– What worries a manager of European equities more omicron or inflation?
Ómicron right now. Inflation is quite controlled, especially in Europe. I believe that we will see inflation very close to 2% in the second half of the year and it will remain at that 2%, which is the objective, in the coming years.
– What is your vision on omicron?
Ómicron is uncertain, new variants are coming out and there is a risk that there will be new closings and that this will harm economic activity. There have been closures in some countries, in others not yet and we hope it is not serious and the normal functioning of the health systems is not altered and this allows a life with a certain normality, but of course it is unknown.
– How do you see the European economy after almost two years of pandemic? What do you expect from 2022?
If the virus allows it and we do not lose normality, that is, everything works normally again, I believe that 2022 will be a very good year, in fact 2021 has already been better than expected, more in the markets than in our own economic activity. The behavior of the markets has been very favorable, the activity also but in some sectors not so much and we hope that the sectors that have lagged the most can recover. We see high growth at the European level, of the order of 5%.
– He is an active manager who selects companies … what must a company have to be part of the Abante European Quality fund? Do you apply some kind of ESG bias?
As the name indicates, they have to be European and quality companies. They must be companies based in the euro zone, even if their activity expands to the rest of the world. Our companies have 50% of their turnover in Europe and the other 50% in the rest of the world, half in America and the other half in Asia. Quality is guaranteed by its own size, it is a fund that invests only in companies with a capitalization of more than 10,000 million euros, companies that belong to or have been part of the Euro Stoxx 50. Size gives you an image of a certain quality, the Quality for us is the ability of a company to maintain its profit margins and grow at rates similar to those of the global economy. That is, companies that grow at an annual rate of 4%, 5%, 6% and if it can be 7% on average with margins that allow them to maintain an ROE – profitability on equity – higher than the cost of capital, with ROE closer to 15% than at least 10%.
– The financial sector weighs about 30% in the fund. What catalysts do banks have to occupy that percentage?
The financial sector now weighs a little less, if we include banks and insurance we have an exposure to the sector of 23% -24% at this time, but it is one of the sectors that weighs the most. We had a greater position in banks but with the recovery that has occurred as a result of the worst of the coronavirus has passed, we have sold some and now we have two insured and four banks in our portfolio. This sector will not really have a great stock market performance until the rate hike is closer, but the rate hike in Europe is somewhat distant, perhaps in 2023 we will see a Euribor standing at 0% or slightly positive. At that time, with a Euribor at 0% or slightly positive, banks’ income statements would improve substantially. In any case, current prices are attractive enough so that without improving income, the mere fact that delinquencies have not skyrocketed as a result of the crisis and the cost reduction measures that banks had carried out in recent years allow them to achieve double-digit financial profitability.
– Consumer cyclicals is also an overweight sector … do you think it has the potential to go further?
Consumption has the potential to rise growing, but certain consumption. Our bet is consumer companies with a certain added value or relatively high prices, such as Adidas or Kering, the parent company of Gucci. In general, we believe that luxury or high-priced companies such as BMW or Daimler are well protected and with a strong link to global growth and a strong presence in markets that will do better than Europe with a medium and long perspective. term as is the Asian.
– Do you see something interesting in the Spanish stock market?
In the Spanish stock market right now our only position is Inditex. We have 23 securities in portfolios and there is only one Spanish which is Inditex. We are very confident in the future of this company, it is a company that has shown before going public that it is capable of growing while maintaining margins and growing in very different geographies and at very significant rates. We believe that to the extent that Inditex is able to demonstrate to the market that it can continue to grow slightly above the global economy, that is, at rates of 5% nominal or higher and maintaining margins, it is a company that perfectly deserves its current stock market valuation.
– What did you think of Inditex’s succession plan and the market’s reaction?
I think that the succession process is something that everyone knew that sooner or later it had to be done, in the end it is a family company and in companies with a family that owns it, these are the usual rules of succession. Now, the market was not expecting it at this time and perhaps it could have been announced in a more leisurely way, it was poorly received by the market the day it was communicated, perhaps due to surprise, but to the extent that we see that there is a continuity in the management and that there are no major changes, I do not think it has to affect the value of the company at all.