NOTA DEL EDITOR: Estas ideas de inversión presentada por el equipo de Metavalor Internacional FI, son obtenidas del Informe Trimestral 1T2018 de Metagestión.
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En cuanto a novedades del fondo, destacar la entrada en cartera en este periodo de Cameco, Vertu Motors y Asia Standard International Group.
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NOTA DEL EDITOR: Esta idea de inversión escrita por Luis García, gestor en Mapfre Asset Management, fue presentada en Wide-Moat Investing Summit 2018.
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Ferrovial [FER] es una empresa española de infraestructuras, servicios y construcción, con actividades en varios países. Fue fundada en 1952 por el empresario Rafael del Pino y Moreno. En la actualidad, la familia Del Pino ostenta una participación cercana al 30% en la compañía. A diferencia de sus competidores españoles, Ferrovial ha mantenido durante las últimas décadas un perfil conservador en cuando al nivel de endeudamiento y cuenta en la actualidad con un balance sólido, con caja neta en la sociedad matriz.
This article is authored by MOI Global instructor by Keith Smith, Fund Manager of Bonhoeffer Fund. Keith is an instructor at Wide-Moat Investing Summit 2018.
“… if the market undervalues the derivative on a mispriced security or group of securities, the odds of the derivative investor can be very favorable. In effect, the investor benefits from the double leverage of two mispriced securities – the underlying and the derivative. Although such a situation doesn’t arise often, it can be particularly profitable. The ability to capture the compound mispricing can lead to extraordinary profits” – David Abrams1
Compound mispricings in moated businesses can create some interesting investment opportunities. Compound mispricings are situations where an underlying business is mispriced and a security in the firm’s capital structure or a third-party derivative is also mispriced. Non-voting common stock, holding company stock, warrants or LEAP’s are examples where derivative/security mispricing can occur.
There are various ways to analyze compound mispricings. One way involves comparing “look through” multiples of cash flows to other traded securities. The “look through” approach is the method Warren Buffet applies to cash flows from his investment portfolio holdings to assess the valuation of his portfolio. Another approach is to estimate the value of the underlying businesses and apply appropriate discounts at the security/derivative level. These discounts include: holding company costs, lack of marketability and lack of control (including voting) discounts for minority shareholders or costs associated with leverage in warrants or LEAPs.
Moated businesses are ideal compound mispricing candidates because the businesses are typically growing and are relatively immune from downward competitive shocks. In contrast, shrinking or competitively challenged businesses in combination with compound mispricings can lead to value traps. In these cases, the large discounts may be justified as the future value of the underlying firm will be lower. The challenge for declining businesses is determining the appropriate rate at which the business value will decline.
If the moated business has a shareholder oriented management team with improving governance, then the governance aspect of the discounts can also shrink as the market reflects improved governance. Management actions and communications can be a key catalyst to unlock compound mispricing discounts.
At Wide-Moat Investing Summit 2018, I will describe compound mispricings, approaches to analyze compound mispricings and then examine two compound mispricings in moated businesses. I look forward to sharing my insights at Wide-Moat Investing Summit 2018.
1 Security Analysis, 6th edition by Benjamin Graham & David L. Dodd, page 621
This article is co-authored by William Heard, CEO and CIO of Heard Capital, and Andrew Jesse, a Partner at Heard Capital and head of its energy and industrials practice. The article previews a key aspect of their session at Wide-Moat Investing Summit 2018.
In the latter stages of a bull market, when valuations are generally rich, deep domain expertise can be especially critical in helping an investor recognize misunderstood pockets of the markets where mispriced assets present attractive long-term opportunities. Within even the strongest bull market there are sectors suffering cyclical bear markets, where valuations are low, and appropriately so. These can be good places to find the figurative “baby that’s been thrown out with the bathwater.”
The prolonged cyclical bear market in the energy sector – one of six permanent, regulated industries where Heard Capital concentrates large, long-term, security-agnostic investments – has punished share prices and valuations across the board. But with the United States producing more natural gas than ever, a deep understanding of the natural gas supply chain reveals a “sweet spot” for companies that are positioned to be the bridge that brings this clean and cheap alternative energy source across the oceans to end-markets around the world. Furthermore, since natural gas end markets typically use the fuel for heating and power generation needs, identifying a quality opportunity within the natural gas supply chain not only can offer value, but the additional benefit of a significant degree of insulation from macroeconomic factors.
