Richard Pzena keeps Buying HPQ, OMC, ETR, C, RDS.A, AVP and keeps Selling XOM, NOC, TEL, LLL, UBS
Richard Pzena is the Founder and Co-Chief Investment Officer of Pzena Investment Management, LLC since 1995. Now, it has more than $24 billion under management. He serves as co-portfolio manager the firm’s domestic investment strategy committees and a member of the firm’s executive committee.
Mr. Pzena started his career working for the Amoco Corporation in various financial and planning roles. He earned a BS summa cum laude and an MBA from the Wharton School of the University of Pennsylvania in 1979 and 1980, respectively. He joined Bernstein in 1986 as an oil industry analyst and was named to the Institutional Investor All America Research Team from 1988-1990. Then Mr. Pzena became the Director of U.S. Equity Investments and Chief Research Officer for Sanford C. Bernstein & Company. During 1990 and 1991, Mr. Pzena served as Chief Investment Officer, Small Cap Equities, and assumed his broader domestic equity role in 1991.
Mr. Pzena’s investment philosophy is based on ranking companies from the cheapest to the most expensive on the basis of current stock price compared to normal long-term earnings power. Pzena takes a value approach when stock picking, focusing on making investments in good businesses that are undervalued by the market and have a low stock price when compared to their earnings potential. This has led him to take a relatively bullish position on financial sector stocks.
Stocks that Richard Pzena keeps Buying
No. 1: Hewlettpackard Co. (HPQ), Weightings: 4.995% - 18,764,961 SharesHewlett Packard is one of the global providers of computing and imaging solutions and services for business and home. Hewlettpackard Co. has a market cap of $54.61 billion; its shares were traded at around $28.52 with a P/E ratio of 5.7 and P/S ratio of 0.4. The dividend yield of Hewlettpackard Co. stocks is 1.7%. Hewlettpackard Co. had an annual average earnings growth of 19.5% over the past 5 years. HPQ offers an unappealing 1.8% dividend, that one would hope they would consider ceasing to plow back into the company to turnaround its negative revenue growth.
PC Wholesale, a division of SYNNEX Corp. announced that the company is now an authorized distributor of the Hewlett-Packard Company's Renew Program, extending PC Wholesale's portfolio of quality HP ProLiant servers, commercial storage and networking products, fully remanufactured by HP and backed by the original same-as-new HP warranty to its reseller customers. Reseller benefits of sourcing HP Renew products through PC Wholesale are many.
Hewlett Packard Company unveiled a new portfolio of 3D innovations for consumers. The new HP TouchSmart620 3D Edition PC will let users enjoy an expanded realm of 3D experiences all within their home environment.
Richard Pzena owns 18,764,961 shares of HPQ, valued as $421 million as of Sep. 30, 2011, which accounts for 4.995% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 15.57%, again in the Sep. 30, 2011 quarter by 22.12%. He only started to buy this stock late 2010 with 6.7 million shares and continuously increased his position at about a 3 million shares per quarter pace every quarter ever since.
No. 2: Omnicom Group Inc. (OMC), Weightings: 3.0348% - 6,947,720 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 $13.01 billion; its shares were traded at around $46.18 with a P/E ratio of 14.7 and P/S ratio of 1. The dividend yield of Omnicom Group Inc. stocks is 2.1%. Omnicom Group Inc. had an annual average earnings growth of 8.1% over the past 10 years. GuruFocus rated Omnicom Group Inc. the business predictability rank of 4-star.
Omnicom Group Inc. announced that it named Dale Adams CEO of its Diversified Agency Services division, who is also president of the division, and succeeding Thomas Harrison, who will continue as chairman.
The Board of Directors of Omnicom Group Inc. declared a quarterly dividend of 25 cents per outstanding share of its common stock. The dividend is payable on January 9, 2012 to Omnicom Group common shareholders of record at the close of business on December 21, 2011.
Richard Pzena owns 6,947,720 shares of OMC, valued as $256 million as of Sep. 30, 2011, which accounts for 3.0348% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 7.18%, again in the Sep. 30, 2011 quarter by 0.86%. He started to buy this stock in late 2008 with 6.3 million shares and increased his position once every few quarters and keeps it fairly constant every time after a multimillion share buy until the next buy. In late 2010, he sold his position from 9.2 million shares to 7 million and has been fluctuating at the that position since.
