Investment Strategy – Distinctive Features
Success on the stock market is reflected in above-average returns. An investment strategy that conforms to the market can only deliver an average return. In order to positively differentiate oneself, one has to do key things differently from other investors. From our experience, profit maximisation with a high risk is therefore a short-sighted approach. Over the past 35 years DJE Group has proven that better results are achievable over the long-term by purposely avoiding high risks. This requires a constant watchful eye and our proven investment strategy, in order to objectively judge stock market events.
Independence in fund management and wealth management allows for decisions to be made in the interest of clients
To be independent has several meanings for us. On the one hand, it is the independence from a bank or major financial group and corresponding sales and revenue targets. We benefit from the performance of our portfolios, not from transaction costs. It however also means to be free from the constraints and restrictions of a benchmark.
Independent research can find investment opportunities in any market situation
Our buy side research serves only the unbiased decision making process. There are no constraints or stipulations since the research is not intended for sale. Moreover, the analysts are free to generate ideas without restrictions in terms of market capitalisation, countries or sectors. Connections between the different markets and sectors can be more easily recognised.
"Follow the trend and do the opposite to what the others do!"
At first glance this seems like a contradiction in terms. What this means is that one must follow the trend as long as the markets are developing in a positive direction. The challenge is to recognise when to act against the mass belief and sell. On the other hand, the deepest depression often offers the best buying opportunities.
It is essential to discipline oneself and not to deviate from given guidelines — even against one's own sentiment — and to act strictly on the results of analysis. For example, during the spring of 2000, DJE Group sold high-tech stocks and invested more in defensive stocks, even though the prevailing opinion saw an increase in these growth stocks. In this way, positive results were achieved even during the crisis years of 2000 and 2001, when clients of other asset managers had to suffer significant losses.
Active timing of market exposure via cash positions avoids risk
The flexible control of cash positions and the use of derivative hedging instruments can minimise sharp price fluctuations. A basis for this is to observe short-term mood swings in the market. Our fast decision making process assists in seizing opportunities or avoiding losses. This is the reason why DJE Group has usually been successful during market downturns.
Counter-cyclical decisions and unconventional ideas
We like to decide differently, compared to the majority of investors, and we have been operating successfully in this fashion since 1974. When over-optimism prevails, we become sceptical. Therefore, we maintain a unique database with sentiment indicators. Located far away from the financial centres, DJE was able to better evaluate the long-term macro-economic developments over the past decade and to recognise important trends long before other investors discovered them.
Value oriented approach and our own valuation models
Before buying in a stock, we create valuation models, in order to be able to make our own substantiated and comprehensible decisions. DJE Group does not rely on third party information. We have one of the most extensive in-house research archives on individual stocks. True to the FMM-Methodology, value indicators that point to a healthy balance sheet and low debt of a company are ranked very highly.
We always have a conservative view on earnings trends. Generally most investors tend to pay too much for growth stocks, which is why in the long-term our value oriented approach has turned out to be the better option.
Loss limitation is more important than maximising profits
We first consider the risk of loss before we look at profit opportunities. This means, we identify the dangers before we evaluate potential opportunities and pursue an "absolute return" way of thinking. Every investor knows that losses require a disproportional profit growth in order to offset them — a 50% loss requires a compensatory profit of 100% in order to be offset. Furthermore, we prefer stocks that are below book value or for which a compensation offer is expected which would limit the downward risks.
Concentrating on our core competencies
In Germany we have one of the largest bank-independent research teams, which primarily focuses on investment in single stocks and bonds. Intransparent, expensive structured products are usually not used. Allocations to illiquid investments are also not made, in order to be able to react to changing market conditions at any time.
Continuity in every respect
At DJE Group, continuity is not only reflected by the proven investment process, but also by the way we look after our customers and employees. Thus we can keep staff turnover to a minimum and retain valuable know-how in-house. A pro-cyclical "hire and fire" mentality does not exist at DJE Group. This raises the satisfaction of our employees and gives us the time to focus on the essentials.