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Pzena’s Biggest Q3 Moves: Hilton, Exxon, Seagate, More

Pzena Investment Management is a New York-based investment manager with over $25 billion in assets under management. The firm was founded in 1996 and pursues a deep-value, concentrated portfolio strategy that sometimes leads to volatile returns. Their investment approach is to buy good businesses at low prices, focusing exclusively on companies that are under performing their historically demonstrated earnings power. In its third quarterly newsletter, Pzena says that the valuation gap between the cheapest and most expensive stocks remains close to the levels seen during the Internet bubble of the late 1990s. When the stock market corrected in early 2000’s, old economy stocks proved resilient and their share prices went up sharply. In the current era of low interest rates and low economic growth, investors are shunning cyclical companies in favor of “safe stable earners” and “bond proxies”. The fund has high exposure to financials, old technology companies, cyclical as well as energy companies and does not own much in REITs, healthcare and utilities which it views as “bond proxies”. In the article below, we describe some of the biggest Q3 movers in Pzena’s portfolio.

At Insider Monkey, we track around 730 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see more details about our small-cap strategy).

Richard Pzena - Pzena Investment Management

Seagate Technology PLC (NASDAQ:STX) is one of the largest manufacturers of hard disk drives (HDDs) in the world. The company is also diversifying into other electronic data storage solutions such as solid state hybrid drives and solid state drives. The stock has given a huge return of more than 81% in the last six months and its current market value is $9.7 billion. The company had initially given poor earnings guidance but then announced large jobs cuts to address the overcapacity in the market. Pzena Investment Management notes that though the overall PC industry shipments remain poor, the company’s enterprise business has performed extremely well. The fund has taken some profits after the stock price climbed steeply over the last couple of quarters. As per the fund’s latest 13F, it held 1.279 million shares in this company. Seagate Technology PLC (NASDAQ:STX) earned revenues of $2.7 billion in the last quarter with a net income of $167 million. While the number of funds holding this stock as per our records declined by 1 to 23 in the second quarter, the value of their holdings declined by almost 26% to $563 million by June end.

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