In this article, we discuss 10 best value stocks to buy in 2022 according to Richard Pzena.
Richard Pzena is an American investor and hedge fund manager who is the founder and chief investment officer of the New York-based Pzena Investment Management, a value-oriented hedge fund. Richard Pzena invests in companies that he believes are valued notably lower than their long-term earnings potential. Pzena Investment Management utilizes normalized earnings instead of price-to-book ratios to effectively assess a company’s longer-term earnings capacity.
Pzena Investment Management aims to generate long-term alpha, investing in the US, emerging, and international markets, as well as in US mutual funds, UCITS funds, and Australian funds.
At Richard Pzena’s fund, ESG analysis is an important part of finding value stocks, which means understanding how environmental, social, and governance aspects might impact long-term normalized earnings. Despite uneven performance of value stocks amid the volatile macro backdrop, the hedge fund finds cheap valuations attractive, focusing on strong metrics and real returns.
Richard Pzena’s hedge fund manages a portfolio worth $26.45 billion, with investments focused in the utilities and telecommunications, information technology, industrials, healthcare, finance, energy, and consumer discretionary sectors. The most notable stocks in Richard Pzena’s Q1 portfolio include Wells Fargo & Company (NYSE:WFC), Exxon Mobil Corporation (NYSE:XOM), and Bank of America Corporation (NYSE:BAC).
We discuss Pzena’s top value plays in this article.
Richard S. Pzena of Pzena Investment Management
Our Methodology
We used Richard Pzena’s Q1 2022 portfolio for this analysis, selecting value stocks with price to earnings ratios of under 20. We also used Insider Monkey’s database of 900+ elite funds to assess the hedge fund sentiment around the stocks. We did so because elite funds pour billions of dollars and hire top talent to pick stocks for their clients. Insider Monkey believes replicating their stock picks is a wise strategy for retail investors.
Best Value Stocks to Buy in 2022 According to Richard Pzena
10. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Number of Hedge Fund Holders: 25
P/E Ratio as of May 20: 17.00
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is the largest holding in Richard Pzena’s Q1 2022 portfolio, with the hedge fund holding 13.4 million shares worth $1.20 billion, representing 4.55% of the total 13F securities. Cognizant Technology Solutions Corporation is a New Jersey-based professional services company, offering consultancy, technology, and outsourcing services through four segments – Financial Services, Healthcare, Products and Resources, and Communications, Media, and Technology.
Cognizant Technology Solutions Corporation on May 4 declared a $0.27 per share quarterly dividend, in line with previous. The dividend is distributable on May 31, to shareholders of the company as of the close of business on May 20.
On May 4, Cognizant Technology Solutions Corporation reported earnings for Q1 2022. The company posted an EPS of $1.08, beating estimates by $0.04. The revenue grew 9.66% year-over-year to $4.83 billion, outperforming analysts’ predictions by $884,940.
Cowen analyst Bryan Bergin on May 9 maintained an Outperform rating on Cognizant Technology Solutions Corporation and lowered the price target on the stock to $95 from $98. The analyst noted that the selloff was overdone in response to how Q1 unfolded, but turnaround is in progress.
According to Insider Monkey’s Q4 database, 25 hedge funds were long Cognizant Technology Solutions Corporation, compared to 29 funds in the prior quarter. Donald Yacktman’s Yacktman Asset Management reported a prominent stake in the company in the first fiscal quarter of 2022, with 5.4 million shares worth $492 million.
In addition to Wells Fargo & Company, Exxon Mobil Corporation, and Bank of America Corporation, Cognizant Technology Solutions Corporation is a notable stock in Richard Pzena’s 2022 portfolio.
9. Wells Fargo & Company (NYSE:WFC)
Number of Hedge Fund Holders: 94
P/E Ratio as of May 20: 8.66
Wells Fargo & Company is an American financial services company that operates through Consumer Banking and Lending, Commercial Banking, Corporate and Investment Banking, and Wealth and Investment Management segments. Wells Fargo & Company has been part of Richard Pzena’s portfolio since Q3 2012. At the conclusion of the first quarter of 2022, Pzena Investment Management owned 17.6 million shares of Wells Fargo & Company, worth $857 million, representing 3.24% of the total 13F holdings.
On April 26, Wells Fargo & Company declared a quarterly dividend of $0.25 per share, in line with previous. The dividend is payable on June 1, to shareholders of record on May 6. Wells Fargo & Company’s dividend yield on May 20 came in at 2.40%.
Wells Fargo & Company posted earnings for Q1 on April 14, reporting an EPS of $0.88, beating analysts’ estimates by $0.07. The revenue, however, slipped 2.41% on a year-over-year basis to $17.59 billion, missing Street consensus by $232.38 million.
