Charles Brandes started the Brandes Investment Partners firm in 1974, and managed $121.7 billion as of September 2007. He manages multiple portfolios including US equity and Global Equity. Charles Brandes is listed as #488 in the Forbes List of World’s Richest People with a net worth of $2 billion. He is author of the book Value Investing Today. As a value investor, Brandes 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. Charles Brandes is a disciple of Benjamin Graham. His value equity fund has beaten the market in the past 15 years. His investing discipline has been summarized in his article 10 Core Beliefs: prices fluctuate, have an long term perspective, owning stock is owning the business, don’t let emotions misguide you, focus on the company not on the market, sell when better opportunities come along, “under-performance is inevitable”, and patience is golden.
His buy & hold brochure shows earnings comparison between short-term “opportunistic” investor with a 1.9% rate of return and the S&P500 with an 8% rate of return for 22 years (page 2). His point is that “the wildness tends to fade overtime”. The market in 2008 & 2009 has been quite volatile. “Stock price fluctuations have been more severe than historical averages…daily price moves of 1%-3%...climbing or falling sharply on a regular basis, investors might be tempted to alter their investment plans. But that can be dangerous. Long-term investors might want to ask themselves if they believe recent levels of volatility will continue or revert toward longer-term averages.” Page 3 & 4 are histogram comparisons of Actual versus Expected rate of returns in the months from year 1926 to 2008 (Exhibit 2 & 3). Clearly, months with 2-5% rate of return were the most frequent; less than 1% of the time did we see 10% or higher returns/losses. Bottom-line, “Market fluctuations certainly can test investors’ long-term conviction,” and the buy-and-hold strategy wins.
Good Companies Vs. Good Investments: “One concept that value investors keep in mind is that a good company is not necessarily the same as a good investment. An established firm with high revenue levels and a stable, strong earnings record, for instance, certainly sounds like a good company. But like any company, that firm only represents a good investment if it can be purchased at a favorable price.” The article gave the example of Cisco in the 2000s as a solid company, but was over-priced, $465 billion to be exact, which “dwarfed its $15 billion revenue and $2.5 billion net income”.
“The Intelligent Investor”: Benjamin Graham says how well a stock is priced depends on the ratio found from dividing price per share by annual earnings per share. Expensive stocks have ratio greater than 20; moderate stocks have ratio between 10 and 20; cheap stocks have ratio less than 10.
Brandes.com has published a study on why GDP is a poor predictor for stock market returns. It graphed U.S. equity returns versus the change in GDP for the past 80 years and found no correlation or lack thereof. “We believe the results confirm that investors are best served by focusing on the valuation of stocks compared to their long-term profitability and earnings power. Perhaps Warren Buffett said it best: “You pay a very high price in the stock market for a cheery consensus.” Investors who wait for GDP and other economic measures to provide clear signals of economic health may miss robust stock market performance.”
Valero Energy Corporation has a market cap of $10.26 billion; its shares were traded at around $18.18 with a P/E ratio of 15.9 and P/S ratio of 0.1. The dividend yield of Valero Energy Corp. stocks is 3.3%. Valero Energy Corp. had an annual average earning growth of 35.9% over the past 10 years. GuruFocus rated Valero Energy Corp. the business predictability rank of 5-star.
The petroleum refiner/retailer reported 4Q loss of $1.4 billion or $2.51 per share, despite 6% revenue rise to $18.9 billion. Valero lost big on the quarter from falling gas prices, currently at $75 a barrel. This brings down the 2008 year to a $1.98 billion loss or $3.67 a share. Valero mentioned their sale of the Delaware refinery to European refinery, PBF Investments.
Charles Brandes owns 19,040,174 shares as of September 2009, an increase of 57% from the previous quarter. This position accounts for 1.73% of the $21.32 billion portfolio of Brandes Investment. He purchased between $16.89 and $19.39.
SK Telecom is one of South Korea’s largest mobile carriers. In September 2009, it says that it will sell off its 3.8% stake of China Unicom Ltd. On Monday, Motorola launched its newest Android powered phone via SK Telecom network. SK plans to expand its smart phone market this year.
Charles Brandes owns 19,300,212 shares as of September 2009, which accounts for 1.58% of the $21.32 billion portfolio of Brandes Investment.
Repsol SA, a Spanish petroleum and energy company has a market cap of $20.21 billion; its shares were traded at around $24.18 with a P/E ratio of 14.9 and P/S ratio of 0.3. The dividend yield of Repsol Ypf S.a. stocks is 4.5%. Repsol Ypf S.a. had an annual average earning growth of 26.3% over the past 10 years.
