Javier Navarro: “We take advantage of the confinement to review the strategy”

Javier Navarro, managing partner of Vinca Capital Corporate Finance, is the guest in the new installment that this newspaper launched two months ago, in order to to find out how Valencian financiers have lived through the state of alarm.

Navarro kindly answered the call from Valencia Plaza to address other aspects such as the performance of the financial markets, the economic recovery and his vision of the so-called ‘new normality’. Here is the talk:

-How have you been during these months of confinement?
We have experienced an unusual and complex situation. At first you go into shock, trying to understand the problem; then we go to a phase of adaptation to the limitation of movements; and for a few weeks we have been in the reconstruction phase, as we recover freedoms.

-And how have you organized yourself to continue at the foot of the canyon?
-Following very specific guidelines for schedules, food, sports… A little daily self-discipline that has allowed us, despite being confined, to clearly differentiate working time from spending time with family and leisure.

-How has Vinca Capital responded to the health crisis?
-We have tried to keep in continuous contact with our customers and partners. Fortunately, today, new technologies allow teleworking and undertaking most tasks in the financial area. In addition, we have taken the opportunity to become part of the team, taking an online course at ESADE on Agile Business, which has allowed us to review our strategic commitment.

-Have you received many calls during this time, especially after the first weeks with the market crashes?
-In general, customers have understood the situation and have remained calm. We have issued several analyzes with our opinion on the market situation, which in addition to communicating it to our clients, we have made them public and shared on our website and on social networks.

-What recommendations have you given them?
-The measures adopted have been varied: we have increased liquidity a little, we have increased exposure to sectors with little exposure to covid-19, such as the technology sector and the pharmaceutical sector; We have sold futures on the Ibex to partially cover the portfolios. At no time have we made crazy sales, because we trust the quality of our analysis system. We have also taken advantage of some opportunities, for example, we doubled our bet on MásMóvil a couple of weeks before the takeover bid for KKR, Providence and Cinven was announced. We have also modified the prospectus of the investment fund Fundamental Approach Spain to make it international.

-Where are the declines in the stock market going to stop after the measures adopted by the big central banks?
-The declines have already stopped weeks ago. In the case of the S&P 500 we have experienced the fastest decline in history, followed by the fastest recovery. It is the first time since the crash of 29 that 85% of the drop has been recovered in less than 80 days. The Nasdaq offers positive returns of +10% for the year and the S&P 500 is positive. The European markets, somewhat lagging behind, offer very good opportunities.

-Do you see a strong economic recovery once the ‘coronavirus effect’ passes?
-Depends on countries. In the United States the recovery is being brilliant: a ‘V’ clearly. The published macroeconomic data has surprised positively, with the creation of 2.5 million jobs in the month of May, the rebound in manufacturing production and an increase of 18% in retail sales.

-And the economic recovery in Europe?
-It will be quite fast in the form of a ‘U’ to put a simile), but we have to say that Spain will be one of the countries that will find it hardest to recover. We expect Spanish GDP in 2020 to be -9.6%, unemployment to reach 21% and the public deficit 11.1%. We will not fully recover until the end of 2022 and much depends on the measures taken by the Government.

-What awaits us in the ‘new normal’?
-In Spain, unfortunately, we are going to find a greater intervention of the public sector, more regulation of economic activity, greater social conflict and an increase in all kinds of taxes. Fortunately, the financial sector is being part of the solution, unlike the 2008 crisis.