In our latest issue of TradersTalk, we spoke with Dr. Ludwig Ulmer. As “ludwig ulmer”, the junior lawyer tries to implement his trading approaches by means of several strategies on wikifolio.com.
How does he assess the stock market year 2015?
Below, he shares his views on trading and market developments with our community.
Please tell us your name.
Dr. Ludwig Ulmer
Under which user name can you be found on wikifolio.com?
What is your profession?
I am currently a Junior Lawyer at the Regional Court in Bonn.
How did you discover trading?
I discovered trading during the financial crisis when one of my friends organized a round in the FAZ stock market game and invited me to take part in it. Due to the recovery that followed the massive price falls, we all did very well, which sparked my interest for more. Hence, I tried out more and more things and eventually invested the money I had earned in part-time jobs.
How does your typical trading day look like?
Since my strategies focus more on the long term, there actually is no typical trading day. But I still check on my wikifolios on a daily basis in order to determine if there is any need for action. However, this can take place both during a break at the computer as well as while on the road on my mobile phone. The actual work of analysis of dividend payments and book value developments of the various companies is independent from the stock exchange opening times anyway and thus happens when my job as a junior lawyer allows it.
How many wikifolios do you currently manage? Are you already a “Real Money” trader?
I currently run 3 wikifolios, but have not applied with anyone for the “Real Money Trader” status yet.
What are your reasons for publishing your trading strategy as a wikifolio?
After I noticed wikifolio.com through Handelsblatt, I simply wanted to try the whole thing out at first. Since the test phase was a lot of fun, I started to seriously think about how wikifolio could be used effectively. When I was still a student, I naturally could only move very small amounts of money; the most obvious advantage was the possibility of a relatively broad diversification with little capital. In addition, one could trade counter-cyclically and without having to pay transaction costs for each trade. My decision to publish my trading strategy was of an egotistic nature to that extent. I wanted to invest in my wikifolios myself. The possibility to convince others of the idea did not cross my mind at first. However, the investments in my wikifolios are of course a nice sign of recognition.
How would you roughly outline your trading style (on wikifolio.com)?
Of course, it differs depending on the wikifolio since I follow different approaches with my wikifolios.
1) “Dividendensteigerung” (Dividend increase): In this wikifolio, the name says it all. Stocks from companies that always increase their dividends are bought. For on the one hand, this results in an interesting return on invested capital in the long term. On the other hand, the historical analysis shows that a basket of stocks from such dividend aristocrats will outperform the market average.
2) “Value Ansatz mit deutschen Aktien” (Value approach with German stocks): This approach relies on the assumption that the price-to-book ratio is usually relatively constant from a historical perspective. Therefore only stocks whose companies show constant and very high book value gains are included in the wikifolio. If the price-to-book ratio is constant and the book value increases, the price would also have to rise.
3) “Marktgespür” (Market intuition): Here, I opt for securities that I currently find exciting and I adapt it to a large degree to the current news situation.
Are you satisfied with the development of your wikifolios?
My wikifolios are developing very well in my opinion. Of course, I would have liked to achieve even higher profits and cope with fewer setbacks, but if I could have foreseen the development, I would have probably borrowed money and invested it in my wikifolios, which is a good sign. The only thing I find is a pity is that my wikifolio “Value approach with
German stocks” only gets very little attention even though it even outperformed the wikifolio ”Dividendensteigerung”. But I am absolutely convinced of the idea and would like to see a positive development of investor confidence here.
What was your trading highlight of the last 360 days?
The Swiss National Bank has provided me with the trading highlight of last year. The decoupling of the franc from the euro has invariably resulted in a strong price gain for the Swiss securities listed in my wikifolio Dividend increase. I neither expected this,
nor took it into account in my considerations. But windfall profits are nevertheless simply the best, since one did not work for them.
How do you assess the stock market year 2015?
I do not believe that the markets will continue to develop as positively as we have witnessed in recent years. Instead, I expect setbacks after the rapid rise at the beginning of the year and the announcements of the ECB. This also means that I expect re-buy opportunities.
Which markets are currently the most fun/make the most sense?
Due to what I know best, I am limited to stocks and the corresponding certificates. I do not understand enough of raw materials or foreign currencies to currently plan trading activities in those directions. Within the stock market, my focus is on Europe and the US, again because I know more about those areas. As just described in my market expectations, I believe that the risk of a setback is currently increasing. That is why I currently build up growing cash positions. I don’t have to be fully invested at all times. In those areas I am familiar with, the opportunities are currently decreasing and the risks increasing from my perspective.
Which stocks and securities do you currently favor in the medium term?
The ones contained in my wikifolios. In other words, companies that regularly increase their dividends or their book value. I do not want to rely on a single stock at the moment, since I expect setbacks in the medium term and am therefore increasingly searching for suitable buy candidates. After all, stocks rarely succeed in sharply rising against the trend in a falling
What was the hardest lesson you had to learn on the market?
I had to learn that even events that do not occur in your own imagination at a given time may take place and can then make your own investment decision seem completely wrong in hindsight. This is what happened with the termination of the “KaliKartell” by Uralkali.
What advice would you give to a novice trader?
I would advise everyone to try out as much as possible. In order to not lose money directly, one can use countless virtual portfolios. At the same time one can use platforms such as wikifolio to gain valuable insights into why others make certain trades or what they
think in terms of security purchases. This can considerably broaden your horizon.
In one of the Wall Street movies, there is a dialogue in which the protagonist is asked for what price he would be willing to stop trading on the stock exchange. In my view, this question is also very interesting for
private investors. While no one should completely cease trading on the stock exchange, I believe it is nevertheless a good idea to think about the point at which one is satisfied with the development of one’s position. Profits can be addictive.
What book can you recommend to other traders?
I personally liked “Der entspannte Weg zum Reichtum” (engl. “The relaxed way to wealth”) by Susan Leverman and “The intelligent investor“ by Benjamin Graham very much.