Sarah Ketterer (Trades, Portfolio), CEO and primary portfolio manager of Causeway Capital Management, disclosed this week that her firm's top five trades during the first quarter included a major reduction in the Baidu Inc. (BIDU, Financial) position and the sale of the Wells Fargo & Co. holding (WFC, Financial). The firm's other key trades included a reduction in its holding of Ryanair Holdings PLC (RYAAY, Financial), a new position in WestRock Co. (WRK, Financial) and an increase to its stake in Essent Group Ltd. (ESNT, Financial).
Co-founded by Ketterer and Harry Hartford, the Los Angeles-based firm seeks long-term capital appreciation through quantitative and fundamental methods to seek prospective stocks for its equity portfolio. Causeway Capital then selects the stocks with high expected risk-adjusted returns, low price-earnings ratios and high dividend yield relative to the market.
As of March 31, Causeway Capital's $5.08 billion equity portfolio contains 82 stocks, with 12 new positions and a turnover ratio of 12%. The top four sectors in terms of weight are technology, consumer cyclical, industrials and communication services, representing 27.56%, 18%, 12.41% and 10.78% of the equity portfolio.
Baidu
Causeway Capital sold 1,819,425 shares of Baidu (BIDU, Financial), slashing 65.33% of the holding and 7.4% of the equity portfolio. The trade relegated Baidu from the largest position to the fourth-largest position in the portfolio.
Shares averaged $261.90 during the first quarter; the stock is modestly overvalued based on Friday's price-to-GF Value ratio of 1.13.
GuruFocus ranks the Beijing-based online search giant's profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and a net profit margin that outperforms approximately 80% of global competitors.
Gurus with large holdings in Baidu include PRIMECAP Management (Trades, Portfolio), Catherine Wood (Trades, Portfolio)'s ARK Invest and Baillie Gifford (Trades, Portfolio).
Wells Fargo
The firm sold 2,483,241 shares of Wells Fargo (WFC, Financial), trimming the equity portfolio 1.41%. Shares averaged $35.37 during the first quarter; the stock is fairly valued based on Friday's price-to-GF Value ratio of 1.05.
GuruFocus ranks the San Francisco-based bank's financial strength 3 out of 10 on several warning signs, which include a low Piotroski F-score of 3 and debt ratios underperforming over 66% of global competitors.
Gurus with large holdings in Wells Fargo include Dodge & Cox and Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial).
Ryanair
The firm sold 661,656 shares of Ryanair (RYAAY, Financial), slimming the holding by 13.25% and the equity portfolio by 1.37%. Shares averaged $107.66 during the first quarter; the stock is significantly overvalued based on Friday's price-to-GF Value ratio of 4.43.
GuruFocus ranks the Ireland-based low cost airline's financial strength 4 out of 10 on several warning signs, which include a low Piotroski F-score of 2, a weak Altman Z-score of 1.62 and a debt-to-equity ratio that underperforms more than 67.55% of global competitors.
WestRock
Causeway Capital purchased 1,022,409 shares of WestRock (WRK, Financial), giving the position 1.05% weight in the equity portfolio. Shares averaged $46.63 during the first quarter; the stock is significantly overvalued based on Friday's price-to-GF Value ratio of 1.53.
GuruFocus ranks the Atlanta-based packaging company's financial strength 4 out of 10 on several warning signs, which include a low Piotroski F-score of 3, a weak Altman Z-score of 1.26 and debt ratios that underperform over 72% of global competitors.
Essent
The firm purchased 1,108,485 shares of Essent (ESNT, Financial), expanding the stake 77.80% and the equity portfolio 1.04%. Shares averaged $44.39 during the first quarter; the stock is fairly valued based on Friday's price-to-GF Value ratio of 0.96.
GuruFocus ranks the U.S.-based private mortgage insurance company's financial strength 5 out of 10: Equity-to-asset and debt-to-equity ratios outperform over 90% of global competitors despite interest coverage ratios underperforming more than half of global banks.
Disclosure: No positions.
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