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Bernard Horn's Top 5 Buys of the 2nd Quarter

Bernard Horn (Trades, Portfolio), manager of the Polaris Global Value Fund, disclosed this week his fund's top five buys included one new position in Asahi Group Holdings Ltd. (TSE:2502) and position boosts in four existing holdings: Methanex Corp. (TSX:MX), Marathon Petroleum Corp. (NYSE:MPC), Basf SE (XTER:BAS) and Lanxess AG (XTER:LXS).

Managing a portfolio of 81 stocks, Horn applies two beliefs into his investing approach: First, country and industry factors are important determinants of security prices, and second, global market fluctuations produce mispriced stocks.


Horn said in his quarterly letter that the Polaris Global Equity Composite returned 3.21% during the three months ended June 30, underperforming the MSCI World Index's return of 4.20%. According to the letter, the financial services sector, the largest sector represented in the $458 million equity portfolio with 29.07% weight, contributed to nearly half of the portfolio gain on the heels of strong performance from two German reinsurers and JPMorgan Chase & Co. (NYSE:JPM), a major bank holding of Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B). Additionally, the basic materials sector, the third-largest sector represented with 11.57% equity portfolio weight, produced the second-highest sector gain.


New buy: Asahi Group

The fund purchased 139,100 shares of Asahi Group, giving the position 1.36% equity portfolio weight. Shares averaged 4,842.46 yen ($45.52) during the quarter.


The Tokyo-based company sells various food and beverages through four business segments: alcohol beverages, soft drinks, food and international. GuruFocus ranks Asahi's profitability 7 out of 10 on several positive indicators, which include expanding profit margins and a three-star business predictability rank. Operating margins have increased approximately 8.40% per year over the past five years despite underperforming 60.63% of global competitors.



The fund purchased 41,400 shares of Methanex, increasing the holding 41.34% and the equity portfolio 0.41%. Shares averaged 67.05 Canadian dollars ($50.69) during the quarter.


Horn said in his letter that although the materials sector produced strong results, Methanex detracted from the portfolio return primarily due to weak methanol prices. Despite this, GuruFocus data suggests Methanex has strong profitability potential on several positive investing signs, which include a return on equity that outperforms 85.94% and a three-year revenue growth rate that outperforms 85.73% of global competitors. Additionally, Methanex's business predictability ranks 2.5 stars out of five on consistent revenue growth.


Marathon Petroleum

The fund purchased 24,900 shares of Marathon Petroleum, increasing the position 26.72% and the equity portfolio 0.30%. Shares averaged $54.73 during the quarter.


The Findlay, Ohio-based company operates several refineries in the midcontinent and Gulf Coast of the U.S. GuruFocus ranks Marathon Petroleum's financial strength 4.8 out of 10 on several moderately weak signs, which include an Altman Z-score of 2.05 and debt ratios that underperform over 55% of global competitors.


Other gurus with holdings in Marathon Petroleum include Daniel Loeb (Trades, Portfolio) and Paul Singer (Trades, Portfolio)'s Elliott Management.

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The fund purchased 18,500 shares of Basf, increasing the position 27.65% and the equity portfolio 0.29%. Shares averaged 65.93 euros ($72.74) during the quarter.


The German chemical company produces products ranging from commodities to specialty chemicals. GuruFocus ranks Basf's profitability 6 out of 10: Although the company has strong net margins and returns, its operating margin of 6.49% underperforms 66.90% of global competitors despite expanding over the past five years.



The fund purchased 11,700 shares of Lanxess, increasing the holding 12.18% and the equity portfolio 0.15%. Shares averaged 49.5 euros during the quarter.


A Bayer AG (XTER:BAYN) spinoff, Lanxess operates chemical businesses, including intermediaries, additives and engineering plastics. GuruFocus ranks Lanxess' financial strength 6 out of 10 and profitability 7 out of 10 on several positive indicators, which include a strong Piotroski F-score of 8, expanding profit margins and a return on equity that outperforms 69.17% of global competitors. Despite this, Lanxess has a poor Altman Z-score of 1.85 and interest coverage just slightly above Benjamin Graham's safe threshold of 5.


Disclosure: No positions.

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This article first appeared on GuruFocus.