Charles Brandes Beefs Up Second-Most Valuable Stake in Portfolio

Aug 14, 2015

Value investor Charles Brandes (Trades, Portfolio), chairman of Brandes Investment Partners, which he founded in 1974, applies Benjamin Graham’s principles to all the portfolios managed by his firm. That approach produced returns of 13.34% last year, 37.6% in 2013 and 18.54% in 2012.

In his second-quarter dealings, Brandes’ mix of buys and sales were normal for him, although he added to more stakes than is typical for him. Brandes added to his positions in 111 companies in the second quarter. Many of those additions were modest, but some were significant.

The most significant addition was Brandes’ purchase of 1,624,240 shares of the second-most valuable stake in his portfolio, Embraer S.A. (ERJ, Financial), a Brazilian aerospace company, for an average price of $30.86 per share. The purchase had a 0.63% impact on Brandes’ portfolio.

Embraer has a market cap of $4.99 billion and an enterprise value of $6.66 billion. It has a P/E of 41.2, a Price/Book of 1.5 and a Price/Sales of 0.9. Brandes is Embraer’s leading stockholder among the gurus, but James Barrow (Trades, Portfolio), Ken Fisher (Trades, Portfolio), HOTCHKIS & WILEY and Jim Simons (Trades, Portfolio) also have shares of Embraer in their portfolios.

Brandes added 490,430 shares to his position in Copa Holdings S.A. (CPA, Financial), a Panama-based Latin American commercial aviation provider of passenger and cargo service, bringing his stake to 1,330,067 shares. Brandes paid an average price of $95.47 per share. The transaction had a 0.55% impact on his portfolio.

Copa Holdings has a market cap of $2.72 billion and an enterprise value of $3.24 billion. It has a P/E of 8.2, a Price/Book of 1.3 and a Price/Sales of 1.0. NWQ Managers (Trades, Portfolio), James Barrow (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) have shares of Copa Holdings in their portfolios.

Copa reported second-quarter profit of $64.1 million and earnings of 93 cents per share, which fell short of analysts’ predictions of earnings of $1.10 per share.

Brandes bought 1,059,195 shares of Shinhan Financial Group Co Ltd. (SHG, Financial), a bank headquarters based in Seoul, South Korea. Brandes paid an average price of $38.71 per share. The deal had a 0.51% impact on his portfolio.

Shinhan Financial Group has a market cap of $16.48 billion and an enterprise value of $20.73 billion. It has a P/E of 8.7, a Price/Book of 0.6 and a Price/Sales of 2.0. Ken Fisher (Trades, Portfolio), Jim Simons (Trades, Portfolio), Richard Pzena (Trades, Portfolio) and David Dreman (Trades, Portfolio) have shares of Shinhan Financial Group in their portfolios.

Brandes acquired 595,682 shares of Merck & Co Inc. (MRK, Financial), a New Jersey-based pharmaceutical company, for an average price of $58.76. The purchase had a 0.44% impact on Brandes’ portfolio.

Merck is Brandes’ 13th-most valuable stake.

Brandes added 2,400,698 shares to his stake in Telefonica Brasil S.A. (VIV, Financial), a Brazilian telecommunications group, for an average price of $14.89 per share. The sale had a 0.44% impact on Brandes’ portfolio.

Telefonica Brasil has a market cap of $19.72 billion and an enterprise value of $14.31 billion. It has a P/E of 11.8, a Price/Book of 0.6 and a Price/Sales of 1.3. Jeremy Grantham (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Howard Marks (Trades, Portfolio) and John Rogers (Trades, Portfolio) have shares of Telefonica Brasil in their portfolios.

Telefonica Brasil is the 11th-most valuable stake in Brandes’ portfolio.

Brandes bought 397,824 shares of Western Digital Corp. (WDC, Financial), an Irvine, California-based hard disk drive manufacturer, for an average price of $94.71 per share. The transaction had a 0.4% impact on Brandes’ portfolio.

Brandes purchased 536,174 shares of Microsoft Corp. (MSFT, Financial), a technology company based in Washington state, for an average price of $45.55 per share. The deal had a 0.3% impact on Brandes’ portfolio. Microsoft is the sixth-most valuable stake in Brandes’ portfolio.

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