Cobas Asset Management recently released its portfolio updates for the second quarter of 2020, which ended on June 30.
Under the management of Chairman and Chief Investment Officer Francisco Garcia Parames (Trades, Portfolio), the asset management company seeks to follow Warren Buffett (Trades, Portfolio)’s value investing strategies, focusing on undervalued assets that show high potential for long-term growth. The firm invests mostly in European companies, but it holds some positions in the United States and Asia as well.
Based on its latest portfolio updates, the firm’s top five trades for the second quarter were new buys of GeoPark Ltd. (GPRK, Financial), AcadeMedia AB (OSTO:ACAD, Financial) and G-III Apparel Group Ltd. (GIII, Financial) and reductions in International Seaways Inc. (INSW, Financial) and Kosmos Energy Ltd. (KOS, Financial).
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
GeoPark
The firm took a new holding worth 645,506 shares in GeoPark (GPRK, Financial), giving the stock a 1.13% weight in the equity portfolio. During the quarter, shares traded for an average price of $15.61.
GeoPark is an independent Latin American oil and natural gas exploration and production company with operations in Colombia, Chile, Brazil, Peru and Argentina. It’s not surprising to see a new energy holding in a guru’s portfolio considering the current state of the Western energy market, which has seen prices skyrocket due to Russia’s war on Ukraine and resulting sanctions.
GeoPark is a rarity among small-cap energy stocks in that it has a stable balance sheet with a Piotroski F-Score of 8 out of 9 and an interest coverage ratio of 8.05. Its return on invested capital is typically higher than its weighted average cost of capital, showing value creation. Its focus on low-cost fields helps improve profitability.
AcadeMedi
The firm also invested in 1,621,995 shares of AcadeMedia AB (OSTO:ACAD, Financial). At the quarter’s average price of 50.69 Swedish kronor (5.01) per share, the holding has a 1.01% portfolio weight.
AcadeMedia is a Swedish provider of educational services for pre-school, elementary and secondary schools as well as vocational and adult education. It also produces lesson plans, provides skills training and offers professional rehabilitation services.
The company is seeking a growth path by changing up its executive management team and seeking out acquisitions. For example, in July, the company announced it entered an agreement to buy Futuregames operator Changemaker Education for $6 million. AcadeMedia is also trading below its GF Value, which is based on past valuation multiples, past returns and analysts’ estimates of future business performance.
G-III Apparel Group
The firm re-established a position in G-III Apparel Group, buying 329,015 shares after previously selling out of the stock in the third quarter of 2021. The stock has a 0.93% portfolio weight and traded for $25.29 per share on average during the quarter.
G-III Apparel is a New York-based American clothing company that holds a portfolio of world-renowned and well-recognized brands, including Calvin Klein, DKNY, Guess, Tommy Hilfiger and Andrew Marc, among others.
Cobas Asset Management has a history of trading in and out of G-III, buying low and selling high as shown in the holding history chart above. Thus, it seems likely that the firm’s latest position in the stock would follow the same reasoning of buying during a time of market pessimism. G-III is well-positioned to survive economic troubles with a profitability rank of 7 out of 10 and margins that outperform 66% of peers.
International Seaways
The firm slashed its International Seaways (INSW, Financial) investment by 67.31%, leaving a remaining holding of 509,074 shares and shaving 2.38% off the equity portfolio at the quarter’s average share price of $21.90.
International Seaways is one of the world’s largest tanker companies that provides transportation services for crude oil and petroleum products. Based in the U.S., the company owns and operates its own fleet of ships.
While the outlook for fossil fuels is generally strong at the moment, the same cannot be said of ocean-going transportation companies, which are beginning to come off of incredibly high spot prices a little too soon after the devastation wrought by pandemic lockdowns. International Seaways has an Altman Z-Score of just 0.38 and its ROIC is much lower than its WACC, implying significant risk.
Kosmos Energy
The firm trimmed its holding in Kosmos Energy (KOS, Financial) by another 32.75%, marking the third consecutive quarter of reductions, for a remaining stake of 2,357,523 shares. The trade took 1.04% off the equity portfolio. Shares averaged $7.21 apiece during the quarter.
Kosmos Energy is a deepwater hydrocarbon production company that was previously incorporated in Bermuda, though it recently reincorporated in Delaware. It primarily produces oil in Equatorial Guinea, Ghana and the Gulf of Mexico.
Even with the positive outlook for the oil and gas sector, Kosmos Energy trades at a price-earnings ratio of 457.92, though the forward price-earnings ratio based on Morningstar analysts’ estimates is 3.79. The return on capital and earnings yield are both low, suggesting operations are not very profitable.
Portfolio overview
As of the quarter’s end, the equity portfolio consisted of 65 common stock positions valued at a total of $703 million. The turnover for the quarter was 10%.
The top holding was Golar LNG Ltd. (GLNG) with 7.47% of the equity portfolio, followed by Babcock International Group PLC (LSE:BAB) with 4.50% and CIR SpA (LTS:0ONR) with 4.22%.
In terms of sector weighting, the firm was most invested in energy, industrials and consumer cyclical.
