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IVA International Fund’s Top Trades in the 3rd Quarter

The IVA International Fund (Trades, Portfolio), part of New York-based International Value Advisors, disclosed this week that its top trades during the third quarter included a new position in Heineken NV (XAMS:HEIA) and sells in Hyundai Motor Co. (XKRX:005380), Bayerische Motoren Werke AG (XTER:BMW), AIB Group PLC (LSE:AIBG) and H U Group Holdings Inc. (TSE:4544).

Managed by Charles de Vaulx (Trades, Portfolio), the fund employs a global, value-oriented approach and seeks to invest in the stocks of companies that have temporarily depressed earnings or entrenched franchises. Emphasis is placed on the fundamental value of companies.

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De Vaulx said in its commentary letter that the International Fund returned 2.38% during the third quarter, underperforming the MSCI All Country World Index’s (ex-U.S.) return of 6.25%. As of quarter-end, the fund’s $675 million equity portfolio contains 73 stocks, with one new position and a turnover ratio of 3%. The top four sectors in terms of weight are industrials, health care, consumer cyclical and consumer defensive, representing 19.44%, 17.35%, 16.49% and 15.55% of the equity portfolio.

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Heineken

The fund purchased 172,476 shares of Heineken, giving the position 2.27% weight in the equity portfolio. Shares averaged 79.74 euros ($96.83) during the third quarter; the stock is fairly valued based on its current price-to-GF Value ratio of 1.08.

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GuruFocus ranks the Dutch-based beer company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7, a 4.5-star business predictability rank and an operating margin that has increased approximately 1.6% per year on average over the past five years.

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The IVA Worldwide Fund also purchased shares of Heineken during the quarter. De Vaulx said that the firm purchased shares of Heineken while paring back its Anheuser-Busch InBev SA (NYSE:BUD)(XBRU:ABI) holding as Heineken offers “a larger discount and less downside risk” compared to Anheuser-Busch.

GuruFocus shows that Heineken has a trailing 12-month debt-to-Ebitda ratio of 4.49, compared with Anheuser-Busch’s debt-to-Ebitda ratio of 15.23. Additionally, Heineken’s Altman Z-score of 2.17 shows less risk of financial distress than Anheuser-Busch’s Altman Z-score of 1.04.

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The MS Global Franchise Fund (Trades, Portfolio) also has a holding in Heineken.

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Hyundai

The fund sold 316,133 shares of Hyundai, trimming the equity portfolio 2.50%. Shares averaged 148,411 won ($135.96) during the third quarter. Based on GuruFocus estimates, the fund gained approximately 7.88% on the stock since initially buying shares during the first quarter of 2016.

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GuruFocus ranks the South Korean auto manufacturer’s financial strength 5 out of 10: Although the company’s interest coverage ratio outperforms 60% of global competitors, warning signs range from low Piotroski F-scores and Altman Z-scores to debt ratios that are underperforming over 78% of global automobile companies.

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Bayerische Motoren Werke

The fund sold 267,085 shares of Bayerische Motoren Werke, trimming the position 33.86% and the equity portfolio 1.64%. Shares averaged 59.49 euros during the third quarter.

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GuruFocus ranks the German auto manufacturer’s profitability 7 out of 10 on the back of profit margins outperforming over 66% of global competitors despite three-year earnings growth rates