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 covers Azvalor's fund performance in Q3 2020. Despite net asset values falling (some funds down 20-30%), the manager argues this is a good time to buy, as the underlying companies' actual value is growing. They use 'estimated value' to measure true worth—for example, one fund's net value is 87 euros, but estimated value is 230 euros, implying nearly 2x upside. They sold stocks that reached fair value (like Gold Fields) and bought beaten-down ones (like SQM, Suncor), while admitting mistakes (e.g., Transocean nearly total loss). For regular investors, the key is not to panic over short-term drops, focus on company value over price, and be patient for returns.
Azvalor's investment research article discusses the performance of its funds in the third quarter of 2020 and its value investing strategy. The core argument is that although the Azvalor Internacional and Azvalor Blue Chips funds rose by 41% and 59% respectively from the March low to the end of the
This chapter discusses the performance of Azvalor funds in the third quarter of 2020 and their value investing philosophy. In terms of market environment, although the funds rebounded sharply from the March lows, the overall performance in the third quarter was flat, and all funds recorded negative returns year-to-date, reflecting the widespread challenges faced by value strategies.
The author's core investment argument is: The decline in fund net asset value is precisely the most profitable and lowest-risk buying opportunity. Price differs from value, and market volatility stems from investor psychology (ranging from optimism to pessimism). The fund's strategy leverages this psychology by buying during pessimism and selling during optimism. The counterintuitive judgment is that despite the decline in net asset value, the fund's intrinsic value is actually growing, laying the foundation for future returns.
This chapter provides a detailed analysis of the Azvalor Internacional fund's portfolio adjustments and value creation process in the third quarter of 2020. The report notes that despite the fund's poor net asset value performance, by selling stocks nearing intrinsic value and buying undervalued assets, the estimated value per fund share increased from €219 to €230, generating €19.5 in "gross value." At the same time, the report candidly acknowledges investment mistakes (such as the near-total losses on Transocean and Valaris) and emphasizes the central role of patience and discipline in value investing.
The author's core investment argument is: Value creation is unrelated to short-term price fluctuations; the key lies in buying at prices below intrinsic value and selling when prices revert, even if individual errors occur—as long as mistakes are the exception, overall value can continue to grow. The counterintuitive judgment is that although the fund's total return since inception is negative, the actual value per share has increased (from €219 to €230), laying the foundation for potential future returns. The author also stresses that market returns are often concentrated in very short periods (e.g., in the Hyundai case, 6% of the holding period generated all returns), making patience more important than market timing.
| Company/Asset | Role | Key Data | Bullish/Bearish |
|---|---|---|---|
| Gold Fields | Sold | Average purchase price $6.2, sold at $15 | Bearish (reached intrinsic value) |
| Southern Copper | Sold | Average purchase price $34, sold at $48 | Bearish (only 25% upside remaining) |
| Sprott | Sold | Average purchase price $21, sold after 4 years at $56 | Bearish (reached intrinsic value) |
| Barrick Gold | Partially sold | Cumulative gain 125%, still over 50% upside (gold at $2,000/oz) | Neutral (partial profit-taking) |
| Agnico | Partially sold | Cumulative gain 86%, still over 50% upside | Neutral (partial profit-taking) |
| Pan American Silver | Partially sold | Cumulative gain 139%, still over 50% upside | Neutral (partial profit-taking) |
| Hyundai | Sold | Held nearly 5 years, surged 157% in final 3 months, total return 53% | Bearish (reached target) |
| SQM | New buy | Average purchase price <$30, down 50% from high | Bullish (cyclical trough, strong competitive position) |
| CF Industries | New buy | Purchase price over 40% below 1-year high, P/E <8x | Bullish (low cost, solid balance sheet) |
| OCI | New buy | Free cash flow yield 14% | Bullish (low cost, family-controlled, logistics network) |
| Suncor | New buy | Purchase price $15, down 72% from 2-year high, normalized P/E 6x | Bullish (low cost, stable operations) |
| New Gold | Added | Average purchase price $1.8, current $2.1, still over 60% upside | Bullish (new CEO, gold/copper price support) |
| Transocean | Written down | Value destruction -€7.6 per share | Bearish (near-total loss) |
| Valaris | Written down | Value destruction -€0.9 per share | Bearish (near-total loss) |
| Petrofac/Tullow Oil/Consol Energy | Held | Together account for 4% of fund | Neutral (limited risk, but prices below estimated value) |
This section primarily reports on the capital flows of the Azvalor fund in the third quarter of 2020, serving as the conclusion of the investor letter. The report notes that despite significant market volatility, the fund experienced minimal net outflows, reflecting clients' confidence in the investment strategy.
The author's core viewpoint is that although the fund's net asset value has underperformed, clients have not engaged in large-scale redemptions, demonstrating investors' trust in Azvalor's investment process. The author believes that this trust is a key foundation for executing a long-term value investment strategy.
| Indicator | Amount (EUR) |
|---|---|
| Total Subscriptions | 22M |
| Total Redemptions | 29M |
| Net Outflows | 7M |
| Percentage of Assets | <1% |
This section does not mention any specific companies or assets; it only discusses the fund's own capital flows.
For investors, the signal conveyed in this section is that despite short-term pressure on net asset value, the fund's capital position remains stable, with no panic redemptions. This suggests that existing holders have confidence in the long-term effectiveness of the strategy, reducing the risk of fund managers being forced to sell assets at unfavorable prices due to large-scale redemptions. Investors should pay attention to this capital stability, viewing it as a positive signal of the strategy's execution capability.