Price-to-Tangible-Book in Germany: 8.76% CAGR and +3.72% Alpha Over the DAX
The P/TBV strategy on Germany's XETRA returned 8.76% annualised over 25 years, beating the DAX's 5.04% by 3.72% per year. Down capture of -1.07% means the portfolio is essentially flat when the DAX falls.
The P/TBV strategy on Germany's XETRA exchange returned 8.76% annualised over 25 years, beating the DAX's 5.04% by 3.72% per year. The CAGR alone doesn't tell the full story. Down capture of -1.07% means the portfolio is essentially flat in years when the DAX falls. Beta of 0.533 confirms it: German tangible-book stocks move at roughly half the speed of the domestic index. In 2007, the DAX dropped 20.77% while this portfolio gained 0.14%. That's not a hedging artefact. It's a structural feature of what XETRA's industrial base actually is.
Contents
Data: FMP financial data warehouse, 2000–2025. Updated March 2026.
The Strategy
Price-to-Tangible-Book removes goodwill and intangible assets from book value before dividing into market cap: P/TBV = marketCap / (totalStockholdersEquity - goodwill - intangibleAssets). The result is a ratio that values only what physically exists in the business. Equipment, inventory, property, receivables.
German XETRA is dominated by Mittelstand-adjacent industrial companies: machinery manufacturers, automotive suppliers, chemical producers, specialty engineers. These businesses hold substantial tangible asset bases. Low P/TBV in Germany doesn't mean a distressed tech company trading below amortised software. It means a profitable manufacturer trading below the replacement value of its factories.
Quality filters prevent buying cheap-but-broken: ROE above 8%, ROA above 3%, operating profit margin above 10%. These keep the portfolio in companies generating real returns on their tangible base, not just cheap on paper.
| Parameter | Value |
|---|---|
| Signal | P/TBV ascending (lowest first) |
| Quality filters | ROE > 8%, ROA > 3%, OPM > 10% |
| Rebalance | Annual (July), 45-day filing lag |
| Portfolio size | Top 30, equal weight |
| Minimum stocks | 10 (else cash) |
| Market cap threshold | €500M (~$545M USD) |
| Universe | XETRA (Germany) |
| Period | 2000-2025 (25 years) |
| Benchmark | DAX |
What We Found
Germany's most visible number is 2000: +68.80% while the DAX lost 12.21%. That's an 81-percentage-point gap in a single year. German manufacturers, automotive companies, and chemical producers that passed the quality screen were cheap on tangible assets and profitable. The DAX was dragged down by its tech and telecom components (Deutsche Telekom, SAP, Infineon) while low-P/TBV industrials re-rated as their earnings held steady.
The down capture of -1.07% is the defining characteristic. A near-zero down capture means the portfolio has historically been flat in years when the DAX fell. The strategy doesn't participate in domestic downturns. It's the result of holding a quality-filtered subset of German industrials that behaves differently from the index as a whole. Beta of 0.533 confirms it: these stocks move at roughly half the speed of the DAX.
The 2007-2008 sequence tells that story clearly. In 2007, the strategy returned +0.14% while the DAX dropped 20.77%. In 2008, when the financial crisis hit globally, the strategy fell 24.85% against the DAX's 25.17%. Germany absorbed the crisis on roughly equal terms. When the damage was systemic and unavoidable, the strategy still lost marginally less than the benchmark.
2013 is a standout: +38.96% against the DAX's +25.29%. European industrial earnings held up as the ECB's accommodative policy supported capex cycles, and low-P/TBV German industrials re-rated as real asset values became more appreciated by European institutional money.
The recent years have been mixed. 2019 brought -6.92% as German manufacturing contracted, especially in automotive (diesel scandal aftermath, EV transition costs). 2022 saw the DAX surge +25.89% while the strategy returned only +6.33%, a 19-point gap as the index rallied on different sector composition. But 2020 delivered +33.03% against the DAX's +24.12%, and 2023 was essentially flat relative to the benchmark (+13.74% vs +14.26%).
Germany averaged 19.7 stocks per period with zero cash years. The quality filter maintained a viable universe throughout, which is notable given how tight the screen is.
Annual Returns
| Year | Strategy | DAX | Excess |
|---|---|---|---|
| 2000 | +68.80% | -12.21% | +81.00% |
| 2001 | -16.02% | -31.32% | +15.31% |
| 2002 | -21.29% | -22.76% | +1.47% |
| 2003 | +17.10% | +23.38% | -6.28% |
| 2004 | +16.03% | +15.62% | +0.41% |
| 2005 | +23.99% | +23.56% | +0.43% |
| 2006 | +23.68% | +39.31% | -15.63% |
| 2007 | +0.14% | -20.77% | +20.91% |
| 2008 | -24.85% | -25.17% | +0.32% |
| 2009 | +26.67% | +23.64% | +3.03% |
| 2010 | +10.07% | +27.58% | -17.51% |
| 2011 | -2.54% | -12.72% | +10.18% |
| 2012 | +6.14% | +21.78% | -15.64% |
| 2013 | +38.96% | +25.29% | +13.67% |
| 2014 | +16.25% | +11.99% | +4.26% |
| 2015 | -4.45% | -12.53% | +8.07% |
| 2016 | +29.54% | +28.49% | +1.05% |
| 2017 | +14.20% | -1.90% | +16.10% |
| 2018 | +1.75% | +2.36% | -0.61% |
| 2019 | -6.92% | +0.65% | -7.57% |
| 2020 | +33.03% | +24.12% | +8.90% |
| 2021 | -12.29% | -18.38% | +6.09% |
| 2022 | +6.33% | +25.89% | -19.57% |
| 2023 | +13.74% | +14.26% | -0.52% |
| 2024 | +6.04% | +29.47% | -23.43% |
The Current Screen
The US screen is available at cetaresearch.com/data-explorer?q=z9gpaUlNfi. Exchange-specific queries for XETRA and other markets can be run on the data explorer at cetaresearch.com.
Limitations
Currency exposure is significant. Returns are calculated in EUR. A non-European investor takes on EUR/USD risk. Post-2022 EUR weakness has been a drag for USD-based investors in European equities.
The portfolio is structurally concentrated in industrials and chemicals. When German manufacturing faces a structural headwind, as it has since 2019 (automotive transition, energy costs), there's no diversification within the strategy's natural universe. The quality filter can't protect against sector-level economic deterioration.
Average portfolio size of 19.7 stocks is smaller than the target of 30. The €500M market cap threshold and quality filters together create a tight screen. The strategy has been capacity-constrained by design, which is a reasonable trade-off but worth understanding.
The 2000 return of +68.80% is real but not repeatable in isolation. It reflects a one-time divergence between DAX tech/telecom components and German industrials during the dot-com collapse. Excluding 2000, the return profile is more modest. Don't use that single year to set return expectations.
Part of a Series
This post is part of a multi-exchange series on the Price-to-Tangible-Book strategy. The US flagship backtest, including full methodology and global results summary, is at ptbv-strategy-us-backtest.
Data: Ceta Research (FMP financial data warehouse), 2000-2025. Full methodology: backtests/METHODOLOGY.md
