Spaniard Ortega Tops Buffett With Zara Fortune of $53.6 Billion

[txitxo]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

http://www.bloomberg.com/news/2012-10-31/ortega-tops-buffett-with-zara-fortune-of-53-6-billion.html

 

[Parsad]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

http://www.bloomberg.com/news/2012-10-31/ortega-tops-buffett-with-zara-fortune-of-53-6-billion.html

 

Yeah, I'd like to really see how they valued this, and then compare it on an apple-to-apple comparison in terms of Inditex's normalized P/E, cash flows, etc relative to Berkshire's.  Cheers! 

[txitxo]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

http://www.bloomberg.com/news/2012-10-31/ortega-tops-buffett-with-zara-fortune-of-53-6-billion.html

 

Yeah, I'd like to really see how they valued this, and then compare it on an apple-to-apple comparison in terms of Inditex's normalized P/E, cash flows, etc relative to Berkshire's.  Cheers!

 

Sure, Inditex has always been expensive (the lowest P/E in the last 5 years was ~15) and right now I'd much rather own BRK. But it is an impressive achievement nonetheless for the son of a railway worker born just before the Spanish Civil War and who had to leave school when he was 14. You'll agree that being the son of a US Congressman and attending Ben Graham's classes at Columbia is a much better starting position.

 

[returnonmycapital]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

http://www.bloomberg.com/news/2012-10-31/ortega-tops-buffett-with-zara-fortune-of-53-6-billion.html

 

Yeah, I'd like to really see how they valued this, and then compare it on an apple-to-apple comparison in terms of Inditex's normalized P/E, cash flows, etc relative to Berkshire's.  Cheers!

 

 

Sure, Inditex has always been expensive (the lowest P/E in the last 5 years was ~15) and right now I'd much rather own BRK. But it is an impressive achievement nonetheless for the son of a railway worker born just before the Spanish Civil War and who had to leave school when he was 14. You'll agree that being the son of a US Congressman and attending Ben Graham's classes at Columbia is a much better starting position.

 

 

I paid just over 12X earnings for Inditex shares in 2008/9, which are still owned. That was EUR 75 ago.

[txitxo]

 

I paid just over 12X earnings for Inditex shares in 2008/9, which are still owned. That was EUR 75 ago.

 

Congratulations. I looked up the lowest P/E during the last 5 years in Reuters, which quotes 14.82, I haven't been tracking this stock.

[Parsad]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

http://www.bloomberg.com/news/2012-10-31/ortega-tops-buffett-with-zara-fortune-of-53-6-billion.html

 

Yeah, I'd like to really see how they valued this, and then compare it on an apple-to-apple comparison in terms of Inditex's normalized P/E, cash flows, etc relative to Berkshire's.  Cheers!

 

Sure, Inditex has always been expensive (the lowest P/E in the last 5 years was ~15) and right now I'd much rather own BRK. But it is an impressive achievement nonetheless for the son of a railway worker born just before the Spanish Civil War and who had to leave school when he was 14. You'll agree that being the son of a US Congressman and attending Ben Graham's classes at Columbia is a much better starting position.

 

Oh no, I totally agree with you.  Phenomenal achievement!  I just hate these annual rankings, because often one person's investment is inflated due to stock price relative to earnings or a bubble in their industry, and the valuation is briefly elevated to obscene levels.  Cheers! 

[alwaysinvert]

I'm really skeptical of the valuations of Inditex and H&M. They are priced for perfection. As if the new stores will give as much revenue as the old ones years out and that they will be able to keep the same huge margins and not meet increasing competitive pressures from other chains, online or offline. H&M is so loved and widely owned by Swedes, giving me Nokia vibes. It's priced like a bond for heaven's sake! Inditex seems much the same although I can't speak to the sentiments of the Spanish public.

 

Even Swedish value blogs are hugely bullish on H&M, almost across the board. When both growth investors, value investors and Average Joes own it I run screaming.

[returnonmycapital]

I'm really skeptical of the valuations of Inditex and H&M. They are priced for perfection. As if the new stores will give as much revenue as the old ones years out and that they will be able to keep the same huge margins and not meet increasing competitive pressures from other chains, online or offline. H&M is so loved and widely owned by Swedes, giving me Nokia vibes. It's priced like a bond for heaven's sake! Inditex seems much the same although I can't speak to the sentiments of the Spanish public.

 

Even Swedish value blogs are hugely bullish on H&M, almost across the board. When both growth investors, value investors and Average Joes own it I run screaming.

 

I sure as heck wouldn't buy either today. I agree, they are both priced for perfection.

 

I chose ITX over HM, which had similar valuations in 08/09, for two main reasons:

 

1) ITX doesn't use advertising

2) ITX's client demographic is wider (cradle to grave).

 

HM both advertises and appeals to a narrower demographic. Also, HM has issued staff warrants that share dividend payouts with the common, kinda like LRE. And with a very high payout ratio, the earnings transfer is not immaterial. Then there is the production/distribution chain which ITX has been better at controlling. In short, there is more to like about ITX. And I see ITX being quite capable of handling competitive pressures today and in the future. Their range of concepts to current store count gives them decent future expansion opportunity.

 

But, as you say, neither is good value for purchase today.

[Palantir]

  One of the biggest "failures" (if it may be called so) of García Paramés, the best value investor of Spain (and one of the best in Europe) is that he never saw Inditex's potential. Inditex has returned 350% in the last 10 years vs 64% for Bestinfond, the flagship product of Bestinver, and 0% for the Ibex35.

 

 

Interesting to find out about Mr Garcia Parames. Seems like a really intelligent guy, reading his comments from years ago on the Spanish Economy and its unsuitability to the Eurozone, and it seems very prescient now.

 

You cannot fault him for missing out on Inditex...value investors tend to avoid these mega growth stories, and Mr WEB himself has missed out on many of them....MSFT, AAPL, SBUX etc etc....

[ubuy2wron]

My wife loves shopping at their stores we were recently (last June in Spain) no one does a better job in fashion retailing IMO. The founder has a very attractive daughter who looks like she will be running the show at some point.

[Rabbitisrich]

http://www.nytimes.com/2012/11/11/magazine/how-zara-grew-into-the-worlds-largest-fashion-retailer.html?pagewanted=1&_r=1

 

 

"More than half of Inditex’s manufacturing takes place either in the factories it owns or within proximity to company headquarters, which is to say in Europe or Northern Africa. Inditex owns factories in Spain and outsources production to factories in Portugal, Morocco and Turkey — considered costly labor markets, typically. The rest of its clothes are produced in China, Bangladesh, Vietnam and Brazil, among other countries. The trendiest items are made closest to home, however, so that the production process, from start to finish, takes only two to three weeks. Inditex’s higher labor costs are offset by greater flexibility — no extra inventory lying around — and on faster turnaround speed."