The Oakmark International Small Cap Fund (Trades, Portfolio) has released its portfolio for the first quarter of 2020. The fund made new purchases of Wynn Macau Ltd. (HKSE:00128, Financial), Software AG (XTER:SOW, Financial) and dorma+kaba Holding AG (XSWX:DOKA, Financial). It also sold out of its holdings in Ontex Group NV (XBRU:ONTEX, Financial) and Criteo SA (CRTO, Financial).
Founded in 1995 and managed by portfolio managers David Herro (Trades, Portfolio), Michael Manelli and Justin Hance, the Oakmark International Small Cap Fund invests in a small number of non-U.S. small-cap stocks. The fund aims to invest in securities that are trading at a discount to intrinsic value and show strong potential to increase value for shareholders.
Portfolio overview
Overall, the portfolio contains 59 different holdings, including the three new purchases. It is valued at $894 million and has seen an 8% turnover rate. Top holdings in the portfolio include Duer AG (XTER:DUE)(4.50%), Julius Baer Grouppe AG (XSWX:BAER)(3.94%), Konecranes Oyj (OHEL:KCR)(3.88%), Atea ASA (OSL:ATEA)(3.39%) and ISS A/S (OCSE:ISS)(3.27%).
By weight, the top three sectors represented are industrials (43.21%), financial services (15.35%) and consumer cyclical (10.77%).
Wynn Macau
In the first quarter, the fund acquired a new holding in Wynn Macau with the purchase of 3.35 million shares. Shares traded at an average of 16.43 Hong Kong dollars ($2.12). The purchase had an overall impact of 0.56% on the portfolio.
Wynn Macau is a holding company principally engaged in the development, owning and operation of destination casino gaming and entertainment resort facilities. The company operates through two business segments: Wynn Macau and Wynn Palace. As of June 4, the company was trading at HK$14.12 with a market cap of HK$70.75 billion ($9.13 billion). According to the Peter Lynch charts the company was trading close to its intrinsic value at the end of 2019.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 8 out of 10. An operating margin of 17.7% and a price-earnings ratio of 13.93 beat the majority of the industry. A low cash-to-debt ratio of 0.36 places them lower than 53.69% of the industry.
Software
Another new holding was established with the purchase of 125,000 shares of Software AG. During the quarter, shares traded at an average price of 30.34 euros ($34.39) per share. The purchase had a 0.42% on the portfoltio.
The company provides enterprise-level software for companies around the world and has been in operation since 1969. As of June 4, the company was trading at 34.90 euros per share at a market cap of 2.55 billion euros ($2.89 billion). According to the Peter Lynch chart, the company was trading above its intrinsic value at the end of 2019.
GuruFocus gives the company a financial strength rating of 7 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 3 out of 10. A cash-to-debt ratio of 2.11, operating margin of 23.1% and net margin of 16.24% all are higher than the rest of the industry.
dormakaba Holding AG
The final new purchase for the company was the addition of 8,000 shares of dormakaba at an average price of 576.64 Swiss francs ($603.15) during the quarter. This is the first time the fund has bought back into the company since the third quarter of 2018 and the purchase had an impact of 0.39% on the portfolio.
The global security company is based in Switzerland and employs around 16,000 employees around the globe. It was formed in in 2015 as a result of the merger between Dorma and Kaba. Accoriding to the Peter Lynch chart, the company was trading above its intrinsic value at the end of 2019.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 8 out of 10. An operating margin of 13% places it well above the industry standard. A low cash-debt ratio of 0.11 places it below 83.15% of the industry due to high levels of debt in recent years.
Ontex Group and Criteo
The fund sold out of its holdings in Ontex Group and Criteo. The sales included 982,000 and 1.04 million shares respectively. Ontex Group traded at 15.38 euros per share during the quarter. Criteo traded at $12.85. The sales represented -1.37% and -1.20% impacts on the portfolio.
Ontex operates out of Belgium in the manufacturing industry. Criteo works with online retailers to develop personalized advertisements. Ontex was trading above its intrinsic value and Criteo was trading below according to their Peter Lynch charts.
Criteo's cash-debt ratio of 2.42 vastly outperforms Ontex's of 0.14 and leads to its higher financial strength rating of 7 out of 10.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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