No. 3: Entergy Corp. (ETR), Weightings: 2.5743% - 3,275,180 Shares
Entergy Corporation engages principally in the following businesses: domestic utility operations, power marketing and trading, global power development, and domestic non-utility nuclear operations. Entergy Corp. has a market cap of $12.36 billion; its shares were traded at around $69.46 with a P/E ratio of 8.8 and P/S ratio of 1.1. The dividend yield of Entergy Corp. stocks is 4.7%. Entergy Corp. had an annual average earnings growth of 8.2% over the past 10 years. GuruFocus rated Entergy Corp. the business predictability rank of 2.5-star.
Entergy Corporation expects fourth quarter 2011 as-reported earnings of approximately $0.86 per share and operational earnings of approximately $0.93 per share. Fourth quarter results in 2010 were $1.26 per share on an as-reported basis and $1.30 per share on an operational basis. The decrease in fourth quarter 2011 earnings was driven by lower results at Parent & Other, which was partially offset by higher earnings at Utility and Entergy Wholesale Commodities.
The company affirmed previously issued operational earnings guidance for 2012 to be in the range of $5.40 to $6.20 per share. Previously issued as-reported earnings guidance of $5.40 to $6.20 per share for 2012 does not reflect any potential future expenses for the special item noted above in connection with the proposed spin-merge of Entergy's transmission business.
The merchant power and utility projects per-share earnings of 93 cents while analysts surveyed expect 91 cents. A year earlier, Entergy's earnings were $1.30 a share, and the company attributed the decrease to lower results at its parent and other segment.
The Nuclear Regulatory Commission said it plans to penalize Entergy Corp. with a $140,000 fine over Internet-viewing habits of workers at the company's Louisiana nuclear-power plant that violated federal rules.
Richard Pzena owns 3,275,180 shares of ETR, valued as $217 million as of Sep. 30, 2011, which accounts for 2.5743% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 2299.44%, again in the Sep. 30, 2011 quarter by 19.19%. He bought an insignificant position of 115,000 shares starting quarter 1 of 2011, but massively increased to 2.75 million shares next quarter and more afterwards.
No. 4: Citigroup Inc. (C), Weightings: 2.3243% - 7,652,951 Shares
Citigroup Inc., the global financial services company, has some two hundred million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citigroup Inc. has a market cap of $86.5 billion; its shares were traded at around $29.9 with a P/E ratio of 8 and P/S ratio of 1.1. The dividend yield of Citigroup Inc. stocks is 0.1%.
The Financial Industry Regulatory Authority said Wednesday that it has struck Citigroup Global Markets with a $725,000 fine for its failure to disclose conflicts of interest in some research reports and analysts' public appearances. From January 2007 to March 2010, FINRA charges that Citigroup handled "public securities offerings, received investment banking or other revenue from, made a market in the securities of and/or had a 1 percent or greater beneficial ownership in covered companies, and did not make these required disclosures in certain research reports."
Citi reported fourth-quarter earnings of $1.17 billion as revenue fell 7% to $17.17 billion. Citi shares are down 40%, earnings of 38 cents a share down from 43 cents, and stocks fell 2.8% in recent premarket activity to $29.89 as results fell well short of analyst expectations over the last year. Citi took a $40 million charge tied to the valuation of its own debt and added $557 million to its reserve for litigation. The bank previously announced a $300 million charge because of its Japan operations and a $400 million hit from 4,500 job cuts. Citi’s fourth-quarter results underline Citi’s struggle to offset trading, underwriting and advisory results with an upswing in lending. Overall loans rose 14%; international consumer loans rose 6%, excluding the impact of the weak dollar.
Similar to its fellow banks, Citi has benefited lately from reducing funds set aside to cover bad loans. Total credit costs in the fourth quarter came in at $4.1 billion, down from $4.84 billion a year earlier and $3.35 billion in the third quarter. Citi reduced its reserve for bad loans by $1.5 billion.
