Over the last 12 months, German stocks have shown a surprisingly strong rebound: Since the Ukraine war crashed the market, they have gained more than 27% from their low in August 2022, beating most major indices worldwide. However, this is only a very short-term perspective of German equities. It is also true that over the last decades, the German equity market as a whole has not shown particularly outstanding performance. Yet, over the last 3 decades, Germany has put forth some amazing performance champions and also some shocking failures among its long-term market constituents.
But what is the secret sauce of long-term investment success in Europe's most important economy? Time and again, I’ve noticed that often unknown companies, which tended to be small or medium-sized, consistently delivered excellent results. Sometimes the stock market reacted positively to this and sometimes not at all or even negatively. But in the long term, these companies were usually not denied success on the stock exchange. It was difficult to systematically research these individual observations, as there were hardly any studies or data on long-term performance - i.e. over more than 20 or 30 years - in the German stock market. So the idea matured to start a project and to systematically work out, both quantitatively and qualitatively, the relationship between long-term stock returns and various fundamental factors and related corporate strategies.
(Continue on my new blog site: https://longtermthinking.substack.com/p/amazing-success-and-shocking-failure )
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