Barclays analyst Jason Goldberg on April 18 raised the price target on Wells Fargo & Company to $64 from $62 and maintained an Overweight rating on the shares after the Q1 results. The analyst increased his 2022 net interest income and loan growth outlook, with an unchanged expense forecast despite Q1 coming in higher than expected.
Among the hedge funds tracked by Insider Monkey, 94 funds were bullish on Wells Fargo & Company at the end of December 2021, with combined stakes of $6.11 billion. In the first quarter of 2022, Patrick Degorce’s Theleme Partners was a prominent stakeholder of the company, with 18.25 million shares worth $884.7 million.
Here is what Davis Opportunity Fund has to say about Wells Fargo & Company in its Q4 2021 investor letter:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Wells Fargo.”
8. Citigroup Inc. (NYSE:C)
Number of Hedge Fund Holders: 97
P/E Ratio as of May 20: 5.87
Citigroup Inc. (NYSE:C) is a New York-based financial services company providing various financial products and services to consumers, corporations, governments, and institutions through Global Consumer Banking and Institutional Clients Group segments. Richard Pzena’s hedge fund held almost 12 million Citigroup Inc. shares in Q1 2022, worth $639.7 million, representing 2.41% of the total 13F portfolio. Pzena first invested in Citigroup Inc. in the third quarter of 2012.
Citigroup Inc. posted earnings for the first fiscal quarter of 2022 on April 14, announcing an EPS of $2.02, beating analysts’ estimates by $0.61. The $19.19 billion revenue outperformed estimates by $1.07 billion.
On April 1, Citigroup Inc. declared a $0.51 per share quarterly dividend, in line with previous. The dividend is payable on May 27, to shareholders of the company as of May 2. Citigroup Inc.’s dividend yield on May 20 stood at 4.10%.
Oppenheimer analyst Chris Kotowski on May 3 reiterated an Outperform rating on Citigroup Inc. but lowered the price target on the shares to $93 from $100. According to the analyst, loan growth and rising interest rates are good for banks, and they stand to perform well even if the economy were to enter recession. The analyst added that banks should remain “solidly profitable with their dividends intact”, and investors should take advantage of the recent share weakness.
According to Insider Monkey’s Q4 data, 97 hedge funds were long Citigroup Inc., up from 79 funds in the prior quarter. In the first quarter of 2022, Warren Buffett’s Berkshire Hathaway disclosed a prominent position in Citigroup Inc., consisting of 55.15 million shares worth about $3 billion.
Here is what Artisan Value Fund has to say about Citigroup Inc. in their Q4 2020 investor letter:
“We fully exited the position in Citigroup. Global financial services company Citigroup made a $900 million clerical error and received a public reprimand from federal regulators. This, after a decade focused on process control, information technology and risk systems, makes the error substantially more costly than just the $900 million mistake. Regulators believe the company’s risk management improvements have fallen short of expectations. To rectify the situation, a process and technology spending surge could negatively affect 2021-2022 profits by 10% to 20%. Trust and confidence are important in large financial institutions, and this incident combined with the CEO’s sudden retirement shook ours.”
7. Capital One Financial Corporation (NYSE:COF)
Number of Hedge Fund Holders: 58
P/E Ratio as of May 20: 4.47
Capital One Financial Corporation (NYSE:COF) is a Virginia-based financial services holding company, operating through three segments – Credit Card, Consumer Banking, and Commercial Banking. Richard Pzena’s Pzena Investment Management first invested in Capital One Financial Corporation in the third quarter of 2016. In Q1 2022, the hedge fund owned 3.90 million shares of the company, worth $513.3 million, representing 1.94% of the total 13F holdings.
Capital One Financial Corporation declared on May 5 a $0.60 per share quarterly dividend. The dividend is distributable on May 27, to shareholders of the company at the close of business on May 16. The company delivers a dividend yield of 2.11% as of May 20.
On April 26, Capital One Financial Corporation posted earnings for Q1 2022, reporting earnings per share of $5.62, beating analysts’ estimates by $0.18. The revenue grew 14.90% year-over-year to $8.17 billion, outperforming Street forecasts by $152.53 million.
Wolfe Research analyst Bill Carcache on May 12 downgraded Capital One Financial Corporation to Underperform from Peer Perform with an $86 price target. The analyst downgraded the credit card issuers group to Underweight from Market Weight ahead of a recession, which he believes is likely.
According to Insider Monkey’s database of elite hedge funds, 58 funds reported owning stakes in Capital One Financial Corporation at the end of December 2021, up from 55 funds in the last quarter. Ken Fisher’s Fisher Asset Management held a leading stake in the company, with almost 7 million shares worth $911.3 million.
