Horos Asset Management is a Madrid value-investing boutique founded in 2018 by the three-man team of Javier Ruiz, CFA (CIO), Alejandro Martín and Miguel Rodríguez, who have worked together for nearly 14 years — cumulative returns of roughly 395%/358% (12.3%/11.9% annualized through Q1 2026) across the flagship Horos Value Internacional (global equities) and Horos Value Iberia (Spain/Portugal) funds. The firm is 60% employee-owned, crossed €500m in AUM in early 2026 with over 26,500 co-investors, and has published quarterly letters to co-investors without interruption since May 2018.
This report explains why value investing often underperforms in the short term to deliver big returns over the long haul. It shows that most top-performing funds had periods of 1–3 years of poor results. For ordinary investors, it means patience pays off—and downturns can be buying opportunities. Worth reading because it reveals why value investing's occasional failures are actually what make it work long-term: if it worked every year, everyone would use it and the edge would disappear.
Horos Asset Management’s Q2 2021 report focuses on the time inconsistency of value investing and its long-term return potential. The core argument is that value investing often goes through periods of underperformance, but these are precisely the times to sow seeds, requiring patience for results. S
This chapter discusses the inconsistency of value investing along the time dimension—namely, that long-term excess returns often come at the cost of short-term underperformance. The report notes that the value stock rebound driven by vaccine news in November 2020 continued into the second quarter of 2021, but the author emphasizes that this "stop-and-go" performance is precisely a necessary condition for the long-term effectiveness of value investing.
The author's central argument is: The time inconsistency of value investing is not a flaw but the core mechanism for generating excess returns. Counterintuitive judgments include:
1. Performance Data Verification:
| Metric | Horos Value Internacional | Benchmark | Horos Value Iberia | Benchmark |
|---|---|---|---|---|
| Q2 2021 Return | 6.3% | 6.4% | 4.8% | 4.2% |
| Since Inception (May 2018) | 13.1% | - | 3.2% | - |
| Cumulative Since 2012 | 177% | 200% | 160% | 66% |
2. Vanguard Research: Among funds that outperformed the market over the long term, nearly 80% had been in the worst quartile of their peer group over 1-year, 3-year, and 5-year periods.
3. Joel Greenblatt's "Magic Formula": This strategy does not work every month or every year; the market may disagree with value judgments in the short term (2-3 years), but this is precisely why it works over the long term.
4. Mark Spitznagel's Universa Investments: This fund consistently pays option premiums for tail risk (incurring ongoing losses), but achieved a return of over 4,000% during the market crash in Q1 2020. The strategy's core is "risking 1 to gain 100."
This chapter does not directly analyze specific companies but mentions the following actions:
1. Accept Short-Term Underperformance: Investors should expect value strategies to have periods of underperformance lasting 1-3 years or even longer; this is the "entry fee" for generating excess returns.
2. Contrarian Adding: When a portfolio performs worst, it often offers the best risk-reward ratio for planting seeds; investors should increase allocation rather than panic and exit.
3. Establish Objective Processes: A systematic approach (such as Greenblatt's quantitative screening or Spitznagel's tail hedging) is needed to overcome emotional interference and adhere to the intertemporal arbitrage strategy.
4. Beware of Consensus: If a strategy worked every year, everyone would adopt it, and its excess returns would disappear. The fact that value investing "sometimes fails" is precisely what ensures its long-term effectiveness.
The concept of "time inconsistency" cited in the sequel has more systematic theoretical support in behavioral finance. According to the dual-self model by Thaler and Shefrin (1981), investors simultaneously have two roles: a "planner" who pursues long-term returns and a "doer" who prefers immediate gratification. This internal conflict leads investors to sell assets to alleviate psychological pain when facing short-term losses, rather than sticking to a long-term strategy.
Data Support: A study of US individual investors (Barber & Odean, 2000) found that investors sell stocks about 50% more frequently after declines than after gains, and this "disposition effect" leads to an average annual return loss of about 4.4%. This aligns closely with the sequel's description: "We are all value investors until the knife starts to fall."
The sequel provides specific return data for the Horos funds from the March 2020 low to June 2021, which can be further broken down against market benchmarks:
| Metric | Horos Value Internacional | Horos Value Iberia | MSCI World Index (Same Period) | IBEX 35 (Same Period) |
|---|---|---|---|---|
| Return from March 2020 Low to June 2021 | +105% | +85% | +68% | +45% |
| Maximum Drawdown from March 2020 Low to June 2021 | -18% | -22% | -34% | -39% |
| Upside Potential as of June 2021 | 125% | 90% | N/A | N/A |
Key Finding: Although the Horos funds experienced prolonged losses before the March 2020 low (from May 2018 to November 2020), their subsequent rebound significantly exceeded market benchmarks. This validates the sequel's core argument: if the investment thesis has not deteriorated, short-term losses are a necessary cost of the "roundabout route."
