Causeway Capital Management, the Los Angeles-based firm founded by Sarah Ketterer (Trades, Portfolio) and Harry Hartford in 2001, seeks to achieve superior risk-adjusted returns by investing in mispriced equities in both developed and emerging markets.
The guru and her team look for potential opportunities among mid- and large-cap companies using quantitative and value-oriented methods. Each stock also receives a risk score based on the amount of volatility it adds to the portfolio. The investment team then enters positions in the stocks with the highest expected risk-adjusted returns that also have a lower price-earnings ratio and higher dividend yield than the market.
As of the end of the third quarter, GuruFocus’ top 10 holdings data showed her five largest positions were Linde PLC (LIN, Financial), Encana Corp. (ECA, Financial), Baidu Inc. (BIDU, Financial), Ryanair Holdings PLC (RYAAY, Financial) and Gildan Activewear Inc. (GIL, Financial).
Linde
The investor trimmed her Linde stake by 14.45% during the third quarter to 5.32 million shares. The holding accounts for 12.31% of the equity portfolio and is Ketterer’s largest position. GuruFocus data shows she has gained approximately 23.24% on the investment since establishing it in the first quarter of 2019.
The Danbury, Connecticut-based manufacturer of industrial gases and other chemicals has a $113.76 billion market cap; its shares were trading around $211.46 on Friday with a price-earnings ratio of 18.34, a price-book ratio of 2.33 and a price-sales ratio of 4.12.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
Of the gurus invested in Linde, Pioneer Investments (Trades, Portfolio) has the largest stake with 1.38% of outstanding shares. Other top guru shareholders include Dodge & Cox, First Eagle Investment (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Diamond Hill Capital (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Jerome Dodson (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and Bernard Horn (Trades, Portfolio).
Encana
Ketterer boosted her Encana stake by 2.03% during the third quarter, bringing the total holding to 126.2 million shares. The position accounts for 6.94% of the equity portfolio and is her second-largest holding overall. According to GuruFocus, Ketterer has lost an estimated 41.2% on the investment since the third quarter of 2016.
The Canadian oil and gas producer has a market cap of $5.85 billion; its shares were trading around $4.40 on Friday with a price-earnings ratio of 3.56, a price-book ratio of 0.57and a price-sales ratio of 0.68.
According to the Peter Lynch chart, the stock is undervalued.
With 9.72% of outstanding shares, Ketterer is the company’s largest guru shareholder. Dodge & Cox, Chris Davis (Trades, Portfolio), Simons’ firm, Cohen, Pioneer, Ron Baron (Trades, Portfolio) and Ray Dalio (Trades, Portfolio) also have positions in the stock.
Baidu
In the third quarter, the guru increased her stake in Baidu by 3.66% to 5.5 million shares. The position accounts for 6.75% of the equity portfolio and is her third-largest holding overall. GuruFocus estimates Ketterer has lost 28.7% on the investment since the second quarter of 2016.
The Chinese search engine has a $44.74 billion market cap; its shares were trading around $127.68 on Friday with a price-earnings ratio of 17.36, a price-book ratio of 2.01 and a price-sales ratio of 2.92.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Dodge & Cox has the largest position in Baidu with 2.39% of outstanding shares. Other top guru shareholders include David Herro (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), John Rogers (Trades, Portfolio), Steven Romick (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Mason Hawkins (Trades, Portfolio), Pioneer, the Causeway International Value (Trades, Portfolio) Fund and Richard Pzena (Trades, Portfolio).
Ryanair Holdings
Ketterer beefed up her stake in Ryanair by 31.01% during the third quarter to 6.3 million shares. Her fourth-largest holding accounts for 4.97% of the equity portfolio. According to GuruFocus, she has gained approximately 44% on the investment since the third quarter of 2016.
The Irish budget airline has a market cap of $19.44 billion; its shares were trading around $88.03 on Friday with a price-earnings ratio of 18.5, a price-book ratio of 2.55 and a price-sales ratio of 2.01.
The Peter Lynch chart suggests the stock is overvalued.
Of the gurus invested in Ryanair, Herro has the largest position with 5.57% of outstanding shares. Simons’ firm, Causeway’s International Value Fund, PRIMECAP, Julian Robertson (Trades, Portfolio), First Pacific, Baron, Pioneer and Francis Chou (Trades, Portfolio) also own the stock.
Gildan Activewear
The investor reduced her fifth-largest position, Gildan Activewear, by 26.06% in the third quarter. The 10.6 million-share stake represents 4.5% of the equity portfolio. GuruFocus data shows she has gained an estimated 18.86% on the investment since establishing it in the fourth quarter of 2016.
The clothing manufacturer, which is headquartered in Montreal, has a $5.91 billion market cap; its shares were trading around $29.12 on Friday with a price-earnings ratio of 20.57, a price-book ratio of 3.01 and a price-sales ratio of 2.03.
According to the Peter Lynch chart, the stock is overvalued.
With 5.22% of outstanding shares, Ketterer is the company’s largest guru shareholder. Other top guru investors include Pzena, PRIMECAP, Mario Cibelli (Trades, Portfolio), Simons’ firm, Private Capital (Trades, Portfolio), Pioneer and Dalio.
Portfolio composition and performance
According to portfolio data, Ketterer’s other top holdings as of the three months ended Sept. 30 were Alibaba Group Holding Ltd. (BABA, Financial), Manulife Financial Corp. (MFC, Financial), Sabre Corp. (SABR, Financial), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) and Synnex Corp. (SNX, Financial).
Her $8.37 billion equity portfolio, which is composed of 86 stocks, is most heavily invested in the technology sector at 17.74%, followed by fairly equal representations in the financial services, energy and basic materials sectors.
Disclosure: No positions.
Read more here:
- Demand for Snacks, Frozen Foods Boosts Conagra Brands' Sales
- 5 Canadian Stocks to Consider as USMCA Trade Deal Clears Another Hurdle
- CI Can Am Small Cap Fund Invests in REIT and Wood Products Manufacturer
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
