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Graham Griffin
Graham Griffin
Articles (170) 

Brandes Investment Boosts Long-Term Embraer Holding

Firm maintains high-level ownership

Charles Brandes (Trades, Portfolio)'s Brandes Investment has revealed a small boost in its long-term holding of Embraer SA (NYSE:ERJ) according to GuruFocus' Real-Time Picks, a Premium feature.

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 holds them until the market recognizes their true worth.

On Dec. 31, the firm purchased an additional 381,534 shares of the Brazillian aircraft and defense manufacturer. The purchase boosted the holding by 1.57%. On the day of the transaction, the shares traded at an average price of $6.81 per share. Overall, the purchase had an impact of 0.09% on the portfolio and GuruFocus estimates the firm has lost a total of 51.18% on the holding.


Embraer is based in Sao Paulo, Brazil and manufactures regional aircraft, business jets and defense and security products. The company also offers a range of services to support its installed base of hardware. Its defense and security business is currently focused on developing the KC-390 military transport aircraft. The company also produces aircraft systems and structural components. It operates through the following segments: commercial aviation, defense and security, executive jets and service.

On Jan. 8, the stock was trading at $6.51 per share with a market cap of $1.21 billion. According to the GF Value line, the stock is a potential value trap, so investors should think twice before purchasing shares.


GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 5 out of 10 and a valuation rank of 10 out of 10. There are currently five severe warning signs issued, including inventory building up, declining revenue per share and an Altman Z-Score of 0.59 placing the company in the distress column. Debt levels were at an all-time low at the end of 2019, but revenue and net income had also seen drastically lower levels.


Brandes Investment is by far the largest holder of the Embraer with 13.39% of shares outstanding. Other top shareholders include Hotchkis & Wiley (Trades, Portfolio), Oldfield Partners LP (Trades, Portfolio), Dimensional Fund Advisors LP (Trades, Portfolio) and Vanguard Group Inc. (Trades, Portfolio).

Portfolio overview

At the end of the third quarter, the portfolio contained 151 stocks with eight new additions. Overall, it is valued at $2.89 billion and has seen a turnover rate of 6%. Top holdings at the end of the quarter included Cemex SAB de CV (NYSE:CX), Embraer, Cameco Corp. (NYSE:CCJ), McKesson Corp. (NYSE:MCK) and Merck & Co. Inc. (NYSE:MRK).


By weight, the top three sectors represented were health care (23.80%), financial services (17.19%) and industrials (13.78%).


Disclosure: Author owns no stocks mentioned.

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