Amidst these geopolitically and geoeconomically-charged conditions, the daily newsflow from official sources is highly fluent and can abruptly change at any time. Historically in situations like these, it has been very unwise to take rash portfolio decisions in the heat of the moment.

Within our mandate as global deep value investors, we have to focus on what we can control. We do this by having a robust investment program in place that is built upon the following key elements:

1. Broad diversification in terms of
   a) the number of individual portfolio holdings
   b) geographic spread in terms of corporate domicile, the sourcing of input materials, labor and revenue generation
   c) sectoral spread in terms of commercial and industrial applications (and end markets)

2. Emphasis on companies that own tangible assets based on which they produce essential products and services that are able to keep their long-term relevance and value even in a possible recessionary or stagflationary environment

3. Emphasis, whenever possible, on companies with strong anchor shareholders and the wherewithal to draw on adequate financial resources to make it through tough market conditions

4. Emphasis on making sure that, at the time of purchase, the equity can be bought at an attractive price without having to count on outsized growth assumptions to generate a satisfactory return

5. Disciplined portfolio management, encompassing
   a) selling a position when it fully reflects its intrinsic value
   b) maintaining an approximate equal-weighted portfolio structure, implying the trimming of positions with strong recent price performances and reallocating funds to reduce the average entry price of stocks that are declining
   c) taking advantage of new opportunities that present themselves during the stock market rout

Over the last 20 years we have been well served by these measures. They are applicable in any crisis, and we apply them for good reason: whereas the nature, extent and outcome of every market turmoil is different, investor and trader psychology stays reliably the same. In this way we can avoid common behavioral errors and instead focus on evaluating the fundamental impact faced by our portfolio companies and then taking well-reasoned action if deemed necessary.

The bottom line is, we should always remember that market dislocations like the ones we are witnessing at present sow the seeds for the generation of attractive returns over time.

Of course we are at your disposal should you have any questions.

Sincerely,

Gregor Trachsel
Chief Investment Officer SG Value Partners AG