Analyzing Pzena's Recent Investment Moves

by: Brian Gorban

Richard Pzena is founder and co-cheif investment officer of Pzena Investment Management. The firm started managing assets on January 1, 1996 and since that time has built a solid track record and disciplined value investing approach that has resulted in the firm managing $13.7B in assets as of Oct. 31, 2011. So following up on my analysis of investment greats such as Mr. Hawkins, Mr. Lampert, and Mr. Pabrai, let's analyze Mr. Pzena and see if there is value as well.

Staples (NASDAQ:SPLS), together with its subsidiaries, operates as an office products company. This is a new holding for Pzena and he went in big with just over 24.1M shares this past quarter. I can see the value with SPLS at just a 10x trailing P/E, 9x forward P/E, .4x P/S and EV/S, 1x PEG, and very nice and growing 2.8% dividend yield. I think SPLS is a quality buy.

Computer Sciences Corporation (CSC) provides information technology and professional services to governments and commercial enterprises. This is another holding Pzena went in big with almost 6.2M shares. CSC looks depressed due to last year's loss, but there seems to be value at just a 6x forward P/E, .2x P/S, .4x EV/S, .7x PEG, .8x P/B, and strong FCF of approximately $900M this past year securing the 3.3% dividend yield. CSC is a buy as well.

MetLife (NYSE:MET), through its subsidiaries, provides insurance, annuities, and employee benefit programs. Pzena increased his holdings significantly this past quarter by more than 5200% and now owns 2.17M shares. This is another great value play at just a 6x trailing and forward P/E, .5x P/S, .6x P/B, .7x PEG, and secure 2.4% dividend yield.

Ingram Micro (NYSE:IM) distributes information technology products and supply chain solutions worldwide. Pzena more than doubled his stake and now holds just under 2.6M shares. This is another solid holding at just an 11x trailing P/E, 9x forward P/E, .1x P/S and EV/S, .8x P/B, and just 4x EV/EBITDA.

Entergy Corporation (NYSE:ETR), together with its subsidiaries, engages in electric power production and retail electric distribution operations in the United States. Pzena boosted his existing large stake by more than 19% and now holds almost 3.3M shares. This is a great dividend holding at a secure 4.7% while trading at a trailing 9x P/E, strong FCF this past year of approximately $1B, and under 7x EV/EBITDA.

ACE Limited (NYSE:ACE), through its subsidiaries, provides a range of insurance and reinsurance products worldwide. Pzena slashed his stake this past quarter by just over 31%, bringing his total ownership to 1.85M shares. I can see why he reduced his stake, as ACE had a strong move higher and now trades at 1x P/B. This is expensive when other competitors such as MET (described above) are trading at much lower valuations. ACE looks like a great company, but MET looks to be the better value at these prices.

Forest Laboratories (NYSE:FRX) develops, manufactures, and sells branded forms of ethical drug products. We recently mentioned the compelling value FRX has, and it's interesting to see that Pzena sold out his stake entirely this past quarter. FRX has been underperforming, but now sits at just a trailing 7x P/E, 4x EV/EBITDA, 1.2x EV/S, and a still sterling balance sheet with no debt and $8.25/share in net cash. Moreover, FRX continues to generate plenty of FCF and has Carl Icahn holding approximately 10% as a wildcard for a potential takeover / shareholder friendly moves that should unlock value. I'm still sticking with FRX.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CSC, MET, FRX over the next 72 hours.