The Invesco European Fund erased The Swatch Group AG (XSWX:UHR, Financial) from its portfolio during the second quarter. The investment firm sold out its remaining 25,736 shares at an average price of 307.83 Swiss francs. The trade had a 0.65% impact on the portfolio.
The Swatch Group AG has a market cap of 14.54 billion Swiss francs, a P/E ratio of 11.73, an enterprise value of $13.01 billion, and a P/B ratio of 1.17.
The Swatch Group AG was founded in 1983. The company and its subsidiaries are engaged in manufacturing watches, jewelry, as well as electronic systems for watches. Swatch Group employs more than 36,000 people in over 50 countries worldwide. Net sales for The Swatch Group in 2015 amounted to 8.45 billion Swiss francs and net profit to 1.12 billion.
According to The Swatch Group’s most recent letter to its shareholders dated July 15, the company stated the following information which may have had an impact on the Invesco European Fund’s decision to sell (there is no need to repeat this).
- Swiss franc shock and negative interest rates resulted in a lower net income of 548 million Swiss francs, 19.4% below the first half of 2014.
- An operating profit totaling 761 million Swiss francs was generated, corresponding to an operating margin of 18.2%. Despite additional pressure resulting from the overvalued Swiss franc against most other currencies, as well as the low or even negative interest rate situation in some currencies and the marked-to-market valuation of the important Euro portfolio held as at mid of January, net income reached 548 million Swiss francs, or 13.1% of net sales.
Since the second quarter of 2015, when the Invesco European Fund purchased its initial stake in The Swatch Group, the company had an estimated 22% loss on invested capital.
Though the Invesco European Fund sold out its stake in The Swatch Group the company has some positive signs:
- A 9/10 financial strength rating according to GuruFocus, with an 8/10 profitability & growth rating, and a 17.17% operating margin, which ranks it above 92% of the 935 companies in the global luxury goods industry. (You do not have to start each sentence with “the company” because you already said it before the list began)
- A high Piotroski score of 7, which indicates a very healthy situation.
- A dividend yield close to its five-year high.
- A stock price at a five-year low.
- A 4/5 star predictability rating according to GuruFocus.
- A trading price below its intrinsic value which, according the the discounted earning model, is 277.06 Swiss francs, providing a 5.69% margin of safety for investors.
Disclosure: Author does not own any shares of this company.
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