YAISA FUND RESULTS 2012

Transcription

1 YAISA FUND RESULTS 2012 Operating Days 550 Total Return (since Sept 2011) 15.31% Average Daily Return 0.03% Average Annual Return 10.16% Performance - vs - Index Yaisa Fund (1) IBEX 35 (2) (1) - (2) Total (since Sept 2011) 15.31% 5.88% 9.43% Year % -4.66% 11.23% Year 2013 (until March 2013) 7.98% 5.74% 2.25% 2012 it s been a good year. Not as much for results as for the experience acquired in my rookie year as amateur fund manager. Yaisa fund s total return today March 10 th 2012, is 15.31% since its creation in September 8 th It has outperformed the Spanish Index by 9.34% averaging an annual return of 10.16%. Yaisa is a really small fund where I seek companies severely punished by the recession originated in I seek undervalued companies quoted in the Spanish Index IBEX 35 to invest in long positions until the intrinsic value is reflected again by the markets. Spain still has to solve some big economic and social problems; the unemployment rate is around 26.02%, its pension system is not sustainable and there s need for educational, social security and fiscal system changes given its debt levels. The tough economic environment that Spain has faced for the last few years has created some opportunities given the fact that the Market Cap of IBEX35 is just around 39.78% of the GDP which might indicate that the market is undervalued. For all those reasons I have been prospecting companies to create a diversified portfolio in different industries with big sales percentages coming from exports in emerging markets. Conditions of these companies are: Price Earnings ratio below the market average Big percentage of sales coming from exports, with a successful expansion over last years. Paying dividends My current portfolio is composed by minor stakes in SAN, TEF, REP, DIA; In banking, telecommunications, energy, and non-cyclical goods industries respectively.

2 Of course, on my rookie year and almost by definition I have committed many mistakes from I keep learning: - YPF expropriation I did not see that one coming - A good lesson to learn. I guess I was not experienced enough to know that Latin American governments such as Argentina would be fearless expropriating YPF from Repsol. I don t think that was a smart move to do from the Argentinean government, it s a bad decision that will scare current and potential foreign investments. In any case, that was a speculative move on my side. My relief is that Repsol continues to be a good company even after the event, operating in emerging markets, and having a great track record discovering new reserves. - Timing on Telefonica Although Telefonica is managing most of the Telecommunications infrastructures in Spain and many Latin American markets. Telcos industry is suffering turbulences given the potential disruptions that might change its current business model. The sounded entry of Facebook in the industry, mobile apps, data storage and data transfer are going to shape the industry differently from what we use to know. Telefonica s future depends on how close to innovation it s going to position itself. They did a great job with Wayra (an accelerator Startup platform) which allows them to keep in touch with the reality of the industry and have a growing portfolio in startups that are giving hints to where the industry is going. Although the stock it s been down for most part of the year, results for 2012 were good for the company, especially in emerging Markets. I m also keen on the new financial deleverage plan of Telefonica. - Fees impact in a Small fund Another challenge in my rookie year as portfolio manager is related to operations. Being a really small fund, operating fees bite a considerable amount of the return. Keeping a low volume of transactions has helped a lot in this regard. - Lack of experience and focus Maybe the biggest issue to Yaisa Fund s performance is personal. I need to be more focus and organized despite different distractions. I lack of technical experience and personal stability in terms of a job. That affects negatively both in time allocation and psychologically when managing

3 the fund. The addition of a good knowledgeable mentor would be great in order to solve part of the issue. Some good decisions have been made when choosing stock as dividend payment for the undervalued stocks. Also adding DIA in our portfolio has been the best pick of the year; the company has a great growth rate in emerging markets and profitability. PORTFOLIO SUMMARY 2012 Company Profit Margin Assets Turnover Financial Leverage ROA ROE SAN 5.03% % 3.52% TEF 6.30% % 14.20% DIA 1.43% % 99.14% REP 3.22% % 7.50% Stock Price EPS Div Yield% Book Value B/V per Market to Company (7 th March 2013) 2012 PER 2012 (B/V)* share B/V SAN % TEF % N/A N/A DIA % N/A N/A REP % *numbers in millions Calculated by subtracting total Liabilities, Goodwill and intangible assets from Total Assets Santander During 2012 total payment defaults from debtors increased to 4.54% from 3.89% being the highest in the Spanish region with 9.65%. Also impairments have impacted severely P&L due asset s restructuration in Real State and there is a high rate of foreclosures. On the other side it has a stronger presence in Emerging Latin American markets focusing in Brazil. Latin America accounts nearly 50% of total income and almost most of the required impairments have been reflected in the balance assets of the bank, leaving Santander as one of the healthiest positions in the industry.

4 Repsol The outcome of potential litigations with Argentina caused by the expropriation of YPF may take long time to resolve and affect Repsol s focus in its operating activities. There s also a reduction in sales and margins at pump stations in the Spanish region have been noticeable due the current recession. Nevertheless, operating income in 2012 totalled 2,303 M, 77% higher than 2011, mainly as the result of resumed operations in Libya, enhanced earnings performance in Bolivia, and the appreciation of the dollar versus the Euro. At year-end 2012, the proven reserve replacement rate stood at 204%. This is the third consecutive year in which Repsol s replacement rate at the end of the year was above 120%. Dia Profits in 2012 grew 60.4%, Dia has achieved sales growth in almost all countries including Spain. Brazil accounts for 13.3% of the sales. Dia keeps investing heavily in emerging markets and acquiring assets in Europe (Schlecker Home Shopping). Its high financial leverage and asset turnover is very common given the nature of the business. Financing operations from accounts payables is a regular practice among the industry. Its operations are mainly in Europe, South America and China. Telefónica Telefonica has the challenge of reducing the amount of debt. It made cut dividends in 2012 and it s fully committed in decreasing its financial risk. Net financial debt stood at 51,259M in December The proactive refinancing policy has enable to cover debt maturities beyond 2014 eliminating refinancing risk. Although disruption business models in telcos industry might happen. Telefonica is still doing well in terms of internationalization. It keeps expanding operation in South America, especially in Brazil, source of 22% in sales of the group where it s going to invest 2,214M during looks promising. I need to keep track of new opportunities that may arise in the future and be careful when choosing exit strategies for current positions. Constrains in time and funds to allocate to Yaisa are a challenge that I hope I ll be able to solve and keep improving its performance. Fredi Fernandez March 10 th 2013

5 APPENDIX Financial data extracted from audited annual Financial Statements 2012 SANTANDER TELEFONICA DIA REPSOL Company Profits Sales Total Assets Total Liabilities Equity Intangible assets Goodwill SAN TEF DIA REP numbers in millions of Company Shares Div Rate Market Value SAN TEF DIA REP numbers in millions of