Bernard Horn’s Polaris buys Ca

Head of Polaris Capital Management

Bernard Horn (Trades, Portfolio) released its company’s second quarter stock portfolio earlier this month.

Aiming to generate strong risk-adjusted returns and capital appreciation, the Boston-based guru’s firm invests in discounted but high-quality stocks in both developed and emerging markets.

With those criteria in mind, the 13F record for the three months ended June 30 showed Horn’s company took a new position, raised a bet, sold two stocks and reduced a host of other existing investments. The most notable transactions included a new stake in The Carlyle Group Inc. (CG, Financial), a boost to Nomad Food Ltd. (NAME, financial), a reduction of Bunzl PLC (LSE: BNZL, Financial) and the sale of Svenska Handelsbanken AB (OSTO:SHB A, Financial) and LG Electronics Inc. (XKRX:066570, Financial).

Investors should be aware that 13F filings do not provide a complete picture of a company’s holdings as the reports only include its positions in US stocks and US certificates of deposit, but they can still provide valuable insight. Additionally, the reports only reflect transactions and holdings as of the most recent portfolio deposit date, which may or may not be held by the reporting company today or even when this article was published.

Carlyle Group

Polaris has invested in 107,200 Carlyle Group shares (CG, Financial), allocating 0.88% of the equity portfolio to the position. The stock traded at an average price of $38.49 per share during the quarter.

The Washington DC-based asset management company has a market capitalization of $12.08 billion; its shares were trading around $33.59 on Tuesday with a price-to-earnings ratio of 6.09, a price-to-book ratio of 2.03 and a price-to-sales ratio of 2.84.

The GF value line suggests that the stock is currently valued at fair value based on historical ratios, past financial performance and analysts’ estimates of future earnings.

GuruFocus rated Carlyle’s financial strength 3 out of 10 thanks to the issuance of new long-term debt in recent years, although it is still at a manageable level. The business may also become less efficient, as assets accumulate at a faster rate than revenue increases.

The company’s profitability was rated 5 out of 10. While returns on equity, assets and capital outperform competitors, the Piotroski F-Score of 4 out of 9 indicates that conditions are typical of a stable company. Despite recording a decline in revenue per share in recent years, Carlyle Group still has a one out of five star predictability rating. According to research by GuruFocus, companies in this ranking have an average return of 1.1% per year over a 10-year period.

Among the gurus invested in Carlyle Group,

Ron Baron (Trades, Portfolio) holds the largest stake with 0.67% of its shares outstanding.

Tom Gayner (Businesses, Portfolio),

steven cohen (Businesses, Portfolio),

Jim Simons (Businesses, Portfolio)’ Renaissance Technologies,

chuck royce (Businesses, Portfolio),

Paul TudorJones (Businesses, Portfolio) and

Joel Greenblatt (Trades, Portfolio) also own the stock.

Nomadic foods

The guru’s firm has increased Nomad Foods (NAME, Financial) holding 85.07%, picking up 78,739 shares. The transaction had an impact of 0.41% on the equity portfolio. The shares traded at an average price of $20.27 each during the quarter.

Polaris now owns a total of 171,300 shares, which represent 0.89% of the equity portfolio. GuruFocus estimates the company has lost 19.46% on investment so far.

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The UK-headquartered frozen food producer has a market capitalization of $3.15 billion; its shares were trading around $18.06 on Tuesday with a price-to-earnings ratio of 13.61, a price-to-book ratio of 1.18 and a price-to-sales ratio of 1.05.

According to the GF value line, the stock, although undervalued, is a possible value trap. As such, potential investors should do thorough research before making a decision.

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Nomad’s financial strength was rated 5 out of 10 by GuruFocus, thanks to adequate interest coverage. The Altman Z-Score of 1.22, however, warns that the company could be at risk of bankruptcy. Return on invested capital also eclipses the weighted average cost of capital, meaning that value is created as the business grows.

The company’s profitability fared slightly better with a 7 out of 10 rating thanks to an expanding operating margin, returns exceeding more than half of its industry peers and a moderate Piotroski F-Score of 5.

With a 2.67% stake, Simons’ company is Nomad Foods’ largest guru shareholder. Royce and

Mario Gabelli (Trades, Portfolio) also have positions.

Bunzl

The company has curbed its Bunzl (LSE: BNZL, financial) by 54.57%, selling 72,235 shares. The transaction impacted the equity portfolio by -0.60%. During the quarter, the stock traded at an average price per share of 28.85 pounds ($34.19).

