Klaus Stefan Müller invested heavily in SAP and Wirecard, accurately grasping the upward trend of German technology stocks, and the annual return of the portfolio reached 38%.
In March 2017, German veteran investor Klaus Stefan Müller once again delivered an impressive annual report card with his forward-looking stock selection logic and prudent position management. In the context of the continued fermentation of global growth stock style, Müller accurately invested in German technology stocks, SAP and Wirecard, and successfully captured the structural market of the growth track, so that the active growth portfolio he managed recorded an annualized return of 38% in 2016, far exceeding the average level of the German stock index during the same period (DAX rose by about 6.9% throughout the year).
Looking back at 2016, the German stock market was affected by multiple uncertainties such as the Brexit referendum, the US election, and the risk of the eurozone banking system, and the overall trend was volatile. However, in Müller’s view, under the macro noise, German technology companies are experiencing a “fundamental transition from localization to globalization of profit models and from traditional licensing to subscription systems”, among which the enterprise software leader SAP and the rising financial technology company Wirecard are the most representative.
Müller began to gradually increase his position in SAP in the first quarter of 2016, and raised its allocation ratio to a core position in the middle of the year. His investment logic is clear: SAP’s share price rose by 28% in 2016, thanks to strong North American order growth and the quarterly performance of its cloud business that exceeded expectations, becoming one of the best performing technology stocks in the DAX index.
Compared with traditional blue chips, Müller’s layout of Wirecard is more forward-looking. He significantly increased his holdings in the stock in the second quarter of 2016, believing that “Wirecard is a pioneer in the overseas expansion of European financial technology models, and its global payment network and risk control capabilities are replicable and expandable.” Supported by strong financial reports, Wirecard’s stock price rose by nearly 80% in 2016, becoming a star company in the German technology sector.
Investment strategy highlights: technology growth + system defense
At the execution level, Müller did not blindly pursue the growth theme, but adopted a combination strategy of “growth allocation + system hedging”:
Use German Bunds and Euro Notes as volatility hedges;
The upper limit of a single technology stock position should not exceed 15%, and the portfolio should be moderately diversified;
Dynamically adjust the weights between growth stocks and defensive consumer sectors to reduce downside risk.
This strategy not only seized the main technology opportunities, but also ensured that the overall drawdown of the portfolio was always kept within 4% amid rising global political uncertainty in the second half of 2016.
In an interview with Handelsblatt, Klaus Stefan Müller said: “German technology companies are moving away from ‘engineering thinking’ and gradually moving towards platform-based, globalized and high-profit service-oriented business models. In the next five years, the valuation system of the German capital market must also re-evaluate the growth quality of these companies.”
The successful bets on SAP and Wirecard not only once again verified Müller’s leading capabilities in judging industry trends and discovering corporate value, but also provided German local investors with a new investment paradigm of “technological growth + macro defense”.
In 2017, Müller said he will continue to focus on the potential stocks in German medium-sized technology companies, especially in the fields of industrial automation, cybersecurity and intelligent transportation. He believes: “German technology is not only a manufacturing powerhouse in the past, but also the value center of the future digital economy.”
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