Azvalor Internacional FI (Trades, Portfolio), which is part of Spanish investment firm Azvalor Asset Management, disclosed its equity portfolio for the second quarter earlier this month.
Managed by Alvaro Guzman de Lazaro and Fernando Bernad, the fund takes a long-term approach to picking stocks in order to generate satisfactory returns. To meet this objective, it invests in undervalued equities from around the world.
Based on these criteria, the fund disclosed in its NPORT-P filing for the three months ended June 30 that it entered eight new positions, sold out of two stocks and added to or trimmed a number of other existing investments. Notable trades included a new stake in Vale SA (VALE, Financial), a boost to the Gold Fields Ltd. (GFI, Financial) holding and reductions to the Consol Energy Inc. (CEIX, Financial), Arch Resources Inc. (ARCH, Financial) and Euronav NV (XBRU:EURN, Financial) positions.
Investors should be aware that, just like 13F reports, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, NPORT-P filings collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these restricted filings can provide valuable information.
Vale
The fund invested in 1.59 million shares of Vale (VALE, Financial), allocating 2.28% of the equity portfolio to the stake. The stock traded for an average price of $17.13 per share during the quarter.
The Brazilian miner, which is one of the world’s largest producers of iron ore and nickel, has a $60.63 billion market cap; its shares were trading around $13.37 on Monday with a price-earnings ratio of 3.19, a price-book ratio of 1.76 and a price-sales ratio of 1.35.
The GF Value Line suggests the stock is modestly undervalued based on historical ratios, past financial results and analysts’ estimates for future earnings.
GuruFocus ranks Vale’s financial strength 6 out of 10. Despite having adequate interest coverage, the Altman Z-Score of 2.62 indicates the company is under some pressure. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability scored a 9 out of 10 rating, driven by operating margin expansion, strong returns on equity, assets and capital that top a majority of competitors and a moderate Piotroski F-Score of 5 out of 9, which means conditions are typical for a stable company. Due to recording declining revenue per share in recent years, Vale’s predictability rank of one out of five stars is on watch. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Vale, Ken Fisher (Trades, Portfolio) has the largest stake with 0.61% of its outstanding shares. Howard Marks (Trades, Portfolio), Baillie Gifford (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have significant positions in the stock.
Gold Fields
Azvalor increased its Gold Fields (GFI, Financial) stake by 114.18%, picking up 2.33 million shares. The transaction had an impact of 2.09% on the equity portfolio. Shares traded for an average price of $12 each during the quarter.
The fund now holds 4.37 million shares total, accounting for its eighth-largest holding with a weight of 3.92%. GuruFocus estimates it has gained 5.06% on the investment so far.
The South African gold miner has a market cap of $8.72 billion; its shares were trading around $9.67 on Monday with a price-earnings ratio of 12.41, a price-book ratio of 2.29 and a price-sales ratio of 2.32.
According to the GF Value Line, the stock is fairly valued currently.
Gold Fields’ financial strength was rated 6 out of 10 by GuruFocus. In addition to sufficient interest coverage, the Altman Z-Score of 3.33 indicates the company is in good standing. Further, the ROIC slightly exceeds the WACC, indicating value is being created.
The miner’s financial strength fared a bit better with a 7 out of 10 rating. In addition to operating margin expansion, Gold Fields is supported by strong returns that top a majority of industry peers, a moderate Piotroski F-Score of 4 and a one-star predictability rank.
With a 0.82% stake, Simons’ firm is Gold Fields’ largest guru shareholder. Other top guru investors include Ron Baron (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Donald Smith & Co.
Consol Energy
With an impact of -4.05% on the equity portfolio, the fund curbed the Consol Energy (CEIX, Financial) holding by 63.71%, selling 1.33 million shares. During the quarter, the stock traded for an average per-share price of $48.50.
Azvalor now holds 759,639 shares total, representing the 10th-largest holding with a 3.68% weight. GuruFocus says the fund has gained an estimated 49.50% on the investment so far.
The Canonsburg, Pennsylvania-based coal producer has a $2.12 billion market cap; its shares were trading around $60.75 on Monday with a price-book ratio of 3.16 and a price-sales ratio of 1.47.
