The Causeway International Value (Trades, Portfolio) Fund recently disclosed its portfolio updates for the second quarter of 2020, which ended on June 30.
Founded in 2001, the fund is part of Sarah Ketterer (Trades, Portfolio)'s Causeway Capital Management. The portfolio managers of the Los Angeles-based fund utilize a bottom-up, research-based investing strategy to identify value opportunities from among mid-cap and large-cap companies mainly in developed international markets, though it may invest up to 15% of total assets in emerging markets. The fund's strategy also prefers companies that return cash to shareholders through dividends or repurchases.
Based on its investing criteria, the fund's top new buys for the second quarter were Amadeus IT Group SA (XMAD:AMS, Financial), Airbus SE (XMAD:AMS, Financial) and Sanofi SA (XPAR:SAN, Financial). However, in terms of portfolio impact, its most significant trade was the sale of its entire stake in China Mobile Ltd. (HKSE:00941, Financial).
Amadeus IT Group
The fund established a new stake of 1,058,988 shares in Amadeus IT Group, impacting the equity portfolio by 1.17%. During the quarter, shares traded for an average price of 45.69 euros ($54.43).
Amadeus is a Spanish provider of IT services for the global travel and tourism industries. One of the top 10 travel technology companies in the world, Amadeus builds technology solutions for airlines, airports, travel agencies, hotels and tour services.
On Sept. 1, shares of Amadeus traded around 46.91 euros for a market cap of 21.10 billion euros and a price-earnings ratio of 56.52. According to the Peter Lynch chart, the stock is trading above its fair value based on recent earnings, but near its fair value based on 2019 earnings.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 10.82 shows the company can continue making interest payments on its debt, while the Altman Z-Score of 2.69 indicates it is not likely to go bankrupt within the next two years. The net margin and operating margin have both plunged to below -100% in the most recent quarter.
Airbus
The fund also made a new investment of 764,878 shares in Airbus SE, which had a 1.15% impact on the equity portfolio. Shares traded for an average price of 59.76 euros during the quarter.
Airbus is an international aerospace company that primarily designs and manufactures commercial and military aircraft as well as satellites, launch vehicles, missiles, telecommunications and defense systems. It is headquartered in the Netherlands.
On Sept. 1, shares of Airbus traded around 68.84 euros for a market cap of 53.95 billion euros. This makes the stock undervalued based on 2019 earnings according to the Peter Lynch chart, though 2020 earnings results have been in the negatives so far.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. The Altman Z-Score of 0.76 indicates the company may face bankruptcy if it cannot raise additional liquidity, though its cash-debt ratio of 0.68 is higher than the industry median of 0.56. The return on invested capital is lower than the weighted average cost of capital, indicating that the company is not profitable.
Sanofi
The fund took a new position worth 517,472 shares in Sanofi after selling out of its previous holding in the company in the third quarter of 2017. The trade impacted the equity portfolio by 1.11%. During the quarter, shares traded for an average price of 88.34 euros.
Sanofi is a French multinational pharmaceutical company headquartered in Paris. It focuses primarily on seven major therapeutic areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis and vaccines. It is one of the world's largest producers of vaccines.
On Sept. 1, shares of Sanofi traded around 84.87 euros for a market cap of 106.63 billion euros and a price-earnings ratio of 9.68. According to the Peter Lynch chart, the stock is trading below its intrinsic value.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The Altman Z-Score of 1.71 shows the company may have liquidity issues, but the interest coverage ratio of 19.22 means it can continue to meet interest payments. The company has a three-year revenue growth rate of 3.8% and a three-year Ebitda growth rate of 3.7%.
China Mobile
The fund sold out of its 16,911,647-share stake in China Mobile, impacting the equity portfolio by -2.88%. Shares traded for an average price of 57.64 Hong Kong dollars ($7.44) during the quarter.
China Mobile is one of the three state-run telecommunications companies that dominate the Chinese market. Founded in 1997, it is China's leading telecommunication services provider, with over 950 million customers and operations in all 31 provinces.
On Sept. 1, shares of China Mobile traded around HK$54.10 for a market cap of HK$1.11 trillion and a price-earnings ratio of 9.5. The stock is undervalued according to the Peter Lynch chart.
GuruFocus gives the company a financial strength rating of 8 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 6.77 and interest coverage ratio of 39.58 are higher than 85.06% of industry peers. The ROIC is still higher than the WACC, indicating profitability, though the gap between the two is shortening.
Portfolio overview
The Causeway International Value (Trades, Portfolio) Fund established nine new positions during the quarter, sold out of 12 positions and added to or reduced several other holdings for a turnover rate of 12%, ending the quarter with an equity portfolio of 64 stocks valued at $4.75 billion.
As of the quarter's end, the top holdings were Volkswagen AG (XTER:VOW3) with a 4.61% portfolio weight, UniCredit SpA (MIL:UCG) with 3.86% and ABB Ltd. (XSWX:ABBN) with 3.36%. In terms of sector weighting, the fund was most invested in industrials and financial services, followed by health care and technology.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
Read more here:
- Oakmark International Small Cap Fund Buys 4 Stocks in 2nd Quarter
- The SPAC Bubble: Buy Signal or Warning Sign?
- Top 2nd-Quarter Trades of Lee Ainslie's Maverick Capital
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
