Last year wasn’t a good one for the market overall, with the S&P 500 down 19.44% in 2022 for its worst decline since 2008. The only sector that was positive for the year was energy, up 59.05% on the back of rebounding travel volumes and the Russia-Ukraine war, though if we add in dividends, the utilities sector technically eked out a 1.59% gain.
Of course, not all investors ended the year in the red. Those that began the year with heavy tech sector allocations likely didn’t do too well, but those who had bet the farm on energy stocks while they were still near Covid-driven lows likely raked in the dough.
Let’s stake a look at which of the investing gurus recorded the best performances in 2022, as well as which stocks and strategies drove their success. According to the Guru Score Board, the gurus with the best fund performances in their top 10 holdings over the past year were Azvalor Asset Management, Francisco Garcia Parames (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and David Einhorn (Trades, Portfolio).
Note: The information on guru fund holdings comes from quarterly 13F filings and mutual fund reports. Investors should be aware that 13F reports and mutual fund reports do not provide a complete picture of a guru’s holdings. The 13F reports include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. The mutual fund 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. However, even these limited reports can provide valuable information.
Azvalor Asset Management
Azvalor Asset Management, a Spanish investment firm founded in 2015, had a spectacular year in 2022. The value-focused firm’s Iberia FI was up 158.46%, its Blue Chips FI gained 141.81%, its Internacional FI rose 140.71% and its Managers FI was up 76.09%.
The Spanish and Portuguese stock specialist follows a long-term value investing strategy, selecting stocks individually without preference for their size or sector and taking advantage of low prices to purchase shares below their intrinsic value. At least 75% of its portfolio must be in undervalued assets, while the value of Spanish stocks must not exceed 90% of its portfolio.
What’s interesting about the outperformance of these funds is that not all of them have much overlap in their top 10 holdings, despite being from the same management firm. The Iberia FI’s performance was driven by recovery in small-caps such as general engineering contractor Tecnicas Reunidas SA (XMAD:TRE, Financial), steel pipe manufacturer Tubacex SA (XMAD:TUB, Financial) and cement conglomerate Semapa SA (XLIS:SEM, Financial).
The Blue Chips FI’s top performers included Barrick Gold Corp. (GOLD, Financial), oilfield equipment company NOV Inc. (NOV, Financial) and Canadian mineral royalties company PrairieSky Royalty Ltd (TSX:PSK, Financial). The Internacional FI also counted Barrick and NOV among its top performers, with oilfield services stock SLB (SLB, Financial) making strong contributions.
Lastly, the Managers FI was propelled by gains in tanker company International Seaways Inc. (INSW, Financial) as well as natural gas producers Range Resources Corp. (RRC, Financial) and EQT Corp. (EQT, Financial).
Francisco Garcia Parames (Trades, Portfolio)
Another Spanish fund manager, Francisco Garcia Parames (Trades, Portfolio), was near top of the Guru Score Board for 2022. His Cobas Seleccion FI was up 123.22% for the year.
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.
The fund’s top holding, Bermuda-based marine natural gas infrastructure company Golar LNG Ltd (GLNG, Financial), was a solid performer that doubled in value over the course of 2022. Deepwater oil producer Kosmos Energy Ltd (KOS, Financial) and Norwegian shipping company Wilh. Wilhelmsen Holding ASA (OSL:WWI, Financial) also helped drive results for the year.
Murray Stahl (Trades, Portfolio)
Murray Stahl (Trades, Portfolio)’s Horizon Kinetics posted a solid 42.33% return for its top 10 holdings.
The New York-based firm seeks long-term capital appreciation by applying a fundamental value and contrarian investing approach. The firm believes in extending its time horizon for investments instead of increasing risk.
Horizon Kinetics has dedicated 53% of its equity portfolio to Texas Pacific Land Corp. (TPL, Financial), so it’s this stock that mostly determines its returns, at least when it comes to its 13F portfolio. The real estate company, which is one of the largest landowners in Texas, saw its stock price double by November 2022 before pulling back. Energy companies Cheniere Energy Inc. (LNG, Financial) and Viper Energy Partners LP (VNOM, Financial) also helped boost gains for the year.
David Einhorn (Trades, Portfolio)
David Einhorn (Trades, Portfolio)’s Greenlight Capital saw its top 10 13F holdings rise a collective 30.87% in 2022.
New York-based Greenlight Capital was founded by David Einhorn (Trades, Portfolio) in 1996. It invests primarily in corporate debt offerings and both long and short positions in stocks. In its early days, the hedge fund made its most significant profits from short selling weak companies such as Lehman Brothers and Conseco. Its stock investments are focused on a value-based approach that sometimes includes activism.
One big source of returns for the firm last year was Twitter, which it bought in anticipation of Elon Musk’s above-market-value buyout. Energy company CONSUL Energy Inc. (CEIX, Financial) and diversified miner Teck Resources Ltd (TECK, Financial) also posted solid returns for the year.
Takeaways
As we can see from the gurus that made the top of the Score Board for 2022, the ball was back in the value court for the year. Investors who took advantage of undervalued energy and small-cap stocks during the market downturn had lots of room to run. There were also some mining and shipping stocks that helped drive portfolios higher as economies became more active again following Covid-related lockdowns and supply chain issues caused shipping prices to rise.
What’s interesting to note is that many of these sectors, primarily energy, mining and shipping, are known for being highly cyclical. Thus, whether or not they can continue their gains in 2023 is up for debate given that many of the Covid recovery tailwinds have abated.
Even so, it’s still possible that value strategies might beat growth strategies again in 2023 due to the general risk-off environment caused by economic uncertainty. It was always a given that the market would have to eventually pay for the easy money policies of 2020 and 2021, as we’re seeing now with how the Federal Reserve had to hike interest rates just to keep inflation from reaching the double-digits.
