According to Citywire’s ranking of the most profitable one-year managers in mid- and small-cap companies (as of the end of November), based on a total of 88 funds and 128 managers, Iván Martín Aranguez, president of Magallanes Value Investors, appears in the position number 5, with its background Magallanes Microcaps Europe. It should also be noted that the 4 managers who precede Martín and who manage the same fund, achieve a profitability of 48.4%, a difference of only 0.6 percentage points between them and Martín, with which in reality Iván Martín would be in the second position.
At that date the fund marked a one-year profitability of 47.8%,while his benchmark index rose 30.89%, that is, a difference in favor of Martín’s management value of almost 17 points percentage, which has continued to increase according to the latest available data. So far this year that is about to end, the difference widens to almost 20 percentage points of difference:
The vocation of the fund is mainly focused on European low and very small capitalization listed companies, where he investment style that characterizes the manager is that of value, based on an analysis that is based on in understanding the business model first and then seeing the degree of undervaluation. The most relevant factors, in addition to attractive valuation, is good financial health, in such a way that we prioritize companies with the best balance sheets, preferably with net cash. In times of difficulties, you are more likely to get your money back, even win, when the balance of a company is free of debt, we have seen it with the Covid crisis.
The good positioning of the securities portfolio of sectors related to industries that have been able to adapt Y to take advantage of the current environment of Economic recovery post-Covid is one of the factors highlighted by Iván Martín. “Many of these companies also share the fact of being companies controlled by family groups, with what this entails from the point of view of alignment of interestsIn addition to trading at very attractive valuations, they have a net cash financial situation, in most cases. “
The portfolio turnover in annual terms it is very low, less than 10%, which “is in line with our commitment to remain long-term in investments,” he adds. That is why there have been no changes in the positioning of the portfolio, which is the same as before even the Covid. Comment that possibly in 2022 there will be changes simply to replace the very high number of companies that have been overshadowed in recent months, in addition to those that have been selling when reaching their target prices with very significant revaluations.
This is a highly concentrated strategy, since according to the last tab, there are 46 positions that make up the portfolio and with which they represent the great universe of European microcaps. The manager highlights Italy as a country in which the implementation of incentives to overcome the Covid-19 pandemic has contributed significantly to the permanence of many of these companies. However, he says that the problem they face is the lack of incentives and support necessary for small, well-managed companies with an attractive business history to go public.
And as might be expected, given that inflation is the topic of the day, comment that the approximately 80% of the portfolio securities “get along” in an environment of high prices, because “those same companies are the ones that generate it or are capable of transferring it.” Mining companies, oil companies, transport of goods, distributors of products or food, service providers, in general those that include price transfer clauses, and those whose product does not represent a very relevant percentage of the company’s cost account that hires them.
Among the main positions in the portfolio are the Swedish Ferronordic, dedicated to the sale and distribution of construction equipment; the Italian dedicated to the wine cellar industry Italian Wine Brands; Orseo SpA, an Italian company dedicated to the importation and distribution of fruit and vegetable products; Sol SpA, based in Italy that is dedicated to the research, production and distribution of pure and medicinal industrial gases; and the Slovenian KRKA DD, producer of pharmaceutical preparations. Its 10 largest positions represent 45.3% of the portfolio’s equity. The bottom has a strong exposure to the industrial sector already Italy. Regarding currency exposure, more than 67% is in euro:
The fund is currently closed for new subscriptions since in more than 2021 it exceeded 100 million euros of equity, which is the capacity limit established in the brochure, and is in order to prioritize quality in management.