Charles Brandes, a closely followed value investor, is the chairman of Brandes Investment Partners. He started his career in 1968 as a broker trainee.
In the late 60s and early 70s, growth investing in the U.S. was the rage. But Brandes was not impressed with the Nifty-Fifty mania or the Go-Go era. Nifty Fifty refers to 50 popular blue-chip stocks that were listed on the New York Stock Exchange and widely regarded as solid growth stocks which investors paid extraordinarily high prices for. The Go-Go era refers to the meteoric rise of growth stocks in the 1960s. The “go-go” stocks plunged in the devastating market crashes that followed in the 1970s.
During that period, a chance yet inspiring meeting occurred with Benjamin Graham who visited his office. After meeting the father of value investing and talking with him personally, Brandes decided that it was time to start his own business based upon the value principles of Benjamin Graham and David Dodd. In 1974, he founded Brandes Investment Partners in San Diego. He encapsulates smart investing by these words: “A stock price can fluctuate a lot more than the actual value of the business it represents. That’s why it’s just smart investing to take advantage of the stock market’s inconsistencies to buy businesses at very big discounts to the their intrinsic value.”
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Rudy Luukko with Morningstar Canada caught up with Charles Brandes. An excerpt from the interaction is reproduced below.
Earnings growth is what ultimately drives stock prices. So, it’s interesting that you would opt for value especially at that time with growth being en vogue. So, why is that? What are the merits of value investing?
The merits are that it actually works better over a long period of time than growth investing. It has a lot to do with the behavioural aspects of the stock market and being able to take advantage of the stock market during various times [when] prices get much cheaper than the actual underlying value of the business that you actually own.