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Florian Bartunek

lines on the record: 50
first: 2022-01-20
most recent: 2022-01-20
sittings or episodes: 1
sources: podcast

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“Hope so. We need to have some good news, and it's a big thing here. So, yeah, I hope we do. We deserve it. It's a national sport, as you know, and people are really fanatic you. So, yeah, I'll definitely root for Braz”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you should definitely go to see a football match. Definitely, you should go to the beaches. You're going to be impressed with how nice people are in Brazil, try the food art. So yeah, go to see the real Brazil, not just come to S ⁇ o Paulo and do the rich guys tour and go to the shopping malls and go to buy things at Chanel or Gucci, which doesn't make sense at all, right? Go to see the Rio Brazil.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk to the young talent, what people usually do, they go and talk to government officials, experienced businessmen, blah, blah, blah, blah. But the real story in Brazil is with a young generation who's entrepreneurs. Go talk to some venture capital funds and see all of the energy and great new businesses and innovative ideas that are being created here in Brazil.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“They have to go to the shopping malls, the nice places, but they also have to go to the big shopping malls, for lack of a better word, not so nice places, right? To see really what Brazil is about. And they're going to see in a Saturday, hundreds of people in the malls. And it's interesting to look at the stores. You're going to see a lot of local brands. You're going to see a lot of local stores. And you're going to see what really Brazil is about. Young people in the malls consuming and having a great time. So you have to go to the malls to really understand what consumption is about. You should go and talk to young people if you have a chance. So ask them, what apps are in your phone? What are you watching? What are you consuming? What do you want to do with your life? And I think investors are going to be impressed with how sophisticated and how entrepreneur the young generation is.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Exactly. I love Bruce Greenwald's books, Competition Mystified, which is a great book to understand business models. It's a great book. There is one book which is, I think it's called Value Investing as an Art, which looks at different disciplines and how these disciplines influence investing. I love Peter Lynch books, one up on Wall Street. It's a great book, especially for individual investors. So, yeah, valuation by Swat Namodoran. I was just asked to write the introduction for the Brazilian edition of Reminiscence of a Stock Operator, which is a book I read 30 years ago. So I had to read it again. And it's a great book. It's a very interesting book. This is for the Brazilian listeners, but I kind of co-wrote a series of books with interviews with great investors in Brazil and great businessmen. So that's a set of books that I like a lot.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“I always tell people read how to make friends and influence people, which is actually Warren Buffett's recommendation as well.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have political risks in the US as well. And Brazil has gone through a lot, and there's still great companies that have been around for years and years and years and companies and good management teams definitely figure it out. Wanted to finish on a few just fun questions for you. We started earlier talking about books, and I mentioned there was a lot of books on your shelves at your offices. Florine, what is your favorite book on investing?”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Or by. And our investors tend to do a portfolio rebalancing, which is one of the very few formulas that work in markets in general. Why? Because it's very hard to do because you have to be buying when you want to sell and you have to be selling when everything looks great. So we are seeing international investors adding to Brazil, let's say using an active portfolio rebalancing strategy. So yeah, a lot of uncertainty, cheap valuations, foreign investors adding and earnings are doing relatively well. So I think that fundamental story is good in Brazil, although, again, politics, inflation, interest rates is the US going to tighten too early, too soon, all of those are still question marks out there.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Again, one and a half on average standard deviations below the average multiple. A peg ratio below 1.8, 0.85, 0.75. So I think it's an interesting time to buy usually when it's darkest, it's most scary, but it's the best time to buy. What we are seeing in our business is we are seeing international investors adding to Brazil right now. Why? They tell us, look, you think Brazil is complicated, it's tough, but most emerging markets are. It's not a walk in the park when you're investing emerging markets. So we are used to it. When locals are pessimistic because inflation, interest rates, politics, usually when local investors are pessimistic. Usually when valuations are cheap, when the currency is cheap, which is the case with the Brazilian real, it's an interesting time to get it.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“So it was all about multiple contraction, this recent corrections. So what I'm saying is that today you could be buying this great businesses at one and a half standard deviation below the average multiple of the last three to four years. So there is a lot of uncertainty which creates opportunity in the great businesses. When you look at earnings, which is the most important thing, right? Because for us What really scares us is not multiple volatility is when earnings start to deteriorate because that's really bad. And when we're wrong about the timing, maybe we bother a little bit more higher than we should, that's okay. But if we were wrong about earnings or the business or profitability, that's usually a permanent loss of capital. So it's a very interesting time because there's a lot of uncertainty. Valuations contract.