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AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

GuruFocus.com
·7 min read

- By Graham Griffin

Spanish and Portuguese stock specialist fund azValor Iberia FI (Trades, Portfolio) has revealed its third-quarter portfolio. Companies that got cut from the portfolio include Promotora De Informaciones SA (XMAD:PRS) and Sonae Capital SGPS SA (XLIS:SONC). The biggest changes to the portfolio included additions to holdings in Indra Sistemas SA (XMAD:IDR) and Compania de Distribucion Integral Logista Holdings (XMAD:LOG).


With several managers at the helm, the fund invests over three-quarters of its assets in Spanish and Portuguese companies listed on secondary markets, with Spanish shares capped at 90% of the fund. The fund managers seek undervalued companies with an easy-to-understand business, sustainable competitive advantages over time, high returns on capital and thar are led by quality management teams. Their overall goal is to obtain satisfactory and sustained returns over time.

Portfolio overview

At the end of the quarter, the portfolio contained 30 stocks with no new holdings. Overall, it is valued at $43 million and has seen a turnover rate of 8%. Top holdings at the end of the quarter were Elecnor SA (XMAD:ENO), Tubacex SA (XMAD:TUB), Galp Energia SGPS SA (SLIS:GALP), Compania De Distribucion Integral Logista Holdings and Miquel y Costas & Miquel SA (XMAD:MCM).

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

By weight, the top three sectors represented are industrials (38.07%), basic materials (30.05%) and energy (10.30%).

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Promotora De Informaciones

The third quarter saw the two-year holding of Promotora de Informaciones get cut entirely from the portfolio. All remaining 1.21 million shares were sold at an average price of 0.43 euros per share (50 cents). The sale had an overall impact of -1.31% on the portfolio and GuruFocus estimates the total loss of the holding at 38.63%.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Promotora de Informaciones operates under the commercial name "Prisa," which is a multimedia group in Spain and Portugal. The business is operated through various segments, including education, radio, press and audiovisual. It sells educational books under the Santillana brand and operates radio network stations, distributes newspapers, magazines and other periodical publications. It also provides cable and satellite television services, production and marketing of digital content for news, entertainment and education.

On Nov. 3, the stock was trading at 0.67 euros per share with a market cap of 464.90 million euros. According to the Peter Lynch chart, the stock was trading below its intrinsic value prior to 2015.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 3 out of 10. There are currently four severe warning signs issued for building days sales outstanding, declining revenue per share, poor financial strength and an Altman Z-Score of 0.84, placing the company in the distress column. The company has managed to drastically decrease its debt over the last decade and maintains a strong operating margin of 9.2% that is better than the majority of the industry.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Sonae Capital

The other company to get cut from the portfolio was Sonae Capital, which had been reduced throughout the last year. The remaining 588,235 shares were sold at an average price of 0.62 euros per share. Overall, the sale had a -0.65% impact on the equity portfolio and GuruFocus estimates the total loss of the holding at 11.23%.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Sonae Capital is a diversified company. It develops and manages the Troia Resort, provides integrated hotel and services management, manages health clubs and provides energy services with a vocation for the industrial component, namely for the development and management of energy production facilities with a focus on cogeneration. It also engages in the design and manufacture of machine tools, operates land plots, residential units, tourist or commercial construction projects and offices.

As of Nov. 3, the stock was trading at 0.77 euros per share with a market cap of 190.03 million euros. The Peter Lynch chart suggests the company has been trading above intrinsic value and was overvalued over most of the last decade.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 3 out of 10 and a valuation rank of 5 out of 10. There are currently four severe warning signs for new long-term debt, poor financial strength, declining gross margin percentage and an Altman Z-Score of 0.68, placing the company in the distress column. A low cash-to-debt ratio and negative operating and net margin percentages are causes of the poor financial and profitability ranks.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Indra Sistemas

The portfolio saw a significant boost in the holding of Indra Sistemas for the second time since it was re-established in the first quarter. Representing an 113.55% increase, 151,998 shares were purchased. The stock traded at an average price of 6.54 euros per share during the quarter. Overall, the purchase had a 2.16% impact on the portfolio and GuruFocus estimates the total loss of the holding at 19.38% during its lifetime.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Indra Sistemas is a Spain-based provider of information technology offerings for the finance, insurance, public administration, airports, defense, health care, media, telecom, security, energy and infrastructure end markets. Its product capabilities include analytics, cloud computing, enterprise resource planning, networks and communications, electoral processes, bus technology, subway technology and sustainability solutions.

Nov. 3 saw shares trading at 5.15 euros with a market cap of 907.06 million euros. The GF Value Line suggests the stock might be a value trap, so investors should do diligent research before investing.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 10 out of 10. There are currently two severe warning signs issued for inventory building up and an Altman Z-Score of 1.15, placing the company in the distress column. The weighted average cost of capital currently outweighs the return on invested capital, indicating difficulties with value as the company grows.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Compania de Distribucion Integral Logista Holdings

The second-largest change in the portfolio was the addition of 46,991 shares to the holding that was established in the second quarter. The shares were trading at an average price of 15.52 euros during the quarter and represented a 47.45% increase in holding. Overall, the purchase had a 1.61% impact on the portfolio and GuruFocus estimates the total loss of the holding at 9.20%.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Compania de Distribucion Integral Logista Holdings is a distributor and logistics operator. The company provides distribution channels for products and services, including tobacco and related tobacco products, convenience goods and lottery tickets. The company organizes itself into three segments: tobacco and related products, transport and other businesses. The tobacco and related products segment contributes the vast majority of revenue. The company primarily operates in France, Italy and Iberia (Spain and Portugal), and derives the majority of revenue in France.

On Nov. 3, the stock was trading at 14.48 euros per share with a market cap of 1.91 billion euros. The GF Value Line shows the stock is a possible value trap, so investors should think twice before investing.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rank of 6 out of 10. There is currently one severe warning sign issued for an Altman Z-Score of 1.51, placing the company in the distress column. The company currently boasts a cash-to-debt ratio of 34.46 that is higher than 93.71% of the industry. The company has maintained good cash flows over the past two years.

AzValor Iberia's Top Portfolio Changes of the 3rd Quarter
AzValor Iberia's Top Portfolio Changes of the 3rd Quarter

Discosure: Author owns no stocks mentioned.

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This article first appeared on GuruFocus.