The Wasatch International Growth (Trades, Portfolio) Fund disclosed this week that its top five new buys for the third quarter were Trainline PLC (LSE:TRN), Sugi Holdings Co. Ltd. (TSE:7649), JCR Pharmaceuticals Co. Ltd. (TSE:4552), Beijer Ref AB (OSTO:BEIJ B) and Endava PLC (NYSE:DAVA).
Managers of the fund, which is part of Utah-based Wasatch Global Advisors, said in their quarterly letter that the fund returned -3.35% during the three months ended Sept. 30, underperforming the MSCI AC World ex. USA Small Cap Index benchmark return of 1.19%. The letter said that primary factors fueling uncertainty included Brexit, the U.S.-China trade war and currency volatility.
Wasatch seeks long-term capital appreciation through a bottom-up, "company-first" investment approach. The fund said in its letter that good balance sheets and strong cash flows represent two of several "integral factors" the fund considers prior to investing in a company's stock. As of quarter-end, the fund's $1.1 billion equity portfolio contains 85 stocks, of which 11 represent new holdings. The portfolio's top three sectors in terms of weight are health care, technology and industrials, with weights of 21.87%, 19.80% and 19.62%.
The fund purchased 3,004,735 shares of Trainline, giving the stake 1.40% weight in the equity portfolio. Shares averaged 4.37 pounds ($5.75) during the quarter.
Trainline, which went public in June, sells rail and coach tickets to travelers worldwide through its website and mobile app. Wasatch said in its letter that while the rail industry remains antiquated, Trainline's online platform improves the customer experience and reduces costs for rail carries. The fund believes that Trainline is "well-positioned" to employ strong cash flows to expand into Europe, where the rail industry is "more fragmented and complicated."
The fund purchased 160,800 shares of Sugi, dedicating 0.79% of the equity portfolio to the position. Shares averaged 5,425.97 yen ($49.96) during the quarter.
The Japanese pharmaceutical retailer sells prescription drugs, generic drugs, discount cosmetics, pet supplies and health supplements in its drugstores. GuruFocus ranks Sugi's financial strength 9 out of 10 on several positive investing signs, which include no long-term debt and a strong Altman Z-score of 4.8. Other positive investing signs, which contribute to a profitability rank of 8, include a three-star business predictability rank and a return on assets that outperforms approximately 75% of global competitors.
The fund purchased 77,500 shares of JCR, giving the holding 0.54% equity portfolio weight. Shares averaged 7,413.39 yen during the quarter.
GuruFocus ranks the Japanese drug manufacturer's profitability 7 out of 10 on the heels of profit margins and returns outperforming over 69% of global competitors, with margins increasing in the double digits over the past five years according to a loglinear regression model.
The fund purchased 254,962 shares of Beijer, giving the position 0.53% weight in the equity portfolio. Shares averaged 218.73 Swedish krona ($22.94) during the quarter.
The Malmo, Sweden-based company distributes refrigeration systems and related components for air conditioners and heat pumps. GuruFocus ranks Beijer's profitability 8 out of 10: Operating margins have expanded 6.50% per year on average over the past five years despite outperforming just 59.47% of global competitors. Additionally, Beijer's return on equity and three-year revenue growth rate are outperforming over 81% of global industrial product companies.
Wasatch purchased 148,914 shares of Endava, giving the holding 0.51% weight in the equity portfolio. Shares averaged $38.33 during the quarter.
The U.K.-based company provides digital transformation consulting and agile software development services in North America and Europe. According to GuruFocus, Endava's margins and returns are outperforming over 75% of global competitors, suggesting good profitability.
Disclosure: No positions.
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This article first appeared on GuruFocus.