market folly

We're posting notes from the London Value Investor Conference 2016.  Next up is Philip Best and Marc Saint John Webb of Quaero Capital who pitched longs of Sonae Capital and Fluidra.


Quaero Capital's London Value Investor Conference Presentation

Quaero Capital is a European focused smallcap fund that adopts a deep value approach.

There is quite a lot of research that shows that family owned businesses outperform. Between 2002 and 2016 family run listed businesses on the Dax returned 397% vs 149% for the Dax index. They define a family owned business as one that controls at least 20% of the supervisory board. The family are stewards of the company but often outsource management.

There are several reasons why family businesses outperform. Owner guided governance, thinking in generations rather than financial quarters, risk aversion/conservatism, strong balance sheets, aversion to debt, the importance of dividends, aversion to dilution and cautious acquisitions policies.


Investment idea: Sonae Capital 

Sonae is diversified holding company with assets in Portugal. It was listed in 2007 and the majority of assets are real estate - residential and offices. Other assets include hotels, power plants, fitness clubs and air conditioning engineering. The Azevedo family own 64% of the shares. The slow economic recovery in Portugal has allowed the company to sell off some assets at good valuations. Gearing has been reduced to 30%. They pay a large dividend and there is a 50% discount to NAV according to Cushman and Wakefield.


Investment idea: Fluidra 

The company was founded in 1969 by four families. It is a world leader in swimming pool equipment with a presence in 41 countries. It sells water treatment pumps, plumbing, valves and chemicals under the Astral Pool brand. The shares have fallen over 50% since the IPO in 2007. A cost reduction programme, lean manufacturing and development outside of Europe have improved the company’s prospects. Profitability and sales are improving helped by the recovery in southern Europe. Fluidra is trading on a 2016 PE of about 12.5x.



Be sure to check out the rest of the presentations from the London Value Investor Conference.