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Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

GuruFocus.com

- By James Li

Bernard Horn (Trades, Portfolio), president of Polaris Global Management, disclosed this week that his Polaris Global Value Fund's top five buys in the second quarter were Trevi Finanziaria Industriale SpA (MIL:TFI), Zhongsheng Group Holdings Ltd. (HKSE:00881), Arrow Electronics Inc. (NYSE:ARW), Weichai Power Co. Ltd. (SZSE:000338) and Sony Corp. (NYSE:SNE)(TSE:6758).


The Boston-based firm's philosophy is based on the belief that global market fluctuations produce mispriced stocks. Investor behavior may create volatility that leads to inefficiencies in certain global markets, resulting in stock prices that do not reflect a company's long-term fundamental valuation or future cash flows.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Horn said in his quarterly letter that the Global Value Fund gained 17.86% during the quarter, underperforming the MSCI World Index benchmark return of 19.54%. As of quarter-end, the fund's $347 million equity portfolio contains 100 stocks, with eight new positions and a turnover of 13%. The top four sectors in terms of weight are financial services, consumer cyclical, industrials and basic materials, representing 22.72%, 17.86%, 14.74% and 12.40% of the equity portfolio.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Trevi

Horn's firm purchased 230,839,718 shares of Trevi, giving the stake 1.91% weight in the equity portfolio. Shares averaged 2 eurocents (2.4 cents) during the second quarter.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

The fund manager said in his letter that the Italian engineering and foundation driller, a "long-standing" holding, struggled over the past few years "due to weakness in end markets" and an "ill-fated" venture in oil drilling. Horn added that Polaris "played an instrumental role" in the company's financial and operational structuring; additionally, the restructured business "may be better positioned for the current environment."

Zhongsheng

Polaris purchased 903,000 shares of Zhongsheng, giving the position 1.44% weight in the equity portfolio. Shares averaged 35.42 Hong Kong dollars ($4.57) during the second quarter.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

GuruFocus ranks the Chinese auto dealer's profitability 9 out of 10 on several positive investing signs, which include a four-star business predictability rank, a return on equity that outperforms over 95% of global competitors and an operating margin that has increased approximately 11.60% per year on average over the past five years.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Arrow Electronics

Polaris purchased 65,000 shares of Arrow Electronics, giving the holding 1.29% weight in the equity portfolio. Shares averaged $62.97 during the second quarter.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

The Centennial, Colorado-based company distributes enterprise infrastructure hardware to small and midsize electronic equipment manufacturers and value-added resellers. GuruFocus ranks Arrow's profitability 7 out of 10 on the back of returns on equity and three-year revenue growth rates that outperform over 65% of global competitors.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Weichai Power

Polaris purchased 2.196 million shares of Weichai Power, giving the stake 1.18% weight in the equity portfolio. Shares averaged 13.46 yuan ($1.97) during the second quarter.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Weichai Power assembles a wide range of engines, hydraulic systems, electronic parts and other components to improve automobile functionality. GuruFocus ranks the company's profitability 8 out of 10 on the back of returns on equity and three-year revenue and earnings growth rates outperforming over 89% of global competitors.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Sony

Polaris purchased 56,000 shares of Sony, giving the position 1.10% weight in the equity portfolio. Shares averaged 6,974.05 yen ($65.67) during the second quarter.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

According to GuruFocus, the Japanese consumer electronics giant's profit margins are outperforming over 77% of global competitors while its return on equity outperforms over 85% of global hardware companies.

Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter
Top 5 Buys of Bernard Horn's Firm in the 2nd Quarter

Disclosure: No positions.

Read more here:

  • Charles de Vaulx's Top 5 Trades of the 2nd Quarter

  • Warren Buffett's Berkshire Plunges Into 5 Japanese Conglomerates

  • Mason Hawkins' Firm Packs Into Carrier, Axes 4 Positions in 2nd Quarter



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This article first appeared on GuruFocus.