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James Li
James Li
Articles (587)  | Author's Website |

Tweedy Browne Global Value Buys 4 Companies in 3rd Quarter

New buys include Weibo parent Sina and British farm and construction company

The Tweedy Browne (Trades, Portfolio) Global Value Fund disclosed on Wednesday four new positions for the third quarter: Sina Corp. (NASDAQ:SINA), CNH Industrial NV (NYSE:CNHI), Chokwang Paint Ltd. (XKRX:004910) and Kangnam Jevisco Co. Ltd. (XKRX:000860).

Managing directors William Browne, Thomas Shrager, John Spears and Robert Wyckoff Jr. invest primarily in undervalued equity securities from developed markets with some exposure to emerging markets. The fund seeks long-term capital appreciation using a Benjamin Graham-style investing approach.

Sina

The fund invested in 1,172,400 shares of Sina for an average price of $74.91, dedicating 0.96% of its equity portfolio to the position. Based on its Peter Lynch chart, the China-based media company trades close to its median price-earnings valuation.

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Sina launched Weibo, a social media platform closely resembling Twitter Inc. (TWTR), in 2009. The company’s digital media network enables internet users to access professional media and user-generated content in multimedia formats and share interests with family and friends.

GuruFocus ranks Sina’s financial strength 6 out of 10: even though the company’s debt-to-EBITDA ratio of 2.45 underperforms 69% of global competitors, Sina’s debt-to-equity ratio of 0.41 ranks higher than 84% of global online media companies.

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CEO Charles Chao said on Aug. 8 that second-quarter revenues increased 50% year over year to $537.4 million, driven on continued growth in Weibo’s user base and monetization despite more intensified competition. Advertising revenues of $454.1 million increased 54% year over year, primarily driven by a $151.6 million, or 69% growth in Weibo advertising and marketing revenues. The strong revenue growth and operating margins that outperform 87% of global competitors contribute to a profitability rank of 7.

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The Global Value Fund’s 1,172,400 shares represent the largest holding in Sina as of the latest portfolio date. Other gurus with holdings include Pioneer Investments (Trades, Portfolio) and Louis Moore Bacon (Trades, Portfolio).

CNH Industrial

The fund invested in 4,297,248 shares of CNH Industrial, a U.K.-based farm and construction equipment company. Shares averaged $11.44 during the quarter.

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Oakmark Global Select Fund managers Bill Nygren (Trades, Portfolio) and David Herro (Trades, Portfolio) said in their third-quarter shareholder letter that CNH Industrial was the largest contributor for the quarter, led by the company’s strong demand across all regions and double-digit earnings growth across all business segments. CNH Industrial said in its semiannual report that net revenues for the three months ending June 30 increased 15% year over year to $8,031 million, which include $7,580 million in Industrial Activities revenues and $498 million in Financial Services revenues. Strong improvements in the company’s Agricultural and Construction Equipment segments contributed to increasing Industrial Activities revenues.

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Chokwang

The fund invested in 248,749 shares of Chokwang, a South Korean painting company. Shares averaged 7,969.38 won ($6.99) per share during the quarter.

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Chokwang primarily manufactures and markets paints for construction and industrial applications. Although the company’s financial strength ranks 6 out of 10, Chokwang’s interest coverage of 1.15 is below Ben Graham’s safe threshold of 5 and underperforms 85% of global competitors. Other red flags include a weak Piotroski F-score of 2 and increasing long-term debt over the past three years.

Kangnam Jevisco

The Global Value Fund invested in 131,339 shares of Kangnam Jevisco for 26,793.10 won ($23.51) per share.

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Like Chokwang, Kangnam Jevisco manufactures and markets paints for construction purposes. Even though Kangnam Jevisco’s Piotroski F-score ranks a low 3 out of 10, the company’s financial strength ranks a strong 7 out of 10 primarily due to good leverage ratios: Kangnam Jevisco’s debt-to-equity ratio of 0.01 and debt-to-EBITDA ratio of 0.18 both rank higher than at least 93% of global competitors.

See also

The fund also increased its holding in two companies: Tarkett SA (XPAR:TKTT) and Inchcape PLC (LSE:INCH). Browne added 2,017,943 shares of the French flooring and sports surface company for an average price of 23.54 euros ($27.11) and 3,692,396 shares of the U.K.-based auto dealer for an average price of 7.20 pounds ($9.50) per share.

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Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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