October Idea of the Month: Toll Roads and Airports

By Travis Johnson, Stock Gumshoe, October 18, 2010

As most of you know, I spent a couple days learning at the Value Investing Congress in New York last week, a wonderful conference that attracts some of the best and brightest in value investing and gives them a great forum for sharing their ideas and methods.

The stars of the Congress are usually the names you know, and they often make headlines — such was certainly the case this year, with a lot of attention given to Bill Ackman’s JC Penney (JCP) investment (revealed a few days before the conference in an SEC filing, and discussed a bit in his Q&A session), David Einhorn’s compelling short case for St. Joe (JOE) that I mentioned to you last week, and a couple others — including Lee Ainslie’s offhand speculation that Michael Dell might take his eponymous computer firm private.

But what I really appreciated about this conference was the depth of analysis given to some lower-profile names, and by some less-well-known investors who talked openly and clearly about their strategies, methodologies, and larger world view. To that end, I thought I’d share one of the interesting ideas I learned more about as the “Idea of the Month” for October.

This idea was shared by Francisco Garcia Parames of Spanish asset management firm Bestinver, and it is for a Madrid-listed firm, though not really a Spanish business. He suggested Ferrovial, which I’ll get into in a minute, and I think his reasoning is right on and the stock looks quite attractive as a long term investment.

Parames spoke about having an “absolute” risk strategy — considering the risk and profitability of any investment in absolute terms, based simply on whether or not the investment would lose money, not relative to the expected performance of other assets. And interestingly, he was unusually forthright about saying that his firm differentiates itself by using a foundation of Austrian Economics — which comes out in practical terms as a belief that trust in a currency can disappear overnight, that low interest rates in his home country of Spain (and elsewhere in the Western world) have been devastating, and that investors should own real assets. He also believes that the European stock exchanges are less efficient than the US market, in part because there are lots of odd conglomerates and family controlled companies.

He also suggested a couple other stocks that I won’t cover ...

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