

    The answer is no. Never.

    Killing helpless, innocent civilians, women, children is ethically not justifiable – under no circumstance, ever.

    Neither in Ukraine, in Israel, nor in Palestine. Nowhere. Ever.

    The only correct position is pro civilians and anti terrorists.

    Anyone who celebrates the murders of civilians are pro terrorists. That applies to everyone regardless of country, religion, politics, or policies.

  • Europe, Act!

    Europe must pay attention now.

    First: As soon as Israel acts absolutely ruthlessly in Gaza, we will see massive violent protests (if not terrorist attacks) in Europe by integration failures from the Middle East and Maghreb.

    Integration failures are illegal migrants who have come to the EU (especially Sweden, Germany) since 2015, but have not integrated, but have been criminalized / radicalized in a parallel society.

    Second: The war in Israel will lead to another massive migrant crisis in Turkey and the EU. The capacity to take in more refugees is exhausted in most countries – especially Turkey and Germany.

    To make room for real war refugees, the EU must immediately launch a massive and consistent remigration for illegal and criminal immigrants and all rejected asylum applications.

    Third: In addition, Hamas could use war refugees to try to smuggle terrorists into the EU.

    The EU must immediately and without exception implement border controls and take strict measures to immediately detect and turn back radicalized Hamas terrorists at the border.

    These measures must be implemented within hours, not days.

  • PayPal Mafia

    The PayPal Mafia is the most fascinating phenomena of the entire history in business.

    A group of people – seemingly randomly – work on a startup, exit, and each founder and employee ends up (co-)founding companies which re-defined the entire internet as we know it.

    Tesla, SpaceX, Palantir, The Boring Company, Neuralink, OpenAI, FoundersFund (arguably Facebook), Affirm, Yammer, Sequoia Capital, YouTube, LinkedIn, Yelp, 500 Startups, Geni.com, and through acquisition X (formerly Twitter).

    Let’s look at the current valuation of each:

    1. Tesla: 795 Billion
    2. SpaceX: 140 Billion
    3. Palantir: 33 Billion
    4. The Boring Company: 5.5 Billion
    5. Neuralink: 5 Billion
    6. OpenAI: 80 Billion (est.)
    7. FoundersFund: 11 Billion (in assets)
    8. Affirm: 6.5 Billion
    9. Yammer: 1.2 Billion (acquired by Microsoft)
    10. Sequoia Capital 80 Billion (assets under management)
    11. YouTube: 1.6 Billion (acquired by Google; today’s valuation is estimated to be 180 Billion)
    12. LinkedIn: 26.2 Billion (acquired by Microsoft)
    13. Yelp: 2.9 Billion
    14. 500 Startups: 2.4 Billion (assets under managemet)
    15. Geni.com: >>100 Million (acquired by MyHeritage for indisclosed amount)
    16. X: 44 Billion (acquired by Elon Musk who holds as the largest shareholder 9.2% of the company)

    Who wants to have fun adding up these numbers?

  • Someone asked about an optimistic prediction about the future 10 years from now.

    As an e/acc optimist myself, here’s the ideal:

    • Human aligned AGI reached.
    • The world transforms into a utopia of efficiency.
    • AGI, synergizing perfectly with human ingenuity, catalyzes unprecedented innovation across sectors; amongst them unlimited free energy.
    • Economies skyrocket, with wealth equitably distributed, eliminating poverty and fostering global prosperity.
    • Individual creative and entrepreneurial endeavors flourish as mundane tasks are automated, unleashing human potential to its fullest.
    • The Law of One is recognized on a mass-scale, revealing the interconnectedness of all beings. Altruism and mutual support become the norm, reshaping socio-economic systems and ushering in a harmonious society and shared spiritual growth.
  • Yesterday I had a conversation with Christian Darnton. He approached me and asked whether I also felt that the entire feed on Twitter, or X as it is now called, became extremely low quality. Or in his words, whether it became a “garbage dump” that feels like “parasites trying to attack your brain”.

    It resonated with me as I felt the same. While I am spending more time on X, I also feel as if the time I spend on the platforms is less and less worth it. To a point where I should really consider whether I should even use it more than a few minutes each day.

    But why does it feel that the quality of the content on X feels mostly so low value?

    I believe we reached a point in content creation where people do not write, record videos or podcasts because they want to, but because they have to. They try to get engagement, get your attention to amass not only the number of followers, a stupid metric on a social platform, but also to participate in the new monetization programs X and closely thereafter TikTok introduced.

    The result?

    People smell the chance to get rich quick. They are seduced to earn 10k a month by posting memes or re-posting stupid content on X.

    X bribes people to chase money, fame. But as Christian noted, “it’s a rat race”. With all the way to get rich with attention (content), everyone should ask themselves the question: “How much value am I really adding to society?”.

    He continued: “I want to talk to interesting people. I love people that are interesting. I don’t care how much money you have. I’m interested in interesting people.”

