| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 9.2% | 2.5% | 7.3% |
| 2025 |
|---|
| 7.3% |
Pzena's Focused Value strategy lagged the value index during the fourth quarter, returning 2.5% net versus 3.8% for the Russell 1000 Value Index. The quarter was characterized by strong earnings beats and continued momentum in AI-related stocks. Basic materials, healthcare, and technology were the largest detracting sectors, with FMC, Baxter, and Skyworks as primary individual detractors due to disappointing results and guidance cuts. Consumer discretionary, financials, and consumer staples contributed positively, led by Dollar General's strong same-store sales from trade-down dynamics and Citigroup's performance amid robust capital markets activity. The team initiated a position in Knight-Swift, capitalizing on the prolonged freight downturn, and added to Baxter following weakness. Trims were made to outperforming positions including Medtronic, Dollar General, and money center banks. The portfolio maintains exposure to businesses facing near-term challenges that obscure durable earnings power, with management believing the environment remains constructive for long-term value investors given attractive valuation dispersion from narrow market leadership.
The portfolio remains positioned across a diverse set of idiosyncratic investment controversies, with exposure to businesses where near-term challenges obscure durable earnings power, while attractive valuation dispersion creates opportunities for long-term value investors.
The environment remains constructive for long-term value investors due to attractive valuation dispersion created by narrow market leadership.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 29 2026 | 2025 Q4 | BAX, C, CTSH, DAL, DG, DOX, FMC, KNX, MDT, PPG, QRVO, RHI, SWKS, WFC | Buybacks, Capital markets, earnings, Freight, Trade Down, value | - | Dollar General delivered strong same-store sales and margin improvement as customers traded down from grocery and pharmacy channels. This trade-down behavior provided a tailwind to… |
| Oct 24 2025 | 2025 Q3 | C, PPG | cyclicals, financials, Health Care, industrials, value | - | The strategy modestly underperformed as value stocks lagged growth amid AI-driven market leadership. Management added to Baxter and initiated new positions in PPG Industries and… |
| Aug 25 2025 | 2025 Q2 | OSK | contrarian, earnings recovery, Mean reversion, Sentiment, valuation |
GPN OSK DG |
The letter is built around the theme of mean reversion, highlighting how temporarily depressed companies often recover as fundamentals normalize. Management argues that pessimism, not… |
| Mar 31 2025 | 2025 Q1 | BAX, CVS, LKQ, NWL, PVH | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Capital MarketsExchanges operate as essential high-margin toll roads for the economy with immense operating leverage. They benefit from trading volume flowing directly to profits with minimal extra cost and have natural inflation hedging through transaction values. |
Exchanges Nasdaq CBOE Trading Fees Market Data |
FreightKnight-Swift operates in a prolonged freight downturn with excess capacity added during the 2021 profit peak persisting despite weaker demand, pressuring rates and earnings. The company's scale and network efficiency should drive profitability recovery as conditions normalize. |
Trucking Capacity Rates Downturn Recovery | |
Trade DownDollar General delivered strong same-store sales and margin improvement as customers traded down from grocery and pharmacy channels. This trade-down behavior provided a tailwind to margins that are expected to persist into 2026. |
Discount Retail Consumer Margins Traffic | |
| 2025 Q3 |
FinancialsEuropean banks have been rehabilitated after years in purgatory, with returns of 77% in 2025. Return on equity has normalized above 12% following exit from ultra-low rates, while capital positions have been rebuilt. However, supportive factors are well-appreciated by markets, reflected in significant valuation re-rating. |
Banks Return On Equity Interest Rates Capital Valuations |
IndustrialsThe fund increased exposure to high-quality industrial businesses with potential for cyclical upturn. Added Quanta Services for AI data center build-out, Hubbell for electrical grid upgrades, Old Dominion for freight cycle recovery, and Waste Connections for secondary market focus. |
Infrastructure Automation Transportation Electrical Equipment Waste Management | |
| 2025 Q2 |
MeanReversion |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Aug 25, 2025 | Fund Letters | Daniel L. Babkes | GPN | Global Payments Inc. | Financials | Transaction & Payment Processing Services | Bull | New York Stock Exchange | acquisition, Genius, M&A, Payments, Point of Sale, scale, Worldpay | Login |
| Aug 25, 2025 | Fund Letters | Daniel L. Babkes | OSK | Oshkosh Corporation | Industrials | Construction Machinery & Heavy Trucks | Bull | New York Stock Exchange | Aerial Work Platforms, AWP, Cyclical, Defense, Postal Contract, Replacement Cycle, Underearning | Login |
| Aug 25, 2025 | Fund Letters | Daniel L. Babkes | DG | Dollar General Corporation | Consumer Discretionary | General Merchandise Stores | Bull | New York Stock Exchange | discount retail, Inventory Control, Margins, Middle-Income Consumer, Shrink, tariffs, Trade-down | Login |
| TICKER | COMMENTARY |
|---|---|
| BAX | We also added to Baxter following share price weakness |
| C | Money center bank Citigroup rose amid strong capital markets activity and benign credit conditions. The company continued to repurchase stock and return capital to shareholders, while expenses related to its transformation are expected to decline next year. |
| CTSH | IT services company Cognizant also contributed following an earnings beat, as organic sales continued to come in at the top of the peer group after several years of company-specific execution challenges. |
| DAL | Delta Air Lines |
| DG | Dollar General, the discount store chain, performed well in the quarter, as it delivered results ahead of market expectations and raised its guidance for 2026. Key to the investment case is improving profitability, and clear evidence of improvement in this area drove the share price gains. Dollar General announced 30% year-over-year operating profit growth, alongside 5% revenue growth, while also investing in store renovations and reducing its debt levels. We believe that with Todd Vasos back in charge and a proven playbook to execute, it can deliver steady revenue growth and margin gains over the long term. |
| DOX | and CRM provider Amdocs |
| FMC | moved out of a holding in FMC |
| KNX | During the quarter we initiated a position in Knight-Swift, North America's largest truckload carrier. The company is operating in a prolonged freight downturn, as excess capacity added during the 2021 profit peak has persisted despite weaker demand, pressuring rates and earnings. With its scale and network efficiency, we believe profitability should recover as conditions normalize. |
| MDT | These purchases were funded through trims to medical device company Medtronic |
| PPG | coatings company PPG |
| QRVO | We believe Skyworks' merger with Qorvo will be a long-term positive, and we see room for rising demand from both industrial and mobile applications. |
| RHI | continued to build positions in staffing firm Robert Half |
| SWKS | Semiconductor company Skyworks traded down during the quarter on weaker forward guidance and concerns around mobile demand and customer concentration. This occurred despite better-than-expected quarterly results and the announced acquisition of competitor Qorvo, creating a combination of the second- and third-largest players in radio frequency smartphone component suppliers. |
| WFC | and money center banks Citigroup and Wells Fargo, all following strong performance |
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