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Graham Griffin
Graham Griffin
Articles (57) 

Brandes Investment Cuts Briggs & Stratton Corp

Firm sells out after a year of small reductions

July 02, 2020 | About:

Charles Brandes (Trades, Portfolio)’ Brandes Investment revealed it sold out of its holding of Briggs & Stratton Corp. (BGG) on June 26.

Brandes, who is now retired, is a Benjamin Graham disciple. As such, his firm seeks to purchase out-of-favor securities that are trading at discounts to their intrinsic values, and then hold them until the market recognizes their true worth.

The firm added to the portfolio through the majority of 2018 and into the first quarter of 2019. From there, the team has slowly been reducing the holding throughout 2019 and into this year. All 3.97 million remaining shares were sold at around an average price of $1.46, representing a total estimated gain of -53.52%.

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Portfolio overview

The portfolio is valued at $2.86 billion and is sitting at a 14% turnover rate. It holds 149 stocks, with 15 new buys, as of quarter-end on March 31. The top sectors by weight are health care (27.46%), financial services (17.01%) and industrials (14.27%).

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New holdings at the end of the first quarter included Textron Inc. (NYSE:TXT), Change Healthcare Inc. (NASDAQ:CHNG) and Tiffany & Co. (NYSE:TIF).

Briggs & Stratton

Briggs & Stratton is a producer of gasoline engines and outdoor power equipment. It operates in two segments: Engines and Products. Briggs & Stratton manufactures four-cycle aluminum alloy gasoline engines with gross horsepower ranging from 5.5hp up to 37hp and torques that range from 4.50 ft-lbs gross torque to 21.00 ft-lbs gross torque. The company's engines are used primarily by the lawn and garden equipment industry.

July 2 saw the company trading at $1.29 with a market cap of $54.76 million. The share price has been in decline throughout 2020 and the Peter Lynch chart suggests the stock was trading above its intrinsic value over the last several years.

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GuruFocus gives the company a financial strength rating of 3 out of 10 and a profitability rank of 5 out of 10. The company has negative operating and net margin percentages that place it lower than over 80% of the industry. The current cash-to-debt ratio of 0.06 places it lower than 93.86% of industrial products companies. Revenue per share is in decline and the operating income represents a loss for the company.

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At the end of the first quarter, Brandes Investment was the second-largest guru shareholder with 9.36% of shares outstanding, following BlackRock Inc. (Trades, Portfolio) at 16.01%. Other top holders include Dimensional Fund Advisors LP (Trades, Portfolio), Vanguard Group Inc. (Trades, Portfolio) and GMT Capital Corp. (Trades, Portfolio).

Disclaimer: Author owns no stocks mentioned.

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