founded New York-based Pzena Investment Management in 1996 and
now has $13.2 billion in assets under management. In the second
quarter, Pzena wrote in his commentary that the combination of
problematic macro events was creating a number of significant
valuation discounts on companies with long-term sustainable
In the second quarter the firm made 22 new buys, the largest of
which are: Oracle Corp. (
), Google Inc. (
), Baker Hughes (
), Partnerre Ltd. (
) and DeVry (
Pzena bought 11,154,144 shares of
Oracle Corp. (
at an average price of $28 in the second quarter of 2012. The new
buy is 3.9% of his portfolio, and the stock has increased 13%
since he purchased.
Oracle makes hardware and software for the cloud and data
centers, with 100 of the Fortune 100 as their clients. The
company was flourishing in its fiscal fourth quarter, with
all-time highs in its new software license sales, total software
revenue, total revenue, EPS, operating margins and operating cash
flow. Several of its product groups also grew 100% year over
year. In fiscal year 2013, it is relying on its engineered
systems and the oracle cloud to drive growth.
Oracle's balance sheet contains approximately $37 billion in
cash, with $19 billion in long-term liabilities and debt. The
company has also been generating higher annual free cash flow for
a solid decade.
Pzena bought 314,389 shares of
Google Inc. (
at an average price of $599 in the second quarter. At one point
in the second quarter, Google dropped to as low as about $560 per
share, and has since increased to $641 per share.
In May, the company purchased Motorola Mobility Holdings, on May
22, 2012 for $40 per share in cash, or $12.5 billion and their
financial results from the acquisition date were added to
Google's second-quarter reporting. The company reported $12.2
billion in revenues for that quarter, a 35% increase year over
year. GAAP net income was $2.8 billion, compared to $2.5 billion
in the second quarter of 2011.
The company also introduced its Android-based Nexus 7 tablet in
the second quarter, and hopes to build more devices through its
Motorola acquisition. The Nexus 7 sold out at several retailers
in the weeks after it was released.
In the last month, Google is reported to be interested in buying
a stake in Twitter and wind power.
Pzena bought 3,010,139 shares of
Baker Hughes (
for an average price of $41 in the second quarter. The stock has
increased almost 19% since he purchased. For the year ended June
30, 2012, Baker Hughes' stock had declined 46%.
Baker Hughes supplies oilfield services worldwide. The company's
revenues have been increasing and it has produced steady profit
over the last ten years, but cash flows ceased recently. In 2010
the company lost $635 million and in 2011, it lost $954 million.
Its P/E ratio also declined to an almost three-year low during
Pzena's second-quarter entry point.
The company is cautiously optimistic about its market outlook for
the remainder of the year. U.S. activity should remain stable if
commodity prices remain stable, and it expects continued growth
in its Gulf of Mexico and international markets.
Pzena bought 1,370,423 shares of
Partnerre Ltd. (
a leading global reinsurer,
at an average price of $71 in the second quarter. The company's
stock price has increased almost 30% over the last year.
The first quarter of 2011, the insurance industry experienced a
record loss quarter due to an unusually high number of
catastrophes. As a result, Partnerre hd an operating loss of $642
million and a net loss of $520 million. By the end of the year,
the company had maintained its strong financial position with
For the second half of 2012, the company reported net income of
$536 million, or $7.76 per share, compared to a net loss of
$682.8 million, or $10.32 per share. The increase was driven by
strong underwriting results. The company's investing portfolio
also returned modest gain, resulting in an 8% increase in book
value per share year to date.
PartnerRe ended the second quarter with $7.5 billion in total
capital, a 3% increase from year-end 2011. The company's dividend
was $2.35 per share in 2011, after a decade of annual increases.
Pzena bought 805,269 shares of
at an average price of $30 in the second quarter. The stock has
dropped 36% from that price and 50% year to date, to trade for
about $19 on Friday.
DeVry is a for-profit education company with the second-largest
market cap in the industry. Almost all of the stocks in this
industry have suffered stock price declines over the last year.
of Auxier Asset Management told GuruFocus in an interview he was
bullish for the long-term prospects of the industry but that it
was facing setbacks: "But the whole group's been hammered. The
fear is of losing accreditation, and that's a political, that's a
government taking. The government is trying to socialize more and
more industries, and that's one of them, unfortunately. That's
been a regulatory risk," he said.
DeVry has been increasing its earnings and revenue each
consecutive year since 2005, having record years for both in
2011. Its P/E on Friday is 6.34, a near all-time low. In the
company's third quarter and first nine months of 2012, reported
revenue deceleration as enrollment declined.
See the rest of
Richard Pzena's portfolio here
. Also check out the
, Top Growth Companies and High Yield stocks of Richard
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