Charles Brandes on Lessons Learned from Ben Graham; Top Holdings: TEL, PFE, EBR, TXN, MSFT, TMX

Charles Brandes is Chairman of the Brandes Investment Management, a firm he founded in 1974. He was an acquaintance of Benjamin Graham, the Columbia University professor and widely considered the father of the value investing.


Dan Richards of Adverisor Perspectives interviewed Charles Brandes on September 17, 2010. GuruFocus has permission to use a few Q&A’s:

If someone were to ask you, having met with Ben Graham a few times, if there were two or three key things that you took away from those conversations, what would be first on the list?


First, I asked what the definition of investing is and what is really true about investing. He explained that most people, when they are thinking short-term, are thinking about stock markets. They are thinking about forecasting quarterly earnings. He said everybody calls that investing, but when you really think about it, it is speculation on short-term price movements which has nothing to do with investing.


So, he pointed out to me what real investing was, which is taking a long term view on the true worth of companies.


What was second on the list in terms of the key takeaways from Ben Graham?


Stock prices and bond prices fluctuate in value a lot more than the actual underlying value of the security that you own. The reason for that is fear and greed, human behavior.


So the notion is that stock prices in the short term don't necessarily really reflect the true underlying value of companies.


That's correct.


Was there a final lesson that you could point to from Ben Graham?


This does not change: If you think fundamentally, and you are conservative, and you understand how wealth is actually produced – not by the stock market – but by businesses, you are doing a fundamentally right thing that not everybody is doing. You don't have the competition so you can be successful that way.

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GuruFocus tracks Brandes’s stock holdings. As of September 30, 2010, his firm manages over $16 billion in equities, distributed among over 200 stocks. Eight of the stocks are new for the quarter. You can say that he is rather diversified and yet slow churning investor. Most value investors churn their portfolio ever so slowly.


Here are his top holdings and holding histories:

No. 1: Tyco Electronics Ltd. (TEL, Financial), Weightings: 3.43% - 18,904,624 Shares

Tyco Electronics Ltd., global provider of engineered electronic components for thousands of consumer and industrial products; network solutions and systems for telecommunications and energy markets; and wireless systems for critical communications, radar and defense applications. Tyco Electronics Ltd. has a market cap of $14.24 billion; its shares were traded at around $31.87 with a P/E ratio of 12.6 and P/S ratio of 1.18. The dividend yield of Tyco Electronics Ltd. stocks is 2.01%.

No. 2: Pfizer Inc (PFE, Financial), Weightings: 3.17% - 29,659,239 Shares

Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Pfizer Inc has a market cap of $135.45 billion; its shares were traded at around $16.85 with a P/E ratio of 7.49 and P/S ratio of 2.71. The dividend yield of Pfizer Inc stocks is 4.27%. Pfizer Inc had an annual average earning growth of 1.8% over the past 10 years.

No. 3: ELETROBRAS (EBR, Financial), Weightings: 2.61% - 32,731,737 Shares

Electrobras is involved in the Utilities Industry. Their principal activity is the generation and distribution of electric power through their companies to the whole of Brazil. Centrais Eletricas Brasileiras S.a.-eletrobras (br has a market cap of $12.01 billion; its shares were traded at around $13.27 with a P/E ratio of 6.88 and P/S ratio of 0.84. The dividend yield of Centrais Eletricas Brasileiras S.a.-eletrobras (br stocks is 1.35%.

No. 4: Texas Instruments Inc. (TXN, Financial), Weightings: 2.23% - 13,201,963 Shares

Texas Instruments, Inc. is a global semiconductor company and one of the world's designers and suppliers of digital signal processors and analog integrated circuits, the engines driving the digitization of electronics. Texas Instruments Inc. has a market cap of $36.99 billion; its shares were traded at around $30.95 with a P/E ratio of 13.06 and P/S ratio of 3.55. The dividend yield of Texas Instruments Inc. stocks is 1.68%. Texas Instruments Inc. had an annual average earning growth of 4.2% over the past 5 years.

No. 5: Microsoft Corp. (MSFT, Financial), Weightings: 2.11% - 13,861,990 Shares

Microsoft develops, manufactures, licenses, and supports a wide range of software products for a multitude of computing devices. Microsoft Corp. has a market cap of $227.33 billion; its shares were traded at around $26.27 with a P/E ratio of 11.32 and P/S ratio of 3.64. The dividend yield of Microsoft Corp. stocks is 1.98%. Microsoft Corp. had an annual average earning growth of 12.6% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 3-star.

No. 6: Telefonos de Mexico S.A. de C.V. (TMX, Financial), Weightings: 2.09% - 22,558,253 Shares

Telmex is a world-class telecommunications company that provides total telecommunications solutions to its clients: Local and long distance wire service, wireless communications, multimedia network for video, audio and data, network engineering, digital wireless network access, and Internet. Telefonos De Mexico S.a. De C.v. has a market cap of $7.54 billion; its shares were traded at around $15.46 with a P/E ratio of 10.04 and P/S ratio of 0.85. The dividend yield of Telefonos De Mexico S.a. De C.v. stocks is 4.77%. Telefonos De Mexico S.a. De C.v. had an annual average earning growth of 3.3% over the past 10 years.





To see his other holdings and trading activities, click on Charles Brandes.