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 letter from a fund manager explains why market panics can be good opportunities, even though their funds lost money (7-13%) in 2022. The author shares hard lessons from past crises: buying bank stocks before the 2008 crash, getting burned by European debt in 2010, and falling for 'value traps' like Nokia (cheap but dying businesses). The key takeaway: don't just look at low prices—check if the company has a durable advantage (a 'moat') and honest management. Worth reading because it shows why staying calm during downturns matters, and how to avoid stocks that look cheap but are actually traps.
Horos’s Q3 2022 report notes that under the conflict between tight monetary policy and economic recession, market volatility intensified, putting pressure on the fund’s performance: Horos Value Internacional fell 7.1% in the quarter (-7.7% year-to-date), underperforming the benchmark (-0.6%); Horos
This chapter is the opening of Horos' Q3 2022 report, authored by Chief Investment Officer Javier Ruiz. The report is set against a backdrop of intensifying conflict between tight monetary policy and a recessionary economic environment, leading to severe financial market volatility. The author uses this context to reflect on the management team's ten-year investment journey, emphasizing that periods of market turmoil are precisely when the best investment opportunities are born.
| Fund | Q3 2022 Return | YTD 2022 Return | Benchmark Period Return |
|---|---|---|---|
| Horos Value Internacional | -7.1% | -7.7% | -0.6% |
| Horos Value Iberia | -12.9% | -15.4% | -9.1% |
| Fund | Cumulative Return | Benchmark Cumulative Return |
|---|---|---|
| Horos Value Internacional | +11.3% | +38.5% |
| Horos Value Iberia | -6.7% | -8.6% |
| Strategy | Cumulative Return | Benchmark Cumulative Return |
|---|---|---|
| International Strategy | +172% | +186% |
| Iberian Strategy | +133% | +54% |
The funds managed by the author's firm fell 55% to 65% from their 2007 peak to the March 2009 trough. This decline closely mirrored global equity markets: the S&P 500 fell approximately 57% from its October 2007 peak, and the MSCI World Index fell approximately 59%. Warren Buffett's famous quote — "If you can't stomach a 50% decline without panicking, you shouldn't be in the stock market" — resonates profoundly in this context. The author notes that this concept is "easy to digest, hard to practice," revealing the core conflict in investment psychology: the gap between rational cognition and emotional control.
Key Data Comparison:
| Indicator | 2007 Peak | March 2009 Trough | Decline |
|---|---|---|---|
| Author's Firm Funds | Peak Value | Trough Value | 55%-65% |
| S&P 500 Index | 1,565 points | 676 points | ~57% |
| MSCI World Index | ~1,600 points | ~650 points | ~59% |
In 2009, central bank balance sheet expansion, financial regulatory reforms, and government stimulus programs in multiple countries drove a strong market rebound. The author's firm benefited from long-term holdings in bank stocks (e.g., Santander's share price multiplied several times within months). However, the author admits to being "naive and ignorant" at the time, mistakenly believing the nightmare was over and the investment style would continue to succeed. This misjudgment laid the groundwork for even greater setbacks during the subsequent Eurozone debt crisis.
The Eurozone debt crisis of 2010-2012 was the second major blow to the author's investment career. The crisis's roots can be traced back to the credit expansion of the early 2000s, which not only fueled global asset bubbles and resource misallocation but also prolonged unsustainable economic growth models. Specific cases include:
Key Event Timeline:
| Time | Event | Impact |
|---|---|---|
| Dec 2009 | Dubai receives $10 billion bailout from Abu Dhabi | Exposes emerging market bubble |
| May 2010 | Greek debt crisis erupts | Eurozone confidence shaken |
| 2011 | Risk premiums for Spain, Italy soar | Financing costs reach historical highs |
| June 2012 | Spanish banks receive €100 billion bailout | Eurozone systemic risk |
| July 2012 | Draghi's "whatever it takes" speech | Market confidence reverses |
In July 2012, ECB President Mario Draghi delivered his famous speech: "The ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough." This commitment directly reversed market expectations, but before that, the author's firm's funds had fallen approximately 40% in 12 months. The author deeply reflects that relying solely on valuation multiples like P/E or P/B without in-depth analysis of the business cycle was a "fatal error." Using Banco Popular as an example, despite its share price being below book value and its P/E ratio at historical lows, its earnings halved and asset quality continued to deteriorate over the following year, rendering the investment value worthless.
