Bestinfond (Trades, Portfolio), formerly run by Francisco Garcia Paramés, disclosed on Tuesday that the fund’s top six positions for the second quarter are Hypera SA (BSP:HYPE3, Financial), Koninklijke Boskalis Westminster NV (XAMS:BOKA, Financial), Melrose Industries PLC (LSE:MRO, Financial), Harley-Davidson Inc. (HOG, Financial), Tecnicas Renuidas SA (XMAD:TRE, Financial) and Valmet Corp. (OHEL:VALMT).
Fund manager reiterates value investing philosophy in a ‘volatile’ market environment
Current fund manager Beltrán de la Lastra said in his shareholder letter that Bestinver has considered market volatility a strong possibility throughout the first six months of the year. The Standard & Poor’s 500 index dropped to a year-to-date low of 2,581 on Feb. 8 in light of fears of increasing interest rates.
De la Lastra mentioned several factors that drive market risk, including “threats of trade wars, tensions in emerging markets and political uncertainty in Europe.” Despite these risks, the firm stays committed to the “value investing philosophy” shared by Benjamin Graham, Warren Buffett (Trades, Portfolio) and Seth Klarman (Trades, Portfolio): peruse the fundamental analysis of companies and “invest in good businesses at low prices.”
Hypera SA
De la Lastra invested in 3,779,363 shares of Hypera for an average price of 30.35 reals ($8.11) per share. The fund manager dedicated 1.65% of his equity portfolio to the position.
Brazil-based Hypera manufactures nonprescription drugs and branded generics. GuruFocus ranks the company’s profitability 5 out of 10: while the company has expanding profit margins and strong returns on equity, Hypera’s revenue has declined approximately 2.2% per year over the past five years. The company’s three-year revenue growth rate of 10% underperforms 84% of global competitors.
Boskalis Westminster
De la Lastra invested in 946,453 shares of Boskalis Westminster for an average price of 24.35 euros ($28.24) per share. The fund manager dedicated 1.6% of his equity portfolio to the position.
The fund manager said in his shareholder letter that while the Dutch company is going through “a difficult time in the cycle,” Boskalis still has strong potential in its dredging and offshore energy services, the former making up approximately 55% of sales.
De la Lastra also said the greatest risk the fund faces with Boskalis is “the length of time the company takes to recover.” Despite this, the fund manager is comfortable with this risk given that the company barely has any net debt. GuruFocus ranks Boskalis’ financial strength 7 out of 10 on several factors, including solid interest coverage of 10 and debt ratios that outperform over 80% of global competitors.
Melrose
De la Lastra invested in 4,787,997 shares of Melrose for an average price of 2.3 pounds ($2.96) per share. The fund manager dedicated 0.78% of his equity portfolio to the position.
U.K.-based Melrose manufactures and supplies electricity-generating equipment for the power generation, industrial, energy and offshore sectors. The company has a strong Piotroski F-score of 7, driven by several factors, including decreasing financial leverage, higher current ratios, higher gross margins and higher asset turnover year over year. Such characteristics imply strong business operations.
Harley-Davidson
De la Lastra invested in 291,667 shares of Harley-Davidson for an average price of $42.17 per share. The fund manager dedicated 0.71% of his portfolio to the position.
Milwaukee-based Harley-Davidson operates in two business segments: Motorcycles and Related Products and Financial Services. The company’s profitability ranks 7 out of 10: Harley-Davidson’s operating margin of 14.51% outperforms 88% of global competitors despite contracting approximately 3.3% per year over the past five years.
Harley-Davidson said on July 24 that diluted earnings per share for the quarter were $1.45, underperforming the prior-year quarter by 3 cents.
Tecnicas Renuidas
De la Lastra invested in 185,683 shares of Tecnicas Renuidas for an average price of 25.88 euros per share. The fund manager dedicated 0.35% of his equity portfolio to the position.
Spain-based Tecnicas Renuidas engages in the engineering, design and construction of industrial facilities for principal national oil and multinational companies. Although the company’s profitability ranks 6 out of 10, GuruFocus lists several red flags for Tecnicas Renuidas, including declining profit margins and a weak Piotroski F-score of 3.
De la Lastra said while the company’s margins suffered due to the fall of crude oil prices over the past three years, the recent recovery of oil prices will lead to “attractive potential” as a result of higher investment plans, lower competition and accelerated activity in oil refineries.
Valmet
De la Lastra invested in 307,324 shares of Valmet for an average price of 16.2 euros per share. The fund manager dedicated 0.34% of his equity portfolio to the position.
The fund manager said Valmet was established in 2014 through the demerger of the pulp, paper and energy businesses of Helsinki-based Mesto Corp. (OHEL:METSO). De la Lastra expects accelerated pulp orders over the next two years as prices remain at historical highs, increasing the potential for high margins for Valmet and Andritz AG (WBO:ANDR), a company where Bestinfond increased its holding 561.03% during the quarter.
Disclosure: No positions.
