The Invesco European Growth Fund (Trades, Portfolio), part of Invesco Ltd., disclosed four new positions when it released its third-quarter portfolio last week.
Managed by a five-person team, the Atlanta-based fund invests in reasonably priced, quality European companies that have strong fundamentals and sustainable earnings growth.
The fund established positions in Philip Morris International Inc. (PM, Financial), Kaufman & Broad SA (XPAR:KOF, Financial), TechnipFMC PLC (FTI, Financial) and Chemical Works of Gedeon Richter PLC (BUD:RICHTER, Financial).
Philip Morris
Invesco invested in 290,053 shares of Philip Morris for an average price of $81.25 per share, giving it 1.62% space in the equity portfolio.
The New York-based tobacco company has a $130.13 billion market cap; its shares were trading around $83.71 on Wednesday with a price-earnings ratio of 20.27 and a price-sales ratio of 4.28.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Phillip Morris’ financial strength 5 out of 10. While the company has issued approximately $2.5 billion in new long-term debt over the last three years, it is at a manageable level as a result of good interest coverage. The Altman Z-Score of 4.33 also indicates the company is in good fiscal standing despite seeing a decline in revenue per share.
As a result of an expanding operating margin, the company’s profitability and growth scored a 6 out of 10 rating. It is also supported by a moderate Piotroski F-Score of 6 and business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
Of the gurus invested in Philip Morris, Barrow, Hanley, Mewhinney & Strauss has the largest position with 0.91% of outstanding shares. Other top guru shareholders include Tom Russo (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and the T Rowe Price Equity Income Fund (Trades, Portfolio).
Kaufman & Broad
The fund picked up 274,470 shares of Kaufman & Broad for an average price of 42.3 euros ($48.85) per share, dedicating 0.91% of the equity portfolio to the holding.
The French real estate development and construction company has a market cap of 860.41 million euros; its shares closed at 39.92 euros on Tuesday with a price-earnings ratio of 10.46, a price-book ratio of 3.95 and a price-sales ratio of 0.54.
According to the Peter Lynch chart, the stock is undervalued.
Kaufman & Broad’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. While the company has good interest coverage, the Altman Z-Score suggests the company is under some fiscal pressure.
The company is also supported by an expanding operating margin, a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
Invesco hold 1.27% of the company’s outstanding shares.
TechnipFMC
The fund purchased 423,260 shares of TechnipFMC for an average price of $31.79 per share, allocating 0.88% of the equity portfolio to the position.
The U.K.-based company, which provides services to the oil and gas industry, has a $14.09 billion market cap; its shares were trading around $31.05 on Wednesday with a price-earnings ratio of 89.72, a price-book ratio of 1.11 and a price-sales ratio of 1.08.
Based on the Peter Lynch chart below, the stock appears to be overpriced.
Despite having poor interest coverage and a low Altman Z-Score of 2.82, which indicates the company is in danger of bankruptcy, GuruFocus rated TechnipFMC’s financial strength 6 out of 10.
The company’s profitability and growth scored a 4 out of 10 rating. Although its operating margin is in decline, it still outperforms 73% of competitors. TechnipFMC also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank. The rank is on watch, though, since the company has reported a decline in revenue per share over the last five years.
With 7.66% of outstanding shares, First Eagle is the company’s largest guru shareholder. Pioneer Investments (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Michael Price (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Simons also own the stock.
Gedeon Richter
Invesco bought 725,326 shares of Gedeon Richter for an average price of 5,200.52 forint ($18.59) per share. The trade had an impact of 0.85% on the equity portfolio.
The Hungarian pharmaceutical company has a market cap of 990.16 billion forint; its shares closed at 5,315 forint on Tuesday with a price-earnings ratio of 51.11, a price-book ratio of 1.43 and a price-sales ratio of 2.24.
The Peter Lynch chart suggests the stock is overpriced.
Gedeon Richter’s financial strength was rated 9 out of 10 by GuruFocus. Despite having poor interest coverage, the Altman Z-Score of 7.52 indicates the company is in good standing financially.
The company’s profitability and growth scored a 7 out of 10 rating as a result of declining margins and weak returns. The Piotroski F-Score of 6, however, implies business conditions are stable. The company also has a one-star business predictability rank, which is on watch.
The fund holds 0.39% of the company’s outstanding shares.
Other trades
The fund also added to many other holdings during the quarter, including Novartis AG (XSWX:NOVN, Financial), Cie Fananciere Richemont SA (XSWX:CFR, Financial), Mediobanca SpA (MIL:MB), Vinci SA (XPAR:DG) and Tupras-Turkiye Petrol Rafineleri AS (IST:TUPRS).
Invesco’s $1.55 billion equity portfolio, which is composed of 62 positions, is largely invested in the industrials and financial services sectors. According to its fact sheet, British companies have the largest representation at 22.29% of the portfolio, followed by German stocks.
Disclosure: No positions.