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Uncertainty regarding next year's 2022 elections. Too early to know, but still when you look at the polls, you have the two perceived far left and far right candidates at the top in terms of the polls. So a lot of uncertainties. And this backdrop of uncertainties is what caused the recent correction from, let's say, September, October, November, where you've had stocks falling 40%, 50%, 30%. When we look at our businesses in the last six months, on average, the companies fell 30% from the peak. Some fell 40%, some fell 15%, but on average 30%. When you look at earnings expectations, they're after the third quarter earnings, they were up 5% to 8% on average. So stocks are down 30, give or take, earnings, expectations are higher, not lower.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are so many uncertainties, and uncertainties is worse than risk. Because if there's risk, you just price it and you move on. But when there's uncertainty, and uncertainties are inflation, therefore interest rates, therefore growth, there is a question mark on China in terms of what are they doing with some sectors, what are they doing regarding some public Chinese companies. There's uncertainty regarding tech valuations if you have interest rates rising in the US, given that most of these stocks or companies are long-duration assets, so higher rates do have an impact on long duration assets. There is a question mark or uncertainty regarding fiscal policies, and this is all around the world, given that COVID widened, if you will, the income gap. There is a real and fair and justifiable demand for more incentive, especially in Brazil for the poor. So there is this question mark about the fiscal picture going forward. And in Brazil, there is a”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“So eight, nine, ten times earnings for low growers, and then you have the compounders trading at 25, 30, some trading at 32. And you also have some highly innovative companies like Mercado Livi, which is the leader in e-commerce in Latin America, trading at 100 times earnings, ninety times earnings, but these are growing earnings at 40, 50% a year. So not very different from the US. What I'll say is that Brazil is cheaper in terms of price to growth. So when you look at the price to growth, most of this compound was trading at 0.8, 0.7, 0.75. So compared to the rest, they're relatively cheap. And the high growers, let's say the really high growers, they're trading at half of the price to revenues compared to their peers in the US or China.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Have almost two groups, which I think is very similar to the US, right? So, the one is the low growers, and as I mentioned before, the valuation gap increased a lot in the last couple of years. If you're growing at 5, 4% a year, nobody cares. If you're growing 20, 25, everybody wants to invest in the business. So the big banks are trading at eight times earnings, nine times earnings, 6% dividend yield. So there's a big question mark regarding the”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“It was just approved by the antitrust authorities here. So we expect Ernest to grow 25, 30 a year with synergies and the growth of the market. There's a common theme. Businesses that have tailwinds in their industries and managed by the owners who have the right incentive to do the right things.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is the leading ERP company in Brazil and now growing in adjacent areas within ciliary products like credit, SEO for online marketing? It's a subscription-based business growing top line and earnings at 25% a year, trading at a big discount to the big software as a service companies in the US or in other markets. The tax code in Brazil is very, very complex. Even multinationals use Tatu's software in Brazil because in order to understand the tax code, you have to have a local provider. So that's one of the advantages of the local incumbents. Localiza, the largest car rental company in Brazil, all these tailwinds in car rental. Most young people don't want to own cars anymore and the best alternative is doing a long term, as they call it, rental with Localiza. It's the leading business. Great margins. They just acquire the second largest player.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“The stock trades at 20 times earnings, which is a bargain. Roaring earns at 30 35%, and it is the best product, the best brand in the financial advisors or asset management business. So it's a great business trading at a very attractive valuation. We like Haya Dogazeil, Hayadogazio is the leading drugstore and pharmacy business in Brazil. As I mentioned before, it's opening 300 locations a year. It's the best brand. It has D-fly wheel in the sector. It has the best data. It's the largest buyer of medicine in Brazil. So it has the best prices. So it's a growing machine. Again, it's healthcare, which is a growing business. So it's also a great stock, great company. All of these companies are owned and managed by the owners, so great businesses. We also like a lot. Totus is the largest ERP software as a service company in Brazil. It's also family-owned.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“30% IRR per year at the current multiple. There's another company we like a lot, which is Hejador. Hejador is the leading hospital operator in Brazil. They have the best management and the best operations, and they are consolidating the market and healthcare in Brazil, as in other places, is a growing business. It's growing three or four times GDP. So very strong tailwinds in the sector and the best management team. It's run by the owners. It's a 20 plus billion dollar company and trading at 25, 30 times earnings. Most of the companies we like have a price to earnest growth below one. We like XP. XP is, if you will, the Brazilian Charles Schwab, the share of independent banks or brokers in the asset management business is very small. So most big banks dominate the fund management business, right? And XP is growing with a better product, a more sophisticated offering.