Paramés: For me this is the easiest time for investing in the last 15 years

[Guest hellsten]

Francisco García Paramés:

For me this is the easiest time for investing in the last 15 years

http://citywire.co.uk/global/param%C3%A9s-this-is-the-easiest-time-ive-had-in-15-years/a605525

 

'It is not only because we see attractive valuations but also that right now no one is really talking about equities, everyone has sold out and pension funds have dropped their equity exposure.’

 

‘Today in general I am very optimistic on markets as there is a huge amount of companies that are attractively priced.’

 

‘While before we were focused on Spanish exporters now we are looking into companies focused on the Spanish market.’

 

‘We were really waiting for the time when the front pages of the newspapers announced bank liquidations. When that was happening and then the European rescue package for Spanish banks came along we believed all this was reflected in valuations.’

 

‘As a consequence, we are now actively researching companies in Spain.’

 

What if anything are people on this board buying in Europe?

 

Off the top of my head, here's a list of stocks that various value investors are interested in:

- Daimler/BMW

- Portugal Telecom/Telefonica/Deutsche Telecom/Freenet AG

- Banco Santander/Bank of Ireland/Credit Suisse/BNP Paribas

- Schindler/Schibsted

- Exor/Investor

 

More information on Bestinver:

http://www.bestinver.com/pdf/fondos/EN_Internacional%20Morningstar.pdf

 

[txitxo]

What if anything are people on this board buying in Europe?

 

Buy Bestinfond. These guys have been systematically outperforming the indexes since 1993. If you don't want to send your money to Spain they also have a fund in Luxembourg for non-residents in Spain: http://www.bloomberg.com/quote/UISBINX:LX .

 

Apart from a large position on Bestinfond, we are buying a basket of French and German small caps with solid financials and ridiculously low valuation ratios, a variation on Ben Graham's cigar butt approach. Once in a while one of them implodes, but on average they do very nicely.

[tombgrt]

I learned about Pamarés last year through another board member and am considering an investment in it (not for myself at this point).

 

In the spirit of sharing, I thought this resource page from Valuewalk was very informative: http://www.valuewalk.com/francisco-garcia-parames-resource-page/#.TzBR9Fx4keU

 

Txitxo, could you explain how this fund in Luxembourg works? Are there any differences in rights, costs, obligations, returns,...? It does seem easier to keep it in a portfolio with the rest of the equities rather than going through the hassle of sending money over to Spain.

[txitxo]

I learned about Pamarés last year through another board member and am considering an investment in it (not for myself at this point).

 

In the spirit of sharing, I thought this resource page from Valuewalk was very informative: http://www.valuewalk.com/francisco-garcia-parames-resource-page/#.TzBR9Fx4keU

 

Txitxo, could you explain how this fund in Luxembourg works? Are there any differences in rights, costs, obligations, returns,...? It does seem easier to keep it in a portfolio with the rest of the equities rather than going through the hassle of sending money over to Spain.

 

I really don't have many details, I know about them from the press. As far as I understand, they have just set up clones of their main three funds (with differ in the fraction of Iberian stocks). This is the Bloomberg quote for one of them: http://www.bloomberg.com/quote/UISBESX:LX

[frog03]

Parames is very good but a couple comments.

 

His funds returns compare themselves to the indices without dividends reinvested

Thierry Flecchia of Flinvest has a much better record than Parames on European equities (despite higher fees)

[txitxo]

Parames is very good but a couple comments.

 

His funds returns compare themselves to the indices without dividends reinvested

Thierry Flecchia of Flinvest has a much better record than Parames on European equities (despite higher fees)

 

Thanks for the tip. I didn't know about Flinvest, pretty impressive record. But I never invest with managers which charge 2 and 20, no matter how good they are:  http://castlehall.typepad.com/risk_without_reward/2010/10/buffett-versus-2-and-20.html.

[matjone]

"His funds returns compare themselves to the indices without dividends reinvested"

 

Really?  That kind of puts me on guard about investing with them.

[tombgrt]

I learned about Pamarés last year through another board member and am considering an investment in it (not for myself at this point).

 

 

Ah I remember again. Credit goes to frog03 for bringing Bestinver to my attention.  :)

 

Parames is very good but a couple comments.

 

His funds returns compare themselves to the indices without dividends reinvested

Thierry Flecchia of Flinvest has a much better record than Parames on European equities (despite higher fees)

 

Correct. On the second comment I'd like to add that I wonder how much of an effect their Spanish exposure had to Bestinver's returns. Until 2007, Paramés CAGR was extremely high. Well it still is of course. 

 

What do people think of their Spanish equities only fund? Something to pick up if we see lower lows for the IBEX35?

[oddballstocks]

What if anything are people on this board buying in Europe?

