Polaris Capital Posts Strong Q3, Talks JM Smucker, IGT, More

Bernard Horn‘s Polaris Capital Management LLC is a value investment management firm, which holds a well-diversified portfolio of global equity products. The firm offers its services to institutions, insurance companies endowments and to high net worth individual clients. As of September 30, 64% of its portfolio consists of international equity products while US equity account for 2%.

During the third quarter, Polaris returned 9.17%, outperforming the MSCI World Index, which gained 4.87%, according to its third-quarter letter to investors. Year-to-date, the fund’s returns amount to 6.33%, while since inception it has delivered an annualized return of 9.39%. In this article, we will discuss some of the stocks that Polaris discussed in the letter, including International Game Technology Ordinary Shares (NYSE:IGT), Carter’s Inc. (NYSE:CRI), J M Smucker Co (NYSE:SJM), Ameris Bancorp (NASDAQ:ABCB), and Popular Inc. (NASDAQ:BPOP).

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International Game Technology Ordinary Shares (NYSE:IGT)’s stock has surged by nearly 77% so far this year and sports a dividend yield of 2.80% At the end of June Polaris held 5.71 million shares worth $107.19 million. Among the funds in our database, 23 investors held $526 million worth of International Game Technology shares at the end of the second quarter. In its investor letter, Polaris Capital noted the strong second-quarter results posted by the company, as well as three consecutive quarters of growth, which coincided with the company paying down the up-frond costs for Italian Lotto concessions.

In Carter’s Inc. (NYSE:CRI), Polaris Capital held a $21.55-million position, which contained 202,451 shares at the end of June. The stock is down by 19% since the beginning of July and Polaris pointed out the stock’s underperformance due to a downward revision of sales and guidance affected by “weak wholesale and international business”. The company also cut its margins due to higher capital expenditures. Overall, 38 funds tracked by us held shares of Carter’s at the end of June, having amassed over 24% of its outstanding stock.

Since Carter’s is an apparel company, we suggest you take a look at our compilation of 10 most expensive cloth stores brands.

Polaris noted that J M Smucker Co (NYSE:SJM) is suffering from deflationary trends as the price index for meat, poultry and egg dropped 6.5% during the period of past 12 months. In addition, pet food business Big Heart, which J M Smucker acquired last year, also showed a decline in volumes and sales in the second quarter, which was contrary to the company’s expectations to offset the decline in food prices. Polaris held 5.1 million shares of the company valued at $24.75 million, being one of the 30 funds from our database that reported long positions as of the end of June.

In Ameris Bancorp (NASDAQ:ABCB), Polaris owned 917,543 shares worth $27.25 million at the end of the second quarter. The investor praised the company for its “healthy quarterly metrics”, which included revenue growth and higher net income generated from its mortgage and Small Business Administration-backed loans. Polaris also noted organic loan growth for the company. Ameris recently reported its earnings for the third quarter at $0.61 per share, beating street estimates of $0.59 per share. Its revenue for the quarter stood at $85.9 million, topping the expectations by some $90,000. A total of 12 investors from our database had positions in Ameris Bancorp worth $84.41 million in aggregate at the end of June.

According to the letter, Polaris closed its stake in Astoria Financial during the third quarter, using the proceeds from the sale of some 1.11 million shares held at the end of June to initiate a stake in Popular Inc. (NASDAQ:BPOP). The timing of the acquisition seems to be right as the stock has climbed by more than 24% since the beginning of the third quarter. Polaris considers that Popular Inc. stock to be undervalued on account of local debt crisis, which, however, is likely to be resolved with the introduction of Puerto Rico Oversight, Management and Economic Stability Act. During the second quarter, the number of funds tracked by us that held shares of Popular went up by five to 27.

Disclosure: none