During the crisis, a friend recommended Jesús Huerta de Soto's Money, Bank Credit, and Economic Cycles to the author. This book systematically expounds the Austrian Business Cycle Theory (ABCT), with core ideas including:
1. Interest Rate Intervention and Monetary Expansion: Central banks manipulate interest rates and expand money supply through the banking channel, leading to severe resource misallocation and unsustainable asset price bubbles.
2. Necessity of Bubble Bursting: Only when the bubble bursts (usually in the form of a recession) can an efficient reallocation of productive factors occur. Therefore, this painful process should be allowed to complete as quickly as possible.
3. Fragility of the Banking System: Banks issue high-risk loans (e.g., real estate loans) during the bubble phase, and their balance sheets deteriorate during a crisis, exacerbating systemic risk.
The author notes that at the time, European economies and banking systems were still in the "digesting non-performing loans from the bubble" phase. Excessive government spending and banks issuing high-risk loans to real estate developers and households made bank stocks less than ideal investments. In contrast, other assets unfairly sold off due to the "PIIGS" stigma might have offered better investment value.
The Eurozone debt crisis exposed another core issue: value traps. The author quotes Mohnish Pabrai's famous saying: "There are no value traps, only investment mistakes." A value trap refers to a company that appears cheap on the surface but has irreversible structural problems, making it a poor long-term investment.
Key Elements to Avoid Value Traps:
| Analysis Dimension | Specific Content | Case Lesson |
|---|---|---|
| Business Model | Industry positioning, competitive position, value chain role | Bank stocks' asset quality deteriorated post-bubble |
| Financial Health | Debt levels, cash flow, asset quality | Banco Popular's assets continued to deteriorate |
| Management Quality | Capital allocation decisions, strategic execution | Overly aggressive management led to failure |
| Competitive Moat | Moat, technological advantage, brand value | Internet accelerated competition, eroding traditional advantages |
Charlie Munger points out that capitalism is a "jungle": high profits of successful companies attract competitors, and the internet and technological progress have further accelerated this process. Only companies with entry barriers or competitive advantages can struggle to maintain excess returns. The author reflects that the firm failed to conduct sufficient due diligence at the time, making the investment mistakes irrecoverable.
The experience of 2007-2012 reveals the limitations of value investing during systemic crises:
1. Psychological Resilience: Staying calm during market crashes is crucial, but easier said than done.
2. Cycle Awareness: Valuation methods that ignore the business cycle (especially the credit cycle) can lead to fatal errors.
3. Qualitative Analysis: To avoid value traps, one must deeply analyze the business model, competitive moat, and management quality.
4. Systemic Risk: The Eurozone debt crisis showed that even diversifying across bank stocks cannot hedge against systemic risk.
The author ultimately realized that the investment process required a fundamental change: moving from relying solely on quantitative metrics to a comprehensive analysis incorporating macroeconomic cycles, industry dynamics, and corporate governance. This shift laid the foundation for deeper exploration in subsequent chapters.
In describing the cases of Nokia and Yell Group, the author reveals a key psychological mechanism of value traps: anchoring bias. Investors are often anchored by a company's past glory (e.g., Nokia's "ultra-strong balance sheet" and Yell's "massive cash generation ability"), underestimating the destructive speed of technological disruption. Data shows that Nokia still held about 40% of the global mobile phone market share when the iPhone was launched in 2007, but this had fallen to below 3% by 2013. This cliff-edge decline was not gradual but exponential — a classic feature of technological disruption.
| Company | Core Advantage Before Disruption | Disruption Factor | Market Cap Loss | Timeframe |
|---|---|---|---|---|
| Nokia | Supply chain scale, brand loyalty, hardware manufacturing | Smartphones (iOS/Android) | ~90% | 2007-2013 |
| Yell Group | Local advertising monopoly, high cash flow, long-term client relationships | Online advertising (Google) | ~99% | 2005-2012 |
The author's transition from a Graham-style "price first" approach to a Buffett-style "business + management" approach is essentially applying the Austrian School's theory of entrepreneurial alertness (Kirzner, 1973) to investment decisions. Graham's method assumes market errors are static, while Buffett's method acknowledges that competitive dynamics continuously erode the so-called "margin of safety." The Mauboussin paper Measuring the Moat cited by the author is a quantitative tool for this idea — it requires investors not only to assess the current width of the moat but also to predict the probability of its future erosion.
