“The market is increasingly volatile and short-term,” a change in model that represents “opportunities for active managers.” That’s how bluntly he showed himself Mark Giacopazzi, CIO of Bestinverin the presentation of the firm’s third quarter investor letter. This “new reality” and “paradigm change,” according to the expert, responds “to the proliferation of vehicles such as short-term ETFs and passive funds,” which aim “for investors to jump on the bandwagon of a trend.” or specific theme.
However, the firm sees this greater volatility as an opportunity and considers that “it is good news for active management.” Here, Giacopazzi explains that cheap stocks are those that are not having a good time or are not in the right ETF, and that buying them is always uncomfortable, “because the volatility of the portfolio increases, there is no visibility on the returns of short term and the most inexperienced participants can end up selling at the worst possible moment. Therefore, “withstanding the elements of short-term volatility is the price you have to pay for long-term profitability” and now, “this is more important than ever for equity investors.”
In this environment, Bestinver’s management team reinforces its principles of diversification and balanced portfolios, made up of “quality companies that are listed at attractive valuations and with good risk management.” What we have seen in the results of the first half of the year – and what we foresee for the remainder of the year – does not deviate us from the growth that we projected for the international portfolio, with increases of 8% in income, of 20% in profits and 24% in free cash flow.
For the coming years, we hope that the process of economic and monetary normalization will continue, within this environment of high volatility: “The market has become a kind of angry teenager incapable of managing frustration,” he described. Thomas Painteddirector of International Variable Income, who then concluded that mature investors, “with a little more patience and a certain tolerance for adversity,” should take advantage of this environment.
In equities, one of the most notable movements in the international portfolio occurred, according to Pintó, in Metawhich is “a good example of the opportunities that volatility offers us” and where the firm has reduced its position due to its good behavior. A little over two years ago, the market’s obsession with the short term led the shares of Mark Zuckerberg’s company to trade at $90, after falling 70% in just eight months. Since then, its revenues have grown at a rate of 20% and its margins – despite heavy investments in artificial intelligence – have once again approached 38%. “After the security multiplied its price by six times, its safety margin is much lower than when we bought and, therefore, we have reduced its weight in the portfolio,” he says.
Another company in which they have lost weight thanks to their good behavior is Rolls Royce. A company that two years ago was trading at 70 pence and today exceeds 520. The market did not see, according to the expert, the potential of the post-pandemic recovery of the sector or the effects of the profound restructuring of the management team. After the increases, “we have decided to reduce its weight in the portfolios.”
Reduction in banks
Among other movements in the quarter, the firm highlights the increases in weight in companies such as Reckitt, Jerónimo Martins, Heidelberg, BMW o Stellar. Among the reductions, companies that have accumulated good performance stand out, such as Berkshire Hathaway, Barclays, Philips o German stock exchange. There have also been movements in Spanish equity portfolios.
Ricardo Seixas, director of Iberian Variable Incomepointed out the recent reduction of positions in banks, which, according to the expert, “we have already been doing since the first quarter of the year” with partial sales in Santander and the definitive exit in Bankinter. In addition, they have increased their position in Amadeus and have taken a position in Endesa.
Active debt management
On the debt side, Eduardo RoqueFixed Income manager, He also sees a favorable environment for active debt management. Although the period has been marked by strong price variations in the credit market in certain sectors and by strong expectations of rate cuts, from now on, the expert prefers to hoard liquidity while waiting for better opportunities: this asset represents the 14% of the firm’s fixed income fund portfolio.
After increasing the duration of the portfolio, its positioning is cautious, in the “risk-free part” – that is, the German bund – and in credit. Of course, he is beginning to see opportunities in bonds in the automotive sector. “There is still good profitability in fixed income, but it will be more stable,” he assures.