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“As I mentioned before, they're these great incumbents who have this flywheel, great brands, great gross margins, a growing market, the best management team. Growing earnings at 20-25% a year. So you do find great businesses, growing earnings at 20, 25% a year. Just some examples. We're very excited with a company called Veggy, W-E-G, which is an industrial company, but more than half of their products were launched in the last five years. And this is one of the best managed companies in Brazil. Today is actually a global company. It has operations all around the world. They are involved with solar wind, their suppliers, electric motors, systems. So this is a very well-managed business, a very innovative. It's a supplier to growth sectors. So that's one that's a great business. It's been a great performer, but we see a”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“In that age bracket now, where I guess I'm trying to simplify. So that's helpful. It's trying to have conviction, but not too much concentration. I thought that was a great way of explaining it. So we've talked about the team and the philosophy. We haven't really talked about what are the current market opportunities. What are you most excited about? You threw a few names around, Newbank, another. What is constellation excited about right now in Brazil?”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Love the 60 year old or 50 year olds. I love the 20 year olds, the 30, 35s are the most dangerous. Why? Because when you're 50, 60, you saw a lot of things and you simplify. You know what works, what doesn't, and you do it very simple. When you're 20, 18, 25, you don't know much. So you also simplify. When you're 35, 40, when I was in my 35, I wanted to do everything different, overthink things. So do not overthink positioning. Do not overthink portfolio managers. It's good common sense. And if you have good companies and if you're diversified in terms of risk factors, you should be okay.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Run a successful asset management business or a fund, you have to have three things. First, you have to be a great stock picker, a great portfolio manager, and a great business manager. And business manager means you have to have mostly a great team and a great client base. Because again, if you're a great manager, but you have the wrong clients, you'll be selling when you should be buying and you would be buying when you should be selling. So first of all, you have to be a great stock picker. And this is talking to a lot of people, being curious about business models, trying to understand what makes a great business and talking to companies, companies and companies. Then know how to build a great portfolio. Most of the times is having the right balance. Sometimes it's a barbell, so we may own a digital bank and a commodity.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“To understand a Brazilian bank, you have to look at the private banks, the startups, and you have to look at the international banks. Either JP Morgan or Chime or Revolute or others, our job is three times harder today than it used to be. You get your edge from first, look at your future. Secondly, talking to private companies. And also, I think that pattern recognition, experience makes a difference. It's not enough and sometimes it's a minus because things change. So you say, I know, of course, 30 years ago, this used to work. This is 30 years ago. It doesn't necessarily work anymore. So yeah, I think it's very possible to get an edge here. And again, I'm a strong believer of specialization. So if you are a global investor, there are some advantages. For instance, you see what's happening in other countries and say, oh, this is happening here. Maybe it's going to happen in Brazil as well. But I'm a strong believer in local talent.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, as I mentioned before, it's different today. The biggest risk today for our businesses is disruption. 20 years ago, when we discussed an investment in a, let's say, large bank or a beer company, we didn't discuss at all about ESG. We didn't discuss at all about disruption. The only thing we discussed was what's the economy going to do? Better economy, better earnings. So that was it. Today, all of our businesses we have to discuss disruption. And disruption comes mostly from the private sector. So you have to have your analysts talking to private companies where you can get your edge. And for emerging markets, you also have to look at international companies. I tell our Alice, if you want to have a look at the future, jump on a plane, go to the United States or China, go see the future and come back from the future.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Having opinions on stocks, which is a totally different thing. To my mind, it's really a kind of pyramid. Everybody can be a journalist just taking notes. Most can do good spreadsheets. Most can have an opinion on the quality of businesses, but it's very hard to find analysts or portfolio managers that have the talent to have a opinion on stocks. But again, that's our job is create environment for people to thrive here and grow. And the best way to do it is again participating in the meetings, going to meetings with companies and meeting people and through courses.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“You have to do is constellation has to be the place where young talented students aspire to work at. You have to be the brand. So that's what we do. And it takes a lot of work because teaching is mandatory reading, mandatory courses. There's a list of courses. Every analyst has to take. It's a constant work, but I think today we are among the top brands. The way you see it is when you begin as an investor, you're almost like a, I'd say, journalist. So you go to a company meeting, you just take notes. Then you start modeling. Then you start becoming an analyst. So you go to the meetings, you take notes, and you have an opinion. After a while, you start having an opinion on business models. What makes a good business, what makes good management team. Then you start having opinion on people. So you know what? I like this business because of this and that. And I trust that management team. And one day you start having...”