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Cobas Funds Commentary: Getting Closer and Closer

By Jose Belascoain

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Sydnee Gatewood
Sep 24, 2021


  • Optimism and conviction, the two words that define the sentiment of our investment team today.
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Optimism and conviction. These two words perhaps best define the sentiment of our investment team today, based on our in-depth knowledge of our portfolios and the context in which we find ourselves as we move away from the pandemic.

Investing against the tide is not easy, but we believe it is necessary.

Our investment philosophy pivots on the objective of finding businesses that, for one reason or another, have a stock market price that is lower than the core value of the business, which we ourselves try to estimate.

In other words, this objective implies investing in those places (industries, countries, etc.) where there is a lack of capital, places without sufficient attractiveness to, for a period of time, attract the attention and interest of the investment community, thus leaving room for opportunity.

This approach to investment, by its very definition, entails the need for two qualities that we believe to be essential: patience and optimism.

PATIENCE, which is necessary when one’s objective is to get to places before others do, because that will mean waiting for them. OPTIMISM, because when we try to get there first, we must implicitly assume that we will travel a path contrary to that of the majority, which will be more bearable if we face it with positivism.

These two qualities go into oneself, and serve as a foundation to develop a third, the one resulting from the valuation work that we carry out daily, CONVICTION.

With these premises, we are nearing the end of our first five years as a fund manager and, at this point in our history, I think it is a good time to stop and ask ourselves where we are and where we are heading, for which, over the following lines, I will try to explain the structure of our portfolios and the most important recent events that have taken place in their main positions, focusing on our International Portfolio, the basis on which our two main funds, Cobas Selección FI and Cobas Internacional FI, are built.

The following table shows the structure of the International Portfolio:


At a first glance, one first idea is clear: conviction.

Around 40% of the portfolio is exposed to two specific energy sources, and a further 30% is made up of businesses listed in two countries which, for various reasons (size of their market and political situation), are not at the centre of the market’s attention.

Let us start with natural gas, our largest exposure. Our general vision for this investment stems from thinking about the energy transition and, in particular, the role we believe gas will play in it as a transitional energy, especially given the strong demand prospects from Asia, the fact that it emits 30-40% less CO2 than oil or coal and that it is the main back-up for renewable energies.


The theory is materialised mainly through infrastructure investment, which we believe, in view of the demand outlook, will be capital-intensive in the coming years.

Our main investment is Golar LNG (

GLNG, Financial), a company that many will already be familiar with and which has been simplified following the sale of its gas import and distribution terminals business in Brazil. This sale has also helped to reduce the company’s financial risk.

Recently there has been a positive event related to its main business, the one that makes it stand out, that of floating liquefaction vessels or FLNGs, given that one of them, the Hilli Episeyo, has signed an agreement with its client (Perenco) to increase the vessel’s capacity utilisation, thus increasing its EBITDA generation.

Looking ahead, we believe that further simplification of its structure through a possible spin-off of its gas transportation division, and the pursuit of new projects in the liquefaction segment, would go a long way to closing the valuation gap that we currently believe exists. We are optimistic about that.

Our other major investment in the sector is the Teekay Group, to which we have exposure through its parent, Teekay Corporation (

TK, Financial), as well as one of its subsidiaries, Teekay LNG, which in turn accounts for the bulk of the valuation.

Teekay LNG (

TGP, Financial) is the world’s largest LNG carrier. In an eminently cyclical segment such as gas transportation, TGP operates in a way that makes it stand out, and the thing is that most of its fleet is fixed through long-term contracts, with an average duration of around 13 years, which offers us a very interesting visibility of future flows.

Today the thesis is being executed flawlessly, with the company generating more and more cash flow, which is being allocated to debt reduction and shareholder distribution via dividend increases. In our view, the main catalyst here will be timing, as such cash generation will eventually push the share price upwards when the profitability of the business cannot go unnoticed by the market.

Let’s move on to oil, our other major sector exposure within the International Portfolio.

In a nutshell, our investment theory is based on the industry’s capital cycle, which we believe will evolve into a supply/demand mismatch once the world returns to full normalcy after the impact of COVID-19, given the low level of investment in capacity over the last few years. You can access a more thorough discussion of this theory by viewing our last quarterly commentary at the following link.

Continue reading here.

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I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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