Two executives who left Spain’s Bestinver around the same time as the famed Francisco Garcia Parames began their own firm in September that Parames may join, azValor Asset Management, where they use a value investing approach to stocks in Spain and abroad.
The founding partners at azValor are Fernando Bernad and Beltran Parages. Bernad is a former manager at Bestinfond, and Parages is AzValor's head of business development and investor relations. Bernad acts as portfolio manager along with Alvaro Guzman de Lazaro -- also a former Bestinfond portfolio manager -- who joined after his one-year non-compete agreement expired in October 2015. Alvaro also has the role of the firm's chief investment officer.
They seek well-managed, undervalued companies whose business they can easily grasp, and hold for the long term.
“Although we especially like good businesses (high ROCE) and brilliant and aligned team management, the most important thing for us is to buy CHEAP,” they said in a letter.
Bestinver has barred Parames from professionally investing due to a non-compete agreement, but azValor told Bloomberg in September they hope he will join when it expires. In his 25-year history at Bestinver Parames produced annual returns of 16%.
The founders of azValor have 20 years of investing experience, but azValor has a short track record. Through Jan. 25 of 2016, its Iberian Fund lost 9.2%, and since inception lost 10.2%, versus a 15.3% drop for the IGBM, the managers said in a January note to clients.
“In an ideal world, this letter would be in five years, because that is the minimum horizon in which we invest,” they said, remarking on their returns.
Bernand and Parages also disclosed the biggest of the 26 holdings in their Iberian Portfolio in January and commented on them (Bestinfond (Trades, Portfolio) also holds each of these stocks in their portfolio, with the exception of ArcelorMittal):
Acerinox (XMCE:ACX, Financial) (8.1%): One of the most efficient producers of stainless steel in the world, with a strong balance sheet. 75% of nickel producers are losing money and base prices are near minimum. We believe it is worth 70% more than what we paid for their shares.
ArcelorMittal (MT, Financial) (7.9%): World leader steel, purchased after an 87% drop. All Chinese producers lose money and we believe that this untenable situation will cause closure of capacity. If this take too long to arrive, an extension may be needed, and although this is not our base-case scenario, it is a risk we are willing to assume.
Galp (XLIS:GALP, Financial) (7.6%): Its assets in Brazil have continued to positively surprise in the last four years, but during that period the shares have fallen 40%. We believe it is worth 60% more.
Semapa (XLIS:SEM, Financial) (7.4%): Holding of Portucel, one of the most efficient integrated producers of paper in Europe. It is worth 40% more using the market value of Portucel, that we believe undervalues the company today.
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