Mr Tenerelli is referring to Atresmedia Corp (formerly Antena 3, a 0.67 per cent holding), and Mediaset España, which is in the top-10 holdings for T Rowe Price European Equity (a Sicav) at 1.79 per cent of the portfolio. A media company reliant on advertising revenue that’s depleted 50 per cent and based in a country gripped by 55 per cent youth unemployment – Spain represents a third of the eurozone’s unemployed – may seem like a contrarian play, but these stocks benefit from the third plank of Mr Tenerelli’s investment approach: competitive advantage.
A consequence of the fall out from Spain’s struggling economy has been the closure of several media companies, as well as public/private rule changes that have effectively whittled the country’s key commercial broadcasters from approximately 10 companies to, well, just these two. As Mr Tenerelli says: “No matter how bad [macroeconomic] Spain is, if you’re L’Oréal and you want to advertise on Spanish TV, you’ve got two stations to go to” – both of which have decent balance sheets.
“If I hadn’t done my work with both the quality and the valuation, I wouldn’t have bought those stocks,” Mr Tenerelli says, “and that’s how you generate performance – and you do it when everyone else is panicking about dumping Spain because [they think] it’s going to leave the euro.”
Spain has featured so prominently in Mr Tenerelli’s media interviews about European stocks that he’s been noted to be ‘running with the Spanish bulls’ in market terms. He is clearly impressed by the Spanish authorities.
“I think Spain deserves all the credit in the world for doing a lot of things during this crisis: restructuring their banking system and doing reforms, although of course they can do more,” he says. “The structural measures that Spain has put in place are starting to manifest in increased exports and gains of competitiveness in the country, so I wasn’t investing in a country that was doing the wrong things; I was investing in a macro situation where the country was doing the right things.
“This led me to believe that at some point in the future it would get better, normalise, and in fact that’s what has happened: Spanish exports have gone up, they’ve gone into a current account surplus, which is a macro figure that shows you that they’re competitive, and now you’re starting to see better PMIs [purchasing managers’ indices].”
