Richard Pzena is founder and co-chief investment officer of Pzena Investment Management LLC with more than $24 billion under management. Pzena started the firm in 1995. He earned a B.S. summa cum laude and an M.B.A. from the Wharton School of the University of Pennsylvania in 1979 and 1980.
The following are the stocks of his portfolio that are undervalued and are trading with a low P/E ratio.
Baxter International Inc. (BAX)
Baxter International is trading at about $37 with a trailing 12-month P/E multiple of 12.00 and an estimated forward P/E multiple of 26.81. Over the last 10 years, the stock has dropped by 5% and during the last 52 weeks the price has been as high as $43.44 and as low as $32.18.
The DCF model gives a fair value of $85.4 that puts the stock as undervalued with a margin of safety of 56% at current prices. The Peter Lynch earnings line suggests a smaller margin of safety, giving a fair price of $67.5.
The company is a health care company. It is engaged in the development, manufacture and sale of products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma and other chronic and acute medical conditions. During the last quarter, driven by a negative impact from foreign exchange, worldwide sales decreased by 8% compared to the prior-year period but in this quarter the company had successful introduction of the recently CE-marked HOMECHOICE CLARIA APD system for home therapy in several markets across Europe.
The company's largest shareholder among the gurus is Daniel Loeb (Trades, Portfolio) with 9.84% of outstanding shares followed by Jana Partners (Trades, Portfolio) with 2.3% and Vanguard Health Care Fund (Trades, Portfolio) 1.32%.
Oracle Corp. (ORCL)
Oracle is trading at about $39 with a trailing 12-month P/E multiple of 18.30 and an estimated forward P/E multiple of 14.73. Over the last 10 years, the stock has dropped by 7% and during the last 52 weeks the price has been as high as $46.71 and as low as $35.14.
The DCF model gives a fair value of $48.66 that puts the stock as undervalued with a margin of safety of 19% at current prices. The Peter Lynch earnings line suggests a fair value of $32.7.
The company develops, manufactures, markets, hosts and supports database and middleware software, application software, Cloud infrastructure, hardware system including computer server, storage and networking products and related services that are engineered to work together in Cloud-based and on-premises information technology (IT) environments. During the last quarter total revenues decreased by 2%.
First Eagle Investment (Trades, Portfolio) is the largest guru shareholder with 0.89% of outstanding shares, followed by James Barrow (Trades, Portfolio) with 0.87% and Donald Yacktman (Trades, Portfolio) with 0.62%.
Qualcomm Inc. (QCOM)
Qualcomm is trading at about $48 with a trailing 12-month P/E multiple of 15.10 and an estimated forward P/E multiple of 11.57. Over the last 10 years, the stock has dropped by 32% and during the last 52 weeks the price has been as high as $75.72 and as low as $47.52.
The DCF model gives a fair value of $56.84 that puts the stock as undervalued with a margin of safety of 15% at current prices. Peter Lynch puts the stock as slightly undervalued, giving a fair price of $51.4.
The company develops and commercializes digital communication technology called CDMA (Code Division Multiple Access) and owns intellectual property applicable to products that implement any version of CDMA including patents, patent applications and trade secrets.
The company's largest shareholder among the gurus is Jana Partners with 1.9% of outstanding shares followed by James Barrow (Trades, Portfolio) with 1.23%, PRIMECAP Management (Trades, Portfolio) with 1.08% and Jeremy Grantham (Trades, Portfolio) with 0.65% of outstanding shares.
Axis Capital Holdings Ltd. (AXS)
Axis Capital Holdings is trading at about $55.5 with a trailing 12-month P/E multiple of 8.80 and an estimated forward P/E multiple of 13.28. Over the last 10 years, the stock has risen by 12% and during the last 52 weeks the price has been as high as $60.00 and as low as $47.65
The DCF model gives a fair value of $65.01 that puts the stock as undervalued with a margin of safety of 15% at current prices. The Peter Lynch earnings line suggests a higher margin of safety, giving a higher price of $95.4
The company provides a broad range of specialty (re)insurance through operating subsidiaries and branch networks.
Richard Pzena (Trades, Portfolio) is the largest guru shareholder with 6.09% of outstanding shares, followed by NWQ Managers (Trades, Portfolio) with 0.42% and Jim Simons (Trades, Portfolio) with 0.31%.
Taiwan Semiconductor Manufacturing Co. (TSM)
Taiwan Semiconductor is trading at about $22 with a trailing 12-month P/E multiple of 11.80 and an estimated forward P/E multiple of 14.88. Over the last 10 years, the stock has risen by 140% and during the last 52 weeks the price has been as high as $22.77 and as low as $17.32.