Based on the GF Value Line, the stock appears to be significantly overvalued.
GuruFocus rated Consol’s financial strength 5 out of 10. In addition to insufficient interest coverage, the Altman Z-Score of 1.34 warns the company could be at risk of bankruptcy. Further, the WACC eclipses the ROIC, so the company is struggling to create value.
The company’s profitability scored a 6 out of 10 rating. Although its margins and returns are underperforming versus competitors, Consol has a high Piotroski F-Score of 7, meaning operations are healthy. Further, revenue per share has declined in recent years.
David Einhorn (Trades, Portfolio) is Consol’s largest guru shareholder with a 4.24% stake. Ken Heebner (Trades, Portfolio), Simons’ firm, Royce and Joel Greenblatt (Trades, Portfolio) also have positions in the stock.
Arch Resources
Impacting the equity portfolio by -3.14%, Azvalor trimmed the Arch Resources (ARCH, Financial) position by 42.13%, selling 283,426 shares. The stock traded for an average price of $158.75 per share during the quarter.
The fund now holds 389,332 shares total, which make up 5.46% of the equity portfolio. It is also the fifth-largest holding. According to GuruFocus, the fund has gained 143% on the investment over its lifetime.
The coal miner headquartered in St. Louis has a market cap of $2.35 billion; its shares were trading around $125.72 on Monday with a price-earnings ratio of 2.59, a price-book ratio of 1.97 and a price-sales ratio of 0.76.
The GF Value Line suggests the stock is significantly overvalued currently.
Arch Resources’ financial strength was rated 8 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company is supported by a robust Altman Z-Score of 5.23 that indicates it is in good standing. The ROIC also surpasses the WACC, so value creation is occurring.
The company’s profitability did not fare as well, scoring a 5 out of 10 rating despite having strong margins and returns. Arch Resources also has a high Piotroski F-Score of 7 as well as a one-star predictability rank.
Of the gurus invested in Arch, Azvalor has the largest position with 2.10% of its outstanding shares. Simons’ firm, Ken Heebner (Trades, Portfolio), Bestinfond (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Jones and several other gurus also own the stock.
Euronav
The fund slashed the Euronav (XBRU:EURN, Financial) investment by 80.51%, selling 3.83 million shares. The transaction impacted the equity portfolio by -2.99%. Shares traded for an average price of 11.27 euros ($11.48) each during the quarter.
Azvalor now holds 927,647 shares total, giving it 1.05% space in the equity portfolio. It has gained an estimated 34.45% on the investment so far.
The Belgian company, which operates a fleet of crude oil tankers, has a market cap of 2.90 billion euros; its shares closed at 14.36 euros on Friday with a price-book ratio of 1.65 and a price-sales ratio of 7.84.
According to the GF Value Line, the stock is significantly overvalued currently.
GuruFocus rated Euronav’s financial strength 2 out of 10, weighed down by a low Altman Z-Score of 1.04, which warns it could be at risk of bankruptcy, and weak debt-related ratios. The WACC also outshines the ROIC, so the company is struggling to create value.
The company’s profitability scored a 3 out of 10 rating on the back of negative margins and returns that underperform a majority of industry peers. Euronav also has a low Piotroski F-Score of 2, indicating operations are in poor shape, and a one-star predictability rank that is on watch due to a decline in revenue per share.
The Internacional FI Fund holds 0.46% of Euronav’s outstanding shares.
Additional trades and portfolio composition
During the quarter, Azvalor also entered new positions in Bayer AG (XTER:BAYN, Financial) and Centrais Eletricas Brasileiras SA (EBR, Financial) as well as trimmed its holdings of Whitehaven Coal Ltd. (ASX:WHC, Financial), TGS ASA (OSL:TGS, Financial) and The Drilling Co. of 1972 AS (OCSE:DRLCO, Financial).
Over 80% of the fund’s $995 million equity portfolio, which is composed of 64 stocks, is invested in the energy and basic materials sectors.
Internacional FI returned 38.70% in 2021, outperforming the S&P 500’s 28.7% return and the MSCI Europe’s return of 25.13%.
