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Brandes Investment Partners in its first quarter message to investors says it is "unflinchingly enthusiastic about the values we are finding" in the stock market. Today will be looked upon as one of history's "most timely and rewarding periods to invest." However, Brandes says it is "frustrated and disappointed with the results we have delivered on your behalf...we are not pleased nor proud of our performance." The money manager, which looks for so-called undervalued stocks, had a dismal year in 2008. Brandes's U.S. value stocks lost 55.4% versus the Standard & Poor's 500's loss of 37%. Brandes's small caps lost 59.5% versus the Russell 2000's minus 33.8%. Brandes's various categories of bonds underperformed starkly, too. The firm took big positions in beaten-down financial stocks, but got hit hard in Freddie Mac, Washington Mutual, Countrywide, and Royal Bank of Scotland. It remains bullish on the financials. Brandes was among the largest investors in newspapers such as Gannett and McClatchy, and took a hosing. It also lost in its big bets on Ford, General Motors, and Kodak. It has $40.6 billion under management, down 51% from 2007 and 60% from 2005.

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Comments

Visduh April 11, 2009 @ 8:45 p.m.

Looking for undervalued stocks in a market that is trending downward is easy. The hard part is knowing which ones will not just keep on going down. David Dreman has described his style of value investing as one where the investor looks for stocks that are irrationally beaten down. This often occurs in whole sectors of the market, and is typical of entire industries. So Brandes appears to have figured the financials could only go up, when the sector bear market was just starting. Wrong. Those stocks were not irrationally beaten down, they were down and are down, and could continue to lose value, for very good reasons.

If they stay with the same stocks and bonds, can they recover fast? Don't bet on it. And the bloodbath in the financial stocks may not be over yet.

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Don Bauder April 11, 2009 @ 9:02 p.m.

Response to post #1: Yes, and David Dreman has been canned, according to a recent column by Floyd Norris in the NY Times. Dreman was a celebrated expert in value investing -- a Forbes columnist. But his recent poor record did him in. Bill Miller of Legg Mason was another value investor who could do no wrong for years and years. But he has been severely belted of late. Too many times, the value investors get stuck with the buggy whip makers. It has happened to me. Brandes bought the financials at much higher prices. They will have to come back a long way for him to get back to even. Best, Don Bauder

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valueinvestingisdead April 13, 2009 @ 8:28 a.m.

You have to be willing to change with the times. Just because it is cheaply priced (i.e. Ford, GM, Fannie Mae, Washington Mutual, Gannett, etc) doesn't mean it is a good value. Houses are cheap in Detroit and from a value perspective, seem like a great buy but are they? Better to own something a little more expensive in a growing industry than a so-called bargain in a dying industry (autos, papers, mortgage companies etc). They preach this margin of safety stuff but how can you defend it when the stocks go down 90% or more in some cases? That is hardly what I call a margin of safety. The performance needed just to get back to even is staggering.

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Don Bauder April 13, 2009 @ 10:34 a.m.

Response to post #3: Good points. In looking for neglected stocks with inordinately low price-earnings multiples, comparatively high yields, and historically good returns by various measures, the value investors have found themselves with dogs in dying industries such as daily newspapers (Gannett and McClatchy), domestic autos (GM and Ford), and financial concerns (Countrywide and Royal Bank of Scotland), etc. Value investing seemed to work beautifully for many years, but this bear market has been the killer. Best, Don Bauder

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valueinvestingisdead April 14, 2009 @ 9:37 p.m.

Firm down to $33 Billion now. Staggering loss of wealth. Goes to show that nobody truly understands this casino called the stock market and the best way to make money is OFF the market (fees, commissions etc) instead of IN the market. While money managers cruise around in million dollar sports cars, investors are wondering how to pay for their next oil change on their Hyundai.

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Don Bauder April 15, 2009 @ 7:33 a.m.

Response to post #5: How do you know the firm is down to $33 billion now? I would appreciate knowing. Also, as we have discussed before, Charles Brandes's conspicuous consumption is not astute, given the dismal investment returns and the money fleeing from his fund. He built the most expensive home in SD County history (Rancho Santa Fe, of course), married a beautiful lady about half his age, indulges himself in expensive autos, gets photographed constantly in the society sections. Not wise at all. Best, Don Bauder

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valueinvestingisdead April 15, 2009 @ 7:55 a.m.

Don, They just posted their stunning (in a bad way) results for 1Q and it has total firm assets listed on each list of $33B.

