Brandes Investment Partners (Europe) Limited (Brandes Europe) was incorporated in 2012 and is authorized by the Central Bank of Ireland to provide investment services under the European Communities Markets in Financial Instruments Directive (MiFID) Regulations 2007 (as amended). As may be permitted ... more
Our investment philosophy is based on two key components:
1. A Graham and Dodd bottom-up value approach to identifying undervalued businesses
2. Active management, which typically sets our portfolios apart from broad market indices
Brandes is committed to using the Graham and Dodd investment approach introduced in the classic book Security Analysis. We believe that behavioral factors may cause investors to make errors in pricing securities, and we search across global investment markets in an effort to identify these potentially undervalued businesses. We perform fundamental analysis to determine a conservative estimate of a company’s “intrinsic” or true long-term business value, considering its earnings power, cash flow generation or net asset value.
The discount of a stock’s current market price to our estimated intrinsic value of that company is what we define as “margin of safety”. While numerous factors are considered in making purchase decisions, the most significant is margin of safety. This metric is our key driver because it captures the risk-adjusted capital appreciation potential we identify in each position.
Brandes expects that over time other investors will often recognize each company’s true long-term business value, and its market price may ultimately reach or exceed our estimate of the company’s intrinsic value. Our experience has shown us that patience is important. It may take three to five years or longer for our estimate of a company’s true long-term business value to be recognized in the market. While it is possible that our estimated intrinsic value for a particular company might not be realized, we believe that consistently buying businesses with attractive margins of safety will enable us to achieve our ultimate goal of outperforming relevant benchmarks over the long term.
Brandes seeks to identify and pursue value opportunities wherever they exist. Our portfolio weightings are purely a by-product of bottom-up stock selection, and we do not attempt to match the security allocations of broad market indices. Therefore, our portfolios are typically positioned quite differently from the benchmark.