“Duck hunters have to stay still until the duck passes by and they shoot. We do the same. And we want ducks head-on, ‘egg’. If not, we won’t shoot,” Álvaro Guzmán de Lázaro explained to his clients, investment director of azValor, during . “The problem is that there aren’t many fat ducks nearby, and when they pass by you have to shoot,” he added.
A hunting simile reminiscent of that of the ‘master’, Warren Buffett, although as always scaled to the corresponding proportion in his case: instead of ducks, elephants. It is what the Oracle of Omaha is looking for, large and simple purchases, which provide a great injection of profitability to the group. And since that’s not very often, you have to be prepared: “If you want to shoot fast-moving elephants, you should always carry a loaded gun,” he said in one of his famous quotes.
To shoot at the ideal value at the right time, two keys are needed. The first is to have the companies to shoot well identified. This is what Beltrán de la Lastra, president of Bestinver, calls “having the shopping list ready.” In other words, analyze interesting values well and establish prices at which to pull the trigger.
“We identify companies that we would like to buy, but not at the price that the market offers us, and what we do is wait,” De la Lastra commented to his clients. “There is an important moment, which is where the analysis is made and the decision is made, and another key moment is the execution of that decision, for which sometimes weeks, months or even years have to pass.”
The second essential factor seems much more obvious: having money to invest, ammunition to shoot. If when the elephants appear there are no bullets, the work will have been for nothing. After the rises of the last few weeks and the inflows of money into the funds, many managers now have high levels of liquidity in their portfolios.
In their conference last week, azValor commented that they had close to 20% of the portfolio in liquidity; in Magallanes they had also risen to almost this figure in the international portfolio, while in Bestinver they were above 13%. Internationally, managers are also well loaded, although not as much. According to the BofA Merrill Lynch survey in February, they placed these levels at 5.1%, above the historical average of 4.6% in the survey.
Although there are also those who prefer to wait for opportunities in another way, as explained by the finance network. “We will practically always be invested close to the legal limit of 99%. Except in 1998 in the Spanish portfolio, there have always been and probably will be enough securities to reach the total investment of the portfolios, despite not being willing to pay, in general, more than twelve years of benefits”, he explained.
And if opportunities arrive without liquidity in the portfolio? “We will sell the company that is less attractive within the portfolio, because it is closer to its target price or for any other reason.” In his opinion, although we are in an environment of “adjusted valuations, surprisingly, the reality is that the set of values that make up our portfolio is extraordinary,” he said.
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