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“I like one of those hospital TV shows in the US, right? And this is a learning hospital. So all of the interns, they do participate, at least they watch all the surgeries. Same thing here. So we have all of the young talent in the room discussing the investment cases so they learn. Imagine their intern. When they go back to their classes, they have to tell their colleagues, you know, what at constellation yesterday I had a meeting with the CEO of company XYZ. Yesterday I had a meeting with the, I don't know, Secretary of the Treasury. Really? Do they invite you? Yes, they do. So we have to create a brand that when our interns or the young Alice, they go back or they talk to their friends or to other students, they really talk highly about us and all of the opportunities we give them. Longpine Capital is a good friend of us and a GP in our business. And I really admire Steve Mandel. And once he told me, he said, look, Florin, you think...”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“On one hand, the market is more volatile, so it's harder, it's almost like dog ears, ten years investing in Brazil, it's almost like you've been probably 20 years investing in some more stable markets, right? So it's a market for fast learners. It's relatively hard, especially these days where you have a lot of competition from venture capital for talent, from private equity for talent. And it's a good thing. 30 years ago, there was a line of young talent in front of the bank because they all wanted to work on Brazilian Wall Street. These days, most bright young people, they want to start their own businesses, which is a great thing. They want to work adventure capital. So your company or your fund has to have a brand that's very attractive for young talent. And what's that? I think first, I always say we are also a learning company. People have to learn here.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“The focus on quality growth the compounders, that's really your history and what you guys have found success on. I wanted to talk a little bit about your team before we even got into process because you made a comment earlier that said that there's some great companies in Brazil, but they're not all great. And that at times in any emerging market, it is hard to find good corporate management. So is it also hard”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Bank in the world just because it's in my backyard. Why settle for the third best management in the banking industry just because it's in my home country? So I think that's the way people are starting to look at the world. Instead of I have to have Brazil just because it's in the indices. Say, you know what? There are great people there, either money managers, either companies. And I want to participate in those businesses.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is gonna stretch, right? It's a mistake. Pay the right price and buy the thing you want so people tend to look for cheap stuff. And in my personal experience, all of the assets public companies or others that I bought think, you know what, this is not so cheap, but it's very high quality. I made money. Most of the things I bought think, oh, this is really a bargain. I probably didn't make a lot of money. So again, it's compounders, quality, harder to do than people think. In the past, foreign investors looked at international markets as a must-do because there's this global indices. What we are seeing more and more is global investors looking at the world thing. You know what? I want to invest in the best businesses, in the best people, either managers or companies. Sometimes the best beer company happens to be in Brazil. If the country is liquid, eligible, and safe, quote unquote, why settle for the second best?”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's the best way in the long run to make very nice returns. We made 12 times our money in the largest education company, Brazil, six times our money in the largest e-commerce business in Brazil, eight times our money in the largest drugstore in Brazil. And this is eight years, six years, seven years, and just betting on the best. I know it's become a cliche recently. You never hear a manager tell you, oh, you know what? I look for the worst companies, the worst management teams. It's all the same. The best people, the best businesses, a large addressable market. But again, it's easier said than done because there is a natural tendency to buy cheap stuff. We Brazilians, we love to go to Miami, to the United States, to Disneyland, and there are all these outlets. And people tend to go to the outlets and buy all of the cheap stuff. There's never your size. I wear 11.5. So it's either 13, 14, or 6. So sometimes there isn't a 10 and a half, which is so cheap to just buy it because you”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stronger, stronger in emerging markets, you really should buy the best property in the sector, trying to buy the second, third best just because the cheap is a trap. This is maybe even global. The valuation gap between the best companies and the so-call companies has never been as wide as is today. In emerging market, I think that the currency is a risk, especially for Greg. You guys, you are dollar-dominated, right? So you don't care if you make money in the local currency, but losing dollars. You're looking in dollar returns. So one additional risk in emerging market is the currency. The currency risk is relatively expensive most of the time. So the best hedge for the currency and for volatility is growth in emerging market. It's not value. Again, that's my personal view. If you want to invest in emerging markets or in Brazil, look for growth. Do not look for trying to buy cheap stocks. Look for the best businesses that are growing much more than average.