David Herro (Trades, Portfolio), portfolio manager of the Oakmark International Fund, disclosed on Wednesday that his top six position boosts for the second quarter were Naspers Ltd. (JSE:NPN, Financial), Nestle SA (XSWX:NESN, Financial), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial)(TPE:2330), Intesa Sanpaolo (MIL:ISP, Financial), BNP Paribas (XPAR:BNP, Financial) and Daimler AG (XTER:DAI).
Herro said in his shareholder letter that the Oakmark International Fund declined 5% for the quarter, lagging the MSCI World ex U.S. Index by 5.8%. Several geopolitical factors, including the North Korean missile crisis and political instability in Italy, contributed to the weak portfolio results.
Despite the setback, the fund has averaged a 9.9% annual return since inception in September 1992, outperforming the index by approximately 3.8%.
Naspers
Herro added 3.294 million shares of Naspers for an average price of 3,150.44 rands ($222.20) per share. The manager increased his equity portfolio 1.98% with this transaction.
The South African online media company offers various e-commerce and internet services. GuruFocus ranks Naspers’ profitability 6 out of 10: although the company has strong net profit margins and returns, its operating margin and three-year revenue growth rate are underperforming over 62% of global competitors. Additionally, the company’s Beneish M-score of -0.91 suggests possible earnings manipulation.
Nestle
Herro added 8.268 million shares of Nestle for an average price of 75.68 Swiss francs ($77) per share. The manager expanded his equity portfolio 1.52% with this transaction.
The company's diverse product line includes brands like Nestle, Nescafe, Perrier, Pure Life and Purina. The company’s profitability ranks 6 out of 10 on several positive investing signs, including expanding operating margins and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 81% of global competitors.
Taiwan Semiconductor Manufacturing
Herro added 64.929 million shares of Taiwan Semiconductor for an average price of 230.11 New Taiwan dollars ($7.50) per share. The manager increased his equity portfolio 1.1% with this transaction.
The Taiwanese semiconductor manufacturing company engages in the computer-aided design of integrated circuits and other semiconductor devices. GuruFocus ranks the company’s financial strength and profitability 8 out of 10 on several positive investing signs, including robust interest coverage, expanding operating margins and a dividend yield near a two-year high.
The company’s business predictability ranks 4.5 stars out of five as it has consistent revenue and earnings growth over the past decade. Several gurus, including Richard Snow (Trades, Portfolio) and Brandes Investment Partners, established a position in the stock as the company offers good growth potential.
Intesa Sanpaolo and BNP Paribas
Herro added 113.375 million shares of Intesa Sanpaolo for an average price of 2.85 euros ($3.31) per share and 4.852 million shares of BNP Paribas for an average price of 59.08 euros ($68.51) per share. The manager expanded his equity portfolio 1.49% with the two transactions in the aggregate.
Herro said the political instability in Italy “spooked the European markets and the euro,” significantly lowering the prices of financial service companies with Italian exposure. Despite this, the manager also said Oakmark International does not think the sharp price declines are “warranted or matched by a similar decline in business value.” Such “price declines” offer an exploitable value gap according to Herro.
Daimler
Herro invested in 3.993 million shares of Daimler for an average price of 64.38 euros per share. The manager expanded his portfolio 0.61% with this transaction.
The manager said Mercedes-Benz parent Daimler detracted from the portfolio’s performance during the quarter as the company disclosed several headwinds to earnings performance, including higher raw material costs and the threat of new tariffs on European vehicles imported to the U.S. Despite these headwinds, Daimler highlighted margin expansion opportunities in its truck division. GuruFocus ranks Daimler’s profitability 6 out of 10 on several positive investing signs, including expanding operating margins and a dividend yield near a five-year high.
Disclosure: No positions.
