Pzena Investment Management is a New York City-based hedge fund focused on classic value investing, founded by Richard S. Pzena in 1996. As of the end of January of 2016, the firm had $24.5 billion in assets under management (AUM). Recently, the firm has filed its 13F for the fourth quarter of 2015, in which it revealed an equity portfolio worth $16.18 billion. As usual, the equity portfolio was pretty focused on financial stocks, which amassed around 39% of the total value. In this article, we are going to take a look at the fund’s top picks as of December 31, 2015.
Out of thousands of stocks that are trading on the market every day, it can be difficult sometimes to pick the right investment that can deliver market-beating returns. Here’s where our research comes in. By analyzing the equity portfolios of 700+ top investors, we can see what stocks they are collectively bullish on and use this data to compile a portfolio that can outperform the market. We have determined through this process that the best strategy is to follow the 15 most popular small-cap picks among hedge funds, which have delivered an alpha of around 81 basis points per month in our backtests covering the period between 1999 and 2012 (see more details).
#5 Royal Dutch Shell plc (ADR) (NYSE:RDS.A)
– Shares Owned by Pzena Investment Management (Q4): 9,969,381
– Value of Holding (Q4): $ 456.50 million
Royal Dutch Shell plc (ADR) (NYSE:RDS.A) climbed two spots in Pzena’s 13F during the fourth quarter, making it the fifth position in terms of value. Royal Dutch Shell plc (ADR) (NYSE:RDS.A) did not deliver strong results over the October-December period as depressed oil prices led the company to report earnings of $0.58 per share, below consensus estimate of $0.60 per share. Despite the poor results, it was not only Pzena that was betting on Shell. Another investor bullish on Royal Dutch Shell is billionaire Jim Simons’ Renaissance Technologies, which reported 692,937 shares in its 13F filing for the end of the fourth quarter.
#4 American International Group Inc (NYSE:AIG)
– Shares Owned by Pzena Investment Management (Q4): 7,578,036
– Value of Holding (Q4): $ 469.61 million
American International Group Inc (NYSE:AIG) fell one place in the list compared to the previous quarter, as the fund trimmed its stake by 7% amid a 9% growth registered by the stock during the fourth quarter. For the fourth quarter of 2016, AIG reported a net loss of $1.10 per share, missing the estimates of $0.93. At the same time, the company has recently reached an agreement with two activists, Carl Icahn and John Paulson, and in May will add Samuel Merksamer, managing director of Icahn Capital, and John Paulson to its board of directors. In their last 13F filings, Carl Icahn and John Paulson’s Paulson & Co. reported holding 1.36 million shares and 14.60 million shares of AIG, held as of the end of September. In addition, American International Group said its board of directors had authorized а $5.0 buyback program and announced plans to conduct an IPO of 19.9% of United Guaranty Corporation, AIG’s mortgage insurance unit.
On the next page we will look into Pzena Investment Mangement’s top 3 picks for the first quarter of 2016.