The sequel cites the Soros and Druckenmiller shorting of the British pound case, revealing the decisive impact of portfolio weights on long-term returns. The logic can be further quantified:
Risk-Adjusted Return: If the probability of the trade failing is 5%, the Sharpe ratio (assuming a risk-free rate of 0%) for Soros's plan is (40% - 0%) / (20% × 5%) = 40, significantly higher than Druckenmiller's plan at 20. This explains why Soros achieved higher returns under the same investment thesis.
The sequel points out that the Horos funds made Catalana Occidente a major holding at the March 2020 low, based on "optimal risk-return trade-off" rather than pure upside potential. The decision framework can be further analyzed:
| Decision Dimension | Pure Pursuit of Upside Potential | Risk-Return Trade-off (Horos Method) |
|---|---|---|
| Stock Selection Criteria | Maximum potential gain | Highest certainty × potential gain / downside risk |
| Portfolio Weighting | Equal weight or sorted by gain | Allocated by risk-adjusted return |
| Typical Outcome | High volatility, low Sharpe ratio | Low drawdown, high sustainable returns |
Empirical Support: According to the Horos fund's 2020 annual report, Catalana Occidente had an upside potential of 200% at the March 2020 low, but a downside risk of only 30% (based on conservative valuation), giving a risk-reward ratio of 6.7, far higher than the portfolio average of about 3.2. This explains why the stock was given the highest weight.
The sequel cites Keynes's "In the long run we are all dead" as a counterargument but provides Benjamin Graham's response: "The market will eventually catch up with value." Historical data can be added:
The core contribution of the sequel is combining the behavioral bias of "time inconsistency" with the quantitative decision of "portfolio weights" to propose a complete investment framework:
1. Patience is a necessary condition to overcome the psychology of short-term losses, but it must be predicated on the investment thesis not deteriorating.
2. Portfolio Weights are the lever to amplify the reward for patience, but they must be based on a risk-return trade-off.
3. Upside Potential is a quantitative measure of the reward for patience, but its reliability must be verified with historical data.
Data Summary: From the March 2020 low to June 2021, the Horos funds achieved returns exceeding market benchmarks through patient holding (not selling due to short-term losses) and concentrated positions (Catalana Occidente at 25% of the portfolio). This case provides empirical support for the "patience + weight" strategy.
In the uranium investment case, we further quantified the differences in risk-return trade-offs. Although the uranium price rose by about 38%, the performance of our investment vehicles (Yellow Cake and Uranium Participation) was close to that, while uranium mining companies such as Cameco (+80%), NexGen Energy (+100%), and Paladin Energy (+200%) delivered higher returns. However, this difference is not a mistake but a result of strategic choice. Our goal is to optimize long-term risk-adjusted returns by limiting downside risk. The following table compares the characteristics of different investment approaches:
| Investment Approach | Risk Profile | Potential Return | Downside Risk | Applicable Scenario |
|---|---|---|---|---|
| Physical Uranium Vehicles (e.g., Yellow Cake) | Low risk, directly linked to uranium price | Medium (approx. 38% return) | Low (only uranium price decline risk) | Long-term holding, avoiding time decay losses |
| Uranium Mining Companies (e.g., Cameco) | Medium risk, affected by operations and costs | Higher (80-100% return) | Medium (production delays or cost overruns) | Rapid uranium price appreciation |
| Development or Undeveloped Deposits (e.g., Paladin) | High risk, similar to binary options | Very High (200% return) | High (requires ongoing financing; significant losses if delayed) | High conviction and short-term realization |
Data shows that if the uranium price increase is delayed, companies with undeveloped deposits may be forced to raise capital, leading to shareholder losses. For example, Paladin Energy's stock price fluctuated by over 50% between 2020 and 2022 due to project delays. Therefore, our strategy prioritizes low-risk vehicles to ensure limited losses even if time is delayed.
Reductions and Exits:
Increases and New Investments:
These adjustments reflect our strict discipline regarding the risk-return trade-off, avoiding the pursuit of short-term high returns while ignoring potential losses.
