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Cobas Asset Management Iberian Portfolio 2nd-Quarter Portfolio

Iberian Portfolio

The net asset value of our Iberian Portfolio in the first half of 2019 was up 3.6%, compared with +10.7% for its benchmark index. However, if we extend the comparison period, this yield spread is considerably less; from the time we started investing in equities through to the end of June 2019, our portfolio generated a return of -1.9%, while the benchmark posted a return of +0.7%.

As with our International Portfolio, the management teams of various companies belonging to the Iberian Portfolio are working to unlock the value of their assets. For example, Vocento (XMAD:VOC) and Sacyr have held Investor Days to make their assets easier to analyse and value. Mean-while, Semapa (Navigator) and Prosegur are both buying back shares. It bears repeating that the only recommen-dation we normally give to companies is that they buy back shares and while many companies have yet to do so, they are certainly analysing this possibility.

The main outperformers behind the positive results of the portfolio during the quarter were Parques Reunidos (+1.2%) and Neinor (+0.3%), although their contribution was undermined by Tecnicas Reunidas (-0.9%) and Semapa (-0.9%).

Perhaps the most important thing to have happened in the second quarter of 2019 was that the prevailing market volatility allowed us to rotate the portfolio significantly to once again generate value. More specifically, we raised our target price by 4% to EUR186/unit, implying an upside potential of 90%. Since the launch of the fund, we have raised its target price by 40%.

As with our International Portfolio, in the Iberian Portfo-lio we have also invested close to 97% and, as a whole, the portfolio trades with an estimated 2019 P/E ratio of 7.9x, compared to the 13x of its benchmark index, and with a ROCE of 28%.

We have also made certain changes to the Iberian Portfolio. In the second quarter, we added three new securities (Ence, Neinor and CTT), with weightings of around 1%, while completely exiting four names, one of them (Par-ques Reunidos) because they bought us out. Aside from these acquisitions, we increased our weight in Sacyr (XMAD:SCYR), Semapa (XLIS:SEM) and Prosegur, due to the performance of their share prices and because of what their respective man-agement teams are doing to unlock the value of their assets.

This article first appeared on GuruFocus.