The MS Global Franchise Portfolio (Trades, Portfolio), part of Morgan Stanley (MS, Financial), disclosed in late May that its top five trades during the first quarter included the closure of its positions in Unilever PLC (LSE:ULVR, Financial) and Fox Corp. (FOXA, Financial)(FOX, Financial), a reduction to its holding in Nike Inc. (NKE, Financial) and boosts to its stakes in Roper Technologies Inc. (ROP, Financial) and Pernod Ricard SA (XPAR:RI, Financial).
The fund seeks long-term capital appreciation by investing primarily in equities around the globe. Stock selection is based on a bottom-up investment process in which sector, industry and stock weights are driven by the fund’s assessment of each stock’s valuation and quality characteristics. Emphasis is placed on companies that have strong franchise businesses, sustainable returns on invested capital and high gross margins.
As of March 31, the fund’s $2.98 billion equity portfolio contains 30 stocks with a turnover ratio of 3%. The top four sectors in terms of weight are consumer staples, health care, technology and financial services, representing 33.62%, 22.02%, 21.57% and 9.93% of the equity portfolio.
Unilever
The fund sold 909,204 shares of Unilever (LSE:ULVR, Financial), discarding 1.79% of its equity portfolio. Shares averaged 41.09 pounds ($58.18) during the first quarter; the stock is fairly valued based on Friday’s price-to-GF Value ratio of 0.97.
GuruFocus ranks the U.K.-based packaged food company’s profitability 8 out of 10: Even though three-year average revenue and earnings growth rates underperform more than half of global competitors, positive investing signs include a high Piotroski F-score of 7 and an operating margin that has increased approximately 6.6% per year on average over the past five years and outperforms more than 89% of global packaged food companies.
Gurus with holdings in Unilever include the Tweedy Browne (Trades, Portfolio) Global Value Fund and the Causeway International Value (Trades, Portfolio) Fund.
Fox
The fund sold 642,980 Class A shares of Fox (FOXA, Financial) and 485,819 Class B shares of Fox (FOX, Financial). The net reduction to the equity portfolio is 1.07%. Class A shares averaged $34.96 during the first quarter, while Class B shares averaged $33.48 during the same period.
GuruFocus ranks the New York-based diversified media company’s financial strength 5 out of 10: Although the company has a solid Piotroski F-score of 6, interest coverage and debt ratios underperform over 65% of global competitors.
Gurus with large holdings in Fox include Dodge & Cox, Yacktman Asset Management (Trades, Portfolio) and Seth Klarman (Trades, Portfolio).
Nike
The fund sold 120,170 shares of Nike (NKE, Financial), booting 32.24% of the position and 0.56% of the equity portfolio. Shares averaged $139.07 during the first quarter; the stock is significantly overvalued based on Friday’s price-to-GF Value ratio of 1.34.
GuruFocus ranks the Beaverton, Oregon-based sports apparel giant’s profitability 8 out of 10 on several positive investing signs, which include profit margins outperforming over 80% of global competitors and returns topping more than 90% of global apparel companies.
Gurus with large holdings in Nike include Ken Fisher (Trades, Portfolio) and Spiros Segalas (Trades, Portfolio).
Roper Technologies
The fund purchased 86,730 shares of Roper Technologies (ROP, Financial), boosting the position 127.06% and the equity portfolio 1.18%. Shares averaged $401.28 during the first quarter; the stock is modestly overvalued based on Friday’s price-to-GF Value ratio of 1.16.
GuruFocus ranks the Sarasota, Florida-based industrial company’s profitability 8 out of 10 on several positive investing signs, which include profit margins outperforming over 90% of global competitors and returns topping more than 60% of global industrial companies.
Pernod Ricard
The fund purchased 139,845 shares of Pernod Ricard (XPAR:RI, Financial), increasing the position by 55.45% and the equity portfolio by 0.88%. Shares averaged 158.67 euros ($193.08) during the first quarter; the stock is modestly overvalued based on Friday’s price-to-GF Value ratio of 1.29.
GuruFocus ranks the French alcoholic beverage company’s financial strength 4 out of 10 on the back of a moderately weak Altman Z-score of 2.64 and interest coverage and debt ratios that underperform more than 65% of global competitors.
