Guru Richard Pzena (Trades, Portfolio) opened three positions in the second quarter. But the guru’s more prolific trade was in the large expansion of its position in troubled conglomerate General Electric Co. (GE, Financial).
The guru’s allegiance to one of the most notorious stocks on the S&P 500 affirmed what a number of other gurus have been saying all along – that the conglomerate is, indeed, worth the trouble, and likely will revive itself.
New filings showed that Pzena expanded his GE stake by 334% from the previous quarter. The guru purchased a total of more than 13 million shares at under $14 a share, bringing his total holding to more than 17 million shares. The holding made up 1.17% of his portfolio of stocks. Shares traded at $13.19 early Monday afternoon. That represented an estimated loss of 8% on the investment since inception.
Pzena is among a steadfast group of value investors who have demonstrated confidence in the troubled conglomerate's ability to turn things around. GE shareholders include a long list of gurus, including Ken Fisher (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ray Dalio(Trades, Portfolio)'s Bridgewater Associates and George Soros (Trades, Portfolio).
Total portfolio
The guru, who is founder of Pzena Investment Management, holds a total of $19 billion in a portfolio of about 161 stocks. He purchased a total of 15 new stocks in the second quarter of the year.
More than one-third of his portfolio is in the stocks of financial services companies. Technology made up 13% of the portfolio in the second quarter. Health care, energy and industrials make the bulk of the remainder of the portfolio.
Pzena’s philosophy is based on ranking companies from the cheapest to the most expensive on the basis of current share price to normal long-term earnings power. He likes to purchase shares of good companies that are selling at a low price. He understands that it is often unrealistic to expect such opportunities to be available absent some sort of problem which causes the price of the shares to drop. The question Pzena and his team try to answer is whether the issue that caused the drop in price is temporary or permanent.
New buys and additions
The founder of Pzena Investment Management opened his largest position, or 2.15% of his equity portfolio, in global consumer goods company Newell Brands Inc. (NWL, Financial).
Pzena also opened a position in a New York insurance company, which represented the largest initial public offering in the U.S. and the second-largest in the world for 2018. AXA Equitable Holdings Inc. (EQH, Financial) holds 1.22% of equity portfolio space.
His third top buy, representing 0.96% of the equity portfolio, was National Oilwell Varco Inc. (NOV, Financial). The Houston-based company provides oilfield services and equipment to the upstream oil and gas industry. The stock price was about $40.46 a share when he opened the stake.
The guru also expanded his stake in Edison International (EIX). He expanded his stake by 43%, adding more than $2.3 million shares, bringing the stake to more than 7.8 million shares. The shares were purchased for an average price of $62.41 a share.
Other additions to his existing holdings were in companies that displayed these ticker symbols: MET, AXE, AIG, RLGY, COF, AMGN, JELD, CI, R, MCK, MRK, IBN, WFC, ORCL, DBD, XOM and VIV.
Newell Brands
The largest buy for the quarter was supported by 16.58 million shares purchased at an average price of $26. The investment has produced an estimated loss of 16%, according to GuruFocus trading data. The current price per share is $21.94.
The New Jersey-based company makes stationery material, including pens and markers, food storage products and hygiene systems. Its revenue segments by product are: writing, home solutions, baby and parenting, commercial products and tools.
The company stood at $26.57 a share after the close on Friday. The stock price was up 0.19%. In Monday trading, shares were down nearly 4%.
The Peter Lynch chart showed that the stock of Newell Brands sold for a price that is below fair market value.
The company has a financial strength rating of 5 out of 10 and a profitability and growth rating of 7 out of 10. It has a market cap of $10.6 billion.
It is trading at a price-earnings ratio of 4.95, which is attractive at higher than 90% of its peers in the Global Household and Personal Products Industry. Newell Brands was trading at 9.35 forward earnings, which is also higher than the vast majority of peers. It has a price-book ratio of 0.76 and a price-sales ratio of 0.75. Both ratios are higher than the majority of its peers.
Its PEG ratio is 0.58, which indicates a good value stock that is likely to continue growing over time.
The company pays a dividend of 4.19%. Its payout is 21%. The yield represents among the top 79% in the industry.
Analysts anticipate that revenue will fall to $11.69 billion in 2020, compared to revenue of $12.6 billion in December of this year.
Other guru shareholders include Dalio, Carl Icahn (Trades, Portfolio), Greenblatt, Mario Gabelli (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
AXA Equitable Holdings
The insurance company raised $2.75 billion in the biggest U.S. IPO of the year, according to Bloomberg. It sold 137.25 million shares for $20 each in May. The proceeds from the listing were expected to help its French parent company fund its takeover of XL Group Ltd. (XL).
A total of 11.75 million shares sat in the guru’s portfolio space of 1.22% in the second quarter. The guru bought about 11.75 million shares for an average price of about $21 a share. The investment had gained 3% since its inception.
Shares were up to $22 a share in Monday trading. The stock surged 0.36%. The company reported a market cap of $12.35 billion. GuruFocus ranked it 5 out of 10 in financial strength and 3 of 10 in profitability and growth.
It traded at 14.66 times price-earnings, which ranked it highest among peers. It traded with a forward price-earnings ratio of 6.14 times, or the highest among peers. It has a price-book ratio of 0.88 times and a price-sales ratio of 0.94 times. Both ratios were highest among peers in the Global Insurance-Diversified Industry.
National Oilwell Varco Inc.
The investment was for a total of 4.4 million shares for an average price of about $40.46 a share. The guru has made about 16% in the investment since inception.
In early Monday trading, it stood at under $47 share, up almost 1%. Shares were up 50% over the last year and up 15% over the last three years. GuruFocus’ median price-sales chart suggested that shares traded above historical value.
Its forward price-earnings ratio reported 303 on Monday, which is among the lowest in the industry. Its price-to-owner earnings is 217.32, which is lower than 84% of peers.
National Oilwell Varco reported a price-book ratio of 1.3, higher than the majority of its peers, and a price-sales ratio of 2.31, lower than the 70% of its peers.
The company has a Piotroski F-Score of 6. Analysts predicted revenue would reach more than $10.5 billion in 2020, compared to $8.29 billion in 2018. The company is expected to begin earnings after multiple years of losses and declining revenues. Most recently, the company reported $7.3 billion in revenues, down from more than $20 billion in 2015.
Other guru shareholders included Francisco Garcia Parames, Greenblatt, Prem Watsa (Trades, Portfolio) and John Buckingham (Trades, Portfolio).
It has a market cap of $17.96 billion and a rating of 6 out of 10 for financial strength and 5 of 10 for profitability and growth.
