Alvaro Guzman de Lazaro and Fernando Bernad, managers of azValor Iberia FI (Trades, Portfolio), disclosed last week they introduced three new holdings during fourth-quarter 2018.
Managing a portfolio of 25 stocks, de Lazaro and Bernad primarily invest in Spanish and Portuguese companies with no more than 90% exposure to Spanish companies. The former managers at Bestinver seek investments in undervalued companies that meet several of Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio)’s four-criterion investing approach: easy-to-understand business, sustainable competitive advantages, high return on capital and fair market price.
According to GuruFocus data, the fund’s top three sectors in terms of portfolio weight are industrials, materials and consumer discretionary. The fund’s three new holdings for the quarter are Repsol SA (XMAD:REP, Financial), Prosegur Compania De Seguridad SA (XMAD:PSG, Financial) and Cofina SPGS SA (XLIS:CFN, Financial).
Repsol
De Lazaro and Bernad purchased 306,321 shares of Repsol, giving the position 3.91% equity portfolio weight. Shares averaged 15.41 euros ($17.63) during the quarter.
The Spanish energy company engages in the exploration, refinement and transportation of crude oil and natural gas. GuruFocus ranks the company’s financial strength 7 out of 10 on several positive indicators, including good interest coverage of 9.08, a strong Piotroski F-score of 7 and a debt-to-EBITDA ratio near a 10-year low of 0.92, safely below Joel Tillinghast’s threshold of 4.
Despite strong financial strength, Repsol’s profitability ranks a modest 5 out of 10 primarily due to a three-year revenue decline rate of 4.70% and profit margins that are close to the industry median. Repsol’s operating margin underperforms 52% of global competitors while its net margin outperforms just 53% of global competitors.
Bestinfond (Trades, Portfolio) increased its Repsol holding to 389,915 shares during the quarter.
Prosegur Compania de Securidad
The fund managers invested in 280,543 shares of Prosegur Compania de Securidad, giving the position 1.12% equity portfolio space. Shares averaged 4.57 euros during the quarter.
“Compania de Securidad” is Spanish for “Security Company.” Prosegur provides a wide variety of security services, including cash-in-transit services and alarm services.
GuruFocus ranks Prosegur’s profitability 6 out of 10: even though the company’s revenues have declined over the trailing 12 months, its operating margin and return on equity are still outperforming over 64% of global competitors.
Cofina
De Lazaro and Bernad invested in 187,273 shares of Cofina, dedicating 0.09% of the equity portfolio to the position. Shares averaged 0.66 euros during the quarter.
Portugal-based Cofina publishes various newspapers, including Correio da Manhã and Jornal De Negocios. GuruFocus ranks the company’s profitability 5 out of 10: although its Joel Greenblatt (Trades, Portfolio) return on capital ranks higher than 88% of global competitors, Cofina’s operating margin of 19.24% underperforms 54% of global publishing companies. Additionally, Cofina’s three-year revenue decline rate of 5.60% ranks lower than 56% of global competitors.
Disclosure: No positions.
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