 

Buy Bestinfond. These guys have been systematically outperforming the indexes since 1993. If you don't want to send your money to Spain they also have a fund in Luxembourg for non-residents in Spain: http://www.bloomberg.com/quote/UISBINX:LX .

 

Apart from a large position on Bestinfond, we are buying a basket of French and German small caps with solid financials and ridiculously low valuation ratios, a variation on Ben Graham's cigar butt approach. Once in a while one of them implodes, but on average they do very nicely.

 

I've been buying French small caps, lots of good value there.  I haven't found as much in Germany, but looking at one in Austria.  No net-nets to speak of like Japan, but plenty of decent companies selling cheaply.  I've found a lot of overcapitalized companies as well, strip out the cash and they have P/E's of 3x or so and 20% ROE.

[xxx1313]

@oddballstocks

Which company are you looking at in Austria?

Semperit? Mayr-Melnhof? BWT? These are no net-nets, but cheap quality stocks.

[Guest hellsten]

What if anything are people on this board buying in Europe?

 

Buy Bestinfond. These guys have been systematically outperforming the indexes since 1993. If you don't want to send your money to Spain they also have a fund in Luxembourg for non-residents in Spain: http://www.bloomberg.com/quote/UISBINX:LX .

 

Apart from a large position on Bestinfond, we are buying a basket of French and German small caps with solid financials and ridiculously low valuation ratios, a variation on Ben Graham's cigar butt approach. Once in a while one of them implodes, but on average they do very nicely.

 

txitxo, thanks for the suggestion. I have considered investing in one of Bestinver's funds. The 1.75% management fee is pretty high IHMO and the effort required to send money to Spain/Luxembourg is not trivial.

 

More information on Bestinfond:

http://www.bestinver.com/pdf/fondos/EN_Bestinfond.pdf

http://www.bestinver.com/pdf/fondos/EN_Bestinfond%20Morningstar.pdf

[Guest hellsten]

I found some further inspiration from the holdings of the GMO International Small Companies funds:

http://portfolios.morningstar.com/fund/holdings?t=GMISX&region=USA&culture=en-us

http://portfolios.morningstar.com/fund/holdings?t=GFSFX&region=USA&culture=en-us

 

Paddy Power Plc - Ireland:

http://www.paddypowerplc.com/uploads/presentations/Prelims_Pres_FY_2011.pdf

 

DCC - Ireland:

http://www.dcc.ie/~/media/Files/D/DCC-Group-Plc/ir/results_and_presentations/2012/2012-preliminary-results.pdf

 

Virbac - France:

http://www.virbac.com/

 

Lancashire Holdings - UK:

http://www.lancashiregroup.com/~/media/Files/L/Lancashire-Group/Attachments/presentations/2012/q1-2012-investor-presentation.pdf

 

"Fully converted book value per share plus accumulated dividends has grown at a compounded annual rate of 19.4% since inception"

 

Enagas - Spain:

http://www.enagas.es/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1146255357167&ssbinary=true

 

Autogrill - Italy:

http://www.autogrill.com/tools/GetFile.aspx?id=9167&archive=1

 

Euromoney Institutional Investor PLC - UK:

http://www.euromoneyplc.com/assets/EuromoneyInterimPresentation2012.pdf

 

This is just a few of the holdings I had time to review (very briefly).

[matjone]

I was thinking about buying a basket of low P/E european stocks.  Haynes Publishing was one I looked at.

 

What broker are you guys using to buy these?  Especially the small ones?

[txitxo]

I was thinking about buying a basket of low P/E european stocks.  Haynes Publishing was one I looked at.

 

What broker are you guys using to buy these?  Especially the small ones?

 

If you are going to use screens, I'd recommend a few things

 

1. Combine P/E, which is a good criteria, with some other value ratio. It will significantly improve the performance and help you avoid a few typical pitfalls of screens.

 

2. Add some financial soundness criteria. That will significantly reduce the number of companies which blow up and also increase the performance.

 

3. You could try adding a momentum indicator, but it is not clear how much that helps in practice. If a company shows up in a momentum screen on Friday, it will tend to go up in price on Monday, so you'll probably buy it at a slightly higher price than the screen shows.

 

3. Diversify. A lot. If you buy the top 20 companies and 2 of them implode (and sometimes they will), you will lose 10% of your investment.  If you buy the top 50, you will lower your return a bit, but it is much more likely that you will stick with the system. 

 

4. Do not overtrade, and do not buy things with too little liquidity or slippage will kill you. Do not pick and choose. Check out thoroughly all the numbers and do you d.d to make sure that there isn't anything really wrong which the ratios are not reflecting, but try to buy nearly all the companies which comply with your criteria. Remember that you'll make money even if those companies are crap; it is enough that they are not as crappy as a depressive Mr. Market thought them to be.

 

Interactive Brokers is a good broker for European stocks.

