Why a Clear Plan Is More Important Than Any Forecast

Not every invest­ment performs as expected. There­fore, what matters most is not getting every entry point right, but knowing at the time of purchase under what condi­tions a position will be sold. BMW illustrates why consi­stent loss limita­tion is a central compo­nent of the Tareno Hawk-Eye approach.

BMW: If the Market Doesn’t Confirm the Signal

The automo­tive industry is under­going a profound struc­tural trans­for­ma­tion due to the transi­tion to electric mobility. New compe­ti­tors, parti­cu­larly from China, are putting pressure on estab­lished manufac­tu­rers with rapid innova­tion and aggres­sive pricing.

This disrup­tion also led to widespread skepti­cism about BMW in the market. While BMW was at times valued at double-digit P/E ratios in earlier market phases, its current P/E ratio stands at around 5.

Combined with the strongly negative senti­ment, this created an intere­sting counter­cy­clical starting point. For the Hawk-Eye approach, however, a favorable valua­tion alone is not enough. The key factor is whether the market begins to confirm this starting point through its price action.

From Entry to Exit

At BMW, the invest­ment process followed four clear steps:

Hawk Eye Oktober Chart of the Month DE

1. Waiting for the turnaround

A low valua­tion is not neces­s­a­rily a buy signal. Especi­ally during a period of struc­tural upheaval, histo­rical valua­tion bench­marks can shift. As long as a stock conti­nues to hit new lows, our models there­fore wait for clearly defined reversal patterns in its price movement.

2. Recogni­zing the entry signal

At BMW, a distinctly negative senti­ment coincided with an incre­a­singly construc­tive price pattern and rising relative strength. When the market thus confirmed our contra­rian position, we built a position.

3. There has been no confir­ma­tion from the market

However, the expected conti­nua­tion did not materia­lize. The relative strength disap­peared, and the positive price pattern was negated. As a result, a key compo­nent of the original invest­ment case was no longer present.

4. A Consi­stent Phase-Out

We sold the position in accordance with our rules. Not because BMW had suddenly become funda­men­tally unattrac­tive, but because the market no longer confirmed our original signal.

Limit losses, protect capital

Not every signal works. There­fore, what matters is not being right about every assess­ment, but knowing right from the start when you’re wrong.

Clear exit rules help limit losses, avoid deadweight positions in your portfolio, and keep capital available for new oppor­tu­ni­ties. This is precisely where a key advan­tage of the Tareno Hawk-Eye approach lies: The strategy does not follow an opinion about the market, but rather a disci­plined process with clear rules for entry and exit.

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Disclaimer

This document has been prepared for marke­ting and infor­ma­tional purposes and does not consti­tute an offer or a solici­ta­tion to subscribe to, buy, or sell shares of this invest­ment fund. It does not consti­tute invest­ment advice. Only the current fund documents (in parti­cular, the prospectus and KID) are exclu­si­vely autho­ri­ta­tive. Past perfor­mance is not a reliable indicator of future results.

Images: Marijke Vosmeer, Luzia Hunziker, Jürg Kaufmann, Istock, Unsplash / Graphics: Tareno AG / Bloom­berg