Asset management firm T.Row Price manages about $440 billion (30 times of that of PZN), and the market values it at $16.5 billion (240 times that of PZN). So in the money management business, scale does matter.
Hopefully, as the years pass by, the AUM of Pzena Investment will grow and market will reward a much larger market cap to the company.
The firm employs value investing to manage the money that is entrusted to them. This is the investment philosophy according to firm’s website:
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
The 3Q10 Quarter letter from the firm’s Chairman and CEO Richard Pzena provides a good discussion on what he means by good business and trade off between return and earnings return:
GuruFocus tracks Pzena’s domestic stock portfolio. Here are the top holdings as of September 30, 2010:
No. 1: Exxon Mobil Corp. (NYSE:XOM), Weightings: 4.42% - 7,312,052 Shares
Exxon Mobil Corporation's principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacturing of petroleum products and transportation and sale of crudeoil, natural gas and petroleum products. Exxon Mobil Corp. has a market cap of $366.69 billion; its shares were traded at around $72.72 with a P/E ratio of 12.9 and P/S ratio of 1.2. The dividend yield of Exxon Mobil Corp. stocks is 2.4%. Exxon Mobil Corp. had an annual average earning growth of 11.2% over the past 10 years. GuruFocus rated Exxon Mobil Corp. the business predictability rank of 3.5-star.
No. 2: Northrop Grumman Corp. (NYSE:NOC), Weightings: 4.19% - 7,061,835 Shares
Northrop Grumman Corporation is a high technology company providing innovative solutions in systems integration, defense electronics and information technology for its U. Northrop Grumman Corp. has a market cap of $18.83 billion; its shares were traded at around $64.5 with a P/E ratio of 10.9 and P/S ratio of 0.5. The dividend yield of Northrop Grumman Corp. stocks is 2.9%. Northrop Grumman Corp. had an annual average earning growth of 6.9% over the past 10 years.
No. 3: J.C. Penney Company Inc. (NYSE:JCP), Weightings: 4.01% - 15,079,154 Shares
JCPenney is one of America's retailers, operating department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp. J.c. Penney Company Inc. has a market cap of $7.97 billion; its shares were traded at around $33.72 with a P/E ratio of 25.4 and P/S ratio of 0.4. The dividend yield of J.c. Penney Company Inc. stocks is 2.4%. J.c. Penney Company Inc. had an annual average earning growth of 18.5% over the past 10 years.
No. 4: Tyco Electronics Ltd. (NYSE:TEL), Weightings: 3.85% - 13,480,050 Shares
Tyco Electronics Ltd., global provider of engineered electronic components for thousands of consumer and industrial products; network solutions and systems for telecommunications and energy markets; and wireless systems for critical communications, radar and defense applications. Tyco Electronics Ltd. has a market cap of $15.6 billion; its shares were traded at around $35.16 with a P/E ratio of 13.9 and P/S ratio of 1.3. The dividend yield of Tyco Electronics Ltd. stocks is 1.8%.
No. 5: Omnicom Group Inc. (NYSE:OMC), Weightings: 3.57% - 9,248,498 Shares
Omnicom Group Inc. provides corporate communications services to clients worldwide on a global, pan-regional, national and local basis. Omnicom Group Inc. has a market cap of $14.08 billion; its shares were traded at around $46.74 with a P/E ratio of 17.9 and P/S ratio of 1.2. The dividend yield of Omnicom Group Inc. stocks is 1.7%. Omnicom Group Inc. had an annual average earning growth of 9% over the past 10 years. GuruFocus rated Omnicom Group Inc. the business predictability rank of 5-star.
No. 6: Allstate Corp. The (NYSE:ALL), Weightings: 3.44% - 11,143,515 Shares
Allstate Corporation's business is conducted principally throughAllstate Insurance Company, Allstate Life Insurance Company and theirsubsidiaries. Allstate Corp. The has a market cap of $17.15 billion; its shares were traded at around $31.87 with a P/E ratio of 9.4 and P/S ratio of 0.5. The dividend yield of Allstate Corp. The stocks is 2.6%. Allstate Corp. The had an annual average earning growth of 7.5% over the past 10 years.
Check out Pzena’s other holding by clicking on Richard Pzena.