Richard Pzena owns 7,652,951 shares of C, valued as $196 million as of Sep. 30, 2011, which accounts for 2.3243% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 5.35%, again in the Sep. 30, 2011 quarter by 13.47%. He had about 2.2 million shares in the early half of 2007 but sold out until 2011. From early 2010, he bought 6.5 million shares, but it went down to 6 million in late 2010, and increased again to the 7.6 million shares now.
No. 5: Royal Dutch Shell Ads Cl A (RDS.A), Weightings: 2.1965% - 3,011,297 Shares
Royal Dutch Petroleum Company owns 60% of the Royal Dutch/Shell Group of companies. Royal Dutch Shell Ads Cl A has a market cap of $226.84 billion; its shares were traded at around $72.13 with a P/E ratio of 8.2 and P/S ratio of 0.6. The dividend yield of Royal Dutch Shell Ads Cl A stocks is 3.9%. Royal Dutch Shell Ads Cl A had an annual average earnings growth of 6.3% over the past 10 years. GuruFocus rated Royal Dutch Shell Ads Cl A the business predictability rank of 2.5-star.
Royal Dutch Shell announced that it will partner up with Tullow Oil to explore new frontiers of the Atlantic in the search for transformational discoveries of oil and gas. The companies announced that they had signed a non-binding memorandum of understanding. It follows their first joint offshore oil discovery off French Guiana last year at their Zeadyus well, with along with Total.
Royal Dutch Shell announced it is closing its research and development center in Thornton, Cheshire and relocating 280 employees to other sites around the UK. The company said none of the scientists currently based there will lose their jobs, but they will be moved to other UK sites in 2014. Some of these positions will migrate to London to be in Shell's Downstream Headquarters while others will remain in the North West. No employees will have to move out of the area and those who prefer to stay in the North West region will be able to work out of offices in Manchester.
Royal Dutch Shell said it had restarted production at its Bonga oil field offshore Nigeria. The facility was forced to shut down after a leak during a tanker loading operation on Dec. 20 that led to Nigeria's worst offshore oil spill in more than a decade. Investigation into the exact cause of the leak is still ongoing, but Shell said it had completed the clean-up from the spill and resumed output on Jan. 1 at the 200,000 barrel a day oil field, which makes up some 10% of Nigeria's total oil output.
Richard Pzena owns 3,011,297 shares of RDS.A, valued as $185 million as of Sep. 30, 2011, which accounts for 2.1965% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 35.89%, again in the Sep. 30, 2011 quarter by 0.05%. He started with 2.2 million shares early 2011 and increased to 3 million shares by quarter 2 in 2011 and kept it constant since.
No. 6: Avon Products Inc. (AVP), Weightings: 1.7646% - 7,593,232 Shares
Avon Products Inc. is one of the world's manufacturers and marketers of beauty and related products, which include cosmetics, fragrance and toiletries; beauty plus which consists of jewelry and accessories and apparel; and non-core which consists of gift and decorative and home entertainment products. Avon Products Inc. has a market cap of $7.73 billion; its shares were traded at around $18.31 with a P/E ratio of 9.8 and P/S ratio of 0.7. The dividend yield of Avon Products Inc. stocks is 5.1%. Avon Products Inc. had an annual average earnings growth of 3.2% over the past 10 years. GuruFocus rated Avon Products Inc. the business predictability rank of 3-star.
Avon shares gained 6.1% to $17.13 after the company said it will separate the roles of chairman and chief executive in 2012. Andrea Jung, the chairman and chief executive, will be named executive chairman, and the board will launch an external search for a new chief.
Richard Pzena owns 7,593,232 shares of AVP, valued as $149 million as of Sep. 30, 2011, which accounts for 1.7646% of his equity portfolio. Richard Pzena added his positions in the Jun. 30, 2011 quarter by 16.64%, again in the Sep. 30, 2011 quarter by 28.49%. He started in early 2009 with almost 6.5 million shares and has fluctuated since then with a peak of 8.7 million shares in mid-2010 and a low right after of 2.9 million shares in late 2010. Since the low, the position has been constantly and drastically increasing to today’s 7.6 million shares.