Stuff like U.S. Value is down 80% in 18 months. Some margin of safety. Wonder what kind of halloween bash we will see this year? They could post statements in a room and call it the ROOM OF HORRORS.

Go to their site....www.brandes.com and performance Open up any of the funds performance and you will see the firm's assets....enjoy.

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Don Bauder April 15, 2009 @ 8:33 a.m.

Response to post #7: Yes, Brandes has just posted its first quarter results, and they continue to be worse than the results of other money managers. The amount of money under management is now $33.3 billion, down from $40.6 billion at yearend 2008 and one-third of the money under management in 2005. I randomly picked three stock categories for the first quarter: Brandes global value fund was down 10.08%, worse than the benchmark's decline of 5.8%. Brandes U.S. value equity was down 14.7% vs. the 11% drop for the S&P 500. Brandes global equity was down 16% vs. a decline of 11.9% for the benchmark. Best, Don Bauder

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Don Bauder April 15, 2009 @ 8:36 a.m.

Response to post #8: In its statement for the first quarter, Brandes says it sees "tremendous values" in today's market. It intends to continue using its value investing approach -- looking for stocks that the market has beaten down too severely. It foresees a "healthy and profitable banking sector" once stability is restored. Best, Don Bauder

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valueinvestingisdead April 15, 2009 @ 8:52 a.m.

They claim that they are not losing clients and that most of the losses are due to market declines (see stability report).. but look at some of these drop-offs:

INTERNATIONAL 5617 Accounts in 1998 to 1809 now. US VALUE 796 Accounts in 2004 to 339 now. GLOBAL 4464 Accounts in 2001 to 1627 now.

WOW! Yet they claim this in their report: "Declines in global markets have affected our firm. Our assets under management (“AUM”) fell from $111.6 billion on 12-31-07 to $52.9 billion on 12-31-08. However, the majority of the losses within our portfolios during 2008 came from market attrition, not from client outflow."

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Don Bauder April 15, 2009 @ 12:13 p.m.

Response to post #11: Brandes may claim that while the number of accounts has dropped, the money under management has not, other than for market reasons. I hasten to say that I don't know that Brandes is making that claim -- it's just one way by which both statements could be reconciled. Certainly, I think it's possible that the MAJORITY of the loss is market decline. After all, those declines have been huge. Best, Don Bauder

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valueinvestingisdead April 15, 2009 @ 1:44 p.m.

Reply to #12

Pull up any of the Performance Portfolios and it lists the # of accounts. It is dropping like a bad transmission.

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Don Bauder April 15, 2009 @ 3:35 p.m.

Response to post #13: That appears to be true. When your performance is this bad, you are going to lose clients. Best, Don Bauder

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valueinvestingisdead April 16, 2009 @ 6:55 a.m.

Reply to #14 - Would have been better off in a money market versus supporting the Ferrari lifestyle. Like I said, the best way to make money is OFF the market, not in it. The HOUSE always wins. They should move Wall St to Vegas.

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Don Bauder April 16, 2009 @ 10:23 a.m.

Response to post #15: There is essentially little difference between Wall Street and Vegas. In recent decades, Wall Street has become a casino. Best, Don Bauder

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katzkup April 23, 2009 @ 8:09 a.m.

Don, just reviewed Brandes performance for Q1. Are you kidden me. When is somebody from some type of regulatory institution going to step in and start holding some of these 6 to 7 figure paycheck clowns responsible for LOSING millions more in the first quarter 2009?

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valueinvestingisdead April 23, 2009 @ 11:48 a.m.

Reply to #17 - Nothing illegal about losing money, just poor decisions. Apparently they thought that a great place to pour Billions of hard earned client dollars was in dying industries like newspapers, homebuilders, leveraged banks and mortgage companies, and the hot hot hot market of autos. I am sure that clients love paying fees for this type of guru stock picking.

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valueinvestingisdead Oct. 19, 2009 @ 7:59 p.m.

Kudos to Brandes so far this year. They have rebounded some. Problem is that if your account got crushed to peanuts, it is not worth peanuts and a half. Anyways, they appear back on track and congrads.

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valueinvestingisdead Oct. 19, 2009 @ 8 p.m.

Kudos to Brandes so far this year. They have rebounded some. Problem is that if your account got crushed to peanuts, it is now worth peanuts and a half. Anyways, they appear back on track and congrads.

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