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Yamil Berard
Yamil Berard
Articles (192) 

Brandes Investment's Top 7 Positions in the 1st Quarter

Pharmaceuticals, which have reported gains so far, keep the value investment firm busy even after the retirement of its founder

Brandes Investment, the firm established by Charles Brandes (Trades, Portfolio), established seven new positions in the first quarter.

In total, the asset management firm held 138 positions in a portfolio valued at $4 billion for a quarter-over-quarter turnover of 4%.

Brandes resigned from the firm in the first quarter in the wake of controversies over a bitter divorce. But the work at the firm continues. A disciple of Benjamin Graham, the value investor taught his partnership team to apply value investing to all portfolios. The asset managefment 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’s largest position in the first quarter was CRH PLC (NYSE:CRH), the Dublin-based parent of an international group of diversified building materials. CRH held 0.06% of the portfolio in the first quarter. The firm executed the purchase of more than 87,000 shares for an average of $35.48 a share. The new holding has earned an estimated 5%.

Miami-based OPKO Health Inc. (NASDAQ:OPK) develops pharmaceutical and diagnostic programs, including routine tests that measure health parameters, including functions of the heart, kidney, liver, thyroid and other organs. The firm executed a buy of 664,000 shares for an average price of about $4 a share. The shares sit in about 0.04% portfolio space. The investment has triggered an estimated gain of 3%.

Eagle Pharmaceuticals Inc. (NASDAQ:EGRX) develops commercialized injectable products in the areas of critical care, orphan diseases and oncology. The New Jersey-based company has five approved products: Argatroban, Ryanodex, docetaxel injection, non-alcohol formulation and Bendeka. Brandes’ partnership purchased 25,291 shares of the company for an average price of $58.15 per share. The estimated gain on the investment is about 16%.

The other new positions are American National Insurance (NASDAQ:ANAT), AMAG Pharmaceuticals Inc. (NASDAQ:AMAG), ACNB Corp. (NASDAQ:ACNB) and Banco Bilbao Vizcaya Argentaria (NYSE:BBVA).

In 2017, Brandes Investment reported a rate of return of 14.96% versus the 21.71% reported by the S&P 500. In 2016, the firm reported 18.63% to the S&P’s 11.99%.

The majority, or more than 54%, of the portfolio is invested in the stocks of companies involved in the financial services, health care and industrials sectors. Basic materials, communication services, energy, technology and communication services make up more than 30% of the portfolio. Lesser positions are in consumer cyclical, utilities and consumer defensive stocks.


The company’s shares closed at $37.41, up 0.7%, on Monday. The 52-week range is $32.47 to $39.33 a share.

The company has market cap of $34 billion. GuruFocus rated its financial strength 6 out of 10 and its profitability and growth 7 of 10. Only one severe warning sign was detected by GuruFocus’ screener. That is the company has been growing assets faster than revenue, at 13% a year, which could signal that operations may becoming less efficient.

The stock is trading at 14 times earnings and 16.34 times forward earnings. It has a price-sales ratio of 1.06 times and a price-book ratio of 1.84 times. The price-book ratio is lower than half of its same-sector competitors. The price-sales ratio is higher than half of its same-sector peers.

It pays shareholders a dividend yield of 2.21%, which is higher than 58% of its peers in the industry.

Analysts project the company will draw $36.8 billion in revenues in 2020, up from $33 billion in 2019 and an estimated $32 billion in 2018.

Gurus who own the stock include Steven Cohen (Trades, Portfolio), Jim Simons (Trades, Portfolio) and Barrow Hanley, Mewhinney & Strauss.

OPKO Health Inc.

The company was trading at $4.11, up 3.53%, after market close. In three years, the stock has lost 75%. Year to date, it is down 17%.

It reported a challenging few years after losses in net income.


It reported a price-book ratio of 1.28 times and a price-sales ratio of 2.24 times. Both ratios are at least 60% higher than its same-sector peers.

The company has a market cap of $2.3 billion and GuruFocus shows it has a financial strength rating of 5 out of 10 and a profitability and growth rating of 4 out of 10. The ratings are the result, in part, of two severe warnings signs that were detected by GuruFocus. These include a Piotroski F-Score of 1, which implies a poor business operation, and substantial debt. Over the past three years, the company has issued $1 billion in debt.

Eagle Pharmaceuticals Inc.

Eagle closed at $67.88 a share, up 0.77%, on Monday. The 52-week range was reported at $45 to $84.20 a share. The stock has fallen 3% in three years. Year to date, it is up 16%.

About 32% of its float is shorted, an issue that triggered a severe warning sign. GuruFocus also detected a second warning sign. That is, the company builds assets at 139% a year, which is faster than its revenue growth rate. It means the company may be getting less efficient.

It is trading at 33.50 times earnings and has a price-book ratio of 5.63 times and a price-sales of 5.17 times. Both ratios are more than half of its same-sector peers.

Revenue was reported at $206 million for the 12 trailing months for earnings per share of $2.07.

Analysts estimate earnings will reach $6.43 per share on revenue of $285 million in 2019.


The company has a market cap of $1 billion and is rated 8 out of 10 in financial strength and 6 of 10 in profitability and growth by GuruFocus. The company has a Piotroski F-Score of 6, which indicates a healthy situation.

Gurus who have invested in Eagle include Chuck Royce (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).

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