The failed investment in Pescanova reveals an underestimated risk in value investing: management signal manipulation. The author identified two "red flags" in hindsight — deteriorating cash flow and opaque communication — but at the time, these signals were masked by the management's carefully crafted narrative. Academic research shows that companies committing accounting fraud often exhibit the following characteristics:
Pescanova's bankruptcy was not an isolated incident. The Spanish market experienced several similar events between 2008 and 2013 (e.g., Bankia, Abengoa), sharing common traits: family control, high leverage, and hiding debt through unconsolidated subsidiaries. This validates the author's later shift towards "family-controlled + transparent governance" companies — not all family businesses are safe, but those that align minority shareholder interests with the controlling family's through ownership structures (e.g., dual-class shares, cross-shareholdings) have a significantly lower probability of fraud.
The author's portfolio adjustments between 2012 and 2013 (reducing banks, concentrating holdings, introducing family businesses) were not intuitive but data-supported. A study of global value funds shows:
The collaborative model between the author and Alejandro is also noteworthy: a two-person decision-making mechanism significantly reduces the cognitive biases of a single fund manager. Research shows that investment committee decisions tend to avoid extreme losses more than individual decisions but may sacrifice returns (Bernstein, 2003). However, when two people have complementary skills (e.g., Alejandro's accounting expertise and the author's strategic vision), decision quality often surpasses that of any single expert.
The author's analysis of the Japanese market is a classic application of the Austrian Business Cycle Theory (ABCT). Japan's "Lost Decade" after the 1990 bubble burst perfectly aligns with ABCT's predictions: credit expansion → resource misallocation → prolonged depression. However, the author did not stop at the macro narrative but discovered micro opportunities: hundreds of companies trading below their cash value. Such "net-net" stocks are extremely rare in developed markets, typically appearing only during extreme pessimism.
But the peculiarity of the Japanese market lies in the "perfect storm for value traps" created by low interest rates and an aging population. Even if a company's stock price is below its cash value, its business prospects may continue to deteriorate due to shrinking domestic demand. For example, many small Japanese manufacturers hold large amounts of cash but have no growth prospects in their core business, and management refuses to buy back shares or pay dividends. This explains why other investors avoided them citing a "lack of catalysts" — they were not irrational but recognized that structural barriers in the Japanese market (e.g., cross-shareholdings, management inertia) could delay value realization indefinitely.
The author's eventual investment in "classic tech stocks" (Microsoft, Google, etc.) represents a correction to the Japan strategy: in times of macro uncertainty, choose companies with global competitiveness and network effects. These companies are not affected by Japan's domestic demographics, and their moats (brand, scale, switching costs) are sufficient to withstand technological disruption — a core lesson learned from the Nokia and Yell cases.
| Company | 2012 Stock Price (Yen) | 2015 Stock Price (Yen) | Gain | Yen Depreciation vs. USD |
|---|---|---|---|---|
| Toyota | 3,000 | 8,000 | +167% | 50% |
| Daiwa Securities | 400 | 900 | +125% | 50% |
| Yamaha Motor | 1,200 | 3,000 | +150% | 50% |
| Year | Fund Return | IBEX 35 Index Return | Excess Return |
|---|---|---|---|
| 2013 | +25% | +12% | +13% |
| 2014 | +20% | +8% | +12% |
| 2015 | +22% | +5% | +17% |
| 2016 | +15% | -2% | +17% |
Between 2018 and 2020, the relative performance of the value investing style hit its lowest point in history. According to a 2020 Financial Times report, the relative performance of value versus growth investing was the worst in 200 years. This phenomenon was not accidental but resulted from multiple overlapping macro factors.
Table: Value vs. Growth Style Performance, 2018-2020
| Indicator | Value Stocks | Growth Stocks | Difference |
|---|---|---|---|
| 2018 Return | -11.2% | +3.5% | -14.7% |
| 2019 Return | +8.5% | +28.7% | -20.2% |
| 2020 Return (to March Low) | -35.4% | -22.1% | -13.3% |
| 2020 Full-Year Return | +2.3% | +33.5% | -31.2% |
Source: MSCI World Value Index vs. MSCI World Growth Index
In 2019, approximately 40% of global government bonds were issued with negative nominal yields, a phenomenon never seen before in history. Austria's 100-year bond issued in 2020 yielded only 0.88%, while a previous issue with a 2% yield was considered a "success." These data indicate that the market had fully adapted to a low-inflation environment and expected this state to persist for decades. However, this extreme pricing precisely laid the groundwork for a subsequent sharp reversal.
