Causeway Capital Management leader Sarah Ketterer (Trades, Portfolio) released her fourth-quarter 2018 portfolio on Thursday, listing seven new holdings.
According to its website, the Los Angeles-based firm, which Ketterer founded in 2001 with Harry Hartford, seeks to achieve superior risk-adjusted returns by investing in mispriced equities in both developed and emerging markets.
Based on these criteria, the firm’s top five new buys for the quarter were Alaska Air Group Inc. (ALK, Financial), Marathon Petroleum Corp. (MPC, Financial), Synnex Corp. (SNX, Financial), FedEx Corp. (FDX, Financial) and Takeda Pharmaceutical Co. Ltd. (TAK, Financial).
Alaska Air Group
The guru invested in 3.16 million shares of Alaska Air for an average price of $64.66 per share, dedicating 2.30% of the equity portfolio to the stake.
The Seattle-based airline has an $8.21 billion market cap; its shares were trading around $66.82 on Friday with a price-earnings ratio of 18.86, a price-book ratio of 2.19 and a price-sales ratio of 1.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Alaska Air’s financial strength 6 out of 10. While the company has adequate interest coverage, the Altman Z-Score of 2.18 indicates it is under some fiscal pressure. The company’s profitability and growth scored an 8 out of 10 rating, boosted by operating margin expansion, good returns, a moderate Piotroski F-Score of 5, which suggests conditions are stable, and a business predictability rank of 3.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 9.3% per year. The rank is on watch, however, despite having consistent earnings and revenue growth.
Of the gurus invested in Alaska Air, PRIMECAP Management (Trades, Portfolio) has the largest stake with 4.59% of outstanding shares. Other guru shareholders are the T Rowe Price Equity Income Fund (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), John Buckingham (Trades, Portfolio), Jeff Auxier (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.
Marathon Petroleum
Ketterer picked up 2.27 million shares of Marathon Petroleum for an average price of $67.67 per share, allocating 1.60% of the equity portfolio to the position.
The petroleum refining company, which is based in Ohio, has a market cap of $43.55 billion; its shares were trading around $64.90 on Friday with a price-earnings ratio of 12.04, a price-book ratio of 1.90 and a price-sales ratio of 0.35.
According to the Peter Lynch chart, the stock is undervalued.
Marathon’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Despite issuing $6.9 billion in new long-term debt over the last three years, the company has sufficient interest coverage and a high Altman Z-Score of 3.18, suggesting it is in good financial health. Although the company has recorded a decline in revenue per share growth, its margins and returns still outperform industry peers. In addition, the company has a high Piotroski F-Score of 8, indicating a healthy operating environment.
Andreas Halvorsen (Trades, Portfolio) has the largest position in Marathon with 1.04% of outstanding shares. Other top guru shareholders include Hotchkis & Wiley, Cohen, Pioneer, Ken Heebner (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, First Eagle Investment (Trades, Portfolio), Leon Cooperman (Trades, Portfolio) and Richard Snow (Trades, Portfolio).
Synnex
Having previously divested Synnex from the portfolio in the third quarter of 2016, the investor purchased a new 1.46 million-share stake for an average price of $78.89 per share. The trade had an impact of 1.4% on the equity portfolio.
The California-based business services company, which provides wholesale information technology integration, distribution and outsourcing services, has a $5.19 billion market cap; its shares were trading around $101.26 on Friday with a price-earnings ratio of 14.02, a price-book ratio of 1.48 and a price-sales ratio of 0.20.
Based on the Peter Lynch chart, the stock appears to be slightly undervalued.
GuruFocus rated Synnex’s financial strength 6 out of 10. Although the company has issued approximately $2 billion in new long-term debt over the last three years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 2.78, however, suggests the company is under some financial stress. The company’s profitability and growth scored a 7 out of 10 rating, boosted by an expanding operating margin, good earnings and revenue growth, a moderate Piotroski F-Score of 4 and a 3.5-star business predictability rank.
With her purchase of 2.85% of outstanding shares, Ketterer became Synnex’s largest guru shareholder. Pioneer and Scott Black (Trades, Portfolio) also hold the stock.
FedEx
Ketterer bought 331,444 shares of FedEx for an average price of $210.41 per share, giving it 0.64% space in the equity portfolio.
The courier company, which is headquartered in Memphis, Tennessee, has a market cap of $48.01 billion; its shares were trading around $177.45 on Friday with a price-earnings ratio of 10.02, a price-book ratio of 2.49 and a price-sales ratio of 0.72.
The Peter Lynch chart suggests the stock is undervalued.
FedEx’s financial strength was rated 6 out of 10 by GuruFocus. While the company has issued roughly $8.5 billion in new long-term debt over the last several years, it is still at a manageable level due to sufficient interest coverage. The company also has a high Altman Z-Score of 3.22. The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms 58% of competitors. The courier service is also supported by strong returns, consistent earnings and revenue growth, a moderate Piotroski F-Score of 6 and a three-star business predictability rank. According to GuruFocus, companies with this rank typically see their stocks gain an average of 8.2% per year.
Dodge & Cox is FedEx’s largest guru shareholder with 6.11% of outstanding shares. Other guru investors who own the stock include PRIMECAP, Bill Gates (Trades, Portfolio)’ foundation trust, Mason Hawkins (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Pioneer, Larry Robbins (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and Jerome Dodson (Trades, Portfolio).
Takeda Pharmaceutical
The guru invested in 2.2 million shares of Takeda Pharmaceutical for an average price of $18.87 per share, granting the stake 0.44% space in the equity portfolio.
The Japanese pharmaceutical company has a $62.76 billion market cap; its shares were trading around $20.27 on Friday with a price-earnings ratio of 24.51, a price-book ratio of 1.60 and a price-sales ratio of 1.93.
According to the Peter Lynch chart, the stock is overvalued.
Takeda’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Despite having weak interest coverage, the Altman Z-Score of 3.12 indicates the company is in good financial standing. The company is also supported by margins and returns that outperform industry peers and a moderate Piotroski F-Score of 5. The drugmaker also has a one-star business predictability rank, which is on watch as a result of a slowdown in revenue per share growth over the last 12 months. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
Ketterer is now the company’s largest guru shareholder with 0.07% of outstanding shares. Charles Brandes (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio) also have positions in the stock.
Additional trades
During the quarter, Ketterer also established positions in Mexican telecom company America Movil SAB de CV (AMX, Financial) and Canadian oil and gas company Crescent Point Energy Corp. (CPG, Financial).
The guru’s $8.39 billion portfolio, which is composed of 90 holdings, is largely invested in the technology and financial services sectors.
Disclosure: No positions.
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