European equities display a distinct lack of quality at present and investors should instead focus on international themes such as commodities, according to value investor Francisco Parames.
Parames said he currently has significant exposure to positions outside Europe and the eurozone across equity funds at his boutique, Cobas Asset Management.
Speaking in the company’s second-quarter update, Parames said: ‘In Europe, which is our natural environment, we are not finding enough quality companies at attractive prices. So, we are maintaining higher positions than usual in non-European companies.
‘This is with a little more orientation towards those in commodities, especially the sectors where we can see capital needs, such as maritime transport. These have the additional advantage of defending the portfolios especially well in light of negative central bank actions.’
Parames, who launched his own investment operation in September of last year, received approval to launch funds this year, which has led to the creation of five domestically available funds, as well as the Luxembourg-domiciled Cobas Lux SICAV-Cobas International fund.
In this fund at present, 22% is invested in the eurozone and 17% is allocated to European stocks. This is while 26% is invested in emerging Europe or related countries.
Elsewhere in his portfolios, Parames said he had been negatively impacted by the depreciating dollar, something that previously affected 25% of his allocations. The exposure was retained over the second quarter, but with hedges added.