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Margaret Moran
Margaret Moran
Articles (290) 

Top 5 Q2 Buys of the Tweedy Browne Global Value Fund

Global investor focuses on positions in several 'boring' businesses

The Tweedy Browne Global Value Fund (Trades, Portfolio) recently disclosed its portfolio updates for the second quarter of 2020, which ended on June 30.

The fund operates as part of New York-based value investing firm Tweedy, Browne Co. LLC. The portfolio managers aim to invest in a diverse range of companies in developing countries, with an emphasis on undervalued securities, in order to achieve long-term capital growth.

According to its investing criteria, the fund’s top five buys for the quarter were for Coca-Cola Femsa SAB de CV (NYSE:KOF), CK Hutchison Holdings Ltd (HKSE:00001), Kuraray Co Ltd (TSE:3405), Jardine Strategic Holdings Ltd (SGX:J37) and FUJI Seal International Inc. (TSE:7864).

Coca-Cola Femsa SAB de CV

The fund added 573,975 shares, or 59.79%, to its investment in Coca-Cola Femsa SAB de CV, impacting the equity portfolio by 0.44%. During the quarter, share traded for an average price of $42.06.

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Coca-Cola Femsa is the world’s largest Coca-Cola (KO) franchise bottler by volume. Based in Mexico City, the multinational beverage bottling company offers 131 brands to nearly 290 million consumers daily.

On July 22, shares of Coca-Cola Femsa traded around $42.20 for a market cap of $70.79 billion and a price-earnings ratio of 35.88.

GuruFocus gives the stock a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 0.42 and Altman Z-Score of 2.06 are average for the industry and indicate the company is not in immediate danger of bankruptcy. The operating margin of 13.67% and net margin of 6.22% reflect slight downtrends over the past few years.

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CK Hutchison Holdings Ltd

The fund also upped its stake in CK Hutchison Holdings Ltd by 2,744,500 shares, or 135.43%, which had a 0.31% on the equity portfolio. Shares traded for an average price of 53.94 Hong Kong Dollars ($6.96) during the quarter.

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Hong Kong-based CK Hutchison is a multinational conglomerate that mainly operates in ports, shipping and related services, as well as retail, infrastructure, energy and telecommunications.

On July 22, shares of CK Hutchison traded around HK$50.85 for a market cap of HK$195.90 billion and a price-earnings ratio of 4.88.

GuruFocus gives the stock a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.31 is below 60.19% of competitors, while the Altman Z-Score of 0.68 shows the company could be in danger of bankruptcy. Revenue and net income have seen growth in recent years, with a three-year revenue growth rate of 11.4%.

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Kuraray Co Ltd

The fund purchased an additional 1,101,000 shares of Kuraray Co Ltd, increasing the position by 133.16% and impacting the equity portfolio by 0.20%. During the quarter, share traded for an average price of 1,111.18 Japanese Yen ($10.37).

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Kuraray is a Japanese company that manufactures chemicals, fibers and other materials. The Tokyo-based company makes products for a wide variety of industries, from medical to textiles.

On July 22, shares of Kuraray traded around ¥1,105 for a market cap of ¥381.54 billion and a price-book ratio of 0.75.

GuruFocus gives the stock a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The Altman Z-Score of 1.84 suggests potential issues with solvency, but the interest coverage ratio of 38.7 is higher than 75.17% of competitors and indicates the company can continue making payments on its debt. The operating margin of 9.02%, which is above the industry median of 6.97%, contrasts recent declines in revenue and net income.

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Jardine Strategic Holdings Ltd

The fund added 505,100 shares, or 116.25%, to its holding in Jardine Strategic Holdings Ltd, impacting the equity portfolio by 0.19%. Shares traded for an average price of $21.97 during the quarter.

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Operating as part of Jardine Matheson Holdings Limited (SGX:J36), Jardine Strategic Holdings is a Hong Kong-based holding company that owns a wide variety of business, primarily in Asia. Some of its subsidiaries operate in the property investment, retail, transport, insurance and restaurants industries.

On July 22, shares of Jardine Strategic Holdings traded around $19.80 for a market cap of $38.14 billion and a price-earnings ratio of 8.91.

GuruFocus gives the stock a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The interest coverage ratio of 6.15 and Altman A-Score of 1.34 indicate the company could have solvency issues within the next couple of years. The return on capital declined to around 35.30% for the most recent full fiscal year, which is still better than 82.71% of competitors.

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FUJI Seal International Inc.

FUJI Seal International Inc. was the fund’s only new common stock buy during the quarter. The fund purchased 212,000 shares of the stock, which had a 0.07% impact on the equity portfolio. During the quarter, shares traded for an average price of ¥1,981.68.

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Fuji Seal is a packaging machinery manufacturing company based in Japan. It is primarily engaged in developing, manufacturing and selling packaging systems, including shrink-sleeve and self-adhesive labels.

On July 22, shares of Fuji Seal traded around ¥1,954 for a market cap of ¥108.35 billion and a price-earnings ratio of 12.55.

GuruFocus gives the stock a financial strength rating of 8 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 201.16 is higher than 93.12% of competitors, while the Altman Z-Score suggests the company is not in danger of bankruptcy. The ROIC (return on invested capital) is consistently higher than the WACC (weighted average cost of capital), indicating dependable profitability.

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Portfolio overview

As of the quarter’s end, the fund held shares in 87 stocks valued at a total of $5.77 billion. The top holdings were Nestle SA (XSWX:NESN) with 6.84% of the equity portfolio, Roche Holding AG (XSWX:ROG) with 5.26% and Diageo PLC (LSE:DGE) with 4.48%.

In terms of sector weighting, the firm was most invested in consumer defensive, financial services and health care.

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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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