Investor Round-Up With Future Funds
Menno Westenbrink, a Dutch econometrician, emphasizes data-driven approaches, shares lessons learned from early speculative investments, and writes about financial literacy.
I am interviewing Menno from Future Funds.
Every investor has their own way to build their wealth by investing.
The goal for this interview series is to share lessons from investors so you can build an investment style that works best for you.
We are going to learn from Menno’s journey.
Let’s get started.
Menno, can you tell us a little about yourself?
My name is Menno Westenbrink, and I'm from the Netherlands. After successfully completing my bachelor's in econometrics, I began my master's in Actuarial Science with a focus on Quantitative Finance at the University of Groningen.
During my studies, I became actively involved in the Groningen Investment Team Delta, or GIT Delta. GIT consists of four teams that each manage around €10,000. While the first three teams (Alpha, Beta, and Gamma) primarily focus on stock picking and typically include students with Economics, Business Administration, or Finance backgrounds, Team Delta is different. We exclusively recruit students with quantitative backgrounds such as Econometrics, Mathematics, Physics, Computer Science, or other STEM degrees. Our approach goes beyond stock picking – we develop tools and automate processes to make investors' lives easier.
I currently serve as the chairman of Team Delta, and this experience has significantly amplified my passion for investing. Looking ahead, this September I'll be joining the European Central Bank as a trainee in Market Operations. I'm excited about this opportunity and curious to see what I'll learn there and where it will take me.
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Tell us about your publication?
Most people here know me not as Menno but as Future Funds. Through this platform, I write weekly articles covering everything from finance and markets to the broader economy. My content ranges from analyzing individual stocks and their business models to exploring macroeconomic topics like inflation in Europe and the yield curve. I also enjoy creating educational content that explains fundamental concepts, like my articles on bonds and options, which help readers understand different markets than just stocks.
Future Funds is deliberately diverse in its coverage because markets are inherently complex and influenced by countless factors. As an econometrician at heart, I'm naturally drawn to modeling and finding definitive answers, but I've come to believe that no single model can fully capture market behavior. This very challenge is what drives me to continually dig deeper, perhaps someday contributing to "solving" the equation we call the markets.
My Substack serves as a platform to share all the knowledge I've accumulated through research and market participation. As my bio states: "My goal is to make YOU financially literate!" This doesn't mean I'll simply provide stock tips; instead, I offer resources that empower readers to identify promising investments themselves, developing skills serving to become a well-rounded investor and maybe even an economist.
Can you describe your investment style?
I began my investing journey at age 17. Eager to learn but having received no education about stocks or investments in the Dutch high school system, I naturally turned to YouTube for guidance on finding promising stocks with good returns.
This approach, as you might expect, led me straight into the SPAC hype of 2021. I found myself investing in companies like Lucid Motors, Clover Health, and even Terra Nova, a company that later went bankrupt, something I didn't even realize was possible at 17. Initially, things went well as I got in early on some of these stocks and watched prices climb. But a valuable lesson was waiting for me: a stock is not just a price; it's a business.
During this early phase, I never examined company financials. My "research" consisted of reading an article, briefly considering if I believed in the business model and industry, and then making an investment decision. After being hit with the harsh reality that stocks aren't just moving price points, I entered a new phase, the DCF (Discounted Cash Flow) phase.
Finally (coinciding with starting my econometrics degree), I had a model I could use to predict price movements. At first, I thought all I needed was a good, reliable DCF analysis to know where a stock would go. Of course, as some of you already know, this isn't the complete approach to research. DCFs rely on many assumptions that aren't always justifiable. Plus, some companies can manipulate their cash flows to appear healthy while their business is actually struggling—think of companies selling their factories or warehouses, generating immediate cash but undermining future business potential.
This led to my second important lesson: it's better to invest in a growing company and pay more than to find a cheap, DCF-justified business. A simple but still relevant example is: would you rather have a penny that doubles every month, or a million bucks? Well, every investor probably takes the penny, understanding the power of compounding.
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How do you find the investments you want to invest in?
I'd like to share how I discovered my most recent stock feature on Future Funds: Heijmans. My process began with curiosity about which Dutch stock had performed best in 2024. I gathered all stock tickers listed in the Netherlands and created a script to check their returns over the past year. After sorting from highest to lowest return, I discovered that Heijmans, a Dutch construction company, emerged as the top performer.
Rather than immediately investing (as my 17-year-old self might have done), I committed to proper research. Being a numbers person, I first examined critical metrics like ROIC and ROE, both of which looked remarkably strong for a construction company. I also always compare a stock's revenue to its market cap and assess its debt position. Finding no red flags at this stage, I continued my investigation.
I then read their annual report specifically looking for their moat (as Warren Buffett emphasizes). Their competitive advantage appeared both present and substantial, which led me to employ my favorite tool: the DCF model. With a solid understanding of the fundamentals, working with the DCF became much more effective. I knew what guidance the company provided and what I could reasonably expect.