[matjone]

Thanks txitxo.  The screen I am looking through is  p/b<1.2, pe<7, 5 yr average ROI and ROE greater than zero, interest coverage>5, and debt<equity.  I try to find ones that are selling at low multiples of current and average earnings.  If they are under TBV that's good, and if they are under ncav even better. 

 

I also read the business description and throw them out if I don't understand what the hell they are talking about, which goes against your rule of not inserting judgment.  For example, haynes makes auto repair manuals for professionals and diy'ers.  They've been in business for 50 years. I figure a business like that might have some customer loyalty.  I'd rather see that than some tiny gold mining company.  I could be wrong, but this is my way of kicking some of them out, which I have to do because I don't have enough money to take a position in all of them anyway.  I don't plan on investing any more than 1% in any of them.

 

 

[oddballstocks]

Great thread, I'm a deep value, Graham/Schloss investor myself, it's served me well.

 

As for investing in Europe I use Fidelity (USA).

 

I've run some screens and here's what I do.  I search for P/B < .8, P/E < 8, D/E < .30, mcap < 200m, I like to search in France, Germany, Netherlands, Austria, there are plenty of companies to be found. 

 

I've found some great names in France, a lot of overcapitalized companies with nice ROE's once you back out excess cash.  There are also some very cheap banks in France, and I mean VERY cheap.  Still working on researching them myself.

[LC]

What do you use to screen for these companies? I use the financial times screener but like to use 2-4 screener with the same criteria to make sure the companies I invest in are showing up in all, therefore removing any data/system errors one screener may have.

[matjone]

Financial times' screener has about 9000 european companies on it if I remember right.  A lot of screeners I have seen only pick up foreign companies if they have an ADR.  If anyone knows of a better one for stocks outside the u.s. I'd like to hear about it.

 

stockscreen123 is a good one for u.s. stocks.

 

What percentage do you guys feel safe putting overseas?  I might be a little paranoid but sometimes I think, "what if it's 1939 again?"  I don't think it is, but I think history shows that a country can go off the rails quickly if conditions are right, and people don't usually see it coming till it's too late.  I've read what some of the greats did.  I think Schloss said once that he didn't feel safe investing overseas.  But I also read that Buffett said if he were starting now he'd be investing all over the world.

[Guest hellsten]

David Nadel from Royce Funds gives his view on investing in Europe:

http://www.latimes.com/business/la-fi-fund-spotlight-20120715,0,532359.story

…the region as a whole is trading at valuations that haven't been seen since the early '80s.

…

We continue to think there's too much money chasing stocks in the U.S. and not enough money chasing stocks in Europe.

 

Royce European Smaller-Companies holdings (http://www.roycefunds.com/funds/open/res/default.asp):

Jupiter Fund Management

Semperit AG Holding

Mayr-Melnhof Karton

Ashmore Group

Hochschild Mining

KWS Saat

Fuchs Petrolub

Burckhardt Compression Holding

Parrot

Takkt

 

Royce International Smaller-Companies Fund holdings (http://www.roycefunds.com/funds/open/ris/default.asp):

Santen Pharmaceutical

SimCorp

FamilyMart

Recordati

Jupiter Fund Management

Pfeiffer Vacuum Technology

Semperit AG Holding

Ashmore Group

Carl Zeiss Meditec

Mayr-Melnhof Karton

 

I think Peter Lynch would be happy to own many of them including Parrot and Fuchs Petrolub; interesting names… I also see Mayr-Melnhof and Semperit. Both were mentioned by xxx1313.

[xxx1313]

I did not know that Mayr-Melnhof and Semperit are among the largest holdings of these Royce Funds. These guys seem to know their business. ;-)

 

Last week I also came across Recordati, a rather small Italian pharmaceutical company. Great track record, still growing, Recordati family behind the company, p/e of 10. Its most important drug lost patent protection about two years ago, but sales still hold up very well. Interesting and cheap stock. But some U.S. medical technology companies trade at only slightly higher p/e ratios (ZMH, SYK, STJ, MDT). So I did not pull the trigger yet.

[Guest hellsten]

"Seeds: … Strangely enough, it's an amazing industry. There are only five global players of any scale. Further, it takes over two decades to develop a commercial variety and bring it to market. That is a deep moat around an industry with excellent economics. In this area we own KWS Saat AG…"

https://www.oppenheimerfunds.com/digitalAssets/Global-Value-Fund-Commentary-a6108e25-261d-4c9d-acc5-4c085aee962f.pdf

 

Many value investors, including Skagen Funds, Oppenheimer and Royce Funds, own or have owned KWS Saat. I added KWS Saat to my stock alerts…

 

More perspective on European stock market valuations:

"According to Citigroup, which looked at 15 different valuation measures, European stocks have been cheaper only 15% of the time over the past 25 to 100 years, depending on the valuation measure."

http://www.invesco.com/site/global/pdf/invest/media/press_releases/2012_07_20.pdf