Ferrari-loving Brandes doubles C&C stake to 6%

Ferrari-loving billionaire US investor Charles Brandes’s firm, which focuses on buying “unloved” stocks, has doubled its stake in C&C to more than 6 per cent since it emerged as an investor 14 months ago.

San Diego-based Brandes Investment Partners disclosed on Tuesday that its position in the cider and beer maker has increased to 6.03 per cent from 5.1 per cent previously, making it the company's fourth-largest investor.

While the firm has been known to take an activist approach to investments, sometimes working behind the scenes to push companies to pursue certain strategies, it is understood that this shareholding is driven by C&C’s strong ability to generate cash and progressive dividends.

However, the firm is sitting on a loss on the shares it has been buying since August last year, when it breached the 3 per cent level at which it is forced to disclose its holding under stock market rules.

Shares in the company are currently priced at €3.50, down from the €3.54 level at which they traded around the time of the initial disclosure and well off the €3.67 and €3.90 points at which they were changing hands on days in November and March, respectively, when Brandes was adding to its position.

Neither C&C nor Brandes commented on the US firm’s shareholding.

Brexit

C&C, which is set next week to report results for the six months to the end of August, is expected by analysts to post €122.8 million of earnings before interest, tax, depreciation and amortisation for the full year, virtually unchanged compared to the prior year. The consensus forecast has come down by almost 3 per cent since the Brexit referendum in June.

With almost 50 per cent of profits denominated in sterling and reported in euro, C&C has been exposed to a 16 per cent decline in the value of the UK currency since the vote.

In its last financial year, C&C returned €115 million of cash to shareholders through dividends and stock buybacks. It had earmarked a further €23.4 million for share buybacks in the first half of the current year and committed to continue its progressive dividend policy.

Charles Brandes, an avid collector of Ferraris with an underground garage with room for 37 cars under his Californian mansion, started off his career as a broker in 1968. He set up Brandes Investment Partners in 1974, with its investment focus on finding value in out-of-favour companies with strong cash flows.

The firm hit the financial headlines on this side of the Atlantic over a decade ago as a shareholder in Marks & Spencer, when it emerged as a rare supporter of Philip Green’s abortive 2004 takeover bid for the retailer. The company subsequently built up and sold a stake in Sainsbury’s to an investment fund backed by Qatar’s royal family. The latter amassed a 25 per cent holding in the supermarket chain in 2007 before launching a failed takeover bid.

Brandes made some costly investments in the financial sector before the crisis, including Washington Mutual, Freddie Mac, and Royal Bank of Scotland.