Although the Acciona management company is known for its flagships (Bestinfond, Bestinver Internacional or Bestinver Bolsa), the firm has among its range products such as Bestinver Hedge Value, a hedge fund managed by Jaime Vázquez, the firm’s senior consumer analyst , together with Miguel Dolz, who achieves a five-year return of 11.8%.
Last year it achieved a 19% return and in 2021 it is achieving 9% (with data up to May). With 278 million euros of equity, this hedge, focused on consumer companies, serves as a small laboratory for ideas of values that then pass to other funds, such as Hellofresh or Delivery Hero.
Why does this fund have this bias towards consumer firms?
If you look at the 20 largest companies that have been created in this century, they all enter the consumer universe, understood broadly, as the traditional food and beverage sector; digital businesses such as platforms, aggregators, fintech companies … It may seem like a limited universe, but it is so wide and dynamic, with so many subsectors, that it allows more than enough diversification in themes and geographies with little correlation with each other.
Some managers are still suspicious of digital signatures.
Clearly there are managers who have not known how to evolve and have stayed in traditional sectors, which are a source of good investments. But we believe that there are companies that at first glance may seem expensive, because they generate losses, but that are very interesting.
You have to distinguish why you lose money. In the world of consumption, investment most of the time goes through the profit and loss account, it is not capitalized, as in an industrial company. Hence, traditional valuation methods contribute very little in many of these sectors, and if you don’t have experience analyzing them, you could miss out on good deals. You have to understand the profitability of each order well to understand the potential profitability of the business as a whole, and normalize the margins.
How can investor turnover towards value affect your growth potential?
The pandemic has accelerated a structural trend that already existed. It is a leap that will continue to grow, albeit at a different pace. But all those customers who have changed their habits are still there. What needs to be analyzed is how much of that growth from last year can be lost.
For example, in food delivey companies we can break down the growth between the number of clients, which we believe will be maintained; the average order, where there may be more normalization, and the frequency, which is going to lose a bit of rhythm.
What are the main positions of the fund?
The main positions are Delivery Hero and Hellofresh, and also Sea Limited, Alibaba and Afterpay. This year we have entered the Polish InPost, Etsy and About You. And we have increased the weight at Doordash.
Do you have any Asian companies in your portfolio?
In China we have Alibaba, Tencent, Meituan, and JD. We are not top down when it comes to selecting securities, but it is very interesting to be invested in China now, because they have already got rid of the Covid. And we should continue to invest in this region to continue learning, to see what will come to the rest of the world, because they are ahead in digitization.
How do you carry out the selection of securities for the ‘hedge’?
Before talking about values and how we select them, our first reflection is that we are increasingly seeing a greater interrelation between companies, between electronic commerce and advertising. There is a greater relationship between ecommece and payments, between payments and financial services, between mobile games and ecommerce, between logistics and last mile businesses … Borders are increasingly blurred and we are moving towards a world that will surely end up dominated for 15 or 20 large ecosystems. And we believe that these types of intersections generate investment opportunities that we are being able to identify thanks to our analysis and our experience of what has happened, specifically in China, which has been several years ahead of the West in aspects of digitization.
How does this evolution take place?
For example, the Australian company Afterpay, which in theory is a payments and financial services company, is evolving into an advertising firm, a traffic seller, and even eventually an ecommerce platform. Or the Brazilian Locaweb, which is very similar to Shopify, which facilitates ecommerce for small merchants, with solutions that range from logistics, payments, software … Delivey Hero seems like a large company, which capitalizes 30,000 million, but it will probably end up being part of one of these global mega-ecosystems. It might make sense that it ended up at Sea Limited, which is the Amazon of Southeast Asia.
Why do you like Delivery Hero and Hellofresh so much?
We have had them in our portfolio for four or five years now. We exited JustEat a year ago, but Delivey Hero has had it since its IPO in June 2017. It is the largest position along with Hellofresh. It is present in 40 countries, with a leadership position in almost all of them. They have made an acquisition in Korea that is nearly twice the size of the company. They bought it cheap but before the pandemic. It was born as a traffic generator for restaurants, but they saw the importance of making a delivery made by themselves and now more than half of the orders are already executed by them. They have gotten into the quick commerce business, which consists of opening dark stores, warehouses in the cities, and they are able to deliver what you ask in 15 minutes. We believe that it is an unstoppable trend because we are becoming more and more demanding with the deliveries. Asia represents 70% of the company, Korea is practically half and has many years ahead.
What growth potential do these companies still have?
If you look at the frequency in Korea, people use it already five times a month. In the UK, Just Eat customers use it 11 times a year. In China it is already used even for breakfast or to order a coffee. And I would say the same of Hellofresh, where every time you have to order food with less notice and the menu offer is more extensive. They are getting into the convenience food business and are competing directly with supermarkets, so their potential is infinite.
In the end, these digital signatures need logistics. What firms of this type do you have in your portfolio?
InPost, for example. But these giant ecommerce companies ultimately have their own logistics businesses. JD, which is the Amazon of China, has 700 warehouses of its own and opens its logistics to third parties, not only to merchants in its market place, but even to those who are not. We also see that in Brazil, where Via Varejo has its warehouses and shops for last-mile businesses as well. And it is a company that is also opening its logistics business to third parties.