The IVA International Fund (Trades, Portfolio), part of New York-based firm International Value Advisers, disclosed six new positions in its fourth-quarter 2019 portfolio earlier this week.
The value-oriented fund, which is managed by Charles de Vaulx (Trades, Portfolio) and Charles de Lardemelle, typically invests in financially strong companies from around the world that are temporarily trading at a discount in order to generate long-term growth of capital.
With these criteria in mind, the portfolio managers established holdings in Bangkok Bank PLC (BKK:BBL-R, Financial), Publicis Groupe SA (XPAR:PUB, Financial), Embraer SA (ERJ, Financial), Unilever NV (XAMS:UNA, Financial), Health and Happiness (H&H) International Holdings (HKSE:01112, Financial) and Alliance Global Group Inc. (PHS:AGI, Financial).
Bangkok Bank
The fund invested in 3.5 million shares of Bangkok Bank, allocating 0.92% of the equity portfolio to the stake. The stock traded for an average price of 170.49 Thai baht ($5.40) per share during the quarter.
The commercial bank, which is headquartered in Thailand, has a market cap of 245.15 billion baht; its shares closed at 135.37 baht on Thursday with a price-earnings ratio of 7.04, a price-book ratio of 0.59 and a price-sales ratio of 1.91.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued. The GuruFocus valuation rank of 9 out of 10 supports this assessment as its price ratios are all near 10-year lows.
Weighed down by approximately 26.9 billion baht in new long-term debt, GuruFocus rated Bangkok Bank’s financial strength 2 out of 10.
The bank’s profitability did not fare much better, scoring a 4 out of 10 rating even though its net margin and return on assets outperform over half of its competitors. Bangkok Bank also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this bank typically see a 1.1% gain per annum over a 10-year period.
De Vaulx also established a position in the stock for the IVA Worldwide Fund during the quarter, which consisted of 0.24% of the bank’s outstanding shares. The International Fund holds 0.18%.
Publicis Groupe
Having previously exited a position in Pulicis Groupe in the fourth quarter of 2013, IVA entered a new 252,805-share holding. The trade had an impact of 0.56% on the equity portfolio. Shares traded for an average price of 39.75 euros ($45.03) each during the quarter.
The French advertising and public relations company has a market cap of 7.82 billion euros; its shares closed at 33.02 euros on Thursday with a price-earnings ratio of 8.07, a price-book ratio of 1.15 and a price-sales ratio of 0.78.
According to the Peter Lynch chart, the stock is undervalued. The GuruFocus valuation rank of 10 out of 10 also leans toward undervaluation as the price ratios are all near 10-year lows.
Publicis’ profitability scored a 5 out of 10 rating on the back of a low cash-debt ratio of 0.67 and sufficient interest coverage. The Altman Z-Score of 0.74, however, warns the company is in financial distress and could be at risk of going bankrupt.
The company’s profitability fared much better with a 9 out of 10 rating. Although the operating margin is in decline, Publicis is supported by strong returns that outperform over half of its industry peers and a moderate Piotroski F-Score of 6, which suggests operations are stable. Even though there has been a slowdown in revenue per share growth over the past year, the company has a perfect five-star business predictability rank. GuruFocus says companies with this rank typically see a 12.1% gain per year.
Of the gurus invested in Publicis, David Herro (Trades, Portfolio) has the largest stake with 6.37% of outstanding shares. The IVA Worldwide Fund and Bernard Horn (Trades, Portfolio) also have positions in the stock.
Embraer
The International Fund picked up 20,092 shares of Embraer, dedicating 0.02% of the equity portfolio to the holding. During the quarter, the stock traded for an average per-share price of $17.61.
The Brazilian aerospace conglomerate, which manufactures commercial, military, executive and agricultural aircraft and provides aeronautical services, has a $2.57 billion market cap; its shares were trading around $13.79 on Friday with a forward price-earnings ratio of 14.86, a price-book ratio of 0.77 and a price-sales ratio of 0.65.
Based on the median price-sales chart, the stock is undervalued. The GuruFocus valuation rank of 7 out of 10 also supports that assessment as the price-book and price-sales ratios are near multiyear lows.
GuruFocus rated Embraer’s financial strength 4 out of 10 on the back of poor interest coverage and a low Altman Z-Score of 1.02. The company may not be very capital efficient either as its weighted average cost of capital outweighs its return on invested capital.
The company’s profitability scored a 7 out of 10 rating even though its margins are in decline and its returns are negative and underperform a majority of competitors. Embraer is supported, however, by a moderate Piotroski F-Score of 4 and a 2.5-star business predictability rank, which is on watch as a result of its revenue declining over the past three years. GuruFocus noted that companies with this rank typically record an annual average gain of 7.3%.
