Luis García, named Fund Manager of the Month
The good performance of the MAPFRE AM Behavioral Fund over the last twelve months, whose portfolio has appreciated by more than 60%, has allowed Luis García, manager of MAPFRE AM, to receive the 'Manager of the Month' award. In an interview in Rankia Pro, the expert highlights the importance of controlling emotions and value investing in the fund's investment decisions.
- When and how did you come to work in the finance sector? Did you have any other vocation?
When I initially decided to study Economics, it was almost more by process of elimination than as a vocation. But then, over the years, my interest grew and grew. However, my passion for investment didn't fully blossom until I discovered value investing, after I'd worked in the finance sector for a few years. Reading the books of Peter Lynch, Benjamin Graham, Philip Fisher and Pat Dorsey really opened my eyes to a way of investing that I understood and that made sense to me.
- What are your favorite hobbies?
The main one is definitely spending time with my family. Even more so now I'm a father. I also still love sports. Both playing and watching as a spectator. And I really enjoy reading.
- Looking to the second half of this year, what are the risks that the financial markets face and that will need to be at the forefront of people's minds?
We don't make investment decisions based on what we think might happen in the financial markets over the next few months. Rather, we try to identify the companies that, in our opinion, can make things better over the years to come. That said, it is true that there are specific moments, such as now, when certain factors need to be borne in mind. Never before have markets been so flooded with liquidity, and that can lead to errors in market pricing. That is why we retain a certain amount of liquidity and try to look for stories that are interesting in and of themselves, that can offer promising opportunities regardless of the direction the markets take.
- You invest in several soccer clubs as part of the MAPFRE AM Behavioral Fund. Why invest in the world of sports?
Surprisingly, sports is the major area that is widely forgotten about by the investment industry. I can't think of any other sector that shows such positive trends yet receives so little attention from analysts and managers. A quarter of our portfolio is invested across seven sports-related companies. From a business perspective, what is currently happening in European soccer is particularly attractive. The industry lost almost 1.7 billion euros at an aggregate level in 2011, the year that UEFA began to introduce its financial control measures. Yet just six years later, the situation had turned around and the aggregate profits had reached over 100 million. Today, the financial health of European soccer in general is better than ever. This meant that, in the last year, clubs could pass one of the most severe stress tests they would ever be faced with. There are few stories out there that tell of a comparably huge turnaround.
- Which clubs is the fund currently invested in?
The weighting of soccer clubs in our fund is 10 percent, distributed across Germany's Borussia Dortmund (5.5 percent), the Netherlands' Ajax Amsterdam (2.5 percent), and the rest in France's Olympique Lyonnais. These are all well-managed clubs, with years of sound capital allocation that has created value for their shareholders.
- How important is it to exercise emotional control when investing?
Over the years, I've come to the conclusion that this is the most important thing. Of course, a solid understanding of accounting, company valuation and other technical tools is required. But none of that matters if you don't also have a knowledge of psychology and of how we behave as investors. Our brain is geared for survival, not for making decisions about money. This is a problem that needs to be tackled.
- What are the criteria or factors that you value most when selecting stocks to invest in?
When it comes to investing in a company, we have three basic requirements:
- That we're able to fully understand the business and have confidence in its long-term prospects.
- That it has a healthy balance sheet with little or no net debt.
- That its management team shows ethical integrity and has a history of sound capital allocation.
- In addition to this, of course, the price also has to be reasonable.
- What kinds of companies would you never invest in?
We would never invest in companies that make the world worse. In other words, those that are harmful to society or the environment. Nor would we ever invest in a company whose management team we can't trust. Finally, a high level of debt is almost always a red line that we will not cross. We need to make sure we can rest easy.
- How important is liquidity in these current times?
We are not usually in favor of retaining a high level of liquidity in the fund but, as I mentioned earlier, there are periods when we do hold on to some money while we wait for opportunities. And right now is one of those times. While we're very optimistic about the future, we have our eye on some imbalances that the market should probably even out.
- Where do you see yourself in ten years?
I feel privileged to be able to enjoy time with my family and friends, and to work in a field I'm passionate about. Here's hoping that lasts a long time.