Brandes Investment, the firm founded by Charles Brandes (Trades, Portfolio) in 1974, revealed its first-quarter equity portfolio earlier this week.
Following Benjamin Graham’s value investing style, the San Diego-based investment firm takes positions in out-of-favor securities that have attractive total return potential and holds them until the market recognizes their true worth.
Keeping these criteria in mind, the firm’s 13F filing for the three months ended March 31 showed it entered 19 new positions, sold out of four stocks and added to or trimmed a number of other existing investments. The most notable trades for the quarter included increased bets on Embraer SA (ERJ, Financial), Sanofi SA (SNY, Financial) and Wells Fargo & Co. (WFC, Financial) and reductions of the General Dynamics Corp. (GD, Financial) and Truist Financial Corp. (TFC, Financial) holdings.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Embraer
Brandes invested in 2.76 million shares of Embraer (ERJ, Financial), adding 17.59% to the stake. The transaction had an impact of 0.96% on the equity portfolio. The stock traded for an average price of $13.31 per share during the quarter.
The firm now holds 18.48 million shares, accounting for 6.43% of the equity portfolio. GuruFocus estimates it has lost 28.95% on the long-held investment, which is also its top holding.
The Brazilian aerospace company has a $2.46 billion market cap; its shares were trading around $13.48 on Thursday with a price-earnings ratio of 67.06, a price-book ratio of 0.92 and a price-sales ratio of 0.53.
The GF Value Line suggests the stock is modestly overvalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 70 out of 100, the GF Score indicates the company has poor performance potential. While it received a high rating for momentum, the profitability, growth and financial strength ranks are more moderate and the GF Value is low.
Of the gurus invested in Embraer, Brandes Investment has the largest stake with 10.06% of its outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Steven Cohen (Trades, Portfolio) also have positions in the stock.
Sanofi
The firm boosted the Sanofi (SNY, Financial) stake by 164.14%, picking up 644,231 shares. The transaction impacted the equity portfolio by 0.75%. Shares traded for an average price of $48.64 each during the quarter.
Brandes now holds 1.03 million shares, representing 1.20% of the equity portfolio. GuruFocus data shows it has gained 25.59% on the investment over its lifetime.
The French pharmaceutical company has a market cap of $134.82 billion; its shares were trading around $53.98 on Thursday with a price-earnings ratio of 15.32, a price-book ratio of 1.67 and a price-sales ratio of 2.73.
According to the GF Value Line, the stock is fairly valued currently.
The GF Score of 84 implies the company has good outperformance potential, driven by high ratings for profitability, financial strength and momentum and more moderate growth and GF Value ranks.
With a 3.36% stake, Dodge & Cox is Sanofi’s largest guru shareholder. Other top guru investors include Ken Fisher (Trades, Portfolio), Hotchkis & Wiley and PRIMECAP Management (Trades, Portfolio).
Wells Fargo
Brandes Investment upped its Wells Fargo (WFC, Financial) stake by 30.23%, buying 856,484 shares. The equity portfolio was impacted by 0.68%. During the quarter, the stock traded for an average per-share price of $43.59.
The firm now holds 3.68 million shares, which occupy 2.93% of the equity portfolio as its second-largest holding. GuruFocus found it has gained 56.21% on the investment so far.
The San Francisco-based bank has a $143.52 billion market cap; its shares were trading around $38.30 on Thursday with a price-earnings ratio of 10.96, a price-book ratio of 0.91 and a price-sales ratio of 1.89.
Based on the GF Value Line, the stock appears to be modestly undervalued currently.
The company is likely to have average performance going forward with a GF Score of 71. Despite having a high GF Value rank and middling marks for profitability, growth and momentum, the financial strength rating is low.
Dodge & Cox is the bank’s largest guru shareholder with a 3.10% stake. Wells Fargo is also being held by Primecap, Chris Davis (Trades, Portfolio), Hotchkis & Wiley, Richard Pzena (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, the T Rowe Price Equity Income Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and many others.
General Dynamics
The firm slashed the General Dynamics (GD, Financial) position by 87.93%, selling 215,713 shares. The transaction had an impact of -1.50% on the equity portfolio. The stock traded for an average price of $231.05 per share during the quarter.
Brandes now holds 29,602 shares, which make up 0.14% of the equity portfolio. According to GuruFocus, the firm has gained an estimated 45.30% on the investment to date.
The aerospace and defense company, which is headquartered in Reston, Virginia, has a market cap of $57.10 billion; its shares were trading around $208.14 on Thursday with a price-earnings ratio of 17.02, a price-book ratio of 2.99 and a price-sales ratio of 1.45.
The GF Value Line suggests the stock is fairly valued currently.
The GF Score of 81 means the company has good outperformance potential due to a high profitability rank and more moderate ratings for the other four criteria.
Holding 0.35% of its outstanding shares, Primecap is General Dynamics’ largest guru shareholder. Tom Gayner (Trades, Portfolio), Pzena, Barrow, Hanley, Mewhinney & Strauss and Ray Dalio (Trades, Portfolio)’s Bridgewater Associates are among its other guru investors.
Truist Financial
Brandes curbed the holding of Truist Financial (TFC, Financial) by 65.65%, dumping 826,965 shares. The transaction impacted the equity portfolio by -1%. During the quarter, shares traded for an average price of $43.65 each.
The firm now holds 432,639 shares, giving it 0.31% space in the equity portfolio. GuruFocus says it has gained around 24.49% on the investment thus far.
The Charlotte, North Carolina-based bank holding company has a $35.56 billion market cap; its shares were trading around $26.70 on Thursday with a price-earnings ratio of 5.95, a price-book ratio of 0.64 and a price-sales ratio of 1.49.
According to the GF Value Line, the stock is significantly undervalued currently.
The company has poor performance potential with a GF Score of 59. Although it raked in a high GF Value rank and moderate profitability rating, the other three metrics are low.
Dodge & Cox is Truist’s largest guru shareholder with a 1.42% stake. Other guru investors include Diamond Hill Capital (Trades, Portfolio), Simons’ firm, Dalio’s firm, Tweedy Browne (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Davis.
Additional trades and performance
During the quarter, the firm also added to a number of holdings, including UBS Group AG (UBS, Financial), Bank of America Corp. (BAC, Financial), Alibaba Group Holdings Ltd. (BABA, Financial), Takeda Pharmaceutical Co. Ltd. (TAK, Financial) and SAP SE (SAP, Financial).
Brandes’ $4.71 billion equity portfolio, which was composed of 153 stocks as of March 31, is most heavily invested in the health care, financial services and industrials sectors.
According to GuruFocus, the firm returned -2.18% in 2022, outperforming the S&P 500’s return of -18.11%.
