Over the past days hedge funds have been filing their form 13-F, which is a quarterly report of equity holdings by filed institutional investment managers with at least $100 million in equity assets under management, as required by the United States Securities and Exchange Commission (SEC). In this article, let´s concentrate in one particular hedge fund and try to see the principal holdings in its portfolio. I will look into Pzena Investment Management LLC (PZN) from Richard S. Pzena, who is founder and co-chief investment officer.
Recently the fund reported its equity portfolio, as at the end of last year. The total value of the portfolio amounted to $17.1 billion, up from $15.5 billion disclosed at the end of the previous quarter. Consequently, the fund's total return was 10.7% in the last quarter. The filing revealed that at the end of last year, the fund added eight new positions to its equity portfolio, and sold out of eight other companies. The top 10 portfolio holdings as of the end of the quarter represented 31.6%. The largest changes from previous 13-F fillings are in the consumer discretionary sector (2.2%) followed by health care stocks (0.3%).
In this article, we have selected three companies, in which the fund holds the largest stakes, in terms of market value.
The first on the list is Hewlett-Packard Company (HPQ), in which Pzena Investment disclosed an $856.5 million stake with over 30.61 million shares. The company is a leading maker of computer products, including printers, servers and PCs, has a large service and support network. It operates in a highly competitive industry, including companies such as Apple (AAPL), IBM (IBM) and Dell (DELL). The firm's strategy is to diversify its business through acquisitions, adding services, hardware and solutions for data centers and for mobile computing. We believe that H-P will expand its software for data centers aiming to boost results in the long term.
Microsoft Corp. (MSFT) comes in next, the fund owning over 10.94 million shares, worth $409.4 million. The company reported earnings per share increased by 2.6% in the most recent quarter compared to the same quarter a year ago. The ROE of 18.2% highly outperformed the industry average (5.2%).
In Bank of America Corp. (BAC) Pzena disclosed ownership of over 26.24 million shares, worth $408.5 million. The company reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago, and it has a positive trend in the last years, as we can see in the next chart.
In the next chart we can appreciate the stock’s price movement. All of them have an upward trend for the five-year period.
We think the three stocks should continue to move higher in the future. All of them are certainly attractive for fundamental investors and make them a worthy investment for Pzena’s portfolio. In future articles we are going to calculate the intrinsic value of these stocks to determine if they are a good buy in terms of valuation.
Disclosure: Victor Selva holds no position in any stocks mentioned.