Charles de Vaulx (Trades, Portfolio)’s IVA Funds was only 55% invested in equities on average from Oct. 1, 2013 to March 31, 2014, to protect against risk in light of soaring valuations spurred by quantitative easing and low interest rates. Fund managers have sought out for investments well-capitalized companies with healthy balance sheets to see them through turns in business or recessions. In his semi-annual letter, de Vaulx said:
“Smart, shareholder friendly managements, coupled with good businesses (moderate to high organic top line growth over the economic cycle, high barriers to entry, high returns on capital employed, low to reasonable capital intensity, some inflation protection or ability to raise prices, little to no political interference) could provide reasonable, but not stellar, returns in the years to come, given the prices these companies trade at. With high cash levels in both Funds, we have plenty of ammunition to buy more of these companies if their share prices fall, and are prepared, with the help of our ten talented analysts, to seize upon similar investment opportunities when they present themselves.”
Though small and mid-cap stocks are “very expensive” in his view, reasonably priced and highly profitable companies were found in Japan, an economy in a waning deflationary period, with an uncertain future. De Vaulx in his letter added:
“Valuations in Japan remain reasonable and could even turn out to be cheap if companies implement the right reforms, such as returning excess capital to shareholders or engaging in mergers and acquisitions to mitigate potential pressure on wages and lack of available labor.”
In keeping with this view, of de Vaulx’s only two new stocks in his IVA International Fund (Trades, Portfolio) in the first quarter was from Japan, with another based in India. His two new stocks were: Bajaj Holdings and Investment Ltd. (LSE:BAUD, Financial) and Earth Chemical Co. Ltd. (TSE:4985, Financial).
Earth Chemical Co. Ltd. (TSE:4985, Financial)
As his larger new holding, de Vaulx acquired 124,500 shares of Earth Chemical Co. Ltd., giving it a 0.23% space in the International Fund equity portfolio. The company’s share price averaged 3,536.12 yen in the first quarter.
Earth Chemical Co. Ltd. is engaged in the manufacturing, marketing and import or export of household insecticides, gardening insecticides, oral-care products, bath powders and air fresheners. Earth Chemical Co. Ltd. has a market cap of $75.94 billion; its shares were traded at around 3765.00 yen with a P/E ratio of 25.40 and P/S ratio of 0.54. The dividend yield of Earth Chemical Co. Ltd. stocks is 2.23%. Earth Chemical Co. Ltd. had an annual average earnings growth of 5.50% over the past five years.
Bajaj Holdings and Investment Ltd. (LSE:BAUD, Financial)
He also purchased 65,150 shares of Bajaj Holdings and Investment Ltd. during the quarter, giving it a 0.057% space in the portfolio.
Bajaj Holdings and Investment Ltd. is engaged in strategic business undertakings consisting of wind farm business and financial services business. Bajaj Holdings and Investment Ltd. has a market cap of $1.67 billion; its shares were traded at around $15.00 with a P/E ratio of 4.80 and P/S ratio of 24.63. The dividend yield of Bajaj Holdings and Investment Ltd. stocks is 2.46%. Bajaj Holdings and Investment Ltd. had an annual average earnings growth of 1.0% over the past five years.
To see more of Charles de Vaulx (Trades, Portfolio) and the IVA International Fund (Trades, Portfolio)’s holdings, visit their portfolio here. Not a Premium Member of GuruFocus? Try it free for 7 days here!
