The Tweedy Browne Global Value Fund (Trades, Portfolio) has disclosed its portfolio for the third quarter.
The fund operates as part of New York-based value investing firm Tweedy, Browne Co. LLC. The fund's management team invests in a diverse number of undervalued companies from developed countries to achieve long-term capital growth.
During the quarter, the largest changes for the fund's portfolio consisted of selling out of the holdings in Antofagasta PLC (LSE:ANTO, Financial) and Royal Dutch Shell PLC (XAMS:RDSA, Financial), as well as reducing its positions in Novartis AG (XSWX:NOVN, Financial), Zurich Insurance Group AG (XSWX:ZURN, Financial) and Nestle SA (XSWX:NESN, Financial).
Portfolio overview
At the end of the quarter, the portfolio contained 86 stocks, with three new holdings. The three new holdings are Johnson Service Group PLC (LSE:JSG), Alliance Global Group Inc. (PHS:AGI) and Okamoto Industries Inc. (TSE:5122). Overall, it is valued at $5.55 billion and has seen a turnover rate of 2%.
Top holdings as of the quarter's end include Nestle, Roche Holding AG (XSWX:ROG), Diageo PLC (LSE:DGE), Heineken Holding NV (XAMS:HEIO) and Safran SA (XPAR:SAF).
By weight, the top three sectors represented are consumer defensive (24.74%), financial services (21.56%) and industrials (15.63%).
Antofagasta
The fund sold out of the remaining 8.32 million shares of Antofagasta during the quarter. The fund had been consistently selling the holding since 2018. The shares traded at an average price of 10.57 pounds ($13.80) during the quarter. The sale had an overall impact of -1.67% on the portfolio and GuruFocus estimates the total gain of the holding at 27.29%.
Antofagasta is a Chilean copper mining company. The company operates four copper mines in Chile, two of which produce significant volumes of byproducts. In addition to mining, the company has a transport division providing rail and road cargo services in northern Chile to mining customers. All of the company's operations are located in the Antofagasta Region of northern Chile except for its flagship operation, Los Pelambres, which is in the Coquimbo Region of central Chile.
As of Oct. 12, the stock was trading at 10.15 pounds per share with a market cap of 12.12 billion pounds. According to the Peter Lynch chart, the stock has been trading slightly above its intrinsic value over the last several years.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 3 out of 10. The GF Value line shows that the stock is currently fairly valued.
The company has settled into consistent financials with a Piotroski F-Score of 4 indicating stable performance. Debt levels saw an increase back in 2016, but they have been brought down in recent years. The company also boasts an operating margin of 23.95%, which surpasses the majority of the industry alongside a net margin of 7.28%.
Royal Dutch Shell
The fund also saw the end of the longstanding Royal Dutch Shell holding with the sale of the remaining 2.24 million shares. The shares traded for an average price of 13.01 euros ($15.36) during the quarter and represented a -0.64% impact on the portfolio. GuruFocus estimates the total loss of the holding at 18.86%.
Royal Dutch Shell is an integrated oil and gas company that explores for, produces and refines oil around the world. In 2019, it produced 2.0 million barrels of liquids and 11.4 billion cubic feet of natural gas per day. Its production and reserves are in Europe, Asia, Oceania, Africa and North and South America. Its largest chemical plants, often integrated with its local refineries, are in Central Europe, China, Singapore and North America.
Oct. 12 saw the stock trading at 11.35 euros per share with a market cap of 156.54 billion euros. According to the Peter Lynch chart, the stock was trading near intrinsic value at the end of 2019.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rank of 6 out of 10. The company shows three severe warning signs of an Altman Z-Score placing the company in the distress column, declining revenue per share and a Beneish M-Score showing the company as a possible manipulator in the industry. The company has a subpar cash-to-debt ratio of 0.27, but has managed to increase cash flows since 2016.
Novartis
The Novartis holding was reduced during the quarter by 33.74% with the sale of 915,159 shares. The stock traded for an average price of 79.8 Swiss francs ($87.75) during the quarter. The reduction had a -1.38% impact on the portfolio and GuruFocus estimates the total gain of the holding at a staggering 409.22%.
Novartis develops and manufactures health care products through two segments: Innovative Medicines and Sandoz. It generates the vast majority of its revenue from the Innovative Medicines segment, which consists of global business franchises in oncology, ophthalmology, neuroscience, immunology, respiratory, cardio-metabolic and established medicines. The company sells its products globally, with the United States representing close to one-third of total sales.
On Oct. 12, the stock was trading at 80.66 francs per share with a market cap of 211.80 billion francs. According the the Peter Lynch chart, the stock was trading well above intrinsic value at the end of 2019.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 3 out of 10. There is currently one severe warning sign issued for declining revenue per share. The company has an operating margin percentage and net margin percentage that stand above the rest of the industry, yet an Altman Z-Score of 2.29 places the company in the grey zone as debt has increased.
Zurich Insurance Group
The fund reduced its 10-year holding of Zurich Insurance Group AG by 25.1% with the sale of 162,809 shares. During the quarter, the shares traded at an average price of 340.31 francs per share. The sale had a -1% impact on the portfolio and GuruFocus estimates the total gain of the holding at 350.06%.
Zurich Insurance is a global insurer organized into three core businesses: general insurance, global life and Farmers Management Services. The stock was trading at 321.80 francs per share on Oct. 12, with a market cap of 53.66 billion francs. The Peter Lynch chart shows that the stock has traded near intrinsic value since 2016.
GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 3 out of 10. There is one severe warning sign issued for declining revenue per share. The GF Value line shows that the stock is modestly overvalued.
Nestle
The fund also reduced its largest holding, Nestle, by 11.61% with the sale of 413,206 shares. The stock traded at an average price of 108.78 francs per share during the quarter. The sale represented a -0.79% impact on the portfolio and GuruFocus estimates the total gain on the holding at a staggering 647.93%.
With a 150-year-plus history, Nestle is the largest food and beverage manufacturer in the world by sales, generating more than 90 billion francs in annual revenue. Its diverse product portfolio includes brands such as Nestle, Nescafe, Perrier, Pure Life and Purina. Nestle also owns just over 23% of French cosmetics company L'Oreal. The company has a vast portfolio of global products, with 34 brands each achieving more than 1 billion francs in sales annually and a geographic presence that spans 189 countries.
As of Oct. 12, the stock was trading at 108.66 francs per share with a market cap of 346.93 billion francs. According to the Peter Lynch chart, the stock has been trading above intrinsic value since 2015.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 1 out of 10. The GF Value line shows that the company is currently modestly overvalued.
While the company has seen increased levels of debt over the last two years, interest coverage remains higher than 59.62% of the industry and the company has maintained consistent cash flows. The company maintains a return on equity and assets that substantially outdoes the rest of the industry.
Disclaimer: Author owns no stocks mentioned.
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