The Oakmark International Small Cap Fund, part of Harris Associates, released its fourth-quarter portfolio of Feb. 27, disclosing it established four new positions and exited another.
Managed by David Herro (Trades, Portfolio), Michael Manelli and Justin Hance, the fund invests in foreign small-cap companies to achieve capital appreciation. According to its fact sheet, the fund’s 26.08% return underperformed the MSCI World ex. U.S. Small Cap Index in 2017. The index returned 31.04%.
The fund picked up four European stocks in the fourth quarter: GrandVision NV (XAMS:GVNV, Financial), Salvatore Ferragamo SpA (MIL:SFER, Financial), Nos SGPS SA (XLIS:NOS, Financial) and Ontex Group NV (XBRU:ONTEX, Financial). It closed its position in BBA Aviation PLC (LSE:BBA, Financial).
GrandVision
Oakmark invested in 1.74 million shares of GrandVision for an average price of 21.31 euros ($26.02) per share, giving it 1.51% portfolio space.
Headquartered in the Netherlands, the company, which operates optical retail chains, has a market cap of 4.63 billion euros; its shares closed around 18.24 euros on Tuesday with a price-earnings (P/E) ratio of 20.27, a price-book (P/B) ratio of 4.84 and a price-sales (P/S) ratio of 1.40.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
GrandVision’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Not only does the company have sufficient interest coverage, but its Altman Z-Score of 3.35 indicates the company is in good financial standing. In addition, it has a strong Piotroski F-Score of 6 and its operating margins are expanding, which is a good sign.
Oakmark holds 0.69% of GrandVision’s outstanding shares.
Salvatore Ferragamo
The fund started a 1.6 million-share stake in Salvatore Ferragamo for an average price of 22.4 euros per share, expanding the portfolio 1.45%.
The Italian luxury goods company, which specializes in shoes, leather goods, Swiss-made watches and clothing, has a market cap of 3.82 billion euros; its shares closed at 22.64 euros on Tuesday with a price-earnings ratio of 36.52, a price-book ratio of 5.55 and a price-sales ratio of 3.80.
According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.
While the company’s interest coverage ratio of 5.62 barely meets Benjamin Graham’s threshold of 5, Salvatore Ferragamo’s financial strength was rated 7 out of 10 by GuruFocus as it has a high Altman Z-Score of 7.55. As the company has a high Piotroski F-Score of 6 and expanding operating margins, its profitability and growth was rated 8 of 10.
The fund holds 0.95% of the company’s outstanding shares.
Nos SGPS
The International Small Cap Fund purchased 4.4 million shares of Nos SGPS for an average price of 5.39 euros per share. The trade had an impact of 0.98% on the portfolio.
The Portuguese media holding company has a market cap of 2.59 billion euros; its shares closed at 5.04 euros on Tuesday with a price-earnings ratio of 21, a price-book ratio of 2.46 and a price-sales ratio of 1.66.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading higher than its fair value.
GuruFocus rated Nos SGPS’s financial strength 4 out of 10 as its Altman Z-Score of 1.49 suggests it is under some financial stress. While the company has issued new debt over the past three years, the debt level is manageable. The company’s profitability and growth was rated 8 of 10 as it has a strong Piotroski F-Score of 6, a one-star business predictability rating and operating margin expansion.
Holding 0.85% of outstanding shares, Oakmark is the company’s largest guru shareholder. Bestinfond (Trades, Portfolio), azValor Iberia FI (Trades, Portfolio) and Francisco GarcĂ Âa ParamĂ©s (Trades, Portfolio) also own the stock.
Ontex Group
Oakmark bought 452,000 shares of Ontex Group for an average price of 28.53 euros per share, giving it 0.51% portfolio space.
The Belgian consumer packaged goods company, which produces a variety of personal hygiene products, has a market cap of 1.97 billion euros; its shares closed at 23.94 euros on Tuesday with a price-earnings ratio of 14.87, a price-book ratio of 1.63 and a price-sales ratio of 0.90.
According to the Peter Lynch chart below, the stock is trading close to its fair value.
Ontex’s financial strength was rated 5 out of 10 as its Altman Z-Score of 2.09 suggests it is under some financial stress. In addition, its interest coverage ratio of 5.91 barely meets Graham’s standard. As the company has a strong Piotroski F-Score of 7 and expanding operating margins, its profitability and growth was rated 6 of 10.
The fund holds 0.55% of Ontex’s outstanding shares.
BBA Aviation
The fund exited its BBA Aviation stake, selling 1.9 million shares for an average price of 4.24 pounds ($5.84) per share. The trade had an impact of -0.27% on the portfolio. GuruFocus estimates the fund has gained 40% on its investment since the first quarter of 2012.
The British aviation services company has a market cap of 3.59 billion pounds; its shares closed at 3.48 pounds on Tuesday with a price-earnings ratio of 21.74, a price-book ratio of 2.44 and a price-sales ratio of 2.07.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated BBA Aviation’s financial strength 5 out of 10. The company’s Altman Z-Score of 1.6, which indicates it could potentially face bankruptcy, is backed by poor earnings quality and the issuance of new long-term debt. The company’s profitability and growth was rated 4 out of 10 as it has a one-star business predictability rating and a moderate Piotroski F-Score of 4. In addition, its operating margin has been declining over the past five years, although it still outperforms 64% of competitors.
Bernard Horn (Trades, Portfolio) is the company’s largest guru shareholder with 0.11% of outstanding shares.
Other trades
Oakmark also added to many positions during the quarter, including IWG PLC (LSE:IWG), Criteo SA (CRTO) and Controladora Vuela Comapnia de Aviacion SAB de CV (VLRS), among others. Positions that were reduced include MTU Aero Engines AG (XTER:MTX) and Otsuka Corp. (TSE:4768), among others.
The current portfolio of 61 holdings is largely composed of stocks in the industrials and financial services sectors. European stocks represent 62.5% of the portfolio. View the fund’s entire portfolio here.
Disclosure: No positions.
