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 2023, 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 trades of the quarter included a new buy for UBS Group AG (UBS, Financial), an addition to Ryanair Holdings PLC (RYAAY, Financial), the sale of its Booking Holdings Inc. (BKNG, Financial) position and a reduction in Las Vegas Sands Corp. (LVS, Financial).
Investors should be aware 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.
UBS Group
The firm established a new holding worth 9,650,640 shares in UBS Group (UBS, Financial), giving it a 4.89% weight in the equity portfolio at the quarter’s average share price of $20.86.
UBS Group is the largest banking institution in Switzerland and the largest private bank in the world, offering a range of investment banking and other financial services. On March 19, UBS Group announced it would acquire fellow Swiss bank major Credit Suisse (CS, Financial) for $3.3 billion after its near-collapse in a deal negotiated with regulators.
The shotgun merger will take effort, but UBS claims confidence that it will be valuable for shareholders, with potential synergies including cost savings and favorable asset sales. The GF Value chart rates the stock as fairly valued at Friday’s share price of $19.16.
Ryanair Holdings
Causeway upped its stake in Ryanair Holdings (RYAAY, Financial) by 20.07% for a total position of 9,242,910 shares, adding 3.49% to the equity portfolio. During the quarter, shares averaged $92.30 apiece.
Ryanair Holdings is a 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.
Ryanair’s revenue and earnings tanked due to the pandemic and have struggled to recover, much like other airline companies. It is in the process of recovery, though, and has returned to profitability with a price-earnings ratio of 16.53. The GF Value chart rates the stock as a possible value trap due to the decline in profitability and share price, but with a financial strength rank of 6 out of 10, the company likely has what it takes to weather the storm.
Booking Holdings
The firm sold all 31,513 of its shares of Booking Holdings (BKNG, Financial), which previously took up 1.84% of the equity portfolio. Shares traded for an average price of $2,433.33 during the quarter.
Based in Norwalk, Connecticut, Booking Holdings is a world leader in online travel services, providing booking services for everything from flights and cars to hotels and vacation packages. The company’s focus is mainly on the more fragmented European and Asian hotel markets rather than the U.S. market.
Following Booking’s stellar rebound from pandemic-driven travel pauses, investors are worrying about early signs of a new slowdown in travel, which can likely be attributed to inflation and a brewing economic downturn. Analysts are still projecting long-term growth for now, resulting in a modestly undervalued rating from the GF Value chart for the stock.
Las Vegas Sands
Causeway reduced its investment in Las Vegas Sands (LVS, Financial) by 78.19%, leaving a remaining holding of 282,413 shares and trimming 1.42% off the equity portfolio. During the quarter, shares traded for an average price of $55.99.
A Nevada-based casino and resort company, Las Vegas Sands has been undergoing a bold transformation strategy. Following its Covid-related financial struggles, it has finally finished divesting all of its U.S. casinos and convention centers to focus on Macau and Singapore, which it believes will be higher-growth regions. It began the shift out of the U.S. in the early 2000s, breaking into the Macau casino scene to develop the so-called “Las Vegas of Asia.”
The company’s ambitions may be lofty, but Ebitda has declined an average of 56% per year for the past three years, which is a lot for investors to digest. The GF Value chart rates the stock as fairly valued.
See also
Causeway’s other top trades for the fourth quarter included additions to Bank Bradesco SA (BBD, Financial) and Canadian National Railway Co. (CNI, Financial) and a new stake in Credicorp Ltd. (BAP, Financial).
As of the quarter’s end, Causeway Capital Management held positions in 81 stocks in a 13F portfolio valued at $4.17 billion. The turnover for the period was 21%.
The firm’s top holding was Ryanair with 20.90% of the equity portfolio, followed by Canadian National Railway with 13.38% and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) with 6.10%.
In terms of sector weighting, the firm was most invested in industrials, technology and consumer cyclical stocks.
