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David Herro Buys 5 Companies in 3rd Quarter

- By James Li

David Herro (Trades, Portfolio), portfolio manager of the Oakmark International Fund, disclosed this week he established five new positions in the third quarter: Accor SA (AC.PA), Komatsu Ltd. (TSE:6301), ThyssenKrupp AG (XTER:TKA), Brambles Ltd. (BXB.AX) and OMRON Corp. (TSE:6645).


Managing a portfolio of 60 stocks, Herro seeks international businesses with good quality, positive free cash flow and intelligent investment of cash. Herro said in his shareholder letter that despite underperforming the MSCI World ex U.S. Index during the quarter, the fund still averaged a 9.7% return per year since its September 1992 inception, outperforming the benchmark by approximately 3.1% per year over the same period. The fund's top three sectors in terms of portfolio weight are financial services, consumer cyclical and industrials.

Accor

Herro invested in 9.314 million shares of Accor, a French travel and leisure company. Shares averaged 43.41 euros ($49.44) during the quarter.

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Accor operates hotels under brands like Sofitel, Pullman and Novotel. GuruFocus ranks the company's financial strength 6 out of 10: while its debt-to-EBITDA ratio of 8.04 exceeds Joel Tillinghast's safe threshold of 4, Accor has good interest coverage of 6.03 and $1.33 in cash for every $1 in debt.

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Komatsu

Herro invested in 15.259 million shares of Komatsu, a Japanese farm and construction equipment company. Shares averaged 3,185.88 yen ($28.09) during the quarter.

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Komatsu manufactures and markets equipment, utilities and industrial machinery for construction and mining purposes. GuruFocus ranks the company's profitability 6 out of 10: while its revenue growth rate underperforms 55% of global competitors, operating margins are near a 10-year high of 14.26% and outperform 81% of global farm and construction equipment companies.

Other gurus with holdings in Komatsu include the T Rowe Price Japan Fund and the Signature Select Canadian Fund (Trades, Portfolio).

ThyssenKrupp

Herro invested in 9.523 million shares of ThyssenKrupp, a German metal fabrication company. Shares averaged 20.8 euros ($23.69) during the quarter.

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ThyssenKrupp engages in steel operations for the manufacturing of automotive components, elevators and carbon steels. GuruFocus ranks the company's profitability 5 out of 10: ThyssenKrupp's profit margins are above their historical 10-year median albeit underperforming over 70% of global competitors. Despite this, returns on equity of 11.13% are outperforming 91% of global competitors.

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Brambles

Herro invested in 9.611 million shares of Brambles, an Australian supply-chain logistics company. Shares averaged 10.15 Australian dollars ($7.15) during the quarter.

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The company engages in the pooling of unit-load equipment and the outsourced management of returnable pallets, crates and containers. GuruFocus ranks Brambles' profitability 7 out of 10 on several good signs, which include expanding operating margins and a solid Piotroski F-score of 6.

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OMRON

Herro invested in 248,000 shares of OMRON, a Japanese electronic components manufacturer. Shares averaged 4,943.69 yen ($43.58) during the quarter.

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GuruFocus ranks OMRON's financial strength 9 out of 10 on several positive indicators, which include no long-term debt, a high Piotroski F-score of 7 and a robust Altman Z-score of 4.64. The company also has expanding profit margins and a return on assets that outperforms 81% of global competitors.

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Disclosure: No positions.

Read more here:

  • David Herro: European Financials Are the Most Attractive Sector in the World
  • David Herro's Top 6 Position Boosts in 2nd Quarter
  • David Herro: Trade War Tension and European Politics Open Up Opportunities


This article first appeared on GuruFocus.