Some of my value investing experiences

I have looked at the various sections of the blog on the Cobas Asset Management website, and find that one of them – “From the Deckchair” – asks investors to talk about their own experiences. So I shall tell you about two experiences I had with the value investing philosophy and how it worked out for me.

The first experience was one I had at first hand. This was back in 1989 and 1990, when I was able to get together a few savings. I realise that my money needed to be properly managed if it was not to be eaten away by inflation.

I met with several Spanish and foreign banks seeking advice and solutions. I wanted my savings to grow, even if this meant taking on a measure of risk.

I was just looking for medium- and long-term returns on my modest investment.

My meeting with a very well-known American asset management firm was typical of what I encountered. The conversation went rather like this:

Account executive: So, what brings you here?

Me: [I briefly explained my situation.]

Account executive: How did you hear about us?

Me: From friends of mine who work in finance.

Account executive: I see, so you’ve heard about the “Rolls-Royce”, but haven’t tried driving it… [literally his words]

Me: If that’s the case, I suppose I must have found what I was looking for.

Account executive: And what do you expect from …? (He then uttered the name of the firm in a perfect American accent)

Me: Well, I’m looking for medium- and long-term returns on my modest investment.

Account executive: What do you think this firm’s clients are looking for?

Me: Much the same thing as I am, I guess.

Account executive: Well, not exactly. What our clients want is great service – mainly service. That’s why we assign a personal manager to each of them to cater for their needs 24 hours a day…

At that moment, a vision crossed my mind of my savings being used up to pay for that personal manager’s salary. I would get whatever was left over, a few percentage points up, unless there were some overriding international reason why even this might not come about.

So I bid goodbye to the financial Rolls-Royce and went on my way, promising to think it over more thoroughly.

The thing was, this was not what I was looking for!

Next, I got in touch with two of my friends, and told them about my experience. They encouraged me to join them in their venture, which was then at an early stage under the leadership of Francisco García Paramés – their goals seemed to resemble my own.

So, I did get on board in the spring of 1991. Now, here I am again with my money under the guidance of my asset manager – who, after so many years, is now also a friend – after such great returns achieved over time, subject as they of course were to natural ups and downs.

The second experience I can tell you about has to do with a young nephew of mine. In July 1995, he told me that his godmother, who had recently died, had left him by way of a bequest an envelope filled with a million pesetas in banknotes. He didn’t know what to do with the money, and sought my advice. I suggested that he hand it over to me, and I would hold it in his name in the form of an investment managed by Francisco García Paramés, with whom at that stage I was entirely in tune with.

I could make this story a lot longer and full of incident and flourishes, but I think that what the reader will find most striking is that I have just returned to my nephew not just a million pesetas (equivalent to about €6,000) but an account in his name with Cobas Asset Management, in the COBAS Selección fund, showing a balance of €114,000. This means the amount he handed over to me has multiplied by a factor of 18.833, leaving aside complicated calculations of present value in terms of the purchasing power of the original investment – it might be interesting to find out, but let’s leave it to the more meticulous of our readers.