Charles Brandes (Trades, Portfolio)’ Brandes Investment Partners is Embraer’s largest guru shareholder with an 11.17% stake. Hotchkis & Wiley and Steven Cohen (Trades, Portfolio) curbed their positions in the company during the fourth quarter, while Jim Simons (Trades, Portfolio)’ Renaissance Technologies added to its holdings.
Unilever
The fund opened a 3,431-share position in Unilever, giving it 0.01% space in the equity portfolio. During the quarter, the company’s Amsterdam-listed shares traded for an average price of 53.26 euros each.
The British-Dutch consumer goods manufacturer has a market cap of 133.31 billion euros; its shares closed at 50.83 euros on Thursday with a price-earnings ratio of 23.75, a price-book ratio of 10.08 and a price-sales ratio of 2.57.
The Peter Lynch chart suggests the stock is overvalued. Although the price-book ratio is near a one-year low, the GuruFocus valuation rank of 2 out of 10 also supports this analysis.
Unilever’s financial strength was rated 5 out of 10 by GuruFocus. Despite issuing approximately 9.8 billion euros in new long-term debt over the past three years, it is at a manageable level since the company has sufficient interest coverage. The Altman Z-Score of 2.75, however, indicate that it is under some financial pressure as its assets are building at a faster rate than revenue is growing, which may mean the company is becoming less efficient.
The company’s profitability scored a 9 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 7, which suggests healthy operations. Although Unilever has recorded consistent earnings and revenue growth, the four-star business predictability rank is on watch. According to GuruFocus, companies with this rank typically gain an average of 9.8% per year.
The Tweedy Browne (Trades, Portfolio) Global Value Fund is the company’s largest shareholder with a 0.05% stake.
Health and Happiness
IVA International purchased 24,500 shares of Health and Happiness. During the quarter, the stock traded for an average price of 31.86 Hong Kong dollars ($4.10) per share.
The Hong Kong-based investment holding company, which is mainly engaged in the manufacture and sale of pediatric nutritional products, has a HK$22.74 billion market cap; its shares were trading around HK$35.15 on Friday with a price-earnings ratio of 16.7, a price-book ratio of 3.69 and a price-sales ratio of 1.92.
According to the Peter Lynch chart, the stock is slightly overvalued.
GuruFocus rated H&H’s financial strength 5 out of 10. Although the company has adequate interest coverage, the Altman Z-Score of 2.36 indicates it is under some financial stress as its assets are building up at a faster rate than revenue is growing.
The company’s profitability fared better with a 9 out of 10 rating. H&H is not only supported by strong margins and returns that outperform a majority of competitors, but also has a high Piotroski F-Score of 7.
There are currently no other gurus invested in the stock.
Alliance Global Group
The fund bought 444,500 shares of Alliance Global. The stock traded for an average price of 11.1 Philippine pesos (22 cents) per share during the quarter.
Headquartered in the Philippines, the conglomerate is involved in the food and beverage, gambling and real estate development businesses. It has a market cap of 96.29 billion pesos; its shares closed at 9.93 pesos on Thursday with a price-earnings ratio of 6.1, a price-book ratio of 0.52 and a price-sales ratio of 0.56.
Based on the Peter Lynch chart, the stock appears to be undervalued. The GuruFocus valuation rank of 10 out of 10 also leans toward undervaluation as the price ratios are all near 10-year lows.
Alliance Global’s financial strength was rated 4 out of 10 by GuruFocus. Although the company has issued approximately 94.3 billion pesos in new long-term debt over the past three years, it is at a manageable level due to sufficient interest coverage. The Altman Z-Score of 1.34, however, warns the company could be in danger of bankruptcy as its assets are building up at a faster rate than revenue is growing.
The company’s profitability scored an 8 out of 10 rating, driven by operating margin expansion, strong margins that outperform a majority of industry peers, a moderate Piotroski F-Score of 6, steady earnings and revenue growth and a three-star business predictability rank. GuruFocus says companies with this rank record an average gain of 8.2% per year.
The fund is the only guru invested in the stock.
Additional trades and portfolio performance
During the quarter, the International Fund also added to several positions, including Vicat SA (XPAR:VCT), Gruma SAV de CV (MEX:GRUMA B), Grupo Comercial Chedraui SAB de CV (MEX:CHDRAUIB), Corporativo Fragua SAB de CV (MEX:FRAGUA B) and Ipsos SA (XPAR:IPS).
Slightly over 40% of the fund’s $2.05 billion equity portfolio, which is composed of 97 stocks, is invested in the consumer cyclical and industrials sectors.
According to its fact sheet, the fund posted a 14.26% return for 2019. The MSCI All Country World Index posted a return of 21.51%.
Disclosure: No positions.
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