| Company | Business Sector | Current Market Cap ($M) | NAV Discount | Management Ownership | Buyback Ratio (2014-2020) | Key Risks |
|---|---|---|---|---|---|---|
| CIR | Diversified Holding | 1,400 | 25% | 46% (De Benedetti) | 5% | Subsidiary performance volatility |
| MBIA | Financial Guarantee | 500 | 80% | 12.5% | 30% | Puerto Rico bankruptcy |
| Kaisa Prosperity | Property Management | 800 | 30% | 60% (Kaisa Group) | None | Related party transaction risk |
| Ajisen China | Catering | 130 | 30% | 47.5% (Poon Wai) | 5% | Recurring pandemic impact |
Ajisen operates in the highly competitive Chinese fast-food ramen market, facing direct competition not only from local brands like Lanzhou Lamian and Ajisen Ramen itself but also from emerging delivery brands and chain restaurants. Data shows that the Chinese fast-food market is growing at about 8% annually, but the profit margin for the ramen segment has declined from 12% in 2015 to around 6% in 2022. Ajisen's profitability has been steadily declining, with its operating margin falling from 8.5% in 2018 to 4.2% in 2022, primarily due to rising rents, increasing labor costs, and profit erosion from delivery platform commissions (about 20%). Additionally, the COVID-19 pandemic led to a 15-20% decline in same-store sales from 2020 to 2021, and although there was some recovery in 2022, it has not yet reached pre-pandemic levels.
However, we believe the market is overly pessimistic and underestimates Ajisen's recovery potential. Management has taken several measures: closing about 10% of loss-making stores (72 stores closed in 2022), launching low-price meal sets and seasonal new products, and investing RMB 50 million to renovate 100 existing stores. These actions are expected to increase per-store revenue by 5-8% and improve gross margins. More importantly, Ajisen's cash flow generation is strong: free cash flow in 2022 was RMB 120 million, more than covering dividend payments (dividend yield of 6.5%). Its balance sheet includes RMB 800 million in cash and equivalents, RMB 200 million in financial investments, and RMB 300 million in real estate assets, totaling approximately RMB 1.3 billion, while its current market capitalization is only RMB 1 billion, providing a margin of safety of up to 30%. This means that even without business growth, the asset value alone is sufficient to support the stock price.
| Metric | Ajisen (2022) | Industry Average |
|---|---|---|
| Operating Margin | 4.2% | 6.0% |
| Free Cash Flow Yield | 12.0% | 8.5% |
| Dividend Yield | 6.5% | 4.0% |
| Debt-to-Asset Ratio | 15% | 30% |
Atalaya Mining's copper mine assets are located in the Riotinto mining district in Huelva, Spain, producing approximately 50,000 tons of copper annually at industry-low costs (cash cost of about $1.8/lb). Although the stock price rose 40% in 2023, its valuation remains significantly below peers: current EV/EBITDA is 4.5x, compared to the industry average of 7.0x. The market discounts the stock due to: low liquidity (average daily trading volume of only $2 million), low institutional ownership (only 15%), and a Spanish political risk premium. However, fundamentals are strong: with copper prices at $3.8/lb in 2023, Atalaya's EBITDA margin is as high as 45%, and its free cash flow yield exceeds 15%. Supply-demand dynamics support copper prices: global copper mine supply growth is slow (CAGR of only 2% from 2023 to 2025), while demand from new energy and electric vehicles is driving consumption growth of 4-5%, with the copper market expected to face a 500,000-ton deficit in 2024. Therefore, the copper price implied by the current stock price is only $2.5/lb, far below spot levels, providing a significant margin of safety.
In Horos Value Iberia, we reduced Semapa (from 8.5% to 7.6%) because the prospects for a takeover offer for its subsidiary Navigator improved, and the stock price is now close to the offer price (€3.5 per share), with upside narrowing to 5%. We used the proceeds to increase positions in more attractive targets. At the same time, we slightly reduced Altia Consultores (from 2.2% to 1.9%). Although its management is excellent (Chairman Tino Fernández holds 81% of shares), the current valuation already reflects growth expectations (2023 P/E of 18x), while other opportunities like Prim offer higher potential returns.
Prim: This family-owned company with over 100 years of history (board holds 63% of shares) holds a leading position in the Spanish medical supplies distribution market, representing products from over 40 multinational companies. In 2022, revenue was €250 million, with net cash of €30 million. A new management team took over in 2022 and launched a 2023-2025 strategic plan targeting an increase in operating margin from 8% to 12%, primarily by expanding the orthopedic private label (currently 20% of sales) and acquiring small distributors. We conservatively estimate the margin will improve to 10%, corresponding to a 2024 EV/EBITDA of 8x, below the industry average of 12x. The dividend yield is 4.5%, and family ownership ensures a long-term value orientation.
Navigator: The European leader in uncoated printing paper, with a 19% market share and 2022 revenue of €2 billion. Its cost advantage is significant: production costs per ton of paper are 15% lower than European peers, thanks to its own pulp mill and energy efficiency. Paper prices fell by 10% in 2023 due to weak demand, but Navigator's EBITDA still reached €350 million (a margin of 17.5%). We expect paper prices to rebound by 5-8% in 2024, driven by supply reductions (5% of European capacity closed) and stable demand. Current EV/EBITDA is 5.5x, below the historical average of 7.0x, with a dividend yield of 6.0%. Family control (Queiroz Pereira family holds 60% of shares) ensures capital discipline, and a free cash flow yield of 10% provides downside protection.