David Nadel (Trades, Portfolio), manager of the Royce International Premier Fund, disclosed his first-quarter portfolio this week, listing nine new positions.
When picking stocks for the $216 million portfolio, Nadel focuses on a limited number of high-quality, international small-cap companies that have distinct competitive advantages, high returns on invested capital and sustainable products.
Among the companies that met this criteria in the most recent quarter were SimCorp A/S (OCSE:SIM, Financial), Sartorius Stedim Biotech SA (XPAR:DIM, Financial), Altus Group Ltd. (TSX:AIF, Financial), Computer Modelling Group Ltd. (TSX:CMG, Financial) and Technology One Ltd. (ASX:TNE, Financial).
SimCorp
Having previously exited a position in SimCorp in the first quarter of 2017, Nadel established a new 62,000-share holding for an average price of 382.57 Danish krone ($61.51) per share, giving it 2.09% portfolio space.
Headquartered in Copenhagen, Denmark, the software company has a market cap of 17.63 billion krone; its shares closed at 447.4 krone on Tuesday with a price-earnings ratio of 36, a price-book ratio of 20.32 and a price-sales ratio of 6.98.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
SimCorp’s financial strength and profitability and growth were both rated 8 out of 10 by GuruFocus. Not only does it have a sufficient level of interest coverage, but the company’s Altman Z-Score of 15.92 indicates it is financially stable. The company is further strengthened by its expanding operating margin, a high Piotroski F-Score of 7 and a 3.5-star (out of five) business predictability rating.
Nadel holds 0.16% of the company’s outstanding shares.
Sartorius Stedim Biotech
Nadel invested in 46,500 shares of Sartorius Stedim for an average price of 69.09 euros ($82.58) per share, expanding the portfolio 2.04%.
The French company, which supplies pharmaceutical and laboratory equipment, has a market cap of 7.13 billion euros; its shares closed at 77.4 euros on Monday with a price-earnings ratio of 44.23, a price-book ratio of 8.19 and a price-sales ratio of 6.60.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Despite issuing new long-term debt over the past several years, GuruFocus rated Sartorius’ financial strength 7 out of 10 as it is at a manageable level. In addition, its Altman Z-Score of 9.90 indicates the company is financially strong. Boosted by an expanding operating margin, the company’s profitability and growth was rated 8 of 10. The company also has a moderate Piotroski F-Score of 4 and a perfect, five-star business predictability rating.
Nadel holds 0.05% of the company’s outstanding shares. The Wasatch International Growth (Trades, Portfolio) Fund is also a shareholder.
Altus Group
The guru purchased 166,000 shares of Altus Group for an average price of 33.68 Canadian dollars ($26.15) per share. The trade had an impact of 2.03% on the portfolio.
The Canadian real estate services company has a market cap of CA$1.26 billion; its shares closed at CA$32.25 per share on Tuesday with a price-earnings ratio of 11.56, a price-book ratio of 3.07 and a price-sales ratio of 2.64.
Based on the Peter Lynch chart below, the stock appears to be undervalued as it is trading below its fair value.
GuruFocus rated Altus’ financial strength 6 out of 10. While its interest coverage does not meet GuruFocus’ standard of 10, its Altman Z-Score of 3.6 indicates it is financially healthy. Its profitability and growth did not fare as well with a rating of 4 of 10. The company is being dragged down by its declining operating margin and moderate Piotroski F-Score of 4. It does have a one-star business predictability rating, however.
The Mawer New Canada Fund (Trades, Portfolio) is the company’s largest guru shareholder with 4.38% of outstanding shares. Nadel holds 0.43%.
Computer Modelling Group
The investor bought 515,000 shares of Computer Modelling Group for an average price of CA$9.41 per share, giving it 1.8% portfolio space.
The Canadian company, which provides reservoir simulation software to the oil and gas industry, has a market cap of CA$761.24 million; its shares closed at CA$9.49 on Tuesday with a price-earnings ratio of 37.96, a price-book ratio of 13.32 and a price-sales ratio of 10.20.
The Peter Lynch chart below suggests the stock is overpriced as it is trading above its fair value.
Since the company has no debt and a high Altman Z-Score, GuruFocus rated Computer Modelling’s financial strength 9 out of 10. GuruFocus warns, however, that the Beneish M-Score indicates the company may manipulate its financial results. As its operating margin has declined, the company’s profitability and growth was rated 7 of 10. It also has a moderate Piotroski F-Score of 4 and a one-star business predictability rating.
With 1.61% of outstanding shares, Wasatch is the company’s largest guru shareholder. Nadel holds 0.64%.
Technology One
Nadel invested in 910,000 shares of Technology One for an average price of 4.97 Australian dollars ($3.72) per share, expanding the portfolio 1.77%.
The Brisbane, Australia-based enterprise software company has a market cap of AU$1.6 billion; its shares closed at AU$5.08 on Wednesday with a price-earnings ratio of 36.14 and a price-book ratio of 10.14.
Other trades
The other positions Nadel established during the quarter were Intertrust NV (XAMS:INTR), AIA Engineering Ltd. (NSE:AIAENG), Lagercrantz Group AB (OSTO:LAGR B) and Medikit Co. Ltd. (TSE:7749).
The guru’s portfolio of 52 stocks is largely invested in the industrials and technology sectors. Western Europe is the largest region represented at 48.5%. According to its fact sheet, the fund outperformed its benchmark, the Russell Global ex-U.S. Small Cap, in 2017 with a 39.8% return. The index returned 30.5%.
Disclosure: No positions.
