Iberian Portfolio
The net asset value of our Iberian Portfolio in the first 9 months of 2019 was -4.1%, versus +10.4% for its benchmark index. If we extend the comparison period since we started investing in equities until the end of September 2019, it has obtained a return of -9.2%, while its benchmark index has obtained a return of +0.4% for the same period.
This bad performance this year was not due to the companies having bad results, but to erratic market behaviour that we must take advantage of.
The main overperformers shaping the results of the portfolio over the quarter were Sacyr (XMAD:SCYR, Financial) (+0.5%), Repsol (XMAD:REP, Financial) (+0.1%) and Miquel y Costas (XMAD:MCM, Financial) (+0.1%), although their contribution did not offset the underperformance by Elecnor (XMAD:ENO, Financial) (-1.6%), Quabit (XMAD:QBT, Financial)(-1.1%) and Bankia (XMAD:BKIA) (-0.7%).
Perhaps the most important thing to have happened in the first 9 months of 2019 was that the prevailing marketvolatility allowed us to rotate the portfolio significantly to once again generate value. More specifically, we raised our target price by +6% to €186/unit, which means an upside potential of 105%. Since the launch of the fund, we have raised its target price by 40%.
In the introduction to this letter, we referred to the gap between our target prices and current prices. This gap is represented by the following graph.
As with our International Portfolio, in the Iberian portfolio, we have also invested close to the legal maximum, at 98%, and, as a whole, the portfolio trades with an estimated 2020 P/E ratio of 7.3x, compared to the 12.1x of its benchmark index, and it has a ROCE of 25%.
As mentioned, we have made some changes to the Iberian Portfolio. In the third quarter, we added four new companies (Repsol, Logista, Aedas (XMAD:AEDAS) and Viscofán (XMAD:VIS)), with weightings of around 1%, while completely exiting two names, Neinor (XMAD:HOME) and Duro Felguera (XMAD:MDF). Aside from these acquisitions, we increased our weight in Técnicas Reunidas (XMAD:TRE), Semapa (XLIS:SEM), Miquel y Costas and Acerinox (XMAD:ACX), due to the performance of their share prices.
