David Herro Buys Ferrari, 2 Other Italian Stocks

The Oakmark International Small Cap Fund found plenty of opportunity in Europe

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Jun 03, 2016
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David Herro (Trades, Portfolio) of the Oakmark International Small Cap Fund found opportunities in five companies during the first quarter, three of which were Italian firms, according to data reported by GuruFocus Real Time Picks.

Azimut Holding SPA (MIL:AZM, Financial)

Herro’s largest purchase during the quarter was 2,554,000 shares in Azimut Holding for an average of €18.87 per share. He reinitiated the holding after closing out a prior holding in the fourth quarter 2014.

Azimut provides asset management and financial advisory services in Italy. Its stock declined 22% over the past year and now trades at 10.6x earnings.

In fiscal year 2015, diluted EPS reached its highest point since 2004 at 1.84. Similarly, net income also reached its historical high at €247.4 million.

Azimut’s dividend yield is close to the three-year high at 2.53% with a 5% payout ratio. The low payout ratio indicates the company has plenty of room to increase the dividend going forward.

Regus PLC (LSE:RGU, Financial)

The fund also purchased 9,171,000 shares of Regus for an average of £2.93 per share. Over the past year, the company has seen its stock rise by 22% and currently trades at 24x earnings.

Regus provides office outsourcing services such as business communications and virtual offices. Diluted EPS in fiscal year 2015 was 13 pence, up from 7 pence in the prior year. Net income for the year also hit a high at £120 million.

Regus’ trailing dividend yield is 1.43% with a 33% payout ratio. Wasatch International Growth (Trades, Portfolio) Fund is the only other guru shareholder in the company as of the quarter.

Aberdeen Asset Management (LSE:ADN, Financial)

Herro also purchased 7,207,000 shares in Aberdeen Asset for an average price of £2.51 per share. The stock is down 39% over the past year, and the stock closed at £2.70 on Wednesday afternoon.

Aberdeen is a British company offering asset management services. Diluted EPS in fiscal year 2015 ended September was 22 pence, which is about the same level it has been for the past three years.

The dividend yield is a high 6.93% with a 118% payout ratio. The high ratio means the company must increase its earnings or reduce the dividend because the current level is unsustainable.

Ferrari NV (MIL:RACE, Financial)

Oakmark purchased 511,000 shares of Ferrari for an average of €36.48 per share The famed sports car company produces six models of sport cars and two GT cars.

The stock declined 12% over the past year and now trades at 30x earnings. The company began trading separately from its parent company Fiat Chrysler under the symbol RACE in October 2015.

Diluted EPS in the first quarter was 41 euro cents, up sequentially from 23 euro cents the prior quarter. Net income for fiscal year 2015 was €288 million.

As of the first quarter, Herro is the only guru shareholder.

Interpump Group (MIL:IP, Financial)

The fund’s fifth purchase during the quarter was 181,000 shares in Interpump Group at an average of €12.36 per share.

Interpump operates in the hydraulic sector and produces high pressure pumps, as well as electric motors and plunger pumps. The stock traded down by 5% over the past year and is now undervalued according to the Peter Lynch earnings line.

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Diluted EPS in the first quarter 2016 was 20 euro cents, down from 27 euro cents in the year-ago quarter. The company’s operating margin has also remained steady at about 15%, which is well-above the industry median of 5.8%.

Interpump pays a dividend yield of 1.32% with a 18% payout ratio.

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