Francisco Garcia Paramés, chairman and chief investment officer of Cobas Asset Management, disclosed earlier this month his top five buys for the first quarter were Golar LNG Ltd. (GLNG, Financial), Saipem SpA (MIL:SPM, Financial), Semapa SA (XLIS:SEM, Financial), Melia Hotels International SA (XMAD:MEL, Financial) and Cairn Energy PLC (LSE:CNE, Financial).
Paramés, one of the speakers at our Value Conference earlier this month, managed Bestinfond (Trades, Portfolio) until September 2014. The Spanish investor’s 25-year track record near the top of performance rankings makes him one of Europe’s best asset managers in the value school and he is often dubbed the Spanish equivalent of Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio).
A self-taught follower of Buffett’s investment approach, Paramés applies the principles of value investing within the framework of the Austrian business cycle theory. As of quarter-end, Paramés’ $784 million equity portfolio contains 72 stocks, of which six represent new holdings. The portfolio’s top sectors in terms of weight are industrials, consumer cyclical and consumer defensive.
Golar LNG
Paramés added 579,209 shares of Golar LNG, increasing the position 59.69% and his equity portfolio 1.39%. Shares averaged $22.07 during the quarter.
The Hamilton, Bermuda-based company engages in the transportation, regasification, liquefaction and trading of liquefied natural gas. GuruFocus ranks the company’s financial strength 4 out of 10 on several weak indicators, which include increasing long-term debt over the past three years, interest coverage below Benjamin Graham’s required threshold of 5 and an Altman Z-score that suggests possible financial distress. Despite this, Golar LNG’s profitability ranks 6 out of 10 primarily due to a strong Piotroski F-score of 6 and a three-year revenue growth rate that outperforms 66.19% of global competitors.
Other gurus that increased their holdings of Golar include Pioneer Investments (Trades, Portfolio) and Louis Moore Bacon (Trades, Portfolio).
Saipam
Paramés purchased 1,556,356 shares of Saipam, giving the stake 0.94% equity portfolio space. Shares averaged 4.22 euros ($4.70) during the quarter.
Paramés said in his quarterly letter that even though Cobas’ International Portfolio gained 10.80% for the quarter, underperforming the benchmark return of 12.80%, he feels confident about the upside potential ahead. Paramés said Saipam, an Italian oil and gas conglomerate, took advantage of the “crisis” in the energy sector during 2015 and reduced its long-term debt in 2016 through a “capital increase.” GuruFocus ranks Saipam’s financial strength 5 out of 10: Even though the company’s interest coverage underperforms 82.64% of global competitors, its debt ratios are outperforming over 68% of global energy equipment and services companies.
Semapa
Paramés purchased 382,256 shares of Semapa, increasing the holding to 396,694 shares. The transaction increased the equity portfolio 0.73%. Shares averaged 14.88 euros during the quarter.
The Portuguese forest products manufacturer operates three business segments based on product type: paper and pulp, cement and environment. GuruFocus ranks the company’s profitability 8 out of 10 on several positive indicators, which include expanding profit margins, a strong Piotroski F-score of 7 and a three-year revenue growth rate that outperforms 86% of global competitors. Despite this, Semapa’s business predictability ranks two stars out of five as revenues have decelerated over the trailing 12 months.
Melia Hotels
Paramés purchased 598,671 shares of Melia Hotels, giving the position 0.63% equity portfolio space. Shares averaged 8.58 euros during the quarter.
The Spanish travel and leisure company owns and operates midscale, upscale and premium hotels across brands like Sol Hotels & Resorts, Melia Hotels & Resorts and Grand Melia. GuruFocus ranks the company’s profitability 4 out of 10: Although the returns on equity and assets outperform over 70% of global competitors, Melia Hotels’ profit margins are outperforming just over 50% of global travel and leisure companies. Additionally, the company’s three-year revenue per share decline rate of 2.90% and three-year total revenue growth rate of 1.80% are lagging over 50% of global competitors.
AzValor Iberia FI also has a position in Melia Hotels.
Cairn Energy
Paramés purchased 2,185,075 shares of Cairn Energy, giving the stake 0.52% equity portfolio space. Shares averaged 1.85 pounds ($2.34) during the quarter.
The Edinburgh, Scotland-based company engages in exploration activities in Greenland, Europe and Africa. GuruFocus ranks the company’s financial strength 5 out of 10: Although the debt ratios are outperforming 86% of global competitors, Cairn Energy’s Altman Z-score suggests possible financial distress, while the Beneish M-score suggests possible earnings manipulation.
See also
Paramés joined fellow gurus Mario Gabelli (Trades, Portfolio) and Chuck Royce (Trades, Portfolio) at our value conference earlier this month. Early registration for the 2020 Value Conference has started; register now for $300 off the regular price.
Disclosure: No positions.
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