Within the energy sector broadly, natural gas has an attractive demand dynamic that is by now generally well understood and factored in by the market. Electric power generation end markets globally are seeing a secular shift, with gas plants taking meaningful market share from other sources such as coal and oil-fired plants. This secular shift is due to a litany of practical reasons (e.g., security of supply), financial reasons (e.g., marginal cost) and environmental reasons (e.g., carbon footprint / air quality) . Importantly, the $/mmbtu cost advantage of natural gas versus other fuel substitutes used in similar end markets is large, even on a “landed basis” (i.e., the all-in delivered cost to the end user, not merely the Henry Hub or comparable price), and even without assuming any particular price for natural gas within a relevant historical range.
But a major technological shift now underway within the natural gas supply chain portends a new and different significant shift in market share in which investors can participate. It is a shift from land-based natural gas and related storage and transportation infrastructure, to off-shore natural gas storage, transportation and related services, by means of Floating Liquefied Natural Gas (FLNG) and Floating Storage and Regasification Units (FSRU). We think of the coming market share shift toward FLNG/FSRU as a technological innovation that is creating as area of “induced demand” activity at the upstream end of the natural gas supply chain.
FLNG/FSRU are essentially specialized shipping / transportation assets that allow producers of natural gas and LNG to get their production to overseas end markets. FLNG are shipping vessels or platforms that convert natural gas into LNG at the offshore well site, thereby avoiding the need for large scale development of subsea pipeline infrastructure and onshore liquefaction trains. FSRUs are shipping assets that can store LNG as well as convert LNG to natural gas that meets pipeline specifications for delivery to end users. Compared with shore-based alternatives (i.e., a fixed plant), FRSUs offer flexible, faster and cheaper means to store LNG and convert LNG to natural gas for end uses.
In essence, FLNG/FSRU act as the bridge that gets upstream natural gas resources into the midstream portion of the value chain, where they can then be delivered to end markets and monetized. Players in this space at times say they are “linking the well to the grid.”
We believe companies significantly exposed to growth in usage of FLNG/FSRU assets and technology will attract demand and market share away from shore-based incumbents, while also retaining the secular benefits of natural gas relative to other fuels, as well as the degree of insulation natural gas provides from macroeconomic factors.
FLNG/FSRU providers enjoy a number competitive advantages over shore-based solutions.
Importantly, FLNG/FSRU is location- and supplier- agnostic. While the US is likely to be a low cost supplier of natural gas for the foreseeable future, FLNG/FSRU providers are not beholden to any one specific geography or formation, and given the mobility of their asset base they are able to continue to play a key role in the LNG value chain regardless of where source gas is produced. Additionally, FSRUs are not subject to the intense competition and potentially difficult and lengthy permitting / approval processes to site new shore-based LNG liquefaction and regasification trains, and instead offer a flexible, fast-track solution to delivering natural gas to market.
FLNG/FSRU also are lower cost and more flexible solutions – and in certain circumstances they are the only viable solution for monetizing gas assets. FSRUs allow producers to avoid the expense of siting, permitting and building shore-based facilities. Meanwhile, FLNG represents a lower cost solution for getting far offshore natural gas assets to market. Furthermore, by avoiding large scale subsea pipeline developments and onshore liquefaction facilities, FLNG in some instances can represent the only solution to free otherwise stranded assets.
The return of dispersion to the equity markets that began in 2016 has been a welcome development for active managers. Earlier this Spring, we commented to our investors that a key difference between the investing environments of 2017 and 2016 was that in 2017, we witnessed dispersion elevated at the intra-sector levels, rather than inter-sector levels. In 2016, the primary driver of return dispersion was sector allocation, that is being in the right “neighborhood” was more often sufficient to generate excess returns. Extending the metaphor, the current dispersion environment now makes excess returns available to managers who can find the right house in the neighborhood: since 2017, we have observed dispersion at the individual sector level, which all else equal, provides a more robust security selection environment for sector specialists with domain expertise.
