Sarah Ketterer Dumps Credicorp – GuruFocus.com

Sarah Ketterer (Trades, Portfolio), the CEO and fundamental portfolio manager of Causeway Capital Management, recently released the firm’s 13F portfolio updates for the first quarter of 2022, which ended on March 31.

Causeway Capital Management was founded in 2001 by Ketterer and Harry Hartford. The Los Angeles-based firm chooses stocks from among large and mid-cap companies in developed markets around the world. Their screens use quantitative, value-oriented metrics and a “risk score” to find potential investment opportunities. After screening, the investment team chooses the stocks that have the most favorable risk-adjusted returns, price-earnings ratios and dividend yields.

Based on its latest 13F report, the firm’s top five trades for the quarter were the sale of its Credicorp Ltd. (BAP, Financial) stake, additions to Ryanair Holdings PLC (RYAAY, Financial) and Canadian National Railway Co. (CNI, Financial) and reductions to Broadcom Inc. (AVGO, Financial) and Ashland Global Holdings Inc. (ASH, Financial).

Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.

Credicorp

The firm sold out of its 1,284,148-share stake in Credicorp (BAP, Financial), which used to take up 3.14% of the equity portfolio. During the quarter, shares traded for an average price of $150.96.

Credicorp is a Peruvian financial services holding company. Its subsidiary companies are divided into four business categories: Universal Banking (traditional banking services), Microfinance (for groups typically excluded from traditional banking), Insurance/Pensions and Investment Banking.

On May 17, shares of Credicorp traded around $140.05 for a market cap of $11.14 billion. According to the GF Value chart, the stock is fairly valued.

The company has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 5 out of 10. The cash-debt ratio of 1.69 and Piotroski F-Score of 6 out of 9 indicate financial stability. The return on equity and return on assets are outperforming 78% of other companies in the banks industry.

Ryanair Holdings

The firm increased its investment in Ryanair Holdings (RYAAY, Financial) by 1,291,742 shares for a total holding of 6,309,195 shares. At the quarter’s average share price of $103.11, the trade added 2.69% to the equity portfolio.

Ryanair Holdings is an Irish holding company for a family of airlines and adjacent companies, including Ryanair DAC, Ryanair UK, Buzz, Malta Air and Lauda. It also provides travel insurance and accommodation services.

On May 17, shares of Ryanair Holdings traded around $84.62 for a market cap of $19.20 billion. According to the GF Value chart, the stock is modestly overvalued.

The company has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. The Altman Z-Score of 1.78 is in the grey zone, indicating potential financial distress, but the Piotroski F-Score of 6 out of 9 implies a stable financial situation. The return on invested capital recently dropped below the weighted average cost of capital, indicating struggles with profitability.

Canadian National Railway

The firm also added another 772,817 shares to its Canadian National Railway (CNI, Financial) stake, bringing the total number of shares owned to 2,572,261. The trade added 2.48% to the equity portfolio. Shares traded for an average price of $124.98 during the quarter.

Headquartered in Montreal, Canada, Canadian National Railway is a major freight railway spanning a 20,000-mile network across Canada as well as the Midwestern and Southern U.S. It is the largest Canadian railway and the only transcontinental network in North America.

On May 17, shares of Canadian National Railway traded around $115.17 for a market cap of $79.21 billion. According to the GF Value chart, the stock is fairly valued.

The company has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10. While the cash-debt ratio is worryingly low at 0.05, the Piotroski F-Score of 8 out of 9 implies a very healthy financial situation. The operating and net margins are well into the double-digits and outperform 82% of transportation industry peers.

Broadcom

The firm continued reducing its Broadcom Inc. (AVGO, Financial) stake, selling 101,644 shares for a remaining holding of 67,822 shares. The trade slimmed the equity portfolio by 1.49% at the quarter’s average share price of $593.78.

Broadcom is a designer, developer, manufacturer and global supplier of a range of semiconductor and infrastructure software products primarily for data center, networking, software, broadband, wireless, storage and industrial markets. It is based in San Jose, California.

On May 17, shares of Broadcom traded around $608.15 for a market cap of $248.30 billion. According to the GF Value chart, the stock is significantly overvalued.

The company has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 10 out of 10. On the financial side, the interest coverage ratio of 5.74 is on the low side, but the Altman Z-Score of 3.82 shows no red flag for imminent bankruptcy. The company has a three-year revenue per share growth rate of 9.8% and a three-year Ebitda per share growth rate of 16.8%.

Ashland Global Holdings

The firm sold 603,543 shares of its Ashland Global Holdings (ASH, Financial) holding, leaving only a nominal stake of 2,227 shares and reducing the equity portfolio by 1.42%. During the quarter, shares changed hands for an average price of $96.26.

Ashland is a leading provider of specialty chemicals and chemical technologies. The company has reorganized in recent years, divesting unprofitable businesses and making more acquisitions in the specialty chemicals field.

On May 17, shares of Ashland traded around $101.26 for a market cap of $5.48 billion. According to the GF Value chart, the stock is modestly overvalued.

The company has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 6 out of 10. While the Altman Z-Score is in the distress zone at 1.56, the Piotroski F-Score of 8 out of 9 implies a very healthy balance sheet. The profitability score is driven by return on equity and return on asset ratios that are beating 86% of industry peers.

Portfolio overview

As of the quarter’s end, Causeway Capital Management held positions in 75 stocks valued at a total of $4.18 billion. The turnover for the period was 12%.

The firm’s top holding was Ryanair Holdings with 13.14% of the equity portfolio, followed by Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) with 9.08% and Canadian National Railway with 8.25%.

In terms of sector weighting, the firm was most invested in technology, industrials and consumer cyclical stocks.