The Causeway International Value (Trades, Portfolio) Fund recently disclosed its portfolio updates for the third quarter of 2020, which ended on Sept. 30.
Founded in 2001, the fund is part of Sarah Ketterer (Trades, Portfolio)'s Causeway Capital Management. The portfolio managers of the Los Angeles-based fund utilize a bottom-up, research-based investing strategy to identify value opportunities from among mid-cap and large-cap companies mainly in developed international markets, though it may invest up to 15% of total assets in emerging markets. The fund's strategy also prefers companies that return cash to shareholders through dividends or repurchases.
Based on its investing criteria, the fund's top new buys for the quarter were AXA SA (XPAR:CS, Financial), SK Hynix Inc. (XKRX:000660, Financial) and Zurich Insurance Group AG (XSWX:ZURN, Financial).
AXA
The fund established a new stake of 4,520,617 shares in AXA SA, impacting the equity portfolio by 1.76%. During the quarter, shares traded for an average price of 17.48 euros ($21.22).
Axa is a French multinational insurance company headquartered in Paris. It provides property-casualty insurance, life insurance, investment management and other financial services to more than 108 million clients in 57 countries.
On Dec. 3, shares of Axa traded around 19.97 euros for a market cap of 47.60 billion euros. The GuruFocus Value chart rates the stock as "modestly undervalued."
The company has a financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. While the cash-debt ratio of 0.51 is lower than 80% of peers, the Piotroski F-Score of 8 out of 9 indicates a healthy financial situation. The three-year revenue growth rate is 1.3%, while the three-year Ebitda growth rate is -6.4%.
SK Hynix
The fund also took a new position in SK Hynix worth 862,967 shares, impacting the equity portfolio by 1.30%. Shares traded for an average price of 81,069.70 South Korean won ($74.25) during the quarter.
SK Hynix is a South Koran semiconductor company that primarily supplies DRAM and flash memory chips as well as CMOS image sensors. It is the world's second-largest memory chipmaker and third-largest semiconductor company.
On Dec. 3, shares of SK Hynix traded around 109,000 won for a market cap of 74.56 trillion won. The GuruFocus Value chart rates the stock as modestly overvalued.
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 17.19 is average for the industry, and the Altman Z-Score of 3.85 indicates the company is not likely in danger of bankruptcy. The return on invested capital exceeds the weighted average cost of capital in most quarters, indicating that the company is creating value.
Zurich Insurance Group
The fund acquired a 166,684-share holding in Zurich Insurance Group, impacting the equity portfolio by 1.22%. During the quarter, shares traded for an average price of 340.31 Swiss francs ($381.60).
Based in the city that it named itself after, Zurich is Switzerland's largest insurance company. It provides a wide range of property-casualty and life insurance products to individual and corporate clients in over 215 countries and territories around the world.
On Dec. 3, shares of Zurich traded around 373.20 francs for a market cap of 55.26 billion francs. The GuruFocus Value chart rates the stock as significantly overvalued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 5 out of 10. The interest coverage ratio of 5.84 is lower than 69% of peers, but the Piotroski F-Score of 6 out of 9 suggests the company is financially stable. The return on equity and net margin have not yet recovered to their pre-financial crisis levels, though both are higher than the industry medians.
Portfolio overview
In total, the Causeway International Value (Trades, Portfolio) Fund established eight new positions during the quarter. It also sold out of eight positions, most notably its Vodafone Group PLC (LSE:VOD, Financial) stake, which represented 1.90% of the portfolio last quarter, and added to or reduced several other holdings for a turnover of 17%. The equity portfolio is valued at $4.76 billion.
As of the quarter's end, the top holdings were Volkswagen AG (XTER:VOW3, Financial) with a 4.44% portfolio weight, Basf SE (XTER:BAS) with 3.78% and UniCredit SpA (MIL:UCG) with 3.60%. In terms of sector weighting, the fund was most invested in financial services and industrials, followed by technology and health care.
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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