According to GuruFocus top-10 holdings data, Francisco Garcàa Paramés’ top five holdings as of the third quarter are Aryzta AG (XSWX:ARYN, Financial), Teekay LNG Partners LP (TGP, Financial), Teekay Corp. (TK, Financial), International Seaways Inc. (INSW, Financial) and Babcock International Group PLC (LSE:BAB, Financial).
Paramés, chairman and chief investment officer of Cobas Asset Management, is a self-taught follower of Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)’s investment approach. The former Bestinfond (Trades, Portfolio) manager strictly applies the principles of value investing within the framework of the Austrian business cycle theory. He is the author of “Invirtiendo a largo plazo,” Spanish for “investing in the long term.”
Paramés track record of 25 years near the top of performance rankings makes him one of Europe’s top asset managers in the value school. The Cobas fund manager is one of three gurus that will speak at next year’s value conference: The other two are Mario Gabelli and keynote speaker Chuck Royce.
Aryzta
Aryzta, a Swiss consumer packaged goods company, represents 6.01% of Paramés’ equity portfolio.
The Cobas fund manager expanded his Aryzta holding 449.92% during the quarter, increasing the holding to 31,584,946 shares. Paramés in his shareholder letter reiterated his contrarian view about the company even though Aryzta’s profitability ranks a modest 5 out of 10 according to GuruFocus.
GuruFocus lists two severe warning signs for Aryzta, including a five-year gross margin decline rate of 1.3% per year and a five-year revenue decline rate of 4.3%.
Teekay LNG Partners and Teekay Corp.
Teekay LNG Partners, a Bermuda-based provider of marine transportation services for liquefied natural gas, occupies 4.73% of the equity portfolio. Teekay Corp., the holding company for Teekay LNG Partners, represents a further 4.68% of the portfolio.
Teekay Corp. CEO Kenneth Hvid said on Nov. 15 the company’s total cash flow from vessel operations for the third quarter increased over 20% from the second quarter primarily due to “higher cash flows from [Teekay’s] directly-owned FPSO units, which have upside exposure to oil prices and production.” Hvid also said Teekay LNG expects to take delivery of seven more carriers in 2019, adding to the three Teekay LNG took delivery over the past quarter.
GuruFocus ranks Teekay Corp.’s profitability 5 out of 10: The company’s three-year revenue growth rate of -7.70% outperforms 56% of global integrated oil and gas companies. Additionally, operating margins have increased approximately 5.80% per year over the past five years despite underperforming 81% of global competitors.
Paramés said in his letter that although the market appears to agree with the expected strong generation of cash flows at Teekay LNG, the cash flows are not yet reflected in the share price.
International Seaways
International Seaways, a major shipping and ports company, represents 4.05% of the equity portfolio.
GuruFocus lists several warning signs for the New York-based tanker company, including declining revenues, a weak Piotroski F-score of 3 and a Beneish M-score that suggests possible earnings manipulation. Such factors, which include profit margins underperforming 96% of global competitors, contribute to a weak profitability rank of 3.
Paramés said that even though International Seaways’ current situation is near “the lowest point” in the past 30 years, the situation “encourages investment.” The manager noted progress of several weak factors returning to normal.
Babcock
Babcock, a U.K.-based engineering and construction company, represents 3.8% of the portfolio.
Babcock engages in the construction and decommission of nuclear power plants and submarines. GuruFocus ranks the company’s profitability 7 out of 10 on several positive signs, which include expanding profit margins and a dividend yield near a 10-year high.
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Disclosure: no positions.
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