After years trying to fix its financial crisis, Spain's future
is still uncertain. On June 9, the country's leaders agreed to
accept from European finance ministers an emergency $125 billion
bailout to shore up its banks and help stabilize its economy.
Currently, the country has an unemployment rate of 24.3 percent,
and Prime Minister Mariano Rajoy is aiming to cut the deficit to
5.3 percent of gross domestic product this year and 3 percent by
the end of 2013. The European Commission estimates that the
deficit will end the year with a deficit of 6.4 percent of GDP
and 6.3 percent in 2013.
Uncertainty has pushed Spanish stocks down to unusually low
prices. According to
GuruFocus' All-in-One Screener
, the three largest U.S.-traded Spanish stocks are: Banco
), Banco Bilbao (
) and Telefonica (
Banco Santander's stock price has declined 45.75 percent in the
last year. It currently trades at about $6 per share, near its
52-week low of $5.19, and has a market cap of $54.6 billion and
P/E ratio of 6.66. Fitch Ratings downgraded the bank's long-term
issuer default ratings on Monday. It said that the bank owns a
large portfolio of domestic sovereign debt and is highly exposed
to domestic counterparties, making profitability and asset
quality vulnerable to macroeconomic and market trends.
But Banco Santander has diversification across international
markets that helps stabilize it, with 56 percent of profit
derived from high-growth emerging countries. It also had some
positive developments in the first quarter. It earned a profit of
1.6 billion euro, 23.9 percent less than the previous year, due
primarily to still high provisions in some units, higher minority
interests in Brazil and Chile, a reduced stake in Santander USA
and more taxes. Its non-performing loan ratio rose slightly to
3.98 percent, but was lower than the NPL ratio in Spain, which
was 5.75 percent.
both added to their stakes in Banco Santander in the first
quarter of 2012.
Dreman listed Banco Santander as one of his worst performers in
2011, but said in his Forbes column in March, "Overall I stand by
my 2011 calls. I am a contrarian value investor and not a timer,
and it's not unusual for my picks to be 'early.'"
Banco Bilbao Vizcaya Argentina SA (
) ADR declined 40 percent in the last year and 24 percent year to
date. Fitch Ratings also cut its rating for Banco Bilbao for the
same reason as Banco Santander. The two banks are the largest
lenders in Spain. Banco Balboa and Santander are two of only
three banks that are well capitalized enough to meet loan loss
provisions in 2012 and 2013 if that were required, according to
Banco Bilbao is solvent after earnings over the first three
months of 2012 enabled it to meet EBA capital recommendations
prior to their June 30, 2012 deadline. In the first quarter it
built a 9 percent core capital according to EBA criteria, 10.7
percent under Basel II. It did this without selling any strategic
assets, resorting to public aid or modifying shareholder
remuneration. The bank earned a profit of $1.3 billion in the
first quarter, up from a net loss of $182 million in the previous
quarter, and down from $1.6 billion in the year-ago quarter.
Banco Bilbao's non-performing asset ratio ended the first quarter
at 4%, differing across its different geographic segments.
Non-performing assets were 16.1 billion euros at the end of the
first quarter, compared to 15.9 billion euros at year-end 2011.
The number went up due to the higher NPA ratio in Spain,
exchanged rates and stricter regulatory framework in Mexico.
David Dreman and Jim Simons are the only two gurus to hold Banco
Bilbao stock, though Simons cut his stake by 93.5 percent in the
is the third-largest U.S.-traded Spanish stock by market cap,
with a market cap of $57.4 billion. It trades for $12.31, off of
its 52-week high of $24.82. The telecommunications company also
has a dividend yield of 9.1 percent and P/E of 3.1. Its stock
dropped 47 percent over the last year and 28 percent year to
In order to reduce its debt, Telefonica agreed to sell a 4.56
percent stake in China Unicom (
) in June for $1.4 billion. It currently has $70 billion in debt
and about $22.4 billion in cash on its balance sheet. After the
sale, Telefonica will still have a 5.01 percent stake in China
The company's European has suffered due to the financial crisis.
Overall revenue in the first quarter 2012 increased 0.5 percent,
largely due to mobile termination rate cuts. While revenue in its
Latinoamerica segment increased 8.3 percent, revenue in
Telefonica Europe declined 6.6 percent. Overall net income
dropped 53.9 percent from the year-ago quarter.
Over the last decade, Telefonica has produced solid growth,
raising revenue at a rate of 15.9 percent annually, EBITDA at
22.6 percent and book value at 9.6 percent. The company has also
been generating cash flow over $10 billion for all but one year
David Dreman and Charles Brandes bought more shares of Telefonica
in the first quarter, and Bruce Berkowitz and Ken Fisher both
sold out their positions. Other gurus that hold Telefonica are:
Brian Rogers, Mario Gabelli and Jim Simons, who sold some of his
shares in the fourth quarter (or his computers did).
To see more Spanish stocks, or other stocks by country, try
GuruFocus' All-in-One Screener.About GuruFocus: GuruFocus.com
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