Monday, April 2, 2007
In investing, you have to be willing to go where no one wants to go.
Just ask Charles Brandes.
Brandes founded his firm, Brandes Investment Partners, in 1974 – right after the seventh worst stock crash in history. U.S. equities had lost 45% of their value in the previous two years. Few times in the 20th century seemed worse to open a stock-based investment firm.
But Brandes was a disciple of legendary value investor Benjamin Graham. So while everyone else saw disaster in the U.S. markets, Brandes saw quality companies trading at bargain-basement prices. He saw a beautiful illustration of the three most important words Graham ever spoke to him: "margin of safety."
Brandes bought and bought big.
Since 1987, Brandes' Global Equity fund has shown investors an average annual return of 14%, outperforming the MSCI global-stock benchmark by an average of 5%. Last, year he returned a whopping 27%.
Today, Brandes' firm manages more than $117 billion in assets. Brandes himself is worth about $2 billion, making him the 133rd richest American.
And he's shifting his firm's money into telecom stocks.
Investing trends usually take five years to play out. Telecom stock ruled from 1996 to 2001. It's no coincidence that from 2001 to today, the stocks on the other end of the spectrum – real estate and commodities – have been the biggest winners.
Brandes is betting that it's time for the pendulum to swing back. He currently has more than 24% of his portfolio in telecom stocks.
The value there is unbelievable. Telecom giants Verizon (VZ) and Sprint Nextel (S) are both trading at four times cash flow. And the industry is beginning to show signs of life again. Verizon and AT&T are both approaching new 52-week highs.
The Telecom ETF (IYZ) has outperformed every other industry except utilities for the last 12 months. While oil and real estate dominate the headlines, telecom stocks have begun a strong rally.
Brandes favors international fixed-line operators...
The U.S. may be saturated with phone lines, but in many developing countries, these services are still in their infancy. We'll dig deeper in to the sector in the coming week and report on our findings soon.
Everything related to metals production soaring... Steel Dynamics, Chaparral Steel, Market Vectors Steel, International Aluminum, Metal Management, and Cleveland Cliffs at new highs.
Food producers Groupe DANONE, Unilever, Sanderson Farms, Tyson, and JM Smucker reach new 52-week highs.
Biopharma leader Gilead Sciences at new all-time high.