Panza Capital ended 2024 as the second full investment year of the manager founded by Beltrán de la Lastra and Gustavo Trillo, after their departure from Bestinver. And the firm feels satisfied with the results obtained since the creation of the funds, with a return of 18.2% in Panza Investments19.3% in Premium Belly and 22.9% in Tummy Valuein line with its competitors but “poor” compared to the indices, according to Trillo, CEO of the manager, during the presentation of the evolution of the portfolios, who highlighted that compared to the United States and technological values, “Europe is has been left behind and, specifically, the small caps“When we see this unbalanced and unsustainable market, it is normal for a firm like us to fall behind. But it has already happened to us in other moments in which stock market excesses were generated that ended up being corrected in one way or another. “This is not the time to invest in indices, but in active management,” he noted.
Among the sectors that are not in fashion but where Panza Capital finds value is the automotive sector, which, according to De la Lastra, president and investment director of the manager, offers a “practically historic opportunity” to invest in it. “LThe automotive industry is experiencing a complex moment globallybut it is not a homogeneous sector. Demand in some markets has been quite low, and on the supply side, new suppliers have appeared, Chinese firms, which come with competitive cars, and there is also regulatory and tariff uncertainty. But Stellantis, BMW, CIE or Forvia will continue to exist,” explained De la Lastra, for whom “moments when we can buy cheaper will probably not exist. There are dark clouds, but if you look beyond this phase, the sector will adapt to the changes and the regulatory risk will become clearer, making it a practically historic opportunity to invest in the sector,” he reiterated.
De la Lastra exemplified with CIE Automotive the commitment to medium-sized values at a time when they are not under the focus of investors. “In a sector where sales have fallen globally, the company has increased profit margins, with net profits of 330 million euros last year. We understand why the market offers us these valuations, and not because we are especially clever in the analysis. It seems that if you invest in Europe you are stupid, but you have tremendously attractive investment opportunities,” insisted the investment director of Panza Capital, who highlighted that in the aggregate of the manager’s portfolio, “practically all the companies have net cash in balance sheet, with strong alignment of interests of the management team, as it is a business that has the support of a family or a CEO who earns more than five times his gross salary in company shares. And they are businesses with good governance and good asset quality that are valued at a PER between 7 and 8 times earnings, with a return on capital of 23%,” he explained.
Construction and chemicals
The other two sectors that make up Panza’s investment blocks are construction and the chemical industry. Regarding the first, where they have several English firms, he recalled the housing construction deficit that exists in the United Kingdom, a phenomenon similar to that of other markets. “Few houses have been built because firms have had to adjust the cost of financing to the rise in rates, but there is stagnant demand. In the United Kingdom, historically 200,000 houses are built a year, but the new government promises to raise the figure to 300,000 homes. Currently 140,000 houses are being built and our valuations are based on this data, but If it returned to its historical average, you would be buying these companies at 6 times earnings. They are investments where the risk assumed is the time it will take to start the sector. We do not control it, because it depends on the types and government decisions, but it is attractive,” said the head of investments at Panza Capital.
Regarding the chemical sector, he explained that although volumes have recovered marginally, they have not done so enough to increase the unit prices of the products they sell.
In the last quarter, they entered Rovi into the management company. “We have had an opportunity to start with the fall that it has had because it has made uncomfortable decisions. The market anticipated the sale of its third-party manufacturing firm. And although they were able to do it at a good price, they decided not to do it. And the second decision was not to do so. distribute some of its sustained-release injectable drugs in the US even though they had the license, and it was perceived as negative; apart from the fact that since Moderna is going to sell fewer vaccines, this affects Rovi, and investors perceived it badly,” De la Lastra pointed out. .
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