The guru's Los Angeles-based firm, which she founded in 2001 with Harry Hartford, seeks to achieve superior risk-adjusted returns by investing in mispriced equities in both developed as well as emerging markets.
Based on these criteria, Ketterer's top five new buys for the quarter were General Electric Co. (NYSE:GE), Yum China Holdings Inc. (NYSE:YUMC), Aviva PLC (AVVIY), the iShares MSCI India (INDA) exchange-traded fund and the iShares MSCI Saudi Arabia Capped ETF (KSA).
The guru invested in 6.98 million shares of General Electric, allocating 0.80% of the equity portfolio to the stake. The stock traded for an average price of $9.86 per share during the quarter.
The Boston-based industrial conglomerate has a $73.48 billion market cap; its shares were trading around $8.50 on Thursday with a forward price-earnings ratio of 15.85, a price-book ratio of 2.07 and a price-sales ratio of 0.63.
The median price-sales chart shows the stock is trading below its historical average, suggesting it is undervalued.
GuruFocus rated General Electric's financial strength 4.4 out of 10. Although the company has sufficient interest coverage, the Altman Z-Score of 1.03 warns it could be at risk of going bankrupt.
The company's profitability and growth scored a 4 out of 10 rating on the back of declining margins, negative returns that underperform a majority of competitors and a slowdown in revenue per share growth over the past year. It also has a moderate Piotroski F-Score of 4, which indicates operations are stable, and 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 General Electric, Barrow, Hanley, Mewhinney & Strauss has the largest position with 1.29% of outstanding shares. Other top guru shareholders include Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), Mason Hawkins (Trades, Portfolio), Jim Simons (Trades, Portfolio)' Renaissance Technologies, Bill Nygren (Trades, Portfolio), Ken Fisher (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Prem Watsa (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Yum China Holdings
Ketterer picked up 1.19 million shares of Yum China, dedicating 0.60% of the equity portfolio to the stake. Shares traded for an average price of $43.37 during the quarter.
Headquartered in China, the company, which operates fast-food restaurant chains like Taco Bell, KFC, Pizza Hut and Wingstreet, has a market cap of $16.15 billion; its shares were trading around $42.94 on Thursday with a price-earnings ratio of 24.76, a price-book ratio of 5.41 and a price-sales ratio of 1.94.
According to the Peter Lynch chart, the stock is overvalued.
Yum China's financial strength was rated 5.5 out of 10 by GuruFocus. Boosted by a moderate cash-debt ratio of 0.72, the Altman Z-Score of 4.64 suggests the company is in good financial standing.
The company's profitability and growth scored a 5 out of 10 rating, driven by operating margin expansion, strong returns that outperform over half of industry peers and a moderate Piotroski F-Score of 5.
With 0.98% of outstanding shares, the Matthews Pacific Tiger Fund (Trades, Portfolio) is the company's largest guru shareholder. Simons' firm, Hawkins, Pioneer, Jeremy Grantham (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Jeff Auxier (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) also own the stock.
Having previously closed a position in Aviva in the fourth quarter of 2016, the investor opened a new 850,500-share holding, expanding the equity portfolio 0.38%. During the quarter, the stock traded for an average per-share price of $10.81.
The British insurance company has a $17.47 billion market cap; its shares were trading around $8.91 on Thursday with a price-earnings ratio of 6.39, a price-book ratio of 0.83 and a price-sales ratio of 0.84.
Based on the Peter Lynch chart, the stock appears to be undervalued.
Supported by a good cash-debt ratio of 1.66, GuruFocus rated Aviva's financial strength 4.2 out of 10.
The company's profitability and growth did not fare as well, scoring a 1 out of 10 rating. While the net margin is outperforming a majority of its competitors, Aviva's returns are underperforming. Although the company has recorded a decline in revenue per share over the past five years, it has a one-star business predictability rank.
Ketterer holds 0.04% of the company's outstanding shares.
IShares MSCI India
Having previously closed a position in the iShares MSCI India ETF in the first quarter, the guru opened a new 227,900-unit holding, giving it 0.09% space in the equity portfolio. The ETF averaged around $35.18 per unit during the quarter.
Tracking the performance of an index composed of Indian equities, the ETF has a market cap of $4.7 billion; the units were trading around $31.69 on Thursday with a price-earnings ratio of 21.26 and a price-book ratio of 2.92.
IShares MSCI Saudi Arabia
Ketterer invested in 142,000 units of the iShares MSCI Saudi Arabia Capped ETF, impacting the equity portfolio by 0.05%. The ETF averaged around $33.38 per unit during the quarter.
The ETF, which tracks the performance of a broad-based index composed of Saudi Arabian equities, has an $801.76 million market cap; the units were trading around $31.92 on Thursday with a price-earnings ratio of 18.65 and a price-book ratio of 2.32.
During the quarter, Ketterer also established positions in JinkoSolar Holding Co. Ltd. (NYSE:JKS), Vipshop Holdings Ltd. (NYSE:VIPS) and Changyou.com Ltd. (NASDAQ:CYOU).
The guru's $9.14 billion equity portfolio, which is composed of 87 stocks, is largely invested in the technology, financial services, basic materials and energy sectors.
Disclosure: No positions.
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This article first appeared on GuruFocus.
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