The DCF model gives a fair value of $25.69 that puts the stock as undervalued with a margin of safety of 13% at current prices. The Peter Lynch earnings line suggests a higher margin of safety, giving a fair price of $28.2
The company engages in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices; it also manufactures masks. During the third quarter revenue increased 1.7% year over year while net income and diluted EPS both decreased 1.3% compared to the same quarter of a year before. Compared to the second quarter, these results represent a 3.4% growth in revenue and a 5.1% decrease in net income.
The company's largest shareholder among the gurus is Ken Fisher (Trades, Portfolio) with 0.53% of outstanding shares followed by Jeremy Grantham (Trades, Portfolio) with 0.18% and Jim Simons (Trades, Portfolio) with 0.1%.
Franklin Resources Inc. (BEN)
Franklin Resources is trading at about $41 with a trailing 12-month P/E multiple of 12.60 and an estimated forward P/E multiple of 13.28. Over the last 10 years, the stock has risen by 32% and during the last 52 weeks the price has been as high as $59.43 and as low as $36.10.
The DCF model gives a fair value of $48.36 that puts the stock as undervalued with a margin of safety of 14% at current prices. The Peter Lynch earnings line suggests a higher margin of safety, giving a fair price of $52.8
The company together with its subsidiaries operates as an investment management company. It offers investment services under Franklin, Templeton, Mutual Series, Bissett, Fiduciary Trust, Darby, Balanced Equity Management and K2 brand names.
Richard Pzena (Trades, Portfolio) is the largest guru shareholder with 1.28% of outstanding shares, followed by Diamond Hill Capital (Trades, Portfolio) with 0.93% and Bill Nygren (Trades, Portfolio) with 0.89%.
Cognizant Technology Solutions Corp. (CTSH)
Cognizant Technology Solutions is trading at about $64 with a trailing 12-month P/E multiple of 25.50 and an estimated forward P/E multiple of 18.35. Over the last 10 years, the stock has risen by 420%. During the last 52 weeks the price has been as high as $69.80 and as low as $50.17.
The DCF model gives a fair value of $72.31 that puts the stock as undervalued with a margin of safety of 10% at current prices. The Peter Lynch earnings line puts the stock as overpriced, giving a fair price of $37.6.
The company has offices and operations in various countries around the world and provides services to clients globally. Its business is organized and managed primarily around its four industry-oriented business segments: Financial Services; Healthcare; Manufacturing, Retail and Logistics; and Other, which includes Communications, Information, Media and Entertainment, and High Technology. During the last quarter revenue was up by 3.3% from the quarter before and 23.5% from the same quarter of a year before.
The company's largest shareholder among the gurus is David Rolfe (Trades, Portfolio) with 1.13% of outstanding shares followed by Pioneer Investments (Trades, Portfolio) with 0.36%, Jeremy Grantham (Trades, Portfolio) with 0.36% and Matthews Pacific Tiger Fund (Trades, Portfolio) with 0.23% of outstanding shares.
Infosys Ltd. (INFY)
Infosys is trading at about $16.47 with a trailing 12-month P/E multiple of 25.10 and an estimated forward P/E multiple of 17.79. Over the last 10 years, the stock has risen by 79%. During the last 52 weeks the price has been as high as $19.46 and as low as $15.20.
The DCF model gives a fair value of $17.98 that puts the stock as undervalued with a margin of safety of 8% at current prices. The Peter Lynch earnings line says the stock is overpriced, giving a fair price of $10.1.
The company provides technology, business consulting, outsourcing and engineering services to help clients in more than 30 countries.
Ken Fisher (Trades, Portfolio) is the largest guru shareholder with 0.94% of outstanding shares, followed by Jeremy Grantham (Trades, Portfolio) with 0.09% and Sarah Ketterer (Trades, Portfolio) with 0.04%.
Walmart Stores Inc. (WMT)
Walmart Stores is trading at about $60 with a trailing 12-month P/E multiple of 12.50 and an estimated forward P/E multiple of 13.18. Over the last 10 years, the stock has risen by 25%. During the last 52 weeks the price has been as high as $90.97 and as low as $56.30.
The DCF model gives a fair value of $62.09 that puts the stock as undervalued with a margin of safety of 4% at current prices. The Peter Lynch earnings line gives a higher margin of safety, giving a fair price of $72.8
Walmart Stores was incorporated in October 1969. The company operates retail stores located throughout the U.S., Africa, Argentina, Brazil, Canada, Central America, Chile, China, India, Japan, Mexico and the United Kingdom. Its operations comprise three reportable business segments: Walmart U.S., Walmart International and Sam's Club.
The company's largest shareholder among the gurus is Warren Buffett (Trades, Portfolio) with 1.75% of outstanding shares followed by Dodge & Cox with 0.96%, and James Barrow (Trades, Portfolio) with 0.52%.
