This is the editorial of our monthly Quant Value Investment Newsletter published on 2023-12-05. Sign up here to get it in your inbox the first Tuesday of every month.

More information about the newsletter can be found here: This is how we select ideas for the Quant Value investment newsletter

This month I would like to talk to you about REGRET, how it can lead to bad decision making, and what you can do about it.

But first the portfolio updates.

Portfolio Changes

Europe – Buy One – Hold Two

One new recommendation this month as the index is above its 200-day simple moving average.

The company is a VERY undervalued Italian manufacturer of motor vehicle parts trading at Price to Earnings ratio of 4.5, Price to Free Cash Flow of 3.8, EV to EBIT of 4.1, EV to Free Cash Flow of 9.1 and Price to Book of 0.7.

Hold – Two

Continue to hold Naturhouse Health S.A. +2.1% (recommended December 2021) and Shoe Zone plc +16.2% (recommended December 2022) as they still meet the portfolio’s selection criteria.

Braemar suspension lifted

If you did not manage to sell Braemar Plc in July because its listing was suspended, the company is trading again so you can now sell it at a price of GBP2.82. The current price is 21% higher than the price of GBP2.33 when we recommended the company be sold in July.

North America – Sell One

No new recommendation this month as the companies we found elsewhere in the world fit the newsletter’s investment strategy a lot better.

Stop Loss – Sell

Sell DATA Communications Management Corp. at a loss of 1.5%

Asia – Buy Three – Sell Two – Hold Two

Three new recommendations this month as the Japanese index is well above its 200-day simple moving average .

The first is a growing Japanese construction and design of building equipment company trading at Price to Earnings ratio of 8.7, Price to Free Cash Flow of 6.5, EV to EBIT of 5.1, EV to Free Cash Flow of 5.8, Price to Book of 1.1 and it pays a dividend of 3.3%.

The second is a fast-growing Japan-based company engaged in purchasing and sales of pharmaceuticals trading at Price to Earnings ratio of 10.8, Price to Free Cash Flow of 11.8, EV to EBIT of 5.0, EV to Free Cash Flow of 8.7, Price to Book of 1.4 with a dividend yield of 1.6%.

The third and last company is a very undervalued Japanese manufacturer and seller of hydraulic shock absorbers and hydraulic equipment. It is trading at an attractive Price to Earnings ratio of 4.6, Price to Free Cash Flow of 5.3, EV to EBIT of 5.4, EV to Free Cash Flow of 6.8, Price to Book of 0.6 and pays a dividend of 4.4%.

Sell One Hold Two

Sell Artnature Inc. at a profit of +24.7% as it no longer meets the portfolio’s selection criteria.

Continue to hold Exedy Corporation +65.4% (recommended December 2021) and Nojima Corporation +8.0% (recommended December 2022) as they still meet the portfolio’s selection criteria.

Stop Loss

Sell Fuji Corporation for a nice profit of 27.6%

Crash Portfolio – Sell One

No new Crash Portfolio ideas as most markets have recovered.

To date the 15 Crash Portfolio ideas, recommended between August 2022 and May 2023, are up an average of 26.0%!

Sell One

Vinx Corp. received a takeover offer at JPY2020. As the current price of JPY2015 is only 0.2% below the takeover offer, rather than taking the offer (and waiting for your money) I suggest that you sell now for a nice profit of 51.8% in less than a year!

Looking Back and Forward: The Role of Regret and Fear in Investment Choices

This month I want to talk to you about something we have all experienced at some point in our investment journey – regret over past decisions and how it impacts our future decisions.

Wishing we could turn back the clock

We have all been there, wishing we could turn back the clock to seize a missed opportunity or steer clear of a bad decision.

This regret can sting, especially when we think about how different things could have been.

Imagine you are a lottery player. You did not renew your ticket, only to see your usual numbers win the jackpot of $2 million, I am sure you have experienced something similar with a stock you missed out on. I have, a few times.

Positive and negative regret

Regret can be a teacher. But it can also cause us to avoid making decisions that have led to pain in the past.

You might have noticed a common tendency we have of selling winning stocks for a fast profit while holding on to the losing investments “to get our money back”.

We are nervous about a winner turning loser, or hopeful that a loser could turn around.

Buying more of a losing investment

And here's another strange but common practice: we often pour more money into stocks that are underperforming rather than the ones that are doing well.

Regret aversion plays a part here. If we didn't invest heavily in a stock that's performing well, we might regret not having bought more initially. To avoid facing the mistake, we might not add more to that winning position, even though we believe it'll continue to do well.

Regret aversion isn't just about feelings. It's also because we compare what happened to what might've happened.

Imagine a bull market in some asset, crypto for example. If you did not invest you may feel regret but if all your neighbours celebrate their crypto windfalls the regret hits harder.

As you have most likely also realised regret aversion is a strong emotion, and it has a big influence on our investment decisions!

How to move beyond regret

As these feelings are normal and automatic if we don’t change something they will for ever

Our emotions are like wild winds that can cloud our judgement. This means we need to establish strong systems to prevent regret from holding us back.

What we truly require is a system that swiftly eliminates our losing investments and allows our successful ones to thrive.

Here are some of the prominent measures I suggest:

• Using the trailing stop loss system to quickly cut losses
• Letting successful investments continue based on your investment strategy
• Refraining from investing when the markets are on a downward spiral

By swiftly cutting losses, the pain from those losses diminishes, making it less distressing and thus more likely for you to invest or stick to your investment plan with confidence.

In addition, by maintaining small investment positions, you limit potential losses and make it simpler to remain invested. And by refraining from investing during market downturns, you can reduce emotional stress, making it easier for you to stay invested and start investing again when the market bounces back.

This is precisely what our newsletter accomplishes for you. It avoids investing during market downturns, keeps positions petite, enforces a strict trailing stop loss system, and only holds onto investments if they align with its quality value and momentum criteria over the long term.

I won't sugarcoat it: adhering to these rules might slightly reduce your returns. However, their purpose is to ensure that you persist and adhere to your investment strategy in the long run, which is where the real benefit lies.

When you manage to keep your emotions in check, it significantly bolsters your odds of achieving exceptional long-term investment returns.

If you have any questions or thoughts, remember that I'm here to support you on your investment journey.

Wishing you prosperous investing!

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