The Causeway International Value (Trades, Portfolio) Fund, part of Sarah Ketterer (Trades, Portfolio)’s Causeway Capital Management, released its fourth-quarter portfolio on March 2, disclosing it established three new positions.
According to Causeway’s website, the investment team seeks to achieve long-term growth of capital and income by investing in mid- to large-cap companies in developed countries outside the U.S.
The fund established positions in Sompo Holdings Inc. (TSE:8630, Financial), Red Electrica Corportacion SA (XMCE:REE, Financial) and Sinopharm Group Co. Ltd. (HKSE:01099, Financial) during the quarter.
Sompo Holdings
Causeway invested in 1.09 million shares of Sompo for an average price of 4,432.85 yen ($41.93) per share, giving it 0.5% portfolio space.
The Japanese insurance company has a market cap of 1.56 trillion yen; its shares closed at 3,974 yen on Friday with a price-earnings ratio of 8.25, a price-book ratio of 0.76 and a price-sales ratio of 0.42.
The Peter Lynch chart below indicates the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Sompo’s financial strength 5 out of 10. While its interest coverage ratio of 14.62 exceeds Benjamin Graham’s minimum of 5, it falls below the industry average. The company’s profitability and growth was rated 4 of 10 as its operating margin underperforms 74% of competitors.
Causeway holds 0.29% of the company’s outstanding shares.
Red Electrica
Having previously closed a position in Red Electrica in first-quarter 2013, the fund established a new holding of 279,380 shares for an average price of 18.39 euros ($22.66) per share, expanding the portfolio 0.07%.
The Spanish utility company has a market cap of 8.59 billion euros; its shares closed at 15.73 euros on Friday with a price-earnings ratio of 12.85, a price-book ratio of 2.78 and a price-sales ratio of 4.42.
According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.
Red Electrica’s financial strength was rated 4 out of 10 by GuruFocus as it has insufficient interest coverage and its Altman Z-Score of 1.26 suggests it is under financial stress. In contrast, its profitability and growth was rated 8 of 10 as its operating margins are expanding and it has a high Piotroski F-Score of 6 and a 4.5-star business predictability rating.
The fund holds 0.05% of the company’s outstanding shares.
Sinopharm Group
The fund purchased 936,800 shares of Sinopharm for an average price of 32.89 Hong Kong dollars ($4.20) per share. The trade had an impact of 0.05% on the portfolio.
The Chinese pharmaceutical company has a market cap of HK$94.22 billion; its shares closed at HK$34.8 on Friday with a price-earnings ratio of 17.02, a price-book ratio of 2.50 and a price-sales ratio of 0.34.
Based on the Peter Lynch chart below, the stock appears to be trading close to its fair value.
GuruFocus rated Sinopharm’s financial strength 5 out of 10. Its interest coverage ratio barely meets Graham’s threshold and its Altman Z-Score of 2.63 suggests it is under some financial stress. The company’s profitability and growth was rated 8 of 10 as its operating margin is expanding and it has a high Piotroski F-Score of 7 and a 3.5-star business predictability rating.
With 2.21% of outstanding shares, the Matthews Pacific Tiger Fund (Trades, Portfolio) is the company’s largest guru shareholder. Arnold Van Den Berg (Trades, Portfolio) and Value Partners (Trades, Portfolio) also own the stock.
Other trades
The fund also expanded its position in several holdings during the quarter, including Takeda Pharmaceutical Co. Ltd. (TSE:4502, Financial), Linde AG (XTER:LIN, Financial), GlaxoSmithKline PLC (LSE:GSK), Barclays PLC (LSE:BARC) and SSE PLC (LSE:SSE), among others.
The current portfolio of 58 holdings is largely composed of stocks in the industrials and financial services sectors. Stocks of U.K.-based companies represent the largest portion of the portfolio at 31.5%.
According to its fact sheet, the fund outperformed its benchmark, the MSCI EAFE Index, in 2017 with a return of 27.18%.
Disclosure: No positions.
