Pzena Investment Management’s Top Five Picks for Start of 2016

#3 Citigroup Inc (NYSE:C)

– Shares Owned by Pzena Investment Management (Q4): 9,076,626

– Value of Holding (Q4): $ 469,715,000

Citigroup Inc (NYSE:C) ascended one spot in Pzena’s list over the fourth quarter (even though the firm trimmed its stake in the company by 2%) driven by a 4.31% increase in the stock’s price. For the fourth quarter of 2015, Citigroup posted adjusted EPS of $1.06 on revenue of $18.64 billion, which was better than the $1.05 in EPS and $17.87 billion in revenue that analysts had expected. Among the funds that we track, Ken Fisher’s Fisher Asset Management is one of the top shareholders of Citigroup Inc (NYSE:C). As of the end of the fourth quarter of 2015, Fisher Asset Management disclosed ownership of 12.03 million shares of the banking company, worth more than $622 million. Harris Associates was, once again, among the largest institutional investors of record, with 26.51 million shares held as of December 31.

#2 Exxon Mobil Corporation (NYSE:XOM)

– Shares Owned by Pzena Investment Management (Q4): 6,072,604

– Value of Holding (Q4): $ 473,359,000

In the second place was Exxon Mobil Corporation (NYSE:XOM). Even though the stock was affected by a plunge in oil prices, the 12% decline over the past year is better than the drops registered by many of its peers. Exxon is much better positioned to deal with weak oil prices than its peers and despite concerns over its capability to pay dividends, the company has recenty announced a dividend of $0.73 per share for the first quarter of 2015. However, analysts are still concerned that in the current environment, if Exxon maintains the same dividend, the payout ratio might exceed 100% and the dividend payments might be higher than the company’s net income, for the first time in over 30 years. Since the beginning of the year, Exxon’s stock has inched up by 2% even though the company posted a net income of $0.67 per share for the fourth quarter, down from $1.56 posted a year earlier, but above the estimates of $0.63. At the same time, as the profit was the lowest in a decade, Exxon decided to slash its spending this year and said it is going to suspend the stock buybacks. Donald Yacktman’s Yacktman Asset Management reduced its exposure to Exxon Mobil Corporation (NYSE:XOM) by 27% during the fourth quarter, taking its holdings to 4.26 million shares.

#1 Bank of America Corp (NYSE:BAC)

– Shares Owned by Pzena Investment Management (Q4): 28,668,804

– Value of Holding (Q4): $ 482,496,000

Bank of America Corp (NYSE:BAC) was Pzena’s top pick for the first quarter of 2016. Even though the firm cut its stake in the company by 4% over the fourth quarter of 2015, the position was still the most valuable in the fund’s portfolio – aided by an 8.02% growth registered by the stock during the quarter. For the fourth quarter of 2015, Bank of America Corp (NYSE:BAC) posted earnings of $0.28 per share, $0.01 above the Street’s consensus, on revenue of $19.759 billion, which fell a bit short of expectations for $20.292 billion in sales. Fisher Asset Management was also quite bullish on the stock and disclosed holding more than 43 million shares (worth over $725 million) in its 13F filing for the fourth quarter.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.