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James Li
James Li
Articles (287)  | Author's Website |

Bestinfond Seeks Value in UK Equities in 1st Quarter

Firm adds 3 new positions to its portfolio

Francisco García Paramés (Trades, Portfolio), the former portfolio manager of Bestinfond (Trades, Portfolio), follows investing styles from Benjamin Graham, Warren Buffett (Trades, Portfolio) and Peter Lynch. Current Bestinfond President Beltrán de la Lastra continued Paramés' approach by investing in companies with good competitive advantages, good mangement and a reasonable share price. De la Lastra invested in three British companies during the first quarter: Pearson PLC (LSE:PSON)(NYSE:PSO), BHP Billiton PLC (LSE:BLT)(NYSE:BBL) and Rio Tinto PLC (LSE:RIO)(NYSE:RIO).

Pearson

De la Lastra added 5,179,879 shares of Pearson, a major educational publishing company. The company’s share price averaged 6.96 British pounds ($9.06) during the first quarter. With this transaction, the guru increased his portfolio 2.94%.

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Pearson has weak business operations as the company’s Piotroski F-score ranks a poor 2 out of 9. The company’s margins and returns underperform over 90% of global competitors.

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Pearson’s management highlighted several initiatives to “improve profitability and focus on the large opportunities in global education” in the company’s May 5 press release. Net sales during the 13-week period ending March 31 increased 6%, driven by revenue growth in North American higher education and K-12 courseware. The company also reported positive “phasing” (higher sales and lower returns) in several business segments, including U.K. student assessment and South African businesses.

CEO John Fallon reiterated the company’s strategic position to create a company “equipped to innovate and win in digital education.” Pearson’s management addressed the increasing opportunities in digital education, including new courseware products in business and economics and pilot programs in developmental mathematics. These products, including the “strategic review of [Pearson’s] K-12 courseware publishing business,” are expected to improve the company’s revenue growth and operating margins for the rest of the year.

BHP Billiton

De la Lastra invested in 1,781,662 shares of BHP Billiton, a global diversified miner supplying iron ore, copper, oil, gas and coal. The company’s share price averaged 13.57 pounds during the quarter. With this transaction, the guru added 1.83% to his portfolio.

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Even though the company’s profitability ranks a poor 4 out of 10, BHP Billiton still has solid margins and returns. As the company’s operating margin and ROE outperform 85% and 81% of global competitors, BHP has higher growth potential than other industrial mining companies.

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BHP CEO Andrew Mackenzie reported increased value to the company’s portfolio across each of six focus areas, including record production for the nine-month period ended March 31 in the Western Australia Iron Ore division and five Queensland Coal mines. The CEO listed several initiatives to create short-term and long-term shareholder value: increased recoveries in Eagle Ford, the approval of the Mad Dog Phase 2 project and lower Permian costs through consolidation and optimization of acreage position.

Rio Tinto

De la Lastra invested in 681,602 shares of Rio Tinto, an international mining group engaged in processing mineral resources. Rio Tinto’s share price averaged 33.89 pounds during the quarter. With this transaction, the guru increased his portfolio 1.82%.

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Rio Tinto’s Piotroski F-score ranks a perfect nine, which implies a strong business operation. The company’s operation margin is higher than its 10-year median of 19.03% and outperforms 84% of global competitors.

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Rio Tinto reported “solid production in the first quarter” according to CEO Jean-Sebastien Jacques. The company increased its bauxite and aluminum productions 2% year over year and semi-soft and thermal coal 4% year over year. Titanium dioxide slag increased the highest at 35% year over year, driven by higher market demand. For the year, Rio Tinto expects to produce 48 million to 50 million tonnes of bauxite, 8.0 million to 8.2 million tonnes of alumina, 3.5 million to 3.7 million tonnes of aluminum and 1.2 million to 1.3 million tonnes of titanium dioxide slag. Rio Tinto increased its full-year guidance for the last mineral by 0.1 million tonnes.

Disclosure: The author has no positions in the stocks mentioned.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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