Having identified the FLNG/FSRU category within the natural gas supply chain as what we believe to be a fundamentally attractive and undervalued neighborhood within the beaten down energy sector, we focus during our Wide-Moat Investing Summit presentation on the house (i.e., company) we have identified as being best positioned to reward shareholders.
This article is authored by MOI Global instructor by Phil Ordway, Portfolio Manager of Anabatic Investment Partners. The article previews Phil’s presentation at Wide-Moat Investing Summit 2018.
A competitive advantage can come in many different flavors, but my favorite might be a low-cost advantage. I don’t think it’s necessarily better than others, but for me it’s easier to understand. A low-cost advantage can also be best exploited by one of my own areas of strength: patience.
An underlying premise here is that the world is competitive; I think the rumors of the death of capitalism are premature, and I see vicious competition in almost every business I come across. In these competitive fights there are few better allies to have than a low-cost advantage. Put differently, high costs – or even just an industry-average cost structure – can create serious impediments to success. Suffering less and avoiding failure can turn a prosaic business into a great success.
Some of the companies I most admire use a low-cost business model to create a virtuous feedback loop with volumes: low costs enable low prices; low prices generate high volumes; high volumes allow lower costs; lower costs are reinvested in lower prices; on and on we go. The best companies take this feedback loop and combine it with other hallmarks of “wide moat” companies – stellar customer service, notable brands/loyalty, strong network effects, effective capital allocation, etc. – to get exceptional and durable long-term results.
As noted in our 2017 letter to partners, history offers many examples of business success that was derived partially or mostly from a low-cost advantage:
Ford – The Model T changed the world with its efficient manufacturing approach, enabling a low-price product that was accessible to the masses.
McDonald’s – Real estate played a big role, but without a standardized, low-cost approach and low-price menu there would be no McDonald’s.
Sears – Before Amazon there was Sears and its low-cost catalog sales model that revolutionized the retail industry.
GEICO – Realizing that car insurance is both required and commodity-like, GEICO has been ruthless in exploiting its low-cost, direct-to-consumers approach.
Walmart – Sam Walton is perhaps the best-known example of a low-cost advantage being scaled up to massive effect.
IKEA – A simple warehouse with cheap, self-assembled furniture is now among the leading retailers (and brands) in the world.
Costco – Sol Price’s low-cost warehouse model was perfected at Costco, a company famous for reinvesting every last nickel of cost savings back into a virtuous loop of low prices and higher volumes. The annual membership fee (later copied by Amazon Prime) is also an important wrinkle that further enables low prices.
Nucor – Steel production is a brutal industry, but Nucor rode its low-cost “mini-mill” strategy to great success.
Southwest – Over more than 40 years Southwest has exploited its low-cost advantage to post an unbroken string of profits while many of its competitors withered and died. Ryanair took Southwest’s low-cost approach to the next level in Europe.
The Home Depot – After a successful stint running a leading home improvement chain, Blank and Marcus asked themselves a simple question: What kind of home improvement store could we not compete against? A big, no-frills, low-cost/low-price warehouse.
Wells Fargo – An efficient, low-cost deposit gathering machine is very tough to beat.
Amazon – The modern paragon of success, Amazon has low costs – and the reinvestment of those low costs – at the core of everything it does.
Vanguard – Aided by lean operations and its ownership structure, the low-cost index fund has made an enormous impact on the investment world.
Even if we accept the idea that history has proven low-cost business models to be successful, does that mean the future will offer similar rewards? Only time will tell, but I think the odds are favorable. I make an ongoing study of many of these companies and believe several of them are worthwhile investments.
Some current examples of companies/industries with a low-cost advantage that may be worth further consideration include:
– ultra-low-cost carriers (airlines);
– building products companies;
– industrial distributors;
– software companies;
– and financial intermediaries.
Jean Philippe Tissot, miembro de MOI Global e inversor value colombiano, muy amablemente accedió a darnos una entrevista. Jean gestiona Tissot Ayram Family Partnership, una sociedad de inversión donde gestiona su propio patrimonio y el de su familia. Con un enfoque concentrado, Jean pone un peso signiticativo al comportamiento humano para ser un buen inversor.
