Sam Stuart founded Wasatch Advisers in 1975, and has been the lead portfolio manager of the Strategic Income Fund since its inception in 2006 and the World Innovators Fund since 2008.
The firm follows a five-step approach to investing: First, the firm runs proprietary financial screens across all sectors, followed by studying the company financials of the attractive investments. Next is studying the broader competitive landscape, then meeting with the management, and finally value the company.
The International Growth Fund is a small-cap growth portfolio that pursues an aggressive investment strategy designed for long-term investors.
As of the fourth quarter, the majority of assets were held in Asia at 48%, of which 23.2% is held in Japan. Industrials is the largest sector in the portfolio at 16.5% of assets, followed by 16.1% in consumer cyclical, and 15.7% in technology. During the quarter, the fund purchased nine new holdings. The top five in order of portfolio impact are listed below.
MISUMI Group (TSE:9962, Financial)
Wasatch purchased 434,472 shares of MISUMI Group, which traded for an average price of ¥3538.29 during the quarter. The company has a 1.1% portfolio weighting.
MISUMI manufactures and sells metal mold components and precision machinery parts. The Factory Automation segment carries standardized components for automated equipment, and the Die Components segment carries die and mold products for automobiles and mobile devices.
The company’s EBIT per share for the trailing 12 months is ¥239.50, which has increased steadily since 2010.
The operating margin in FY 2014 was 10.92%, down from 12.47% the year before.
The stock has been up 65% over the past year and currently trades at ¥4755 with a P/E ratio of 33.1 and P/S ratio of 2.18.
Glenmark Pharmaceuticals (NSE:GLENMARK, Financial)
Wasatch also purchased 1,027,700 shares of Glenmark Pharmaceuticals for an average price of 760.89 rupees. The new holding has a 0.98% portfolio weighting.
Glenmark is a global pharmaceutical company based in Mumbai, India. Glenmark has a significant presence in branded generics markets in emerging economies, including India. Its subsidiary, Glenmark Generics Limited, has a growing US generics business.
EBIT per share for the trailing 12 months is 34.74 rupees. Over the past five years, EBIT per share has grown almost 13%.
One warning sign is the company’s operating margin has been in consistent decline since 2008. In FY 2014, the margin was 14.63%.
The stock has been up 37% over the past year and currently trades at 786.85 rupees, with a P/E ratio of 35.1 and P/S ratio of 3.3.
Havells India (NSE:HAVELLS, Financial)
Wasatch also picked up 2,583,900 shares of Havells India for an average price of 285.61 rupees.
Havells is an electrical equipment company with a wide spectrum of products, including cables and wires, home appliances, electric water heaters, and CFL lamps. In 2007, Havells acquired lighting company Sylvania.
The company’s EBIT per share in FY 2014 was 9.52 rupees, down from 10.64 rupees the year before. The following chart shows the earnings trend over time.
The stock has gone up 81% over the past year and currently trades at 278.55 rupees. The current P/E ratio is 38.9, while the P/S ratio is 2.12.
Bertrandt (XTER:BDT, Financial)
The fund also purchased 74,665 shares of Bertrandt, which traded for an average of €105.40 during the quarter. The new holding has a 0.81% portfolio weighting.
Bertrandt provides development solutions for the international automobile industry. This includes services for the design, development, construction, and testing of interiors, engines, and drive trains in Germany, France and the U.K.
The company’s EBIT per share for the trailing 12 months was €8.86. The following chart shows the earnings trend over time.
Bertrandt carries no long-term debt and has a current ratio of 1.89, indicating the company can comfortably meet its short-term obligations.
The stock has been up 21% over the past year and currently trades at €131.10, with a P/E ratio of 21.2 and P/S ratio of 1.52.
Kingdee International Software Group (HKSE:00268)
The funds fifth largest purchase during the quarter was 21,784,200 shares of Kingdee International for an average price of HK$2.45. The new holding accounts for 0.5% of the portfolio.
Kingdee develops and manufactures enterprise management software products, and provides technical services in China and the Asia-Pacific region.
After a tough year in 2012, the company improved its financials in 2013, with EBIT per share pulling out of the red to HK$0.12.
The stock declined 17% over the past year and currently trades at HK$2.53, with a P/E ratio of 41.3 and P/S ratio of 3.12.
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