Polaris now owns 60,128 shares in total, giving it 0.52% space in the stock portfolio. GuruFocus claims the company has earned around 51.67% on investment since its inception in Q1 2020.

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The London-based multinational distribution and outsourcing company has a market cap of £10.51 billion; its shares closed at 31.13 pounds on Monday with a price-to-earnings ratio of 23.62, a price-to-book ratio of 4.76 and a price-to-sales ratio of 1.02.

Based on the GF value line, the stock appears to be slightly overvalued currently.

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GuruFocus rated Bunzl’s financial strength at 6 out of 10. Although the company has issued new long-term debt in recent years, it is at a manageable level due to adequate interest coverage. The Altman Z-Score of 3.62 indicates the company is in good standing, even though assets are accumulating at a faster rate than revenue growth. The ROIC also eclipses the WACC, so value creation occurs.

The company’s profitability has further improved, earning an 8 out of 10 thanks to operating margin expansion, strong returns that outperform the majority of competitors, and a moderate Piotroski F-Score of 4. Despite slowing earnings-per-share growth, Bunzl also has a five-star predictability ranking. GuruFocus found companies with this rank yield, on average, 12.1% per year.

The iShares MSCI ACWI ex. US ETF and Polaris both own 0.02% of Bunzl’s outstanding shares.

Svenska Handelsbanken

With an impact of -0.91% on the equity portfolio, the company sold its investment of 460,533 shares in Svenska Handelsbanken (OSTO:SHB A, Financial). The stock traded at an average price of 94.31 crowns ($8.88) per share during the quarter.

Data from GuruFocus shows that Horn’s business has earned around 3.27% on investment over its lifetime.

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The Swedish bank has a market capitalization of 176.65 billion crowns; its shares closed at 88.96 crowns on Monday with a price-to-earnings ratio of 8.71, a price-to-pound ratio of 0.94 and a price-to-sales ratio of 3.85.

The GF value line suggests that the stock is currently slightly undervalued.

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Svenska’s financial strength was rated 1 out of 10 by GuruFocus due to low debt-related ratios that underperform compared to other players in the industry.

The company’s profitability fared much better with a rating of 6 out of 10. In addition to superior margins and returns compared to its industry peers, Svenska has a high Piotroski F-Score of 7, indicating operations are sound. Steady profit and revenue growth also contributed to a three-star predictability ranking. According to GuruFocus, companies in this ranking have an average annual return of 8.2%.

The iShares MSCI ACWI ex. American ETF and the

Invesco EQV European Equity Fund (Trades, Portfolio) both own 0.01% of the bank’s outstanding shares.

LG Electronics

Impacting the stock portfolio by -0.83%, Polaris sold the 39,100 shares of LG Electronics (XKRX:066570, Financial). During the quarter, the shares traded at an average price of 108,259 won ($80.87) each.

GuruFocus estimates that the company lost 28.48% on the investment.

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The Korea-based electronics maker, whose products range from televisions and cellphones to home appliances like washing machines and refrigerators, has a market capitalization of 17.11 trillion won; its shares closed at 100,000 won on Monday with a price-earnings ratio of 9.77, a price-to-pound ratio of 0.90 and a price-to-sales ratio of 0.21.

According to the GF Value Line, the stock is currently slightly undervalued.

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GuruFocus rated LG’s financial strength at 6 out of 10. Although the company has adequate interest coverage, the Altman Z-Score of 2.53 suggests that it is under some financial pressure. Also, the ROIC exceeds the WACC, so value is created.

The company’s profitability was rated 7 out of 10, thanks to an expanding operating margin, strong returns outpacing the majority of competitors and a high Piotroski F-Score of 7. LG is also backed by a one-star predictability rating.

The iShares MSCI ACWI ex. US ETF owns 0.01% of the company’s outstanding shares.

Additional transactions and portfolio performance

During the quarter, Horn’s company also reduced its investment in Marubeni Corp. (EAST: 8002, Finance), Lundin Mining Corp. (TSX: MON, Financial), AbbVie Inc. (ABBV, Financial), Publicis Groupe SA (XPAR:PUB, Financial) and BanColombia SA (PEATLAND: BCOLOMBI, finance), among many others.

Polaris’ $384 million equity portfolio, comprised of 100 stocks, is most heavily invested in the financials sector with a weighting of 22.46%, followed by smaller representation in the Consumer Discretionary, Healthcare and Industrials.

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Data from GuruFocus shows the company returned 15.39% in 2021, underperforming the S&P 500 return of 28.7%.

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