Brandes Investment Partners, L.P., is a leading investment advisory firm, specializing in managing global equity and fixed-income assets for clients worldwide. Since the firm’s inception in 1974, Brandes has applied the value investing approach pioneered by Benjamin Graham to security selection, and was among the first investment firms to bring a global perspective to value investing.
By applying the value-oriented investing principles of Graham and Dodd, Brandes seeks to take advantage of market irrationality and short-term security mispricing by buying securities that we believe are undervalued and offer attractive total-return potential – i.e., dividend income and capital appreciation growth. Our analysts begin with rigorous, independent, bottom-up analysis of individual companies. By choosing stocks that are selling at a discount to our estimates of their intrinsic business value, Brandes seeks to establish a margin of safety and an opportunity for competitive long-term performance.
"Margin of safety" is the difference between a company’s market price and what Brandes believes is the intrinsic value of the company. Intrinsic value is a company’s real worth, taking into consideration all determinants of value. For example, we believe book value and short-term pricing variables don't always reflect true value. That’s why we undertake a thorough due diligence to estimate each company’s true value and establish a reasonable expectation for how its price may behave going forward.
The theory of value investing holds that the market should eventually realize the true worth of a company and its price should climb toward its intrinsic value over the long term. This combination of rational fundamental analysis and the discipline to try and take advantage of market price irrationality enables the firm to target competitive long-term results.
An unwavering belief in the long-term benefits of value investing.
A disciplined, team-oriented approach to identifying high-quality securities selling at what we believe are discounted prices.
A 48-year history of independent, bottom-up portfolio construction and client service.
Brandes’ process uses fundamental analysis of price ratios to seek quality investments trading at discount valuations. Price ratios are a way to measure how cheaply (or expensively) a stock is trading compared to fundamental characteristics of its issuing company. For example, the price-to-earnings ratio (P/E) represents the current stock price divided by earnings. A lower P/E indicates a stock may offer better value in relation to its earnings. Similarly, a lower price-to book (P/B), price-to-cash flow (P/CF) or debt-to-equity (D/E) ratio may speak well of a company’s balance sheet and growth potential. Average dividend yield may also help us to gauge a company’s outlook for dividends, which may affect a stock’s total return over the long run.
We use a similar approach and investment criteria for identifying quality, potentially mispriced fixed-income securities:
Structured, research-driven process:
The goal of such thorough research analysis and an Investment Committee discussion process are portfolios that we believe are well diversified, contrarian in composition, and which seek the lowest entry point risk possible for our clients.
Value investment managers research and analyze individual companies to determine their underlying business value (intrinsic value), and then look even further for companies they believe are trading well below this estimated intrinsic value. Ideally, companies are purchased for a value-oriented investment portfolio at significant discounts, and sold if they appreciate to their intrinsic value.
Our emphasis on Graham and Dodd value principles results in a concentration in value securities. Such value securities, by their nature, have tended to be out of favor with many investors, and their market prices and liquidity may exhibit periods of higher volatility than non-value securities. In addition, the market may experience periods where investors’ concerns about risk cause value securities as a whole to generally fall in or out of favor, causing our investment performance to vary widely from that of the benchmark.