AZValor sees copper deficit providing long term opportunity
Value investor azValor Asset Management sees copper companies occupying a prospective high growth niche in the basic materials sector.
azValor Investment Director and CEO, Alvaro Guzman, notes that global Copper supply has been sluggish for some time but as world growth picks up, further supply shortages are likely before new capacity increases feed through.
In his latest quarterly investor letter, he notes that much has been made of the proposed switch from fossil-fuel powered vehicles to electric cars to reduce global carbon emissions, but few realise that these cars need four times more copper than used in most vehicles today.
“The company that produces the cheapest copper in the world and has the largest known reserves is Southern Copper, 89% owned by Grupo Mexico, a company which forms 6% of our portfolio azValor International,” said Guzmán.
He believes Copper producers are set to benefit from firmer pricing across the value chain. “China has an accumulated copper stock of just 30 million tonnes, compared to more than 100 million tonnes in the Western world. We expect demand to keep increasing for many years,” he notes.
The favourable long-term outlook for Copper will also benefit stocks like Minas de Buenaventura (presently with a 9% weight in the azValor Internacional fund) through its 20% stake in Cerro Verde, the third largest copper mine in the world.
“We believe the value of that share is currently equivalent to the stock price. In addition, investors get another major asset within the price: production of 600,000 ounces of gold a year at an all sustaining cost of $1,000/ounce.”
Guzman and his colleagues launched azValor in November 2015 and it has already accumulated some €1.7bn under management in four core funds: two pension funds and two Luxembourg (SICAV) funds. Unusually, the business focuses on selling directly to retail investors, who appreciate the track record of its two principal portfolio managers – Guzman and another of his co-partners Fernando Bernad. As an active manager Guzman has been running his ‘International’ strategy since January 2003, as part of the management team of Bestinver AM, which Bernad joined in 2007. Guzman intends to close the fund once it reaches €2.5bn to protect its performance record and investor interests.
Notes to Editors
azValor is an independent Spanish asset management boutique, founded by a group of experienced investment professionals, who adopt a high conviction Value investing philosophy. The firm’s goal is that of a classic value investment house, that is, to maximise long-term returns on investments and minimise the risks of permanent losses. Set up in 2016, azValor has four funds, accounting for some €1.7 billion assets under management. The Value approach involves exhaustive analysis of stocks within a defined universe to uncover good businesses with sustainable competitive advantages and a high return on capital employed. As value investors, Managers seek companies whose intrinsic value is not reflected in their share price and which are managed by teams that look after the interests of shareholders. Crucially, AzValor managers are co-invested with clients, ensuring a true alignment of interests.
For more information about azValor Asset Management, please go to www.azvalor.com.
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