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Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

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- By Margaret Moran

The Tweedy Browne (Trades, Portfolio) Global Value Fund recently disclosed its portfolio updates for the fourth quarter of 2020, which ended on Dec. 31.


The fund operates as part of New York-based value investing firm Tweedy, Browne Co. LLC. The portfolio managers aim to invest in a diverse range of companies in developing countries, with an emphasis on undervalued securities, in order to achieve long-term capital growth.

According to its investing criteria, the fund's top buys for the quarter were Alibaba Group Holding Ltd (NYSE:BABA) and Rubis SCA (XPAR:RUI), while its top sells were Safran SA (XPAR:SAF) and Nestle SA (XSWX:NESN).

Alibaba

The fund established a new position of 405,725 shares in Alibaba, impacting the equity portfolio by 1.55%. During the quarter, shares traded for an average price of $276.59.

Alibaba is a Chinese multinational conglomerate with holdings in e-commerce, retail, internet and technology assets, among many others. By volume, Alibaba is the largest e-commerce company in the world, with millions of merchants and hundreds of millions of users.

On Jan. 12, shares of Alibaba traded around $226.38 for a market cap of $612.56 billion and a price-earnings ratio of 32.65. The GuruFocus Value chart rates the stock as modestly undervalued.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

The company has a financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10. The cash-debt ratio of 3.37 and Altman Z-Score of 6.86 indicate a fortress-like balance sheet. The three-year revenue growth rate is 45%, while the three-year earnings per share without non-recurring items growth rate is 47.9%.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Rubis

The fund also took a new stake of 376,845 shares in Rubis, impacting the equity portfolio by 0.29%. Shares traded for an average price of 33.83 euros ($41.27) during the quarter.

Rubis is a French independent energy operator that specializes in the international storage, distribution and sale of petroleum, liquefied petroleum gas, food and chemical products.

On Jan. 12, shares of Rubis traded around 40.24 euros for a market cap of 4.17 billion euros and a price-earnings ratio of 14.02. The GuruFocus Value chart rates the stock as modestly undervalued.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 10.26 is better than 76% of industry peers, while the Altman Z-Score of 2.45 indicates the company is not facing high risk of bankruptcy. The return on invested capital is consistently higher than the weighted average cost of capital, indicating a value-creating company.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Safran

The fund reduced its investment in Safran by 583,988 shares, or 29.25%, for a remaining stake of 1,412,745 share. The trade had a -1.04% impact on the equity portfolio. During the quarter, shares traded for an average price of 107.86 euros.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Safran is a French multinational aerospace and defense company formed from the merger between aircraft manufacturer group SNECMA and security company SAGEM in 2005.

On Jan. 12, shares of Safran traded around 116.50 euros for a market cap of 49.74 billion euros and a price-earnings ratio of 74.68. The GuruFocus Value chart rates the stock as modestly overvalued.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The interest coverage ratio of 20.13 more than doubles the industry median of 9.33, though the Altman Z-Score of 1.86 indicates some financial distress. The operating margin and gross margin are mostly holding steady, but there has been a slight downtrend in both in recent years.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Nestle

The fund also trimmed its Nestle position by 458,350 shares, or 14.57%, for a remaining holding of 2,686,824 shares. The trade had a -0.98% impact on the equity portfolio. Shares traded for an average price of 104.18 Swiss francs ($117.45) during the quarter.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Switzerland-based Nestle is the world's largest food and beverage company in terms of revenue. Products include several shelf-stable foods and drink powders, as well as coffee, dairy, sweets and pet food. The company owns iconic brands such as Kit-Kat, Gerber, Stouffer's and Purina.

On Jan. 12, shares of Nestle traded around 100.60 francs for a market cap of 289.73 billion francs and a price-earnings ratio of 21.54. The GuruFocus Value chart rates the stock as modestly overvalued.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

The company has a financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.14 is below the industry median of 0.49, but the Altman Z-Score of 4.31 indicates the company is not at risk of bankruptcy. The ROIC consistently surpasses the WACC, indicating a value-creating company.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

Portfolio overview

As of the quarter's end, the fund held shares in 86 stocks valued at a total of $6.09 billion. The top holdings were Nestle with 5.23% of the equity portfolio, Roche Holding AG (XSWX:ROG) with 4.14% and Heineken Holding NV (XAMS:HEIO) with 4.13 %.

In terms of sector weighting, the firm was most invested in consumer defensive, financial services and industrials.

Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund
Top 4th-Quarter Trades of the Tweedy Browne Global Value Fund

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.