David Herro’s Top 4 Trades in the 3rd Quarter

David Herro (Trades, Portfolio), a portfolio manager of the Oakmark International Fund, disclosed this week that the fund’s top four trades during the third quarter included new positions in Fresenius Medical Care AG & Co. KGaA (XTER:FME) and Anheuser-Busch InBev SA/NV (XBRU:ABI) and position reductions in NAVER Corp. (XKRX:035420) and Daimler AG (XTER:DAI).

The fund, which is part of Chicago-based Oakmark Funds, seeks long-term capital appreciation through equity investments in mid-cap and large-cap companies primarily in non-U.S. countries. The fund looks for companies that not only are trading below intrinsic value, but also have potential to grow shareholder value over time. Key factors include positive free cash flow and management teams that understand the dynamics of per-share value growth and strive to achieve such growth.


Oakmark International Fund disclosed in its September-quarter commentary letter that the fund returned an average of 8.3{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} per year since its September 1992 inception, outperforming the MSCI World ex U.S. Index’s return of an average of 5.6{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} per year over the same period, despite underperforming the benchmark over the past 12 months. As of third-quarter end, the fund’s $20.88 billion equity portfolio contains 64 stocks, with four new positions and a turnover ratio of 6{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644}. The top three sectors in terms of weight are financial services, consumer cyclical and industrials, representing 26.24{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644}, 25.17{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} and 18.27{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of the equity portfolio.


Fresenius Medical Care

Oakmark International Fund purchased 2.3 million shares of Fresenius Medical Care, giving the position 0.93{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} weight in the equity portfolio. Shares averaged 73.84 euros ($89.11) during the third quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.9.


GuruFocus ranks the German dialysis company’s profitability 8 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a high Piotroski F-score of 7 and profit margins outperforming over 76{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of global competitors.


Fresenius’ valuation ranks 10 out of 10 on the back of price valuations near 10-year lows and that outperform over 85{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of global competitors.



The fund purchased 3.596 million shares of Anheuser-Busch, giving the position 0.93{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} weight in the equity portfolio. Shares averaged 47.38 euros ($57.19) during the third quarter; the stock is modestly undervalued with a price-to-GF Value ratio of 0.81.


GuruFocus ranks the Belgian company’s profitability 6 out of 10: Although the company’s operating margin and three-year earnings growth rate are outperforming over 90{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of global competitors, net margins and returns are underperforming over 72{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of global alcoholic beverage companies.


Gurus with large holdings in Anheuser-Busch’s U.S.-based shares (NYSE:BUD) include Ken Fisher (Trades, Portfolio)’s Fisher Investments, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Charles Brandes (Trades, Portfolio)’ Brandes Investment.



The fund sold 966,000 shares of NAVER, trimming the position 53.49{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} and the equity portfolio 1.02{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644}. Shares averaged 301,159 won ($272.25) during the third quarter; the fund said in its commentary that NAVER was a major contributor to portfolio performance for the 12 months ending Sept. 30.


GuruFocus ranks the South Korean media company’s profitability 9 out of 10 on the back of a high Piotroski F-score of 7, as well as a net margin and three-year revenue growth rate that outperforms over 64{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} of global competitors.


The Matthews Pacific Tiger Fund (Trades, Portfolio) also has a holding in NAVER.



The fund sold 4.719 million shares of Daimler, trimming the position 23.11{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644} and the equity portfolio 0.91{2e54b6599e2852fcddcb96c51aef71201c0435684ebd8fbda55b4c693aab2644}. Shares averaged 41.57 euros ($50.19) during the third quarter.


Oakmark International said in its commentary that the German auto manufacturer contributed to portfolio performance during the past three quarters on the heels of positive earnings results from Mercedes-Benz.

Disclosure: No positions.

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James Li

I am an editorial researcher at GuruFocus. I have a Master’s in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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