Throughout these years, the share price has fluctuated sharply, despite very robust earnings. Annual returns range from minus 56 per cent in 2002 to more than a tripling of the share price in 2009.
Perhaps the fund should have exited and bought anew along the way?
Well, the fund has, in some ways, done just that – although not entirely. When the oil price fell in 2014 and 2015, TGS was dragged down with it. This allowed the fund to buy more shares at very agreeable prices over the next few years. The managers knew the company very well and were confident that this was a good investment. In such circumstances, it is easier to jump when you see a good opportunity.
In 2018, TGS reached a new all-time high of just over NOK 350. At that point, the price had more than doubled since the previous years' investments, and the managers began to sell instead. During 2018, Pareto Aksje Norge reduced its position in TGS by about three percentage points.
This trade has been demonstrably profitable. Over the past three years, the fund has reaped an effective (money-weighted) return on its TGS investment that is one percentage point above the share's annual average return on the stock exchange. Over time, such figures do make a difference.
Still, perhaps the fund should have stayed clear of TGS for long periods at a time?
Hardly. For the fund, TGS has been a fantastic share. In fact, since this stock was included in the portfolio, the value has increased more than tenfold (including dividends).
We dare say a ten-fold increase is a fair reward for a bit of disciplined patience.
Finn Øystein Bergh
Chief Economist & Strategist
The article is an excerpt from our 2018 Annual report.
Historical returns are no guarantee for future returns. Future returns will depend, inter alia, on, market developments, the portfolio manager's skill, the fund's risk profile, as well as fees for subscription, management and redemption. Returns may become negative as a result of negative price developments.