Stocks that Richard Pzena keeps Selling
No. 1: Exxon Mobil Corp. (XOM), Weightings: 3.7271% - 4,327,934 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 $415.68 billion; its shares were traded at around $87.18 with a P/E ratio of 10.5 and P/S ratio of 1.1. The dividend yield of Exxon Mobil Corp. stocks is 2.2%. Exxon Mobil Corp. had an annual average earnings growth of 9.1% over the past 10 years.
While Exxon Mobil Corp. recently drew a $908 million reward in an arbitration case against Venezuela in the International Chamber of Commerce, it may take at least a year or two before a separate proceeding over a $12 billion claim for assets seized Venezuela wraps up, according to an arbitration expert. The case is already nearing the five-year mark and may still take years more. A hearing on Exxon’s claim is expected next month in Paris in the International Centre for Settlement of Investment Disputes (ICSID), an affiliate of the World Bank.
Richard Pzena owns 4,327,934 shares of XOM, valued as $314 million as of Sep. 30, 2011, which accounts for 3.7271% of his equity portfolio. Richard Pzena reduced his positions in the Jun. 30, 2011 quarter by 21.28%, again in the Sep. 30, 2011 quarter by 9.9%. He had some insignificant 707,000 shares in 2007 and decreasing over the next two years until he sold out. In mid-2009, he bought 984,000 shares and drastically increased his position to 7.3 million shares by mid-2010, but started to sell from then on.
No. 2: Northrop Grumman Corp. (NOC), Weightings: 3.6686% - 5,930,771 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 $15.66 billion; its shares were traded at around $60 with a P/E ratio of 10.1 and P/S ratio of 0.5. The dividend yield of Northrop Grumman Corp. stocks is 3.3%. TTM Diluted EPS at $6.72, MRQ Book Value Per Share at $45.01, Graham number at $82.50 (vs. current price at $61.32, implies a potential upside of 34.53%). Northrop Grumman Corp. had an annual average earnings growth of 11.6% over the past 10 years.
The U.S. Air Force has awarded Northrop Grumman Corporation an indefinite delivery, indefinite quantity contract for its Design and Engineering Support Program (DESP III). Northrop Grumman is one of 26 companies to receive awards under the contract, which has an overall ceiling valued at $1.9 billion. The DESP III contract is specifically established with Air Force Material Command, but it may be used by all Department of Defense (DoD) agencies. Under the DESP III contract, Northrop Grumman will compete for individual task orders focused on improving life cycle costs, operational life, performance and sustainment of DoD weapon systems. The contract vehicle has a seven year period of performance.
Richard Pzena owns 5,930,771 shares of NOC, valued as $309 million as of Sep. 30, 2011, which accounts for 3.6686% of his equity portfolio. Richard Pzena reduced his positions in the Jun. 30, 2011 quarter by 2.32%, again in the Sep. 30, 2011 quarter by 11.41%. He started with 5.56 million shares in mid-2010 and fluctuated a bit over the years but overall has increased his position by 1.5-2 million shares until 2011, when he started to sell.
No. 3: Te Connectivity (TEL), Weightings: 2.3319% - 6,988,896 Shares
TE Connectivity Ltd., formerly known as Tyco Electronics Ltd. Te Connectivity has a market cap of $15.41 billion; its shares were traded at around $35.71 with a P/E ratio of 11.6 and P/S ratio of 1.1. The dividend yield of Te Connectivity stocks is 2%. Te Connectivity had an annual average earnings growth of 0.6% over the past 5 years.
Quarter 1 net income for the diversified electronics company fell to $260 million (61 cents per share) vs. $265 million (59 cents per share) a year earlier. This is a decline of 1.9% from the year earlier quarter. Revenue rose 3.4% to $3.31 billion from the year earlier quarter. TEL reported adjusted net income of 66 cents per share. By that measure, the company fell short of mean estimate of 70 cents per share. It fell short of the average revenue estimate of $3.44 billion.
