Investment philosophy


At Horos we know the benefits of value investing over the long term, so we follow this investment philosophy in a disciplined way. Value investing consists of investing in companies whose shares trade with a high margin of safety. That is to say, we invest in companies that, after analyzing them, we consider that they should be valued higher than their current market cap. This reasonable investment philosophy has been proved to be very successful throughout the history of the stock market.

Following this methodology, our management team has directed different products, achieving great results. In addition to placing funds in the highest long-term profitability positions, we have also been awarded the Citywire Award for the best equity management team in Spain of 2016, as well as other awards granted by Morningstar and Expansión-Allfunds.

How and why does value investing work?

Like any human creation, nothing is ever perfect. For many short term investments, investors are not rational. Instead of buying and selling for logical and objective reasons, they operate based on their feelings, generating continuous inefficiencies in the market. Thanks to these inefficiencies, value investors are able to find quality companies with significant discounts in regards to a more accurate value.

However, as in many other aspects of life, over time the short-term problems are solved. On the stock exchange, this situation is repeated continuously. Therefore, with the passage of time, the market is able to recognize its mistakes and correctly value listed companies. In this way, companies whose shares have been traded with large discounts in the past tend to reach their inherent value. In this process, value investors benefit by buying inexpensive shares at first, and then selling them as the shares approach their true value later.

What do you need to know before you start?

Surely you will find it surprising that a form of investment based on reason, is a method that is not the most widespread in the market. There are several reasons why investors do not follow value investing. Therefore, if you are or want to be an investor in our products, it is important that you know the skills necessary to be successful:

1. Patience: Markets can be irrational for weeks, months and even years. For a philosophy based on value investing to work, it is necessary to have patience. Just as if you were a company, you would not expect to get benefits from the first moment, because collecting the fruits of an investment takes time, and products like those at Horos require time to mature.

2. Rationality: Sooner or later you will find euphoric or panic markets. Although it is totally free to do the operations you want, selling when everyone usually sells is not the best decision, because in those moments the prices of the shares are usually attractive. Therefore, if you are a participant with a long-term vision, you must be prepared mentally for difficult market moments.

3. Financial security: In order to comply with the above points, it is necessary that you do not need the money you are going to invest with us soon. We want our co-investors to be aligned with us, just as we are with them. Therefore, it is usually a good idea to only invest the savings that you will not need in at least five years.

What is our work?

Our management team dedicates 99% of its time to analyze and study companies. To do this, they review their accounts in depth, examine their business, and study their competitors, suppliers, the opportunities or threats that may arise, and so on.

To value a company, our managers try to understand not only the quantitative part of the company, but especially the qualitative part. For this reason, they study the competitive advantages and barriers to entry of the company and its sector, as well as study all the ways in which the company could be killed.

For our portfolios to have only high conviction investments, most of the companies are discarded in this investment process. In our search for companies with potential and with the aim of minimizing errors, we rule out companies that are highly indebted, poorly managed, that present a high regulatory risk, are suffering a disruption, or those with a future that we are not able to foresee in the long term.

If the company overcomes this process unscathed, our managers value the company. After doing so, if they consider that there is a high margin of safety, invest in it.

This strict investment process results in very concentrated portfolios, in which we only have companies that we know in depth and with high conviction. Our managers frequently review their thesis to avoid investment mistakes. Once a mistake is recognized, the position is immediately sold.