22 May Rankia interviews Miguel Ángel Temprano
Rankia interview with Miguel Ángel Temprano, CEO of Orfeo Capital
A year ago, around this time, the FED assured there would four rate rises for 2019. A year later, it talks about only one rise, and the market itself predicts that there will be none. Our vision is not only cautious, it is fearful. I dare say that we will see in the S&P at 2600 sooner than 3000.
Q: How is Orfeo Capital born? And what has led you to become an Investment Management firm?
Orfeo Capital is born from the evolution of a family office. Almost 10 years ago we started to work as a family office created in the wake of the biggest sale made up to that moment of a company of the new economy. The volume of money managed demands a team of professionals of recognized trajectory in this sector.
Other investors were interested in our investment philosophy, which forced us to create a EAFI to serve them. But our investment philosophy is always the same, for some and for others, so we decided to transform ourselves into a management firm in order to manage our own investment vehicles, which today are SICAVs but that in a very short period of time will be funds of Investment.
Q: How would you define the investment philosophy of the Orfeo Capital?
Our investment philosophy is based on three critical pillars. The co-investment, fidelity to the method and the objective of preservation of the wealth.
We understand that for an investor to feel calm, the first thing he or she needs to know is that the manager also has all or almost all of his or hers financial assets invested in the same thing that he or she is investing money, and that the amount invested by the manager is a sizable figure, not what can be obtained in 2-3 years salary, but a much larger figure.
In this way, the investor will be sure that the manager will not do crazy things.
It is proven that if the method of selection of assets and the management of these is solid, it offers good results, but only if the manager is faithful to it. But fidelity to the method must be consistent, not when only when it suits the manager.
And finally, our origins mark our style. Preservation of wealth as the first objective for profitability. Benchmarks are a children’s story to make the investor believe that you are a genius as a manager, because you only have lost ten percent of his or her assets, when the benchmark has lost fifteen percent. This has come to show that there is no symmetry between the happiness that gives you winning 10% and the uneasiness that produces loosing 10%.
Q: What are the main characteristics you seek when selecting companies to invest in?
The first characteristic of ours is that we don’t buy the analysis. All the analysis is made internally. If we can not access the directors because the company is very large, we access its channel, its products…. In short, if we invest in something is because we are convinced, not because an unknown to us analyst recommends the purchase.
We look for assets that lack five intrinsic risks to its value that we consider are critical: a debt exceeding three times EBITDA, a liquidity risk of the value due to the small size of the company, an excessive territorial concentration of sales, that the company sector has an effective competition, by not regulated, and that the products sold do not have a high reputational risk.
Once these risks have been eliminated, we are looking at at least four of the following five competitive advantages: entry barriers for their competitors, exit barriers for their customers, high scalability of their products, high territorial replication and a Portfolio sufficiently diversified.
Q: What is your current vision of the market? And what events should the Spanish investor be attentive to when investing?
Nowadays, access to international markets is easy and cheap, so a Spanish investor should never focus on Spain alone. The IBEX 35 is an index managed by only six indexes. The first thing to do is to look not only at the Eurostoxx 50, but the S&P 500, or rather the S&P 499 plus Amazon. Doing so will reduce some of the risks.
Almost all the news that came out this year have been bad. We follow 16 monthly indicators, that is to say that in the year so far we have analyzed about 80 indicators. Well, of these 80, only 4 have been good, but the S&P 500 risen up to 15%.
A year ago, around this time, the FED assured there would four rate rises for 2019. A year later, it talks about only one rise, and the market itself predicts that there will be none.
“Our vision is not of caution, it is of fear. I dare say that we will see the S&P 500 at 2600 rather than 3000.”
Q: What has been the evolution in these last years of the vehicles that you advice?
The evolution has been very good, of course this was until November and December of last year. If the end-of-year photo had been delayed for another three months, we could say that our track record is in line with our goals, but no one lets me touch the calendar.
Q: With more than 30 years of experience, what are the events that have marked your investment route?
I like to say that our method of analysis and selection of stocks is marked by our experience in the real economy. We all have been, and still are, managers, but not of portfolios but of companies. This gives us an internal knowledge of the functioning of companies.
I was struck by the attacks of the Twin Towers, not only because of the psychological effect of the same, but also because it gave the fret of a private equity operation of an airline And also because it made me see that despite the vulnerability of the markets, they have a very, very scarce memory.
Which are the challenges and objectives of Orfeo Capital for the coming years?
We have a project to grow, like most people, but we would like, more sooner than later, to set up variable income and mixed income funds denominated in US dollars, fundamentally for our Latin American investors, and the reference currency is the USD.