Charles Brandes

Charles Brandes

Last Update: 02-10-2017

Number of Stocks: 176
Number of New Stocks: 21

Total Value: $6,660 Mil
Q/Q Turnover: 4%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

Charles Brandes Watch

  • Brandes Funds Comments on Companhia de Saneamento Basico do Estado de Sao Paulo

    We’ve highlighted our investment in SABESP (NYSE:SBS) in past commentaries when economic fear in Brazil, coupled with a severe drought, brought the market valuation for the company down to what we considered attractive levels. However, there have been a number of incremental positives for SABESP over the past year, including:

    • Rainfall: Thanks to the long-awaited rainfall, the water reservoirs in Sao Paolo region have improved—albeit still low—from the critical levels observed a year ago.

  • Brandes Funds Comments on Eletrobras

    A long-time position in the Fund, Eletrobras (BSP:LIPR3) is a holding company that operates across the entire electricity value chain. The company is Brazil’s largest electricity provider, controlling 33% of the country’s generation capacity, mainly via hydro plants, and nearly 50% of the transmission grid.

    In late April, Brazil’s Ministry of Mines and Energy announced very favorable compensation payment terms for the residual value of transmission assets built prior to 2000 (previously arbitrarily set to zero). The change marked a significant regulatory turnabout for Eletrobras and drove up its shares. The share-price increase, combined with a strong rally for Brazilian securities in general, led us to believe that the risk/reward tradeoff no longer warranted an investment in Eletrobras.


  • Brandes Funds Comments on Erste Group Bank

    Also weighing on performance in the quarter was Erste GroupBank (WBO:EBS), an Austria-domiciled bank with a majority of assets in emerging Europe. European financial companies—Erste was no exception—were negatively impacted by the Brexit news due to increased fears of a euro break-up, prolonged macroeconomic uncertainty and more downward pressure on interest rates. Compared to other developing markets, emerging Central and Eastern European countries tend to have higher exposure to exports to the United Kingdom and the euro zone, as well as currencies that are more correlated to the euro. However, we believe Erste will be relatively resilient due to its strong capital adequacy and improving asset quality.


  • Brandes Funds Comments on Embraer

    For Embraer (NYSE:ERJ), which derives the majority of its sales outside Brazil, the real’s appreciation continued to present a headwind. The company has also been experiencing margin compression, mainly due to the mature state of its current product mix ahead of the launch of its next-generation models expected in 2018. We see the challenges facing Copa and Embraer as temporary in nature and we continue to believe they represent attractive investment opportunities.


  • Brandes Funds Comments on Copa

    After starting the year with strong performance buoyed by the currency strengthening of a number of Latin American countries in which it operates, Copa (NYSE:CPA) saw its shares decline due to downward revisions to its 2016 guidance on revenue per available seat mile (or RASM, normally used to measure an airline’s efficiency) and operating margins.


  • Brandes Funds Comments on Lifestyle International

    Lifestyle International (HKSE:01212) announced in April a proposal to spin off all of its businesses and investments in China as a separate entity in an effort to unlock hidden value. Lifestyle’s Hong Kong and Chinese assets have different growth paths, risk profiles and historical cash-flow generation properties. We generally view the spinoff as positive news as it may increase financial transparency, enable management teams to better focus on their respective businesses, and allow greater access to debt and equity markets.


  • Brandes Funds Comments on Estacio

    A bidding war for Estacio (BSP:ESTC3) erupted in early June after Kroton Educacional and Ser, two of Estacio’s peers, made non-binding merger offers for the company. In mid-June, Estacio’s chief executive officer resigned and was replaced on an interim basis by a member of the Zaher family. This development magnified the bidding war as there has been speculation that the Zaher family, which owns 14% of Estacio, is also considering a possible tender offer for 36%-61% of the company in order to acquire majority control.

    While the situation is ongoing, shares of Estacio and Kroton (BSP:KROT3) have appreciated materially on the news of the potential acquisition. The merger between the two companies could produce meaningful synergies, including scale and operational improvements, especially considering Kroton’s margins are materially higher than Estacio’s.