Importantly, I no longer use DCF as a price target. For me, it's simply a tool to justify current valuations and determine if I'm willing to buy at the present price. This analysis looked promising. I proceeded to a competition study to identify rivals and evaluate potential threats to the company's moat.
Novo Nordisk provides an excellent example of why competitive analysis matters. Despite being exceptional from both valuation and growth perspectives, fears about competition developing a pill-form alternative to their injectable Ozempic caused the stock to drop nearly 50% with (good) reason.
Once all these boxes are checked, I'll purchase the stock; though more often, I prefer to sell a put option instead.
How do you reduce your risk?
In essence, when you simply buy a stock, your maximum risk is losing your entire investment. While that's not pleasant, I believe that when you've conducted thorough research using my methods, the chance of losing your entire investment becomes virtually zero.
I typically establish a hypothesis and rationale before entering a position. For Heijmans, my thesis was: "The Dutch housing shortage will worsen, and declining interest rates will allow Heijmans to continue profiting from this trend." If I observe interest rates beginning to climb or the housing shortage suddenly resolving, I'll reassess my position and potentially sell. Of course, other factors might trigger reconsideration, profitability issues, or competitive concerns, for instance, but these elements were part of my initial analysis. As long as my entry conditions remain valid, I see no immediate reason to exit, regardless of price.
Regarding options, the approach is somewhat more complex, but I'll emphasize one critical point: when selling puts, you ALWAYS need sufficient capital to handle the worst-case scenario. I don't just sell puts; I sell cash-secured puts. If assignment occurs, you'll have the funds to cover your position and will simply end up holding the stock at a more attractive price than your initial target purchase price.
When do you sell?
When it comes to selling, I don't react to price movements alone. I sell when my original investment thesis has been invalidated.
Take Alfen, a Dutch company with three business segments: EV charging equipment, energy storage systems, and smart grid solutions (transformer substations). My thesis was that the Dutch energy transition would drive growth across these segments, particularly as the country shifts from gas to electric infrastructure.
Despite weakness in their EV charger business, management maintained their positive outlook, and my DCF showed the stock trading at a major discount from what could be implied from management. However, when earnings came in dramatically below expectations and the CFO unexpectedly departed a few weeks before earnings, it became clear management had severely presented misleading growth projections.
My thesis was broken, so I sold despite taking a loss, a decision that proved correct as the stock continued to decline afterward.
I maintain this discipline consistently: when the fundamental reasons I bought a stock no longer hold true, I exit. As long as my original thesis remains valid, temporary price fluctuations don't concern me, regardless of their magnitude.
What is your most memorable investment whether good or bad?
I'd like to share both a learning experience and a successful investment story. When I first started investing, I made what I now consider a speculative gamble with the CCIV SPAC that later became LCID stock. In hindsight, this was a reckless move that cost me significantly on similar plays. Even though this particular trade worked out, I bought around $16, the stock climbed to nearly $52, and I sold at $32. I wouldn't call this an investment but rather a gamble, and I'm not "proud" of it as it violated all my current investment rules.
A more representative example of my evolved approach is my investment in Flow Traders (FLOW.AS) last year. This was one of the first opportunities where I rigorously followed all my investment principles, and it aligned perfectly with the macro environment. My primary hypothesis centered on 2024 being a major election year. I had read research indicating that election years typically experience higher market volatility.
Flow Traders is a market-making firm that profits from spreads in electronically traded products (ETPs), with increased volatility directly benefiting their bottom line. With the VIX at historic lows and their stock similarly depressed, I concluded there was only upside potential. I thoroughly read their annual report, analyzed their financials, completed a DCF model, and even interviewed for a position there to gain deeper insights into the company. When my interviewer smiled while mentioning that bonuses were distributed across all employees, it confirmed I was holding the right stock (but did not end up getting the job).
My analysis proved correct. I purchased shares in early 2024 at €17, and the stock currently trades around €27, largely attributed to the volatility many associate with Trump (though I believe there's more to the story). I haven't written about this stock on Future Funds yet, but perhaps I should, as the company is implementing some interesting strategies and their upward trajectory might continue.
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What advice would you give your younger self?
I'll keep it simple: start earlier and just do it. I began with nothing but interest. While I started fairly young, I've learned continuously along the way by connecting with people who share my passion but bring different perspectives. Through GIT, I've gained tremendous knowledge from others, and I've learned invaluable lessons from my mistakes. They truly hurt because real money was lost.
You'll never truly learn investing until you put money on the line. It's like getting punched in the face every time you make a mistake, which naturally motivates you to make fewer errors over time.
My advice: Start now, and always assume you don't know enough, because trust me, you don't. Only that mindset will drive you closer to the truth.
Before You Go
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Disclaimer: The views of the guest do not represent the views of The PIMM Trader or its affiliates. The author of this post is not a financial advisor. The information provided herein is not financial advice and should not be construed as such. This content is intended solely for educational purposes and should not be used as a basis for any financial decision-making. Investing involves risk, including the potential loss of your invested capital. Only invest what you are willing and able to lose.
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