This week, international bidding opens for the Venezuela Carabobo oil reserves. Repsol is one of the first row bidders, along with China National Petro, BP, and Chevron. According to Marketwatch, only 40% of the stake is left for auction. The company CEO Antonio Brufau is facing challenge on his chairman position by share holder Sacyr.
Charles Brandes owns 25,010 shares as of September 2009, an increase of 27.47% from the previous quarter. This position accounts for less than 0.01% of the $21.32 billion portfolio of Brandes Investment.
Barclays PLC operates in commercial and investment banking, insurance, financial and other related services. It has a market cap of $27.82 billion; its shares were traded at around $17.1 with and P/S ratio of 0.5. The dividend yield of Barclays Plc stocks is 0.3%. Barclays Plc had an annual average earning growth of 26% over the past 10 years.
Barclays subsidiary maintains 2500 branches in the United Kingdom and 1000 branches in over 75 other countries. Lehman bankruptcy estate filed suit November 2009 against Barclay Capital for a $5 billion markup gain during Lehman’s September 2008 bankruptcy sale. This week, Barclay is trying to establish a dismissal from the judge. According to NYT, the company might have to raise $27.7 billion in capital to avoid losing its holdings on investment firm BlackRock.
Charles Brandes owns 3,743,566 shares as of September 2009, which accounts for 0.42% of the $21.32 billion portfolio of Brandes Investment.
Health Management Associates, Inc. has a market cap of $1.68 billion; its shares were traded at around $6.77 with a P/E ratio of 15 and P/S ratio of 0.4. Health Management Associates Inc. had an annual average earning growth of 25.2% over the past 10 years. GuruFocus rated Health Management Associates Inc. the business predictability rank of 3-star.
The hospital operator will be releasing their annual earnings report near the end of February. HMA expects an annual net revenue of $4.6 billion and earnings between $0.49 and $0.50 per share. The company recently appointed Kelly Curry as the EVP and CFO. HMA operates 55 hospitals in non-urban communities in the U.S.
Charles Brandes owns 954,632 shares as of September 2009, which accounts for 0.03% of the $21.32 billion portfolio of Brandes Investment. Private Capital owns 6,290,841 shares as of September 2009, which accounts for 3% of the $1.57 billion portfolio of Private Capital Management.
Sources:
Brandes Investment
His buy & hold brochure shows earnings comparison between short-term “opportunistic” investor with a 1.9% rate of return and the S&P500 with an 8% rate of return for 22 years (page 2). His point is that “the wildness tends to fade overtime”. The market in 2008 & 2009 has been quite volatile. “Stock price fluctuations have been more severe than historical averages…daily price moves of 1%-3%...climbing or falling sharply on a regular basis, investors might be tempted to alter their investment plans. But that can be dangerous. Long-term investors might want to ask themselves if they believe recent levels of volatility will continue or revert toward longer-term averages.” Page 3 & 4 are histogram comparisons of Actual versus Expected rate of returns in the months from year 1926 to 2008 (Exhibit 2 & 3). Clearly, months with 2-5% rate of return were the most frequent; less than 1% of the time did we see 10% or higher returns/losses. Bottom-line, “Market fluctuations certainly can test investors’ long-term conviction,” and the buy-and-hold strategy wins.
Good Companies Vs. Good Investments: “One concept that value investors keep in mind is that a good company is not necessarily the same as a good investment. An established firm with high revenue levels and a stable, strong earnings record, for instance, certainly sounds like a good company. But like any company, that firm only represents a good investment if it can be purchased at a favorable price.” The article gave the example of Cisco in the 2000s as a solid company, but was over-priced, $465 billion to be exact, which “dwarfed its $15 billion revenue and $2.5 billion net income”.
“The Intelligent Investor”: Benjamin Graham says how well a stock is priced depends on the ratio found from dividing price per share by annual earnings per share. Expensive stocks have ratio greater than 20; moderate stocks have ratio between 10 and 20; cheap stocks have ratio less than 10.
Brandes.com has published a study on why GDP is a poor predictor for stock market returns. It graphed U.S. equity returns versus the change in GDP for the past 80 years and found no correlation or lack thereof. “We believe the results confirm that investors are best served by focusing on the valuation of stocks compared to their long-term profitability and earnings power. Perhaps Warren Buffett said it best: “You pay a very high price in the stock market for a cheery consensus.” Investors who wait for GDP and other economic measures to provide clear signals of economic health may miss robust stock market performance.”
