Causeway International Takes Stake in Japan Airlines

Fund exits 3 other holdings during 4th quarter

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Mar 16, 2016
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The Causeway International Value (Trades, Portfolio), led by CEO Sarah Ketterer (Trades, Portfolio), aims to invest at least 80% of total assets in companies located in at least 10 foreign countries.

Causeway’s only new purchase during the fourth quarter was 2,784,000 shares of Japan Airlines Co. Ltd. (TSE:9201, Financial) for an average price of ¥4,377.05 per share. Japan Airlines is the flag carrier airline of Japan and the second largest in the country behind All Nippon Airways.

The stock has held steady over the past year and trades at 9.8x earnings.

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Fourth quarter EPS was ¥81, down from ¥117.89 in the year-ago quarter. Annual EPS has been declining since fiscal year 2012. For the nine months ended Dec. 31, 2015, the airline reported consumer spending was generally robust but experienced weakness from the Chinese economy. In addition, the yen remained weaker against the U.S. dollar. Still, operating income increased by 123% versus the previous nine-month period.

The trailing dividend yield is 2.56% and the payout ratio is 25%. During the fourth quarter, the only other guru shareholder T. Rowe Price Japan Fund (Trades, Portfolio) sold out its holding in Japan Airlines.

During the quarter, Causeway sold its 1,525,223 shares in Credit Suisse Group (XSWX:CSGN, Financial) for an average CHF 22.84 per share.

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The Swiss bank provides private banking, wealth management and investment banking services. In the past year, the stock has sunk 37% and now trades at 7.4x earnings. Preliminary fourth quarter data show losses per share of CHF 3.28 per share compared to EPS of CHF 43 cents in the year-ago quarter.

The fund also closed its stake in AXA SA (XPAR:CS, Financial), selling 1,382,941 shares for an average €24.31 per share. ASA is an insurance company that operates in Europe, North America and the Asia-Pacific region. The stock has declined 9% over the past year and trades at 11x earnings.

In the first six months of 2015, ASA had EPS of €1.19, which was flat compared to the prior period’s EPS.

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The trailing dividend yield of 4.4% is close to the two-year high with a 46% payout ratio.

Causeway’s other divestiture was 486,954 shares in Unilever NV (XAMS:UNIA, Financial) for an average €40.05 per share. The consumer product company’s stock has held mostly steady over the past year, declining only 2%. The Peter Lynch earnings line estimates the stock is overvalued.

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Unilever’s operating margin in 2015 was 14.11%, slightly down from 16.48% the year before. The margin is much higher than the industry median of 3.9%. The company pays a dividend yield of 3.03%, and the payout ratio is 69%.

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