– By Margaret Moran
Bestinfond (Trades, Portfolio), which is part of Spanish investment firm Bestinver, recently disclosed its portfolio updates for the fourth quarter of 2020, which ended on Dec. 31.
Managed by Beltran de la Lastra, the fund’s strategy seeks long-term capital appreciation through value opportunities in the markets, following in the footsteps of Benjamin Graham, Peter Lynch and Warren Buffett (Trades, Portfolio). It also utilizes the Austrian theory of economic cycles, which views cycles as a consequence of the artificial expansion of monetary supply and manipulation of interest rates by central banks or fractional reserve banks.
Based on its investing criteria, the fund’s top buys for the quarter were Smurfit Kappa Group PLC (FRA:SK3) and Berkshire Hathaway Inc. (NYSE:BRK.B), while its top sells were Just Eat Takeaway.com NV (LSE:JET) and Rio Tinto PLC (LSE:RIO).
Smurfit Kappa Group
The fund established a new position worth 824,723 shares in Smurfit Kappa Group (FRA:SK3), impacting the equity portfolio by 2.11%. Shares traded for an average price of 35.70 euros ($43.33) during the quarter.
Based in Ireland, Smurfit Kappa is a leading supplier of corrugated cardboard and other paper-based packaging materials to the European market. With operations in over 30 countries, it is also one of the largest companies of its kind in the world.
On Dec. 11, shares of Smurfit Kappa traded around 41.64 euros for a market cap of 10.39 billion euros and a price-earnings ratio of 22.32. The GuruFocus Value chart rates the stock as significantly overvalued, but investors should take this with a grain of salt as the company only reports its earnings on a semi-annual basis, meaning information is often out of date.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The cash-debt ratio of 0.16 is lower than 73% of competitors, but the Piotroski F-Score of 6 out of 9 is typical of a financially stable company. The return on invested capital has surpassed the weighted average cost of capital in recent years, indicating value creation.
The fund also increased its holding of Berkshire Hathaway Inc. Class B shares (NYSE:BRK.B) by 139,839 shares, or 160.62%, for a total holding of 226,902 shares. The trade had a 1.73% impact on the equity portfolio. During the quarter, shares traded for an average price of $220.33.
Berkshire Hathaway is the conglomerate headed by famous value investor Warren Buffett (Trades, Portfolio) and his partner Charlie Munger (Trades, Portfolio). The group owns a wide variety of businesses, including Geico and other insurance companies, Berkshire Hathaway Energy, BNSF and a sizable investment portfolio.
On Dec. 11, Berkshire Hathaway traded around $239.76 per Class B share for a market cap of $563.09 billion and a price-earnings ratio of 16.02. The GF Value chart rates the stock as fairly valued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The interest coverage ratio of 12.72 and Piotroski F-Score of 7 out of 9 indicate a fortress-like balance sheet. The three-year revenue growth rate is 13.8% and the three-year Ebitda growth rate is 36.4%, though investors should note the outsized impact of the company’s equity portfolio on earnings results in light of recent changes in U.S. accounting regulations.
Just Eat Takeaway.com
The fund sold out of its 405,770-share investment in Just Eat Takeaway.com (LSE:JET), impacting the equity portfolio by -3.07%. Shares traded for an average price of 84.30 British pounds ($116.47) during the quarter.
Just Eat is the leading European online food delivery company. Headquartered in the Netherlands, the company provides a platform to connect consumers and restaurants in Western Europe, Australia, Canada and several other countries. It has also entered into an agreement to acquire U.S.-based Grubhub Inc. (NYSE:GRUB) in late 2021.
On Dec. 11, shares of Just Eat traded around 76.20 pounds for a market cap of 11.35 billion pounds. The GF Value chart warns the stock is a possible value trap as shares are trading too far below their intrinsic value estimates and the future earnings that analysts are expecting.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 2 out of 10. The cash-debt ratio of 0.86 outperforms 60% of industry peers, while the Altman Z-Score of 15.16 indicates the company is not in danger of bankruptcy. The operating margin of -18.02% and the net margin of -27.77% are both the result of steady profitability declines over the years.
The fund cut its position in Rio Tinto PLC (LSE:RIO) by 541,682 shares, or 76.14%, leaving a remaining holding of 169,707 shares. The trade had a -2.22% impact on the equity portfolio. During the quarter, shares traded for an average price of 49.62 pounds.
Rio Tinto is a multinational mining company headquartered in the United Kingdom. It is the world’s second-largest metals and mining corporation and primarily produces iron ore, copper, aluminum, diamonds, gold and uranium, among others. It has operations in 36 countries.
On Dec. 11, Rio Tinto traded around 59.22 pounds per share for a market cap of 73.85 billion pounds and a price-earnings ratio of 17.24. 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 21.8 is low for the industry, but the Altman Z-Score of 2.75 indicates the company is not likely in danger of bankruptcy. The ROIC has surpassed the WACC in recent years, indicating overall profitability.
As of the quarter’s end, the fund held shares in 75 common stocks valued at a total of $1.55 billion. The top holdings were HelloFresh SE (XTER:HFG) with 4.15% of the equity portfolio, Delivery Hero SE (XTER:DHER) with 3.87% and Informa PLC (LSE:INF) with 3.38%.
In terms of sector weighting, the fund was most invested in consumer cyclical, industrials and basic materials.
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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This article first appeared on GuruFocus.