Direct dialogue aims to educate investors
You Tube Channel promotes financial education
Only long-term investors encouraged to invest
Madrid-based ‘direct’ investment boutique azValor has attracted over 16,000 new retail investors, using its ‘direct dialogue’ educational model, in the two years since its launch in 2015.
The concept is based not on high tech solutions, but on directly educating investors to invest long-term, rather than short-term. The whole approach is based on the fundamental principles laid down by the father of value investing Benjamin Graham and further developed by Warren Buffett, his most famous disciple.
Essentially, the azValor model works by maintaining an ‘educational’ dialogue with its clients to encourage them to overcome behavioural biases that would otherwise destroy value during times of market turmoil. In other words, the firm aims to educate its investors to buy when the value of ‘quality’ stocks fall, rather than to sell, and so crystallise a loss.
The two-year anniversary of the firm’s launch has led azValor to launch an audio-visual educational channel through YouTube, their website, and other social media, to extend the dialogue with their clients.
The approach has worked spectacularly well for azValor investors who backed quality investable stocks when European stock markets fell following the UK’s Brexit result in June 2016. In subsequent weeks, azValor took in €75m of assets, with no significant redemptions. The move by their investors paid off as the azValor International Fund has since risen by 12.46% and azValor Iberia by 42.2%
More recently azValor managers Alvaro Guzman and Fernando Bernad, did a classic ‘value’ swoop on Spanish equities after share prices of high quality companies fell during the Catalan crisis. Such moves by azValor come with explanations to customers and a perspective on the potential upside of such moves over three to five years. In their most recent quarterly newsletter Guzman says that the ‘value grab’ boosted the long-term upside potential value of their Iberian fund by 55% up from 40% - so giving an indicative value of up to €200 per share.
Guzman and Bernad point out that while “nothing is guaranteed” from their Catalan strategy, were the value that they perceive in the portfolio to be realised, then over a three-year period, investors would receive a 15% annual compound return from the current market value of €130 - or 9% if value is realised over five years.
Apart from encouraging investors ignore short term volatility in stock prices and to look at their investments long term, central to their direct dialogue approach is transparency and humility. For example, in their latest Quarterly Newsletter, the duo acknowledges the under performance of their funds throughout 2017 and explain why this is not so important in the context of long term investment, particularly because their investment process they have adopted looks to identify the future sustainable earnings power of the companies in which they invest.
“This is not easy, from a psychological point of view, but there are ‘tools’ that help – chiefly developing a profound knowledge of our portfolio companies through research…. The main objective remains to discern if a company’s future economic returns is more or less sustainable, predictable and to understand why. Unfortunately, no matter how solid our investment process might be it will never eliminate mistakes completely,” writes Guzman.
In the two years since the firm has been established, the strategy evolved by Guzman and Bernad - contrary to their mantra of long term investment - has not had to wait long for true value to be realised. For example, since November 2015 the Iberian fund has returned over 30% and the international fund over 20%. The returns are particularly notable given markets crashed in January 2016 shortly after the firm was established. Since that time the Iberian fund has risen more than 57% and the International fund by more than 48%.
Commercial partner Beltran Parages emphasised the firm’s desire only to acquire the right sort of investor when he said, “We do not seek investors who need to have a short-term outlook, as the chances are that we are not likely to deliver on our promises. All we can say is that the prospects of a good outcome are only with those who can invest over many years. As Warren Buffett says, “in the short run, the market is a voting machine, but in the long run, it is a weighing machine.”
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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.
2. Performance since launch
azValor’s latest available NAV dates to 13/11/2017, the exact ITD performance being:
azValor Internacional FI: +17.29%; benchmark: MSCI Europe Net TR : +11.03%, (Inception date: 13/11/2015).
azValor Iberia FI: +32.77%; benchmark: 85% IGBMT 15% PSI 20: +9.40% (inception date: 13/11/2015).
Mimosa Capital Sicav, azValor International “I”: +24.95%; benchmark: +13.81% (inception date: 11/1/2016)
3. Compliance Notes
The information provided is copyright of azValor Asset Management SGIIC, S.A.U. whose registered office is Pº de la Castellana 110 – 3ª planta, 28046 Madrid.
azValor Asset Management SGIIC, S.A., as well as the products and services it provides, are subject to the legislation in force and under the supervision of the Spanish funds regulator Comisión Nacional de Mercado de Valores (CNMV) and other regulatory bodies.
This communication is specifically written for use only by journalists. It has been prepared solely for information purposes and is not a solicitation, or an offer to buy or sell any security. The information on which the document is based has been obtained from sources that we believe to be reliable, and in good faith, but we have not independently verified such information and no representation or warranty, express or implied, is made as to their accuracy. All expressions of opinion are subject to change without notice and the views expressed are those of the fund manager at the time of writing, and may have since changed.
Please note that the prices of mutual funds and shares, and the income from them, can fall as well as rise and you may not get back the amount originally invested. This can be as a result of market movements and also of variations in the exchange rates between currencies. Past performance does not guarantee or predict future performance.
azValor accepts no liability or responsibility whatsoever for any consequential loss of any kind arising out of the use of this document or any part of its contents. The use of this document should not be regarded as a substitute for the exercise by the recipient of his or her own judgment.
For further information please contact:
Fortuna Asset Management Communications
Tel: 07769 262272