  • Brandes Emerging Markets Value Fund 2nd Quarter Commentary

    Market Overview


  • John Rogers Continues to Buy Morgan Stanley, Ansys

    John Rogers (Trades, Portfolio) is the founder of Ariel Investment LLC, which he started in 1983. In both fourth quarter 2015 and first quarter 2016 the guru bought shares in the following stocks:

    HSBC Holdings PLC (HSBC)


  • Charles Brandes Continues to Buy Avon, Higher One Holdings

    Charles Brandes (Trades, Portfolio) is the chairman of Brandes Investment Partners, the firm he started in 1974. In both fourth quarter 2015 and first quarter 2016, the guru bought shares in the following stocks:

    Endeavour Silver Corp. (EXK)


  • Honda Approaches Its 10-Year P/B Ratio Low

    Honda Motor Co. Ltd. (NYSE:HMC) is traded at a P/B ratio of 0.80, close to its 10-year low of 0.72. The company is owned by eight gurus.

    Honda has a market cap of $47.89 billion; its shares were traded around $26.57 with a P/E ratio of 17.38 and P/S ratio of 0.39. The trailing 12-month dividend yield of Honda stock is 2.89%. Honda's forward dividend yield is 3.25%. Honda had an annual average earnings growth of 3.90% over the past 10 years. GuruFocus rated Honda the business predictability rank of 2.5-star.


  • Brandes Investments Comments on Chesapeake

    The uncertainty with Chesapeake (NYSE:CHK) is (and has been) the natural gas price. We believe that supply and demand warrant a much higher price than the current sub-$2 per mmBtu level (currently even lower in Pennsylvania where Chesapeake has a significant percentage of its acreage), likely in the $4-$6 range in the medium to long term. At the current natural gas price, producers are cutting capex significantly, which could ultimately impact the supply of natural gas. The path of natural gas prices is uncertain with a lag between capex cuts and changes to production levels. At higher long-term price levels we believe that Chesapeake’s enterprise value would be substantially more than what was valued by the market.

    However, as Chesapeake built out its acreage, it utilized a significant amount of debt, making it one of the more leveraged oil and natural gas companies today. As a result, while we think it likely has access to liquidity to survive the depressed natural-gas price environment for the next year or two, we cannot rule out that the management and board will choose to preemptively file for reorganization under the bankruptcy code in order to restructure the company and reduce the substantial debt burden.


  • Brandes Investments Comments on Total

    We purchased France-based Total (NYSE:TOT), a vertically integrated oil company operating at all levels within the oil & gas industry, including exploration & production as well as refining & marketing. We had owned Total in the past and sold it in 2014 after the company had several positive developments. However, over the past year the stock declined significantly with the fall in oil prices and has traded near book value. We believe the company has positive attributes, including:

    • Solid fundamentals: While the market is concerned about the fall in oil prices, we see a strong company with industry-

  • Brandes Investments Comments on Express Scripts

    Express Scripts (NASDAQ:ESRX) declined 20% during the quarter due to a dispute with its largest client, health insurer Anthem (which accounts for 15%-20% of Express Scripts’ sales), as Anthem believes that Express Scripts needs to pass on larger drug cost savings to its customers. Under the existing contract, Anthem is entitled to a good-faith repricing of the contract terms, the deadline for which was December 15, 2015. As the deadline has passed and Express Scripts still has not provided Anthem with an offer that Anthem deems acceptable, Anthem has recently decided to take legal action against Express Scripts. Express Scripts’ CEO stated the company intends to resolve the dispute and keep Anthem as a customer.

    We believe the market has over-reacted to the dispute as the current valuation prices in more than a complete loss of the Anthem contract. While there are multiple possibilities, we believe the most likely outcome is a renegotiation to extend the contract, likely at a lower margin but with increased volumes due to Anthem’s acquisition of Cigna. However there is a risk that Anthem switches to another vendor or brings the business in-house, although it lacks scale relative to peers. Given that the market seems to have priced in the worst-case outcome, we continue to believe that Express Scripts offers an attractive margin of safety.


  • Brandes Investments Comments on Credit Suisse

    Credit Suisse (NYSE:CS) declined over 30% during the quarter as the market remained concerned about the company’s restructuring/turnaround and the possible negative effect on financial results over the next year. Nonetheless, we continue to believe Credit Suisse has an economically attractive business model and is significantly discounted at its current valuation of 0.7x tangible book value. Accordingly, we increased our allocation during the quarter.

    From Brandes' Global Equity Fund first quarter 2016 commentary.


