Dialogue between Francisco García Paramés and Carlos Rodríguez Braun

Dialogue between Francisco G

On 25 October 2016, the Rafael del Pino Foundation organised a dialogue between Francisco García Paramés and Carlos Rodríguez Braun on the occasion of his latest book "Investing for the long term", published by Deusto.

Francisco García Paramés is one of Spain's leading investment managers. With a degree in Economics and Business Studies and an MBA from IESE, in 1989 he joined Bestinver Gestión, a company belonging to the multinational Acciona, where he managed 10,000 million euros and reached the position of chief investment officer. He resigned on 20 September 2014, a departure that caused a great stir in the Spanish financial world. Self-taught, his management style is based on the strict application of the principles of the school of value investing, within the framework of the Austrian theory of the economic cycle, and he is considered a faithful disciple of Warren Buffett.

In addition to his personal and professional experience, Garcia Paramés explains the keys to the investment process. He first establishes the appropriate economic frame of reference, in his case that of the Austrian school of thought, which he discusses his reference authors and what he has learnt from each of them. He then discusses the differences between real assets and monetary assets, and passive, semi-passive and active investment. He also explains what types of stocks to look for and where to find them, as well as illustrating the ultimate source of opportunities: our emotions.

Summary:

On the occasion of the presentation of his book "Investing for the long term", a dialogue with Francisco García Paramés, one of Spain's leading investment managers, took place on 25 October at the Rafael del Pino Foundation. Paramés, known for his philosophy of value investing, explained that this strategy consists of investing with a certain amount of common sense, of doing things logically. It's not just about buying cheap, but about valuing the quality of the companies you invest in more, which sometimes leads you to pay a little more for it. And then it is necessary to have the psychological strength to maintain decisions at times when the market is taking them to losses, because it is about investing for the long term, not the short term. Paramés explained that the formulas they applied at university did not work for him. What he felt was the need to apply common sense to analyse and understand what people are doing in the market. In this sense, he stressed that one cannot extrapolate the past to predict the future, as mathematical models do. In his strategy, Paramés tends to invest in family companies because investment managers cannot sit on all the boards to control what executives do, whose interests are not always aligned with those of the companies. Therefore, he prefers to leave that role to the families that control the companies, because when an important part of their wealth is a stake in the company, their interests are aligned with those of the company. Even so, he never invested in Inditex, as he acknowledges in his book, because he always considered the company to be expensive. Defending a long-term investment strategy is not easy because the ups and downs of the market can lead to significant losses at certain points in time. What you have to do is to convince through your work that long-term investment is good, by demonstrating that it can be done. It has to be kept in mind that it works very slowly, but there is no alternative. In this regard, he recalled the large losses that occurred at some point during the crisis, but explained to his clients that these are extraordinary circumstances that occur from time to time, and that the companies in which they were invested were good and only had a liquidity problem. In this context, they greatly increased communication with clients, gave them lots and lots of information about their investment portfolios, and clients responded well. Paramés pointed out that, when analysing companies, he does not pay attention to the macroeconomic context. As this is unpredictable, he explained, there is no point in spending too little time on it. The work should concentrate on the predictable, such as the situation of the companies and the sectors in which they operate.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of their authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.