Let’s open a dedicated thread for Inderes’ failures and criticism. Praising is forbidden in this thread. Perhaps we’ll learn from the mistakes made together. Bring it on! 
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{“content”:“Some people seem to criticize you without really understanding their own arguments. Plus, there are a lot of impatient people around… they can’t handle even a small dip, because they want “everything for me here and now” in terms of returns.\n\nSo, I’m criticizing those who criticize you based on the above.”}
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And the very first reply in the thread was translated into a big compliment 
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#neverforget verkkis #howtobuystocks? Miten ostaa osakkeita? - Inderes
PS. Still feels bad man…
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I was a premium user for a year, but I canceled my subscription because I thought there was too much content on the free side already. I promise I’ll buy a subscription again if my investments go well this year
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Jesse could do videos sometimes. He has such a soothing voice. #fridaylightening
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I’ve tipped my colleague Petri over the years on Okmetic, Comptel, Revenio, Stonesoft, etc. In return, Petri’s tips have landed Pihlajalinna and Nexstim in my own portfolio at the time 
(disclaimer: PetriK has otherwise done well)
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Pihlajalinna. I was also in this, from €14.82 → €11.48. After Q1, I dumped the shares, with TJ Aaltonen’s interview being the final straw. Should have reacted earlier, there were bad signs since Aktan’s departure.
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After yesterday, I just have to mention Enersense. I haven’t studied the company, but based on other comments, the Inderes report was already considered too optimistic at the time of the offering. I haven’t read the earnings report, but yesterday’s stock reaction tells quite a bit. I’m eagerly awaiting the updated report and recommendation.
Edit: I should check the reports from the last few weeks to make sure this hasn’t already been done..
The risks in GF Money’s investment case weren’t well enough considered, and your target price for the stock was sky-high. The introduction video was certainly cheerful, as GF Money couldn’t answer anything and simply passed all questions to Inderes. Well, I guess you made some tenner in profit from this.
In the Orava case, not all signs of a pyramid scheme were seen, where Excel money was pouring into the balance sheet with great gusto, and insiders ran rampant, immediately dumping their shares as soon as they could exchange properties for stocks. Someone probably knew that the properties might not be as valuable as implied, and it was better to take the cash. 
The picture of Martela also seemed a bit too positive.
P.S. It’s cute to notice that Inderes already has its own groupies…
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Innofactor and Martela are cases I’ve been involved in myself. They share many similarities:
- Inderes found them in the “junk pile” of the stock exchange at low valuations, and when for a moment it looked like a turnaround was happening, the shares rose sharply.
- During the upward phase, quiet negative signals began to emerge (slowing growth for Martela, weak development of the Lumagate acquisition for Innofactor, for example). However, these were drowned out by positive vibes, and the recommendation was to add and even buy at absolute share price peaks.
- This was followed by clearer negative signals – problems with IT system reforms for both, stalling growth for Martela otherwise, failures in integrating acquisitions for Innofactor – and a string of earnings warnings. However, the investment view remained predominantly positive for a long time, as the share reacted relatively strongly to bad news, perhaps partly due to weak liquidity. On the other hand, the companies long held on to their targets, which later proved to be stratospheric (Martela’s 8% EBIT, Innofactor’s 20-20 targets), and even if no one directly believed in these, the fact that the companies would perform at least “adequately” seemed to be enough to restore the valuation to at least a slightly higher level.
- Finally, a clearly negative stance was reached about six months after the onset of clear problems, at which point the share price was about -50% from its previous peak.
What can be learned from this? The number of earnings warnings suggests that the companies themselves did not understand what was actually happening, so it is challenging to claim that the turnaround would have been easily foreseeable. It’s also easy to say in hindsight that weak (and sometimes stronger) signals were visible, but if you turn the view negative with every signal, you also miss out on many good cases. Perhaps the clearest lessons for me personally were:
- Even if one disappointment can be attributed to quarterly fluctuations, successive disappointments should be taken seriously. With this logic, both Innofactor and Martela should have been reduced/sold already in June-August 2017, and at the very latest in October.
- Investors and analysts must have enough courage to question management’s loose explanations in earnings reports. These compiled explanations were present in both cases throughout the year without being seriously questioned.
- Turnaround companies have had a reason to need a turnaround in the first place. It’s good to remember this before getting too excited that a turnaround seems to be succeeding – it’s not the same as the company having become high-quality.
Feel free to supplement both lists, especially if you disagree with any point.
PS. A similar thread could be made about successful recommendations and the factors behind them. Reflecting on successes is at least as useful as reflecting on failures. At least the primary purpose of my own investment activities is precisely to achieve as many successes as possible.
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If a company does something SaaS-based, it almost always has significant potential for any company.
For real estate companies, potential is seen in the fact that yield requirements decrease and property values increase. In the current market situation, this is indeed the case, but it receives disproportionately high weight when valuing companies. Over a one-year horizon, it may support the stock price, but in the long run, it is a negative thing.
I actually disagree with this a bit. Success means you’ve mastered something, and in a way, you can’t really learn much new from it. From mistakes, on the other hand, you can better find areas for development and identify the shortcomings in your reasoning and expertise. Of course, it’s not quite so black and white, but failures develop you more. Of course, it’s better if you know everything and don’t fail, but no one can do that.
From a mental perspective, reflecting on success can also be useful, but purely for developing expertise, it’s not an optimal solution. How did things go at Nokia when they focused on their strengths, by the way?
