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Invesco European Growth Fund's Top 3rd-Quarter Trades

GuruFocus.com
·6 mins read

- By Margaret Moran

Earlier this week, the Invesco European Growth Fund (Trades, Portfolio) disclosed its portfolio updates for its third quarter of fiscal 2020, which ended on July 31.


Invesco is a global financial services company with headquarters in Atlanta and offices in 25 countries around the world. The European Growth Fund seeks long-term exposure to high-quality growth opportunities in both developed and emerging European markets.

Based on its investing criteria, the Invesco European Growth Fund (Trades, Portfolio)'s biggest buys for the quarter were Sandvik AB (OSTO:SAND) and Roche Holding AG (XSWX:ROG), while its biggest sells were RELX PLC (LSE:REL) and Bureau Veritas SA (XPAR:BVI).

Sandvik

The Invesco European Growth Fund invested in 694,280 new shares of Sandvik after selling out of its previous holding in the stock in the first quarter of 2017. The trade had a 1.33% impact on the equity portfolio. During the quarter, shares traded for an average price of 162.94 Swedish krona ($18.18).

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Sandvik is a Swedish multinational engineering company that designs and produces tools and tooling systems for metal cutting. It also provides tools, services and technical solutions for companies in the mining, metal-cutting, excavation and materials technology industries.

On Sept. 30, shares of Sandvik traded around 174.75 krona for a market cap of 219.20 billion krona and a price-earnings ratio of 45.4. The GuruFocus value chart indicates that the stock is now modestly overvalued, though it was undervalued during most of the quarter in question.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.42 is near the bottom of the industry and its own 10-year low of 0.25, but the Altman Z-Score of 5.81 indicates the company is financially stable. With an operating margin of 10.4% that beats 71.80% of peers, Sandvik has grown its top and bottom lines in recent years with a three-year revenue growth rate of 8% and a three-year Ebitda growth rate of 14.4%.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Roche Holding

The fund increased its stake in Roche Holding by 27,245 shares, or 82.48%, for a total holding of 60,277 shares. The trade had a 0.97% impact on the equity portfolio. Shares traded for an average price of 336.31 Swiss francs ($364.71) during the quarter.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Roche is a pharmaceutical company based in Switzerland. Founded in 1896, the company develops and manufactures pharmaceutical and diagnostic products mainly in the following fields: cardiovascular, autoimmune, infectious diseases, respiratory diseases, oncology, dermatology, metabolic disorders and transplantation.

On Sept. 30, shares of Roche traded around 320.20 Swiss francs for a market cap of 273.94 billion francs and a price-earnings ratio of 21.45. The Peter Lynch chart indicates that the stock trades above its intrinsic value, but very close to its historical median valuation.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

GuruFocus gives the company a financial strength rating of 7 out of 10 and a profitability rating of 8 out of 10. Roche's interest coverage ratio of 26.16 and Altman Z-Score of 5.81 are higher than 64.32% of competitors. The operating margin of 28.78% is beating 93.50% of competitors, and the company has managed to achieve a three-year revenue growth rate of 6.6% and a three-year Ebitda growth rate of 6.4%.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

RELX

The fund reduced its investment in RELX PLC by 503,681 shares, or 48.98%, for a remaining holding of 524,556 shares. The trade impacted the equity portfolio by -1.30%. During the quarter, shares traded for an average price of 18.38 British pounds ($23.72).

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

London-based RELX is a British multinational corporation made up of a group of publishing and related companies. The companies publish scientific, technical and medical material. Some also create decision-making tools and organize exhibitions.

On Sept. 30, shares of RELX traded around 17.24 pounds for a market cap of 33.30 billion pounds and a price-earnings ratio of 26.28. The Peter Lynch chart indicates that the stock trades above its intrinsic value, but in line with its historical median valuation.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.03 is lower than 95.63% of competitors, while the current ratio of 0.47 also indicates potential liquidity problems. The return on invested capital is higher than the weighted average cost of capital, indicating overall profitability.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Bureau Veritas

The fund exited its holding in Bureau Veritas, selling all 302,601 shares during the quarter and impacting the equity portfolio by -0.72%. Shares traded for an average price of 19.19 euros ($22.48) during the quarter.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Bureau Veritas is a certifications company based in Paris. Founded in 1828, the company specializes in testing, inspection and certification in a variety of sectors, including building, infrastructure, agriculture, commodities, marine and offshore, industrials and consumer products.

On Sept. 30, shares of Bureau Veritas traded around 19.44 euros for a market cap of 8.73 billion euros and a price-earnings ratio of 54. The Peter Lynch chart labels the company as overvalued.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. At 3.68, the debt-to-equity ratio is higher than 93.74% of competitors, but the Piotroski F-Score of 5 out of 9 indicates financial stability. The ROIC is higher than the WACC, indicating overall profitability, though both metrics have fallen over time.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

Portfolio overview

As of the quarter's end, the equity portfolio consisted of positions in 54 stocks valued at $976 million. In total, it established one new position during the quarter, sold out of six stocks and added to or reduced several other holdings for a turnover rate of 4%.

The fund's top equity positions were London-based marketing group DCC PLC (LSE:DCC) with 5.93% of the equity portfolio, Sberbank of Russia PJSC (MIC:SBERP) with 5.40% and Ultra Electronics Holdings PLC (LSE:ULE) with 3.75%. In terms of sector weighting, the fund was most heavily invested in financial services and industrials, followed by health care and consumer defensive.

Invesco European Growth Fund's Top 3rd-Quarter Trades
Invesco European Growth Fund's Top 3rd-Quarter Trades

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.

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This article first appeared on GuruFocus.