Spanish investment funds azValor Iberia FI (Trades, Portfolio) and Bestinfond (Trades, Portfolio) seek value opportunities in Europe and around the world. Although the two funds are managed by separate firms, azValor and Bestinver, they both see value in some of the same companies.
According to the Aggregated Portfolio, a Premium GuruFocus feature, the top five holdings the two funds have in common as of the three months ended Sept. 30 are Galp Energia SGPS SA (XLIS:GALP, Financial), Elecnor SA (XMAD:ENO, Financial), Repsol SA (XMAD:REP, Financial), Miquel y Costas y Miquel SA (XMAD:MCM, Financial) and Tecnicas Reunidas SA (XMAD:TRE, Financial).
Galp Energia
In the third quarter, Bestinfond made no changes to its Galp Energia position, while azValor reduced its holding by 11.13%. They have a combined equity portfolio weight of 16.02% in the stock.
The Portuguese natural gas distribution company has a market cap of 13.07 billion euros ($14.5 billion); its shares were trading around 15.76 euros on Monday with a price-earnings ratio of 40.41, a price-book ratio of 2.96 and a price-sales ratio of 0.78.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Galp’s financial strength 5 out of 10. Although the company has issued approximately 252 million euros in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 2.69, however, indicates the company is under some financial pressure.
The company’s profitability scored a 6 out of 10 rating on the back of operating margin expansion and good returns that outperform over half of its competitors. Galp Energia also has a low Piotroski F-Score of 3, which means business conditions are in poor shape. As a result of recording a decline in revenue per share over the past five years, its business predictability rank of one out of five stars is on watch. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
GuruFocus estimates azValor has gained 12.52% on its investment since the fourth quarter of 2015, while Bestinfond has gained roughly 6.06% since the third quarter of 2012.
Elecnor
Bestinfond did not make any significant changes to its Elecnor holding in the third quarter, while azValor trimmed its position by 0.46%. They have a combined portfolio weight of 10.85% in the stock.
The construction engineering company, which is headquartered in Spain, has a market cap of 931.46 million euros; its shares were trading around 11 euros on Monday with a price-earnings ratio of 12.64, a price-book ratio of 1.86 and a price-sales ratio of 0.56.
According to the Peter Lynch chart, the stock is undervalued.
Elecnor’s financial strength was rated 3 out of 10 by GuruFocus on the back of low debt ratios. In addition, the low Altman Z-Score of 0.83 warns the company could be at risk of going bankrupt since its revenue per share has declined over the past 12 months.
The company’s profitability scored a 6 out of 10 rating, driven by strong margins and returns that outperform over half of industry peers and a moderate Piotroski F-Score of 4, which indicates business conditions are stable. It also has a one-star business predictability rank.
GuruFocus data shows azValor has gained an estimated 13.91% on its investment since the fourth quarter of 2015. Bestinfond has gained roughly 24.57% since the second quarter of 2013.
Repsol
During the third quarter, Bestinfond increased its Repsol position by 3.61% and azValor curbed its holding by 10.32%. They have a combined equity portfolio weight of 5.50% in the stock.
Headquartered in Madrid, the oil and gas producer has a market cap of 20.83 billion euros; its shares were trading around 14.35 euros on Monday with a price-earnings ratio of 13.05 a price-book ratio of 0.68 and a price-sales ratio of 0.42.
Based on the Peter Lynch chart, the stock appears to be undervalued.
Repsol’s financial strength and profitability were both rated 5 out of 10 by GuruFocus. Although the company has sufficient interest coverage, the Altman Z-Score of 1.88 suggests the company is under some financial stress since its revenue per share has been in decline for the past five years.
The company is also being supported by an expanding operating margin, returns that outperform at least half of its competitors and a moderate Piotroski F-Score of 5. The one-star business predictability rank is on watch.
Since establishing the position in fourth-quarter 2019, GuruFocus estimates azValor has lost 8.88% on the investment. Bestinfond has gained approximately 6.86% since the second quarter of 2012.
Miquel y Costas y Miquel
Bestinfond left its Miquel y Costas position unchanged in the third quarter, while azValor curbed its holding by 9.1%. The funds have a combined portfolio weight of 5.47% in the stock.
The Spanish paper manufacturing company has a market cap of 491.87 million euros; its shares were trading around 16.2 euros on Monday with a price-earnings ratio of 12.86, a price-book ratio of 1.77 and a price-sales ratio of 1.83.
The Peter Lynch chart suggests the stock is undervalued.
Miquel y Costas’ financial strength was rated 5 out of 10 by GuruFocus as a result of having no long-term debt and comfortable interest coverage.
The company’s profitability fared a bit better, scoring a 6 out of 10 rating on the back of operating margin expansion and strong returns that outperform a majority of industry. As a result of recording a decline in revenue per share over the past five years, the paper manufacturer’s one-star business predictability rank is on watch.
AzValor has lost roughly 28.73% on its investment since the fourth quarter of 2015. GuruFocus data shows Bestinfond has gained around 11.59% since the third quarter of 2012.
Tecnicas Reunidas
Bestinfond left its Tecnicas Reunidas position unchanged in the third quarter, while azValor added 4.65% to its holding. The stock has a combined weight of 5.44% in their equity portfolios.
The Spanish contractor, which provides engineering, procurement and construction services, has a market cap of 1.29 billion euros; its shares were trading around 24.02 euros on Monday with a price-earnings ratio of 40.03, a price-book ratio of 3.73 and a price-sales ratio of 0.28.
According to the Peter Lynch chart, the stock is overvalued.
GuruFocus rated Tecnicas Reunidas’ financial strength 5 out of 10. Despite having a good cash-debt ratio of 1.37, the company has low interest coverage. In addition, the Altman Z-Score of 1.33 warns it is in financial distress and could be in danger of going bankrupt.
The company’s profitability fared much better, scoring an 8 out of 10 rating despite its margins and returns underperforming competitors and recording a slowdown in revenue per share growth over the past 12 months. Tecnicas Reunidas also has a moderate Piotroski F-Score of 4 and a one-star business predictability rank.
According to GuruFocus, azValor has lost an estimated 11.21% on its investment since the fourth quarter of 2015. Bestinfond has lost 1.01% since the second quarter of 2018.
Portfolio composition
AzValor’s $90 million equity portfolio, which was composed of 24 stocks as of the end of the third quarter, is largely invested in the industrials sector with a weight of 35.23%, followed by smaller holdings in the basic materials and energy spaces. The fund looks for long-term investment opportunities among undervalued Spanish and Portuguese companies that have understandable business models and sustainable competitive advantages.
Bestinfond’s $1.57 billion equity portfolio, which was composed of 91 holdings as of the third quarter, is largely invested in the industrials and financial services sectors. The fund seeks to achieve long-term capital appreciation by applying key value investing principles that were introduced and used by legends like Benjamin Graham, Peter Lynch and Berkshire Hathaway (BRK.A)(BRK.B) CEO Warren Buffett (Trades, Portfolio).
Disclosure: No positions.
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