JULY 2016
Dear Clients and Friends,
As we close out the first half of 2016, financial-market turbulence worldwide has once again taken center stage, this time spurred by uncertainties surrounding the ramifications of a "Brexit" win in a referendum for the United Kingdom to leave the European Union. In the weeks and months to come, we expect markets and investors will continue to grapple with the many unknowns about the medium- to long-term macroeconomic and geopolitical implications of Brexit.
However, Brandes' experience navigating global markets for over 42 years has taught us that markets have a tendency to misprice companies during the height of uncertainty. From a valuation standpoint, we are investigating appealing opportunities in the United Kingdom, the rest of Europe and other regions in the aftermath of the global market selloff in June. At quarter end, Brandes' U.K. allocations were primarily in the retail sector, pharmaceuticals and integrated oil companies. Exhibiting attractive valuations relative to their fundamentals, in our opinion, these holdings represent potentially mispriced opportunities. While the companies will undoubtedly face challenges as they navigate the evolving landscape, we believe they will continue to adapt to this dynamic environment, as they always have.
Read Brandes’ official statement on Brexit here.
During the quarter, we were encouraged by increased interest in value as an investment style. For most of the past decade, growth benchmarks in many markets around the world have outpaced their value counterparts, making this one of value's longest periods of underperformance we have observed. However, despite the pickup in short-term volatility at the end of the second quarter, we have noticed a definite change: more investors asking about value and some are concerned that they may not have enough of it in their portfolios.
Not too long ago, some investors were wondering, "Is value dead?" Our thought leadership division, the Brandes Institute, hosted a meeting of its advisory board in New York City in early April. We invited clients, colleagues and fellow practitioners to join us for a panel discussion on value investing and to debate this question.
A summary of the panel discussion can be found here.
Another topic on investors' minds, particularly those with exposure to value portfolios, is the price of oil and how to make sense of investing in the sector. Our analyst team recently wrote a report on the topic titled "Analyzing the Oil-Price Decline and the Search for Value."
To view it, please click here.
Thank you for your continued business.
Brandes Investment Partners
Past performance is not a guarantee of future results. No investment strategy can assure a profit or protect against loss. The information provided in this material should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any security transactions, holdings or sectors discussed were or will be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance discussed herein. Strategies discussed are subject to change at any time by the investment manager in its discretion due to market conditions or opportunities. Market conditions may impact performance. Please note that all indices are unmanaged and are not available for direct investment. International and emerging markets investing is subject to certain risks such as currency fluctuation and social and political changes; such risks may result in greater share price volatility.
The recommended reading has been prepared by independent sources which are not affiliated with Brandes Investment Partners. Any securities mentioned reflect independent analysts’ opinions and are not recommendations of Brandes Investment Partners.
The Brandes Institute is a division of Brandes Investment Partners.
Ireland/Europe: FOR PROFESSIONAL INVESTOR USE ONLY. Issued by Brandes Investment Partners (Europe) Limited, 36 Lower Baggot Street, Dublin 2. Registered in Ireland Number 510203. Authorised and regulated by the Central Bank of Ireland. This report is being provided for information purposes only, no representation or warranty is made, whether express or implied as to the accuracy or completeness of the information provided. To the fullest extent permitted by law Brandes Investment Partners (Europe) Limited (Brandes Europe) shall not be liable for any loss or damage suffered by any person as a result of the receipt of this Report. Recipients of this Report should obtain their own professional advice. The distribution of this Report may be restricted by law. No action has been or will be taken by Brandes Europe to permit the possession or distribution of this Report in any jurisdiction where action for that purpose may be required. Accordingly, this Report may not be used in any jurisdiction except under circumstances that will result in compliance with any applicable laws and regulations. Persons to whom this Report is communicated should inform themselves about and observe any such restrictions. This information is being issued only to, and/or is directed only at (i) persons who have professional experience in matters relating to investments or (ii) are persons falling within Article 49(2)(a) to (d) ("high net worth companies, unincorporated associations etc.") of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 or to whom it may otherwise lawfully be communicated (all such persons together being referred to as "Relevant Persons"). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is available only to relevant persons and will be engaged in only with relevant persons. This Report is a confidential communication to, and solely for the use of, the persons to whom it is distributed to by Brandes Europe.
The foregoing reflects the thoughts and opinions of Brandes Investment Partners exclusively and is subject to change without notice.