MOI Global en Español: Cuéntanos acerca de tu formación y tu trayectoria.
Jean Philippe Tissot: Yo soy de Bogotá, Colombia, donde nací y crecí. Mis estudios universitarios los hice en el CESA en Bogotá, donde estudié Administración de Empresas. En Colombia, la universidad dura cinco años; en el segundo año yo me doy cuenta que las finanzas y los mercados me apasionan y decido entrar a trabajar en el tiempo que tenía libre en una firma comisionista de Bolsa llamada: Bolsa & Banca.
Entré muy joven y los primeros nueve meses fueron de aprendizaje, en donde pasé un tiempo en todos los departamentos de la firma: riesgo, investigaciones económicas, comercial y generación de precios en monedas, bonos y acciones. Después, finalmente me contrataron como asistente de trading de la mesa de divisas; todo esto siendo aún estudiante. El último año de mi universidad consiste en una práctica laboral, lo que significa que desde ese momento solo tenía una clase al día y tenía más tiempo, ese momento coincide con la oferta que me hacen en la empresa de ser el encargado de divisas de la firma.
La experiencia en Bolsa me marco para siempre. Para los generadores de precios era un ambiente en donde se podía hacer mucho dinero muy rápidamente y yo vi desde muy joven los excesos que esto llega a producir. Más de dos veces la empresa se quedó sin patrimonio técnico por perdidas excesivas de los traders de bonos; al mayor accionista le toco rescatarla. A mí me encantaba mi trabajo y lo que más quería era sobrevivir por lo cual era demasiado conservador y no me dejé influenciar por estas actitudes extremas.
Durante mi tiempo en Colombia, más de cinco firmas de Bolsa se quiebran precisamente por el mal manejo del riesgo en posición propia. Para mí, empezando mi carrera fue una experiencia que me enseñó a respetar a los mercados.
Mi hambre de aprender me llevó a trazarme la meta que quería trabajar para un banco top tier en Londres. En esos momentos, mi pequeña experiencia me indicaba erróneamente que la sabiduría estaría en los grandes bancos de Estados Unidos e Inglaterra; y mi ambición juvenil de querer estar en ellos me llevó a renunciar a mi trabajo en Colombia. En el 2007, una semana después de graduado, me fui a Inglaterra a aprender inglés.
Estando en Inglaterra y después de siete meses, decidí que quiero continuar mi camino y viajé a Alemania a estudiar un máster en gestión financiera. El máster duró dos años y en el tercer semestre (2008) tocó hacer una práctica laboral. Apliqué a todos los bancos sin éxito alguno. Decidí a regañadientes aplicar a una empresa del sector real, encuentro una práctica en la tesorería de Adidas [ADS], me aceptaron y fui a trabajar con ellos. Al final no ha habido empresa en donde haya aprendido más que en Adidas: fue una experiencia invaluable y siempre estaré agradecido.
Mi primer día en Adidas es el primero de octubre de 2008, justo dentro de la gran crisis financiera. En la segunda semana trabajando me enteré que los subsidiarios que operaban en mercados donde la moneda local no es transferible internacionalmente (on-shore) tuvieron pérdidas enormes debido a posiciones cambiaras que tenían sin cubrir, especialmente los subsidiarios latino-norteamericanos.
New memo "Investing Without People" from Howard Marks. Read/subscribe/watch: https://t.co/zj30nJSafM #OaktreeInsights #OaktreeVideos pic.twitter.com/WvImcO4PhO
— Oaktree (@Oaktree) June 18, 2018
This article is authored by MOI Global instructor Henrik Andersson, Partner and Fund Manager at Didner & Gerge. The article previews Henrik’s in-depth idea presentation on Bunzl (London: BNZL) at Wide-Moat Investing Summit 2018.
I first met the company in 2003. It has to me set a high bar in how a corporation slowly but steadily, with the highest ethical standards, year in and year out keeps expanding its business one well-served customer at a time. It is a grand example of what is today known as a compounding machine.
At the face of it, Bunzl is a distributor of goods typically not for resale; to food stores, restaurants, large corporations, health care operations…The list goes on. It is the brooms to clean the stores, the kitchen disposables, the napkins in conference rooms, the first aid kits in offices and the protection gloves in factories. But as with all great business models, Bunzl provides something more in its daily operations.