Here is what Davis Opportunity Fund has to say about Capital One Financial Corporation in its Q4 2021 investor letter:
“The absolute level of revenues and profits generated by such companies is in fact so large that most of the major financial holdings in the portfolio produce enough annual operating income individually that a number of them could, in theory, purchase several entire businesses among hundreds of choices within the S&P 1500 Index, using just a year’s cash earnings without dipping into capital. This is theoretical, as financial companies would not be in the business of buying healthcare or technology companies, for example, but we point out these facts to illustrate the sheer scale of the economics produced by single financial companies in a given year, which is often a multiple of the cash earnings yielded by companies in a host of other industries.
Given this cash-generation power, we are naturally drawn to what we believe are strong and profitable financial institutions when the price is right. Presently, we believe the valuations of our financial holdings are not only reasonable, but extremely compelling, and our portfolio composition reflects this view. Representative financial holdings in the Fund include Capital One Financial.”
6. American International Group, Inc. (NYSE:AIG)
Number of Hedge Fund Holders: 33
P/E Ratio as of May 20: 4.80
American International Group, Inc. (NYSE:AIG) is a New York-based provider of insurance products for commercial, institutional, and individual customers in North America and internationally. Richard Pzena has been a long-term shareholder of American International Group, Inc., first investing in the company in Q3 2012. He has been consistent with his stake, except for a few minor breaks. In Q1 2022, Pzena Investment Management held 15.7 million shares of the company, worth more than $988 million, representing 3.73% of the total securities.
American International Group, Inc. announced earnings for Q1 2022 on May 3, reporting an EPS of $1.30, above consensus estimates by $0.13. The $15.81 billion revenue grew 9.37% year-over-year, beating Street forecasts by $4.38 billion.
According to Insider Monkey’s database, 33 hedge funds were bullish on American International Group, Inc. at the end of Q4 2021, compared to 30 funds in the preceding quarter. Harris Associates was a notable shareholder of the company in Q1 2022, with 27.8 million shares worth $1.7 billion.
Like Wells Fargo & Company, Exxon Mobil Corporation, and Bank of America Corporation, American International Group, Inc. is on the radar of institutional investors.
5. Hewlett Packard Enterprise Company (NYSE:HPE)
Number of Hedge Fund Holders: 35
P/E Ratio as of May 20: 5.08
Hewlett Packard Enterprise Company (NYSE:HPE) was founded in 1939 and is headquartered in Houston, Texas. The company offers multi-workload computing and workload-optimized servers to customers in the Americas, Europe, the Middle East, Africa, the Asia Pacific, and Japan. Richard Pzena invested in Hewlett Packard Enterprise Company back in the fourth quarter of 2015, and in Q1 2022, he held a stake in the company worth about $628 million.
On May 20, BofA analyst Wamsi Mohan downgraded Hewlett Packard Enterprise Company to Neutral from Buy, slashing the price target to $16 from $19, as he expects negative estimate revisions and is worried about order deceleration due to the tight supply chain situation given recent China lockdowns. He sees risk from an economic slowdown, component shortages, and high backlog that is cancelable.
Among the hedge funds tracked by Insider Monkey, 35 funds were bullish on Hewlett Packard Enterprise Company at the end of December 2021, up from 33 funds in the earlier quarter. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a prominent shareholder of the company, with 5.16 million shares worth $86.2 million.
4. PVH Corp. (NYSE:PVH)
Number of Hedge Fund Holders: 38
P/E Ratio as of May 20: 4.88
PVH Corp. (NYSE:PVH) is a New York-based apparel company that operates through six segments – Tommy Hilfiger North America, Tommy Hilfiger International, Calvin Klein North America, Calvin Klein International, Heritage Brands Wholesale, and Heritage Brands Retail.
Securities filings for Q1 2022 reveal that Richard Pzena’s Pzena Investment Management owned 7.8 million shares of PVH Corp., worth $600.3 million, representing 2.26% of the total 13F securities. PVH Corp. was added to Richard Pzena’s portfolio in the first quarter of 2019.
On April 18, Credit Suisse analyst Michael Binetti raised the price target on PVH Corp. to $120 from $112 and reiterated an Outperform rating on the shares. The analyst noted that PVH Corp. hosted its first Analyst Day in a decade, targeting earnings per share ranging between $21 to $23 in 2025.
According to Insider Monkey’s fourth quarter database, 38 hedge funds were bullish on PVH Corp., holding collective stakes worth over $2 billion. John Armitage’s Egerton Capital Limited held a significant stake in the company, with 1.80 million shares worth $138.6 million.
