The Causeway International Value (Trades, Portfolio) Fund, part of Sarah Ketterer (Trades, Portfolio)’s Causeway Capital Management, disclosed it established three new positions when it released its first-quarter portfolio.
The fund, which was established in 2001, strives to achieve long-term capital growth by investing in foreign companies with market caps that exceed $1 billion.
The stocks that met these requirements in the most recent quarter were Rolls-Royce Holdings PLC (LSE:RR., Financial), Givaudan SA (XSWX:GIVN, Financial) and Johnson Matthey PLC (LSE:JMAT, Financial).
Rolls-Royce
Having previously closed a position in Rolls-Royce in the first quarter of 2014, Causeway started a new 7.4 million-share stake for an average price of 8.61 pounds ($11.51) per share, giving it 1.11% portfolio space.
The U.K.-based engineering company, which designs and manufactures power systems for aircraft, has a market cap of 15.49 billion pounds; its shares closed at 8.33 pounds on Monday with a price-earnings ratio of 3.64, a price-book ratio of 2.48 and a price-sales ratio of 0.94.
The Peter Lynch chart below shows the stock is trading significantly lower than its fair value, suggesting it is undervalued.
Rolls-Royce’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Although the company has been issuing new long-term debt over the past several years, it is still at a manageable level. Its Altman Z-Score of 1.86, however, suggests it is experiencing some financial pressure. The company is also supported by an operating margin that outperforms 79% of competitors, a moderate Piotroski F-Score of 4 and a business predictability rating of one out of five stars.
The fund holds 0.4% of the company’s outstanding shares.
Givaudan
After exiting its Givaudan holding in the second quarter of 2016, the fund opened a new 33,852-share position for an average price of 2,191.08 Swiss francs ($2,225.37) per share, expanding the portfolio 0.94%.
The Swiss manufacturer of flavors, fragrances and active cosmetic ingredients has a market cap of 20.48 billion francs; its shares closed at 2,224 francs on Monday with a price-earnings ratio of 28.68, a price-book ratio of 5.78 and a price-sales ratio of 4.09.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Both Givaudan’s financial strength and profitability and growth were rated 7 out of 10 by GuruFocus. Even though the company has issued new long-term debt over the past several years, it is still at a manageable level. Further, the Altman Z-Score of 5.60 indicates the company is financially strong. The company is also supported by an expanding operating margin and a high Piotroski F-Score of 7. It also has a one-star business predictability rating, which GuruFocus has marked as on watch, implying its score may change.
Causeway holds 0.37% of Givaudan’s outstanding shares.
Johnson Matthey
Causeway invested in 197,076 shares of Johnson Matthey for an average price of 31.84 pounds per share, allocating 0.1% of the portfolio to the position.
The specialty chemicals manufacturer, which is headquartered in the U.K., has a market cap of 7.38 billion pounds; its shares closed at 38.15 pounds on Monday with a price-earnings ratio of 24.61, a price-book ratio of 3.08 and a price-sales ratio of 0.52.
Based on the Peter Lynch chart below, the stock appears to be overpriced since it is trading above its fair value.
Johnson Matthey’s financial strength was rated 7 out of 10 by GuruFocus. While the company’s interest coverage surpasses Benjamin Graham’s standard of 5, it still falls below the industry median. This is offset, however, by a strong Altman Z-Score of 5.84, which indicates the company is financially stable. The company’s profitability and growth scored a rating of 6 out of 10, supported by a moderate Piotroski F-Score of 5 and a three-star business predictability rating, which is also on watch. The company’s operating margin, however, underperforms 73% of its peers.
The fund holds 0.1% of the company’s outstanding shares.
Other trades
During the quarter, the fund also expanded its positions in Manulife Financial Corp. (TSX:MFC, Financial), Sompo Holdings Inc. (TSE:8630, Financial), Linde AG (XTER:LIN), Takeda Pharmaceutical Co. Ltd. (TSE:4502) and British American Tobbaco PLC (LSE:BATS), among others.
The portfolio, which is composed of 58 holdings, is largely invested in the financial services sector.
Disclosure: No positions.
