Sarah Ketterer (Trades, Portfolio)’s Causeway International Value (Trades, Portfolio) Fund acquired seven new holdings in the third quarter. The top three new positions are Basf SE (XTER:BAS, Financial), Encana Corp. (TSX:ECA, Financial) and ABB Ltd. (XSWX:ABBN, Financial).
Ketterer founded Causeway Capital Management in 2001. The International Value Fund was established that same year. The fund seeks long-term growth of capital and income. The investment team looks for international companies that generally have market caps greater than $750 million. The investment philosophy is value-driven and uses a bottom-up approach.
The fund bought 1,003,147 shares of Basf for an average price of 71.48 euros ($75.33) per share. The transaction had an impact of 1.43% on the portfolio. The fund previously sold out in the first quarter of 2013.
Basf SE is a German chemical company. It has a market cap of 78.7 billion euros and an enterprise value of 91.7 billion euros. It has a price-earnings (P/E) ratio of 21.3, a forward P/E ratio of 16.6, a price-book (P/B) ratio of 2.7 and a price-sales (P/S) ratio of 1.4.
GuruFocus ranked Basf’s financial strength 6 of 10. The Piotroski F-Score of 7 and Altman Z-Score of 2.8 suggest the company is in healthy financial condition with minor stress. The company is creating value as it grows because the return on invested capital (ROIC) outperforms the weighted average cost of capital (WACC). The cash-debt ratio of 0.22 is below the industry median of 0.6.
As for the company’s profitability and growth, GuruFocus gave it a ranking of 7 of 10. It has an operating margin of 9.5% and a net margin of 6.5%. The return on equity (ROE) and return on assets (ROA) outperform 68% and 59% of other companies in the global chemicals industry. The return on capital (ROC) outperforms 53% of competitors.
With its purchase, Causeway became the company’s largest shareholder among the gurus. It holds 0.11% of outstanding shares, which is 1.43% of its total assets managed. Bernard Horn (Trades, Portfolio) also holds a position.
The DCF Calculator gives the stock a fair value of 11.06 euros; it was trading at 85.72 euros on Friday.
The International Value Fund purchased 4,985,500 shares of Encana for an average price of 11.73 Canadian dollars ($8.90) per share. The trade impacted the portfolio by 0.9%.
Encana is a Canadian energy company that produces, transports and markets natural gas, oil and natural gas liquids. It has a market cap of 16.4 billion Canadian dollars and an enterprise value of C$21.4 billion Canadian dollars. It has a forward P/E ratio of 38.6, a P/B ratio of 1.9 and a P/S of 3.4.
GuruFocus ranked Encana’s financial strength 4 of 10. The moderate Piotroski F-Score of 5 and low Altman Z-Score of 0.63 suggest that while the company is stable, it does have financial stress, likely due to the current condition of the oil and gas industry. Since the ROIC underperforms the WACC, the company is destroying value as it grows. The cash-debt ratio of 0.2 is below the industry median of 0.6.
For profitability and growth, GuruFocus gave Encana a ranking of 5 of 10. The margins and returns are negative but are still outperforming other competitors. The operating margin of -7.8% and net margin of -40.8% outperform 75% and 62% of other companies. The ROA and ROC are outperforming 61% and 51% of other companies in the global oil and gas exploration and production industry. In contrast, the ROE underperforms 51% of competitors.
Causeway again took the largest position among the gurus with its purchase. It owns 0.5% of Encana’s outstanding shares, which represents 0.8% of its total assets managed. Leith Wheeler Canadian Equity (Trades, Portfolio) also holds a position.
The DCF Calculator gives the stock a fair value of 5.19 Canadian dollars; it was trading at $16.9 Canadian dollars on Friday.
Causeway purchased 2,128,631 shares of ABB for an average price of 20.93 Swiss francs ($20.52) per share. The trade had an impact of 0.8% on the portfolio. The fund previously sold out in the second quarter of 2014.
ABB is a Swiss automation company that specializes in robotics and automation technology. It has a market cap of 45.4 billion Swiss francs and an enterprise value of 48.1 billion Swiss francs. It has a P/E ratio of 27.6, a forward P/E ratio of 18.3, a P/B ratio of 3.5 and a P/S ratio of 1.4.
GuruFocus ranked the company’s financial strength 6 of 10. The Piotroski F-Score of 5 and Altman Z-Score of 2.9 suggest the company is financially stable but does have some financial stress. The company is creating value as it grows because the ROIC outperforms the WACC. The cash-debt ratio of 0.7 is slightly below the industry median of 0.9.
For profitability and growth, GuruFocus gave ABB a ranking of 6 of 10. It has an operating margin of 7.77% and a net margin of 4.9%. The ROE and ROA outperform 72% and 58% of other companies in the global diversified industrials industry. Similarly, the ROC outperforms 85% of competitors.
The Tweedy Browne (Trades, Portfolio) Global Value Fund has the largest position in ABB among the gurus with 0.11% of outstanding shares. This is 0.68% of its total assets managed.
The DCF Calculator gives the stock a fair value of 2.71 Swiss francs; it was trading at 21.23 Swiss francs on Friday.
Other new positions the fund gained during the quarter are ArcelorMittal SA (XAMS:MT, Financial), Asahi Group Holdings Ltd. (TSE:2502, Financial), Alfa Laval AB (OSTO:ALFA) and Manulife Financial Corp. (TSX:MFC).
Disclosure: I do not own stock in any companies mentioned in the article.
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