3. Newell Brands Inc. (NASDAQ:NWL)
Number of Hedge Fund Holders: 26
P/E Ratio as of May 20: 11.58
Newell Brands Inc. (NASDAQ:NWL) is one of the top value stocks in Richard Pzena’s portfolio, with a price to earnings ratio of 11.58. Newell Brands Inc. is a producer of consumer and commercial products, operating through five segments – Commercial Solutions, Home Appliances, Home Solutions, Learning and Development, and Outdoor and Recreation.
Securities filings for Q1 2022 revealed that Richard Pzena’s hedge fund held 36.25 million shares of Newell Brands Inc., worth over $776 million, representing 2.93% of the total 13F portfolio. Richard Pzena initially invested in the company back in Q2 2018.
On May 5, Newell Brands Inc. declared a quarterly dividend of $0.23 per share, in line with previous. The dividend is payable on June 15, to shareholders of the company as of May 31. Newell Brands Inc. on May 20 delivered a dividend yield of 4.73%.
JPMorgan analyst Andrea Teixeira on March 30 maintained an Overweight rating on Newell Brands Inc. and lowered the price target on the shares to $26 from $29. With the ongoing Russia/Ukraine war and its impact on commodities costs, transportation, and currency, the analyst slashed estimates for most of the companies in the beverages and personal care space.
In Q1 2022, billionaire Carl Icahn’s Icahn Capital LP disclosed a prominent stake in Newell Brands Inc., with 33 million shares worth $708 million. Overall, 26 hedge funds were bullish on Newell Brands Inc. in Q4 2021, with collective stakes worth $1.74 billion.
2. NRG Energy, Inc. (NYSE:NRG)
Number of Hedge Fund Holders: 28
P/E Ratio as of May 20: 2.78
NRG Energy, Inc. (NYSE:NRG) is an integrated power company in the United States, serving residential, commercial, industrial, and wholesale customers. Richard Pzena’s Pzena Investment Management added NRG Energy, Inc. to its portfolio in Q2 2020. In the first quarter of 2022, Pzena elevated his stake in NRG Energy, Inc. by 9%, holding 18.65 million shares worth $715.5 million, representing 2.70% of the total 13F portfolio.
NRG Energy, Inc. declared on April 20 a $0.35 per share quarterly dividend, in line with previous. The dividend was paid on May 16, to shareholders of the company as of May 2. NRG Energy, Inc.’s dividend yield on May 20 stood at 3.06%.
On May 6, NRG Energy, Inc. reported its Q1 results, posting GAAP earnings per share of $7.17, beating market estimates by $6.55. The revenue of $7.90 billion also outperformed analysts’ estimates by $3.44 billion.
BofA analyst Julien Dumoulin-Smith on April 21 downgraded NRG Energy, Inc. to Neutral from Buy with a price target of $43, down from $47, citing increasing concerns about NRG Energy, Inc. being at greater risk given exposure to elevated gas prices.
According to Insider Monkey’s Q4 database, NRG Energy, Inc. was part of 28 public hedge fund portfolios, compared to 34 funds in the prior quarter. Andrew Wellington and Jeff Keswin’s Lyrical Asset Management disclosed a significant stake in the company in the first quarter of 2022, with 5.6 million shares worth over $217 million.
1. Equitable Holdings, Inc. (NYSE:EQH)
Number of Hedge Fund Holders: 45
P/E Ratio as of May 20: 7.29
Equitable Holdings, Inc. (NYSE:EQH) is a diversified financial services company operating worldwide, with segments including Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. Richard Pzena’s hedge fund held about 22 million shares of Equitable Holdings, Inc., worth $677.75 million, representing 2.56% of the total 13F portfolio.
On May 9, Equitable Holdings, Inc. reported its Q1 results, posting earnings per share of $1.36, missing market estimates by $0.15. The first quarter revenue of $3.94 billion grew 13.56% year-over-year, outperforming Street estimates by $334.18 million.
Equitable Holdings, Inc. on May 20 declared a $0.20 per share quarterly dividend, an 11.1% increase from its prior dividend of $0.18. The dividend is payable on June 6, to shareholders of record on May 30. Equitable Holdings, Inc.’s dividend yield on May 20 came in at 2.59%.
Barclays analyst Tracy Benguigui on May 12 reiterated an Overweight on Equitable Holdings, Inc. and lowered the price target on the stock to $37 from $43. The company’s Q1 earnings “strain owed to a weaker equity market is tempered by strong sales and positive net flows”, the analyst told investors.
According to Insider Monkey’s Q4 data, 45 hedge funds were bullish on Equitable Holdings, Inc., with collective stakes worth $1.6 billion, compared to 46 funds in the earlier quarter, holding stakes in the company valued at $1.70 billion.
You can also take a look at 10 Best Stocks to Buy Now According to Billionaire Nicholas Pritzker’s Tao Capital and 10 Best Stocks to Buy Now According to Billionaire David Harding.
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This article is originally published at Insider Monkey.
