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 how Azvalor managed its funds in Q4 2020. The key idea: they bought cheap energy stocks (like Total and Canadian Natural Resources) and tobacco stocks (like BAT and Philip Morris) when most investors were avoiding them. These companies had strong profits but low prices—price-to-earnings ratios under 10 and dividend yields around 8%. They also bought a cinema chain, Kinepolis, at less than 8 times normal profits. Meanwhile, they sold mining stocks that had surged, like First Quantum (up 110%). For regular investors, this suggests looking at beaten-down sectors like energy and tobacco that might be recovering. It's worth reading because it shows concrete examples of contrarian investing with real numbers, not just hype.
Azvalor's International, Iberian, and Blue-Chip funds rose 24%, 21%, and 25% respectively in the fourth quarter, rebounding 77%, 31%, and 101% from their lows, but still recorded negative full-year returns (-6%, -24%, and -2%). The report's core argument is that the portfolio remains cheaper than th
This section discusses the performance and portfolio adjustments of Azvalor’s funds in the fourth quarter of 2020. In terms of market environment, although the funds rebounded significantly from their lows, they still recorded negative returns for the full year. The author believes the portfolio remains cheaper than the market, and the fundamentals of the invested companies are improving, thus expecting a sustained recovery over the coming years.
The author’s core investment thesis is that the current portfolio valuation is still significantly below the market, and the fundamentals of the holdings are improving, so the recovery trend from the lows will continue in the coming years. Counterintuitive judgments include: in sectors heavily impacted by the pandemic, such as energy and tourism (e.g., Técnicas Reunidas, Meliá), the author believes there is excessive pessimism that has already begun to correct. Meanwhile, the author increased positions in several energy and tobacco companies against the trend in the fourth quarter.
| Company/Asset | Role | Key Data | Bullish/Bearish |
|---|---|---|---|
| Iberian Portfolio | |||
| Ence, Aena, Naturgy | Liquidated | Specific returns not disclosed | Bearish (sold) |
| Acerinox, Arcelor, Applus, Elecnor | Reduced | Specific proportions not disclosed | Bearish (reduced) |
| Técnicas Reunidas | Increased | Bought after sharp decline in October | Bullish (increased) |
| Repsol, Galp, Tubacex | Held | Excessive pessimism in energy sector | Bullish |
| Meliá | Held | Rebounded after vaccine news | Bullish |
| Elecnor | Held | Traditional business is free | Bullish |
| Altri, Miquel y Costas | Held | Among best-managed pulp companies in Europe | Bullish |
| Logista | Held | Discussed in previous report | Bullish |
| Mota Engil | Held | Favorable deal with Chinese construction company | Bullish |
| International Portfolio | |||
| Total | New Buy | P/E <10x, dividend yield 8% | Bullish |
| Kinepolis | New Buy | <8x normalized earnings | Bullish |
| British American Tobacco | New Buy | 7x earnings, high ROCE | Bullish |
| Prairie Sky | New Buy | 80% below IPO price | Bullish (potential to double) |
| Hyundai Preferred Shares | New Buy | Discount >50% | Bullish (potential to double) |
| Canadian Natural Resources | New Buy | <6x normalized earnings | Bullish |
| Philip Morris | New Buy | 35% below price three years ago, 10x normalized earnings | Bullish |
| First Quantum, Freeport | Sold | +110%, +54% | Bearish (profit-taking) |
| Lundin, Grupo México | Sold | +20% | Bearish (profit-taking) |
| Suzano, CNH Industrial | Sold | +50%, +46% | Bearish (profit-taking) |