azvalor Asset Management is a Madrid deep-value boutique founded in 2015 by Álvaro Guzmán de Lázaro and Fernando Bernad, formerly the core of Bestinver's investment team in the Graham tradition. It is known for contrarian concentration in unloved cyclical assets — gold and silver miners, oil services, uranium — buying into panic and exiting once value is realized. Its flagship international fund is about 70% of firm AUM and has more than tripled since inception a decade ago; letters were quarterly from 2016-2022 and semiannual since 2023.
This report says that in early 2019, the stock market was full of hype—companies like Beyond Meat had sky-high prices but no profits. Azvalor's fund, however, bought cheap, ignored stocks (like uranium miners and oil services) that were actually improving. Their performance lagged behind the market, but the author argues this is like the 2000 dot-com bubble: popular stocks are overpriced, and their own holdings are undervalued. For regular investors, the takeaway is to avoid chasing trendy stocks and instead look at out-of-favor industries (like energy) that might bounce back.
Azvalor's letter to investors discusses the fund's performance in the first half of 2019 and since its inception at the end of 2015. The core view is that the current market is experiencing an unprecedented speculative bubble, with stock markets being expensive and fixed-income markets showing a his
This chapter discusses the performance of the Azvalor fund in the first half of 2019 and provides an in-depth analysis of the current market environment. The report notes that although the fund's performance has lagged its benchmark in the short term (the international portfolio returned +0.1% year-to-date versus the benchmark's +12.3%; the Iberian portfolio returned -1.1% versus the benchmark's +5.4%), the author believes the market is experiencing an unprecedented speculative bubble, highly reminiscent of the 2000 dot-com bubble. The core backdrop is that stock markets are expensive, fixed-income markets are experiencing a historic bubble, valuation dispersion has reached extreme levels, and Azvalor's portfolio is attractively valued.
The author's core investment argument is: the current market exhibits systemic irrationality and rampant speculative sentiment, but Azvalor's portfolio holds long-term value, and short-term market mispricing will ultimately be corrected. Counterintuitive judgments include:
The author cites multiple data points to support the judgment of a speculative bubble:
| Indicator | Data |
|---|---|
| Total value of U.S. stocks and fixed-income markets as a percentage of GDP | Reached a peak in 2018 not seen since 1940, and surpassed it in 2019 |
| Passive asset management as a share of U.S. stock market value | 60% (per JP Morgan) |
| Share of global bonds with negative nominal yields | 25% (including some European junk bonds) |
| Share of IPOs from loss-making companies in 2018 | Reached 80% in some quarters, the highest since the dot-com bubble |
| Beyond Meat valuation | Market cap of $14 billion, annual sales of $240 million, price-to-sales ratio of approximately 60x, and loss-making |
| Stock options as a percentage of sales for select tech companies | 20% to 60% (Dropbox, Twilio, Splunk, Workday, etc.) |
| Total market cap of FANGMAN (Facebook, Amazon, Netflix, Google, Microsoft, Apple, Nvidia) | Equivalent to half the total market cap of all listed companies in the UK, Germany, and France combined |
| Crude oil price increase from 2016 lows | 110% |
| Oilfield services sector performance over the same period | Down 40% |
| Dot-com bubble case: Sun Microsystems | Stock price rose from $5 to $64 (1996-2000), then fell back to $5, with a peak price-to-sales ratio of 10x |
| Dot-com bubble case: Terra | Stock price rose from €3-4 to over €160, then fell to €1 |
The author also emphasizes that the fundamentals of many portfolio holdings are improving, yet their stock prices are declining, providing "clues" that the market lacks "calculation" and insight.
| Company/Asset | Role | Key Data | Bullish/Bearish |
|---|---|---|---|
| Beyond Meat | Typical representative of speculative bubble | Market cap $14B, annual sales $240M, P/S 60x, loss-making | Bearish |
| WeWork, Tesla, Uber, Crowdstrike | Cases of overvaluation and underestimated risk | No specific data provided | Bearish |
| Dropbox, Twilio, Splunk, Workday | Cases of stock option abuse | Option costs as % of sales: 20%-60% | Bearish |
| FANGMAN (Facebook, Amazon, Netflix, Google, Microsoft, Apple, Nvidia) | Market concentration risk | Total market cap equals half of all listed companies in UK, Germany, and France combined | Bearish (implied) |
| Telefónica | "Darling" of the dot-com era | No specific data provided, but used as a case of bubble burst | Neutral (historical case) |
| Catalana Occidente | Representative of "old economy" companies | No specific data provided, but used as a case of value recovery after bubble burst | Bullish (implied) |
| Oilfield services sector (not specifically named) | Neglected cheap asset | Oil up 110%, sector down 40% | Bullish (implied) |
This chapter focuses on the latest fundamental changes and market pricing dislocations in four heavy holdings (Cameco, Buenaventura, Tullow Oil, Consol Energy) within the Azvalor international portfolio. The report argues that despite the recent sharp declines in these companies' stock prices, the supply-demand dynamics in their respective industries are improving, or prices have reached unsustainably low levels, presenting contrarian investment opportunities.
| Company | Recent Stock Price Decline | Current Valuation | Key Fundamental Improvement Signals |
|---|---|---|---|
| Cameco | Down 22% in the past month, over 80% below historical highs | Normalized P/E of 6.5x, debt-free | Uranium demand has exceeded pre-Fukushima levels; China/India accelerating nuclear plant construction; long-term contract prices significantly above spot; major producers maintaining supply discipline |
| Buenaventura | Down over 10% from recent high of $17.5 | No specific multiple given, but stated to be far below value | Gold/silver prices rebounding; Cerro Verde copper mine production decline is a one-time stripping operation, expected to improve shortly |
| Tullow Oil | Down 25% from 2018 highs, once fell 35% | Below 6.5 times earnings | Slightly lower Ghana production due to technical issues; Uganda project approval delayed; Guyana exploration success could independently impact value |
| Consol Energy | Down 44% year-to-date, hitting all-time lows | 3 times normalized earnings, 2 times 2019 earnings | US natural gas prices have fallen to extremely low levels seen in 2016, but this is unsustainable (100% of producers are losing money); the company is the most efficient coal producer and has announced a stock buyback program |
Overall Portfolio Data:
This chapter focuses on the confidence of the Azvalor fund management team in the current portfolio, as well as the fund manager's validation of their investment judgment through concrete actions (increasing fund holdings). The report aims to convey to investors the management's strong conviction in the long-term returns of the portfolio.
The author's core argument is that despite unfavorable market conditions, the fund management team is highly confident in the potential of the companies within the portfolio, viewing the current environment as a "historic investment opportunity." A counterintuitive judgment is that management proves its point through personal increases in fund holdings ("skin in the game"), rather than relying on short-term market performance.