The IVA International Fund (Trades, Portfolio), part of International Value Advisors, disclosed it established five new positions when it released its second-quarter portfolio earlier this week.
Managed by Charles de Vaulx (Trades, Portfolio) and Charles de Lardemelle, the value-oriented fund, which is based in New York, looks for potential investments among financially strong companies around the world that are temporarily trading below their intrinsic value.
The fund took an interest in KSB SE & Co. KGaA (XTER:KSB3, Financial), D’Ieteren SA(XBRU:DIE, Financial), Kyung Dong Pharmaceutical Co. Ltd. (XKRX:011040, Financial), Askul Corp. (TSE:2678, Financial) and Avanti Communications Group PLC (LSE:AVN, Financial).
KSB
The fund invested in 32,403 preferred shares of KSB for an average price of 391.31 euros ($455.86) per share, giving it 0.49% space in the equity portfolio.
The German manufacturer of pumps and valves has a market cap of 564.02 million euros; its shares closed at 318 euros on Wednesday with a price-earnings ratio of 76.43, a price-book ratio of 0.77 and a price-sales ratio of 0.26.
The Peter Lynch chart suggests the stock is overpriced since it is trading above its fair value.
Despite having poor interest coverage, GuruFocus rated KSB’s financial strength 6 out of 10 as it has good cash-to-debt and debt-to-equity ratios. The Altman Z-Score of 1.85, however, indicates the company is under some financial pressure. The company’s profitability and growth scored a 5 out of 10 rating as its operating margin is in decline. The strong Piotroski F-Score of 7, however, implies operating conditions are good. The company has a business predictability rank of one out of five stars. According to GuruFocus, stocks with this rank see an average gain of 1.1% per year. The rank is on watch, however, as its revenue and earnings per share growth have slowed down.
IVA holds 1.85% of the company’s outstanding shares.
D’Ieteren
IVA picked up 293,505 shares of D’Ieteren for an average price of 35.29 euros per share, allocating 0.44% of the equity portfolio to the holding.
The Belgian company, which is involved in automobile distribution, has a market cap of 2 billion euros; its shares closed at 36.98 euros on Thursday with a price-earnings ratio of 18.03, a price-book ratio of 1.13 and a price-sales ratio of 0.59.
According to the Peter Lynch chart, the stock is overpriced since it is trading higher than its fair value.
Boosted by a sufficient level of interest coverage, D’Ieteren’s financial strength was rated 7 out of 10 by GuruFocus. The Altman Z-Score of 1.68, however, indicates the company is at risk of going bankrupt. The company’s profitability and growth scored a 4 out of 10 rating as it has poor margins and returns. The Piotroski F-Score of 6, though, suggests operations are stable. The company also has a one-star business predictability rank.
With its purchase of 0.54% of the company’s outstanding shares, the International Fund became the company’s largest guru shareholder. Bestinfond (Trades, Portfolio) is also a shareholder.
Kyung Dong Pharmaceutical
The fund purchased 452,205 shares of Kyung Dong Pharmaceutical for an average price of 12,417.34 won ($11.13) per share, dedicating 0.18% of the equity portfolio to the holding.
The South Korean pharmaceutical company has a market cap of 306.63 billion won; its shares closed at 12,950 won on Thursday with a price-earnings ratio of 16.30, a price-book ratio of 1.41 and a price-sales ratio of 1.69.
Based on the Peter Lynch chart below, the stock appears to be overpriced since it is trading above its fair value.
Supported by a comfortable level of interest coverage and a high Altman Z-Score of 9.09, Kyung Dong’s financial strength was rated 9 out of 10 by GuruFocus. The company’s profitability and growth scored a 7 out of 10 rating. While the operating margin has declined over the past several years, it still outperforms 80% of competitors. It is also supported by a high Piotroski F-Score of 7, which indicates operations are stable, and a two-star business predictability rank. According to GuruFocus, companies with this rank typically see their stocks gain an average of 6% per year and have consistent earnings and revenue growth.
The fund holds 1.91% of the Kyung Dong’s outstanding shares.
Askul
The portfolio managers bought 98,800 shares of Askul for an average price of 3,374.46 yen ($30.44) per share, expanding the equity portfolio 0.12%.
The Japanese company, which sells office equipment, has a market cap of 162.6 billion yen; its shares closed at 3,190 yen on Thursday with a price-earnings ratio of 34.66, a price-book ratio of 3.30 and a price-sales ratio of 0.45.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
Boosted by comfortable interest coverage and a strong Altman Z-Score of 3.5, GuruFocus rated Askul’s financial strength 7 out of 10. The company’s profitability and growth was rated 6 out of 10. Despite the Piotroski F-Score of 4 indicating operations are stable, the operating margin is declining and underperforms 68% of industry peers. The company also has a one-star business predictability rank.
The IVA Worldwide Fund, which is also managed by de Vaulx and de Lardemelle, also established a position in the stock in the second quarter. Both funds hold 0.19% of Askul’s outstanding shares.
Avanti Communications
Having previously closed a position in Avanti Communications in the fourth quarter of 2015, the fund opened a new 35.4 million-share stake for an average price of 0.06 pounds (0.08 cents) per share. The trade had an impact of 0.09% on the equity portfolio.
The British company, which provides satellite communications services, has a market cap of 113.58 million pounds; its shares closed at 0.05 pounds on Thursday with a price-book ratio of 0.20 and a price-sales ratio of 0.18.
According to the median price-sales chart, the stock is trading below its historical average.
As a result of issuing approximately $142.3 million in new long-term debt over the last three years, Avanti’s financial strength was rated 3 out of 10 by GuruFocus. In addition, the Altman Z-Score of -0.33 warns the company is in danger of going bankrupt. The company’s profitability and growth did not fare much better, scoring a 5 out of 10 rating. In addition to having dismal margins and returns, the Piotroski F-Score of 3 suggests poor business conditions. The operating margin is expanding, however, which is usually a good sign. The company also has a one-star business predictability rank.
The fund holds 1.64% of the company’s outstanding shares.
Other trades
The portfolio managers also added to many other positions during the quarter, including Sodexo (XPAR:SW), Koninklijke Boskalis Westminster NV (XAMS:BOKA), Kangwon Land Inc. (XKRX:035250), Schlumberger Ltd. (SLB) and Hyundai Motor Co. (XKRX:005830).
The International Fund’s $2.75 billion portfolio, which is composed of 100 stocks, is largely invested in the industrials and consumer cyclical sectors. According to GuruFocus, the fund returned 17.25% in 2017, underperforming the MSCI All Country World Index (Ex. U.S.). The index posted a 27.19% return.
Disclosure: No positions.
