Spanish equities: the bet of the funds that have earned close to 20% over 12 months

Spanish equity funds are among the standout performers of 2024. Overall, the category is up more than 14% year-to-date and 27% over the past 12 months, and it has the potential to continue to make gains in line with the expected performance of the Spanish market. This sentiment is echoed by investors in the latest Confidence Index prepared by JPMorgan AM, where 27.6% of those surveyed believe that the Spanish stock market will see the biggest gains in 2024, outpacing the European and U.S. markets.

Javier Miralles, manager of equities at MAPFRE AM and manager of the Fondmapfre Bolsa Iberia and MAPFRE AM Iberian Equities mutual fundS, says that the Iberian market is “so undervalued” that “opportunities are arising in high or very high quality companies trading at historically low multiples”.

Among the roughly forty funds in the Spanish Equity category, the fund he manages is one of the two MAPFRE AM funds in the green so far this year, returns close to 20% over 12 months. Specifically, the Fondmapfre Bolsa Iberia and MAPFRE AM Iberian Equities posted returns of 18.3% and 16.6%, respectively, according to the latest available net asset value. Over a longer period, both funds have achieved annualized returns of around 7% over three years.

Why is the Spanish equity category performing so well this year? Technology and banking are key: they have driven the positive dynamics in the markets this year. However, these sectors have not contributed to the positive performance of the two funds managed by MAPFRE AM, as these funds are not heavily exposed to them.

Miralles explains that their strategy involves raising standards and selecting the highest quality stocks in these sectors. “The macroeconomic environment we are experiencing is unusual, highly unpredictable, and markets are following the lead of central banks and inflation. That's why I feel a bit less comfortable with sectors that are more sensitive to these macro data,” the manager explains.

The strong performance of these products is due to stock selection: “Specific bets on companies that have suddenly realized their value, primarily due to corporate events.” Significant gains came from movements like those of Applus and the Portuguese company Greenvolt, which were taken over; FCC, which announced a partial takeover bid; and even Talgo, which received a takeover offer that did not materialize. They have earned “generous capital gains” in all of them.

Positions in companies such as Elecnor, Rovi, and Técnicas Reunidas have also contributed very positively to the funds’ performance, thanks to their extraordinary progress over the past year. “In short, the main driver has been getting the stock picking right,” emphasizes Javier Miralles.

Key portfolio holdings

What are the main bets of these two funds? According to the latest available data, Fondmapfre Bolsa Iberia’s largest positions include Almirall, CAF, Catalana Occidente, Viscofan, and Técnicas Reunidas.

“The fund's philosophy is to maintain a balance between high-quality companies and those with high potential for appreciation,” explains Miralles, adding that they have made significant changes in recent months. “We had to replace Applus, which had a very significant weight in the portfolio, with some new assets,” he notes.

They also have Corticeira Amorim and Ebro Foods on their radar, two “high-quality stocks offering entry opportunities at historically low multiples without any apparent justification.” Additionally, the manager mentions Almirall and Dominion as ideas with high potential for appreciation, with “potential to realize that value in the medium term,” along with opportunities in the small and mid-cap segment, which are “very attractive” for investment.

With “many years of history” and having transitioned from a more passive to a “fully active” management approach, the assets of Fondmapfre Bolsa Iberia as of July 9 are approximately 18 million euros.

Fondmapfre Bolsa Iberia: 10 main positions

Meanwhile, the Mapfre AM Iberian Equities fund holds significant positions in Almirall, Catalana Occidente, CAF, Corticeira Amorim, and Global Dominion Access.

Sector-wise, the fund primarily invests in industrial, cyclical consumer, and financial services companies, among others. As of July 9, the fund manages assets totaling 45 million euros.

MAPFRE AM Iberian Equities: 10 main positions

This fund has recently been classified as Article 8, following approval from the Luxembourg regulator (CSSF). As before, it is an investment vehicle that focuses on Iberian companies, with a preference for the Spanish market. What sets it apart now is its incorporation of ESG criteria into investment decisions. This enables clients not only to pursue financial returns but also to contribute to social and environmental objectives.

“We are thus taking a significant step forward by prioritizing investments that aim to improve society and the environment,” stated Álvaro Anguita, CEO of MAPFRE AM, who also mentioned that the asset manager plans to “continue incorporating more funds of this nature” into its portfolio.