Pzena Investment Management leader Richard Pzena (Trades, Portfolio) disclosed on Dec. 14 he trimmed his Essendant Inc. (ESND, Financial) stake by 15.10%.
The guru’s New York-based firm says on its website it uses a classic value approach to invest in good businesses that are currently underperforming their historical earnings power.
According to GuruFocus real-time picks, Pzena sold 589,121 shares of the Illinois-based company for an average price of $12.55 per share. He now holds roughly 3.3 million shares, which represent 0.2% of the equity portfolio.
GuruFocus estimates Pzena has lost 40% on the investment since the second quarter of 2015.
The company, which is a wholesale distributor of office supplies and furniture, has a $464.5 million market cap; its shares were trading around $12.34 on Tuesday with a price-book ratio of 1.08 and a price-sales ratio of 0.09.
The median price-sales chart shows the stock is trading below its historical value.
The company reported third-quarter results in October. Essendant posted adjusted earnings of 14 cents per share on $1.3 billion in revenue, which declined 1.2% from the prior-year quarter.
GuruFocus rated Essendant’s financial strength 5 out of 10. Although the company has a heavy debt load and seen a decline in revenue per share over the last 12 months, the Altman Z-Score of 4.31 suggests it is in good fiscal standing.
The company’s profitability and growth scored a 6 out of 10 rating, impacted by a declining operating margin and negative returns that underperform a majority of industry peers. The company also has a moderate Piotroski F-Score of 4, which indicates operations are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
In September, Staples Inc. (SPLS, Financial) announced one of its affiliates is acquiring Essendant for $12.80 per share, a deal valued at $996 million including net debt. On Dec. 12, the companies extended the deadline for expiration of the tender offer to 6 p.m. Eastern on Dec. 18.
With 8.8% of outstanding shares, Pzena is Essendant’s largest guru shareholder. Barrow, Hanley, Mewhinney & Strauss, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Joel Greenblatt (Trades, Portfolio) also have positions in the stock.
Portfolio composition
Pzena’s $20.56 billion portfolio, which is composed of 183 stocks, is heavily invested in the financial services sector with a 34.45% weight.
As of the third quarter, other business equipment companies the guru owns are VeriFone Systems Inc. (PAY, Financial) and Steelcase Inc. (SCS, Financial).
Disclosure: No positions.
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