AzValor Iberia FI recently disclosed its portfolio updates for the second quarter of 2021, which ended on June 30.
The Spanish and Portuguese stock specialist follows a long-term value investing strategy, selecting stocks individually without preference for their size or sector and taking advantage of low prices to purchase shares below their intrinsic value. At least 75% of its portfolio must be in undervalued assets, while the value of Spanish stocks must not exceed 90% of its portfolio. The fund is managed by Ălvaro GuzmĂĄn de LĂĄzaro and Fernando Bernad, with the strategy being determined by the managers.
Based on its investing strategy, the fundâs top buys for the quarter were Sprott Physical Uranium Trust (TSX:U.UN, Financial) and Acerinox SA (XMAD:ACX, Financial), while its most notable sells were Euskaltel SA (XMAD:EKT, Financial) and Zegona Communications PLC (LSE:ZEG, Financial).
Sprott Physical Uranium Trust
The fund invested in 182,728 shares of Sprott Physical Uranium Trust (TSX:U.UN, Financial), impacting the equity portfolio by 2.96%. During the quarter, shares were trading for an average price of 11.02 Canadian dollars ($8.83).
Sprott Physical Uranium Trust is the worldâs largest physical uranium trust. The Toronto, Canada-based company invests and holds substantially all of its assets in uranium to provide a secure, convenient and exchange-traded investment vehicle for the material.
On July 30, shares of Sprott traded around CA$11.19 for a market cap of CA$841.61 million. According to the GuruFocus Value chart, the stock is significantly undervalued.
The company has a financial strength rating of 10 out of 10 and a profitability rating of 3 out of 10. It has no debt and a Piotroski F-Score of 5 out of 9, showing the company is financially stable. The year-revenue growth rate is 79.2%, though the three-year Ebitda growth rate is only 2.6% and Ebitda is still in the negative range.
Acerinox
The fund also picked up 82,474 new shares of Acerinox (XMAD:ACX, Financial) after selling out of its previous holding in the stock in the first quarter of 2021. The trade had a 1.84% impact on the equity portfolio. Shares traded for an average price of 11.38 euros ($13.50) during the quarter.
Based in Madrid, Acerinox is a Spanish stainless steel manufacturing conglomerate. It produces a variety of stainless steel products through factories in Spain, the U.S., South Africa and Malaysia.
On July 30, shares of Acerinox traded around 11.59 euros for a market cap of 3.13 billion euros. According to the GF Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 6 out of 10. The Altman Z-Score of 1.99 puts the company in grey zone in terms of bankruptcy risk, but the Piotroski F-Score of 8 out of 9 is typical of a very healthy financial situation. The return on equity of 18.97% and return on assets of 6.62% are about average for the industry.
Euskaltel SA
The fund sold out of its 203,784-share position in Euskaltel SA (XMAD:EKT, Financial), impacting the equity portfolio by -4.91%. During the quarter, shares traded for an average price of 11.04 euros.
Headquartered in Derio, Euskaltel is one of the leading Spanish telecommunications companies. It was formed in 1995 by the Basque Government and several Basque saving banks. Euskaltel is set to be acquired by rival Masmovil (XMAD:MAS).
On July 30, shares of Euskaltel traded around 10.96 euros for a market cap of 1.96 billion euros. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.05 is lower than 86% of industry peers, though the Piotroski F-Score of 7 out of 9 implies a healthy financial situation. The return on invested capital (ROIC) is higher than the weighted average cost of capital (WACC), meaning the company is creating value.
Zegona Communications
The fund also exited its 369,879-share investment in Zegona Communications PLC (LSE:ZEG, Financial), impacting the equity portfolio by -1.24%. Shares traded for an average price of 1.40 British pounds ($1.44) during the quarter.
Zegona Communications is a United Kingdom-based company focusing on network-based communications and entertainment. Its operating strategy is to acquire companies in the European telecommunications, media and technology sectors.
On July 30, shares of Zegona traded around 1.46 pounds for a market cap of 318.60 million pounds. According to the Peter Lynch chart, the stock is trading above its intrinsic value.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 2 out of 10. The cash-debt ratio of 1.39 is better than 71% of industry peers, though the Piotroski F-Score of 2 out of 9 implies poor business operation. The WACC is consistently higher than the ROIC, meaning the company is not creating value.
Portfolio overview
As of the quarterâs end, the fund held shares in 23 stocks valued at a total of $46 million. The turnover rate was 13%.
The top holdings were Tubacex SA (XMAD:TUB) with 11.04% of the equity portfolio, Tecnicas Reunidas SA (XMAD:TRE) with 9.07% and Galp Energia SGPS SA (XLIS:GALP) with 8.63%. In terms of sector weighting, the fund was most invested in industrials, basic materials and energy.
