At The Motley Fool, we understand that it often pays to zig when the rest of Wall Street zags. Like us, hedge funds rarely move in lockstep with the broader market. By tracking these little-followed funds' buy and sell decisions, we can often gain valuable insights into opportunities the market might be missing.

Every quarter, any fund managers overseeing more than $100 million must publicly disclose their quarter-end holdings in the Securities and Exchange Commission's Form 13-F. It lists all U.S.-traded securities the fund's manager held at the end of the quarter. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.

To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.

Meet Brandes Investment Partners
Charles Brandes is the founder and chairman of Brandes Investment Partners. He started the company in 1974. Brandes is a value investor and focuses on the purchase of securities that are trading at discounts to their intrinsic value. The total market value of Brandes Investment Partners' disclosed equity holdings as of March 31 -- the latest quarter for which data is available -- was $14.0 billion across 170 holdings.

Why should you care? Because according to AlphaClone's back-test simulation, if you'd invested in Brandes Investment's 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 51.9% between January 2000 and now, versus just 13.9% for the S&P 500.

The fund's 10 largest positions (by value) and associated changes in share counts as of March 31 were:

  1. Pfizer (NYSE: PFE) -- reduced 8.9%
  2. Centrais Eletricas Brasileiras (NYSE: EBR) -- reduced 4.1%
  3. Microsoft (Nasdaq: MSFT) -- increased 12.3%
  4. Telefonos de Mexico (NYSE: TMX) -- reduced 8.0%
  5. Petroleo Brasileiro (NYSE: PBR) -- increased 0.2%
  6. Chesapeake Energy (NYSE: CHK) -- reduced 16.7%
  7. Cemex (NYSE: CX) -- reduced 1.1%
  8. Valero Energy (NYSE: VLO) -- reduced 30.6%
  9. Chevron (NYSE: CVX) -- reduced 12.2%
  10. AT&T (NYSE: T) -- reduced 8.0%

Outside the top 10 holdings:

  • Rising Positions: The fund increased its positions in Western Digital and Merck.
  • Falling Positions: The fund reduced its exposure to Wells Fargo and Intel.
  • Eliminated Positions: During the quarter, the fund sold out of stock positions in Motorola Solutions and Te Connectivity.

Selected Q1 2011 commentary
Brandes Investment Partners has a fairly well-diversified portfolio. At just 25%, the services sector represents the highest-weighted part of the portfolio, while technology, financial, and energy stocks also play a significant role. Here's where the firm is winning and losing, and making new bets, at the moment:

  • Current leaders: Chesapeake Energy and Valero Energy did well in the first quarter, rising 30% and 29%, respectively. These stocks together represent about 5% of the overall portfolio.
  • Current laggard: Cemex fell 17% in the first quarter of 2011.
  • New bets: The largest new addition during the quarter was Dell, which represented 2% of the total portfolio at quarter-end.

So there you have it -- the blow-by-blow of Brandes Investment Partners' latest moves. Tell us what you think in the comments section below.

Company data provided by AlphaClone LLC, a San Francisco-based research and investment-management firm that tracks hedge-fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.


Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance had a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance, and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.

The Motley Fool owns shares of Microsoft, Western Digital, Wells Fargo, and Petroleo Brasileiro, and owns shares of and has bought calls on Intel. Motley Fool newsletter services have recommended buying shares of Microsoft, AT&T, Pfizer, Petroleo Brasileiro, Chesapeake Energy, Chevron, and Intel, as well as creating a diagonal call position on Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.