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just some examples. The largest drugstore and pharmacies, let's say Chain in Brazil, they're opening this year more pharmacies than the combined number of their competitors. The leading apari retailer grew sales twenty percent on the third quarter year over year, which is more than double the growth of the other players. So the stronger and stronger, the strong usually have a stronger mode, the strong have a flywheel. So the best way for us, I think, to invest is finding these great businesses, great people that acts and things like owners. There's no owners at the end of the day, they take more risk and companies now have to take risks, given that all of the businesses are being disrupted. So you need more risk takers and owners are on average better risk takers than, let's say, professional managers and corporations. Again, they're exceptions, but on average. So compounders, great businesses.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Philosophy has been shaped in 30 to 35 years of observations, what works and what doesn't. And given the volatility of the economy in emerging markets as the balance sheets of governments are more fragile, markets are more volatile, what has really worked is the compounders. Credit, for instance, is either available or not available. So during downturns or bad economic cycles, the strong get really stronger. It's a very hostile market for the third, fourth, fifth player. So during market crises or economic crises, there's a lot of consolidation. So the strong in Brazil gets stronger during crises because they have the strongest balance sheets. They consolidate their industries. And giving how hard it is to compete with these incumbents, they are great businesses and they grow and grow and they compound very nicely.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Way some indices are, let's say, constructed or set up in emerging markets is idiosyncratic as well. So for instance, in Brazil, commodity producers and some very liquid stocks represent So, I would say that in Brazil and probably most emerging markets, going local makes a big difference. I strongly believe in specialization, so an investor who has a niche, he's specialized, he has an edge in that industry, in that region, in that market. I think being specialized makes a big difference. So that's what we are here in Brazil. We have probably better access to private companies, which today is hugely important for investing in public companies and that's another topic which I think is very interesting, the overlaps between public, private, and international. And the local managers have been able to generate a lot of alpha in the last 10, 20 years. So the numbers are there. And much more indices agnostic than average. So we want to be in the best companies. We don't really care much about the indices.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is probably the most efficient or the best managed beer company in the world. So given that it's so hard to do business here, especially for foreigners, the incumbents have huge competitive advantages. So you do find great local companies. And as the economy is, as I said, big, these companies can get to 10, $20 billion of valuation. I would dare to say that corporate governance is the best among emerging markets here. If not the best among the best, definitely.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“As I said, it's a big market investor friendly. However, it has a lot of challenges in terms of doing business here. It's a relatively closed economy in terms of import-exports. There is a lot of red tape, regulatory issues. It's a big country, so distribution is a challenge. Access to local talent, managerial talent is a challenge. Local incumbents have a lot of competitive advantages. So it's very hard for a foreign company to be profitable in Brazil. With the exception of Santander, which actually acquired a big local bank here in Brazil, very few international banks make money in Brazil. And when you look at the return on equity of the local banks, it's like 20%. Car rental, one of the most efficient car rental companies in the world is Brazilian. The US companies never really were profitable here. Same thing in healthcare. Same thing in beer. So Amb is”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's very idiosyncratic. We'll touch on that later. It's very liquid. In the last couple of years, we had several great new businesses going public, like just last week New Bank. New Bank is the largest digital bank in the world with almost 50 million customers. It's now trading at a $45 billion valuation. Warren Buffett, Berkshire Hathway actually invested in a private round and in the IPO, Sequoya Soft Bank are investors. So we have had several unicorns, several 10, 20 billion dollar companies being listed in the last couple of years. So it's a relatively liquid market, billions of dollars traded every day, several ADRs in the New York Stock Exchange. The local market is relatively big. Currently have, I would say, gas 5 million, 6 million individual investors in the stock exchange, which is not that big compared to the United States, but it's much bigger than it was before. We had like 2 million a couple of years ago. Now it's like six.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Course so Brazil is a very big country, 220 to 130 million people, very young, very tax savvy. In some apps, Brazil is the first or second country in terms of users for ways of WhatsApp and others. Brazilians are really fast adopters of technology. It's mostly middle class. In terms of the economy, I'd say market friendly economy. It's an open society. There's the rule of law. We have free press. So it's a big economy. It's very innovative. I think it's a great place to invest. The level of corporate governance is great. And the majority of our investors are international investors. Sovereign wealth funds, endowments, pension plans, families all around the world. And when they come to S ⁇ o Paulo or Rio, S ⁇ o Paulo is the business capital of Brazil, they get really impressed with the quality of managers and business people here. So I think it's a very sophisticated country.