Bestinfond (Trades, Portfolio), which is part of Spanish investment firm Bestinver, recently disclosed its portfolio updates on its website for the fourth quarter of 2022, which ended on Dec. 31.
Managed by Beltran de la Lastra, the fund’s strategy seeks long-term capital appreciation through value opportunities in the markets, following in the footsteps of Benjamin Graham, Peter Lynch and Warren Buffett (Trades, Portfolio). It also utilizes the Austrian theory of economic cycles, which views cycles as a consequence of the artificial expansion of monetary supply and manipulation of interest rates by central banks or fractional reserve banks.
Based on its latest portfolio update, the fund’s top buys for the quarter were Exor NV (XAMS:EXO, Financial), Heineken NV (XAMS:HEIA) and International Flavors & Fragrances Inc. (IFF, Financial).
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
Exor
The fund bought 236,867 shares of Exor (XAMS:EXO, Financial), giving the holding a 1.39% weight in the equity portfolio. During the quarter, shares traded for an average price of 70.14 euros ($76.54).
Exor is a Dutch holding company that is controlled by the Agnelli family. It invests in a wide variety of companies, but its primary focuses are the reinsurance, automotive, construction and agricultural equipment industries.
In essence, Exor functions as an activist investor by either outright buying or taking a significant equity stake in companies in order to develop and improve them. Its current holdings include multiple automotive companies, agricultural and construction equipment companies, luxury brands, a public transportation technology company and even a professional football team.
The holding company thus provides decent diversification, though most of its revenue comes from its investment in CNH Industrial (CNHI, Financial), which manufactures equipment for the agricultural and construction industries and provides related financial services.
Heineken
The fund established a stake worth 178,664 shares in Heineken NV (XAMS:HEIA), giving it a portfolio weight of 1.35% at the quarter’s average share price of 88.01 euros.
Heineken is a huge German multinational brewing company with more than 165 breweries in 70-plus countries. Collectively, its breweries produce more than 348 international, regional, local and specialty beers and ciders. In addition to its namesake brand, top brands include Amstel, Sol, Edelweiss and Desperadoes.
The brewing company currently trades well below its historical average valuation levels with a price-earnings ratio of 14.84, though its Ebitda growth has slowed down in recent years, resulting in a PEG ratio of 5.89. Revenue has flatlined while earnings have whiplashed due to the Covid-induced recession and recovery.
Due to the lack of growth recently, Heineken may be closer to fairly valued than undervalued, but it could become a recovery pay as the alcoholic beverages industry tends to rebound strongly alongside the economy.
International Flavors & Fragrances
Bestinfond (Trades, Portfolio) purchased 143,199 shares of International Flavors & Fragrances (IFF, Financial). At the quarter’s average share price of $98.31, this gives the holding a 1.19% weight in the equity portfolio.
International Flavors & Fragrances is a New-York based company that produces a variety of flavors, fragrances, cosmetic actives and other chemicals for sale around the world. It has facilities in more than 44 countries.
The company is making progress in carrying out its business optimization strategy, which aims to divest non-core businesses and acquire core-related businesses in order to focus on its main areas of expertise. It is certainly in need of a turnaround because while revenue has remained consistent, earnings per share have dropped in recent years, as shown in the chart below.
The company did end up taking on much more debt than it usually does in order to make several ill-timed and overvalued acquisitions at the top of the Covid bull market, which is a risk going forward as it tries to deleverage. However, the good news is the 2.81% dividend yield looks well covered on a five-year average basis, excluding the huge plunge in the bottom line for the company’s third quarter of 2022 that resulted from an amortization charge due to the above-mentioned overvalued acquisitions.
See also
As of the latest portfolio update, the fund held shares in 60 stocks valued at a total of $1.16 billion. The turnover for the quarter was 10%.
The top holding was Berkshire Hathaway’s Class B shares (BRK.B, Financial) with 3.68% of the equity portfolio, followed by Holcim Ltd. (XSWX:HOLN, Financial) with 3.64% and BP PLC (LSE:BP., Financial) with 3.46%.
In terms of sector weighting, the fund was most invested in consumer cyclical, basic materials and industrials stocks.
