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Brandes Investment Partners Buys 7.9% Stake in Countrywide, 1.5% of Washington Mutual

By , Money Morning •

From Staff Reports

Countrywide Financial Corp. (CFC) received another financial backer during the third quarter, when U.S. fund manager Brandes Investment Partners LP bought a 7.9% stake in the nation's largest mortgage lender.

The purchase makes the San Diego-based Brandes the second-largest Countrywide investor, trailing the 10.1% stake held by Baltimore-based mutual fund manager Legg Mason Inc. (LM).

Specifically, Brandes acquired 45.7 million of Countrywide's outstanding common shares during the third quarter, according to a regulatory filing with the U.S. Securities and Exchange Commission. The fund manager also disclosed that it had purchased 12.9 million shares, or 1.5%, of Washington Mutual Inc., (WM).

Brandes didn't own shares in either company during the previous quarter in Calabasas, Calif.-based Countrywide or Seattle-based Washington Mutual, according to the SEC filing and data compiled by Bloomberg News.

A value-oriented investment company, Brandes follows the stock-picking methodology pioneered by the late Benjamin Graham, the money manager, author, and lecturer who is today probably best remembered as the mentor to investment guru Warren Buffett, the chairman of Berkshire Hathaway Inc. (BRK.A, BRK.B).

Brandes Investment Partners was founded by money manager Charles Brandes in 1974, and currently oversees $125 million in assets. The Brandes U.S. Value Equity Fund fell 1.1% this year through Sept. 30, including a 9.5% drop in the third quarter, according to the firm's Web site. But the fund has beaten the Standard & Poor's 500 Stock Index for the past five, 10 and 15 years, while trailing for the past three, the firm reported.

Countrywide is the nation's largest U.S. mortgage lender. Hit hard by the subprime mortgage meltdown and the global credit crunch, Countrywide last week posted a $1.2 billion loss for its fiscal third quarter. Since Jan. 1, the company's shares have plunged by more than 62%. It was the company's first loss in 25 years.

In September, Countrywide also announced layoffs of up to 12,000 employees. And though Countrywide believes the housing market will continue to struggle, the company said it's on track to return to profitability in the fourth quarter.

Washington Mutual, on Oct. 17, reported a 72% freefall in third-quarter net income, and said it may have to set aside $2.9 billion to cover credit losses this year.

Brandes isn't the only investor banking on a Countrywide turnaround. Nearly a month after the credit market collapsed, Bank of America Corp. (BAC) invested $2 billion in Countrywide. And Friday - the day Countrywide released its third-quarter earnings - marked the highest daily trading volume in the lender's shares since Bank of America announced its investment, hinting that investor interest may be climbing.

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