Valero Energy Corp. (VLO, Financial)
Valero Energy Corporation has a market cap of $10.26 billion; its shares were traded at around $18.18 with a P/E ratio of 15.9 and P/S ratio of 0.1. The dividend yield of Valero Energy Corp. stocks is 3.3%. Valero Energy Corp. had an annual average earning growth of 35.9% over the past 10 years. GuruFocus rated Valero Energy Corp. the business predictability rank of 5-star.
The petroleum refiner/retailer reported 4Q loss of $1.4 billion or $2.51 per share, despite 6% revenue rise to $18.9 billion. Valero lost big on the quarter from falling gas prices, currently at $75 a barrel. This brings down the 2008 year to a $1.98 billion loss or $3.67 a share. Valero mentioned their sale of the Delaware refinery to European refinery, PBF Investments.
Charles Brandes owns 19,040,174 shares as of September 2009, an increase of 57% from the previous quarter. This position accounts for 1.73% of the $21.32 billion portfolio of Brandes Investment. He purchased between $16.89 and $19.39.
SK Telecom Co. Ltd. (SKM, Financial)
SK Telecom Co. is the world's first commercial CDMA digital cellular service. The company has a market cap of $11.26 billion; its shares were traded at around $17.28 with and P/S ratio of 1.1. The dividend yield of Sk Telecom Co. Ltd. stocks is 0.4%. Sk Telecom Co. Ltd. had an annual average earning growth of 29.2% over the past 10 years.SK Telecom is one of South Korea’s largest mobile carriers. In September 2009, it says that it will sell off its 3.8% stake of China Unicom Ltd. On Monday, Motorola launched its newest Android powered phone via SK Telecom network. SK plans to expand its smart phone market this year.
Charles Brandes owns 19,300,212 shares as of September 2009, which accounts for 1.58% of the $21.32 billion portfolio of Brandes Investment.
Repsol YPF S.A. (REP, Financial)
Repsol SA, a Spanish petroleum and energy company has a market cap of $20.21 billion; its shares were traded at around $24.18 with a P/E ratio of 14.9 and P/S ratio of 0.3. The dividend yield of Repsol Ypf S.a. stocks is 4.5%. Repsol Ypf S.a. had an annual average earning growth of 26.3% over the past 10 years.
This week, international bidding opens for the Venezuela Carabobo oil reserves. Repsol is one of the first row bidders, along with China National Petro, BP, and Chevron. According to Marketwatch, only 40% of the stake is left for auction. The company CEO Antonio Brufau is facing challenge on his chairman position by share holder Sacyr.
Charles Brandes owns 25,010 shares as of September 2009, an increase of 27.47% from the previous quarter. This position accounts for less than 0.01% of the $21.32 billion portfolio of Brandes Investment.
Barclays PLC (BCS, Financial)
Barclays PLC operates in commercial and investment banking, insurance, financial and other related services. It has a market cap of $27.82 billion; its shares were traded at around $17.1 with and P/S ratio of 0.5. The dividend yield of Barclays Plc stocks is 0.3%. Barclays Plc had an annual average earning growth of 26% over the past 10 years.
Barclays subsidiary maintains 2500 branches in the United Kingdom and 1000 branches in over 75 other countries. Lehman bankruptcy estate filed suit November 2009 against Barclay Capital for a $5 billion markup gain during Lehman’s September 2008 bankruptcy sale. This week, Barclay is trying to establish a dismissal from the judge. According to NYT, the company might have to raise $27.7 billion in capital to avoid losing its holdings on investment firm BlackRock.
Charles Brandes owns 3,743,566 shares as of September 2009, which accounts for 0.42% of the $21.32 billion portfolio of Brandes Investment.
Health Management Associates Inc. (HMA, Financial)
Health Management Associates, Inc. has a market cap of $1.68 billion; its shares were traded at around $6.77 with a P/E ratio of 15 and P/S ratio of 0.4. Health Management Associates Inc. had an annual average earning growth of 25.2% over the past 10 years. GuruFocus rated Health Management Associates Inc. the business predictability rank of 3-star.
The hospital operator will be releasing their annual earnings report near the end of February. HMA expects an annual net revenue of $4.6 billion and earnings between $0.49 and $0.50 per share. The company recently appointed Kelly Curry as the EVP and CFO. HMA operates 55 hospitals in non-urban communities in the U.S.
Charles Brandes owns 954,632 shares as of September 2009, which accounts for 0.03% of the $21.32 billion portfolio of Brandes Investment. Private Capital owns 6,290,841 shares as of September 2009, which accounts for 3% of the $1.57 billion portfolio of Private Capital Management.
Sources:
Brandes Investment
