Francisco Garcàa Paramés (Trades, Portfolio), chairman and chief investment officer of Cobas Asset Management, disclosed this week he expanded his holding in Aryzta AG (XSWX:ARYN, Financial) and established five new positions during the third quarter: Samsung C&T Corp. (XKRX:028260, Financial), Owens-Illinois Inc. (OI, Financial), OVS SpA (MIL:OVS, Financial), Iliad SA (XPAR:ILD) and SK Innovation Co. Ltd. (XKRX:096775).
Prior to founding Cobas, Paramés joined Bestinver and managed Bestinfond (Trades, Portfolio), where his 25-year track record near the top of performance rankings made him one of Europe’s top asset managers in the value school. Often dubbed “Spain’s Warren Buffett (Trades, Portfolio),” Paramés follows the Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO’s investing approach and other principles of value investing.
Guru plunges further into Aryzta
Paramés detailed in his letter that exposure to Aryzta, a Swiss consumer packaged goods company, negatively impacted Cobas’ international portfolio by approximately 3% during the quarter and 10% year to date. Despite the depressed share price, which averaged just 2.46 francs ($2.44) during the quarter, Paramés added 25,841,342 shares, boosting the holding 449.92%.
The manager reiterated his contrarian view about Aryzta in his previous shareholder letter and underscored how his views have not changed: Paramés still continues to believe “there is no justified reason why” Aryzta, a top company in its sector, cannot achieve higher profit margins than its competitors. Despite this, Aryzta’s operating margin of -1.89% and net profit margin of -13.67% are both underperforming over 90% of global consumer packaged goods companies according to GuruFocus.
The investor took an activist stance on Aryzta to oppose the company’s capital increase of 800 million euros ($902.919 million) but only received 47% of the shareholder votes. Despite the defeat, Paramés was positive about the approval, saying the capital increase strengthens the balance sheet and reduces risk.
Samsung C&T
Paramés invested in 176,166 shares of Samsung C&T, dedicating 1.93% of his equity portfolio to the position. Shares averaged 122,746 won ($108.41) during the quarter.
The South Korean credit finance company provides credit card, lease, loan, financial product sales and online shopping services through three business segments: Card Business, Installment Business and Other. GuruFocus ranks the company’s financial strength a weak 3 out of 10 on several warning signs, which include increasing long-term debt over the past three years and a debt-to-equity ratio that ranks lower than 60% of global competitors.
Owens-Illinois
Paramés invested in 548,818 shares of Owens-Illinois, giving the holding 0.97% weight in the equity portfolio. Shares averaged $16.40 during the quarter.
The Perrysburg, Ohio-based company manufactures glass packaging for beer, wine, food, non-alcoholic beverages, cosmetics and pharmaceuticals. GuruFocus ranks the company’s profitability 5 out of 10: although returns on equity outperform 93% of global competitors, Owens-Illinois’ profit margins have declined over the past five years.
OVS
Paramés invested in 2,517,814 shares of OVS, giving the position 0.67% equity portfolio space. Shares averaged 2.64 euros ($2.98) during the quarter.
The Italian fashion retailer creates, develops and markets stylish and high-quality clothing for men, women and children under two brands: OVS and Upim. GuruFocus ranks the company’s profitability 7 out of 10: even though profit margins underperform over two-thirds of global competitors, OVS has a solid Piotroski F-score of 6 and a three-year compound annual growth rate of sales that outperforms 80% of global apparel manufacturing companies.
Iliad
Paramés invested in 36,009 shares of Iliad, giving the position 0.44% equity portfolio weight. Shares averaged 127.21 euros ($143.43) during the quarter.
The French telecommunications company offers several telecom services, which include telephone services, prepaid phone cards and internet access. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include expanding profit margins and a dividend yield near a 10-year high of 0.71%. Additionally, Iliad’s business predictability ranks four stars out of five on consistent revenue and earnings growth over the past 10 years.
SK Innovation
Paramés invested in 6,401 shares of SK Innovation, giving the position 0.07% portfolio weight. Shares averaged 123,800 won ($109.13) during the quarter.
The South Korean company engages in petroleum production, refining, chemicals and lubricants. GuruFocus ranks the company’s financial strength 7 out of 10 on several positive investing signs, which include a strong Piotroski F-score of 7, solid interest coverage of 16.10 and debt ratios that rank higher than 72% of global competitors.
Guru will speak at our value conference next year
We are honored to have Paramés as one of our speakers for our 2019 value conference. Other speakers include Mario Gabelli (Trades, Portfolio) and keynote speaker Chuck Royce (Trades, Portfolio). Register now and save $200 from the regular price.
Disclosure: No positions.
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