    It is a valid point. Most attention on the internet is not used in. a productive way at all. It is at best a zero-sum game. Getting attention through controversies, charisma, or pure sexiness is easy. I understand, we live in an attention economy. But isn’t it a fair question to ask how many young people would be of so much more value to the world, when instead of becoming an influencer, they’d actually build a product, or they actually solved hard issues.

    Out of experience, Christian said that your time is limited and when you focus on content it takes a lot of time out of your day, including mental energy

    So without an economy of attention, how many more people would be valuable to the world, especially young people? Instead of creating just another podcast on productivity, how can we benefit humanity on a larger scale?

    I don’t want to badmouth the potential of social media and the internet. Instead, I want everyone to think about how we can design social platforms in a way that is net-positive.

    For me, I like essays. You write them because you have something to say, and you want to say it. You just write it. Without any intention of gaining fame or riches. There is no schedule. You don’t write it daily, not monthly. There is no target, no sequence, no goal. You write when you have not only the inspiration but also the urge to share it with the world – because if you didn’t, you wouldn’t sleep well.

    I think a great example for this is Paul Graham. Over the past 20 years or so, Paul Graham wrote essays because he feels he has to say something. Not because he set himself a goal for 500,000 followers on Twitter (Twitter didn’t even exist when he started writing his essays). Not because he wanted to get rich by doing so. He wrote because he felt he has something really valuable and unique to say. Over time, it became the most popular blog on startups, and as a byproduct he now has well over 1 Million followers on X.

    This is why I believe long-format content without a schedule is the healthiest form of content on the internet. This is not only true for essays or newsletters. Even YouTube videos: you only record and publish a video when feel that you really have something to say. Not to become famous or rich.

    For many, content creation is now a job. The opposite of what I believe to be a healthy form of content. Instead of working for traditional media, you are now working for an algorithm. The more content is mass-produced out of wrong incentives, the more time is wasted on the internet, the more human potential is destroyed.

    Again, the ideal is the Paul-Graham-Style: you post content when you feel you really have something to say about a certain topic, but you don’t just post it, you let 5 friends proof it, so you know it’s really worth the time of your reader, listener, or viewer.

    While there is a large market for podcasts and videos, I truly believe the basis for each spoken word should be a written word. When you really sit down and write, you think much more deeply about a certain topic. By prioritizing written words over spoken words, people will think much more deeply about what they have to say. They do more research, they proofread it, they ask other people for their opinions, they edit, and re-edit the essay, before it is finally published. The output is therefore always more valuable than an improvised conversation on a podcast.

    In podcast, it is the opposite, it is all freestyle. If a question is asked or a certain topic raised, you have to say something – within a second or two. The contrast is drastic.

    The remaining question is then: how can we create also meaningful and valuable discussions on the internet?

    When essays are the basis, then essays should be the basis for replies, discussions, and debates as well. If you disagree with a standpoint strongly enough, you sit down, and write yourself an essay or a short article, as a reply.

    X makes it too easy to reply “haha, you’re stupid” – which adds zero value to anything.

    By replying yourself with an essay, you think deeply about the topic. And if it’s not worth the time to write an essay, then maybe your opinion is not worth much to anyone at all.

    Reading and writing essays and books is – how Christian described it – “an antonym to the constant hedonism which is so prevalent on social media.”

  • Things are getting quieter around crypto.

    The laser eyes are gone, the price has stopped going straight up, JPEGs are fairly valued: worthless.

    I got very excited about Ethereum and Bitcoin around 2016. The more I researched the underlying blockchain technology, the more excited I became.

    Today, I barely touch crypto.

    But once you have understood the underlying technologies behind crypto, everything changes, and you can’t really “leave crypto behind”.

    You can’t leave it behind because you’ve understood the potential and the impact it’s going to have on the world, not just the financial system.

    What you can leave behind instead are all the cults, the scams, the hype, and the broken technologies. When you leave that shit behind, it gets very quiet.

    There aren’t many projects that survive the test of time – the test of real-world adaptation and use.

    As the attention in crypto slowly shifts to creating solutions instead of getting rich quick, we will see the true potential of crypto, DeFi and the blockchain realized.

    The time is ripe.

  • Yesterday, Mexico unveiled the mummies of two aliens during an official meeting of their congress. The two alien mummies were found in Peru and are believed to be over 1,000 years old. Since I’m a child, I’m very interested in aliens, UFOs, and the supernatural. The photos which have been published are one of the most exciting one’s I’ve seen for quite some time. Scientists of the Autonomous National University of Mexico found that over 30% of the specimens’ DNA was “unknown”.

    What makes be dumbfounded – however – are not the mummies themselves but the surrounding silence. I saw more memes on X than I’ve seen curious reporting on them. Shouldn’t we assume the alien mummies are real? Otherwise, what is the incentive for Mexico to fake them? Shouldn’t we at least probe their authenticity? The question I ask myself: Where did all our curiosity go? For me, nothing is more exciting than alien life. I really don’t get it.