Perhaps so. Especially in investment cases, however, I would argue that success is never guaranteed, no matter how well one handles their affairs – and in such cases, it’s good to reflect afterwards on why one got involved in a successful case. At the very least, one can identify whether it was pure luck (didn’t understand what they invested in, but still made a profit), the realization of a positive scenario (even if the risk-reward ratio was actually perhaps negative), or true success (the case went as it should). In the last instance, I personally have found it beneficial to consider why this happened – where did I get my information, who did I listen to, who did I not, how did my view evolve as the situation progressed, what weak signals of success were visible in retrospect. These lessons can then be utilized when looking for the next success story to get involved in.
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This is a bit off-topic, but let’s go with it:
If you think purely theoretically, you made that successful chain of reasoning. So you have the ability and expertise to make that chain of reasoning. If nothing changes, you would make the same chain of reasoning again. If something changes, you would most likely still make successful conclusions.
If you fail, you don’t have the automatic knowledge and ability to make the correct chain of reasoning, and in that case, you need to find the right path to the desired outcome. There can be many wrong and bad solutions, but generally significantly fewer good decisions.
If you make a good decision, you will likely make it again in a nearly identical situation. If you do things wrong, there’s a much higher probability that you’ll mess up again than that you’ll make the right decision. For this reason, it’s more beneficial to focus on errors. However, this doesn’t rule out that it’s also worth examining successes to some extent.
I, for one, learn better from mistakes, because it’s frustrating enough to lose money that I don’t want to do it again.
You don’t really need to listen to anyone, maybe the management and look at the numbers, if you understand anything about this business. Of course, another way is to follow Inderes’ model portfolio and consider yourself a genius at evening gatherings.
Martela is the worst failure I’ve been a part of. The other is Verkkis, at least for now, but I believe it will still rise.
Of course, it’s a shame. Still, Inderes is on average more right than wrong in its forecasts.
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You can succeed for the wrong reason (a bull market!) and fail even if you’ve done a thorough analysis. It’s rare for anyone to stop and wonder why they ended up with a bigger profit than they expected. In a way, I’m just surprised that for many analysts, Rovio’s target price at 9 euros is 9 ± 1€, and at 5.5 euros, it’s 5.5 ± 0.5€. This is a kind of anchoring. A more in-depth, proper DCF analysis would require much broader research, and reducing it to a recommendation for a single company would be a waste of resources. Instead of focusing on whether target prices hit the mark, I’d be more concerned about whether the target price is even correctly formed in the first place, or if giving a target price is justified for all risky investments. I recently looked at a firm’s recommendations for Nordea at €11.50: an add recommendation and a beautiful EPS growth in the table for the next six years. I sold the shares, because if an €11.50 valuation requires the bull market to continue for another 6 years, I think I’ll wait a bit.
Surely no one can be blamed just for being an optimist. It’s about attitude. A bull market is precisely when people trust the future. Rising prices and results reinforce this even further. Optimists have been right for a long time, and the stock market yields 7 percent compound interest. We need someone to keep their feet on the ground and say whether this company can really grow at the pace the stock price demands.
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You’re absolutely right. However, it’s also important to note that if you’ve failed in a bull market, then you’ve truly failed. If you succeed in a bull market, you can’t conclude that you would fail in a different kind of environment (because you can’t know what that different environment would be like: changing even one thing changes the entire system).
The past reality always leads to the present reality. From an unreal past, a present reality or an unreal present can follow. There are an infinite number of alternatives for an unreal past. You could just as easily have failed, even if, in light of current information, you had done the right thing at the time. Cf. not playing a standard lottery line in a round where the jackpot would have hit. You wouldn’t have won it, even if you had played that week, because that line wouldn’t have been drawn as the same. Or the probability of winning would still remain only 1/15,000,000.
However, this doesn’t mean that one cannot learn from the past. One can learn from it because the present reality is based on the past, and a real past always leads to a real present. They thus continuously follow the same law.
It’s just as valid to think that the economy could have collapsed during this bull run so far as it is to think that the world would have ended during this bull run so far. Their truth value is the same. Pondering different past scenarios is just idle speculation without any real benefit. So, it’s pointless to try to learn from an unreal past and speculate. We can only learn from the real past. All successes are practically equally good because you’ve been able to achieve them in some way. However, this requires that there hasn’t been an error in your conclusions that could be corrected by repetition. For example, in poker, calling with bad odds doesn’t become profitable even if you win. But if you see the call as profitable in similar situations and failed in a specific situation, then the call is good. The same applies if you call with bad cards and win. That’s not a success, because you made the call due to a reasoning error. However, if your conclusion, based on the information available at the time of the action, wasn’t a bad decision, then it was profitable to make, regardless of the outcome. Failures are thus inevitable when playing with probabilities. The key is the overall outcome.
Even if the decision criteria were as bad as possible, but the success was good, one can ask whether you would make the same decision again. If you would, then that decision was successful regardless of the reasons for it. The same question can be asked if you’ve made a bad decision. You probably wouldn’t repeat that bad decision, so there’s a learning opportunity there.
Good analysis on Martela & Innofactor cases @Observer! I’m on the same page. In both companies, people became increasingly blind, as despite the share price peaks, they thought “this is really cheap if the company’s own goals are even close to being met.” So, a classic “Fear of missing out.” Then, when the price came down, “well, with the fallen share price, it’s so cheap that…”
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Yes, Verkkokauppa (online store) was given too positive an image. Too much flattery, the CEO should be grilled more about where the rapid growth in Finland truly comes from. The feed isn’t enough, it seems. It appears that efficiency is also just loose talk, as models are easy for others, including brick-and-mortar stores, to develop. Now I’m stuck with a big loss, thanks a lot.
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