The Matthews Pacific Tiger Fund (Trades, Portfolio) invests at least 80% of its total assets in the Asia region except Japan. As of Dec. 31, the fund had $8.1 billion in assets under management.
The fund’s portfolio manager is Sharat Shroff, who joined Matthews in 2005 as a research analyst. Shroff also co-manages Matthews’ India, Asia Growth and Asia Focus strategies.
The majority of the portfolio is held in the financial sector at 28.5%, followed by consumer staples at more than 20%, and information technology at 16%.
During the fourth quarter, the fund bought two new holdings, and also sold out of two positions.
New buys
Cognizant Technology Solutions Corp (CTSH, Financial)
Matthews bought 1,382,600 shares of CTSH at an average price of $49.95 per share.
Cognizant Technology is an IT development and maintenance service business. Its four industry-oriented segments are financial services; healthcare; manufacturing, retail, and logistics; and Other, which includes communications, information, and media and entertainment.
The stock has been up 14% over the past year and may be overvalued when the price is compared to the Peter Lynch earnings line.
GuruFocus rates Cognizant Technology’s business predictability as 4 out of 5 stars due to the company’s consistent revenue and earnings growth. The DCF model projects a fair value of $65.19, which gives a 15% margin of safety.
Other gurus who own the stock include Lee Ainslie, Ray Dalio (Trades, Portfolio), and David Rolfe (Trades, Portfolio).
The fund’s second purchase during the quarter was 945,000 shares of Yum! Brands at an average price of $72.44 per share.
Yum! spun off from PepsiCo (PEP) in 1997 and is the holding company of the restaurant brands KFC, Pizza Hut, and Taco Bell. It is one of the largest restaurant companies in the world with 41,000 locations in more than 125 countries.
The stock currently trades at $73.61 and the DCF model projects a fair value of $50.53, which gives a -46% margin of safety.
Yum!’s current ratio for the trailing 12 months is 0.98. A ratio of less than 1 indicates the company cannot cover its short-term obligations.
The company has continuously increased its dividend since 2004. The current yield is 2.2%, which is near the five-year high. Yum!’s dividend payout ratio is 46%.
Sold out
Hyundai Mobis Co (XKRX:012330, Financial)
Matthews sold out of 299,719 shares in Hyundai Mobis for an average of â‚© 299,672.13 per share. The fund had held shares since the second quarter of 2010.
One warning sign may be that over the past 12 months, the company’s free cash flow growth rate declined by almost 50%.
The current P/E ratio is 10.6, compared to the industry average of 9.3.
Hyundai Mobis’ dividend yield is 0.78%, while the payout ratio is 7%.
MegaStudy Co (XKRX:072870, Financial)
The fund sold 76,412 shares of MegaStudy at an average price of â‚© 63,679.03 per share. Matthews had previously held 396,412 shares, but sold out of it in the first quarter of 2011.
MegaStudy is an education company that provides online education content and home-school materials, as well as consulting for private institutes.
The stock has been down 26% over the past year. Over the past five years, MegaStudy has struggled to grow its earnings per share, as indicated by the growth percentages below.
The company’s operating margin has also been in decline over time, and recorded at 18.87% for the trailing 12 months.
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