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Holly LaFon
Holly LaFon
Articles (7844) 

Guru Richard Pzena's Top Q4 Stock Buys

February 11, 2013 | About:

Pzena Investment Management is a global investment management firm with $18.6 billion in assets managed, which Richard Pzena founded using classic value investing principles. In its portfolio containing 124 stocks, it chose 7 new ones in the fourth quarter, the largest of which are: Assurant Inc. (NYSE:AIZ), Aetna Inc. (NYSE:AET) and Anixter International Inc. (NYSE:AXE).

According to its website, these or any of the stocks it buys must meet the following five criteria:

  • 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 Pzena Investment Management portfolio is also valued at $12.17 billion and its largest weighting is 35.6% financial services, followed by 12.4% in consumer cyclical, with a 6% quarter-over-quarter turnover.

Read more about Pzena’s 2013 outlook in his fourth quarter commentary.

New Buys: Assurant Inc. (NYSE:AIZ)

Assurant is an insurance company with a variety of specialty insurance businesses that each seek to gain a competitive advantage in their respective markets through risk management expertise, strong distribution partnerships and complex administration skills. It also employs a disciplined and conservative investment and capital management philosophy.

Pzena purchased 1,064,590 shares of Assurant for $37 per share on average in the fourth quarter.

The company’s stock lost almost 39% of its market value over the past five years and trades for $38.49 per share on Monday afternoon.

Assurant is facing a temporary setback in net income due to increased catastrophe losses related to superstorm Sandy in the fourth quarter. Earnings decreased to $483.7 million, or $5.67 per diluted share, from $539 million, or $5.51 per diluted share in 2011.

The insurance company’s book value in the same period increased by 13.8% to $53.87, from $47.34. Return on assets also expanded to 10.4%, from 10.1%.

Assurant is expecting growth or consistency across all of its platforms for full-year 2013, except for Assurant Health due to health care reform and less 2012 investment income from real estate joint venture partnerships, and corporate and other due to additional investment areas the company is trying to grow.

Aetna Inc. (NYSE:AET)

Aetna is an insurance provider covering health care, dental, pharmacy, group life, disability and employee benefits. Pzena bought 772,250 shares of the company for $44 per share on average in the fourth quarter, after closing out a former position in the first quarter of 2012, which he held for several years.

Shares of Aetna are up to $50.38 each on Monday afternoon, after descending as low as the mid $30s in mid-2012. In the past five years its share price is virtually flat.

Aetna’s fourth quarter revenue rose 5% in the fourth quarter compared to last year’s fourth quarter, as earnings declined 49% in the same period to $190.1 million. The company spent $7.3 billion in the fourth quarter to acquire Coventry Health Care Inc. in the fourth quarter, a diversified managed health care company, designed to increase Aetna’s Medicaid footprint, among other advantages.

Going forward, Aetna expects to grow earnings per share at a double-digit rate on average over time, on the strength of its core businesses, emerging business growth and effective capital deployment, as well as the opportunities provided by the new acquisition.

Anixter International Inc. (NYSE:AXE)

Anixter International supplies communications and security products, wire and cable and other products to the global market to reduce supply chain costs. Pzena bought 506,488 shares of the company for $59 per share on average in the fourth quarter.

After digressing in mid-2012, Anixter’s share price has steadily increased to $70.66 on Thursday afternoon.

In the fourth quarter, Anixter stock reported record sales of $1.54 billion, a 3% increase from the previous year’s fourth quarter. Net income over the same period fell 90% to $5.2 million. Excluding $38.3 million in impairment, pension-related and restructuring charges of $38.3 million, net of tax, its net income would have been $43.5 million.

The company saw its biggest sales increase of 18% come from its electrical and electronic wire and cable segment, helped by its acquisition of Jorvex and strong performance in its natural resource extraction and power generation businesses. Sales at its OEM supply segment declined 12.4% due to a decline in heavy truck production in North America, combined with weaker manufacturing in Europe.

For 2013, Anixter expects mid-single digit organic sales growth, weighted to the second half of the year as its 2012 growth measures gain effectiveness.

To see more of Richard Pzena’s portfolio moves, see his portfolio here. Also check out the undervalued stocks, top growth companies and high yield stocks of Richard Pzena.

Rating: 3.3/5 (4 votes)


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