Rich Pzena: Background & bio
Richard S. Pzena is the Founder and Co-CIO of Pzena Investment Management. He serves as Co-Portfolio Manager on each of the firm’s domestic investment strategies, and he is a member of the firm’s executive committee. Prior to forming Pzena Investment Management in 1995, Mr. Pzena was the Director of U.S. Equity Investments and Chief Research Officer for Sanford C. Bernstein & Company. He joined Bernstein in 1986 as an oil industry Analyst and was named to the Institutional Investor All-America Research Team from 1988 to 1990. During 1990 and 1991, Mr. Pzena served as CIO for small-cap equities and assumed his broader domestic equity role in 1991. Prior to joining Bernstein, Mr. Pzena worked for the Amoco Corporation in various financial and planning roles. He earned a B.S., summa cum laude, and an MBA from The Wharton School of the University of Pennsylvania, in 1979 and 1980, respectively.
Rich Pzena: Investment philosophy
Rich Pzena isn’t afraid of taking risks. Since Its founding in 1996, his Pzena Investment Management has pursued a deep-value, concentrated portfolio strategy that has sometimes led to volatile returns. The John Hancock Classic Value fund (ticker: PZFVX), which is managed by the firm, had a great 2013, rising 40.5%, eight percentage points ahead of the Standard & Poor’s 500 index. But the fund was crunched in 2008, dropping 46.6%, nine percentage points worse than the index. Through the middle of last week, the fund was up 7.8% in 2014, two points behind the S&P 500.
The firm managed $26.4 billion for institutions and retail investors at the end of July. Shares of the company (PZN) have had a wild ride after its 2007 initial public offering at $18. The stock dropped below $2 in 2009 and has since rallied to $10. In addition to the Hancock fund, Pzena manages 30% of the $18 billion Vanguard Windsor fund (VWNDX), and this year started three funds, Pzena Mid-Cap Focused Value (PZVMX), Pzena Long/Short Value (PZVLX), and Pzena Emerging Markets Focused Value (PZVEX).
Barron’s: How would you describe your approach?
Rich Pzena: We are deep-value. We’re trying to buy stocks that are generally extremely depressed because something has gone wrong in the business. These companies are under-earning versus their historic norms. We believe that they can fix their problems, and that’s why we get to buy at a low price. It is a strategy that requires a lot of patience, has a great long-term track record, but it is less predictable in the short term. So it has to be part of a managed portfolio, but as part of that, it’s a really valuable addition to a portfolio.
Barron’s: How many stocks do you own?
Rich Pzena: We are relatively concentrated. Our large-cap value strategy in the U.S. includes only 30 to 40 stocks. Our emerging-markets and global portfolios are 50 or 60 stocks.
Barron’s: So you are willing to tolerate some volatility?
Rich Pzena: Owning the cheapest stuff in the long run does pay off. And short-term volatility should be mostly irrelevant to people investing in the stock market, because it is not a short-term investment medium. If you have a one-year time horizon, you’re probably making a mistake. It is more like gambling. If you have a 10-year time horizon or a 20-year time horizon, monthly volatility should be completely irrelevant, and people focus too much on it.
Pzena Investment Management
Pzena Investment Management is a global investment management firm that employs a classic value investment approach. The firm began managing assets on January 1, 1996. Our solid return record and reputation for business integrity, research excellence, and devotion to our investment philosophy has led to significant growth in our business. As of December 31, 2014, the firm managed $27.7 billion in assets for leading corporate, public, and individual clients. Our team is made up of 81 employees. Our headquarters is in New York City, with a representative office in Melbourne, Australia.
Our Investment Philosophy
Simple: buy good businesses when they go on sale. We require five characteristics before we invest:
- Low price relative to the company’s normal earnings power
- Current earnings are below normal
- Management has a sound plan for earnings recovery
- The business has a history of earning attractive long-term returns
- There is tangible downside protection
Building a portfolio exclusively focused on companies with these characteristics should generate excess returns for long-term investors.
Pzena Investment Management: Investment analysis
Pzena Fourth Quarter 2014 Newsletter Commentary – The markets are in the early stages of correcting for an oversupply of oil. There will be winners and losers, with the long-term oil price dictated by the economics of supply.
Pzena Third Quarter 2014 Newsletter Commentary – Using short-term volatility when making long-term investment decisions can lead to dubious results. A strong case for equities emerges when using consistent time horizons for the investor with long-dated liabilities.
Pzena Second Quarter 2014 Newsletter Commentary – History suggests that value stocks are effective in cushioning the downside during most market corrections. The patterns appear tied to excessive valuations, recessions, and financial crises.
Pzena First Quarter 2014 Newsletter Commentary – Significant opportunities are taking shape in emerging markets, but selectivity is warranted as the correction continues. Consider fundamentals and valuation, not just stock price.
Pzena Fourth-Quarter 2013 Newsletter Commentary – Do peak profits spell doom for the equity markets? We think not, and present the evidence that there are ample opportunities to be exploited.
Pzena White Paper: Assessing Risk and Return – For the long-term investor, risk is more appropriately defined as the permanent impairment of capital rather than short-term volatility.
Richard Pzena: Articles
- Rich Pzena: A Working Man’s Buffett
- The Brooklyn Investor: Pzena Investment Management
- Drilling Deep for Value – Barron’s
- Pzena Investment Management
- Richard Pzena – Columbia Business School
- Richard Pzena’s Q4 Top Five Stocks – NASDAQ.com
- Richard Stanton Pzena – Bloomberg
- Incredible opportunity in one sector: Pro
- Richard Pzena Trims Stake in Possible Acquisition Target Company
- Pzena Mid Cap Focused Value Instl
- Deep value still, despite full prices
- Richard Pzena Is Bullish On Citigroup Inc
- Microsoft Valuation by Richard Pzena