Bernard Horn (Trades, Portfolio), manager of Polaris Capital Management, disclosed on Aug. 31 that the firm established three new positions during the second quarter: Publicis Groupe SA (XPAR:PUB, Financial), Shinhan Financial Group Co. Ltd. (XKRX:055550, Financial) and Inchcape PLC (LSE:INCH, Financial).
Managing a portfolio of 82 stocks, Horn said the firm’s investing philosophy derives from two basic beliefs: country and industry factors are important determinants of security prices and global market fluctuations produce mispriced stocks. The portfolio’s top sectors are financial services, consumer cyclical and basic materials.
Horn said in his shareholder letter that the Polaris Global Equity fund gained 1.66% for the quarter, underperforming the MSCI World Index benchmark by approximately 0.27%. The manager noted that although U.S. stocks have performed well, the portfolio was significantly underweight U.S. securities: the portfolio’s U.S. allocation was approximately 37% while the U.S. represented 61% of the index benchmark. Despite this, the fund still returned a net 11.61% since its Sept. 30, 1984 inception, outperforming the benchmark by 1.61%.
Publicis Groupe
Horn invested in 100,300 shares of Publicis Groupe for an average price of 59.37 euros ($68.73) per share, giving the position 1.43% equity portfolio space.
France-based Publicis Groupe engages in various services, including advertising, media investment management and public relations. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, including a strong Piotroski F-score of 7 and a three-year revenue growth rate that outperforms 75% of global competitors. Additionally, the website gives Publicis Groupe a perfect five-star business predictability rank.
Shinhan Financial Group
Horn invested in 124,200 shares of Shinhan Financial Group for an average price of 45,999.2 won ($41.12) per share, giving the position 1% equity portfolio space.
The South Korean bank offers various financial services, including retail banking, corporate banking, wealth management and investment banking. GuruFocus ranks the bank’s financial strength a poor 3 out of 10 on several factors, including an equity-to-asset ratio that underperforms 72% of Asian banks. The website also warns that Shinhan’s long-term debt has increased 19.8 billion won over the past three years, resulting in debt ratios that rank lower than 89% of competitors.
Inchcape
Horn invested in 363,777 shares of Inchcape for an average price of 7.37 pounds ($9.48) per share, giving the position 0.78% portfolio weight.
U.K.-based Inchcape distributes and markets premium and luxury automobiles and auto parts around the world. GuruFocus ranks the company’s profitability 7 out of 10: even though profit margins underperform over 60% of global competitors, operating margins have increased approximately 2.40% per year over the past five years. Other positive investing signs include a dividend yield near a five-year high, a price-sales ratio near a five-year low and a strong Piotroski F-score of 7.
See also
Horn’s top holding as of quarter-end is Teva Pharmaceutical Industries Ltd. (TEVA, Financial), a company that Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEOÂ Warren Buffett (Trades, Portfolio) raised his holding to 43,249,295 shares during the quarter.
Horn said health care produced top-performing results at the sector level, with double-digit gains in Teva, UnitedHealth Group (UNH, Financial) and Quest Diagnostics Inc. (DGX). The manager said Israeli-based Teva “rebounded from prior lows” on several factors, including the restructuring of the company’s debt and the reaffirming of the long-term safety of “blockbuster branded drug” Copaxone.
Disclosure: No positions.
