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Causeway International Value Fund Adds 2 Stocks to Portfolio in 4th Quarter

The Causeway International Value (Trades, Portfolio) Fund released its fourth-quarter 2019 portfolio earlier this week, listing two new holdings.


The fund, which is part of Sarah Ketterer (Trades, Portfolio)'s Los Angeles-based Causeway Capital Management, was founded in 2001. Executing a bottom-up investment strategy based on fundamental research, the portfolio managers look for value opportunities among mid- to large-cap companies in developed international markets to achieve long-term capital growth.

Keeping these criteria in mind, the fund established positions in Murata Manufacturing Co. Ltd. (TSE:6981) and Cie Financiere Richemont SA (XSWX:CFR) during the quarter.

Murata Manufacturing

The fund invested in 647,200 shares of Murata Manufacturing, allocating 0.58% of the equity portfolio to the holding. The stock traded for an average price of 6,185.23 yen ($57.88) per share during the quarter.

The Japanese company, which manufactures electronic components, has a market cap of 3.71 trillion yen; its shares closed at 5,805 yen on Wednesday with a price-earnings ratio of 20.47, a price-book ratio of 2.26 and a price-sales ratio of 2.47.

The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced. The GuruFocus valuation rank of 4 out of 10 also supports this assessment.

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GuruFocus rated Murata's financial strength 8 out of 10. Although the company has issued approximately 170.4 billion yen in new long-term debt over the past three years, it is at a manageable level due to comfortable interest coverage. The robust Altman Z-Score of 6.32 also indicates the company is in good standing financially.

The company's profitability scored a 7 out of 10 rating. While the operating margin is in decline, it still outperforms a majority of competitors. Murata is also supported by strong returns and a moderate Piotroski F-Score of 5, which implies operations are stable. Although the manufacturer's revenue per share has declined over the last five years, it still 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.

Of the gurus invested in Murata, the Matthews Japan Fund (Trades, Portfolio) has the largest position with 0.13% of outstanding shares. The T. Rowe Price Japan Fund (Trades, Portfolio) is also a shareholder.

Cie Financiere Richemont

Having divested of a position in Cie Financiere Richemont in the third quarter of 2019, Causeway picked up a new holding of 388,267 shares, dedicating 0.44% of the equity portfolio to it. Shares traded for an average price of 74.71 Swiss francs ($78.58) each during the quarter.

The Swiss luxury goods manufacturer, which produces everything from jewelry and watches to leather goods, clothing and accessories, has a market cap of 37.21 billion francs; its shares closed at 65.88 francs on Wednesday with a price-earnings ratio of 24.13, a price-book ratio of 2 and a price-sales ratio of 2.36.

According to the Peter Lynch chart, the stock is overvalued. The GuruFocus valuation rank of 6 out of 10, however, leans more toward undervaluation as the price-book and price-sales ratios are near 10-year lows.

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Richemont's financial strength was rated 6 out of 10 by GuruFocus. Although the company has issued approximately 4.2 billion euros in new long-term debt over the past three years, it is at a manageable level due to adequate interest coverage. The high Altman Z-Score also suggests good financial health.

The company's profitability scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of industry peers. Richemont is also supported by strong returns and a moderate Piotroski F-Score of 5. Despite having consistent earnings and revenue growth, the company's 2.5-star business predictability rank is on watch. GuruFocus says companies with this rank typically see their stocks gain an average of 7.3% per year.

With 0.96% of outstanding shares, David Herro (Trades, Portfolio) is the company's largest guru shareholder. Other top guru investors include Charles de Vaulx (Trades, Portfolio), the IVA International Fund (Trades, Portfolio) and the Invesco European Growth Fund (Trades, Portfolio).

Addition trades and portfolio performance

During the quarter, the International Value Fund also added to several other positions, including Siemens AG (XTER:SIE), Danone SA (XPAR:BN), Fanuc Corp. (TSE:6954), Bayer AG (XTER:BAYN), RELX PLC (LES:REL), Novartis AG (XSXW:NOVN), Infineion Technologies AG (XTER:IFX) and Carrefour (XPAR:CA).

Nearly 40% of the fund's $6.85 billion equity portfolio, which is composed of 59 stocks, is invested in the financial services and industrials sectors.

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According to Causeway Capital's website, the fund returned 20.1% in 2019, slightly underperforming the MSCI EAFE Index's 22.7% return.

Disclosure: No positions.

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This article first appeared on GuruFocus.