Richard Pzena (Trades, Portfolio) of Pzena Investment Management acquired 12 new holdings in the third quarter. His top three new holdings are Capital One Financial Corp. (COF, Financial), Hilton Worldwide Holdings Inc. (HLT, Financial) and Wesco Aircraft Holdings Inc. (WAIR, Financial).
Pzena founded his firm in 1995 in New York City. Pzena seeks classic value through buying good companies at low prices. The firm focuses on companies that are underperforming their historically demonstrated earnings power.
Capital One
In Capital One, Pzena purchased 3,190,520 shares for an average price of $68.68 per share. The transaction had an impact of 1.4% on the portfolio.
The financial services holding company has a market cap of $38.3 billion with an enterprise value of $89.4 billion. It has a price-earnings (P/E) ratio of 10.4, a forward P/E of 9.2, a price-book (P/B) ratio of 0.77 and a price-sales (P/S) ratio of 1.6.
GuruFocus ranked Capital One’s financial strength 5 of 10. Its Piotroski F-Score of 5 indicates the company is in stable financial condition. Its cash-debt ratio of 0.16 is far below the industry median of 6.28.
GuruFocus ranked the company’s profitability and growth 7 of 10. It has an operating margin of 22.6% and a net margin of 15.4%. Its return on equity (ROE) of 7.6% outperforms 56% of other companies in the global credit services industry. Its return on assets (ROA) of 1.17% underperforms 59% of its competitors.
Pzena previously sold out of Capital One in the third quarter of 2011. Dodge & Cox is the company’s largest shareholder among the gurus with 9.7% of outstanding shares, which is 3.1% of his total assets managed. In total, 19 gurus hold positions in the company.
The DCF Calculator gives the stock a fair value of $101.04 with a 26% margin of safety; it was trading at $74.6 on Monday.
Hilton
In Hilton, Pzena purchased 9,804,419 shares for an average price of $23.51 per share. The transaction had an impact of 1.37% on the portfolio.
The hospitality company has a market cap of $22.6 billion with an enterprise value of $32.1 billion. It has a P/E of 14.6, a forward P/E of 23.5, a P/B of 3.5 and a P/S of 1.9.
GuruFocus ranked Hilton’s financial strength 4 of 10. Its Piotroski F-Score of 7 indicates the company is in a healthy financial condition, but the Altman Z-Score of 1.25 suggests the company has some minor financial stress. The company’s cash-debt ratio of 0.08 is below the industry median of 0.71.
GuruFocus ranked the company’s profitability and growth 6 of 10. It has an operating margin of 16.8% and a net margin of 13.4%. The company’s ROE outperforms 92% of other companies in the global lodging industry. Its ROA and return on capital (ROC) outperform 74% and 70% of its competitors.
Pzena is the company’s largest shareholder among the gurus with 0.99% of outstanding shares, which is 1.4% of his total assets managed. Ron Baron (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Signature Select Canadian Fund (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) also hold positions.
The DCF Calculator gives Hilton’s stock a fair value of $16.69; it was trading at $22.9 on Monday.
Wesco
In Wesco, Pzena purchased 379,177 shares for an average price of $13.55 per share. The transaction had an impact of 0.03% on the portfolio.
The aerospace industry supplier has a market cap of $1.3 billion with an enterprise value of $2.13 billion. It has a forward P/E of 11.2, a P/B of 1.5 and a P/S of 0.87.
GuruFocus ranked Wesco’s financial strength 4 of 10. Its low Piotroski F-Score of 3 and Altman Z-Score of 1.9 suggest the company is in poor financial condition with minor financial stress. Its cash-debt ratio of 0.07 is below the industry median of 0.67.
GuruFocus ranked the company’s profitability and growth 6 of 10. The company’s operating margin and net margin are both negative. Similarly, the company’s ROE, ROA and ROC are negative and underperform 90% of its competitors in the global industrial distribution industry. The company’s saving grace is its three-year revenue growth of 24%, which outperforms 96% of its competitors.
Michael Dell (Trades, Portfolio) is Wesco’s largest shareholder among the gurus with 5.6% of outstanding shares, which is 18.5% of his total assets managed. Other gurus with a position are Chris Davis (Trades, Portfolio), Richard Snow (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and David Dreman (Trades, Portfolio).
The DCF Calculator gives the stock a fair value of $-16.27; it was trading at $13.13 on Monday.
To view see all of Pzena’s new buys for the quarter, view his portfolio.
Disclosure: I do not own stock in any companies mentioned in the article.
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