When analyzing the recent performance of our portfolios and their future prospects, we at Buy & Hold would like to thank you once again for your confidence in investing in the funds we manage and in which we also invest with you . Having placed all our funds in the top decile by performance in their corresponding categories, we have a strong conviction that the upward trend of our strategies will continue in 2024. “The conviction we have in the future performance of our funds for the coming years is very high, even when most of them are right now at their all-time highs.” This was explained by Julián Pascual, president and manager of Buy & Hold, in the new Semiannual Letter. In it, our three co-founding partners highlighted that “we started the year with more than 365 million euros under management“, which represents an increase of more than 50% compared to the start of 2022 and one of the most significant growth rates in the entire Spanish asset management industry. While 2023 has been a good year for equities, Pascual stressed that “the technology giants known as the ‘Magnificent Seven’ have been responsible for almost half of the MSCI World index’s performance, while small-cap stocks have performed poorly.” However, after a thorough analysis and selection process, “portfolios such as ours can be constructed that are undervalued against the solid business figures of the companies in which we invest.” After pointing out that “the stock market does not act in a weighted manner, but that suddenly, in a short time, there are big changes in the price of shares that make it necessary to always be correctly invested“, the manager emphasized that “patience is usually the key to obtaining good returns in the long term, respecting the time horizon indicated for each strategy”. In this context, over the last six months, both in B&H Equity / B&H Shares and in the equity part of B&H Flexible, he has disposed of part of his investment in four of these ‘superb’ stocks (Meta, Alphabet, Amazon and Microsoft) with capital gains to strengthen his portfolio in smallcaps such as Vidrala, Brookfield Corp, Texas Instruments, Next Fifteen and Team Internet. He has also started a new position in the solvent Catalana Occidente Group.
Contrary to the oft-heard thesis that stock markets are expensive, Pascual pointed out that “the P/E of nine of the most significant stocks in our equity portfolio remains at an attractive 10.7 times”, identical to those he calculated six months earlier, as he pointed out in the previous Buy & Hold Half-Yearly Letter.
Fixed income investment strategy
With regard to fixed income, Rafael Valera, our CEO, pointed out that “the correct management of events as staggering as the bankruptcies of several US banks followed by the bailout of Credit Suisse by UBS in the spring of 2023 is key to explaining the good results achieved last year”, with B&H Bonds / B&H Renta Fija achieving double-digit returns and close to 20% in the bond portfolio of the firm’s mixed fund: B&H Flexible. Within this chapter, at Buy & Hold we continue to see potential in subordinated debt issues of entities such as Cajamar, Ibercaja or Abanca. However, the CEO acknowledged having “lightened some of the weight due to the accumulated revaluation” in favor of other positions with more potential. “As we have always maintained, at Buy & Hold we do not make macro bets, but prefer to take advantage of market opportunities to create portfolios with solid potential in accordance with the time and risk horizon of each of our strategies”, emphasized Valera, after stressing that “our task as investors is to distance ourselves from the noise of the central banks, which modulate their messages to scare market agents more or less as appropriate”. In this scenario, in which just a few days ago it was possible to see different members of the European Central Bank “say one thing and the opposite about interest rates within hours of each other”, Buy & Hold’s fixed-income portfolios are slightly lengthening their durations without altering their quality, as they are currently “the most solid and liquid in their history”. From the 19% weight in investment grade bonds of B&H Flexible to 100% of the invested assets of B&H Deuda, our most conservative fund, which closed last year with a 7% return. “We are not going to lengthen the duration of the portfolios much beyond where we have placed them today, unless we see a clear evolution of rates and sufficient reward for it,” Valera said, explaining that B&H Bonds / B&H Renta Fija currently has a duration of around 3.5 with a portfolio yield that doubles current inflation rates by exceeding 6%. Meanwhile, B&H Debt has a duration of less than 2 with an average yield of over 4%. Likewise, the manager – recognized by several specialized portals as the best in Europe in fixed income – has emphasized that this portfolio lengthening has taken place through the entry into high credit quality issues, with the objective of not adding duration risk and credit risk in any of its positions.
The most important financial media have echoed our Letter.
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