The Wasatch International Growth (Trades, Portfolio) Fund, part of the Wasatch Funds, released its fourth-quarter portfolio on Feb. 27, listing 10 new positions.
Managed by Roger Edgley, Ken Applegate and Linda Lasater, the fund invests primarily in foreign small- and mid-cap growth companies to achieve long-term growth of capital.
The fund’s top five new buys for the quarter were Asahi Intecc Co. Ltd. (TSE:7747, Financial), Kusuri No Aoki Holdings (TSE:3549, Financial), Airtac International Group (TPE:1590, Financial), Takeuchi Manufacturing Co. Ltd. (TSE:6432, Financial) and VAT Group AG (XSWX:VACN, Financial).
Asahi Intecc
The fund’s largest new purchase was 559,000 shares of Asahi Intecc for an average price of 3,472.15 yen ($32.92) per share, giving it 1.26% portfolio space.
The Japanese company, which manufactures ultra-fine stainless steel wire ropes for medical and industrial use, has a market cap of 496.14 billion yen; its shares closed at 3,840 yen on Thursday with a price-earnings (P/E) ratio of 51.47, a price-book (P/B) ratio of 9.92 and a price-sales (P/S) ratio of 10.39.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
Asahi’s financial strength was rated 8 out of 10 by GuruFocus as it has sufficient interest coverage and a strong Altman Z-Score of 20.28. Its profitability and growth was rated 9 of 10 because its operating margins, which outperform 93% of competitors, are expanding and it has a strong Piotroski F-Score of 6 and a three-star business predictability rating.
The Matthews Japan Fund (Trades, Portfolio) is the company’s largest guru shareholder with 2.06% of outstanding shares. Wasatch holds 0.43%.
Kusuri No Aoki
The fund invested in 259,300 shares of Kusuri No Aoki for an average price of 6,468.31 yen per share, expanding the portfolio 0.9%.
The Japanese drugstore chain has a market cap of 201.57 billion yen; its shares closed at 6,400 yen on Thursday with a price-earnings ratio of 16.11, a price-book ratio of 5.04 and a price-sales ratio of 0.68.
According to the Peter Lynch chart below, the stock is overpriced as it is trading slightly above its fair value.
GuruFocus rated Kusuri’s financial strength 7 out of 10 as it has sufficient interest coverage and a high Altman Z-Score. In addition, its profitability and growth was rated 8 of 10 as it has a 4.5-star business predictability rating, a moderate Piotroski F-Score of 5 and expanding operating margins.
Wasatch holds 0.83% of the company’s outstanding shares.
Airtac International
Wasatch bought 730,000 shares of Airtac International for an average price of 479 New Taiwan dollars ($16.33) per share. The trade had an impact of 0.86% on the portfolio.
The Taiwan-based company, which manufactures pneumatic equipment, has a market cap of NT$99.81 billion; its shares closed at NT$528 on Thursday with a price-earnings ratio of 34.12, a price-book ratio of 6.60 and a price-sales ratio of 7.49.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading higher than its fair value.
Although the company has been issuing new debt over the past several years, GuruFocus rated its financial strength 6 out of 10 as it is manageable. In addition, it has a high Altman Z-Score of 6.58. As it has a high Piotroski F-Score of 7, its profitability and growth was rated 8 of 10. While its operating margin has declined over the past five years, it still outperforms 97% of competitors.
The fund holds 0.39% of the company’s outstanding shares.
Takeuchi Manufacturing
Having previously exited a position in Takeuchi Manufacturing in second-quarter 2014, the fund established a new holding of 543,200 shares for an average price of 2,384.06 yen per share. The holding was given 0.85% portfolio space.
The Japanese manufacturer of construction machinery and equipment has a market cap of 116.5 billion yen; its shares closed at 2,443 yen on Thursday with a price-earnings ratio of 12.86, a price-book ratio of 1.76 and a price-sales ratio of 1.28.
The Peter Lynch chart below shows the stock is trading below its fair value, suggesting it is undervalued.
As the company has no debt and a high Altman Z-Score, GuruFocus rated Takeuchi’s financial strength 9 out of 10. Its profitability and growth was rated 8 of 10 as its operating margins are expanding and it has a moderate Piotroski F-Score of 6 and a one-star business predictability rating.
Wasatch holds 1.14% of the company’s outstanding shares.
VAT Group
Wasatch invested in 80,288 shares of VAT Group for an average price of 134.62 Swiss francs ($143.58) per share, expanding the portfolio 0.78%.
The Swiss manufacturer of vacuum valves and components has a market cap of 4.5 billion Swiss francs; its shares closed at 150.6 francs on Thursday with a price-earnings ratio of 42.53 and a price-book ratio of 9.40.
According to the Peter Lynch chart below, the stock is overpriced as it is trading well above its fair value.
VAT Group’s financial strength was rated 5 out of 10 by GuruFocus. While its interest coverage ratio of 10 exceeds Benjamin Graham’s threshold of 5, it is well below the industry average of 39.08. Its profitability and growth was rated 2 of 10 despite the fact its operating margin outperforms 95% of competitors.
The fund holds 0.27% of the company’s outstanding shares.
Other trades
During the quarter, the portfolio managers also established positions in Berger Paints India Ltd. (BOM:509480), Schoeller-Bleckmann Oilfield Equipment AG (WBO:SBO), Page Industries Ltd. (BOM: 532827), Create SD Holdings Co. Ltd. (TSE:3148) and Webjet Ltd. (ASX:WEB).
The current portfolio of 87 holdings is largely composed of securities in the technology sector. According to the fund’s fact sheet, Asian stocks represent the largest portion of the portfolio at 43.2%, followed by West Europe at 39.6%.
The fund outperformed both of its benchmarks, the MSCI AC World Ex-U.S.A. Small Cap Index and the MSCI World Ex-U.S.A. Small Cap Index, in 2017 with a return of 33.01%.
Disclosure: No positions.
