The Oakmark Intl Small Cap (Trades, Portfolio) Fund, which is part of Chicago-based investment firm Harris Associates, released its first-quarter portfolio earlier this week, listing five new holdings.
Managed by David Herro (Trades, Portfolio), Michael Manelli and Justin Hance, the fund seeks to achieve long-term capital appreciation by investing in foreign, small-cap companies that are trading at a discount to their estimate of intrinsic value.
Based on these criteria, the fund established positions in Autoliv Inc. (OSTO:ALIVSDB, Financial), Dometic Group AB (OSTO:DOM, Financial), DS Smith PLC (LSE:SMDS, Financial), Bharti Infratel Ltd. (BOM:534816, Financial) and Autogrill SpA (MIL:AGL, Financial) during the quartert.
Autoliv
The fund invested in 216,000 shares of Autoliv, dedicating 1.16% of the equity portfolio to the holding. The stock traded for an average price of 709.33 Swedish krona ($75.04) per share during the quarter.
The Swedish automotive safety supplier has a market cap of 54.82 billion krona; its shares closed at 631.2 krona on Wednesday with a price-earnings ratio of 32.96, a price-book ratio of 2.93 and a price-sales ratio of 0.66.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Autoliv’s financial strength 6 out of 10. Although the company has issued approximately $567.8 million in new long-term debt over the last three years, it is at a manageable level as a result of adequate interest coverage. The Altman Z-Score of 2.74, however, indicates it is under some fiscal pressure.
The company’s profitability and growth scored a 5 out of 10 rating. While the operating margin is expanding, Autoliv is weighed down by returns that underperform competitors and a low Piotroski F-Score of 3, which implies business conditions are poor. The business predictability rank of one out of five stars is also on watch as a result of a decline in revenue per share over the last three years. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per year.
The fund holds 0.25% of Autoliv’s outstanding shares.
Dometic Group
Oakmark picked up 1.9 million shares of Dometic Group, allocating 1.12% of the equity portfolio to the stake. Shares traded for an average price of 68.72 krona during the quarter.
The Swedish manufacturer of climate, hygiene, sanitation, food and beverage applications within the RV, marine and automotive industries, has a market cap of 27.60 billion krona; its shares closed at 93.3 krona on Wednesday with a price-earnings ratio of 17.88, a price-book ratio of 1.62 and a price-sales ratio of 1.49.
According to the Peter Lynch chart, the stock is overvalued.
Dometic’s financial strength was rated 5 out of 10 by GuruFocus. Despite issuing approximately 7.7 billion krona in new long-term debt over the last three years, it is at a manageable level since the company has sufficient interest coverage. The Altman Z-Score of 1.72, however, warns it is at risk of going bankrupt.
The company’s profitability and growth fared much better, scoring an 8 out of 10 rating on operating margin expansion, strong returns that outperform at least 60% of industry peers and a high Piotroski F-Score of 7, which suggests business conditions are healthy.
The International Small Cap Fund holds 0.66% of Dometic’s outstanding shares.
DS Smith
The portfolio managers purchased 3.14 million shares of DS Smith, expanding the equity portfolio 1%. During the quarter, the stock traded for an average price of 3.36 pounds ($4.26) per share.
The London-based company, which manufactures and sells packaging and related products, has a market cap of 4.71 billion pounds; its shares closed at 3.43 pounds on Wednesday with a price-earnings ratio of 14.95, a price-book ratio of 1.46 and a price-sales ratio of 0.67.
Based on the Peter Lynch chart, the stock appears to be trading close to its fair value.
GuruFocus rated DS Smith’s financial strength 6 out of 10. Although the company has issued approximately 647 million pounds 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 1.67, though, warns the company is in danger of bankruptcy.
The company’s profitability and growth scored a 7 out of 10 rating, driven by operating margin expansion, steady returns and a moderate Piotroski F-Score of 6, which suggests business conditions are stable. DS Smith also has a one-star business predictability rank.
The fund holds 0.23% of the company’s outstanding shares.
Bharti Infratel
Oakmark bought 2.3 million shares of Bharti Infratel, giving the stake 0.77% space in the equity portfolio. Shares traded for an average price of 299.03 rupees ($4.30) during the quarter.
The Indian company, which provides telecommunications tower infrastructure services, has a market cap of 542.73 billion rupees; its shares closed at 273.95 rupees on Wednesday with a price-earnings ratio of 20.05, a price-book ratio of 3.44 and a price-sales ratio of 7.34.
The Peter Lynch chart suggests the stock is overvalued.
Bharti Infratel’s financial strength was rated 9 out of 10 by GuruFocus, boosted by comfortable interest coverage and a robust Altman Z-Score of 13.05, which indicates it is in good fiscal health.
The company’s profitability and growth did not fare as well, scoring a 5 out of 10 rating despite having strong returns that outperform over half of its competitors, an expanding operating margin and a moderate Piotroski F-Score of 6. GuruFocus noted Bharti’s revenue per share has been in decline over the last five years.
The International Small Cap Fund holds 0.13% of the company’s outstanding shares.
Autogrill
The fund established a 680,000-share position in Autogrill, impacting the equity portfolio by 0.48%. The stock traded for an average per-share price of 7.78 euros ($8.77) during the quarter.
The catering company, which is headquartered in Rozzano, Italy, has a market cap of 2.42 billion euros; its shares closed at 9.5 euros on Wednesday with a price-earnings ratio of 35.19, a price-book ratio of 3.54 and a price-sales ratio of 0.49.
According to the Peter Lynch chart, the stock is overvalued.
Autogrill’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Although the company has issued approximately 116.96 million euros in new long-term debt over the last three years, it is at manageable level as a result of sufficient interest coverage. The Altman Z-Score of 2.77, however, suggests it is under some fiscal stress.
Even though the operating margin is expanding, it still underperforms 68% of industry peers. Autogrill is also weighed down by poor returns, but the Piotroski F-Score of 5 indicates its operations are stable. It also has a one-star business predictability rank, which is on watch.
The fund holds 0.27% of Autogrill’s outstanding shares.
Additional trades
The portfolio managers also added to several other positions during the quarter, including Pirelli & Co. SpA (MIL:PIRC), PageGroup PLC (LSE:PAGE), Incitec Pivot Ltd. (ASX:IPL), ConvaTec Group PLC (LSE:CTEC) and Morgan Advanced Materials PLC (LSE:MGAM).
Oakmark’s $1.37 billion equity portfolio, which is composed of 61 stocks, is heavily invested in the industrials sector with a weight of 37.47%. According to its fact sheet, the International Small Cap Fund posted a -23.73% return for 2018, underperforming the MSCI World ex. U.S. Small Cap Index’s return of -18.07%.
Disclosure: No positions.
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