Pzena Investment Management’s Top Stock Picks Ahead of Q2; Two Leading Oil and Gas Companies Among Top Holdings

Pzena Investment Management is a value-oriented investment management firm founded by Richard S. Pzena in 1995. The firm’s investment philosophy solely focuses on a classic, deep value approach to investing, which involves buying good businesses at low prices. In particular, the New York-based investment firm seeks companies that are underperforming their historically-demonstrated earnings power and ones which it believes could solve the issues causing that underperformance. In mid-March, Mr. Pzena said during CNBC’s ‘Halftime Report’ that “After five years of underperformance of value versus growth, the spreads in valuations are at provocative levels”, suggesting that these spreads may be very rewarding. With this in mind, let’s have a look at Pzena Investment Management’s top-5 holdings as of the end of March, as well as briefly touch on the recent performance of those positions.

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#5 Franklin Resources Inc. (NYSE:BEN)

 – Number of shares held by Pzena (as of March 31): 10.60 Million

 – Value of Pzena’s holding (as of March 31): $413.84 Million

In the first quarter of 2016, Pzena Investment Management upped its position in Franklin Resources Inc. (NYSE:BEN) by 11%. The increased stake was valued at $413.84 million on March 31 and accounted for 2.5% of Pzena’s equity portfolio. The top- and bottom-line figures of the global investment management organization dropped in the second quarter of fiscal year 2016 ended March 31, as assets under management continue to decline. Franklin’s total AUM on March 31 amounted to $742.6 billion, which marked a decrease of 4% relative to the figure recorded on September 30 and a decrease of 16% year-over-year. The investment firm has also been hit by fast-growing demand for low-fee passive products such as exchange-traded funds, which are favored at the expense of mutual funds. Nonetheless, the management team at Franklin Resources is planning on expanding the reach of its operations into the ETF market. Eric Sportt’s Sprott Asset Management owns 247,000 shares of Franklin Resources Inc. (NYSE:BEN) as of March 31.

#4 Exxon Mobil Corporation (NYSE:XOM)

 – Number of shares held by Pzena (as of March 31): 4.98 Million

 – Value of Pzena’s holding (as of March 31): $416.33 Million

The value-oriented investment firm trimmed its Exxon Mobil Corporation (NYSE:XOM) stake by roughly 17% during the January-to-March period, ending the quarter with 4.98 million shares worth $416.33 million. The world’s largest publicly-traded oil and gas company has seen its market value gain 14% since the beginning of 2016. Exxon has increased its annual dividend payment for 33 consecutive years and may continue to do so, though crude oil prices remain at low levels. The company’s net earnings came in at $16.15 billion in 2015, slightly less than half of the $32.52 billion it raked in during 2014. The world’s fourth-largest company by market capitalization paid out $12.09 billion of those earnings to shareholders in 2015, in the form of dividend payments, which yielded a payout ratio of 75%. Although the company’s payout ratio is on track to exceed 100% for 2016, Exxon nonetheless increased its quarterly dividend payment to $0.75 per share from $0.73 earlier this year. Ken Fisher’s Fisher Asset Management reported ownership of 4.54 million shares of Exxon Mobil Corporation (NYSE:XOM) as of March 31.

Pzena Investment’s top-3 holdings are discussed on the next page.