  • Someone asked me what I think about the stability of the eurozone and where Europe is headed. Here is my answer:

    I think we are entering a very chaotic decade overall. Global power structures are changing rapidly towards a more multipolar world. The US is losing some relevance, OPEC+ is gaining power, China is in a massive housing bubble, Russia is cut off from the West. The problem with Europe is that we’re not just losing a little relevance, we seem to be losing almost all of our relevance. The EU and Germany are vassals of the United States. We have no pride, we have no self-confident foreign policy, we have no independent defense policy or defense capabilities.

    Germany’s deindustrialization will threaten the eurozone, since the euro is largely dependent on Germany’s economic performance and rating. If Germany doesn’t wake up to reality sooner rather than later, I don’t see how the euro can survive.

    Waking up means that Germany makes rigorous policy changes, from drastically reducing energy costs, to mediating peace in Ukraine, to massively reducing taxes and duties for individuals and businesses, to massively reducing red tape, to choosing the free market over a centrally planned green economy, and so on. If this does not happen, companies and their top performers will leave Germany for the United States and some for Central Asia.

    The ultimate problem is to get out of this terrible socialist situation that we have gotten ourselves into – especially Germany. Politicians now have to make decisions that are unpopular with many voters. Just as an example, I recently read that in Germany a regular full-time worker earns only 300€ more than if he were unemployed (of which he has to buy gas, lunch, etc.). The German Fleiß (diligence) that made Germany and the EU strong is actively discouraged by attractive unemployment benefits, high taxes, high tariffs, high energy costs, high inflation. There’s basically no environment for Fleiß anymore, rather we’ve created an encouragement to shut down your business and not work – or leave the country (and ultimately the continent).

    I’ve seen all of this coming since COVID-19 hit. It’s just shocking how everything is intensifying and nothing is happening to stop the downfall. I think we’re going to see very chaotic times in Europe, but out of chaos comes order. It might be wise to leave the EU for a while until everything collapses and then rebuild – economically and politically. With the collapse of the Euro, we may see strong independent currencies again, we may eventually see an adaptation of crypto, we may also see the Euro split into a North and South Euro. Competitiveness will probably improve to compete with the US and China. All of this will create opportunities for us as entrepreneurs. But right now we are seeing the fall, not the rise.

    By the way, as I’m looking for companies to buy, I’ve talked to many dozens of entrepreneurs lately. Now, I often start the first meeting by asking if he plans to leave Germany after successfully selling his business. With increasing regularity, the answer is yes. We’re not alone. Something has to be done.

    Overall, out of chaos comes order, and we as man must now be masculine, stand up, and (re)build.

  • Die deutsche Wirtschaft kollabiert in einem noch nie dagewesenen Tempo. Investoren haben sich dieser Tatsache noch nicht bewusst werden können. Sobald sie dies tun, könnte es zu einer massiven Kapitalflucht aus der Eurozone kommen.

    Diese Situation stellt eine ernsthafte Bedrohung für die Stabilität der Euro-Währung und der EU selbst dar. Wir haben das Problem selbst verschuldet. In den letzten zehn Jahren haben die deutschen Wähler mit überwältigender Mehrheit die derzeitige Politik sowohl auf Bundes- als auch auf Landesebene unterstützt und gewählt. Deutschland erntet im Wesentlichen, was es durch demokratische Entscheidungen gesät hat.

    Die Folgen einer Deindustrialisierung Deutschlands werden auf dem ganzen Kontinent zu spüren sein. Es entsteht ein perfekter Sturm, der nicht nur unser Land selbst betrifft, sondern auch ganz Europa ins Wanken bringen wird, da der Euro von der Wirtschaftsleistung und dem Rating Deutschlands abhängt. Deutschland ist nicht nur die größte Volkswirtschaft Europas, sondern zugleich auch sein wirtschaftliches Zentrum, das als größter Handelspartner und als Investor in vielen Ländern Europas die verschiedenen Volkswirtschaften miteinander verbindet.

    Die Zukunft Europas hängt vom hausgemachten Niedergang einer einst mächtigen Wirtschaftsmacht ab. Ich frage mich, warum die anderen europäischen Staaten, von Frankreich über Italien bis Spanien, nicht mehr Druck auf Deutschland ausüben.

    Irgendwann werden die Deutschen aufwachen und die Situation erkennen. Aber ich bin skeptisch, dass sich sofort etwas ändert. Wenn es in der Bevölkerung ein echtes Bedauern gäbe, würde sich das bei künftigen Wahlen zeigen. Der Niedergang des Landes wird sich wahrscheinlich fortsetzen, solange die öffentliche Verleugnung anhält.

    Irgendwann werden die Deutschen aufwachen und die Situation erkennen. Aber ich bin skeptisch, dass sich dies rasch ändern wird. Wenn es in der Bevölkerung ein echtes Bewusstsein für die Situation gäbe, würde sich dies bei künftigen Wahlen zeigen. Der Niedergang des Landes wird sich wahrscheinlich fortsetzen, solange die öffentliche Verdrängung anhält.