If Common Shareholders Are Wiped Out in Fannie/Freddie Bailout, Brandes Could Take Another Hit
The New York Times Reports this morning (Sept. 6) that Fannie Mae and Freddie Mac, the big mortgage giants, may be bailed out by the federal government this weekend before the Asian markets open Sunday evening. "Shareholders would be virtually wiped out," says the Times. This could be another black eye for San Diego's Brandes Investment Partners, the beleaguered money manager which has made a lot of bad bets since last year. According to Yahoo, Brandes is one of the largest shareholders of Freddie Mac, holding 25.9 million shares of the common, or 4 percent of it. As I have reported earlier, Brandes had $125 billion under management late last year, and was down to $86.4 billion on June 30. "I am not concerned with our recent underperformance," chief executive Charles Brandes says on his current website. He says that the fundamental trait of successful investing is to "have enough knowledge of the companies and industries in which you're investing." But Brandes has gotten into some huge losers. The firm has had huge positions in faltering newspaper chains Gannett and McClatchy, and mortgage firms Countrywide, Washington Mutual, and Freddie Mac. In each case, he got in at a price substantially higher than the current value, as I have reported earlier. Weak performance has been stark through midyear, according to data on the Brandes website. For example, Brandes U.S. midcap value stocks are down 24.32% this year, versus minus 6.53% for Standard & Poor's U.S. midcap universe. Similar underperformance runs through various other categories of the Brandes portfolio. As reported earlier, Charles Brandes has built the most expensive home in San Diego County, a Rancho Santa Fe estate worth $60 million, according to Forbes Magazine. There he lives with his new, beautiful, young bride. The two are frequently pictured in high society. Investors would be justified in asking if Brandes has run into a string of bad luck, or is not minding the store. He is listed in the Forbes 400 as a multi-billionaire. If the portfolio continues to underperform and money keeps flowing out, it is a good question if he will be on the list this year.
More like this:
- Brandes Lays Off More Than 40 — Dec. 7, 2011
- Brandes Investment Partners Still Underperforming Sharply, Losing Clients — Jan. 20, 2009
- Brandes Takes Another Bath; This One Is in Royal Bank of Scotland — Oct. 11, 2008
- Money Flows Out of Brandes's Investment Firm, As Stock Portfolio Fails To Perform — July 28, 2008
- Brace Yourself for Another Bailout: Fannie Mae and Freddie Mac Near the Brink — July 10, 2008