Francisco Garcia Parames (Trades, Portfolio), founder of Cobas Asset Management and one of Spain’s top investors, spoke at the GuruFocus Value Conference this year in a talk emphasizing optimism and his strategy.
Parames started by underscoring the unstoppable growth of the global economy. After 40 years of uninterrupted growth, including during the recession of 2008 and 2009, it slowed but did not turn negative.
“Stop focusing on the next recession,” Parames said. “The global economy is there and will be there for the next years.”
“The world is growing and we should be optimistic always,” he added.
Slowdowns will occur, he went on to say. He used the example of inflation in Austria in the 1920s and Germany at the end of the 1930s, which killed the morale of Austrian savers. In Argentina, he said, inflation has more recently soared to 15%. Investors can do little about these situations, he said. But, they can put themselves in the best position to meet them.
“The good thing is we have something we can think about, which is real assets,” he said. “Things you can own. Whatever you prefer. I personally prefer shares. Anything will do, houses, gold, whatever.”
Regarding valuation, Parames said that all investors want the same things: good companies, at good prices, with good management. But it’s not possible for everyone. Investors should find a spot that offers an advantage. He has found those in: shareholder structure, geography, organization of assets, small caps, cyclical companies, share classes, long-term projects and patience.
He also likes family-owned companies, which outperform the market because they have the same long-term approach and approach to incentives that his firm has.
As a stock recommendation, Parames pitched Teekay LNG Partners TGP. It is a family-owned shipping company with a market cap of $1.3 billion. It has planned to make $200 million in net income by 2020 and earned $180 million this year. Trading at 6x free cash flow, it has a 6.7 price-earnings ratio. His target price for the stock is $32.10, for 109% upside.
Last, Parames encouraged investors to stay focused on one sector for no longer than three to five years and to be a generalist rather than a specialist, as he explained in his book, “Investing for the Long Term.” To do this, he recommended reading voraciously about the sector and choosing one that is not correlated to the market or highly analyzed.
The best investor he ever met in Spain, he said, was a university professor of sociology and a Marxist. Parames attributed his greatness to his being able to spend only three hours per week on investing.
“A non-professional investor can have an edge sometimes,” he said.
See Francisco Parames' portfolio here.
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