  • Brandes Investments Comments on Citigroup

    Citigroup (NYSE:C) has energy-loan exposure of less than 4% of total loans, and is, in our view, positioned to benefit from an eventual increase in interest rates. At its current valuation (as of March 31) of just 60% of book value and 7.7x earnings on depressed net interest margins, we believe the stock offers a compelling investment opportunity.

    From Brandes' Global Equity Fund first quarter 2016 commentary.


  • Brandes Global Equity Fund 1st Quarter Commentary

    Equity markets worldwide closed a volatile first quarter of 2016 with mixed performance. After posting losses through mid-February, many markets recovered, fueled by a rebound in oil prices and data pointing to the U.S. economy’s relative strength. Federal Reserve officials gave upbeat assessments of the economy while scaling back the number of rate increases expected this year, citing risks posed by global economic and financial developments.


  • Charles Brandes Sells Out Stake in OmniVision Technologies

    Guru Charles Brandes (Trades, Portfolio) sold out his 1,622,993-share stake in Omnivision Technologies (NASDAQ:OVTI) for an average price of $28.16 per share in the first quarter.

    Brandes netted a 13.43% return on investment (ROI) after he increased his stake by fivefold during the third quarter of 2015.


  • Brandes Funds Comments on Publicis

    Publicis (XPAR:PUB) is the world’s third-largest global ad agency holding company, with many valuable brands such as Saatchi & Saatchi, Leo Burnett, Razorfish, ZenithOptimedia, and Starcom MediaVest. Publicis has historically been a well-run company with a sound balance sheet and industry-leading margins.

    In our view, the business model of ad agencies has attractive economics given their variable cost structure, industry consolidation, and exposure to long-term ad spending and global gross domestic product growth. While the industry as a whole appears to be valued somewhat fully by the market, Publicis has been the recent exception due to concerns over slowing organic growth, a handful of recent account losses and its acquisition of Sapient (its largest acquisition to date), which was seen as expensive.


  • Brandes Funds Comments on Credit Suisse

    Credit Suisse (NYSE:CS) saw its shares fall over 30% in the quarter as the market remained concerned about the company’s restructuring and its negative effect on financial results over the next year. Nonetheless, we continue to believe Credit Suisse has an economically attractive business model and is significantly discounted at its valuation of 0.7x tangible book value as of March 31.

    From Brandes International Equity Fund first quarter 2016 commentary.


  • Brandes Funds Comments on Barclays

    Barclays (LSE:BARC) declined as it announced a dividend cut and a rationalization of some of its businesses in efforts to focus on its core U.K. and U.S. markets and improve its capital position. Trading at 50% of tangible book value at quarter end, Barclays offers, in our opinion, an attractive risk/reward tradeoff as we believe it should see the benefits of its restructuring over the next couple of years.

    From Brandes International Equity Fund first quarter 2016 commentary.


  • Brandes International Equity Fund Q1 Commentary

    Market Overview


  • Brandes Funds Comments on Embraer

    Brazilian regional jet manufacturer Embraer (NYSE:ERJ) also weighed on returns as the real’s appreciation presented a headwind for the company, which derives the majority of its sales outside Brazil. Moreover, Embraer’s 2015 earnings indicated margin compression and the company issued guidance that was lower than market expectations. Pressure on the defense segment also hurt performance.

    The margin compression was not surprising to us given the product transition that is underway in Embraer’s commercial aircraft division. With regard to the defense segment, we see the issue astemporary as it is driven by a cut in the Brazilian defense budget and we believe Embraer will generate more defense revenue from abroad over the longer term. Accordingly, it is our view that the long-term investment thesis for Embraer remains compelling.


  • The Investors’ Dilemma: Why 2016 May Be a Turning Point - Brandes Investment Funds

    Many institutional investors ostensibly support the idea of focusing on long-term horizons. “Short-termism” suggests speculation, with exposure to the randomness of volatile markets. For institutions, the investors’ dilemma is that their obligations are long term but regulatory and behavioral pressures increasingly exert short-term influences on their decisions. Institutional funds and their investment managers are stewards of the capital entrusted to them, with liabilities that may have a multi-decade or even a multi-generational time horizon. They must maintain a long-term perspective.


  • Avon's Price Looks Attractive Enough

    Avon Products Inc. (NYSE:AVP) is a $1.64 billion market cap company, which is the world's leading direct marketer of cosmetics, toiletries, fashion jewelry and fragrances, with about 6 million sales representatives worldwide.

    Strategic alternatives


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