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because the more you understand businesses, the more businesses you see a better investor you get. This is very similar to art. I had an art professor and I asked him, how do you know why this piece of art is worth $1 million? The other one is worth $100,000. He said, look, the more art you see, the better your eye is trained, if you will. Same thing with businesses. So today I read a lot of different things, but I still read a lot of end reports and also the classics. I try to read one book a week or every two weeks and there is no way you have a great book being published every week. So you know what they do? I read Warren Buffett letters. I write them 10 times. I read the classics again and again. Sometimes it's better to reread the classics than try and come up with new books just for a fear of missing out. So yeah, reading is very important.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Entertain an evolution as most investors, you start with reading end reports, you start at valuation, then you move to the great investors, Pierre Lynch, who are in Buffett, Fisher, and then you start reading about other sciences. It's interesting because 20 years ago I was walking through the offices of the bank and had economists of the bank who is currently the economic minister, as we call it here in Brazil. He was reading a book and I said, what are you reading? And this was during the day, which at that time said, look, this guy is doing trading hours he's reading. He's crazy. So he must be reading something about markets. And he was reading Darwin. Why are you reading that? No, this has everything to do with markets. Learning, reading, understanding, other sciences is key. I think to investing plus understanding businesses, I was very fortunate to have Bruce Greenwald as a professor for a value investing course. And I asked him, Professor Greenwald, which book do you recommend? He said, you know what? I recommend you reading any reports.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“But why not spend some hours alone with him reading his books? I always like to read a lot, biographies, Benjamin Franklin. He couldn't be a mentor, but still, if you read his biographies, it's like having a conversation with him. I'm always curious and I love to hear stories of people and they always inspire me, especially people that are very successful because they always make you think bigger and want to do greater things.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Course, there's no right or wrong, but I always liked having a boss or someone more senior alongside me. I always liked to have a mentor. Because again, in investing, if you can share your fears, if you can have senior soundboards, people that went through what you are going through now, it helps a lot. So I had people at the Banco Pactual, which today called VTG, who are great traders, great investors, and great economists helping me. Georges Paolo is still a great mentor, great investor. I also had great mentors or friends that operated businesses, that teach me how business work. So it was a comprehensive education and was always looking for mentors. And sometimes reading a book, you wouldn't be able to have Benjamin Graham as a mentor today, but why not spend some hours with him reading his books? Your may probably not be able to have Warren Buffett as a mentor today.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was beginning Time It was more about trading and long and short. The perspective for Brazil weren't that great, so we had to do longs and short to kind of try and be market neutral. This strategy quickly evol Long term compounders. And that's what we have been doing for some”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, after a couple of years, I focus only on managing. Equity portfol Time I manage a fund called Infinity Fund, which was One given Best performing fund in the world. Some time Portfolio for George Soros.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Had the research and proprietary trade is managing my money. Great. Today, this is unacceptable, obviously, for very good reasons, but at that time it was okay”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Course, Greg, pleasure being here. It's definitely warmer here in S ⁇ o Paulo, Brazil. Happy to be here Sharing a little bit of our. View and experience. Investing in emerging markets, investing in Brazil. So to start. Doing this for 30 plus years Started by the end of the 80s, beginning of the 90s at an investment bank, at the time the largest investment bank in Brazil still is still. And it was a different market, Greg. It was all about market time. Was all about Was all about having an edge on politics, on the economy. Had foreign investors starting to invest in Brazil and in Latin America, and this changed the game to a much better level and a much more sophisticated Way of investing I started As an analyst Became head of research, proprietary trader, and portfolio manager all at once. I did three things. The same”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Today's manager meeting Greg Dowling interviews Florian Bartoneck. Greg is the co-CIO and head of research for fund evaluation group, an institutional OCIO and investment consultant with eighty three billion dollars in assets under advisement. Florian is the founding partner and CIO of Constellation Asset Management along only asset manager focused on Brazil with approximately $3 billion in assets. Florian found a constellation in 1999 alongside Jorge Palo Laman and 3G and brought in Steve Mandel's Lone Pine Capital as a partner in 2007. Their conversation starts with Florian's career in investment management, his passion for reading, and an overview of Brazil's business environment and equity market. They then turn to Constellations investment philosophy, team, portfolio construction, and investment exam.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source
“Opinions expressed by Ted, guest hosts, and podcast guests are solely their own opinions and do not reflect the opinion of capital allocators or their respective firms. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of capital allocators, the firms of guest hosts, or podcast guests, may maintain positions in securities or managers discussed on this podcast.”
2022-01-20 · Capital Allocators · Florian Bartunek – Equities in Brazil at Constellation Asset Management (Manager Meetings, EP.27) · IDENTIFIED FROM THE TRANSCRIPT · source