The Oakmark Intl Small Cap (Trades, Portfolio) Fund, part of Chicago-based Harris Associates, revealed four new positions in its second-quarter portfolio, which was released last week.
The fund, which is managed by David Herro (Trades, Portfolio), Michael Manelli and Justin Hance, seeks long-term capital appreciation by investing in foreign, small-cap companies that are trading at a discount to its estimate of intrinsic value.
Based on these criteria, the fund established positions in Loomis AB (OSTO:LOOMB, Financial), BBA Aviation PLC (LSE:BBA, Financial), Fluidra SA (XMAD:FDR, Financial) and HKBN Ltd. (HKSE:01310, Financial) during the quarter.
Loomis
The fund invested in 459,000 shares of Loomis, allocating 1.10% of the equity portfolio to the holding. The stock traded for an average price of 328.69 krona ($34.18) per share during the quarter.
The Swedish business services company, which provides cash handling services, has a market cap of 24.22 billion krona; its shares closed at 322 krona on Friday with a price-earnings ratio of 15.56, a price-book ratio of 2.82 and a price-sales ratio of 1.21.
The Peter Lynch chart shows the stock is trading slightly above its fair value.
GuruFocus rated Loomis’ financial strength 4.8 out of 10. Although the company has adequate interest coverage, the Altman Z-Score of 2.35 suggests it is under some financial pressure.
The company’s profitability and growth scored a 5 out of 10 rating, driven by operating margin expansion, strong returns that outperform over half of competitors and a moderate Piotroski F-Score of 5, which indicates business conditions are stable. Loomis also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
With its purchase of 0.61% of Loomis’ outstanding shares, Oakmark is now the largest guru shareholder. David Nadel (Trades, Portfolio) and Bernard Horn (Trades, Portfolio) also own the stock.
BBA Aviation
After closing a position in BBA Aviation in fourth-quarter 2017, the fund opened a new 2.19 million-share stake. The trade had an impact of 0.55% on the equity portfolio. Shares traded for an average price of 2.65 pounds ($3.25) during the quarter.
The British aviation services company has a market cap of 3.16 billion pounds; its shares closed at 3.06 pounds on Friday with a price-earnings ratio of 38.25, a price-book ratio of 2.16 and a price-sales ratio of 1.71.
According to the Peter Lynch chart, the stock is overvalued.
BBA’s financial strength was rated 4.5 out of 10 by GuruFocus. As a result of issuing approximately $747.3 million in new long-term debt over the last three years, the company has poor interest coverage. In addition, the Altman Z-Score of 1.82 warns the company could be in danger of going bankrupt as its revenue per share has declined over the last five years.
The company’s profitability and growth scored a 4 out of 10 rating, driven by operating margin expansion and a moderate Piotroski F-Score of 6. BBA also has a one-star business predictability rank.
The fund holds 0.21% of BBA’s outstanding shares. Horn is also a shareholder.
Fluidra
Oakmark picked up 345,000 shares of Fluidra, dedicating 0.32% of the equity portfolio to the position. The stock traded for an average per-share price of 10.67 euros ($11.99) during the quarter.
The Spanish company, which manufactures products for swimming pools as well as irrigation, water treatment and purification systems, has a market cap of 2.08 billion euros; its shares closed at 10.82 euros on Friday with a forward price-earnings ratio of 20.24, a price-book ratio of 1.45 and a price-sales ratio of 1.58.
Based on the Peter Lynch chart, the stock appears to be overvalued, but the median price-sales lines suggests it is undervalued.
Weighed down by poor interest coverage, GuruFocus rated Fluidra’s financial strength 5 out of 10. The Altman Z-Score of 1.94 also suggests the company is under some financial pressure.
The company’s profitability and growth scored a 6 out of 10 rating, driven by solid margins and returns that outperform over half of its industry peers. Fluidra also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
The fund holds 0.18% of Fluidra’s outstanding shares.
HKBN
The fund entered a 1.9 million-share stake in HKBN, expanding the equity portfolio by 0.25%. During the quarter, the stock traded for an average price of 13.07 Hong Kong dollars ($1.67) per share.
The Hong Kong-based telecom company has an HK$18.44 billion market cap; its shares closed at HK$14.06 on Friday with a price-earnings ratio of 40.17, a price-book ratio of 10.80 and a price-sales ratio of 3.57.
The Peter Lynch chart suggests the stock is overvalued.
HKBN’s financial strength was rated 4.4 out of 10 by GuruFocus. Although the company has issued approximately HK$701.96 million in new long-term debt over the past three years, it is at a manageable level due to sufficient interest coverage. The Altman Z-Score of 3, however, indicates the company is under some financial stress.
The company’s profitability and growth scored a 4 out of 10 rating. HKBN is supported by strong margins and returns that outperform at least half of its competitors as well as a moderate Piotroski F-Score of 5.
Oakmark holds 0.15% of the company’s outstanding shares.
Additional trades
During the quarter, the portfolio managers also boosted a number of holdings, including Duerr AG (XTER:DUE, Financial), Autoliv Inc. (OSTO:ALIV SDB), Autogrill SpA (MIL:AGL), Atea ASA (OSL:ATEA) and Smith (DS) PLC (LSE:SMDS), among others.
The fund’s $1.43 billion equity portfolio, which is composed of 63 stocks, is largely invested in the industrials sector.
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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