Investing successfully in value-oriented equities from the Eurozone - 5 questions to Thomas Meier

Learn more about the MainFirst Euro Value Stars.

Transcription of the video

Welcome, ladies and gentlemen,

Great to see you again for the MainFirst Investors’ Update. Today we talk to fund manager Thomas Meier, and our topic is the MainFirst - Classic Stock Fund, as it’s been called for 15 years.

1.      Mr Meier, in September 2018 the fund was renamed MainFirst Euro Value Stars. What were the reasons to do this?

We thought it was important that, after 15 years, we should put a greater emphasis on theclarity of the product, as the term classic is a rather vague way to define the investment range. Therefore, we decided to call it Euro Value Stars. Firstly, the word Euro emphasises that the fund invests in the Eurozone, and, secondly, the term Value Stars shows that we invest in value-based equities.

2.      Value-based equities – what does a value-based investment mean to you?       

We see it as classic value investments, and we distinguish ourselves from many competitors by saying that this is not a mechanical procedure. Rather than focusing on a small number of individual KPIs, we believe that it is better to combine four strategies.

Firstly, we have Classic Value Investments, which means that we invest in companies we believe to be underrated in terms of long-term profitability.

Next, we have Contrarian, i.e. anti-cyclical investments in companies whose restructuring successes have not yet been rated in the market. These could be Italian banks or indeed Deep Value companies that are traded at a substantial discount in relation to their net asset value, or when compared with competitors.

Finally, we have Event-Driven investments, for instance, placements, capital increases, management changes or similar events, which may prompt us to invest.

3. You have just explained four investment approaches that are all combined in this fund. Exactly what kind of values are behind them?

The best way to illustrate this is through individual values, which are also weighted in the portfolio.

Take, for instance, our biggest position, Sixt. This is an example of a Classic Value Investment, because, as we see it, its long-term profitability and potential for growth is not reflected in its current market price.

On the other hand, when it comes to Contrarian, anti-cyclical investments, we can see definite opportunities with Italian banks. In particular, there is UniCredit, which has been successfully restructured and, as we believe, this is not being honoured by the capital markets.

When it comes to Deep Value, we have invested in Porsche Holding, a majority shareholder of VW. We think that VW has been rated at less than its value. The same is true of Porsche to an even greater extent, by a significant 30%, so that we believe it offers some attractive potential.

As for Event-Driven business, we can point to Strabag, a medium sized European and Austrian construction company with a relatively low free float. Hence, we believe that the shareholder package will be dissolved over the next few years and will be replaced by a number of packages. As we see it, this should make the company considerably more attractive again for many other investors.

4.    2018 has not exactly been very easy for many value investors. Why do you think this is the case?

2018 can sometimes be described as an annus horribilis for value-focused investors. Particularly since early summer, we have seen some clear decoupling with regard to growth-based values, as investors have been focusing very much on growth-based securities and value stocks. This is because many investors have by now come to believe that we have reached the end of both the economic cycle and the capital market cycle, and that these companies will be facing difficult times over the next few years. 

5. Let’s have a look ahead, into 2019. What does Thomas Meier as a value investor believe it will bring?

We believe that the current fluctuations should encourage people to sow seed now, with a view to reaping a good harvest later. We actually believe that the discrepancy between value-based and growth-based stocks have reached a multi-year high, and so we think that this gap is likely to narrow again.

Mr Meier, thank you very much for this brief update, and all the best.