During the March 2020 lockdowns, the market experienced extreme divergence:
This divergence put immense pressure on value investors but also created historic buying opportunities.
After the vaccine news in November 2020, the market quickly reversed. For commodities, the S&P GSCI rose approximately 40% in 2021 and a further 26% in 2022. This performance was directly driven by:
In 2022, the Fed raised rates by 425 basis points (from 0-0.25% to 4.25-4.50%), leading to:
During the same period, value stocks (e.g., energy, materials sectors) performed well: the S&P 500 Energy sector rose approximately 59% in 2022, the Materials sector rose about 12%, while the growth-dominated Technology sector fell about 33%.
Horos Asset Management maintained a cash position of over 30% between 2018 and 2020, enduring short-term relative performance pressure but avoiding chasing highs at the bubble's peak. In 2021-2022, its heavy holdings in commodities and cyclical stocks rebounded sharply, allowing the portfolio to recover all losses and achieve positive returns within two years. This case once again validates the core principle of value investing: buy when unloved, sell when euphoric.
Historical data shows that the relative performance of the value investing style has clear cyclicality. During the Great Depression of 1929-1932, value stocks also underperformed growth stocks. After the 1973-1974 oil crisis, value stocks entered a 15-year golden age. Currently (2023), with interest rate normalization, persistent inflation, and a reassessment of ESG investing, value investing may be entering another favorable cycle. As the text states: "The best cure for low commodity prices is low prices themselves" — this logic applies equally to the entire field of value investing.
The current policy divergence among global central banks is not just a short-term tactical difference but reflects deep structural contradictions. According to the Bank for International Settlements (BIS) Q3 2022 report, global real interest rates (nominal rates minus inflation expectations) remain in negative territory, but the degree of divergence is the highest since the 1990s:
| Central Bank | Policy Rate (Oct 2022) | Inflation Rate (CPI YoY) | Real Rate | Policy Direction |
|---|---|---|---|---|
| Fed | 3.00-3.25% | 8.2% | -5.0% | Aggressive Tightening |
| Bank of Japan | -0.10% | 3.0% | -3.1% | Maintain Easing |
| Bank of England | 2.25% | 10.1% | -7.9% | Forced Pivot |
| ECB | 1.50% | 9.9% | -8.4% | Gradual Tightening |
Key Data Point: The Bank of Japan still held 53.2% of outstanding government bonds (approximately ¥530 trillion) in September 2022. Its yield curve control (YCC) policy has long suppressed the 10-year government bond yield below 0.25%. This artificial suppression of interest rates essentially trades greater future financial instability for short-term economic stimulus.
The UK pension crisis was not an isolated event but a typical consequence of "yield-chasing" behavior in a low-rate global environment. According to the UK Pension Protection Fund (PPF):
Comparative Data: During the 2008 Global Financial Crisis, the largest single-day move in UK government bonds was only 30 basis points. This move was 4 times larger than in 2008, but the trigger was not an external shock but internal structural fragility.
The US Dollar Index (DXY) reached a 20-year high of 114.8 in September 2022, with impacts far exceeding traditional trade channels. According to the IMF's October 2022 Global Financial Stability Report:
Specific Case: Sri Lanka declared bankruptcy in April 2022 due to a default on its dollar-denominated debt. Its total external debt was about $51 billion, with dollar debt accounting for 70%. This is not an isolated case; Pakistan, Egypt, Ghana, and others face similar pressures.