Look up “solving client problems” in a dictionary and a picture of Bunzl emerges. By managing customers working capital, solving complex logistics with a 98% fulfillment rate, being just-in-time, providing consultancy around procurement and providing push-through cost savings, Bunzl is one of these businesses that provides essential services that aids an entire operation but at a very small cost.
It is to me like an iceberg – what you see above the water (i.e. Bunzl´s fee/margin) is a fraction of its true impact.
It is furthermore governed by outstanding people, in a strong corporate culture with lots of responsibility and decentralization. Words such as modest, hard-working, long-term, steadfast come to mind. We hope to be part-owners of Bunzl for many years to come.
NOTA DEL EDITOR: Estas ideas de inversión son obtenidas de una carta trimestral del fondo Japan Deep Value Fund.
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En este primer trimestre de 2018, hemos vendido todas nuestras acciones de Elematec Corp. [TYO: 2715] empresa de componentes electrónicos. A pesar de mantener en liquidez un 40% de todo su valor en bolsa y generar caja, su alta inestabilidad en su cuenta de resultados nos ha aconsejado venderla. Siendo una inversión considerablemente mucho más atractiva que cualquier valor europeo o norteamericano, tenemos en nuestro universo de compañías, empresas con ratios igual de buenos, pero con mayor estabilidad. Vendimos nuestras acciones en enero con una ganancia cercana al +35%.
Hemos dedicado el dinero de esta venta y especialmente al volumen de nuevas entradas a comprar nueve nuevas compañías.
Entre ellas está Ohashi Technica Inc. [TYO: 7628], un proveedor de piezas para la industria de la automoción japonesa. Mantiene una excelente y diversificada cartera de clientes de primer nivel como son Nissan Motors [TYO: 7201], Mitsubishi Motor [TYO: 7211], Honda Motor [TYO: 7267] o Hitachi [TYO: 6501]. Es una compañía sin deudas y que mantiene una caja y activos líquidos que suponen cerca del 70% de su capitalización o valor en bolsa. Cotiza a menos de 3 veces su flujo de caja neto (free cash flow), por lo que la rentabilidad estimada a medio plazo en esta inversión es del 30% anual. Su rentabilidad sobre activos (ROIC) se sitúa regularmente por encima del 25%, cifra excepcional. Prácticamente la mitad se sus ingresos provienen de Japón y el resto son exportaciones. Cotiza a solo 0,9 veces su valor contable o Price to Book y a 0,7 veces ventas, aunque sus ventas son muy estables.
NOTA DEL EDITOR: El siguiente texto es extraído de una carta de Horos Asset Management.
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Si hay una frase que describe nuestro proceso inversor es “invertir con sentido común”. No tratamos nunca de ser los más listos de la clase en cada momento. Trabajamos para conseguir la matrícula de honor al finalizar el curso, sabiendo que habrá asignaturas en las que otros alumnos quedarán por encima de nosotros. Por eso, nos centramos en lo que sabemos hacer y en aquello donde hemos demostrado que podemos aportar valor para nuestros partícipes. En concreto, nuestro proceso de inversión se apoya en cinco pilares que determinan, en general, si una compañía debe o no formar parte de nuestras carteras.
Sólo invertiremos en compañías cuyo negocio seamos capaces de entender y visualizar dentro de unos años. Dicho de otra manera y siguiendo el término que popularizó hace años Warren Buffett, evitaremos negocios que estén fuera de nuestro círculo de competencia, independientemente de lo barata que pueda estar una compañía. Seguir este principio concienzudamente reducirá drásticamente los potenciales errores de inversión que podamos cometer.
Posiblemente la parte que más tiempo nos lleva en el análisis de una compañía sea profundizar sobre los aspectos cualitativos de su negocio, con el fin de localizar negocios “especiales” que cuenten con algún tipo de ventaja competitiva y/o barrera de entrada que limite los efectos de la competencia. Un negocio muy rentable que no cuente con este tipo de ventajas perderá muy rápido esa rentabilidad en un entorno de libre competencia. Por eso, como accionistas, preferiremos siempre invertir en compañías difíciles de atacar.
