Fransisco is Managing Director at Bestinver. He is commonly called the Warren Buffett of Spain
Fransisco Garcia Parames, Bestinver Asset Management (Spain) – Two Decades of Finding European Value’,
- Keys
- Companies with
- High ROIC
- Sustainable
- Correct attitude with cash flow
- Austrian School of Economics
- Economic general structure
- Human behavior
- Euphoria & panic
- Non predictable consequences in stocks
- Good profits due to
- Share structure (family owned)
- Type of shares
- Geographical reasons (shareholders in different zones)
- Long term (impatient markets)
- Small caps (unnoticed)
- Asset organization (holdings)
- Time
- Patience
- Psychological preparation
- Client education
- Austrian concepts
- Markets never in equilibrium
- Growth from division of labor and savings to finance
- Government manipulation of interest rates leads to bubbles
- Natural state of economy is deflation (more goods with same money)
- Lack of anchor currency
- General
- Profit from growth in China is sustainable
- Avoid countries not dealing with overinvestment
- Most probable outcome is inflation
- Avoid monetary investments – depreciation
- Own real assets 9equities, commodities, real estate)
- Economic scenario
- Est. GDP growth in China 2012 7x higher (+599) than potential combination in southern Europe countries (-89)
- How China grows
- Average growth 4% 90′-08′
- Growth due to internal development
- Exports net of imports now little to economic growth (1% in 2011)
- Despite surge in investment, capital stock per capita not even 15% of Korea
- Outside of state owned (30% of economy), world’s most flexible and dynamic market
- China’s rail network is less than U.S. in 1880
- High savings rate
- Financial system has little borrowing
- Loans/Deposits 0.66 (Spain 1.40)
- In China bank crisis 2000 it was 0.90
- Reasonable interest rates (mortgage 6% & 13% of all loans)
- Borrowing from bank to buy land not allowed
- Europe vs. USA
- Europe less efficient
- Less developed financial culture
- Fewer value investors
- Significant public family owned companies
- Long term view (80% of Bestinver Investments)
- Organic growth & productive M&A
- Example BMW (BIT:BMW) Preferred shares
11 12 13e
- Ordinary Shares P/FCF 5.8x 4.1x 5.7x
- Preferred Shares P/FCF 3.0x 1.5x 1.5x
- 2013
- Norm operating profit 8.2%
- Company guidance 8%-10%
- Why Preferred?
- No liquidity, no voting rights
- Employee incentives through preferred
- Slightly higher dividend
- Average discount of 5 largest German stocks with dual share 4%
Value Investor Conference: Omaha, Nebraska – May 4th, 2012
Dustin Hunter, SunRift Capital Partners (www.sunriftcp.com)
(These notes are to the best of my recollection and trusty ink pen. Discrepancies are due to my error in understanding & transcribing.)