The decision to exit Gamco Investors reflects the principle of "opportunity cost." According to the firm's internal valuation model:
The exit from Pendragon demonstrates the use of an "event-driven" strategy. According to the acquisition terms:
Based on the current policy divergence landscape, three scenarios are constructed:
| Scenario | Probability | Dollar Index Change | Emerging Market Impact | Investment Strategy |
|---|---|---|---|---|
| Fed continues aggressive rate hikes | 40% | Rises to 120+ | Debt crisis spreads to middle-income countries | Increase USD cash + short EM currencies |
| Global central banks forced to pivot to easing | 30% | Falls below 100 | Broad asset price rebound | Increase growth stocks + EM bonds |
| Policy divergence persists but moderates | 30% | Oscillates in 105-115 range | Localized crises but systemic risk manageable | Stock selection + hedge tail risks |
Key Conclusion: The current market pricing implies an overly high probability of a "soft landing" (about 60%), while the model suggests the actual probability may be only 30-40%. This creates positioning opportunities for contrarian investors — particularly in high-quality assets that have been excessively sold off.
Looking back at the 1970s stagflation period, the Dollar Index depreciated about 30% between 1971 and 1978 but then appreciated about 80% between 1979 and 1985. The current environment shares similarities with 1979-1980:
Historical Lesson: During periods of sharp policy shifts, liquidity management is more important than return maximization. The portfolio's cash ratio was increased from 5% in mid-2022 to the current 12% based on this judgment. As Buffett said: "Cash is a call option with no expiration date."
In Q3 2023, AerCap's aircraft leasing business recovered faster than expected, with fleet utilization rising to 97% (above the industry average of 94%). The company saved approximately $120 million in annual costs through the GECAS integration and plans to launch a $1 billion share buyback in Q1 2024. The current P/B ratio is 0.65 times, below the historical average of 1.2 times, implying 40% upside.
The merger of ALD and LeasePlan is expected to close in Q2 2024, creating a new group controlling approximately 3.5 million leased vehicles (third globally). Post-merger, its cost of debt is expected to fall by 0.3 percentage points (due to improved credit ratings from scale), and used vehicle residual value management will be enhanced (via a shared data platform). Compared to peers, ALD's ROE is 18.5%, higher than the European auto leasing industry average of 14.2%.
| Metric | ALD Automotive | Industry Average | Difference |
|---|---|---|---|
| ROE | 18.5% | 14.2% | +4.3% |
| Cost-to-Income Ratio (2025 Target) | 45% | 52% | -7% |
| P/B | 0.75x | 1.1x | -32% |
In Q4 2023, LNG spot prices rose 25% due to surging European winter demand. Cool Company's spot charter rates rose to $120,000 per day (from $80,000 in Q4 2022). The company has locked in 80% of its 2024 capacity under contract, with average rates only 10% below spot, ensuring stable cash flow.
Cool Company's current EV/EBITDA is 6.2 times, below the industry average of 8.5 times. Its fleet has an average age of 5 years (industry: 12 years), resulting in lower maintenance costs. Two new vessels are scheduled for delivery in 2024, increasing capacity by 15%.
Verallia has hedged 85% of its natural gas needs (2024-2026) at a locked-in price approximately 60% of the current spot price. In contrast, peer Vidrala has only 50% coverage, causing its Q3 2023 EBIT margin to fall by 2.3 percentage points. Verallia's EBIT margin is stable at 23.5%, compared to the industry average of 19.8%.
The company repurchased 3.2% of its outstanding shares in 2023 (spending €150 million) and maintains a 4.5% dividend yield. Based on 2025 expected FCF, its FCF yield is 11.8%, higher than the European industrial sector average of 7.2%.
Although stainless steel prices have fallen 40% from their 2022 peak, Aperam's Brazilian operations (35% of revenue) benefit from lower iron ore costs (down 18% YoY), and its Q3 2023 EBIT margin was still 12.5%. Acerinox's US subsidiary (45% of revenue) has a 20% increase in order backlog due to infrastructure bill demand. Aperam's current EV/EBITDA is 4.8 times, and Acerinox's is 5.2 times, both below their historical median of 7.5 times.
The company's Q3 2023 revenue grew 8% YoY (to €3.2 billion), despite a 3% decline in European auto production. Its contract coverage is 90% (for 2024), and its Debt/EBITDA ratio fell from 2.5 times in 2022 to 1.8 times. The current P/FCF is 6.3 times, below the historical average of 10.2 times.
| Company | Current P/FCF | Historical Average | Discount |
|---|---|---|---|
| Gestamp Automoción | 6.3x | 10.2x | -38% |
| Aperam | 4.8x (EV/EBITDA) | 7.5x | -36% |
| Acerinox | 5.2x (EV/EBITDA) | 7.5x | -31% |