Brandes Investment, the firm founded by Charles Brandes (Trades, Portfolio), disclosed this week that it trimmed its Embraer SA (ERJ, Financial) holding by approximately 10% according to GuruFocus Real-Time Picks, a Premium feature.
The firm’s top four holdings had solid gains in 2021: Embraer, Cemex SAB de CV (CX, Financial), Wells Fargo & Co. (WFC, Financial) and Bank of America Corp. (BAC, Financial).
A Benjamin Graham disciple, Brandes Investment seeks to purchase out-of-favor securities trading at discounts to intrinsic value and holds them until the market recognizes the company’s true worth.
As of the latest quarterly report filing, Brandes’ $4.61 billion equity portfolio contains 158 stocks, with eight new positions and a quarterly turnover ratio of 8%. The top four sectors in terms of weight are financial services, health care, industrials and energy, representing 23.70%, 21.84%, 18.38% and 10.21% of the equity portfolio.
Embraer
Brandes sold 2,165,624 shares of Embraer (ERJ, Financial) in December 2021, trimming 10.29% of the holding. Despite this, the position remains Brandes’ top holding with a 7.34% equity portfolio weight.
Shares of Embraer averaged $17.75 on Dec. 31, up approximately 157.25% over the past 12 months. The stock is fairly valued based on Monday’s price-to-GF Value ratio of 1.03.
GuruFocus ranks the Brazilian aircraft company’s profitability 5 out of 10 on the back of profit margins and returns underperforming more than 60% of global competitors despite having a three-year revenue growth rate that outperforms over 90% of global aerospace and defense companies.
Other gurus with holdings in Embraer include Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Caxton Associates (Trades, Portfolio).
Cemex
Brandes owns 27,430,533 shares of Cemex (CX, Financial), giving the stake 4.27% weight in the equity portfolio.
Shares of Cemex traded around $6.37, up approximately 14.11% over the past 12 months. The stock is significantly overvalued based on Monday’s price-to-GF Value ratio of 1.43.
GuruFocus ranks the Mexican building material company’s financial strength 6 out of 10 on the back of a high Piotroski F-score of 7 despite a low Altman Z-score of 1.24 and interest coverage ratios that underperform more than 88% of global competitors.
Wells Fargo
Brandes owns 3,143,573 shares of Wells Fargo (WFC, Financial), giving the position 3.17% of equity portfolio space.
Shares of Wells Fargo traded around $55.35, up 65.63% over the past 12 months. The stock is modestly overvalued based on Monday’s price-to-GF Value ratio of 1.18.
GuruFocus ranks the San Francisco-based bank’s financial strength 3 out of 10 on the back of debt ratios underperforming more than 62% of global competitors.
Other gurus with holdings in Wells Fargo include Dodge & Cox and PRIMECAP Management (Trades, Portfolio).
Bank of America
Brandes owns 3,140,855 shares of Bank of America (BAC, Financial), giving the position 2.89% equity portfolio weight.
Shares of Bank of America traded around $48.93, up approximately 52.04% over the past 12 months. The stock is significantly overvalued based on Monday’s price-to-GF Value ratio of 1.42.
GuruFocus ranks the Charlotte, North Carolina-based bank’s financial strength 3 out of 10 on several warning signs, which include cash-to-debt and debt-to-equity ratios that are underperforming over 69% of global competitors.
Other gurus with holdings in Bank of America include Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) and Charlie Munger (Trades, Portfolio)’s Daily Journal Corp. (DJCO, Financial).
