Fransisco Garcia Parames Likes BMW Preferreds



GrizzlyRock: Long Thesis For This European Travel Company [Q1 Letter]

TravelGrizzlyRock Value Partners was up 16.6% for the first quarter, compared to the S&P 500's 5.77% gain and the Russell 2000's 12.44% return. GrizzlyRock's long return was 22.3% gross, while its short return was -2.9% gross. Compared to the Russell 2000, the fund's long portfolio delivered alpha of 10.8%, while its short portfolio delivered alpha Read More

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
  1. Companies with
  • High ROIC
  • Sustainable
  • Correct attitude with cash flow
  1. Austrian School of Economics
  • Economic general structure
  • Human behavior
  • Euphoria & panic
  • Non predictable consequences in stocks
  1. 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)
  1. 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 (

    (These notes are to the best of my recollection and trusty ink pen. Discrepancies are due to my error in understanding & transcribing.)

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