«I’ve been meaning to write a post about Cintra all day after seeing how badly it’s been hit over the last few days. It closed today down 9%, and I’ve finally decided to share my thoughts on the stock with you. In fact, I’ve been talking to my friends about Cintra for over a year now. I started following it back in December 2007, at an investors« meeting organised by Credit Suisse, where the bank recommended investing in the stock market and specifically highlighted Cintra as a »safe« stock. I still have the piece of paper with the recommendation for the share when it was trading at around 12 euros. I kept it because I was convinced that a bear market was on the horizon and I wanted to test the bank’s predictions. Since then, I’ve kept asking the CS fund managers about the share on a regular basis. When the share price hit 6.5 euros in the summer, I asked, with a touch of sarcasm, whether the bank still recommended it. The manager pulled out all the stops, like a good salesman, to convince me that it was an extremely safe investment, and that the bank had recommended it all along. His exact words were: »We recommended it when it was at 8.5, and now that it’s at 6.5, we recommend it even more.« From there, the fund manager launched into a whole spiel about how good Cintra’s business is, how stable its revenues are (I don’t agree with this, but never mind) and the conclusion was that the stock market was behaving irrationally and that Cintra would return to its target price of 13.5 shortly. My response is that I’ve never asked the stock market to behave rationally because it never has; and that I’d rather wait another year to see what happened. Today, Cintra closed at 3.76?. If, back in December 2007, I’d have listened to the bank, I’d have lost 70% on a stock that was supposedly »safe’. Thank goodness I used my own judgement rather than the bank’s. I’ve never been so glad not to have bought a share. I’ve just received an email from Renta4 forecasting theoretical falls as low as 2.3. Given that, the clear floor is 0, but I’m sure it will bottom out before then.
I think Cintra’s bottom is near, although I can’t say exactly where, and I don’t think anyone can predict it. Even so, I still don’t dare to buy. The spectre of a takeover by Ferrovial is the main reason. I also think you shouldn’t buy a stock in free fall on the assumption that it will bottom out just because you know it will. The fact is, Cintra’s share placement reminds me far too much of Terra’s IPO. I have no doubt that Cintra, unlike Terra, has real assets. But as things stand, what Cintra has most of all is DEBT! I reckon Ferrovial is going to wait for Cintra to fall as far as possible before reabsorbing it, and I doubt you can make any money from that operation unless you have inside information on when and at what prices. Let someone tell me they made money from Terra’s plunge into the abyss or from its takeover by Telefónica.
What do you think? I’m sure many of you would want to buy «tangible assets» at a good price given those figures. That’s why this is a clear example of the stock market not behaving rationally, isn’t it? «
Regardless of any comments that may arise regarding the specific figure, I found this text to be a clear example of what the world of financial advice is like today. Renta4’s projections may well be just as unreliable as those made in their day by the managers at Credit Suisse, although their accuracy may differ incidentally. 
Or do we perhaps think that Renta4’s advisers are more competent than those at CS? It’s simply that this time, in this specific case, it happened to be their turn to get it right, and we’d have to see what they recommended regarding Cintra when it was at €12. And vice versa, because we could say the same about CS’s advisers. But we mustn’t view these recommendations solely as a means of raking in commissions (though that does happen), but rather recognise that the advisers, brokers and fund managers at financial institutions – who spend their days in front of a few screens, who go to bed and wake up with share prices on their minds – genuinely believe in the soundness of certain securities. In other words, it’s not all about prostitution as well as the recommendation (committees), there are also other components such as the incompetence, the poor risk management, the inexperience (youth), the gambling addiction, etc…
Of course, we can find the same shortcomings in managing our own equity investments, assuming we can shield ourselves from the influence of external advisers (friends and acquaintances, the press, radio and television, financial blogs, etc.). 
But with one exception: the selling out of investment decisions in exchange for commissions. The Juan Palomo administration, however, in many cases it inevitably compensates for the absence of such corruption with an increase in incompetence. Self-management is not immune to the other dangers mentioned either, but in some cases, such as that of our anonymous subject, it has managed to safeguard the investment against wind and tide.
I simply can’t resist recommending that you read it again the article we published in September 2007 and note the distinguished names mentioned: Alberto Espelosín (Head of Analysis from Ibercaja Gestión) and Gustavo Trillo (Head of Management (from JPMorgan Asset Management Spain and Portugal) among others. A great many investment vehicles and instruments – which a huge number of savers accepted at face value – depend (or did they?) on all of them.
Having said that, let’s talk about CINTRA…