market folly

We're posting up notes from the 2018 London Value Investor Conference.  Next up is Alvaro Guzman and Fernando Bernad of Az-Valor Asset Management who pitched a long of Buenaventura (NYSE:BVN).


Alvaro Guzman & Fernando Bernad's London Value Investor Conference Presentation

Alvaro Guzman was Francisco Parames' partner at Bestinver 2003-2014.

Long: Buenaventura (NYSE: BVN)  Mining is not a good business. ROCE is low across the cycle.  There are potentially some negative stock specific issues: Buenaventura has all its assets in Peru. It is family owned. The stock is up x4 already.  But if you are going to invest in mining copper is not a bad place to be. Population growth, urbanisation, industrialisation and growth in disposable income will lead to more demand.

Copper use in China is only 30KG/ capita Vs 100KG/ capital in the West. There is a long way to go.  Copper production is getting structurally harder. On a global basis, BVN has the 3rd largest copper mine and the 4th largest reserves. It’s a low-cost mine, open pit and highly mechanised.  A 20% stake in the Cerro Verde mine is worth the entire EV of Buenaventura. You get Buenaventura’s gold assets for free.

Guzman disagrees with Buffett’s negative view on gold as an asset for investment. Owning gold is a good insurance policy at a time when governments and institutions are trying to drive inflation higher.BVN’s management team is unusually good in the mining industry. No capital increases; they hate debt; they own more shares than anybody else; they have successfully negotiated a period of hyperinflation; they are good capital allocators.


Be sure to check out the rest of the presentations from the London Value Investor Conference 2018.