Richard Pzena owns 6,988,896 shares of TEL, valued as $197 million as of Sep. 30, 2011, which accounts for 2.3319% of his equity portfolio. Richard Pzena reduced his positions in the Jun. 30, 2011 quarter by 12.05%, again in the Sep. 30, 2011 quarter by 1.43%. He has a minimal 1.9 million shares or less in late 2007 and 2008, but by early 2009 he suddenly increased his position to 16.8 million shares. He has been selling ever since as the stock price has been increasing.
No. 4: L3 Communications Holdings Inc. (LLL), Weightings: 2.254% - 3,067,594 Shares
L-3 Communications Holdings is a merchant supplier of sophisticated secure communication systems and specialized communication products. L3 Communications Holdings Inc. has a market cap of $7.04 billion; its shares were traded at around $70.34 with a P/E ratio of 8.1 and P/S ratio of 0.4. The dividend yield of L3 Communications Holdings Inc. stocks is 2.6%. L3 Communications Holdings Inc. had an annual average earnings growth of 17.8% over the past 10 years. GuruFocus rated L3 Communications Holdings Inc. the business predictability rank of 4-star.
L-3 Communications Holdings Inc. agreed to acquire Danaher Corp.'s Kollmorgen Electro-Optical unit for $210 million, broadening the defense contractor's presence in electronics systems used in military and commercial applications. L-3 expects the deal closing in the first quarter. Kollmorgen--which develops and manufactures specialized equipment such as submarine photonics systems and periscopes--is expected to generate 2012 sales of about $160 million to $170 million, according to L-3.
Richard Pzena owns 3,067,594 shares of LLL, valued as $190 million as of Sep. 30, 2011, which accounts for 2.254% of his equity portfolio. Richard Pzena reduced his positions in the Jun. 30, 2011 quarter by 9.39%, again in the Sep. 30, 2011 quarter by 11.73%. He began with 1 million shares in mid-2007 and has been increasing ever since until late 2004 when he started selling.
No. 5: Ubs Ag (UBS), Weightings: 1.6366% - 12,075,996 Shares
UBS AG is one of the world's financial firms, combining financial strength with a reputation for innovation and a global culture that embraces change. Ubs Ag has a market cap of $50.06 billion; its shares were traded at around $13.59 with a P/E ratio of 8.9 and P/S ratio of 2.3. Ubs Ag had an annual average earnings growth of 18.6% over the past 10 years.Check out the complete list of the stocks that Richard Pzena keeps on buying.
Peabody Energy Corp is seeking to sell Peabody (Wilkie Creek) Pty Ltd. Peabody Energy has hired UBS AG to find a buyer for its Wilkie Creek coal mine after decisions to sell Wilkie Creek was taken in the final three months of 2011.
UBS AG, acting through its London Branch, issued a 1.875% fixed rate covered bond in the amount of USD 1.5 billion, maturing on January 23, 2015 and payment date on January 24, 2012.
The Securities and Exchange Commission said it fined UBS $300,000 for allegedly not following fair valuation procedures in three UBS Global Asset Management mutual funds. The SEC found that 48 of 54 purchases of no agency mortgage-backed securities in 2008 were valued at prices substantially in excess of the transaction prices, including many at least 100% higher. The valuations used by UBS were provided by pricing sources that did not appear to take into account the prices at which the mutual funds had purchased the securities. The SEC said that because the securities were not properly or timely priced at fair value, the NAVs of the funds were misstated between one cent and 10 cents per share for several days in June 2008.
UBS AG recently extended its agreement with Charles Schwab Corp. to handle a majority of the discount brokerage's equity order flow for another two years, locking down a key retail customer as competition for trading business remains tense. Representatives for UBS and Schwab confirmed the arrangement, which renews a previous eight-year deal the two companies struck in 2004 when Schwab sold UBS its capital markets business for $256 million.
Richard Pzena owns 12,075,996 shares of UBS, valued as $138 million as of Sept. 30, 2011, which accounts for 1.6366% of his equity portfolio. Richard Pzena reduced his positions in the Jun. 30, 2011 quarter by 5.54%, again in the Sept. 30, 2011 quarter by 3.12%. He had a peak position of 15.7 million shares by the end of 2008 but has been selling ever since.